Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 26 - Evidence, May 17, 2007
OTTAWA, Thursday, May 17, 2007
The Standing Senate Committee on Agriculture and Forestry met this day at 8:13 a.m. to examine and report upon rural poverty in Canada.
Senator Joyce Fairbairn (Chairman) in the chair.
[English]
The Chairman: Good morning, colleagues. Last May this committee was authorized to examine and report on rural poverty in Canada and last the fall we heard from a number of witnesses who gave us an overview of that subject. On the basis of their testimony we wrote an interim report, which I believe you have seen. We released it in December just before Christmas and did not necessarily expect too much of a response because of the timing, however, because of what we heard, almost instantly, it really seemed to strike a nerve.
We are now in the midst of our second phase of the research where we meet with rural Canadians in rural Canada. So far we have travelled to Athens, Ontario, through the four Eastern provinces and all across the West. In the fall, after we do some visits in Ontario and Quebec, we will also go up to the Northwest Territories.
Along the way we have met a truly wonderful and diverse group of rural Canadians, who have welcomed us with open arms into their communities and sometimes even into their homes. However, the committee still has a lot of work to do. We still have to visit these communities across the country and in the North and we still want to meet as many people here in Ottawa because we need to get this right and understand rural poverty to its core.
Our witnesses this morning are from Canada Economic Development for Quebec Regions and to tell us about the economic development there we are very pleased to have Johanne Béchard, Director General, Policy and Programs; and Stéphane Dufour, Acting Director General, Infrastructure and Business Development. We want to thank you particularly for coming. We need to hear from people who are doing what you are doing, on the ground in your region.
[Translation]
Johanne Béchard, Director General, Policy and Program, Canada Economic Development for Quebec Regions: Madam Chairman, it gives me great pleasure to be here today, and to present Canada Economic Development's activities regarding rural Quebec.
As you will see, the Agency is very sensitive to the problems experienced by communities that are struggling with issues related to slow economic growth. Canada Economic Development (CED) is one of four regional development agencies. You have already met our colleagues from ACOA over the past few months.
Economic Development Canada serves the regions of Quebec. Its mandate is to promote the long-term economic development of these regions by giving special attention to regions where slow economic growth is prevalent or where opportunities for productive employment are inadequate and by promoting cooperation and complimentarity with Quebec and communities in Quebec.
The Agency has more that 420 employees providing products and services for our clients, mainly small- and medium-sized enterprises and non-profit organizations. In the field, our workforce is spread out across all of Quebec. We have 14 business offices, plus an office in Gatineau that liaises with our federal departments. Our head office is located in Montreal. CED's annual budget for grants and contributions totals nearly $200 million.
Before speaking about our intervention targets and our programs, I would first like to define the context in which CED operates in Quebec and make a few observations concerning Quebec's rural regions.
Quebec, like everywhere else in the world, cannot escape the new economic order of the 21st century. Globalization is a phenomenon that cannot be ignored, one that poses daunting challenges for our economy, our regions, our SMEs and, consequently, our communities. The effects of increasingly fierce international competition are being felt in every region of Quebec, especially in our single industry communities, which are more sensitive to economic upheaval. In some regions, we are witnessing a destabilization of economic structures based on natural resource development.
Sectors such as forestry and fishing, which until recently were the engines driving many of our regions' economies, are now falling on hard times.
Other regions are hard-hit by a decline in manufacturing industries such as textiles, clothing and furniture.
[English]
In a period marked by the rise of emerging economies, such as China and India, and by a stronger Canadian dollar, productivity and innovation are now more than ever seen as key factors in our community's prosperity and vitality, and, consequently, the quality of life of our citizens. Many of our traditional industries and companies will now have to rethink or improve the way they do business.
[Translation]
Let us take a moment to look at the issues facing Quebec's rural regions. There are huge differences among these regions. Rural regions located near major urban centres — or central areas, as we call them — are facing issues that are very different from those affecting more remote regions, or outlying areas.
Today, I will discuss rural regions in outlying areas. We have identified a number of regions that must overcome serious challenges related to socio-economic devitalisation. We offer these regions specially targeted types of interventions. These outlying regions are Abitibi-Témiscamingue, Bas-Saint-Laurent, Côte-Nord, Gaspésie-Îles-de-la- Madeleine, Mauricie, Nord-du-Québec and Saguenay-Lac-Saint-Jean.
In addition, we also look after 21 regional county municipalities that are facing similar difficulties. The outlying areas are dealing with, among other things, a continuously shrinking population, higher unemployment, lower education rates and, in some instances, a migration of young people towards the large urban centres due to the distance of these big centres and the low-population density.
[English]
Many of these communities have single-sector economies, which means that they are highly dependent on one main employer, such as a factory or sawmill, or a dominant industry such as mining, forestry or fishing. In recent years, because of the low diversification of their economies, these regions have been suffering from falling employment in natural resources industries, such as forestry and fishing, owing to such factors as reductions in the availability of resources, foreign competition and increased industry productivity.
[Translation]
Economic diversification efforts in these regions often run into obstacles such as remoteness from markets and varying access to major transportation networks, which increase production costs, and difficulties in recruiting a high- skilled workforce.
In addition, our target interventions also apply to 21 regional county municipalities which have the same characteristics as the outlying areas and are experiencing similar difficulties. Although they are in central areas, many of these MRCs still suffer from problems related to remoteness, since they are located on the outskirts of these central areas. Other MRCs have had to deal with the closure of businesses that were the main employer in their community, as was the case in the l'Amiante and Asbestos MRCs or in the Haut-Saint-Laurent MRC, where Huntington is located, and where its textile plant was shut down.
[English]
By taking into account the economic and social context of the many economic and regional development challenges facing Quebec regions, we were able to establish our targets for action, renew our programs and introduce new departmental initiatives and measures, which I would like to describe for you.
[Translation]
A moment ago, I mentioned that CED's mission consists in promoting long-term economic development by giving special attention to regions where slow economic growth is prevalent. From this mission a vision emerged that has guided the development of our new strategic directions and programs.
[English]
This vision can be described as follows. In the long term, Quebec's regions and communities will have increased their development capacity, dynamism and prosperity in sustainable and meaningful terms to the benefit of their citizens.
I would like to draw your attention to the following four elements: We take a long-term perspective in our work; pay special attention to regions where economic growth is slow; strive for sustainability; and want to work in a cooperative and complementary manner.
[Translation]
Our mission and vision have prompted us to identify two strategic outcomes representing intervention targets where the Agency wants to take action in coming years and tailor our intervention approach to the particular characteristics of each area.
Our first intervention target concerns the vitality of communities and is aimed at intensifying the economic diversification of communities where economic growth is slow, thus fighting against economic decline.
The second target concerns the competitiveness of SMEs and Quebec regions and to render them more competitive, which is essential in a context of globalization.
Furthermore, to optimize their desired impact, the agency's interventions are now carried out according to the development issues specific to four types of areas. I have already told you about outlying areas, commonly called resource regions, where we find primary industries and central areas — that is, areas no more than about an hour-and- a-half drive from a major urban centre — where the manufacturing sector and universities have a strong presence.
In addition to these areas, there are the major urban centres of Quebec City and Gatineau, where the public sector plays a prominent role, and the Montreal CMA, which is comparable to other world-class metropolises.
[English]
Allow me to illustrate how this affects the planning of our activities. For example, the agency's activities in outlying areas promote the restructuring and diversification of the economic base; whereas in central areas, we encourage entrepreneurship and competitive clusters. In the major urban centres of Quebec City and Gatineau, we help increase the private sector's share of the economy through the start-up and development of small- and medium-sized enterprises, SMEs, in recognized growth sectors. In the Montreal CMA, or census metropolitan area, we foster the international positioning of highly competitive industry sectors with strong potential for growth.
[Translation]
The two intervention targets previously mentioned form the foundations of two new programs that came into effect on April 1, 2007, namely the Community Diversification Program and the Business and Regional Growth Program. These programs were developed in line with the government wide approach that emphasizes results-based management. That is what guides our business offices in the development of their annual business plans and their decisions for intervention.
Now, allow me to briefly describe for you the Agency's programs and initiatives.
[English]
The community diversification program allows Quebec's regions to maintain and develop the economic activity base. More specifically, the program is aimed at mobilizing communities so that they are better equipped to take charge of their development; fostering entrepreneurship and increasing the number of viable businesses; and increasing communities' drawing power to help them attract and retain tourists and a qualified workforce.
[Translation]
The Business and Regional Growth Program is aimed at helping enterprises improve their performance, become more competitive and engage in more innovation to facilitate their sustainable development supporting the transfer of technology and research outputs to enterprises and creating the conditions conducive to attract foreign investment and international organizations.
Like other regional development agencies, Canada Economic Development also delivers the Community Futures Program. This program is primarily a program for rural communities. Its purpose is to support the local development of communities and build their capacities for reaching their full potential in a sustainable manner.
[English]
In concrete terms, this program allows the agency to offer financial assistance to 57 Community Futures Development Corporations, CFDCs, located in rural communities. These CFDCs foster the creation, retention and development of sustainable jobs and help small enterprises gain access to financial assistance and advice.
The program also supports 10 business development centres, BDCs, which operate primarily in Quebec's central regions. The purpose of these BDCs is to provide technical services and financial assistance for SMEs.
[Translation]
In addition to these programs, the Agency recently developed other measures and intervention tools designed specifically and exclusively for regions and MRCs in decline.
In September 2006, the Agency introduced four initiative that bear witness to our tangible commitment to helping seven regions and 21 municipal regional counties that are dealing with declining populations and weak economic growth.
The first initiative, namely the Community Economic Diversification Initiative, is intended to diversify the economic base of these communities, reduce the dependency of communities whose economies are based on a single industry or sector, or on natural resource development, create sustainable employment and decrease the population exodus. This initiative includes special terms and conditions, such as the possibility of offering business non repayable contributions of up to $100,000, which is not possible for other regions.
We have also seen the importance of the conditions in which our businesses emerge, develop and flourish. A region's ability to attract investors is intimately linked to the presence of modern and effective community economic facilities in the area. With this in mind, we introduced the ``community economic facilities'' measure to help regions and communities experiencing slow economic growth to acquire sustainable community economic facilities.
[English]
The establishment of new businesses is crucial to answering the vitality of regions to make those regions more dynamic. Currently, only 4 per cent of all venture capital in Quebec is invested outside the major urban centres of Montreal, Quebec City and Gatineau. This is why we implemented the new venture capital fund for business start-ups in the regions, which is aimed at promoting the start-up of businesses that could not be launched otherwise. This venture capital fund was created in partnership with the CFDCs and the BDCs with the support of venture capital firms and the Fondation de lèntrepreneurship. Canada Economic Development for Quebec Regions has invested $5 million to create this fund that will be administrated by CFDCs or the BDCs. Including the contribution of all the partners, over $20 million is available for business start-up projects in those regions.
[Translation]
In Quebec, 98 per cent of all businesses are SMEs. They account for approximately two thirds of all jobs. According to the Canadian Federation of Independent Business, more than 40 per cent of Quebec's entrepreneurs will retire within the next five years. Without a structured succession plan, we will inevitably witness the closure of countless well- established businesses in our communities. It is precisely to prevent this situation that we created this fund.
Canada Economic Development has invested $8 million to create the Capital Fund for Business Succession, which will be administered by the CFDCs or BDCs. Including a contribution of all the partners, over $30 million is available to entrepreneurs purchasing an existing business. This venture capital fund was created in partnership with CFDCs and BDCs, with the support of venture capital firms and the Fondation de l'entrepreneurship.
It goes without saying that all the programs and initiatives we have introduced contribute to the achievement of an important goal, namely straightening the vitality and economic growth of Quebec's regions.
[English]
I hope that our representation has given you a better idea of what we are doing in Quebec's regions, in particular those that are struggling with problems related to social and economic decline. This will no doubt be of assistance to you in your examination of the question of poverty.
[Translation]
In closing, I would like to assure you that CED will continue to work with communities and support the diversification efforts of communities facing economic upheaval. We would like to thank the committee for allowing us to share our experiences and accomplishments. We are now prepared to answer any questions you might have.
[English]
The Chairman: Thank you for your presentation. It is exactly what we need to hear before we travel to the province of Quebec tomorrow.
Senator Mercer: I am pleased to see both of you here because I am a big supporter of regional economic development programs. I am from Nova Scotia, so I am familiar with the activities of the Atlantic Canada Opportunities Agency, ACOA, but I have also worked nationally and am aware of some of the good work of Canada Economic Development for Quebec Regions.
By point of interest, at some time I would like to talk to Ms. Béchard about her time at the Royal Commission on Seals and Sealing, because the sealing industry is another interest we have in common.
Ms. Béchard, you mentioned the community diversification program. Could you tell me how many jobs you can attribute to the diversification program? Have you an ability to measure that and how is it done? You talked about two kinds of rural regions, which I thought was an interesting terminology: the central areas and the outlying areas. How are those jobs split? Are they closer to central areas or to outlying areas?
Ms. Béchard: Those are good questions.
[Translation]
I am happy to see that you two are working on the Royal Commission on Sealing, in which I had the great pleasure of participating.
The regional economic diversification program is a new program set up just a month ago. It was not thought out in terms of job creation for targetive results. I mentioned that these programs were developed in accordance with the new government philosophy of results-based management. When we talk about results-based management, there are always three aspects that need to be taking into account: first of all, you want to have an impact, a measurable impact where the results can be attributed to your actions. When you decide to invest in an activity, it is so that you can say that the difference that occurred was thanks to CED. You have to be closer to the result. I will explain how we manage this.
There are three aspects to this program: one aspect pertains to the mobilization of the community, enabling communities to develop a vision and develop a plan and then to implement them. We look for tangible results on which the communities can base themselves. The second aspect pertains to the development of entrepreneurship. This is about creating enterprises by helping organizations that support such enterprises by drawing up their business plans and consolidating their development. This is the type of results that we measure.
The third aspect is about making the community attractive. When we talk about community vitality or diversification, the issue of tourism and the attractiveness of the community are also important. We will try to measure the economic contribution in accordance with the number of tourists. This is the type of immediate results that we will be looking at on a long-term basis, in order to create jobs. Jobs will be a contributor, but not directly. It will be one of a number of factors. I do not know if I have answered your question, but this is how we manage the process.
With respect to central areas and outlying areas, various studies have enabled us to understand that although the problems are just about the same everywhere, they cannot be dealt with in the same way and everything hinges on where they are located. In the outlying areas, where we have seen a significant decline in population and a significant natural resource sector presence, we will emphasize diversification of the economic base in order to promote employment.
There are two types of rural communities in the central areas: the remote rural area which is part of the outlying area and the close rural area, which is not far from the big urban centres offering better job development opportunities, where we can liaise with the university towns present in these areas, and where the manufacturing sector is present, but with a very low technology rate. In this instance, we will try to make them more competitive. That will boost job creation but, in particular, consolidate the economic base because we are trying to ensure that our interventions are sustainable.
[English]
Senator Mercer: You provided a frightening statistic: More than 40 per cent of Quebec's entrepreneurs will retire within the next five years. That is a huge percentage. It is shocking, but I am glad to see that the department is addressing this.
You talk about the venture capital fund that you have developed. Is that as new as the other program? Has it been in place for a while?
[Translation]
Ms. Béchard: It began under our former program in September 2006. Mr. Dufour could provide you with more information about it.
Stéphane Dufour, Acting Director General, Infrastructure and Business Development, Canada Economic Development for Quebec Regions: Madam Chairman, this is part of a series of initiatives taken specifically for the rural region, the outlying areas, the RMCs with slow economic growth. Whether it be under our current or past programs, we have the authority to do this. We wanted to deal with the issue regarding the lack of venture capital companies in these areas. Our idea was to work with financial institutions and venture capital companies in order to create a lever effect to test the formula. We wanted to find out whether or not we were able to facilitate access to this capital for these areas.
There are two major types of problems: getting the enterprise off the ground and succession planning in the enterprise. We were most interested in this latter point and that is where we invested the most money.
[English]
Senator Mercer: Three problems came to the surface everywhere we went in rural Canada. They arose in roughly this order: The lack of available child care; the lack of high-speed Internet; and the difficulty and cost of transportation.
Have those things factored into your planning, or is that not as major an issue in Quebec as it is in the rest of the country?
[Translation]
Ms. Béchard: I cannot answer your question about the daycare centres. I can only talk to you from personal experience.
As for high-speed Internet, most of Quebec's regions are connected. We worked especially with Industry Canada to ensure that Internet connections would be distributed well. We helped communities do studies at the outset to see whether they should get organized in order to get connected. One initiative was undertaken on an exceptional basis, the one which we took in northern Quebec, in 2003. That was some time ago. However, they had been working to get organized for about five years. The Industry Canada program became available in 2004. So we helped the people in northern Quebec by contributing $1.6 million for a project that cost, in total, $8.1 million. That was how we responded to this request.
A few months ago, through our Community Economic Facilities program for the regions, we made a contribution to the Sept-Îles port to develop its capacity to handle bigger boats. Since trade is important and Sept-Îles is a gateway to the Gulf of St. Lawrence, we helped consolidate this infrastructure. The project is currently under way.
As far as transportation is concerned, we worked with various regions on problematic railway sections in order to provide for continuity.
Yes, the issue of connection is one of the aspects that we consider still when planning our activities.
There is another initiative which we have not yet discussed. We are in the process of setting up advisory committees to inform the minister and our business offices about the priorities that should be guiding our interventions in the regions. Of the 14 committees, 4 are really operational. It has been announced that 4 or 5 others will come on stream over the next few months. It is important to have a more direct tie in order to be aware of the concerns of communities and regions to guide our planning. An individual from the Community Futures Development Corporation (CFDC) from the rural area sits on each of these committees. We always strike a balance between the rural areas, the SMEs and the urban areas. We try to have a representative committee.
[English]
Senator Callbeck: Like Senator Mercer, I am a strong supporter of regional economic agencies. ACOA has had a positive effect in our part of the country.
With respect to your budget, I was looking at the background information, and trying to figure whether your budget is increasing or decreasing.
Your 2006-07 expenditures are $392 million and then they go up $4 million in 2007-08. Then they drop to $251 million. Granted, infrastructure was factored into the first two amounts I stated. However, if you factor infrastructure funding out of those first two budgets, is the $251 million an increase or a decrease?
[Translation]
Ms. Béchard: That is why I talked about the $200 million; it is for our regular programs. The agency is also called upon to deliver programs for other departments. You mentioned Infrastructure Canada, but we also delivered the CANtex program for textiles and the Softwood Lumber program for Industry Canada. That is added to our regular budget, but it is always for very specific targets. Our real flexibility is demonstrated in our regular programming for our two programs: Community Economic Diversification and Business Regional Growth. I would say that this has been relatively constant for some time now and will probably remain so over the next few years. That is what we have planned. I do not know if that answers your question.
[English]
Senator Callbeck: Yes, it does. With respect to the infrastructure issue, in the last budget there was an infrastructure program announced. I see where your plans and priorities show zero spending for the year 2007-08.
Will you not be involved with administering the infrastructure program? How much of this will be given to rural areas? What have your discussions been with the government in regard to this issue?
[Translation]
Mr. Dufour: Are you referring to the new measure announced in the recent budget for which we do not know the terms and conditions at present, or the former program, which we call the MIRF, which was managed by Infrastructure Canada? If you are referring to the MIRF program, the Province of Quebec is in charge. We did not design the program. We ensure that Quebec's proposal to implement this program complies with the terms and agreements of the Canada-Quebec agreement. We play a secondary role in delivering this program.
As for the final program, Strategic Infrastructures, we do not know the terms and conditions yet, in terms of what type of activity will be involved and how it will be targeted geographically.
[English]
Senator Callbeck: Do we know how much of that money will be targeted for rural areas yet?
Ms. Béchard: No.
Senator Callbeck: The other question I had, which you did not mention, deals with women entrepreneurs. ACOA has specific programs for women entrepreneurs. They have been very successful. Do you have similar programs, or are you thinking of developing programs?
[Translation]
Ms. Béchard: The answer to both questions is yes. The Community Diversification program includes a component that focuses specifically on the integration of target groups such as women, Aboriginals, minority linguistic communities, in liaison with the Canadian government's multiculturalism policy and strategy. We will continue to take a targeted approach with respect to this program over the next few years.
In my branch, we are in the process of preparing action plans and strategies that we will apply, based on evaluations made in past years for women and youth. I think that Stéphane could give you some relatively interesting examples of our achievements.
Before I turn the floor over to him, I would like to add that it is not because we are in the process of preparing a strategy that we are unable to carry out projects. For example, we have a project under way regarding female Anglophone entrepreneurs in the Laurentides region, a group that we are trying to integrate into the existing economic network. We are not trying to marginalize them, but rather we are trying to integrate all of the strengths of the sector to offer the entire community better job opportunities.
Stéphane could give you two tangible examples of successful projects that are currently being assessed.
Mr. Dufour: We undertook two other initiatives. The first one pertains specifically to the rural areas and was designed to assist female entrepreneurs in rural areas. Working with the CFDCs, the initiative was aimed at helping female entrepreneurs in preparing business plans. To facilitate access to capital, a non-refundable contribution of approximately $25,000 was given to these women, to assist with the preparation of their business plans. This could be viewed as a way of funding their working capital.
The initiative was spread over three years and involved 125 participants. We are currently in a process of analysing the results. In terms of tangible results, the number of participants was a great success. Moreover, the number of enterprises that are still active after a certain length of time is part of our assessment.
We have another province wide initiative being carried out through Quebec. We are working with the Centre d'entrepreneuriat féminin du Québec and the Réseau des femmes d'affaires du Québec. Through this initiative, we are providing many types of services including mentoring, coaching, business plan preparation, in order to promote the creation of enterprises by women. This initiative will expire in 2007.
[English]
Senator Oliver: When a new CEO takes over a business, normally they are always called upon first, to grow the business and add to shareholder value and, second, to do succession planning. I was surprised, therefore, to find that in your plan in Quebec you are actually doing the succession planning. You say that 98 per cent of businesses in Quebec are SMEs and that you have created a fund of $8 million and another of $30 million. These two funds are being used to do succession planning in Quebec.
Therefore, if a person has a business that has sales of $3 million a year and that person dies, who do you finance to take over that business so it stays as a viable business? Does it have to be someone from Quebec, or could it be someone from Nova Scotia? Is it repayable money or a grant? Do you give them $1 million to buy the business, how does it work?
[Translation]
Mr. Dufour: With respect to succession planning for enterprises, the issue that we are dealing with pertains to their location. What is important for us, is that the enterprise remains in the rural area where it was, because that is where the jobs are, and that is what our pilot project is aimed at ensuring. Whether the money comes from a foreign investor, with one of our existing programs, or from somebody else from another province who has bought the enterprise, the important thing is that the enterprise remains in its original location. The type of assistance provided will be refundable. Any type of assistance.
Senator Oliver: At 100 per cent?
Mr. Dufour: Yes, always, because any assistance provided to enterprises is necessarily refundable, except for the measure that we discussed with you, for certain regions in Quebec, and which enabled us to provide up to $100,000 depending on the requirements and the preparation of the business plan.
Ms. Béchard: I would like to rectify the amount that you mentioned; this was a $30-million fund, of which eight million came from CED. We achieve the lever effect with the participation of venture capital companies, such as the Desjardins Corporation, with whom we work, to name but one.
Mr. Dufour: In addition, as part of these initiatives, CED's contribution is always refundable and represents 25 per cent of the cost of the project. The eight million dollars mentioned should climb to $32 million in capital in the regions. The local partner must also invest 25 per cent of the amount and we expect the venture capital companies to invest in equivalent amount, namely the remaining 50 per cent. That is one of the features of the program; otherwise the project is not eligible.
Ms. Béchard: This is also a pilot project; we are doing this on a trial basis because it is new. We do not know how difficult it will be to carry out, so we have given ourselves a one year period to test the idea and see if it works. That would mean that, in theory, by December we will have an idea of what we are able to accomplish; we will do an assessment and decide whether the program is worth renewing, if there is a demand for it. It is quite difficult to implement. It is not only for the employees, or for the entrepreneur's children, it could be the employees or other individuals. The idea, as Stéphane said, is to ensure that the enterprise remains in the community.
[English]
Senator Oliver: By taking one of the poorest regions in Quebec under your umbrella, can you help me to understand how your various programs impact poverty? What can your economic development programs do there?
I do know it is possible for some of the small communities suffering from poverty to get a $100,000 non-repayable grant to help them, but what types of programs would you apply to a community that had one industry? If a large sawmill that employed most of the people closes, for example, what will you do to revitalize that community?
[Translation]
Ms. Béchard: We try to have an approach that is quite structured. As a first step, we see the role of the Agency as being that of a guide, a facilitator. We want to be able to support the communities, help them mobilize, work together to come up with a vision of their development, define what type of action plan they would like to implement. We help hire experts, conduct studies, help them develop their plan and carry it out by hiring experts to guide them in implementing a diversification plan. We are hoping that, over a given period of time, the communities will have a better grasp of the possibilities and will see the different avenues that can be followed for their development.
Earlier I discussed four elements that underlie our vision; we want to work on a long-term basis, we want to achieve sustainable affects by working on the communities development capacities. We strongly believe that if we give the communities the tools allowing them to take charge, they will be able to help those individuals who have more problems. You talked about poverty. The way we see things, we do not have a community of poor people, but one where there are people who are much more underprivileged than others. Our aim is to come up with plans that manage to reach out to these people so that they can be reintegrated into the workforce.
This is an ambitious project, but we think that with the support of the communities, with the support of the CFDCs — we work with a very wide network and we are quite well connected with our other colleagues in ACOA and in other agencies — that can make a difference.
Mr. Dufour: If I may, I would like to give you an example that illustrates the way we work. In the Huntington region, in April 2005, two plants had to close down and 600 workers were laid off. This closure was the result of the lifting of textile quotas. The impact was major. This crisis resembles the example that you just gave.
We are still working with the community and assisting it with its endeavours. We hired some individuals, in cooperation with the town, so that we could examine the situation. Initially, the town had decided to purchase the two existing buildings with a view to possibly relocating a few businesses there.
We also, with consultants, did an analysis of the strengths and weaknesses in order to determine what could be done. We opted to hire a salesperson outside the country to see if we could attract some enterprises there.
At the same time, we assessed the possibilities in this region, based on the strengths and existing opportunities. The results varied and we are still at the implementation stage. We mobilized all of the local players, our partners in Quebec and the municipality to try and identify the possibilities.
A variety of avenues have been identified. The development commissioner is still there. To date, nearly 65 per cent of the buildings are occupied by new businesses. We noted a requirement for an adapted technology transfer centre. The project is still under study and will eventually be proposed to the Quebec government. An industrial plan for transportation was prepared, given the proximity of this region to the St. Lawrence Seaway. We also looked at ways to attract tourism. So we have a concerted vision with respect to this issue.
Some of the businesses that have settled in this region received direct assistance from the Agency, which promoted employment. As a result of these interventions, we prevented a potentially catastrophic situation. That is more or less how we want to work with these communities.
[English]
Senator Mahovlich: Now that we are dealing with world markets, in the southern part of the United States, in states such as Georgia, Alabama and South Carolina there have been tax incentives offered to large corporations — Honda, for example, a world-renowned company — to encourage them to establish their homes in these states. Does Quebec offer such large corporations this kind of incentive? If so, could you give us an example?
[Translation]
Ms. Béchard: I am not familiar with the kind of tax havens that the province of Quebec provides to these companies. However, our program, Croissance des entreprises et des régions, has a section specifically on the issue of foreign investors in order to encourage them to come and settle in Quebec. We help communities better understand localization factors, which make a Quebec community more attractive to investors. Factors that need to be taken into consideration include, for example, attractive tax credits, quality of the labour force and the quality of life in the targeted regions.
We help the regions come up with a development plan to attract foreign investors. In this era of globalization, everybody is trying to attract foreign investors and large corporations. Only one big company is needed to create many jobs.
In the past, we did not feel that this was very important. It was part of the eligible activities. However, we have now identified it as a target that we intend to work on in the coming years.
Mr. Dufour: The Agency has an annual budget of $200 million. So we cannot invest in just anything. Investissement Québec is an organization that we work with on various specific projects. For major projects, we pay special attention to the structural effect and the impact on employment.
A project in Montreal may be less interesting than an identical 300-job project in a rural region. For example, we have invested a great deal of money in various facilities in the Thetford-Mines area given the impact on jobs. Economic Development Canada can examine these files.
Ubisoft was also a new initiative in the Montreal area, in which we invested $8 million. This initiative had a major impact. It was a second investment. We had already funded this company in the past. It creates many jobs.
Employment is an extremely important condition to our participation.
Senator Saint-German: I am from British Columbia and I am going to ask my question in French.
My question concerns the forestry sector. The impact of this sector in rural regions in Quebec is significant. Given the strength of the Canadian dollar, the drop in stumpage fees, problems in the United States construction industry, how would you describe the current state of the forestry sector in Quebec?
Ms. Béchard: The situation within the forestry sector remains precarious and difficult. Since January 2005, this sector has lost nearly 11,000 jobs, 5,700 of which on a permanent basis. The numbers are high.
From a structural perspective, forestry communities are suffering. We are talking not only about pulp and paper companies but also sawmills. These industries are restructuring.
Another problem in Quebec concerns a government plan resulting from the Coulombe report. This report found that the industry needed to reduce its cut volume by 20 per cent. This limits all the more any possibilities of expansion.
In order to recover, this industry faces a number of challenges. Companies must change their business and forestry management practices in order to preserve an increasingly less available resource. They should also streamline their activities in order to become more competitive and to develop additional ways to add value during secondary and tertiary processing.
We have seen several diversification projects whereby mills will adapt their product line to develop added-value products. For example, they will attempt to find other markets for their production of wood board destined for the construction industry. So, these companies are versifying their products and export markets.
The issue of stumpage fees also needs to be reviewed. This falls under provincial jurisdiction. They must also renew their labour force.
We have also been involved in the delivery of the softwood lumber initiative put forward by Industry Canada several years ago, to promote diversification. This led us to create a new development approach at the agency.
The Economic Diversification Initiative that we put forward seeks to respond to the need for communities struggling over the forestry sector to diversify. However, we do not have any short-term solutions. We must keep our eyes open. We are working closely with our colleagues in the Quebec government and with the Canadian Forest Service and Industry Canada to ensure we work together to support this industry which is undergoing an inevitable change and for which we are trying to reduce the negative impact.
Senator St. Germain: Do you have sufficient financial means, in your programs, to resolve the problems within this sector? This represents billions of dollars.
Ms. Béchard: Money has always been a central issue for all regional agencies. We are multi-sectoral and we serve the communities affected by the fisheries, forestry, the manufacturing sector, which are related to globalization.
We are trying to balance our approach. In the past, we focused exclusively on small business development and improving the development environment for small businesses. Currently, our programs still cover small businesses, to make them more competitive given global competition, but we are proud to have a program that also addresses community vitality to promote the diversification of the economic base in a more structured and targeted fashion, and this is something we will focus increasingly on in the coming years. In all likelihood, we will not have enough money to do everything, but we will have enough to ensure that what we do produce results.
Mr. Dufour: With the means at our disposal, we have, nonetheless, focused on communities with structural problems related to their economy. All this is part of our budgetary allocation models.
For example, last year, with regard to the seven outlying areas, this represented 20 p. 100 of Quebec's population. Also, 40 p. 100 of our financial resources went voluntarily to those regions to respect the spirit of the legislation that established the Economic Development Agency.
[English]
Senator Callbeck: In your province, the government has an antipoverty strategy. It is my understanding that there are microcredit loans available there from $500 to $20,000. Is your agency involved in the delivery of that program, or do you provide your own microcredit loans?
[Translation]
Ms. Béchard: The Agency is not directly involved in micro-credit. Often, micro-credit is better suited to self- employed workers. Usually, the CFD works with companies or individuals who want to start a business for which the required level of funding is somewhat higher than for micro-credit.
However, we propose strategies similar to micro-credit that help young people start businesses. That is how we deal with this problem and Stéphane can provide you with examples to illustrate this.
Mr. Dufour: The initiative began in 1997 to deal with the youth drain. In cooperation with the Community Futures Development Corporations, we implemented a youth strategy to promote the creation of a local fund specifically for youth. These were personal loans between $5,000 and $15,000 along with repayment conditions and a two-year interest holiday. This initiative encouraged people to start businesses and it is still in place because we decided to support it.
Another major characteristic is to promote the hiring of resources to make young people aware of the importance of entrepreneurship as a development tool that helps them develop business plans and then supports them once the company has been created. This initiative is ongoing and we are still in partnership until 2010 because, essentially, the program has met its objectives.
In terms of job creation this is excellent. As we said, it is not the micro credit as it is typically defined, but it is quite close to the idea of promoting access to capital and new business start-ups.
[English]
Senator Callbeck: That was set up in 1997. Is there an increase each year in the number of youth taking advantage of it?
[Translation]
Mr. Dufour: I would say that it is fairly stable because there are approximately 400 to 450 companies starting up every year. I have the data before me for the last five years. Some $18 million is in play, which means that the money repaid allows for capital turnover. The success rate is approximately 72 per cent and various figures prove that entrepreneurs repay the full amount they have borrowed and that the failure rate is low.
Obviously, given the two-year interest holiday, the fund does not show the same yield as other funds after the first year. But the financial loss is approximately 6 to 7 per cent, which is quite respectable given the conditions and environment in which we are working.
[English]
Senator Callbeck: That is a real success story.
[Translation]
Mr. Dufour: True. This problem has helped to resolve the youth drain from rural areas. We have to work with the community, support young people, guide them and encourage them. It is not just about money, I think the program goes beyond that. The agency estimates that support is essential because, with regard to the resource, it is great to have available access to capital, but this only represents one part of the entrepreneurship equation.
[English]
Senator Callbeck: That will contribute to your success rate.
Senator Mercer: Madame Béchard, you mentioned in answer to a question that there are local advisory committees. Could you tell me how those committees are established? Can a citizen apply to be on an advisory committee? Who chooses committee members? Do the local members of Parliament have any input into the advisory committee and do they have a role in recommending which projects are approved in the regions?
[Translation]
Ms. Béchard: The minister creates the committees based on the recommendations he obtains. The committee members are known in their communities. I am speculating somewhat because this program just started.
We want to know the concerns and wishes of the communities in order to establish priorities. These committees are working on an action plan. Projects are not part of the planning process because it is related to the minister's accountability. The committees are there to guide us in identifying our priorities.
They may tell us that the initiative implemented is good and needs to be continued. They may also help us change an initiative given the problems in various regions.
Mr. Dufour: To add to that, I would say that we want to ensure geographical representation within our regions' dominant business sectors and, for the most part, business people are the ones being recruited based on a list of suggested names.
[English]
Senator Mercer: The names are recommended to you, but who recommends them?
[Translation]
Mr. Dufour: It is based on what we read. We need these business people. In Montérégie, in the Salaberry area, for example, we know which companies dominate. In the urban area, we sought out people involved in the aerospatial industry.
Generally, we work with extremely representative individuals with good credibility. We also try to ensure a marriage between small- and medium-sized businesses to ensure we have covered all perspectives. The idea is to give the minister an idea of the opportunities available, and we want to cooperate with people who can talk about their experience on the ground. I also want to remind you that the individuals we recruit are business people and not interest groups sitting on the advisory board.
[English]
Senator Mercer: I am not being negative. I am just trying to figure out how it works, because it may be something we should duplicate. I still do not understand how the names come forward and how you select the names. From what list do the names come? Could anyone propose a name?
[Translation]
Mr. Dufour: There is no public notice, and we do not screen candidates; our role is to offer suggestions based on the reading we make, through conversations and networking, of the circumstances under which our local partners operate.
Ms. Béchard: The director of the business office identified a number of people whom he believed were representative of the area and submitted their candidacies.
Senator St. Germain: It is the minister who makes the final selection.
Ms. Béchard: Yes, and his committee advises him on the priorities.
[English]
Senator Mercer: Does the local member of Parliament, whether a member of the government or the opposition, have any input?
[Translation]
Ms. Béchard: I honestly do not know. I will have to check and come back to you with an answer.
[English]
Senator Mercer: I am trying to determine whether your agency is different from ACOA. Under the current government, opposition members of Parliament cannot talk directly to ACOA officials and ask questions about projects that might be happening in their riding. Can a deputy in Quebec, who may be a member of the Bloc or the Liberal Party — in other words, not a member of the Conservative Party — contact the agency directly and ask questions about projects in their districts? That is their job as members of Parliament to take care of the people.
[Translation]
Ms. Béchard: I can answer your question. In fact, last week, I briefed the caucus of the various parties on our most recent programs.
In Quebec, our operations are different from those of ACOA. Our gateway is the minister's office. When members of a party, whether it be the Liberal Party, Conservative Party or Bloc Québécois, need information on a project, they call the minister's office; people in the minister's office then ask officials to provide them with the necessary information. This is the way it has been happening for years.
[English]
Senator Mercer: That is the way it has been happening for years.
[Translation]
Ms. Béchard: Yes, absolutely.
[English]
Senator Mercer: ACOA has caught up with you, because, at one time, members of Parliament in Atlantic Canada — no matter which party — were able to contact ACOA to ask questions. The questions were not directly to ACOA, but to find out what was happening with projects in their area.
Senator Oliver: When you put money into areas where there is poverty, how do you measure whether you are being successful? What is the mechanism by which you measure your results? How do you know you are making a difference?
[Translation]
Ms. Béchard: I will try to answer that to the best of my knowledge. We have new programs and a new strategic policy that will lead us, over the next few years, to consider the vitality of communities. In the past, that was not the case because our action focussed mainly on businesses and how to improve their environment in order to help them develop. CFDCs alone would help communities deal with their most pressing concerns.
We are currently evaluating the program, which has just been renewed, using a number of indicators, such as job creation, the number of businesses receiving support and the strengthening of their investment funds. Those are the criteria.
In the past few years — and this has had a certain impact on the role of regional agencies, particularly in Quebec — we have dealt with crisis such as the Saguenay floods and the ice storm, and we have also been involved in all reconstruction efforts, whether it be in the fishing, forest or textile industries. In each case, we were able to assess our action and check whether the results were in line with our stated objectives. We have learned lessons, which have let us to introduce a number of elements in our current program. Our current program, which focuses on community diversification, includes new elements that are affective, and we left out those elements that were conclusive. For example, helping communities take charge, that is, giving people the tools to act for themselves and make difference, is something that has shown results.
The fact that we now have new policies, which are different from the old ones, but more constructive, makes it difficult for me to give you a straight answer. That is the best answer I can provide you with. Does that answer your question?
Senator Oliver: No, that is fine.
[English]
In response to a question put by Senator Callbeck about women entrepreneurs in Quebec, you mentioned Canada's Multiculturalism Program. You were probably referring to the four target groups being isolated there, which are Aboriginal peoples, women, the disabled and visible minorities. Do you have any special Quebec programs to assist and promote visible minorities who may be living and working in areas with much poverty? This committee is now studying rural poverty. Do you have special programs for the visible minority groups?
[Translation]
Ms. Béchard: We will not have programs for visible minorities. Rather, we are developing an approach that will help us identify the problems we want to deal with and the means that we will use. Multiculturalism and minorities are new elements for us. In the past, those elements were part of our programs, and we considered that minority groups had the same level of access to our programs as other groups. However, in certain cases, we have to better target our programs and find appropriate ways to alleviate problems in those communities.
[English]
Senator Mahovlich: My home was in Northern Ontario, very close to Quebec. We find many institutions are now closing. My high school closed in 1968. This year our church is closing. On my visits to Quebec, I notice the churches in every little town. Are you having a problem with institutions closing in these small rural areas?
[Translation]
Ms. Béchard: I do not have the answer to your question. That is not something we have studied. We can only observe what is happening. I cannot speak for Stéphane, but I come from a small community where schools and churches are currently closing, that is a fact. I cannot give you more information on something we are not specifically studying as part of our current mandate and programs. I am sorry I cannot give you more information.
Mr. Dufour: Those are some of the signs of what is called the decline — and that is not a term I like to use — of rural areas, which are experiencing much greater hardships than in the 1950s. I used to be the president of Équipe rurale du Québec, and when we participated in Canadian forums, what you have described was what we saw. People today have to travel farther and farther to get to the post office and school house, and access services. This is what we are trying to underscore with the means at our disposal: from now on, community diversification and economic rebuilding will be the primary objectives we will strive to attain. They are part of the features associated with the poverty and demographic decline that you noticed. All that leads to the closing of those churches and schools.
[English]
Senator Mahovlich: Community arenas are the last to go.
The Chairman: Thank you very much. We are visiting Quebec tomorrow. It was very good to hear from you today.
The committee adjourned.