ARCHIVED - Economic Development Agency of Canada for the Regions of Quebec

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I am pleased to sign this Departmental Performance Report with my colleague and Minister of State for the Economic Development Agency of Canada for the Regions of Quebec, the Honourable Denis Lebel.

This report demonstrates the relevancy of the initiatives and programs implemented by the Agency in order to contribute to the vitality of the communities and enterprise development in Quebec.

In these times of global market turbulence, more than ever before the Government of Canada is placing the economy at the heart of its priorities. It continues to support the engines of regional development—small- and medium-sized enterprises—in their various growth, marketing, innovation and export initiatives.

In 2006, the Government of Canada implemented Advantage Canada, a strategic and economic plan aimed at building a strong economy for Canadians, creating new opportunities and improving the country’s economic prosperity.

This plan, whose underlying principles are to support investment to further sustainable growth and create a climate conducive to the development and success of our enterprises, is a testimony to the vision of the Government of Canada.

Our economic fundamentals are strong, the best among the major industrial nations, and the actions of the Agency are part of this context, by contributing to the growth of our enterprises as well as the well-being of our communities.

The results presented in this report eloquently illustrate this fact.

The original version was signed by

Christian Paradis
Minister of Public Works and Government
Services and Minister responsible for the
Economic Development Agency of Canada
for the Regions of Quebec

Message from the Minister of State for the Agency

I am pleased to present the Departmental Performance Report of the Economic Development Agency of Canada for the Regions of Quebec for the period ending March 31, 2008.

In April 2007, the Agency introduced two new programs: Community Diversification and Business and Regional Growth. Measures reflecting both the priorities of the Government of Canada and the needs of Quebec’s regions were also instituted.

The Quebec economy is facing many challenges. The rise in the Canadian dollar, soaring energy costs, increased scarcity of skilled labour, heightened foreign competition on emerging markets and slowing of the U.S. economy are some of the key factors behind the economic conditions that prevailed over the past year.

It was against this backdrop that a series of measures were implemented and aimed, most particularly, at economically-devitalized regions.

As of March 31, 2008, the Agency was contributing financially to 1,386 projects at various stages of completion. With the $753.3 million in total funding they received, these projects generated overall investment totalling $2.6 billion. This investment has contributed to the creation, development and maintenance of employmentgenerating enterprises, an increase in tourism from outside Quebec and a rise in enterprise performance.

I am convinced that the determination, skill and dynamism of Quebec’s entrepreneurs and regions are solid foundations from which they will rise to the challenges ahead and help build a strong and healthy economy for all Canadians. As you will read in the following pages, to do so, they can depend on the commitment and the support of the Agency.

The original version was signed by

Denis Lebel
Minister of State for the
Economic Development Agency of Canada
for the Regions of Quebec

Management representation statement

I submit for tabling in Parliament, the 2007–2008 Departmental Performance Report for the Economic Development Agency of Canada for the Regions of Quebec.

This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2007–2008 Estimates: Reports on Plans and Priorities and Departmental Performance Reports:

• It adheres to the specific reporting requirements outlined in the Treasury Board Secretariat guidance.
• It is based on the department’s approved Strategic Outcomes and Program Activity Architecture that were approved by the Treasury Board.
• It presents consistent, comprehensive, balanced and reliable information. 
• It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it.
• It reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.
  
  
  

The original version was signed by

Guy Mc Kenzie
Deputy Minister/President

Date : 29 août 2008

1 Agency Overview

1.1 Summary information

1.1.1 Raison d’être

Mission

The object of the Agency is to promote the long-term economic development of the regions of Quebec by giving special attention to those where slow economic growth is prevalent or opportunities for productive employment are inadequate. In carrying out this mission, the Agency shall take such measures as will promote cooperation and complementarity with Quebec and the communities of Quebec.

Vision

In the long term, Quebec’s regions and communities will have increased their development capabilities, dynamism and prosperity in a lasting and significant manner for the benefit of their citizens.

1.1.2 The Agency in action

The Agency’s aim is to increase the vitality of communities and strengthen the competitiveness of small- and medium-sized enterprises (SMEs) and regions while giving due consideration to the realities of Quebec’s regions. Through its programs and presence in the regions, the Agency provides financial assistance, guidance and consulting services, analyses, forward-looking studies, referrals and information. It covers the entire province with its 14 business offices and delivers support to SMEs and non-profit organizations (NPOs).

In 2007-2008, the Agency targeted its actions to making the economic diversification of regions and communities posting slow economic growth a key priority. This priority was reflected in the implementation of four measures intended mainly for seven regions and 21 Regional County Municipalities (RCMs)¹ suffering devitalization: CEDI-Vitality, the Community Economic Facilities for the Regions support measure (CEF), the Venture Capital Fund for Business Startups in the Regions and the Capital Fund for Business Succession. In the area of business growth, the Agency made it a priority in all regions to strengthen the performance of innovative SMEs in key sectors through, among other things, the Partnering with Enterprises for Commercialization initiative.

In 2007-2008, the Agency supported the economic development efforts of Quebec’s regions through cooperation and collaboration with federal, Government of Quebec and Quebec community partners, notably by:

• collaborating with federal departments and agencies operating in the regions of Quebec
• collaborating with Government of Quebec departments and agencies
• working in cooperation with stakeholders in each region so as to pool their knowledge and skills
• helping the various regions and communities of Quebec through initiatives tailored to local realities.

By way of illustration, the Agency established 14 advisory committees across Quebec whose recommendations prompted the reflection process leading to the June 2008 announcement of a strategic plan to help communities and SMEs overcome development challenges.

The Agency also set two priorities to ensure continuous improvement of its management practices, working to build staff capabilities with regard to its new programs and improving its planning and its performance measurement processes.

1.1.3 New performance measurement fundamentals

The Agency’s new programs are implemented in such a way as to emphasize results-based management. Indeed, performance indicators have been established to reflect the new Program Activity Architecture (PAA) (see the following table). The performance of each Agency-funded project is thus measured using these indicators. Rigorous performance measurement practices, backed by a project monitoring system applied by advisors in the 14 business offices, ensure data on the Agency’s results can be collected and reported. Economic development support can take several years before producing a concrete impact in the regions. As such, other information sources will be added in the future to allow for better assessment of the long-term impacts on communities and enterprises funded by the Agency.

In addition to being able to measure project performance, the Agency recently implemented a system making it possible to monitor efforts by type of service provided (e.g. guidance and advice) or activity organized by the regional offices that produce results in the regions.

Analyzing the Agency’s performance in 2007-2008 posed two methodological challenges, the first having to do with the fact that the results presented in this report involve projects carried out under both the Agency’s former and new programs. The data collection methods used for the past and current programs therefore had to be harmonized so as to account for all of the projects subject to spending in 2007-2008. These program changes make it difficult however to compare current results with those recorded in previous years.

The second challenge centred on the fact that the projects approved under the new programs are less than a year old. It is still too early to measure the full impact of these projects on the communities and enterprises assisted by the Agency. Future departmental performance reports will be better positioned to account for the results arising from these new programs.

Program Activity Architecture

The table below shows the Agency’s full framework of program activities and subactivities and how they further its three strategic outcomes. This report presents an overview of the performance achieved in 2007-2008 in relation to these components.

Strategic Outcomes	Program Activities	Program subactivities
Vitality of communities - Dynamic and revitalized communities with better socio-economic prospects	Development of communities	Community mobilization Community development Attractive communities
	Infrastructure	Water quality Highways and public transit Assets with urban and regional economic impacts Special infrastucture-dedicated programs
	Special intervention measures	Community adjustment to economic shocks Community adjustment to natural disasters
Competitiveness of SMEs and regions - Presence of conditions conducive to the sustainable growth and competitive positioning of SMEs and regions	Competitiveness of enterprises (SMEs)	Development of enterprises' capabilities Development of strategic enterprises
	Competitive positioning of regions	Competitiveness poles International promotion
Policies, representation and cooperation - Policies, programs and initiatives that reflect the realities of Quebec's regions	Policies, programs and initiatives	Strategic research and analysis Representation and influence Cooperation and collaboration

1.2 Performance summary

1.2.1 Comparison of planned to actual expenditures

This table offers a comparison of the Main Estimates, planned spending, total authorities and actual spending by program activity.

	2005-2006	2006-2007	2007-2008
Program activity (in thousands of dollars)	Actual spending	Actual spending	Main Estimates2	Planned spending	Total authorities	Actual spending
Development of communities	—	—	162,859	163,010	173,960	166,681
Infrastructure	—	—	100,101	100,101	105,338	48,562
Special intervention measures	—	—	8,078	8,078	0	0
Competitiveness of enterprises (SMEs)	—	—	72,577	74,535	72,109	69,049
Competitive positioning of regions	—	—	44,497	44,551	45,443	45,515
Policies, programs and initiatives	—	—	6,588	6,588	6,590	6,578
Total Agency spending	334,235	364,899	394,700	396,863	403,440	336,385
Less:
Non-respendable revenue	(45,791)	(50,211)	(42,500)	(42,500)	(42,500)	(53,906)
Plus :
Costs of services received without charge	5,957	6,100	5,320	5,320	5,320	6,083
Net cost for the Agency	294,401	320,788	357,520	359,683	366,260	288,562

The $60.5 million variance between total planned and actual spending is primarily attributable to the deferral to the coming year of planned infrastructure spending. Note that the Canadian Apparel and Textile Industries Program (CANtex) used to be considered a special intervention measure. For 2007-2008, the Agency recorded its interventions under this program in Competitiveness of enterprises (SMEs).

1.2.2 Human resources

2007-2008
Human resources Full-time equivalent
Planned	Actual	Variance
409	401	-8

This table (opposite) shows the total number of full-time equivalents (FTEs).The difference between planned and actual numbers reflects the normal fluctuation in FTEs during the course of a year.

1.2.3 Strategic outcome #1: Vitality of communities

Performance objective  :	Summary of performance  :	Variance in budget intensity 3 :
Generate socio-economic spinoffs	Leverage4 : 1 $ from the Agency ⇒ 3,18 $ in investment 98% of promoters reported they could not have carried out their project without Agency financial assistance or could not have carried it out on the same scale or within the same timeframe.	↑ 7 %

Community vitality is linked to improved quality of life for citizens. It enables Quebec communities to be dynamic so they enjoy better socio-economic prospects and maintain and develop their economic activity base.

In 2007-2008, a larger share of grants and contributions spending was devoted to the Vitality of Communities strategic outcome than to Competitiveness of SMEs and regions.

Summary of progress made in relation to 2007-2008 program priorities

The Agency made it its priority to Intensify the economic diversification of regions and communities posting slow economic growth through one of its program activities, namely Development of communities. This priority contributed to the development of communities in Quebec, particularly those in the seven regions and 21 Regional County Municipalities (RCMs)⁵ suffering the greatest devitalization. The Agency’s efforts were translated into action through CEDI-Vitality, support for Community Economic Facilities (such as industrial parks, loading docks, railway lines and telecommunications systems), the Venture Capital Fund for Business Startups in the Regions and the Capital Fund for Business Succession. In line with this priority, the Agency had planned to invest $80 million in grants and contributions. Actual grants and contributions spending reached $90 million⁶ for the devitalized communities. For Development of communities overall, the Agency planned to spend $163 million, whereas its actual spending in the area totalled $166.7 million.

Summary of results and spending 7 (in thousands of dollars) in 2007-2008
Program activity	Anticipated results	Actual results (sample) 8	Planned spending	Total authorities	Actual spending	Link to Government of Canada performance: Strong Economic Growth 9
Development of communities	Development initiatives and projects generate socio-economic spinoffs within communities.	154 development initiatives and projects have been or are being carried out	163,010	173,960	166,681
	Communities benefit from enterprises that generate jobs and wealth.	An average of nearly 7.2 jobs created and maintained per funded SME, particularly in devitalized communities
	Communities are "attractive", tangibly drawing and retaining tourists and skilled individuals.	Eight community economic facilities (e.g. acquisition of the Matapédia-Chandler railway line) Increase of more than 400,000 tourists from outside Quebec
Infrastructure	Rural and urban communities have quality public infrastructure.	More than 1.4 million households have or will have acces to new or improved infrastructure.	100,10110	105,338	48,56210
Special intervention measures	N/A	N/A	8,07811	0	011

1.2.4 Strategic outcome #2: Competitiveness of SMEs and regions

Performance objective:	Summary of performance:	Variance in budget intensity 12 :
Improve the performance of enterprises and competitiveness of regions	Leverage: $1 from the Agency - $3.77 in investment13 94% of promoters reported they could not have carried out their project without Agency financial assistance or could not have carried it out on the same scale or within the same timeframe.	↓ 9 %

This second strategic outcome, Competitiveness of SMEs and regions, seeks to reinforce conditions conducive to the sustainable growth and competitive positioning of SMEs and regions through the development of SMEs’ strategic capabilities, networks, innovation and knowledge.

In 2007-2008, the share of total spending allocated to this strategic outcome decreased by 9% from 2006-2007, reflecting the priority given to the economic diversification of devitalized communities.

Summary of progress made in relation to 2007-2008 program priorities

Under this strategic outcome, the Agency’s priority for 2007-2008 was to Reinforce the performance of innovative SMEs in key sectors. To achieve this, the Agency stepped up its efforts to obtain results under its Competitiveness of enterprises (SMEs) program activity, particularly in the area of Development of enterprises’ capabilities. To this end, the Agency planned $54 million in contributions and grants spending in 2007-2008, while its actual spending amounted to $51.7 million. For Competitiveness of enterprises (SMEs) as a whole, the Agency forecast an investment of $74.5 million, whereas its actual spending in the area totalled $69 million. The rise in the value of the Canadian dollar may have made it more difficult or less appealing for SMEs to sell to the U.S. market. Consequently, the Agency saw a decrease in its investments in the implementation of foreign commercialization strategies.

Summary of results and spending 14 (in thousands of dollars) in 2007-2008
Program activity	Anticipated results	Actual results (sample) 15	Planned spending	Total authorities	Actual spending	Link to Government of Canada performance: Strong Economic Growth16
Competitiveness of enterprises (SMEs)	Enterprises are high-performance and competitive.	Average increase of $808,200 in revenues and $583,500 in foreign sales for funded SMEs, with 339 enterprises having improved their productivity	74,535	72,109	69,049
Competitive positioning of regions	Competitive regions and poles contribute to enhancing Canada's competitive positioning.	4,585 enterprises networked	44,551	45,443	45,515

1.2.5 Strategic outcome #3: Policies, representation and cooperation

Performance objective :	Summary of performance  :	Variance in budget intensity 17 :
Strengthen Quebec’s regional economies through policies, programs and actions that reflect the realities of the regions.	Quebec regions and communities benefit from adapted, coherent and effective federal action.	↑- 2 %

This third strategic outcome ensures Quebec’s regions and communities benefit from federal policies, programs and initiatives that reinforce the economic development of Quebec regions.

Summary of progress made in relation to 2007-2008 management priorities

One of the Agency’s management priorities for 2007-2008 was to Implement new programs in a coherent and effective manner. Through the development of tools and guidelines and staff training, the Community Diversification and the Business and Regional Growth programs were successfully implemented. The Agency further met its planned achievements under this priority by setting policies to guide delivery of these programs and by establishing a strategic plan for 2008-2011 (announced in June 2008) that better addresses the challenges and issues facing communities, enterprises and the regions.

Summary of results and spending 18 (in thousands of dollars) in 2007-2008
Program activity	Anticipated results	Actual results (sample) 19	Planned spending	Total authorities	Actual spending	Link to Government of Canada performance: Strong Economic Growth 20
Policies, programs and initiatives	Quebec’s regions and communities are benefiting from adapted, coherent and effective federal action (policies, programs and initiatives) that generates socioeconomic spinoffs, and Quebec’s communities and regions are harnessing business and development opportunities.	Two new core programs implemented Recommendations by 14 advisory committees in as many regions taken into account in the Agency’s 2008-2011 strategic plan Two trade missions to the U.S. organized Support initiative for international cruise development established with government bodies	6,588	6,590	6,578

1.2.6 Management priorities

In its 2007-2008 Report on Plans and Priorities (RPP), the Agency committed to pursuing four priorities, two of them targeting internal management as a means of helping it achieve its strategic outcomes. These management priorities consisted of Implementing new Agency programs (coming under the framework of the third strategic outcome) and Reinforcing results-based management.

In an effort to Reinforce results-based management, the Agency carried out a number of integrated planning, performance measurement, information management and evaluation activities that enabled it to register progress in this area:

• A first departmental plan arising from an integrated planning process was developed. In addition to laying out operational forecasts in a detailed manner, this plan incorporates financial and human resource aspects as well as the dimensions of risk management, performance, information and intersectoral collaboration.
• The performance measurement framework (standardized performance indicators) was put into operation. Business office advisors were given training and tools to enable them to carry out rigorous performance measurement.
• Performance information management practices were improved. The Agency placed particular emphasis on improving the quality of its performance data. The indicators to measure performance for all of the projects approved for funding in 2007-2008 were streamlined.
• The team of evaluators was strengthened. Through the evaluations conducted in Fiscal Year 2007-2008 (see table of evaluations²¹), the Agency was able to fine-tune its evaluation tools and methods and formulate judicious recommendations as to the timeliness of its interventions.
• A system to monitor the services offered and activities conducted by the business offices was put in place. This system will make it possible to track all of the resources used to carry out the activities that generate results in the regions.
• An action plan for improving management capabilities was developed and implemented. The evaluation conducted by the Treasury Board Secretariat (in accordance with the Management Accountability Framework²²) identified an improvement in the Agency’s performance in this regard.

1.2.7 Risk and issue analysis

General background

Certain external factors have had an impact on the Agency’s efforts in Quebec’s regions and communities. Indeed, it is largely due to the buoyancy of domestic demand that the Quebec economy grew by 2.4% in 2007, virtually the same rate it has averaged over the last five years but slightly lower than the average rate for Canada’s provinces as a whole (2.7%). The economy was invigorated by the growth in consumer spending, public spending and business investment. However, the strength of the Canadian dollar, coupled with the slowing of the U.S. economy, brought exports to a virtual standstill (+ 0,1%) and widened the trade deficit (more than $24 billion). Despite this, the Quebec labour market is faring relatively well, with employment growth affecting the different regions of the province to varying degrees.

Given the Quebec economy’s openness to the world, changes in the global economic context are considerably influencing growth in various sectors. The manufacturing sector, in particular, is feeling the impact of these changes. The rapid jump in energy and raw material costs in relation to manufacturers’ selling prices has put a major cost squeeze on enterprises. At the same time, the Quebec economy is grappling with the additional difficulty of finding skilled labour, a situation that could have a negative impact on its long-term economic growth.

Issues linked to Strategic outcome #1: Vitality of communities

Sectors that are predominantly present in the devitalized communities are undergoing adjustment. The economic situation in the forest industry has been characterized by heavy job losses over the past few years (nearly 30,000 jobs lost between 2005 and 2007). The softwood lumber dispute, high cost of fibre supply, rising energy costs, adjustments precipitated by the 20% reduction in stumpage rights and the high Canadian dollar have posed considerable challenges to the industry. The mining sector, for its part, is undergoing a good period marked by significant investment and job recovery. The revitalization of mining exploration activities in Quebec is the result of the rise in base metal prices generated by growing, sustained demand from emerging countries.

Issues linked to Strategic outcome #2: Competitiveness of SMEs and regions

The Agency has had to deal with a number of challenges relating to productivity, innovation, energy and enterprise performance in its efforts to support the competitiveness of Quebec’s SMEs and regions. Productivity in Quebec is lower than the national average and lags behind that of most Organisation for Economic Cooperation and Development (OECD) countries. This has demanded the need for a higher level of investment in machinery and equipment. The strong Canadian dollar has translated into lower prices on the global market, thereby encouraging investment in leading-edge technologies. Sustained effort in innovation also helped improve business productivity. But despite their active involvement in research and development, Quebec enterprises, and SMEs in particular, had a hard time bringing their innovations to market. The higher transportation costs brought on by rising fuel prices made distance an undermining factor in the competitiveness of some regions and sectors. In contrast, the rise in fuel prices also had an incidence on the long-term impact of the relocation of manufacturing operations to emerging markets by forcing enterprises to move closer to their respective markets.

Management issues

Results in regional economic development take time to materialize. To adequately report on the performance of the new programs, it is therefore necessary to track the funded projects over several years and make use of various sources of data to determine the impact of the Agency’s interventions on the communities and SMEs it supports.

1.2.8 Profile of expenditures

The Agency’s actual expenditures for 2007-2008 reached $336.4 million, of which $285.8 million was grants and contributions spending. The Agency plans to gradually decrease its expenditures over the coming years to $218.1 million in total spending in 2010-2011, of which $174.8 million for grants and contributions. This decrease is mainly attributable to the completion of temporary funding awarded for such specific projects as the 400th anniversary of Québec and the Chantier de l’économie sociale Trust as well as to the termination of mandated programs (Infrastructure Canada Program and CANtex) for which the Agency receives dedicated funding. Excluding the amounts relating to the additional funds for strategic investments in permanent funding, Agency spending has remained relatively stable. The following chart shows the evolution of grants and contributions spending over a six-year period.

Grants and Contributions Spending Trends

1.2.9 Voted and statutory item

This table repeats the summary table from the Main Estimates and shows appropriations voted (Main Estimates) by Parliament; resources provided for in the Report on Plans and Priorities 2007-2008; level of spending authorized (total authorities) as per changes made in the Supplementary Estimates; and funds used (actual expenditures).

			2007-2008 (in thousands of dollars)
Vote or statutory item	Truncated vote or statutory wording	Main Estimates 23	Planned spending	Total authorities	Actual expenditures
1	Operating expenditures	42,357	44,444	48,675	45,663
5	Grants and contributions	346,842	346,842	349,822	285,784
(S)	Contribution to employee benefit plans	5,501	5,577	4,934	4,934
(S)	Spending of proceeds from disposal of surplus Crown assets	—	—	9	4
Total		394,700	396,863	403,440	336,385

The $60.5 million variance between total planned and actual spending is primarily attributable to the deferral to the coming year of planned infrastructure spending

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