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

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2 Analysis of Program Activities by Strategic Outcome

2.1 Strategic outcome #1: Vitality of communities

Many regions and communities that have traditionally resource-based economies and are geographically distant from major markets are having a hard time diversifying their economic base. Because of their strong economic reliance on a small number of industries or sectors, these communities are often the ones most severely hit in the event of a crisis in one of their predominant sectors.

It is with this in mind that the Agency carries out its mission to help Quebec communities posting slow economic growth improve their development capabilities and dynamism. The Agency also intervenes financially in all communities to renew and help build infrastructure that will ensure citizens a better quality of life.

The Agency pursues Strategic outcome #1: Vitality of Communities through three program activities:

• Development of communities – by developing a community in terms of its capabilities for socio-economic adjustment, support for emergence of new entrepreneurs and creation of small- and medium-sized enterprises, attraction of tourists and attraction and retention of skilled individuals
• Infrastructure – by renewing and building quality public infrastructure in Quebec’s rural and urban communities
• Special intervention measures – by supporting communities facing major economic shocks.

In Fiscal Year 2007-2008, a larger share of the Agency’s funding was devoted to the Vitality of communities strategic outcome, and more specifically to the Development of communities program activity, which accounted for 50% of Agency spending.

2.1.1 Program activity: Development of communities

Program activity summary

A community’s vitality depends on its ability to develop, grow and thrive by building on its own assets. The Agency promotes the dynamism of Quebec’s communities by helping them maintain and develop their economic activity base.

The objectives pursued by the Development of communities program activity are:

• Community mobilization: fostering communities’ development and increasing their mobilization by drawing up visions and projects of local and regional scope
• Community development²⁷: assisting communities through support for entrepreneurship and through creation or maintenance of viable enterprises
• Attractive communities²⁸: increasing communities’ capability to attract tourists and skilled individuals.

The Agency provided direct support to SMEs and NPOs through its Community Diversification grants and contributions program as well as funding to development organizations Community Futures Development Corporation (CFDC), Community Economic Development Corporation (CEDC), Business Development Centre (BDC) through the CFP.

Agency intervention under this program activity was linked to the Intensifying the economic diversification of regions and communities posting slow economic growth priority and targeted more specifically Quebec’s seven regions and 21 RCMs²⁹ suffering devitalization. This priority was pursued through the following initiatives: the Community Economic Diversification Initiative – Vitality (CEDI-Vitality) and support measures for business startups in the regions, business succession and community economic facilities.

Analysis of performance and benefits to Canada

Certain external factors had an impact on the communities supported by the Agency. Indeed, the slowing of the U.S. economy, rise in the Canadian dollar, soaring energy and raw material costs and competition from emerging countries (e.g. China and India) had an effect on the manufacturing sector, among others. Moreover, restructuring of the forest industry continued, impacting many of the communities (some of them devitalized) that rely on the sector. Some of these communities are more vulnerable due to their low level of economic diversification or they are facing such challenges as insufficient and obsolete community infrastructure.

The total value of the 674 projects supported by this program activity was $1.3 billion, a third of which (or $408.8 million) was from Agency contributions.

Total actual spending for current projects stood at $166.7 million for Fiscal Year 2007-2008, slightly higher than the $163 million in planned spending.

Of this $166.7 million in actual spending by the Agency in 2007-2008:

• $39 million³⁰ went to supporting such local and regional development organizations as the CFDCs, BDCs and CEDCs (including the Venture Capital Fund for Business Startups in the Regions and Capital Fund for Business Succession). These investments contributed to the creation and maintenance of 14,569 jobs. The funds, for their part, clearly helped make venture capital more accessible in the regions for succession and startup activities.³¹ Both initiatives posted good results in terms of the number of projects supported and volume of capital made available in the targeted regions. The evaluation of the initiatives confirmed the need for these funds in regions experiencing slow economic growth or an entrepreneurial shortage.
• $5.7 million was invested in the Chantier de l’économie sociale Trust.³² This funding made it possible to grant 12 loans to social economy enterprises and generate $25 million in investment.

The Agency also funds Canada Business Service Centres (CBSCs),³³ which provide government information and referral services to business. Operating expenditures for 2007-2008 were $1.7 million, while annual operating budgets stood at $1.8 million. The CBSCs responded to more than 26,000 requests for information, of which some 4,800 were received in person and 17,600 over the phone.

Maintaining or improving the quality of life in communities is a prerequisite to creating the kind of environment that enables enterprises and regions to become more competitive. The Agency supported projects that help set these conditions by, among other things, mobilizing communities experiencing slow economic growth, creating and maintaining jobs and improving tourist attractions.

In a tangible sense, as of March 31, 2008, Agency funding through its initiatives had enabled:

• mobilization of 31 heavily devitalized communities (notably in Chandler, New-Richmond and Basse-Côte-Nord) through the establishment of an economic diversification or development plan
• implementation of 154 initiatives that will help generate socio-economic spinoffs within these communities (e.g. enhancement of non-forest timber products, direct-sales activities, activities arising from a recovery plan, etc.)
• investment of $72.8 million in the creation, development or maintenance of 139 SMEs
• an annual average increase in sales of $486,000 (46 SMEs)
• creation or maintenance of 2,354 jobs (or 7.2 jobs created or maintained per assisted enterprise³⁴)
• targeted intervention in the commercialization of tourism offerings, producing $58.1 million in investment, the creation or improvement of 52 tourist attractions and an increase of 400,000 tourists from outside Quebec
• an average increase in sales of $368,100 for 19 tourism operators
• a total investment of $119.3 million in the creation, modernization or expansion of eight community facilities. Of this amount, $35 million was invested ($14.5 million of it Agency-approved assistance) through the Community Economic Facilities support initiative (e.g. acquisition of the Matapédia-Chandler railway line). Despite the magnitude of this investment, the results of interventions of this nature generally only tend to become tangible in the longer range. As such, the Agency intends to rely on impact studies to track the economic spinoffs generated by these interventions over the coming years.

Based on an annual survey conducted within the framework of this report, 98% of promoters said 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. Such a high percentage is evidence of the incentive nature of Agency financial assistance. In conclusion, the performance of the Development of communities activity program indicates that progress has been made in terms of the achievement of desired outcomes. Indeed, the Agency realizes that socioeconomic spinoffs from this intervention will take longer to materialize than under other program activities due to its emphasis on slow economic growth regions.

Lessons learned

The Agency decided to pursue its Community Economic Diversification Initiative – Vitality (CEDI-Vitality) to achieve better results and more effective actions to strengthen the economic base of devitalized regions. The Agency also developed and unveiled the Major Economic and Tourism Facilities initiative to help regions improve their drawing power and increase their economic spinoffs from tourism. This measure includes the following components: Community Economic Facilities (announced in Fall 2006), Access to broadband services in the regions, International Cruise Development along the St. Lawrence and Saguenay Rivers, and Major Tourism Facilities.

The Agency is also working to further incorporate its commitments on official language minority communities, sustainable development and multiculturalism into its planning operations.

These efforts by the Agency will ensure more effective support of devitalized communities through initiatives that reflect its priorities, thereby better helping these communities achieve economic diversification and long-term prosperity.

2.1.2 Program activity: Infrastructure

Program activity summary

The quality of community infrastructure has an impact on citizens’ quality of life. Quality infrastructure enables a community to attract and retain businesses and workers to secure its economic and social future. It also ensures the safe and efficient circulation of people and merchandise.

It is in this spirit that the Government of Canada has introduced a series of infrastructure support programs since 2000 and, among others, in October 2000, it signed an agreement with the Government of Quebec on implementation of the Infrastructure Canada Program (ICP).³⁵ In July 2005, this agreement was amended to extend the term of the ICP to March 31, 2011, and to incorporate a new program: the Municipal Rural Infrastructure Fund (MRIF). The MRIF came into effect July 18, 2005, and the deadline for project approval is December 31, 2008.

The Agency has full responsibility over administration of the ICP. With regard to the MRIF and Canadian Strategic Infrastructure Fund (CSIF) projects, the Agency partners with Infrastructure Canada in delivering these initiatives. Infrastructure Canada reports on the MRIF and CSIF activities and results in its departmental performance report.³⁶

The ICP is aimed at the repair, replacement or construction of infrastructure and includes three components: water quality, highways and public transit, and assets with urban or regional economic impacts.

The ICP’s objectives are to:

• improve the quality of the environment
• support long-term economic growth
• enhance community infrastructure
• build 21st century infrastructure by using the best technologies, new approaches and best practices.

Analysis of performance and benefits to Canada

The total value of the 127 active³⁷ ICP projects was $785.5 million, $228 million of it from Agency funding. Actual spending for the year totalled $48.6 million, while planned spending as reported in the 2007-2008 RPP was $100 million. This variance is attributable to the carry-over of unclaimed expenses from the year.

The funded activities consisted of investments in Quebec municipal, urban and rural infrastructure to improve the quality of the environment so as to support long-term economic growth, enhance community infrastructure and build 21st century infrastructure.

As of March 31, 2008, the projects funded since the start of the program³⁸ had yielded the following benefits:

• 3,873 households connected or to be connected to a municipal water system
• 549,744 households connected or to be connected to a municipal water system supplying better-quality drinking water
• 19,063 additional households connected or to be connected to a municipal sewage collection and water treatment system
• 847,788 households connected or to be connected to an improved sewage collection and water treatment system
• 262 communities with improved highways and public transit infrastructure
• 90 communities with improved sports, recreational and cultural facilities
• 880 permanent jobs created as a direct result of these projects.

A post-program evaluation of the ICP is under way to determine project outcomes.

Lessons learned

Based on the high number of applications received, the ICP clearly answers a real need in Quebec’s regions. This strong demand justifies the need to pursue other infrastructure programs. In the 2007 Speech from the Throne, a new infrastructure program—the Building Canada Plan—was announced to help Canada’s provinces, territories and communities build modern, 21st century infrastructure.

2.1.3  Program activity: Special intervention measures

Program activity summary

Special intervention measures are intended to support communities or regions facing significant economic shocks or natural disasters. In such situations, where additional dedicated funding is provided by the Government of Canada, the Agency temporarily institutes special adjustment measures to enable communities to sustain their economic activity and undertake action to find a new balance or regain economic stability.

This program activity has two objectives:

• Community adjustment to economic shocks: facilitate identification and implementation of development and diversification opportunities in communities faced with the loss of major sources of employment. The Agency provides assistance to communities and regions facing significant economic shocks.
• Community adjustment to natural disasters: facilitate adjustment by communities confronted with natural disasters.

Analysis of performance and benefits to Canada

In the past, the Canadian Apparel and Textile Industries Program (CANtex) was considered a special intervention measure. This has been changed in light of the fact that the program seeks to support SME competitiveness in response to a sectoral crisis rather than to an economic shock. Therefore, the Agency accounted for the interventions carried out through the CANtex program in 2007-2008 under Competitiveness of enterprises (SMEs), and more specifically under Development of enterprises’ capabilities. The new performance measurements were thus applied in connection with the targeted objectives and outcomes. As such, the actual spending and human resources used for the program now figure under Competitiveness of enterprises (SMEs).

2.2 Strategic outcome #2: Competitiveness of SMEs and regions

Enterprises and regions are operating in an increasingly integrated economic environment characterized by, among other things, the growing presence of emerging economies (e.g. China and India). Coupled with the acceleration in technological advances, this situation has resulted in increased opportunities (access to new markets and new ideas) as well as in greater need for adjustment (reassignment of workers, new business models). Raising the competitiveness of SMEs and regions will help generate wealth and create jobs.

Given this environment, the Agency focuses its actions supporting SMEs and NPOs in the area of competitiveness on the development of strategic capabilities, networks, innovation and knowledge and the attraction of investment. These interventions are ultimately aimed at reinforcing conditions conducive to the sustainable growth and competitive positioning of the regions and of SMEs.

In pursuing this strategic outcome, the Agency supported the following two components:

• Competitiveness of enterprises (SMEs) – by helping enterprises improve their performance and competitiveness and become more innovative to facilitate their sustainable growth.
• Competitive positioning of regions – by promoting the development of clusters, the transfer of technology and research outputs to enterprises and the creation of conditions conducive to the attraction of foreign investment and international organizations.

Of these components, the Agency concentrated its funding primarily on Competitiveness of enterprises (SMEs). Consequently, the results achieved through this strategic outcome are due to efforts to improve SME performance.

2.2.1 Program activity: Competitiveness of enterprises (SMEs)

Program activity summary

This program activity enables enterprises to improve their performance and competitiveness through higher productivity, income earned and number of jobs in the regions, thereby contributing to the creation of conditions conducive to sustainable growth.

Mainly targeting SMEs and NPOs, this program activity is carried out through two grants and contributions programs, namely Business and Regional Growth and the Canadian Apparel and Textile Industries Program (CANtex).

To support the competitiveness of SMEs, the Agency fostered:

• Development of enterprises’ capabilities⁴² – by improving SME capabilities for management, innovation, adoption of leading-edge technologies, market development and integration within global production chains
• Development of strategic enterprises – by supporting the establishment and early expansion phases of enterprises in economic sectors considered strategic to a region’s development so as to consolidate its economic base.

Analysis of performance and benefits to Canada

The higher Canadian dollar, increased energy costs and economic slowdown in the United States have had the effect of checking the intensity of enterprises’ market development activities in the U.S., causing a drop in their export growth. At the same time, the rise in the Canadian dollar has also brought about a decrease in the acquisition cost of machinery and equipment, thereby bolstering investment in higher-performance equipment that consequently helped enterprises improve their productivity.

The total value of the 594 projects recorded under the Competitiveness of enterprises (SMEs) component in 2007-2008 reached more than $780 million, of which $181.9 million was from Agency funding.

In 2007-2008, actual spending for projects in execution amounted to $69 million, whereas planned spending for the year stood at $72 million. Despite this gap, the Agency’s share of investments rose by 13% over 2006-2007.

Of these expenditures, grants and contributions spending for the CANtex program accounted for $4.2 million in funding to 52 enterprises. Twenty-two of these enterprises recorded gains in productivity and an average increase in sales of $758,000.

In a global environment, an enterprise’s competitiveness hinges on its ability to be innovative with respect to products and processes, all the way from its sale and after-sale services right through to its integration in major distribution and manufacturing networks. In 2007-2008, the Agency therefore strove to maximize the impact of its investments by putting priority on raising the strategic capabilities of enterprises. The following are performance results that helped further the goal of building a strong economy for Canadians:

• on average, one specialized resource hired per firm, for a total of 148 specialized resources (112 enterprises), to help develop sustainable internal strategic capabilities within these enterprises
• an average increase in sales of $808,200 generated over the course of the year (154 enterprises)
• an average increase in foreign sales of $583,500 (83 enterprises) through market development projects
• export support organizations⁴³ served 3,708 enterprises, of which 484 were new export firms. Of the 1,679 export enterprises supported in all, 194 reported increases in foreign sales
• commercialization of products and services derived from R&D accounted for an average increase in sales of $385,300 for 17 enterprises assisted
• 339 enterprises improved their productivity or carried out projects enabling them to meet the requirements of major contract givers
• an average of 11.2 jobs created per innovative enterprise established or expanded (38 projects).

To stimulate the emergence of innovative enterprises, the Agency has provided funding to 10 technology incubators over the past few years. In 2007, a study was conducted comparing eight technology incubators funded by the Agency to nine others on the international level.⁴⁴ An estimated 57% of enterprises having received incubation services are still in operation five years after the fact, compared to the average survival rate of 35% for new enterprises.⁴⁵ Each Quebec incubator brought in 11 new enterprises per year over the past five years and incubated some 20 firms at a time. Of this number, seven enterprises per incubator per year successfully completed their incubation period. These results are comparable to those observed for the sample group of international incubators. Moreover, the study showed that, on average, each Quebec incubator contributed to the maintenance and creation of 122 jobs within the incubated enterprises as a whole.

Based on the annual survey conducted within the framework of this report, 94% of promoters said 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. Such a high percentage is evidence of the incentive nature of Agency financial assistance. In fact, the Agency’s intervention helped the enterprises that received assistance improve their performance and ability to compete in a highly-competitive market.

Lessons learned

The Agency helped SMEs raise their export capabilities through, among other things, the Partnering with Enterprises for Commercialization measure introduced in Fall 2006. However, as this initiative did not entirely answer the needs of SMEs, the Agency implemented a new export support measure better suited to SME needs in June 2008.

2.2.2 Program activity: Competitive positioning of regions

Program activity summary

This program activity is aimed at improving the regions’ international competitiveness by enhancing their knowledge and competitive advantages on the international stage. It is intended mainly for SMEs and NPOs and supported by the Business and Regional Growth grants and contributions program.

The program activity's two targeted objectives are:

• developing and consolidating regional competitiveness poles and national- and international-calibre poles of excellence; to achieve this, the Agency intends to foster innovation and networking of knowledge players, sustain development of a critical mass of knowledge in the sectors and regions and support technology enhancement and transfer
• enhancing the international competitiveness of Quebec’s regions; to achieve this, the Agency plans to favour the integrated promotion of locational factors, attraction of direct foreign investment and reinvestment by foreign enterprises already established in Quebec.

Analysis of performance and benefits to Canada

The total value of the 118 projects registered under the Competitive positioning of regions component in 2007-2008 totalled more than $555 million. Of this amount, $162.7 million represents Agency funding.

The actual spending for projects in execution stood at $45.5 million in 2007-2008 versus planned spending of $44.5 million as stated the 2007-2008 RPP.

The international competitiveness of the regions is achieved through cluster networking activities, applied research conducted collaboratively by innovative SMEs and knowledge institutions, technology transfers and international promotion of regional assets. To maximize the Agency’s investments in competitiveness of the regions, the activities carried out in 2007-2008 focused on supporting the development of clusters and international promotion and prospecting activities to attract foreign investment and encourage the setting up of international organizations. Through these activities, the following performance results helped further the goal of building a strong economy for Canadians:

• 4,585 enterprises participate in activities of 25 networks
• an average of $3 million invested in 28 applied research projects involving 559 enterprises
• 513 technology transfers carried out among the 659 enterprises having benefited from technology transfer services
• 23 spin-off enterprises resulting from the technology transfer activities
• helped bring about $783 million in direct foreign investment and the creation and maintenance of 3,700 jobs in Quebec
• helped bring about the establishment of three international organizations in Montréal.

In summary, the Agency’s interventions helped make the regions more competitive and the poles better able to contribute to improving Canada’s competitive standing.

Lessons learned

To help achieve Strategic outcome #2: Competitiveness of SMEs and regions, the Agency focused its efforts in 2007-2008 on reinforcing the capabilities of enterprises, an essential condition to ensuring the competitive positioning of the regions. The Agency will continue to address the needs of SMEs to that end.

2.3 Strategic outcome #3: Policies, representation and cooperation

Under its constituting legislation, the Agency has the power to establish policies and programs aimed at promoting the development and diversification of the economy of the regions of Quebec while fostering cooperation and complementarity with Quebec and Quebec’s communities.

With this strategic outcome, the Agency seeks to identify the needs of Quebec’s regions and communities with respect to regional economic development and to address these through policies, programs and initiatives, and by carrying out representation and collaboration activities.

Given the local and regional focus of the Agency’s actions, it became essential that advisory committees be put in place to take the pulse of the regions. As a result of this participatory process, the policies, programs and initiatives of the Agency have become increasingly tuned in to Quebec’s regional realities.

To achieve this strategic outcome:

• The Agency helps development stakeholders make enlightened and informed decisions by conducting and disseminating analyses and research on new trends, issues and challenges in regional development.
• The Agency raises awareness about issues in Quebec’s regions through representation and influence so that Government of Canada decisions affecting regional development better reflect the realities of the regions of Quebec.
• The Agency ensures sound management of public funds through collaborative action with other government bodies involved in economic development.

2.3.1 Program activity: Policies, programs and initiatives

Program activity summary

This program activity enables Quebec’s regions and communities to benefit from federal action that allows for, among others, the production and dissemination of regional economic development knowledge that is helpful to development stakeholders, and to take advantage of business and development opportunities.

Four objectives underpin this program activity:

• Analysis and research: helping development stakeholders gain access to facts and information necessary to enlighten their reflections and facilitate their decision-making on trends, issues and challenges in development.
• Policies and programs: addressing the needs of Quebec’s regions and communities through development of adapted and coherent strategic directions, programs, initiatives, policies and guidelines.
• Representation and influence: enabling Quebec’s regions and communities to benefit from actions influencing government directions and decisions on regional development so that they better reflect the particular realities of the regions.
• Cooperation and collaboration: enabling Quebec’s regions and communities to benefit from coherent, effective and concerted action wherever issues, needs or opportunities could be served by collaboration with federal or non-federal bodies or where such collaboration is necessary or advantageous to the Agency or the Government.

Analysis of performance and benefits to Canada

The Agency’s performance is measured on the basis of the implementation of two main programs (Community Diversification and Business and Regional Growth), the initiatives and the development of the 2008-2011 strategic plan. In order for the programs to achieve their desired outcomes, the Agency invested significant effort in the training and guidance of its advisors in the regions to ensure optimal implementation. In benefiting from programs and initiatives that reflect regional realities, Quebec’s regions and communities were better supported and equipped to strengthen their contribution to national economic growth. Moreover, and again with a view to support implementation of the Agency’s programs and to achieve targeted outcomes, criteria and guidelines were developed and implemented in relation to festivals and sporting events as well as to non-profit organizations.

This was how the Agency was able to fulfil its mandate and thus contribute to the vision of the Government’s Advantage Canada – Building a Strong Economy for Canadians plan to create jobs, help entrepreneurs start up businesses and invest in dynamic communities.

Based on the consultations held with the advisory committees on, among other things, the niches and sectors the Agency should be prioritizing to foster the development of the regions, a certain number of priority intervention areas were established. This ensured that the realities of the regions were taken into account in the Agency’s decision-making process. Indeed, the Agency unveiled its strategic plan for 2008-2011, placing increased emphasis on community and enterprise needs. This consultation mechanism also enabled the Agency to share some of the recommendations it received with other departments so as to inform them of and sensitize them to the issues identified by the advisory committees.

Through its mandate to promote the economic development of Quebec, the Agency works with Industry Canada, the Atlantic Canada Opportunities Agency and Western Economic Diversification in implementing Industry Canada’s Industrial and Regional Benefits Policy. Within this framework and in collaboration with development stakeholders, the Agency organized two trade missions to the United States, one in the defence and aerospace sector and the other involving major Crown projects, in an effort to help Quebec enterprises harness new business and development opportunities. With respect to the defence and aerospace mission, four enterprises have already negotiated contracts valued at nearly $400,000, with prospective contracts evaluated at as much as $18.3 million.

The Agency also collaborated with the Ministère du Tourisme du Québec and the federal Fisheries and Oceans, Transport Canada and Canada Border Services Agency departments to establish a support initiative for international cruise development.

Leçons retenues

The work of the 14 advisory committees (composed of business and economic development representatives) made it possible to more accurately pinpoint the needs of communities and better target the Agency’s strategic directions. Consequently, the new initiatives and measures or the improved measures put forth in the 2008-2011 strategic plan will serve to capitalize on the results of this exercise.

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