ARCHIVED - RPP 2007-2008
Economic Development Agency of Canada for the Regions of Quebec

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2 Agency Priorities and Plans

The purpose of this section is to present the four priorities and associated plans for 2007-2010. The Agency's overall intervention is explained in section 3, which presents total planned spending by program activity.

For the next three years, the Agency has selected the following priorities and plans:

Planned spending1 ($ thousands)		2007-2008	2008-2009	2009-2010
PROGRAM PRIORITIES
Priority #1: Intensify the economic diversification of regions and communities posting slow economic growth, through the following plan: Community Economic Diversification Initiative – Vitality (CEDI-Vitality) Community Economic Facilities for the Regions support measure Venture Capital Fund for Business Startups in the Regions Capital Fund for Business Succession Special attention to target groups (linguistic minorities, Aboriginals and visible minorities).	Type Already established	80,000	64,000	60,000
Planned outcomes: See results under the Development of communities program activity with respect to collective capital, entrepreneurship and attractive communities (subsection 3.1.1).
Priority #2: Reinforce the performance of innovative, competitive SMEs in key sectors, through the following plan: reinforcement of enterprises' strategic capability partner in enterprises' commercialization on foreign markets advisory committees for more effective partnership with the regions.	Type already established	54,000	47,000	49,000
Planned outcomes: See results under the Competitiveness of enterprises program activity with respect to Enterprises' capabilities (subsection 3.2.1).
MANAGEMENT PRIORITIES
Priority #3: Implement the Agency's new programs Priority #4: Reinforce the Agency's results-based management capability and initiate integrated planning.

Note:
1 Planned contributions and grants expenditures.

These priorities are of two types: two program priorities, and two management priorities. The Agency's program priorities aim to intensify the economic diversification of regions and communities posting slow economic growth and reinforce the performance of innovative, competitive SMEs in key sectors. The Agency intends to devote some $350 million from its contributions and grants budget to these two priorities (50% of that budget). The management priorities are aimed at implementing the Agency's new programs, reinforcing the Agency's results-based management capability and initiating integrated planning. The management priorities tie in with the spirit of lifelong learning that is strongly promoted by the Agency and enables it to match its overall resources ever more closely with the priorities identified, along with increasing its effectiveness.

The Agency's priorities, as well as its overall intervention in regional development, are intended on the one hand to be in line with the federal government's major priorities and on the other hand as a response to the context of the socio-economic development of Quebec and its regions and to its management challenges.

2.1 Context of Agency intervention

2.1.1 Institutional context: Government priorities

The Government of Canada recently tabled its long-term economic plan, Advantage Canada – Building a Strong Economy for Canadians,¹ to increase economic prosperity, today and tomorrow.

This economic plan is based on five key advantages. The last three are especially relevant to the Agency, in view of its mission:

• tax advantage, to reduce taxes for all Canadians and establish the lowest tax rate on new business investment in the G7
  
  
• fiscal advantage, to eliminate Canada's total government net debt in less than a generation
  
  
• entrepreneurial advantage, to increase competition on the Canadian market
  
  
• knowledge advantage, to give Canada the best educated, most skilled and most flexible workforce in the world
  
  
• infrastructure advantage, to build modern, world-class infrastructure.

This plan also contains principles that will guide the review of issues and decision-making within the government, and thus the Agency. These principles are as follows:

• focussing government on what it does best so it is efficient and effective, and gets results for people, notably responsible spending
  
  
• creating new opportunities and choices for people, for instance, by retaining and attracting to Canada the most talented people (e.g., innovators, entrepreneurs, researchers), and by bringing under-represented Canadians into the country's economic mainstream: Canadians with low and modest incomes, Aboriginals, older workers, persons with disabilities and immigrants
  
  
• investing for sustainable growth, particularly in three crucial areas: research and development (R&D), the environment, and infrastructure, to ensure that investment reflects national priorities, is aligned with the needs of enterprises and contributes to a clean and healthy environment
  
  
• freeing enterprises to grow and succeed, by encouraging them to invest more in training, machinery, equipment and innovation.

2.1.2 Socio-economic context

The Agency carries out its mission in a context where globalization, in particular the strong growth of such economies as China, India or Brazil, has led to an intensification of the competition faced by a number of the traditional industries which sustained Quebec and its regions for decades, as well as a number of the new industries on which the future success of the Quebec economy increasingly depends.

The growth of the Quebec economy has been steady since the mid-1990s. Thus, employment grew substantially and the unemployment rate hit its lowest level (8% in 2006) since 1974. However, a slowdown in economic growth is anticipated over the next few years. This will be modest at best, and lower than the Canadian average, tempered by the high level of the Canadian dollar and restructuring in the manufacturing sector. Job creation is therefore to be expected to slow down.

The Quebec economy is facing some sizeable challenges, three of which in particular held the Agency's attention.

First, there are substantial economic disparities among Quebec's regions. Added to this observation is the slowdown, and indeed the elimination, of certain traditional economic activities in the manufacturing sector (which lost 68,000 jobs between 2002 and 2006) and natural resources (the forestry sector lost 19,000 jobs between 2002 and 2006). Several Quebec regions and communities are experiencing adjustment difficulties owing to global competition, the higher Canadian dollar and the scarcity of or increasingly difficult access to the resource, making them more vulnerable to economic changes. In view of this new state of affairs, Quebec's regions will have to take foot in new markets and design or implement business models and adopt technology and processes that will enable them to distinguish themselves in industries under direct assault from foreign competition.

All Quebec regions have to face the aging of the population, workers and business leaders, and a number face the departure of some of their young talent toward other regions, and even other provinces and countries. These phenomena jeopardize the ability to create wealth, and social cohesion, particularly in certain communities that are remote or those experiencing economic difficulties. The establishment of a healthy entrepreneurial climate and the creation of sustainable jobs will go a long way toward mitigating both these phenomena.

Second, Quebec's regions have to continue diversifying their activities and pursue their gradual transformation into an economy where export and innovation capability plays an increasingly important role. Indeed, the experts agree that opening up markets presents opportunities, as well as enormous challenges for SMEs, whose competitiveness largely depends on their ability to stake out a position on international markets. Exports represent a significant portion of Quebec's economic activity. However, this proportion has been falling over the past five years, from 60.8% of gross domestic product (GDP) in 2001 to 52.8% of GDP in 2005. SMEs' competitiveness also depends considerably on their ability to innovate. Indeed the challenge of commercializing new products is particularly great for Quebec SMEs. Note that Quebec lags behind on the productivity front. Thus, Quebec's labour productivity is 9.6% lower than Ontario's, and 5.9% beneath the Canadian average. Finally, while Quebec leads Canada in terms of industrial R&D spending in relation to the size of the economy (the province has seen a strong increase in R&D spending, the number of enterprises performing R&D and the labour force dedicated to R&D since 1994), the commercial revenues of those performing R&D lie beneath the Canadian average.

Third, the regions will have to mobilize all their resources successfully behind the objectives they have set for themselves. It is often at the local and regional levels–closer to problems and individuals–that needs are manifested and solutions developed. To that end, their regional leaders will have in particular to take into account the requirements of citizens who expect public bodies to lend an attentive ear to their needs, operate highly transparently, manage precisely and effectively the sums entrusted to them and work closely with all people, corporations and organizations likely to contribute to meeting the regions' challenges.

2.1.3 Agency organizational context

On October 5, 2005, the Act establishing the Agency came into effect. This new statute emphasizes the development and diversification of the economy of the regions of Quebec, in particular the regions posting slow economic growth. It encourages close cooperation with local organizations and the Government of Quebec.

In order to adjust its intervention framework to the new issues generated, on the one hand, by market globalization and the new world economic order and, on the other hand, the challenges specific to Quebec's regions, the Agency has set up new strategic directions² for 2006 2011.

These directions constitute the Agency's long-term strategy for meeting the challenges of regional development in Quebec. They are based on an integrated vision of regional development. It is by focussing its intervention and investment on the vitality of communities, the competitiveness of SMEs and the competitive positioning of regions that the Agency intends to energize the regions of Quebec, thus contributing to their prosperity and to a lasting improvement in Quebecers' quality of life and standard of living.

To anchor its strategic directions firmly in its action, the Agency recently developed new programs, based on its Program Activity Architecture (PAA),³ that will be in place from April 1, 2007. These new separate but interdependent programs reflect the main conclusions drawn from evaluations of prior programming. They target the vitality of communities, competitiveness of SMEs and regions, and strategic research. These programs are:

• CED-Community Diversification Program
• CED-Business and Regional Growth Program
• Regional Development Research Program.

To enhance federal institutions' management capability, the Government of Canada introduced the Management Accountability Framework (MAF)⁴ three years ago. This framework provides a comprehensive, integrated model for management and management practices improvement. The MAF aims to reinforce managers' accountability with respect to 10 major components summarizing the Government of Canada's expectations. The Agency is required to implement all the components of the MAF. It will do so gradually. Indeed, it was recently evaluated by the Treasury Board Secretariat (TBS) and will develop an action plan to address TBS's recommendations.

2.2 Priorities and plans

The 2007-2008 development priorities are in line with those mentioned in last year's RPP. In fact, in view of the socio-economic context, the Agency has chosen to intensify its action in order to support the diversification and vitality of regions and communities posting slow economic growth and the performance of innovative, competitive SMEs in key sectors.

The same is true for management priorities; the Agency will continue the action undertaken last year with respect to policy development and program design by emphasizing the implementation of new programs. It will also pursue its efforts on the results-based management front.

In addition, the Agency recently drafted its fourth Sustainable Development Strategy, which is in line with the federal government's common objectives for sustainable development. The commitments made in the 2007-2010 action plan are an integral part of the Agency's activities. It intends to continue contributing to activities which yield tangible results, in relation both to SMEs and to the regions of Quebec.

2.2.1 Program priorities⁵

Priority #1: Intensify the economic diversification of regions and communities posting slow economic growth

As its first priority, the Agency wishes to intensify the economic diversification of regions and communities posting slow economic growth. The planned grants and contributions budget is approximately $200 million over three years. Through this priority, the Agency is intensifying its efforts to achieve the outcomes of the Development of communities program activity.

The Agency intends to support and foster the completion of projects likely to respond to the issues specific to those communities in order to mitigate socio-economic adjustment difficulties, renew the entrepreneurial base and facilitate economic diversification by building on their specific assets and potential on the industrial, tourism, cultural or knowledge fronts.

The Agency intends to contribute to reinforcing the economic activity of regions posting slow economic growth, in particular seven devitalized regions (Abitibi-Témiscamingue, Bas-Saint-Laurent, Côte Nord, Gaspésie—Îles-de-la-Madeleine, Mauricie, Nord-du-Québec and Saguenay—Lac-Saint-Jean) and 21 regional county municipalities (RCMs) whose devitalization index is high. Certain parts of these regions and RCMs are far from the major North American consumer markets. They show little economic diversification, and this makes them vulnerable when demand for their main products flags, and they have increasingly to adjust to the tightening of rules governing the harvesting of their natural resources (e.g., reduced stumpage dues).

To realize this priority, the Agency intends to implement the following plan:

• Community Economic Diversification Initiative – Vitality (CEDI-Vitality)
• Community Economic Facilities for the Regions support measure
• Venture Capital Fund for Business Startups in the Regions
• Capital Fund for Business Succession
• Special attention to target groups (linguistic minorities, Aboriginals and visible minorities).

Community Economic Diversification Initiative – Vitality (CEDI-Vitality)

There are substantial economic disparities among the regions of Quebec. The prosperity of some communities still often depends on the health of a single industry, or even a single enterprise. Moreover, it often relies on the harvesting and processing of natural resources. These communities have an immediate need of support for diversification of their economic fabric.

The Agency has announced the launch of the Community Economic Diversification Initiative – Vitality (CEDI-Vitality). In the past, the Agency has supported the diversification of communities facing devitalization in certain specific sectors (e.g., fishery). CEDI-Vitality broadens the scope of this assistance by targeting the economic diversification of communities facing economic devitalization and posting a low vitality index. This initiative will thus contribute to diversifying the economic base and reducing the dependency of communities whose economy is based on a single industry or sector or on the harvesting of natural resources; it also aims to create sustainable employment and stem the population exodus.

Community Economic Facilities for the Regions support measure

A region's ability to attract investment and new business is influenced by the presence of certain assets, including adequate community economic facilities. These are an important factor in the development of regions that affects the maintenance and reinforcement of their industrial activity. But Quebec's regions and communities experiencing slow economic growth suffer particularly at times from insufficient or obsolete facilities. For that reason, the Agency decided to establish a two-year pilot measure to support the construction and upgrading of community economic facilities, such as an industrial park, ferry wharf, section of railway line or telecommunications network.

This measure will enable the regions and communities assisted to benefit from community economic facilities that contribute directly to the reinforcement of their economic activity and even facilitate economic diversification. The projects receiving assistance will have to support reinforcement of the economic base directly, generate direct, measurable, short or medium-term economic spinoffs, create a significant number of sustainable jobs, reinforce access to the main markets outside the region and enable a region or community to acquire lasting competitive advantages. The success of the measure will be gauged in particular by the creation and development of enterprises, the maintenance and creation of sustainable employment and the increase in trade.

Venture Capital Fund for Business Startups in the Regions

The creation of new enterprises is a key element in ensuring the vitality of regions and making them more dynamic. But recent studies show that opportunities for business and job creation are insufficient to motivate young people to stay or resettle in the regions. In many regions, the demographic decline is in the process of making the economic base more fragile. In addition, entrepreneurs have to take advantage of business opportunities to create enterprises. To that end, they must, among other things, have access to adequate financing. For that, the Agency wishes to support the development of new enterprises and devote special effort, by means of flexible tools, to keeping young people in the regions. It has set up the Venture Capital Fund for Business Startups in the Regions in partnership with the Community Futures Development Corporations (CFDCs), the Business Development Centres (BDCs), the Fondation de l'entrepreneurship, and the support of Desjardins Venture Capital.

This fund targets SMEs that have no recurring sales and are on their first round of seeking outside investors. It will contribute to creating enterprises which could not have been launched without this new source of capital. It also aims to rectify a serious problem, since a mere 4% of the venture capital in Quebec is currently invested outside Montréal, Québec and Gatineau.

Capital Fund for Business Succession

In Quebec, 98% of enterprises are SMEs, accounting for 64% of all jobs in the province (Statistics Canada, July 2006). Throughout Quebec, the population of SME owners is aging: more than 40% of them plan to retire within five years, and 70% within 10 years (Canadian Federation of Independent Business, June 2005). This represents a major challenge, since the survival of Quebec's entrepreneurial heritage is currently under threat. For Quebec SMEs to be able to keep on creating jobs and generating wealth, it is important to plan the business succession.

To rectify this situation, the Agency has set up the Capital Fund for Business Succession in partnership with the CFDCs and BDCs, with the support of Desjardins Venture Capital, and the Fondation de l'entrepreneurship. This fund aims to help entrepreneurs purchase existing enterprises and ensure that they continue operating in the area they originated in.

As a result, this initiative should help increase the number of successful SME transfers, particularly intergenerational transfers (owner-employee; parent-child), keep existing enterprises, jobs and decision-making centres in the regions, and contribute to reinforcing the regional economic fabric.

Special attention to target groups (linguistic minorities, Aboriginals and visible minorities)

The Agency intends to pay special attention to target groups (linguistic minorities, Aboriginals and visible minorities). Moreover, the Agency's action plan concerning Official Language Minority Communities comprises activities integrated with the Agency's overall areas of intervention. This will also be the case with the next multiculturalism plan that is to be tabled over the coming months.

Over the next few years, the Agency will contribute to the growth of the target groups by focussing in particular on encouraging increased participation by these groups in regional development initiatives and structures.

Priority #2: Reinforce the performance of innovative SMEs in key sectors

As its second priority, the Agency wishes to reinforce the performance of innovative, competitive SMEs in key sectors. The planned grants and contributions budget is approximately $150 million over three years. Through this priority, the Agency is intensifying its efforts to achieve the results of the Competitiveness of enterprises (SMEs) program activity, and more specifically those under the Development of enterprises' capabilities sub-activity.

The Agency is targeting improved international competitiveness of SMEs in key sectors. The sectors it is promoting are: (1) aerospace, life sciences, nanotechnology, biofood and environmental technology for Greater Montréal; (2) optics-photonics, health and nutrition, medical equipment and computer technology for the major urban centres (Québec and Gatineau); (3) biotechnology, metallurgy and agri-food for the central areas; (4) aluminum, marine science and technology, and forestry for the outlying areas.

For the Agency, entrepreneurs' creativity is a crucial factor in regional economic development. Moreover, to start up an enterprise, take foot in new business segments or develop promising markets, enterprise founders or executives need favourable conditions. For instance, they have to have access to the capital they need, obtain advice from experienced experts, make contact with potential partners or take advantage of the proximity of high-level research institutions.

To realize this priority, the Agency intends to implement the following plan:

• Reinforcement of enterprises' strategic capability
• Partner in enterprises' commercialization on foreign markets
• Advisory committees for a more effective partnership with the regions.

Reinforcement of enterprises' strategic capability

In an environment characterized by globalization and fierce competition, enterprises' competitiveness depends on their ability to innovate in terms of products and processes, through sales and after-sales service on up to the ability to integrate with major networks of distributors or manufacturers. In fact, enterprises have to enhance their strategic capability in order to take advantage of the opportunities represented by emerging markets and to meet the competition.

This is the perspective in which the Agency intends to foster the reinforcement of enterprises' strategic capability: ability to manage, innovate, adopt advanced technology, develop markets, and integrate with globalized production chains. To that end, the Agency intends to support the dissemination of information, development of strategic capability and development of sectoral clusters.

Partner in enterprises' commercialization on foreign markets

Globalization has led to market liberalization and generated new business opportunities. But it has also intensified competition, and this represents some sizeable challenges for enterprises. But SMEs' competitiveness in the face of emerging markets is directly linked to their ability to carve themselves out a position abroad. The Agency has decided to intensify its assistance for increasing SMEs' export capability. To that end, it has implemented a new measure entitled Partnering with enterprises' for commercialization. In fact, the difficulties associated with innovative, international exporting enterprises' business activities are among the main obstacles to their development. SMEs' competitiveness in the face of emerging markets largely depends on their ability to stand out on international markets, and the challenge of commercialization is particularly great for most Quebec SMEs. In this context, SMEs have to have access to resources to gather and evaluate the information they need, develop strategies toward international markets, and market their products and services.

In concrete terms, this measure will enable Quebec enterprises or groups of enterprises to finance up to 50% of the salary of export specialists. It will therefore make it possible to provide enterprises with new strategic capability with respect to commercialization abroad and to improve their competitiveness on foreign markets. This is in addition to the support already provided by the Agency to stimulate SMEs' innovation capability, support the commercialization of their products and services and increase their productivity. The spinoffs will include an increase in the value of exports and the number of new exporters.

Advisory committees for a more effective partnership with the regions

The Agency is aware that people, organizations and enterprises in Quebec communities are especially well placed to identify their difficulties and draw up customized solutions likely to encourage their recovery. It also knows that local people can give a project the impetus needed to succeed. Consequently, the Agency wishes to elicit greater participation by socio-economic agents in the design of the directions and priorities to be favoured in their regions, and in the choice of niches to be targeted.

The Agency is setting up advisory committees to keep it informed as to the economic situation in their regions and advise it on the development approaches to be favoured. These committees will be made up of members appointed by the Minister and living in the geographical areas served by the Agency's business offices. They will be individuals recognized in their communities for their knowledge and commitment, in particular business people and representatives of the CFDCs, BDCs and other regional economic organizations. Through this approach involving dialogue and partnership, the Agency is listening more closely to, and reinforcing the dialogue with, the regions and supporting the emergence and development of sectors of excellence and more traditional industries, in line with the needs and priorities clearly identified by the regions.

2.2.2 Management priorities

Priority #3: Implement the Agency's new programs

The Agency recently developed new programs that will come into effect on April 1, 2007. These programs are focussed on the attainment of tangible, measurable results and target improvement of the vitality of communities and the competitiveness of SMEs and regions, and an increase in, and dissemination of, knowledge and knowhow with respect to regional development. The Agency's third priority involves the implementation of these new programs.

To realize this priority, the Agency intends to implement the following plan:

• Deployment of programs and their tools
• Development of departmental policy
• Implementation of the territorial approach.

Deployment of programs and their tools

The Agency intends to promote the further development of its human resources' capability by building, among other things, on training, continuous accompaniment and tools (e.g., intervention frameworks, application frameworks) to guide more specifically the implementation of its new programs and ensure that they lead to tangible results.

In addition, in line with the requirements of the Policy on Transfer Payments, the Agency has analysed the risks associated with the new programs and will be introducing strategies to mitigate them.

Development of departmental policy

The Agency intends to continue consolidating its political and analytical capability so as to be able to specify more clearly its intentions in the areas of intervention and administrative procedures to be adopted.

More specifically, different policies will be developed over the coming year on such topics as tourism, commercialization of technology and innovation, and international promotion.

Implementation of the territorial approach

The Agency intends to implement its territorial approach. Territorial refers to identification of the realities of geographical areas sharing the same development issues and subject to similar challenges. In concrete terms, the Agency intends to develop differentiated, consistent strategies catering to the challenges and potential of the following areas:

• Metropolitan Montréal
• major urban centres
• central areas
• outlying areas.

These strategies will have to include the presentation of the main features of these areas, the main development issues and the main intervention targeted in line with results to be achieved. They represent as it were the plans from which the Agency plans its intervention reflecting the distinct realities of the four types of areas. They are based on sequences of coherent action which tend toward the attainment of objectives and territorial results.

Priority #4: Reinforce results-based management and initiate integrated planning

The Agency targets the continuous improvement of its effectiveness and efficiency. It is important to define clearly the results it intends to achieve, channel its efforts toward their achievement, measure the performance of its intervention and, finally, adapt its action to serve Quebecers and Quebec enterprises more effectively. With a view to sound management and optimum use of resources in a lifelong learning perspective, the Agency's fourth priority will focus on the reinforcement of results-based management and the establishment of integrated planning.

To realize this priority, the Agency intends to implement the following plan:

• Implementation of integrated planning
• Implementation of the performance measurement framework
• Development of information management practices
• Planning of implementation of the government's new evaluation policy.

Implementation of integrated planning

The Agency has set up an integrated results-based planning mechanism. This mechanism integrates and focusses the Agency's overall action toward the attainment of results by matching strategic planning, operational planning, performance measurement and information management.

In this way, the Agency wishes to ensure that results are taken into account in decision-making processes. It targets the alignment of all resources (human, financial, informational, relational and technological) on the basis of targeted results.

Over the next two years, the Agency will intensify its integration efforts, particularly with regard to the matching of operational plans with strategic plans and the reflection of risks and their mitigation strategies in overall plans.

Implementation of the performance measurement framework

Over the past year, the Agency specified its targeted results. It began to translate into specific indicators the objectives it will be pursuing through its new programs. It aims to be in a position, in the medium term, to set targets or levels of results to be attained (quantification of results) in order to be able to measure the extent to which the targeted results are achieved. It will also have to pursue the empowerment and training of personnel with respect to results-based management and the new performance measurement framework. Finally, the Agency will put in place different monitoring and follow-up mechanisms in order to provide senior management with the assurance that the information available to them is reliable and of high quality.

Development of information management practices

Since departmental performance measurement depends, from the outset, on the ability to access reliable, accurate data on results and the costs of its programs and activities, the Agency has undertaken work that will pave the way for the development of information management practices on performance.

Planning of implementation of the government's new evaluation policy

The Agency will continue to improve its tools in order to generate advice and recommendations on the timeliness of its programs and initiatives, the quality of their design and their effectiveness, implementation and management, and to estimate the risks associated with their application.

The Government of Canada is preparing to renew its evaluation policy. The Agency will adjust its evaluation approach in 2007 2008 to bring it in line with this new policy.

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