February 26, 1985

GOVERNMENT ORDERS


[ Translation]


SMALL BUSINESSES LOANS ACT


The House resumed from Monday, February 25, consideration of the motion of Mr. Bissonnette that Bill C-23, an Act to amend the Small Businesses Loans Act, be read the second time and referred to the Standing Committee on Regional Development.


LIB

Fernand Robichaud

Liberal

Mr. Fernand Robichaud (Westmorland-Kent):

Mr. Speaker,

I wish to thank you for giving me this opportunity to take part in the debate on the Small Businesses Loans Act. Having owned two small businesses myself, I believe I am in a position to appreciate the concerns of this sector.

However, I fail to understand the position the present Government seems to be taking with respect to small- and medium-sized businesses. It seems to me there are many contradictions between what I have heard from our Conservative colleagues and what I have read in Bill C-23, and I shall, if I may, Mr. Speaker, touch on a few that are particularly revealing.

First of all, the Hon. Members opposite have been very expansive about their desire to consult with the groups in question so as to better respond to their needs. This is an entirely worthy attitude, but I do not think the Conservatives are particularly innovative in this respect. Otherwise, small-and medium-sized businesses would not, as they do today, represent nearly 30 per cent of the Gross National Product. But let us be generous. Let us give them the benefit of the doubt and believe they are sincere in their desire for consultation. If they are, then how do the Minister of State and his colleagues propose to explain the fact that the vice-president of the Canadian Federation of Small Business and the president of the Canadian Federation of Independent Business have both protested against the provisions of the Bill concerning the 1 per cent fee to be paid by lenders to the Government? If these organizations had been consulted, this fee would not have been included in the Bill, unless the present Government, with all its

consultations, has been ignoring the views of the groups concerned. Not necessarily on purpose-I would not want to believe that.

Mr. Speaker, I can only hope the Government will make good use of these consultations it has been making so much of. In fact, when I was looking at the recent consultation paper on small business presented by the Minister of State (Small Businesses) (Mr. Bissonnette) and the Minister of Regional Industrial Expansion (Mr. Stevens), I noticed some very major paradoxes in the Conservative approach.

The first page of this document refers to some of the goals the federal Government has set for itself. One of these I found particularly interesting, and I quote:

"-to adopt policies that will lead to increased investment, further and more intense innovation, improving our international competitive position and establishing a climate favourable to creating and developing new enterprises."

A little further it says that job creation is a fundamental priority for the present Government and that Canada must strengthen this growth model and promote the start-up of new businesses.

Mr. Speaker, I am afraid the Party opposite has yet to come up with something new. It is as plain as the nose on anyone's face that small- and medium-sized businesses are the motor of any economy. I do not see why it took them six months to realize this.

Even worse, in Bill C-23, the Conservatives have neglected to observe these primordial goals by proposing incoherent policies and amendments.

I say incoherent, Mr. Speaker, because clause 2 of the Bill provides that from now on, liability for losses sustained on loans will be shared by the Government with the lending institutions, the latter to be liable for 10 per cent.

While the Small Businesses Loans Act is aimed at encouraging lenders to make loans to small businesses, the amendments proposed by the present Government will have the opposite effect. It is not at all unlikely that lenders will be reluctant to make loans if they are liable for 10 per cent of the losses sustained on such loans. Lenders will tend to exercise extreme caution and draw up more restrictive regulations, and one could hardly blame them for doing so.

However, this attitude will also make lenders less inclined to make loans to small businesses, which will certainly have an adverse effect on the emergence of new small businesses. The contradiction here is very obvious. On the one hand, the Government wants to make things easier for small- and medi-

February 26, 1985

Small Businesses Loans Act

um-sized businesses and promote the establishment and growth of such businesses, but on the other hand, it is obliging lenders to endorse 10 per cent of losses sustained on loans, which will force lenders to be more selective or to make fewer loans or fewer large loans. What the party opposite is urging is that we cripple a piece of legislation which has been the mainstay of Canadian small business for 23 years.

Our colleagues across the aisle openly brag about stimulating private investment and the Canadian economy, but they fail to take the proper approach-in fact, they throw cold water on businessmen and lenders who are anxious to participate in our economic growth. I hope they realize the disastrous consequences of the fresh approach they want to take with respect to small business. It is essential that you grasp the full implications of such measures. Perhaps I might be of some help.

Still referring to this consultation paper, I read that entrepreneurship and risk-taking are not sufficiently promoted. I fail to see how the provisions of this piece of legislation will enable you to promote and spur risk-taking by small business and lenders. You know as well as I do that no businessman or businesswoman will invest unless the chances of failure are extremely remote. Canadians are not risk-takers, and they should not be unless the economic climate and conditions are altogether favourable. To be frank, I am convinced that your proposition will never create the conditions conducive to and required for risk-taking. The more your Government will force lending institutions to pay for a high percentage of losses incurred on outstanding loans, the fewer loans those institutions will make, the less small business will take advantage of those loans and the less new businesses will want to set up shop.

Furthermore, I can read in this famous consultation paper- and, of course, you had no idea how many inconsistencies this paper would contain-that "small business considers that Governments and most financial institutions have an approach which favours the requirements of big business".

Then again, section 2 on loss sharing by the Government and lenders will do precious little to encourage the latter to make loans to small business. One might even suggest that this measure will be a boon to big business since the market will not be crowded by small business, and lenders will be more inclined to offer better conditions to big business. Hypothetical though it may be, this suggestion is not all that far-fetched.

It is a fact that the Progressive Conservative Government spent the first six months worrying about big business, foreign multinationals and the need to attract them to Canada. This Government has been concerned about making room for big rather than small business. What will be the impact of uncontrolled foreign investments in this country?

The answer is simple: they will corner the Canadian market. That being so, is it still possible to talk about promoting small business in Canada? I hardly think so. I would suggest that the Government will indeed be well advised to reconsider-as they so aptly put it-the regulations and policies that might hinder small business financing, including venture capital.

This is a priority, Mr. Speaker. It is a priority because the legislation contains so many nefarious provisions that will only hinder SMB financing. Among other things, their Conservative Minister will require lenders to pay a fee of 1 per cent of the amount loaned under the Act. This means that on each and every loan, the lender will have to pay 1 per cent to the Government as a guarantee. Assuming that total loans remain at the current level of $900 million a year, lenders will be paying out $9 million to the government to account for that 1 per cent fee. Those $9 million that will go the public Treasury will reduce by $9 million the amount of loans available to small businesses. This is one way for the Government to fill its coffers at the expense of lenders and especially of small businesses. We cannot be consistent and support such a measure. The Minister of State himself is entertaining doubts as to the true efficiency of such a policy. As he stated in this House last week, and I quote:

The total impact on the yield to lenders over that period or over the term will be minimal. Therefore, the volume of loans should not decline significantly.

Despite the weak-kneed phrases used by the Minister, clearly when he said "minimal impact" and "should not decline significantly" he meant that in fact, there will be negative results and the volume of loans will go down. The Minister is admitting therefore that his proposal implies a negative impact. When he says "not significantly" and "minimal", it is only to reassure those who are concerned and distract the attention of the people involved.

In fact his statement was conditional and this is therefore extremely hypothetical. His comments are fraught with uncertainty. "The volume of loans should not...", meaning that it could decline significantly. If we are to rely on assumptions, mine is just as valid as the Minister's. But I for one know very well that the odds are in favour of lenders reacting unfavourably. Who will be happy to pay out $9 million rather than investing the money?

Finally, Mr. Speaker, what the Government wants to achieve with Bill C-23 is to significantly reduce access to the Small Business Loans Act by lenders, and in turn by small businesses. In other words, they are limiting access to financial sources that are absolutely vital and that have in the past enabled a number of small businesses, small Canadian firms to start in business and prosper in this country.

Anybody who claims to support small businesses and view them as our society's economic locomotive must reject the

February 26, 1985

Government's proposals because they are inconsistent and unacceptable. This is a serious issue and so is our duty.

As you know, Mr. Speaker, in New Brunswick in 1980 there were 17,000 small- and medium-sized businesses with a sales volume of less than $2 million a year. There were 17,000 in 1980, and now there are many more. In 1983, with the Small Business Loans Act, 745 new small businesses obtained loans for a total amount of $22 million. You know also, Mr. Speaker, that in my province of New Brunswick, small businesses are essential. They provide most of the jobs and they also are vital to our people. The citizens in my province are born workers whose ability to earn a living is aleatory, greatly dependent as it is on the climatic conditions under which they operate. I refer for instance to our people involved in the fishing, farming and tourist industries.

As they operate already under difficult and uncontrollable conditions, the last thing we should do is to create new obstacles for them. On the contrary, we should try and find ways and means to alleviate these natural impediments. These ways and means are already at our disposal, Mr. Speaker. The party opposite preaches that Canadians should be encouraged to invest. But "preaching" is just not good enough. It should take action. What is more, it should take appropriate action.

So far, the new government has covered the first two stages. As to the third, I suggest that its first appropriate action should be to withdraw the provisions about the 90-10 per cent sharing of losses and the 1 per cent loan fee which lenders would have to pay on each loan to the government.

If the party opposite really wants to help small businesses, it should fulfill its promise.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Are there any question or comment on the Hon. Member's speech? If not, we will resume debate. The Hon. Member for Blainville-Deux-Montagnes (Mrs. Landry) has the floor.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Monique Landry (Parliamentary Secretary to the Secretary of State of Canada)

Progressive Conservative

Mrs. Monique Landry (Parliamentary Secretary to Secretary of State):

Mr. Speaker, it gives me great pleasure to take part in the debate on second reading of Bill C-23 to amend the Small Businesses Loans Act. The fact that I have decided to make my maiden speech in the House on this Bill shows how vital I consider the contribution of small businesses to be for the Canadian economy.

I also want to take this opportunity to thank my constituents of Blainville-Deux-Montagnes. Last September 4, the residents of Blainville-Deux-Montagnes showed unequivocally that they wanted a change in direction. The Progressive Conservative Government, under the leadership of the Right Hon. Prime Minister (Mr. Mulroney) has understood this crystal clear message. Anxious to meet the aspirations of Canadians, our Government has firmly committed itself to renewal, as

Small Businesses Loans Act

evidenced in the Speech from the Throne and the economic statement of the Minister of Finance (Mr. Wilson).

Mr. Speaker, let me remind Hon. Members that the Blainville-Deux-Montagnes constituency, located to the north of the Riviere des Mille-iles and the Lac des Deux-Montagnes and to the south of Mirabel airport, includes ten municipalities. This federal district extends over 287 square kilometres in the greater Montreal area. At the 1981 census, it had a population of 112,000, of which 86 per cent were francophones, 12 per cent anglophones and 2 per cent belonged to other ethnic groups. In addition, the population of Blainville-Deux-Montagnes continues to increase at a rate which reached 22 per cent during the period from 1976 to 1981. This population increase reflects the attraction my constituency holds for many Quebecers.

The economy of this mostly urban constituency revolves around the manufacturing sector, commodity trade and sociocultural, business and personal services. Our primary industries are largely made up of family-type farming businesses. On the other hand, according to a survey conducted by a Department of Employment and Immigration economist, the importance of service industries in the community reflects the suburban character of the region.

The major employer is undoubtedly the Boisbriand General Motors plant, which has a manpower of about 3,500. Mr. Speaker, I would like to emphasize the importance of the auto industry for our local economy. Many subcontractors owe their survival to GM.

Last November, I learned with regret about the decision of GM not to invest $700 million in the upgrading and robotiza-tion of its Boisbriand plant. This unfortunate decision caused great concern to local businessmen who had contributed a lot of energy and effort to welcome the General Motors plant to Boisbriand. Prompted by Mr. Michel Gagne, Chairman of the Laurentian Development Regional Council and mayor of Boisbriand, a regional committee was formed to assess the impact of the cancellation by GM of its investment project. I was more than willing to join this committee which has already met twice. While its function is to examine the direction GM wants to give its Boisbriand plant, the committee fervently wishes for other auto industries to locate in the region, thus attacting more subcontracting business.

The contribution of the General Motors Plant to the economy of my riding is of great significance Mr. Speaker, and I trust that this company will continue to play a major role and will very soon go forward with its ambitious investment project. General Motors facilities in Quebec should be on an equal footing with those in southern Ontario.

In addition to the General Motors plant, the Blainville-Deux-Montagnes constituency has numerous small and medium-size businesses which provide stable employment to a

February 26, 1985

Small Businesses Loans Act

considerable number of residents. Similarly Mr. Speaker, it should be pointed out that this constituency has major assets which allow it to face the future with great confidence. Indeed, because of its very advantageous strategic position it would be the envy of many Canadian constituencies. Located near two international airports and the Port of Montreal, Blainville-Deux-Montagnes has undoubtedly what it takes to become a major industrial centre.

Those few brief socio-economic data demonstrate very clearly, Mr. Speaker, that the bill amending the Small Businesses Loans Act is most important for many small businesses in my constituency.

I would now like to go beyond those strictly local considerations and deal with the importance of the private sector in Canada.

Our government hopes to create a favourable climate for investments, and it has realized that private enterprise had to be allowed to play its proper role as a full economic partner. The entrepreneurship shown by Canadian businessmen has substantially contributed to promote economic development in Canada.

We have to recognize, Mr. Speaker, that some 750,000 small businesses provide 26 per cent of jobs in Canada. Moreover, thanks to their vitality, those small businesses created 90 per cent of the new jobs in Canada during the past five years.

I would like to refer to the case of a small business operating in my constituency. In 1982, two local businessmen decided to set up Electromed International Limited whose aim was to establish a structure for the design and manufacture of high technology products and their marketing in Canada, in the United States and in France. In two short years, that young business has now increased its staff from 20 to 35. Within three years, it expects to have 70 employees. That company was recently awarded by the Quebec government the Stimu-lexport Price for its vitality. I take this opportunity to congratulate those business leaders. This short digression on a small business in my constituency is a vivid example of the economic impact of small businesses. If that kind of success was experienced at the Canadian level, our unusually high unemployment rate would be drastically reduced.

This government has realized that it should cooperate with small businesses to enable them to make a larger contribution to the economic recovery in Canada.

I am pleased that my colleague the Hon. Andre Bissonnette is undertaking this week a Canadian tour to consult businessmen, groups, financial institutions, labour, educational institutions and provincial governments. Our government knows quite well that our policies cannot be developed in isolation

but that they should take into account the proposals put forward by those directly involved.

Through public meetings, our government will gather information, constructive criticisms and suggestions which will help us to meet the needs of Canadian businessmen.

In the same spirit, Mr. Speaker, I am pleased to note to what extent the federal-provincial relations have improved during the past six months. As evidenced by the results of the First Ministers' Economic Conference which was held in Regina, both levels of government are determined to work in a spirit of full cooperation. By avoiding the pointless federal-provincial bickering which had unfortunately become our predecessors' trademark of sort, the Progressive Conservative government will significantly contribute to fostering confidence among private investors. These sterile federal-provincial quarrels have certainly played their part in destroying the confidence of Quebec businessmen. Our government has realized that reestablishing a climate favourable to new investments is a sine qua non for our continued economic recovery.

Mr. Speaker, I should like to emphasize that Bill C-23 should be perceived as part of a series of measures aimed at encouraging entrepreneurship within the private sector.

Over the past few years, small business representatives have made countless representations in their efforts to obtain a streamlining of government regulations. Our government recognizes that small businesses have been the victims of "over-regulation". So, we intend to simplify a good many regulations which have very often inhibited the extension of small businesses and the entrepreneurship of our businessmen. In my humble opinion, thanks to measures such as these, the lot of small businesses can only improve. The state must provide the private enterprise with more latitude to operate.

Mr. Speaker, I feel that this long preamble on the importance of the private sector was necessary before I dealt more specifically with Bill C-23.

Mr. Speaker, I consider this bill of utmost importance for many small businesses, and that is why I support it unreservedly. In the province of Quebec, for instance, for the year ending December 31, 1983, 9,908 small businesses representing some 38 per cent of the total for Canada have availed themselves of the Small Businesses Loans Act. Such a figure proves better than any theoretical demonstration the need for such a legislation. Let us not forget that these 9,908 Quebec businesses which have availed themselves of the provisions of this legislation have created within their communities thousands of jobs. Moreover, they have had locally, more often than not, a multiplier effect by increasing the demand for goods and services.

Together with my colleague Hon. Andre Bissonnette, I do not feel it would be indicated to rise the $100,000 ceiling for these loans. As a matter of fact, Mr. Speaker, the average loan granted in 1984 amounted to only $28,888. This $100,000

February 26, 1985

ceiling for these loans clearly seems to satisfy those who are directly concerned.

Mr. Speaker, there is a second aspect of the Bill that deserves further consideration, and that is the provision that losses will be shared between the Government and the lending institutions. Under the present legislation, the Government is liable for the full amount of losses sustained on loans. This is a situation which, in my view, is very unfair and should be corrected. In the Bill before the House today, the lending institutions will have to share the liability with the Government, that is, they will be liable for 10 per cent of losses sustained on loans to small businesses. The Federal Government will continue to pay the lion's share, since it will be liable for 90 per cent of such losses.

I do not think this puts any undue burden on the lending institutions, and I feel such a measure is entirely justified. I also think it makes very good sense to charge lenders a single fee which amounts to 1 per cent of a loan made under the Act. In this way, the Government will be able to recover part of the losses sustained on these loans.

Finally, Mr. Speaker, I would advise Members opposite not to delay unduly the passage of this legislation. The Small Businesses Loans Act can be said to have passed the test of time, and now, Hon. Members must act quickly to respond to the increasing number of applications under the Small Businesses Loans Act. As the Member for Blainville-Deux-Mon-tagnes and former owner of a small business, I realize how important this legislation is to many local small businesses.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Any questions or comments on the Hon. Member's speech?

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

George Roland Henderson

Liberal

Mr. George Henderson (Egmont):

Mr. Speaker, my concerns about Bill C-23, an Act to amend the Small Businesses Loans Act, is not so much its contents but what is not contained in the bill. The small business sector of our economy certainly has the potential to create jobs but I suggest that it is facing severe difficulties in Canada.

Under, the Small Businesses Loans Act in my province, only 101 loans were submitted in 1983. The total amount of money that was borrowed was $2.4 billion and the average loan in P.E.I. in 1983 was approximately $23,000. That is down significantly from the national average loan of approximately $28,000. The problem related to national programs for small business is the geographic difference and population difference in various parts of the country.

There are three main industries in Prince Edward Island: agriculture, which is the primary industry, the fishery industry, which is basically the inshore fishery; and tourism.

If we look at tourism, Mr. Speaker-I listened to my friend from Carleton-Charlotte (Mr. McCain) yesterday, and I see him coming in now-he made the point that with the lower

Small Businesses Loans Act

dollar we should see more tourists in the Atlantic Provinces, certainly in Canada in general. This is an area that Canada can certainly continue to develop, but in Atlantic Canada we find that while there may be one aspect of an industry or program which is helpful, we run into all kinds of other things that work in the opposite direction. In the tourism sector I think it is mainly high gasoline prices which will have a very serious effect. The increase in ferry rates to my province is also going to take away from any benefit we may have gained by a cheaper dollar.

Small business is faced with many, many problems. High interest rates affect small business in a very detrimental way. With the fall of the dollar it is likely that we will see another round of high interest rates which would have a serious effect on small business, including our tourist operators.

In Prince Edward Island, as in Atlantic Canada generally, we have only a three-month tourist season because of climatic conditions. In my province we have high operating costs because of high energy and transportation costs. This will certainly make people who come to my province look twice. Most of the tourists that we get come from either the New England States, Quebec or Ontario. Therefore, transportation adds to their costs. If they have x number of dollars to spend, if most of them are blue collar workers, and it is going to cost them more at their vacation site, they will shorten their stay by a day or so. Therefore there will be no net benefit.

If we look at agriculture in Canada today, Mr. Speaker, it is in serious trouble. In my province the main agricultural product is potatoes. We are noted for potatoes, as my friend across the way knows. Yesterday we discussed briefly the contemplated increase in inspection fees and what effect that will have on our farmers in Atlantic Canada. As well, hog and dairy producers are affected by high freight rates which are reflected in the price of feed grain in Atlantic Canada. The picture is not bright for the agricultural and tourist communities.

How are we going to create the jobs which all Members from Atlantic Canada believe are going to be necessary in our part of the country over the next few years? It seems as though every time we see a break coming, there is something else that the bureaucracy or the Government bring in to offset that slight advantage. That concerns me a great deal. Look at the fishing industry. In my province it is mainly an inshore fishing industry. Here is an opportunity for some sort of expansion in that industry for value-added products, and research into value-added products, but there is a tremendous problem with the small fishing industry today as it relates to processing.

I have in my riding a very, very good fishing operation called Acadian Fishermen's Co-Op. I think I used this as an example of how small business is having some real difficulties. This Co-Op was formed many years ago, expanded in the early 1970s with great anticipation of the advent of the 200-mile zone, and they thought they could take full advantage of a lucrative fishery and processing in the 1970s. That company, like all other fish processing companies, got into some very serious difficulties through over-capitalization, and high interest rates put a tremendous squeeze on them. As well, they were

February 26, 1985

Small Businesses Loans Act

in competition with some of the larger processing companies in Atlantic Canada and elsewhere.

One of the problems which small business has is cash flow. In many cases they buy a raw product, process it, and then it has to sit in warehouses for many weeks, sometimes as much as a year, before it is actually sold on the market. Of course, when that happens we sometimes get panic selling by those companies. That tends to bring the price down on world markets to a point below the cost of production. You must remember that holding on to a large inventory of goods means high costs. Even if the company is in fairly good financial shape, it has to bear the burden of those dollars tied up over long periods of time. That puts these companies at a tremendous disadvantage if they cannot recover the cost at the other end, in the market-place. Of course, it is then mostly larger companies which get into these problems of high inventory and they start dumping at the wholesale and retail levels. No small business can cope with that sort of situation for very long. Where do they turn to? This legislation does very little for them, because if you have to borrow money at high interest rates, it does not do you an awful lot of good. I think we have not addressed the interest rate situation.

Getting back to the Bill specifically, local credit unions are usually the financial institutions that loan money to small business in my area. They have not used this Act in the past because it has simply no profit margin for them, and being a small financial institution, they cannot bear the cost. It presents some great problems to certain areas of our country. It may not have the same effect in what I call the Golden Triangle of Montreal-Toronto-Ottawa, or in areas that are very close to American markets or markets within our country.

Then we take a look at some other areas of potential growth. We look at a company or a business operator, someone with a good idea who wants to put that idea in the form of a business. I went through this myself a number of years ago in the shellfish industry. I set up Canada's first commercial oyster factory. This was a totally new and innovative idea. It was the first in Canada. I had worked on the research stages with the Fisheries Research Board of Canada. We had the theory worked out in the lab stages in what I called the beaker stages. You bring oysters into holding tanks at a certain water temperature. You take the oysters and you spawn them artificially. You put them in tanks, rear the larvae, and have the larvae set on culch, as they call it. Then you take them from there and put them in the natural environment. You then raise them through to maturity, which takes about five years. In nature that would be a 12-year process.

One of the problems I had in setting up the business was that I needed buildings, tanks and equipment. In some cases I needed very innovative equipment, equipment that had to be designed specifically. That is quite a capital outlay. Then one needs staff and technicians. In the long run you have to wait five to ten years to get any amount of money back from your

investment. But what happens in the interim? Like most people, you find yourself with a cash flow problem.

Where do you turn? When you are setting up the new business today you may be able to get help. In most cases Governments do have vehicles, grants systems, that will help you with your capital infrastructure. But that is only part of the problem of operating a business. The real problem is to be able to operate and carry on in the interval between the time you develop a product, sell it and have cash coming in. That is one of the problems. The Government today and Governments in the past have not had the proper financial mechanism in place for that to take place. Research and development is an area which should be taken full advantage of. We are not doing enough research and development which is needed to create jobs. It will have to be done in the future if we are to create the kinds of jobs that are necessary.

Just last week I talked to a man who is into fox farming. Many years ago Prince Edward Island was noted for its silver fox. Prices back in the early 1900s were as high as $250,000 for a pair of fox-breeding stock. For many years that industry was flat. In the last number of years it has started to come back to a point where there is a profit in it.

For a person interested in fox farming today once again there is a tremendous capital outlay required to start. First, you have to have your ranch in place, which costs a good amount of money. You have to set yourself up with breeding stock. It takes a while to get into the business, three or four years. Those involved with it who understand the genetics of raising foxes, and one thing or another, sometimes are not the ones to benefit. You will find that corporations exploit that kind of an industry, which should be left to those who can do it best, those who understand the industry. Understanding and being able to operate a business is no good unless you have access to the dollars to carry on the business.

These are some examples of how small business is having great difficulty today. Some of our small contractors in rural areas have a tremendous impact on job creation. Once again, they have difficulty getting the required dollars. Contractors do two or three jobs and they have five or six people working for them in the summer months, sometimes year round. They are, however, restrained. They could get lots more business if they had the cash flow, the dollars to tide them over. This is very difficult and this piece of legislation is not doing much for it.

Let me come back to the agricultural industry. Certain areas of small business have to have some support from government. I am speaking about infrastructure. What if you grow potatoes and you do not have the transportation to take those potatoes from the farm to the market? You would find yourself in great difficulty. In my own area we ship about 80 per cent of the potatoes from Prince Edward Island. We were looking for a deep water berth which amounted to $3.5 million to $4 million contract, which was approved. I am now told that is being held up. Governments have to take a look at providing the infrastructure to our industries so that small business can

February 26, 1985

provide the jobs that this Government and I am sure every Member of Parliament would want to see provided.

We can no longer carry on with the welfare state. We have to make sure the dollars we spend in government are spent properly. We should ensure that things are helpful to business and not a hindrance. I come from the business world. There is so much red tape about. Every time you turn around something is in the mail which has to be Filled out. I hope the Government would seriously consider what is happening out there. I hope the Government keeps its ears to the ground to do something to help the people of this country rather than hinder them.

I thank you, Mr. Speaker, for your indulgence. Those are just a few suggestions I wanted to make to add to this debate

today.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Are there any questions or comments?

The Hon. Member for Louis-Hebert (Mrs. Duplessis), for questions or comments.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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Mrs. Duplessis@

For comments, Mr. Speaker.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Please proceed.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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Mrs. Duplessis@

Mr. Speaker, I was quite disappointed in the speech made by the Hon. Member opposite. He obviously does not seem to understand what is happening today to small businesses. I do not know whether he is satisfied with the so-called climate of trust the previous Government tried to create with respect to small- and medium-sized businesses when it was in power, but that is not what this Government intends to do. Just so he will understand, allow me to explain to him what I think of the main features of this Bill and tell him to what extent the Government is anxious to continue to play its role of catalyst with respect to the initiatives of small business in the private sector. I will not insist on what I feel is an administrative re-arrangement of the basic and lasting purposes of the legislation, namely the additional $300 million provided under this measure.

However, the new definition of small business in the Bill is finally geared to the economic situation which has changed radically since 1977. True, the new $2 million ceiling no longer jibes with the definition given by Statistics Canada and the Small Business Secretariat, as the Minister of State (Small Businesses) pointed out. On the other hand, this amendment calls for a broadminded approach in the sense that our Government readily acknowledges that the sales of a small business are expected to grow along with its activities and that the inflationary trend in recent years has put a damper on sales figures, with the result that some businesses which need financial support had been left out in the cold.

Small Businesses Loans Act

Mr. Speaker, is there need to point out that the sales of most Canadian small businesses are in line with the standards advocated in the Bill? When I say most businesses, I mean that more than 95 per cent of Canadian companies account for at least 30 per cent of the GNP, as the Hon. Member for Saint-Leonard-Anjou (Mr. Gagliano) reminded us on behalf of his Party. Our colleague may have been carried away by his own oratorical flight, so I can appreciate why he forgot to mention that the Bill finally reflects the reality of our economy.

Without a doubt, job creation has to be the most significant contributive role of those economic components. According to the Canadian Federation of Independent Business, all new jobs in Canada between 1980 and 1982 were created by small businesses with fewer than 50 employees, including 18 per cent by companies less than two years old.

It is further evidence that we do need those entrepreneurs, and we will encourage them through this Bill. We must encourage them, not take their place. Let me explain. Last February 6, Gulf Canada President John L. Stoick addressed the Greater Barrie Chamber of Commerce and stated-

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PC

Gordon Edward Taylor

Progressive Conservative

The Acting Speaker (Mr. Taylor):

I hesitate to interrupt the Hon. Member, but the comments in question should be very brief. I think his comments are now verging on a speech. Would he complete them and then ask a question, please?

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?

Mrs. Duplessis@

Mr. Speaker, far from making a speech, I was just commenting on the red tape for which the Hon. Member opposite was reproaching us. I should like to follow my point to the end, in order to provide explanations and directly respond to his speech. I continue.

The President said this: The various governments should not forget that what the people with entrepreneurship and owners of small businesses desire is a more discreet presence of the state in their endeavours, and not an increased participation.

It is this more discreet presence that must be provided to these businessmen, and the purpose of this bill is to encourage them to act without, however, the government taking the initiative in their places. So, the difficulties small- and medium-size businesses meet when trying to secure financing are among the major problems they face when they reach their full development. That is why I like the provisions dealing with amalgamated borrowers and the possibility for them to obtain loans under the new program. Indeed, under the new program, increased loans may be obtained through an amalgamation. The amendment which the Hon. Minister has proposed ensures to the corporations the reimbursement of the loans made under the program-

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LIB

Carlo Rossi (Deputy Whip of the Liberal Party)

Liberal

Mr. Rossi:

Mr. Speaker, I rise on a point of order.

February 26, 1985

Small Businesses Loans Act

Mr. Speaker, this sounds much more like a prepared speech than questions and comments.

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PC

Gordon Edward Taylor

Progressive Conservative

The Acting Speaker (Mr. Taylor):

I think the point of order is well taken. The Hon. Member has now spoken for five minutes. I would suggest that you put your question, if you have one. We will give you 30 seconds to finish your comments. Is that satisfactory?

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Mrs. Duplessis@

I hope, therefore, that Hon. Members opposite will support this bill which could create new jobs and ensure our economic recovery, for it is well known that small businesses are the engine of the economy.

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LIB

George Roland Henderson

Liberal

Mr. Henderson:

Mr. Speaker, I certainly did not hear a question in the Hon. Member's comments, so it is very difficult for me to reply. I have to give her some credit because it looked like she had a prepared text which was typed out while I was speaking; I do not know where the secretary was.

However, I think the Hon. Member has missed the point because there was no correlation whatsoever between what she said and what I said. She is supporting this Bill. I mentioned earlier that I am not so much against what is in the Bill but what is not in it for small business. Anyway, this Bill has a regressive aspect to it inasmuch as there is a 1 per cent charge on loans to banks. I have talked with representatives of financial institutions in my riding. I hope the Hon. Member has talked with her financial institution representatives in order to obtain their feelings on it. I challenge her to visit my riding and discuss it with the managers of banks, credit unions and other lending institutions. They will tell her that this 1 per cent stipulation will not work for them. Therefore they will not be very co-operative as far as lending money to those who really need the dollars is concerned.

That is the point I am trying to make. I certainly respect the Hon. Member's comments and views, but in the real world out there it is extremely difficult for small business. It is extremely difficult for them, unless the business was inherited from a family member or from someone closely related, or some government came along with a substantial grant. Even with a government grant, provincial and/or federal, they require operating capital. This is where many small businesses fall down. It is the fact that they do not have the capital with which to operate after they have established themselves. That problem is not dealt with in the Bill. I hope the Government takes a look at it in committee to see if it could bring in some program which would be of real assistance to small business.

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PC

André Plourde

Progressive Conservative

Mr. Andre Plourde (Kamouraska-Riviere-du-Loup):

Mr. Speaker, I wish to thank you for giving me my first opportunity to speak to this honourable House. My reason for making my maiden speech as the Member for Kamouraska-Riviere-du-Loup at this particular time is that the Bill before the House today is an excellent one and is worthy of the set of measures the Progressive Conservative Government is proposing to restore the health of our economy. It is therefore an honour and indeed a duty for me to express today the concerns of the people of Kamouraska-Riviere-du-Loup with respect to Canada's economic future, because it is my sincere conviction that if we are to restore this nation's economy, we must start with the regions. They must have a say in the matter. The fact that I am speaking today to the Parliament of Canada on their behalf is the most precious gift I could ever offer my constituents and is also the measure of the thanks I wish to extend to a team of workers and representatives in my constituency, because in Kamouraska-Riviere-du-Loup, we also live by the words: "Co-operation, co-ordination and collaboration", a motto that honours this Government of which I am proud to be a Member and which reflects honourably on all Canadians.

But, Mr. Speaker, what do the people of Kamouraska-Rivie-re-du-Loup want? They want jobs, and they want food on the table. The Bill before the House today is concerned with exactly that, because if we stop to think for a minute, we will realize how important small business is to our economy.

In fact, it is very easy to understand. We only have to ask: What sector generate the greatest number of jobs? The answer is easy: small business!

Over the period 1978-1982, at the height of the recent depression, they generated almost all of the new jobs that were created. Today, they account for 30 per cent of the Gross Domestic Product in the private sector. Numbering over three quarters of a million, they make up 96 per cent of Canadian businesses and are managed by a class of entrepreneurs who reflect both this country's economic vitality and the image of our changing society. Their average age is 35 to 45, with women on the increase. Their number has increased threefold between 1964 and 1980. And people under 30, anxious to take risks and confident of investing in this country are now twice as numerous as they were 15 years ago.

But for the SMBs to fully exercise their role as the locomotive of our Canadian economy, they must have the means to do so. In order for a business to create jobs, it must operate. And in order to operate at a fair rate, it must provide for a minimum of competition, which means that it must improve, modernize and adjust itself. And in order to do that, the owner of that industry must have access to the funds that are available.

Already, Mr. Speaker, the Progressive Conservative Government has taken a major step towards the promotion of financing for Canadian SMBs by creating Investment Canada, which will build a climate of confidence liable to attract foreign capital and to strengthen the backbone of our economy. All our regions will benefit.

In the case of the Province of Quebec especially, an ancillary agreement under the Canada-Quebec RDA has been

February 26, 1985

signed in order to foster among other things the setting up in our areas of industrial infrastructures. This is another initiative put forward by this Government to encourage industrial expansion and promote SMBs.

All those measures taken in a relaxed and harmonious atmosphere have had a most beneficial impact on our economy and what I might call the "troups' morale".

I spent all of last week in my constituency, where I had the chance to take the pulse of the people, not only of industrialists and workers, but also of all those men and women who on the surface are very remotely involved in that sector. The response was unanimous. The feeling is the same everywhere. Now they can relax! Now, they see the light at the end of the tunnel. But those initiatives, Mr. Speaker, are but a first step. With the legislation now before us, we are taking another step along the road to the summits of excellence which Canada has every right and every duty to look forward to.

That goal is apparently being lost from sight. Too many years of mediocrity, too many years of unhappy results have made us forget that Canada can have its place in the sun. Not in the shadow of another country, but in the full light of day, side by side with our partners from around the world-the Americans, the Japanese or the Europeans. Too many years of neglect under a Liberal administration have led us to forget that we must look far ahead and set our sights high. Such are the secrets, such is the recipe for success. Still, we have let them gather dust.

However, the clean-up has started, and times have changed. With the help of measures like Bill C-23, we have rediscovered the recipe and we can once more aim at those summits. Because with a legislation such as this, our economy can not only tap the international resources to strengthen itself, but it can also turn directly to our national heritage.

I am indeed a bit surprised that our Liberal colleagues would oppose this Bill which promotes Canadian participation in our economic recovery, as this is precisely what they were asking so vehemently a few days ago when Bill C-15 was under consideration.

However, we should not be too upset, Mr. Speaker, because it is not the first time that the Official Opposition contradicts itself. We can see this contradiction in statements like those of the Liberal critic for regional industrial expansion about the 1 per cent fee being charged. He seemed to be suggesting that this fee would be charged every year. This is false, Mr. Speaker, and I fail to understand why the Official Opposition would want to put such doubts in the minds of Canadian men and women. This fee will be charged only the first year and it only affects the return by 0.25 per cent over the average term of a loan, which will do nothing to discourage lending institutions from taking part in the program.

As for the allegations by one of the more vocal Members of the Opposition that the banks will not agree to share 10 per

Small Businesses Loans Act

cent of the losses incurred for guaranteed loans, 1 wonder how the Hon. Member for Hamilton East (Ms. Copps) can presume such a thing when we know from experience that the losses have been relatively low in the past. The risk taken by the banks is therefore minimal compared to the benefits.

However, these trivialities brought up by Hon. Members opposite make me digress. Let me come back to what I was saying.

Bill C-23 will be an excellent tool to help our national economy which is now on the rise. We must not follow the example of Sisyphus and let the stone roll back down the hill. We would then have to start all over again. This is exactly what would happen if we did not approve this Bill immediately. We would have to start all over again. One of the main purposes of this Bill is to provide supplementary funds to allow the banks to continue to administer the program until March 31. Is it our fault if lenders and borrowers have confidence in this program, which meets a real need, and if they make use of it?

Interrupting this program, even only for six weeks, even only for one week, even only for one day, would be enough to destroy all the confidence which surrounds it and which is the main reason for the success of a service which has amply proven its usefulness since its implementation 24 years ago by the Conservative Government led by the Right Hon. John Diefenbaker. Mr. Speaker, any interruption in this program would undermine the efforts made by people throughout the country to promote economic recovery.

Indeed, why dillydally? Why not pass this bill immediately? In addition to the sense of continuity I have just described, a clear evidence of the trust we have in the business sector, the other aspects of the Bill only show plain common sense. This bill does not radically alter the current program but only makes it more consistent with the economic realities of 1985. It simply recognizes the role of each economic sector. Thanks to a deeper involvement, the banks will feel more comfortable while relying on a firm government support.

In addition, the bill will enable small businesses to expand and to diversify into research and development, which is so essential for the growth of our economy and its adjustment to world markets.

Through the comprehensive measures advocated by our government, Canadian businesses will now have the means to devote part of their energy to research and development. This sector has been neglected for too long. In 1968, Canada allotted 1.3 per cent of the its Gross National Product to R&D. Fifteen years later, that percentage has remained unchanged while our economic partners throughout the world doubled or tripled their investments in that sector. During that period, strangely enough, Canada has known stagnation. We have spent less per capita for research and development than

February 26, 1985

Small Businesses Loans Act

any other industrialized nation except Iceland and Ireland. The time has come to change that. Through its actions, among which Bill C-23 which I wholeheartedly support, the Progressive Conservative government intends to set a new direction.

However, we do not want to act unilaterally nor impose our views. We leave that to others I need not name. This desire to consult and meet the needs and demands of people, especially in the industrial sector, has been warmly welcomed as shown by businessmen's statements reported in the great Toronto daily, The Globe and Mail:

[English)

Small business groups say they like the sound of the Government's word. [Translation]

Does this not prove beyond doubt that Canadian businessmen are receptive to the various initiatives taken by the Mulroney Government?

And if it is true for the whole country, it is also true for my constituents.

Some will say that the economy of my riding is primarily based on agriculture. Some might even suggest that a Member from such a riding has no need to be concerned with the problems of small business.

They are wrong, Mr. Speaker. First of all, I must say that I have great respect for people living of the land. As a matter of fact, there are many in my riding and they have special problems. I am well aware of that and throughout my campaign, I made representations on their behalf and demanded policies geared to their needs. Since my election, I did everything in my power to carry out the plans of action developed jointly by farmers and myself.

So, this group is very important, but it is not alone. There is too often a tendency to forget the offshoots of small business located on the fringe of large centres like Montreal and Quebec City.

It is about time our regional industries had their say and a place in the sun as well. As I have been all my life in small business at every level, from the position of clerk to that of chief executive officer, I certainly speak from experience rather than in the abstract.

Mr. Speaker, small business is certainly as important for regional economies as for larger centres, but it is wrong to suggest that the problem should be dealt with in the same manner.

It would therefore be illusive to think that megaprojects are a must before a region can be put on the map, for what is needed is presence and visibility. We must not be afraid to show dynamism in strong regions. I would point out that the provinces were not the only victims of the centralizing mentality which the Liberals made us endure for nearly twenty years-centralization was so powerful that its impact was felt even in the regions.

For too long now, Mr. Speaker, people have forgotten that we cannot have a strong economic country unless the regions are strong as well-there is no way the whole can be strong if the parts are weak. It is unthinkable and illogical, and that is something the team to which I belong has long since recognized. As evidence of that, take the agreements signed with the provinces-including the Atlantic Accord-or again the spirit of open-mindedness and co-operation that prevailed at the Regina conference hardly a few days ago.

Indeed, Mr. Speaker, national prosperity can come only through sound regional development policies. The regions have no need for gigantic projects and white elephants, but there are other options available.

We can pave the way for regional development by encouraging small business, particularly with respect to natural resources. We have to look around us and exploit what we do have. What is the point in trying to get and develop a resource which abound in the next region? Let us make an inventory of the resources around us. Let us develop them, so that we will have strong regions.

In Kamouraska-Riviere-du-Loup, for instance, we do have several promising resources which are often neglected-fishing, and particularly eel fishing. How is it that eel fishermen have only one outlet for their product, which is to ship it to Montreal from where it is exported to Europe? How is it that we have this resource back home, yet its economic fallouts can barely be felt?

The same goes for peat. Why not start up small businesses to process that nearly inexhaustible resource, while peat bags from Riviere-Ouelle, Riviere-du-Loup or elsewhere are for sale on Toronto, Winnipeg or Vancouver markets?

What about our forests? There again the response is unsatisfactory at the economic level. Some industries are leaders in that field, but they can never be really competitive because they are often short of cash. We are strangling them instead of lending them a hand. That practice has to stop. In terms of tourism, my region is nothing more than a throughway between Quebec City and the Gaspe area. What are we waiting for before we develop that tourist industry, that natural and cultural wealth which lies idle along that throughway? The resource is there all right, but it is left unused.

As far as farming is concerned, unfortunately we lack SMBs to process foodstuffs in our area. We have a few which we often look upon as economic pillars for the region, but there are too few of them considering the potential we have.

Also needed are economic development agencies in the area itself. Agencies such as the Corporation de developpement economique de La Pocatiere, which is in charge of industrial promotion for the whole of the Kamouraska County Regional Municipality. This is a Quebec first in that field, and my area is proud of it. Other projects may follow such for Les Basques

February 26, 1985

and Riviere-du-Loup, and this goes to show the positive spinoffs of a healthy decentralization.

There is another kind of agency that could have quite an influence. I am thinking of job creation agencies which cause the most productive interaction, the almost ideal form of co-operation between the private and the public sectors. Being aimed at providing venture capital to the SMBs of a CRM, the key companies can easily become a vital element for the economic survival of a region. The areas of La Pocatiere, Les Basques and Temiscouata are waiting for the setting up of such agencies that would complement the work done by other agencies while responding to the real needs of CRMs. Those companies are proving to be a first rate effort in regions that have been neglected up till now as far as economic development is concerned.

Finally, one has to rely on the vitality of the regions and in ours just as elsewhere in Canada people have rediscovered on September 4 a climate of confidence, conducive to innovation and progress. To illustrate that, we are organizing a seminar on subcontracting which has been labelled a major economic event in Eastern Quebec. The purpose of that seminar is to publicize the region and get entrepreneurs and potential investors to consider our area-

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Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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February 26, 1985