ARCHIVED - Western Economic Diversification Canada

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Minister's Message

Protecting the Future of Western Canadians

As Minister responsible for Western Economic Diversification Canada (WD), I am pleased to present the department's Report on Plans and Priorities for 2010–2011.

Western Canada is blessed with an abundance of natural resources, which have been the foundation of the western economy and made the region a driving force behind Canada's prosperity.

However, the global economic downturn has demonstrated that the West must further diversify its economy to ensure that it remains strong, innovative and competitive.

WD is taking action to ensure the West emerges from the downturn stronger than ever by helping deliver Canada's Economic Action Plan in the western provinces. Specifically, the department is delivering the Recreational Infrastructure Canada (RInC) program and the Community Adjustment Fund (CAF). These short-term programs not only provide timely, targeted and temporary economic stimulus to Canadian communities, they create and maintain jobs, improve the health and quality of life of our communities, and pave the way for future growth and prosperity.

For more than 20 years, WD has worked closely with the West to diversify the western economy. The department will continue to build on the solid foundation it has laid of strategic projects, partnerships and programs that support entrepreneurship, foster innovation, strengthen our communities and open international markets.

 

Minister of State's Message

Creating Economic Prosperity for the West

Since its establishment in 1987, Western Economic Diversification Canada (WD) has been acting on the priorities of western Canadians by focusing on growing small business, creating local jobs, and attracting more investment to expand the economy.

2009 was an extraordinary year, with the worldwide recession requiring an immediate and comprehensive action plan from the Government of Canada. WD played a major role in this action plan by working to maintain and create jobs for Western families, workers, and businesses to weather the economic storm.

As we are now reaching the second year of the plan, WD will continue to deliver the Community Adjustment Fund and Recreational Infrastructure Canada program for western communities. But WD's work won't stop there – we will continue to focus on growing a competitive western economy that responds to the needs of industry, both locally and abroad.

WD is committed to a strong West that will grow and prosper. We will continue to do this by working together with our partners so we can deliver even more results for western Canadians.

 

Section I – Departmental Overview

1.1 Raison d'être and Responsibilities

Western Economic Diversification Canada (WD) was established in 1987 to lessen Western Canada's (Manitoba, Saskatchewan, Alberta and British Columbia) economic dependence on its natural resources. Under the Western Economic Diversification Act, 1988, the department is mandated to:

“promote the development and diversification of the economy of Western Canada and to advance the interests of the West in national economic policy, program and project development and implementation.”

To support these outcomes, WD's programs encourage business development, innovation and community economic development in rural and urban communities. The department plays an important leadership and coordination role in furthering western interests and responding to western challenges. WD works strategically through partnerships – with all orders of government, academic and research institutes, industry associations, and not-for-profit organizations – to implement initiatives that leverage funds and expertise for the benefit of the West and westerners.

WD's Deputy Minister is based in the department's Headquarters office in Edmonton, Alberta. Regional offices are located in each of the western provinces – Vancouver, Edmonton, Saskatoon, and Winnipeg, with a liaison office in Ottawa and regional satellite offices in Calgary and Victoria.

Through its core resources, WD:

• Administers grant and contribution programs that advance innovation, business development and community economic development in rural and urban areas throughout the four western provinces.
• Implements multi-year initiatives such as the Western Economic Partnership Agreements.  These agreements between the Government of Canada and the four western provinces address economic challenges by investing in shared priorities that include:
  • Supporting research and development, with a focus on getting new products, technologies and services out to market;
  • Expanding trade and investment;
  • Enhancing business productivity and competitiveness; and
  • Increasing value-added production in traditional industries.
• Invests in pan-western and multi-regional projects that will further develop and diversify the western Canadian economy.
• Supports the Western Canada Business Service Network, made up of more than 100 economic development organizations in rural and urban communities across the West where entrepreneurs can get assistance in starting and growing their businesses.
• Supports Rural Economic Development Organizations in western Canada to foster entrepreneurship and community economic development in rural areas of western Canada.
• Prepares and disseminates information that improves understanding of western Canadian challenges, opportunities and priorities, and which provides the factual intelligence necessary to undertake internal or external policy and program development.

The department is also responsible for delivering initiatives under the Government of Canada's Economic Action Plan in the West, including:

• The Community Adjustment Fund (CAF) - supports projects that create jobs and maintain employment in and around communities that have experienced significant job losses and lack alternative employment opportunities due to the economic downturn.
• The Recreational Infrastructure Canada (RInC) program - helps reduce the impacts of the global recession by renewing, upgrading and expanding recreational infrastructure in Canadian communities, creating jobs and contributing to the health and quality of life in communities.

In support of national initiatives on behalf of the federal government, WD also:

• Works with provinces and municipalities to deliver a variety of infrastructure programming targeting rural and urban areas in the West, in partnership with the Transport, Infrastructure and Communities Portfolio.
• Administers the Economic Development Initiative in the West, a program supporting business and economic development, which encourages sustainable growth in Western Canada's Francophone communities.

1.2 Strategic Outcome and Program Activity Architecture

The diagram below illustrates WD's Program Activity Architecture (PAA) which is a requirement of all federal departments. WD's PAA provides an inventory of the department's programs, and reflects how WD is structured and how accountabilities are managed. Furthermore, it defines how program activities contribute to WD's strategic outcome. The program activities of the PAA are the first level of activity reflecting how WD allocates and manages the resources under its control to achieve intended results.

 

Strategic Outcome	Program Activities	Program Sub-Activities
The western Canadian economy is developed and diversified	Business Development	Improve Business Productivity
		Market and Trade Development
		Industry Collaboration
		Foreign Direct Investment
		Access to Capital
	Innovation	Technology Adoption and Commercialization
		Technology Linkages
		Technology Research and Development
		Community Innovation
		Technology Skills Development
		Knowledge Infrastructure
	Community Economic Development	Community Planning
		Community Development
		Community Economic Adjustment
		Community Infrastructure
	Policy, Advocacy and Coordination	Collaboration and Coordination
		Research and Analysis
		Advocacy
	Internal Services	Governance and Management Support
		Resource Management Services
		Asset Management Services

1.3 WD's New Program Activity Architecture for 2010-2011

WD received Treasury Board approval to amend its Program Activity Architecture (PAA) in May 2009. The change was made in relation to the department's continued implementation of the Treasury Board Policy on Management, Resources and Results Structure (MRRS), a government-wide approach to the collection, management and reporting of financial and non-financial performance information. The new streamlined PAA will enable the department to improve its focus on objectives and outcomes in planning and reporting, allow it to improve the communication of results and benefits to the public, and assist it to strengthen the capacity to evaluate outcomes and results that will improve management capacity to allocate resources.

The table below illustrates the changes made to WD's PAA (the Internal Services program activity remains unchanged).

PAA for 2009-2010	New PAA for 2010-2011
Strategic Outcome(s)
1. Entrepreneurship and Innovation: The western Canadian economy is competitive, expanded and diversified	1. The western Canadian economy is developed and diversified
2. Community Economic Development: Communities in Western Canada are economically viable
3. Policy, Advocacy and Coordination: Policies and programs that strengthen the western Canadian economy
Program Activities
1.1 Business Development and Entrepreneurship	1.1 Business Development
1.2 Innovation	1.2 Innovation
2.1 Community Economic Planning, Development and Adjustment	1.3 Community Economic Development
2.2 Infrastructure
3.1 Advocacy	1.4 Policy, Advocacy and Coordination
3.2 Collaboration and Coordination
3.3 Research and Analysis

1.4 Planning Summary

1.4.1 Financial and Human Resources

The tables below provide a summary of the department's total planned spending and human resources for the next three fiscal years. The decrease in financial and human resources from fiscal year 2010-2011 onwards is primarily due to the planned conclusion of funding received under Canada's Economic Action Plan, which expires at the end of the 2010-2011 fiscal year.

Financial Resources ($ thousands)

2010-11	2011-12	2012-13
428,958	173,196	160,259

Human Resources (Full-Time Equivalents - FTEs)

2010-11	2011-12	2012-13
474	396	396

1.4.2 Planning Summary Table

Strategic Outcome: The western Canadian econonmy is developed and diversified

Performance Indicators	Targets
Real gross domestic product (GDP) growth in western Canada	3.0% (stable growth rate)
Labour productivity growth in Western Canada, measured as year-over-year change in real GDP per hour worked	1.2% (stable growth rate)
Primary production as a % of GDP	14% (continuation of downward trend)
Research & Development (R&D) intensity: gross domestic expenditures on R&D (GERD) as % of GDP	1.3% (stable growth rate)

The following table illustrates the distribution of WD's overall funding by the five program activities that make up WD's Program Activity Architecture over the next three fiscal years. This table includes funding received by the department through Canada's Economic Action Plan¹.

($ thousands)

Program Activity	Forecast Spending 2009-10	Planned Spending			Alignment to Government of Canada Outcomes
		2010-11	2011-12	2012-13
Business Development	52,072	39,157	42,575	42,575	Strong Economic Growth
Innovation	80,344	59,455	49,207	49,207	An Innovative and Knowledge-based Economy
Community Economic Development	325,430	303,053	54,206	41,269	Strong Economic Growth
Policy, Advocacy and Coordination	9,521	8,873	8,879	8,879	Strong Economic Growth
Internal Services	20,785	18,420	18,329	18,329	Strong Economic Growth and an Innovative and Knowledge-based Economy
Total	488,152	428,958	173,196	160,259

1.5 Contribution of Priorities to Strategic Outcome

For 2010-2011, WD has identified three operational priorities and four management priorities to support the achievement of its strategic outcome.

Operational Priorities

The economies of communities across western Canada face varied and distinct challenges depending in part on their size, historical and current industrial base, and geographic location. In pursuing each of these three operational priorities, WD will strive to ensure that both rural and urban communities benefit from departmental programming.

• Technology Commercialization – to facilitate the translation of knowledge and technology into commercial opportunities.
• Trade and Investment – to enhance small-and medium-sized enterprises (SME) participation in global markets, create value-added opportunities connected to Western Canada's gateways and corridors, and raise Western Canada's visibility as a competitive investment location.
• Business Productivity and Competitiveness – to support the growth and competitiveness of western Canadian SMEs.

All three priorities are ongoing, having been committed to at least three fiscal years prior to 2010-2011.

Technology Commercialization

Why is this a priority?

• In Western Canada, relatively low levels of business expenditures on research and development (BERD) illustrate the weak emphasis on business innovation. There is a strong correlation between BERD and innovation activity, and Western Canada's average BERD of only 0.5 per cent of GDP between 2003 and 2006, is considerably lower than Canada as a whole (1.2 per cent) and well behind innovation leaders such as Finland (2.5 per cent), the state of California (3.1 per cent), and the state of Washington (3.5 per cent)².
• Supporting technology commercialization organizations such as industry associations, technical institutes and universities will foster new knowledge and technologies. Through innovation, knowledge is translated into new products and services, and into new ways of designing, producing or marketing existing products or services for public and private markets.
• WD's investments in innovation and technology commercialization are the foundation for economic diversification and support the transition to a knowledge-based economy and align with the Government of Canada's Science and Technology Strategy.

Plans for meeting the priority, WD will:

• Continue to support the creation and growth of knowledge-based clusters in new economy sectors that contribute to an increase in knowledge-driven and value-added economic activities.
• In partnership with provincial and local governments and other partners, make strategic investments to support technology commercialization and adoption initiatives, enhance technology skills development, support applied research and development, strengthen knowledge infrastructure and create linkages across the innovation system.
• Support research and development, and commercialization in rural communities through working with Post-Secondary Education institutions.

Trade and Investment

Why is this a priority?

• Western Canada is highly dependent on foreign trade with exports accounting for roughly 34 per cent of its GDP. A key challenge facing Western Canada is to build on the existing strengths of a primarily resource-based economy while adapting to the increasing pressures to remain internationally competitive particularly in emerging sectors. Western Canada's future prosperity is heavily dependent on its ability to expand into international markets and attract foreign direct investment.
• The Canada First Defence Strategy along with Canada's mission in Afghanistan have resulted in unprecedented opportunities for western Canadian aerospace and defence companies. Assisting these companies to compete for Canadian defence contracts as well as to link into the global supply chains of multinational defence and aerospace corporations will help them become more competitive internationally.
• This priority directly aligns with the Government of Canada's Global Commerce Strategy, Advantage Canada and the National Policy Framework for Strategic Gateways and Corridors.

Plans for meeting the priority, WD will:

• Support international business development projects targeting the United States and Mexico, the Asia-Pacific region, Latin America and other priority markets.
• Coordinate activities that will enable western Canadian aerospace and defence companies to access federal procurement and industrial regional benefits opportunities.
• Support initiatives that will enhance the trade and investment attraction potential of large-scale technology projects supported by WD.
• Work with partners to pursue value-added economic opportunities associated with Western Canada's gateways and corridors, such as the Asia-Pacific Gateway and Corridor and the Mid-Continent Trade Corridor.

Business Productivity and Competitiveness

Why is this a priority?

• Canada's productivity growth continues to lag behind that of the United States. According to the Competition Policy Review Panel – Compete to Win – Canada's productivity performance lags behind the United States and most Organisation for Economic Co-operation and Development (OECD) countries³ and Canada's growth rate has been much slower than the United States, particularly since 2000⁴. An analysis suggests that the widening productivity gap is due to differences in technology adoption, innovation, firm organization, scale and capacity utilization as opposed to the commonly held belief that the gap is due to relatively low levels of capital investment⁵.
• In addition to facing strong global competition from low wage countries, western Canadian manufacturers are hampered by geographic distance from strategic emerging major markets (e.g. Asia) and lack economies of scale to support a high concentration of traditional manufacturing.
• Productivity growth is considered to be a key component of long-term economic growth and increasing the long-term material standard of living of Canadians.
• This priority aligns with the Government of Canada priorities outlined in Advantage Canada, the Science and Technology Strategy, and the Global Commerce Strategy.

Plans for meeting the priority, WD will:

• Facilitate and enable access to risk capital and business services to small-and medium-sized enterprises through programs and services offered in conjunction with other business services organizations and associations.
• Undertake systemic initiatives to enhance business productivity and competitiveness, including support for initiatives that promote awareness and adoption of new management and business practices (i.e. lean manufacturing), to access global supply chains, and to create strong business networks.

Management Priorities

To improve the management practices of the department in 2010-2011, WD will focus on the following four management priorities to support the achievement of its strategic outcome:

• Public Service Renewal – to sustain the necessary complement of qualified, motivated and knowledgeable staff to deliver on WD's mandate and contribute to federal priorities.
• Performance Measurement – to ensure value for money, support organizational decision-making and demonstrate results.
• Integrated Risk Management – to ensure the comprehensive and consistent use of risk information to inform departmental management.
• Information Management – to enhance access to information supporting decision-making and communication with Canadians.

The first three priorities listed above have been previously committed to two years prior to the 2010-2011 fiscal year. The latter priority is new for 2010-2011.

Public Service Renewal

Why is this a priority?

• To ensure the department continues to have the people, knowledge and skills to effectively deliver on its mandate and contribute to the Government of Canada priorities.

Plans for meeting the priority:

WD will sustain the necessary complement of qualified, motivated and knowledgeable staff by focusing on:

• Encouraging employee engagement, knowledge transfer, career development, talent management, and succession planning.
• Conducting strategic recruitment and renewal initiatives.
• Enabling infrastructure such as developing a new competency-based performance management system and establishing service standards for human resources services.

Performance Measurement

Why is this a priority?

• To demonstrate to Canadians WD's impact on the development and diversification of the western Canadian economy.
• To support evidence-based decision making, policy development, and enable the department to implement strategic adjustments as required throughout the year.
• To ensure a high quality Performance Measurement Framework⁶ that meets Treasury Board requirements.

Plans for meeting the priority:

To support improved performance measurement, WD will focus on:

• Reviewing and implementing performance measures to ensure relevance and effectiveness.
• Developing innovative performance measurement approaches and methodologies to more effectively measure and communicate WD's results.
• Further development of WD's project database system, Project Gateway, to more effectively manage project performance measurement and reporting.

Integrated Risk Management

Why is this a priority?

• To enable the department to identify the range of risks that may compromise the achievement of the department's mandate (e.g. human, financial, and program) and take steps to mitigate these risks.

Plans for meeting the priority:

To continuously improve risk management, WD will focus on:

• Increasing risk-sensitive oversight aimed at reducing the current web of rules for clients and internal administration.
• Developing and promoting tools to encourage the greater integration of risk-based decision-making throughout the department.
• Integrating risk into the department's planning cycle.
• Increasing awareness of risk management expectations and initiatives to encourage greater cultural change.

Information Management

Why is this a priority?

• To enhance access to both accurate and timely information for decision-making and communication with Canadians.
• To improve Canadians' ability to communicate and work with the department.

Plans for meeting the priority:

To support improved information management, WD will focus on:

• Deploying departmental training and technology to optimize access and handling of information, including streamlined work processes and group collaboration, to improve departmental information management practices which will result in better service to Canadians.

1.6 Risk Analysis

After a historic year of decline in which the Canadian and global economies contracted more than two per cent, most analysis suggests that economic recovery will begin to slowly build momentum through 2010 and accelerate over the latter part of 2011, with the Canadian economy closing its output gap in approximately 2013⁷. Despite this optimism, much uncertainty remains and WD faces challenges in pursuit of its strategic outcome and priorities for 2010-2011. The priorities and plans outlined in this document are designed to be flexible and responsive, addressing current economic conditions as well as the long-term challenges confronting Western Canada.

As a commodity driven, trade-oriented economy, Western Canada's economic dependence on resources makes it particularly vulnerable to international market conditions and commodity prices. In 2009, Saskatchewan, Alberta, and British Columbia experienced significant declines in economic activity (GDP fell between 2.5 to 2.7 per cent for these provinces⁸) after experiencing record levels of growth in the previous year. The economic downturn of the past year has not affected all western provinces equally. In spite of struggling mining and manufacturing sectors, Manitoba has proven to be one of the most resilient economies in the country, posting 0.8 per cent GDP growth in 2009⁹.

Despite being hit hard in 2009, public and private sector forecasts suggest the western provinces will be leading a tentative Canadian recovery in 2010. This encouraging outlook is the result of monetary stimulus, improving financial conditions, higher commodity and energy prices, lower construction costs, and strong infrastructure stimulus spending by the federal and provincial governments¹⁰.

As the federal government's regional development agency for Western Canada, WD is well positioned to deliver economic stimulus as part of the Government of Canada's Economic Action Plan. Over the next year, the department will maintain its commitment to the Community Adjustment Fund and the Recreational Infrastructure Canada initiatives increasingly shifting its focus from project development to stewardship and oversight, ensuring value for money and results for Canadians.

In the long term, Western Canada's prosperity will depend largely on its ability to become more competitive by increasing participation in international markets and attracting foreign direct investment. There are growing commercial opportunities for value-added goods and services in non-traditional markets and with growing capacity in both emerging sectors, such as biotechnology and the life sciences, clean energy and environmental technologies, nanotechnology, and established sectors, such as aerospace and value added agriculture, the western innovation system is well positioned to take advantage of these opportunities. Over the next year WD will promote western participation in global value chains and export development in the United States and Mexico, the Asia-Pacific region, Latin America, and other priority markets in order to capitalize on the West's strategic geographic location and access to trade gateways and corridors.

To improve its competitive position in the global environment, Western Canada must strive to establish a more innovative, productive, and diversified economy tailored to the strengths within the region¹¹. Accordingly, businesses and research institutions will need to support innovation, value-added production, and the commercialization of new products, technologies and services; public investments in the western Canadian economy should leverage private sector investments and build on existing strengths in the industrial structure of each province.

WD will support innovation by continuing to build technology commercialization capacity and infrastructure, and by increasing the capacity of research institutions to respond to the needs identified by industry. WD will support competitiveness by working with business and industry to enhance business productivity and strengthen the economic fundamentals of Western Canada.

Throughout its activities, WD remains aware that the department's success is largely dependent on its ability to maintain strong relationships with partners in industry, provincial and local governments, academic and financial institutions, communities, and third-party delivery partners. Given the uncertainty of the current economic climate and limited fiscal capacity of some of our partners going forward, it is more important than ever to work closely with these partners to collaboratively leverage available resources.

In striving to respond to pressing economic concerns as well as long-term competitiveness issues, WD must continue to be mindful of its own organizational risks. Over the next fiscal year these risks, as profiled by WD at a corporate level, relate to the need to: demonstrate value for money spent; renew a skilled workforce in what is expected to become an increasingly competitive labour market; and ensure its operations and decision-making is efficient and effective. WD will respond to these risks by placing a priority on public service renewal, performance measurement, integrated risk management, and information management while continuing to streamline reporting requirements and maintaining strong, flexible partnerships with key stakeholders.

WD's plans and priorities for 2010-2011 reflect the needs of the western Canadian economy and key Government of Canada priorities, as outlined in the 2009 Speech from the Throne, Advantage Canada, the Global Commerce Strategy, and the Science and Technology Strategy - Mobilizing Science and Technology to Canada's Advantage and the National Policy Framework for Strategic Gateways and Corridors. As the global economy continues to adjust to the recent economic and financial turmoil, the department will maintain a flexible policy framework to ensure it remains relevant to western Canadians.

1.7 Expenditure Profile

WD plans to spend $428.9M during fiscal year 2010-2011. Compared to the 2009-2010 fiscal year's forecast spending of $488.1M, this represents a total net decrease of $59.2M.  The majority of the decrease results from a decline in WD's core resources and the planned conclusion of funding for certain programs and initiatives. Highlights of WD's change in level of financial resources include:

• $24.2M increase for the Recreational Infrastructure Canada Budget 2009 initiative.
• $22.9M decrease in funding WD received through Budget 2005.
• $20.9M decrease related to the planned conclusion of funding under the mountain pine beetle initiatives (Community Economic Diversification and Airport Improvements).
• $19.0M decrease related to the re-profiling of Alberta and Saskatchewan Centenaries funding.
• $11.6M decrease related to the planned conclusion of funding for the International Vaccine Centre's Biosafety Level III facility in Saskatoon, Saskatchewan.
• $4.8M decrease related to the planned conclusion of Community Futures funding received through Budget 2005.
• $2.0M decrease in operating funding for the Building Canada Fund.

Planned spending of $173.2M in 2011-2012, compared to the 2010-2011 planned spending of $428.9M, represents a total decrease of $255.7M.  This decrease is primarily due to the following:

• $152.6M decrease related to the planned conclusion of the Community Adjustment Fund under Canada's Economic Action Plan.
• $88.4M decrease related to the planned conclusion of Recreational Infrastructure Canada funding under Canada's Economic Action Plan.
• $7.7M decrease because of the planned conclusion of funding for the mountain pine beetle initiatives (Community Economic Diversification Initiative).
• $9.7M decrease due to the planned conclusion of funding for the International Vaccine Centre's Biosafety Level III facility in Saskatoon.

1.7.1 Canada's Economic Action Plan

Canada's Economic Action Plan (CEAP) under Budget 2009 provided new resources to WD for the delivery of two programs: the Community Adjustment Fund (CAF) and the Recreational Infrastructure Canada program (RInC). These initiatives have the goal of providing timely, targeted and temporary economic stimulus for communities to mitigate the impacts of the economic downturn.

Nationally, CAF and RInC were allocated $1B and $500M, respectively, over two years. WD received $305.3M for CAF and $152.6M for RInC (excludes Public Works and Government Services Canada accommodations costs). The fiscal year breakdown of CEAP spending by program is as follows for Western Canada:

($ thousands)

CEAP Program	Forecasted Spending 2009-10	Planned Spending 2010-11	Total
RInC	64,149	88,450	152,594
CAF	152,732	152,608	305,340
Canada Business Network	3,919	3,919	7,838
Other12	45	45	90
Total	220,845	245,022	465,862

Under the CEAP, WD continues to administer the Building Canada Fund – Communities Component, to accelerate the construction of community projects.  The department was also provided with $3.9M annually for the renewal of the Canada Business Network in Western Canada.  In addition, WD received funding under the Enhanced Federal Students Program to hire additional students above its normal student staffing levels.

The graph below illustrates the financial spending trend (actual and planned) between the fiscal years of 2006-2007 and 2012-2013.

[D]

1.8 Voted and Statutory Items

($ thousands)

Vote # or Statutory Item (S)	Truncated Vote or Statutory Wording	2009-10 Main Estimates	2010-11 Main Estimates
1	Operating expenditures	41,725	54,894
5	Grants and contributions	195,245	368,189
(S)	Contributions to employee benefit plans	4,801	5,873
(S)	Minister of State - salary and motor car allowance	-	2
Total		241,771	428,958

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