The Government's response to the "Think Rural" report of the Standing Committee on Natural Resources

April 1998

Introduction

The Government of Canada welcomes the opportunity to respond to the "Think Rural" report of the Standing Committee on Natural Resources. The report has made a significant contribution to our understanding of the issues and challenges confronting rural Canadians and rural communities. The Government is pleased to acknowledge the impact of "Think Rural" in focussing attention on rural Canada.

"Think Rural" provides the Government with a variety of suggestions and recommendations on potential measures that could address key issues facing rural Canadians. The Canadian Rural Partnership (CRP) provides both the context for the Government's response to "Think Rural" and, in addition, a framework for the evolving federal commitment to rural Canada. It builds on work undertaken in response to the December 1996 Speech from the Throne in which the Government committed to the "economic renewal of rural Canada" and to "address problems facing rural Canadians in a way that is tailored to their needs". The Government reiterated and broadened this commitment in the September 1997 Speech from the Throne and reaffirmed this in a substantive way with the announcement of the Canadian Rural Partnership in Budget 1998.

The CRP is about doing things differently. It is about a coordinated federal effort across departments and agencies to address issues facing rural Canada in an integrated way. For example, the CRP is focussed on better delivery of programs and services to rural Canadians. Thus, improvement in the development, design and management of federal policies and programs is being pursued through multi-departmental collaboration. Another key tool is the "Rural Lens" which was announced as part of the CRP. This is a commitment that federal organizations will examine the impact of policies, programs and services on rural Canada as they are formulated.

In essence, the CRP is a proactive approach to ensure that rural issues, such as those described in "Think Rural", are given the priority they require. The CRP builds on the commitment to rural Canadians described in "Securing Our Future Together" and on the themes of partnership, citizen engagement and connecting Canadians outlined in the September 1997 Speech from the Throne. Many departments are collaborating in the CRP. As well, departments have been proactively taking action within the context of their own mandated responsibilities to address rural issues in areas such as connecting all Canadians, value-added in natural resources, and community economic development and community capacity building.

"Think Rural" provides a baseline on issues facing rural Canada. It is a snap-shot in time, highlighting both good initiatives to be applauded and strengthened, and instances where, in the opinion of the Committee, further attention is required. It provides valuable suggestions and insight. It has stimulated much of the thinking behind the CRP. Over the past two years in particular, the Government's actions correspond to many of the recommendations and suggestions contained in "Think Rural".

The variety of Government actions taken, which are described in the Government's Response, provide a "progress report". In fact, there is much more to report but the response is not intended to be an exhaustive account of all the actions that are being undertaken to address rural issues. The Government is pleased to credit "Think Rural" with providing much of the momentum resulting in many such actions and it welcomes this opportunity to demonstrate its continued commitment to rural Canadians. The Government began its mandate with a commitment to rural Canada. It will continue to pursue this commitment over the life of the mandate through the CRP.

Organization of the Government Response

This Government Response document addresses the 37 recommendations of the Standing Committee within the context of the principal issues discussed in the report. To help place the responses in proper context, they are clustered under the eight principal themes of the "Think Rural" report, and linked back to each recommendation as appropriate:

THEME 1: ADOPTING A COMPREHENSIVE RURAL POLICY

THEME 2: RURAL DEVELOPMENT BEGINS AND ENDS WITH PEOPLE

THEME 3: INFRASTRUCTURE DOES MATTER

THEME 4: ENHANCING NATURAL RESOURCE ACTIVITY

THEME 5: VALUE-ADDED IS IMPORTANT

THEME 6: SUPPORTING TOURISM

THEME 7: DEVELOPING SMALL BUSINESS AND ENTREPRENEURSHIP

THEME 8: DESIGNING APPROPRIATE DEVELOPMENT STRUCTURES

Overview of Government Response

For the most part the Government of Canada accepts the recommendations of the Standing Committee. The Government acknowledges the need to shape policies, programs and services around the needs of rural Canadians and to work in partnership with other levels of government and rural communities to address rural issues. It further recognizes the validity of a "bottom-up" approach which engages rural Canadians as integral partners in the resolution of rural issues.

In response to the Committee's first recommendation, which calls for a comprehensive rural policy, the Government Response acknowledges that the essential elements for the consideration of a comprehensive policy are already in place. It notes that the Government's commitment is dynamic and evolving and that increased priority to rural issues will be achieved through the recently announced Canadian Rural Partnership. The Response also signals that the Government plans to gather grassroots input from rural Canadians through a Rural Dialogue as a vehicle in 1998 to further articulate rural issues and to contribute to policy options.

The Government Response also addresses the issues giving rise to the recommendations. This accommodates a fuller appreciation and recognition of key issues brought to the attention of the Standing Committee and discussed in "Think Rural". Actions have addressed the majority of the recommendations and examples are provided wherever possible to illustrate these actions. In a limited number of cases the recommendation maybe under or require further policy consideration and this is indicated in the response.

Government Response to Committee's Recommendations

PLEASE NOTE: The recommendations from the Standing Committee on Natural Resources are listed under the appropriate 8 Themes of the "Think Rural" report (in bold and italics) and are followed by the Government's Response to each recommendation.

A Federal Rural Policy

1. In the 1998 Budget, the Government announced the Canadian Rural Partnership (CRP) which represents the evolving commitment to a comprehensive federal approach to rural issues. The CRP builds on the commitment in "Securing Our Future Together" and flows directly out of the September 1997 Speech from the Throne in which the Government indicated that it would modify its programs and services "to reflect economic and social realities" confronting rural Canadians. A key element of the CRP will be a Rural Dialogue to gather grassroots input as part of the ongoing development of a comprehensive federal response to rural issues. The Rural Dialogue will culminate in a National Workshop and the results from this meeting will contribute to the development of a federal rural policy. In addition, the announcement of the "Rural Lens" as part of the CRP will ensure that federal departments and agencies take into consideration the impact on rural Canada in their formulation of new policies, programs and services.

Access in rural Canada to federal programs and services

2. The federal government's commitment to addressing the issues and challenges confronting rural Canadians is a priority which is being strengthened and refined on a continuing basis. An important feature of this evolving commitment is to ensure that rural Canadians do not face barriers to accessing federal programs and services. A number of specific actions have been taken to improve access, such as the Community Access Program.

The Government is also taking action to ensure that information about programs and services is effectively communicated to rural Canadians. The Government has been and will continue to undertake outreach activities to address this issue, such as the distribution of the Resource Book, a compendium of programs and services which impact rural Canadians, and the Rural Fairs and Exhibits Program and Info-Fairs to take information out to rural communities and businesses.

Information designed for rural Canadians is also provided through AAFC's Canadian Rural Information Service (CRIS), through Industry Canada's STRATEGIS - a major source of business information available on the Internet, and through Canada Business Service Centres.

Access to education and more effective training

3. The Government concurs with the degree of importance the Standing Committee places on education, training and development. It will continue to work within the framework of the federal agreements which govern these three elements to ensure rural issues are appropriately addressed. Since "Think Rural" was released, the federal government has negotiated and signed Labour Market Development Agreements (LMDAs) with most provinces and territories. This means that the provinces and territories have assumed primary responsibility for direct labour market training.

The Government agrees that appropriate knowledge and skills are of the utmost importance in ensuring that all Canadians are able to fully participate in economic development opportunities. Rural Canadians need access to essential literacy and numeracy skills development as well as on the job training opportunities. The Government is committed to working with key partners, including the provinces/territories, the private sector and rural communities, to achieve these objectives.

4. A variety of existing programs focus on these needs. For example, funding programs designed to improve literacy is a major priority of HRDC's partnership arrangements with provincial governments, non-government organizations, employers and workers. In addition, while life long learning is becoming more and more the responsibility of the private sector, it is an area in which the Government will remain very active, specifically through a partnership approach. Moreover, the Government is actively developing partnerships with other levels of government and the private sector to enable training and skills development in rural communities through the Sectoral Partnerships Initiative (HRDC). There are a number of national Sector Councils whose activities have an impact in rural Canada.

5. Several federal departments and agencies are actively participating in new skills development in rural areas. Examples include: the First Nations Forestry Program (NRCan); Canadian Farm Business Management Program (AAFC); FedNor's Tourism Fund; Tourism Alliance of Western and Northern Canada (WD); Community Futures Development Corporations (Industry Canada and Regional Agencies); Community Economic Development Program (DIAND); and finally, DIAND/NRCAN/DFO are assisting in building skill sets in Aboriginal communities through "Post-Pathways" Regional Bilateral Agreements between HRDC and First Nations, Metis and Inuit.

HRDC's Office of Learning Technologies (OLT) works in partnership with universities, colleges, and a variety of other partners to expand and test opportunities enabling adult leaners, including those in rural Canada, to develop skills through innovative uses of technologies.

In addition, the recent federal budget increased funding for Industry Canada's SchoolNet, Community Access Program, and Canadian Network for the Advancement of Research, Industry, and Education (CANARIE) to help bring the benefits of information technology into more classrooms and communities across Canada.

Rural Infrastructure

6. It is recognised by the Government that physical infrastructure, whether in the form of water and wastewater treatment, transportation, telecommunications, energy or community infrastructure, is important for the development of rural Canada. It is acknowledged that municipalities play a key role in cost-shared programs. In recent years, the Canada Infrastructure Works program has injected approximately $8 billion in infrastructure maintenance and improvement in local communities throughout Canada. Rural areas have benefitted equitably relative to their population size.

Water and Wastewater Infrastructure

The need for acceptable supplies of good quality water is a common need. Water quality issues related to agriculture are currently being targeted by AAFC as part of its Sustainable Development Strategy, and through components of the National Soil and Water Conservation Program. In some regions, the issue of water, and suitable infrastructure, is a very strong priority, frequently addressed through partnership arrangements.

Water infrastructure programs, such as the Partnership Agreement on Municipal Water Infrastructure for Rural Economic Diversification (PAMWI) in Manitoba and the Partnership Agreement on Water Based Economic Development (PAWBED) in Saskatchewan, have assisted rural people and communities with water supply and quality improvements. Good water supports a quality of life for existing residents and enhances the overall sustainability of the rural community or region by providing a secure base from which they can develop business activities.

Access to the Information Highway

7. The Government is in agreement with the Committee as to the importance of encouraging rural Canadians to be connected to the new information and communications tools that are now becoming an increasingly vital part of the global economy. Rural Canadians must be given every opportunity to participate fully in the emerging knowledge-based society. Access to the Information Highway and appropriate technologies is one of the major areas of focus under the CRP. The Government recognises, however, that it alone cannot provide solutions to all access issues and is working in partnership with the private sector and other levels of government to ensure that the needs of rural Canadians are met.

An important component of the Canadian Opportunities Strategy, announced in Budget 1998, is to connect Canadians to information and knowledge. The federal government's role focuses on the needs of schools, public libraries and community access sites to have affordable Internet access. The Budget announced that SchoolNet and the Computers for Schools Program will bring the Internet and 250,000 computers into all classrooms across Canada while the Voluntary Sector Network Program will link 10,000 voluntary organizations to the Internet. These programs directly benefit rural Canadians. As well, in January 1998 the Government announced that a further 830 rural and remote communities across Canada will have access to the Internet through 1,000 Community Access sites. This is the result of funding in budget 1997 for the Community Access Program (CAP) which is now well underway to reach its target of connecting 5,000 rural and remote communities to the Internet by the year 2000.

FedNor has made improved telecommunications and access to the Information Highway in Northern Ontario a major thrust of its planning and programming and has provided support to a number of related local and regional projects. In Ontario, all of the Community Futures Development Corporations (CFDCs) are receiving additional federal funding to upgrade their computer systems to better serve their clients using the Internet. There are several excellent examples of how CFDCs have been able to work with their respective telephone companies to bring about improved service.

The Standing Committee noted the disadvantages faced by rural areas still under multi-line telephone service. The regulated telephone companies have committed that by the year 2000 virtually all remaining party lines will be phased out. The cost of upgrades is being borne by the total customer base, both rural and urban, and is not fully recovered from the recent increases in local telephone rates. However, local telephone rates have risen proportionately more in some rural areas compared to urban areas, as a result of rate rebalancing and restructuring, which is intended to move rates closer to the cost of service provision. While the CRTC has found that there is currently no affordability problem in rural areas, it has set in motion a process for monitoring telephone penetration and affordability. The CRTC has also introduced a number of incentives to encourage competition in remote and rural areas and, in December 1997, announced a public proceeding to explore the best means of ensuring quality telephone service in high cost service areas. The proceeding will include regional hearings in a number of small centres across Canada and is to be complete in time for implementation in the year 2000.

Rural Energy Needs

8. Both access to and availability of reliable energy sources has been a problem in some rural and remote areas, which has sometimes contributed to limit potential economic development. It is recognised that the development of less expensive energy sources could greatly benefit rural and remote communities. In October 1996, the Government's commitment to renewable energy was addressed in Natural Resources Canada's Renewable Energy Strategy. This strategy focuses on accelerating the development and commercialization of renewable energy technologies and has provided a blueprint to achieve this goal.

The Government is also working with the renewable energy industry, First Nations Communities and electric utilities on initiatives to reduce energy costs in remote communities. A highly successful, internationally known project is NRCan's work on the design, implementation and technological improvement of the renewable energy district heating system with the Cree community of Oujé-Bougoumou. Other achievements include: a market assessment for solar preheated ventilation systems; a study by the Assembly of First Nations on Sustainable Energy Opportunities in Remote First Nation Communities; the installation of two photovoltaic systems for demonstration and training in the NWT; and numerous commercial systems already installed or planned under the Photovoltaics for the North Program.

Recent federal budgets have provided further new initiatives to encourage investments in both energy efficiency and renewable energy. For example, rural micro-electric generating facilities (including wind turbines and photovoltaic projects) qualify for accelerated deduction under the Income Tax Act. The 1997 Budget announced that $60 million in funding over three years (starting in 1998) would be available for initiatives that promote investments in energy efficiency and renewable energy. To the extent that renewable energy technologies are often more cost competitive in rural and remote areas, the initiatives announced to date should help stimulate such investments in these regions.

In addition, NRCan is continuing to support research and development in renewable energy technologies including wind, solar thermal, photovoltaic, small hydro and biomass.

Rural transportation issues

9. In Canada, roads and highways are a provincial responsibility. Nevertheless, the federal highway contribution to provinces was $260 million in 1997-98. In addition, a further $100 million per year is spent on federally owned highways and bridges. The Government is working with provinces and territories to update the study of the National Highway System and to examine the potential role of private/public partnerships in renewing the National Highway System.

10. Any tax assistance to support operators of rural transportation facilities or to promote investment would need to be examined in light of the ongoing review of the corporate tax system. However, using tax-based incentives may not be the most effective method of promoting investment in, or assisting operators, of rural transportation networks.

Cost Recovery

11. Under the theme of infrastructure, the Standing Committee also noted the need to ensure that cost recovery from rural/remote industries is not excessively onerous. This will be dealt with under the new Cost Recovery and Charging Policy, announced April 16, 1997 which sets out the principles for all departments in implementing cost-recovery initiatives. These involve more client consultations, greater client involvement in fee setting and service delivery, improved impact assessment and greater transparency.

Sustainability

12. Sustainable development strategies have been a standard requirement for all federal departments since 1996 with the accountability for them resting with the Commissioner of Environment and Sustainable Development 1995 in the Office of the Auditor General. NRCan has developed a sustainable development strategy, "Safeguarding our Assets, Securing our Future" that promotes the achievement of four objectives: enabling Canadians to make balanced decisions regarding natural resources; sustaining the economic and social benefits from natural resources for present and future generations; minimizing the impacts of natural resources development and the use on the environment and the safety of Canadians; and establishing NRCan as a leader in the federal government in managing its operations based on sustainable development principles.

Sustainable development is the foundation of the NRCan's Natural Resource Action Plan. Examples of NRCan's involvement in sustainable development through the promotion of partnerships include the Whitehorse Mining Initiative, the Model Forest Network, National Forest Strategy and the Canada Forest Accord. Other departments are also involved in the promotion of sustainable development, including AAFC's National Soil and Water Conservation Program which encourages environmental farm planning, and identification of best management practices. DFO has also amended the Fisheries Act to manage marine resources through partnerships with local stakeholders.

With regard to issues of sustainable resource development, Health Canada has undertaken several epidemiological studies that monitor specific health parameters affected by the environmental exposures sustained by rural populations. Examples include studies such as the Great Lakes Fish and Wildlife Consumption Survey which monitors intakes and contaminant levels in rural residents consuming foods harvested from the wild. This and other similar studies have been conducted under the auspices of the Bioregional Health Effects Program.

Also, the Laboratory Centre for Disease Control is completing a Pesticide Exposure Assessment Study (PEAS) which samples from a smaller portion of the population of approximately 2,000 farm families participating in the earlier Ontario Farm Family Health Study (OFFHS).

Intergenerational Transfers

13. The Farm Credit Corporation actively promotes its Family Farm Loan (FFL) which is designed to assist rural development through estate planning. The Corporation has been evaluating the effectiveness of this loan product and its uptake by family farms and is developing a variety of other loan products which will further address the needs of intergenerational transfers.

Improving the investment climate

14. The Government is also committed to regulatory reform as a means to encourage a more positive investment climate. Through various consultations with stakeholders, progress has been made in several key industry areas including: mining, forest products, and aquaculture. Progress on regulatory reform is evident already. For example, the 1997 Mines Ministers' Conference recommended that a review of the federal/provincial/territorial regulations affecting mining be undertaken. In response, the Government, led by NRCan, coordinated a review of appropriate federal regulations through an innovative virtual workshop on the Internet and a multi-stakeholder meeting in 1998 to identify areas for improvement. A national workshop in April 1998 will prepare a final report, with recommendations to be tabled at the Mines Ministers' Conference in July, 1998. The goal is to streamline and increase the effectiveness of the existing regulations to foster a favourable investment climate for mining in rural and remote Canada. These objectives will also be furthered by the implementation over the next few years of the January 1998 Canadian Council of Ministers of the Environment Harmonization Accord to expedite the environmental assessment of projects.

The Government has also developed a Sustainable Forest Management Certification System through collaboration with industry stakeholders and provincial representatives. Also related to forest products is the Mutual Recognition Agreement with Japan for building products standards, and the improved harmonization of federal and provincial environmental regulations governing the pulp and paper industry. Finally, improved federal regulations in aquaculture have been introduced as part of the Federal Aquaculture Strategy, which is aimed at promoting the industry as a means to create jobs and promote development in rural areas.

Aboriginal Land Claims

15. The Government acknowledges the Standing Committee's concern with respect to land claims settlement and reaffirms that this remains a priority. Since 1993, seven comprehensive claim settlements have been finalized. With some 70 comprehensive land claims negotiations currently under way, the Government is focussing its efforts on maintaining forward momentum, as outlined in "Gathering Strength", Canada's Aboriginal Action Plan (the response to the Royal Commission on Aboriginal People).

Fiscal Regime for Natural Resource Industries

16. The Government acknowledges the importance of the natural resource industries to rural Canada. The long-term health of these industries depends on a number of factors, including resource prices, access to markets and to capital and a stable and predictable regulatory and tax regime. Following the report of the National Task Force on Oil Sands Strategies, the Government brought in a modest change which provided a balance between income tax support to the oil sands industry and fiscal responsibility. The Government is responsible for ensuring that the tax regime for all industries, including the natural resource industries, is conducive to investment and consistent with the objectives of sustainable development.

Research and Development

17. Research and development (R&D) is critical if Canada is to remain competitive internationally. This is acutely evident in rural areas. Continued support for R&D will be essential to rural and natural resources development. Improvements in efficiency and technology are necessary and initiatives, such as Centres of Excellence, must continue to be supported and developed in rural regions. The Government is demonstrating its commitment to fostering a strong science and technology (S&T) infrastructure in Canada. Revitalization began with the release in 1996 of the federal government's science and technology strategy "Science and Technology for the New Century". Subsequent Budgets gave life to the strategy through a number of initiatives including:

- Canada Foundation for Innovation: a one-time investment of $800 million which, in partnership with the private sector, provincial governments, universities and not-for-profit organizations, will renew research facilities and equipment in Canadian institutions of higher learning.

- Granting Council Budgets: a three-year commitment to increase funding for university research by a total of $405 million over three years.

- Networks of Excellence: funding for the program was stabilized and made permanent and a commitment was made to the creation of new networks.

The Government undertakes R&D in partnership with industry and other stakeholders. Involving partners throughout the process allows for greater leverage in terms of research expenditures, targeting of priorities and increase the efficiency in the transfer to market of new technologies. NRCan is heavily involved in S&T partnerships and much of their work in S&T is transferred to organizations and companies in rural Canada. Examples of such NRCan partnerships include, a cooperative agreement with the University of Québec in Abitibi-Témiscamingue on mining R&D and the CANMET Western Research Centre which delivers S&T programs on energy efficiency and sustainable development.

Value-added processing in rural Canada

18. Rural Canadians are keenly interested in expanding the value-added and rural processing base in their regions. Many see this as a key to maintaining their employment and their population and hence their communities.

In the 1998 Budget, the Government announced increased funding of $34 million for the National Research Council's Industrial Research Assistance Program which will be used to fund innovation in areas such as pollution prevention and the more efficient use of natural resources. In addition, increased funding was provided to the Natural Sciences and Engineering Research Council (NSERC) which supports research in the primary resource sectors.

Trade barriers

19. The Government is in full agreement with the Standing Committee that we must do everything possible to give Canadian entrepreneurs access to markets, both foreign and domestic. This is a key component of the Government's efforts to maintain a strong economy. Canada's International Business Strategy (CIBS) is underpinned by a trade policy that seeks improved and more predictable access to the US and other foreign markets, and promotes continuous improvement and expanded coverage of international rules governing trade and investment.

The Government is continuing to work vigorously to advance and defend its international trade interests. It will continue to press for World Trade Organization (WTO) members to accelerate the liberalization of tariffs beyond levels agreed in the Uruguay Round of the GATT and seek to improve market access in several sectors of importance to Canadian exporters.

The Standing Committee expressed concern that interprovincial trade barriers are hampering progress in adding value to rural output through barriers on trade in value-added products. The Agreement on Internal Trade (AIT) is a major first step forward in dismantling internal trade barriers and the Government is committed to negotiating further improvements. The Government agrees that the process of eliminating provincial trade barriers should be accelerated. In particular, the dispute settlement provisions must be strengthened, the number of exemptions reduced, and the important work on facilitating labour mobility completed expeditiously. Priority will be placed on meeting the commitment to extend the procurement provisions to many more entities (primarily Crown Corporations) and on the negotiation of an Energy Chapter. The Government is committed to encouraging the provinces to complete unfinished business and to make further progress on breaking down internal trade barriers.

Value-added: Role of federal institutions

20. Building innovation-based and value-added firms is an important part of NRCan's resource innovation initiative. NRCan fosters value-added products and services from land use and management, exploration, development and management of reserves, and ongoing resource extraction and processing. NRCan's programs in these areas are conducted in partnership with Canadian industry and academic institutions. For example: the National Centre for Upgrading Technology is working with industry and universities on using biotechnology to upgrade Saskatchewan's heavy oil. NRCan also provides financial support for R&D to Forintek and FERIC, two institutions leading the development of new, technologically advanced wood products and processes and carries out joint activities with Industry Canada to identify opportunities for further processing of minerals and metals in Canada, with a focus on small and medium sized firms (SMEs).

Under its Natural Resources Action Plan, NRCan will continue to encourage partnerships in S&T with industry and others through Government programs such as Industry Canada's Technology Partnerships Canada, and the Industrial Research Assistance Program (IRAP).

The new mandate of the Business Development Bank (BDC) allows it to better address the financial and management needs of small business, with particular emphasis on the knowledge-based firms and exporters. BDC has increased its support for value-added activity in emerging sectors, with new loan authorizations in 1997 to these industries representing 38% of all BDC loans authorized in the year.

Among its many financial services to the agriculture sector, the Farm Credit Corporation (FCC) provides loans to assist value-added enterprises. The 1997 Budget injected a further $50 million into the FCC. The Corporation also delivers the Business Planning for Agri-Ventures program which provides business planning preparation and assistance to farmers and agri-business operators who are planning to establish, expand or diversify agricultural and value-added agriculture-related businesses and services.

The $60 million annual Canadian Adaptation and Rural Development (CARD) Fund was established in 1995 to help the agriculture and agri-food sector and its rural communities adapt, on a sustainable basis, to changes in domestic and international circumstances and to major government policy changes. Important objectives of the CARD strategy have been to foster self-reliance and partnerships in the sector and within rural communities and to promote diversification and value-added, thereby improving the competitiveness of Canada's agriculture and agri-food sector and their rural communities. Over the first four years, about $100 million has been allocated to provincial industry-led adaptation councils which are targeting these funds to local initiatives to assist the sector and rural communities to diversify, add value and remain viable.

Other AAFC initiatives also target innovation. Research into value-added opportunities is supported through the Matching Investment Fund. Support for local and regional initiatives is also provided through the Canadian Agricultural Infrastructure Program Fund. In Alberta, for example, one component of this program targets value added activity. Regional priorities are also respected. PFRA's work related to the capacity of the land and water resource base, and the capacity for rural wealth is a strong contributor.

Regional Agencies, such as ACOA and WD, with their focus on economic development, support value-added activities through their on-going programming. ACOA's Report on Plans and Priorities for 1997-98 highlights the continued priority being placed on value-added. For example, the consolidated economic development agreement with Nova Scotia targets traditional sectors with potential for substantial increases in value-added and export activity.

Economic Development Canada for Quebec Regions (EDC) favours projects which have a solidifying effect on region's economy. As an example, EDC, in concert with six Community Futures Development Corporations, the AAFC regional office, and the UPA's regional office, introduced a project called Entreprises rurales (Rural Entreprises), a rural development initiative in Eastern Quebec, which aims to stimulate innovation and the entrepreneurial spirit in rural communities in the Lower Saint Lawrence region, the Gaspé peninsula and the Magdalen Islands.

In Northern Ontario, FedNor is improving access to capital to small businesses through loan loss agreements with the BDC and Royal Bank that make $35 million available to knowledge-based, innovative businesses that will serve to diversify the Northern Ontario economy. In addition, FedNor delivers a fund which provides repayable contributions for pre-commercial activities (R&D, feasibility or marketing studies) related to the establishment of a facility that would serve to diversify the local economy. Western Economic Diversification has also established a number of investment funds, some specifically aimed at supporting value-added in "traditional" rural-based industries.

Support to rural tourism

21. Growth in tourism is an important element of economic diversification for many rural communities and as a labour-intensive industry, it can be an important creator of jobs. A fundamental component of the CRP is to examine, with rural people, including small rural tourism operators, how the Government might better respond to their needs in programs and service delivery.

Efforts are being made to proactively include small rural tourism operators in the federal programs and services available to them. In 1997, the Canadian Tourism Commission (CTC) held workshops for Small and Medium Enterprise (SME) rural tourism and smaller urban centre operators to test the CTC's range of SME-accessible and SME-targeted programs and to seek suggestions for improvements and potential new activities that will benefit rural and remote tourism operators.

The CTC strongly encourages consortium involvement both by sector and by region in all of its marketing programs. For example, in February 1997, the CTC launched the Rediscover Canada Regional Marketing Initiatives Program beginning in 1997/98. The CTC also held workshops with the industry to further their development of tourism products: five on adventure travel and ecotourism; and, six on culture and heritage in cooperation with Canadian Heritage. Results included the development of new networks for rural businesses and action plans for these tourism industry subsectors. As well, the CTC's Product Clubs offer a way for smaller firms to come together as partners to pursue goals they share with the CTC.

The Business Development Bank of Canada (BDC) launched in 1997 the Tourism Investment Fund, which was designed in collaboration with the Canadian Tourism Commission, to help facilitate access to financing multi-seasonal tourism operations outside major metropolitan areas. In conjunction with industry partners and a $50 million investment from the federal government, the fund is expected to inject $500 million into projects across the country. At the same time, tourism businesses also need to have an adequate knowledge of how to deal with their own financial needs. Two new guides for tourism SMEs will be released by the CTC in 1998: a guide on how to reduce insurance costs; and, a guide on how to prepare to seek financing and where to apply for it.

Among potential areas of interest for rural tourism development are wildlife and recreational activities in forests. NRCan is monitoring these activities as part of criteria and indicators of sustainable forest management.

22. With respect to the importance of infrastructure, the Government agrees that this is an element affecting tourism in rural communities. However, the Infrastructure Program has been developed as a tripartite cost-shared program based on the identification of infrastructure needs at the local level, and the federal government should not dictate the degree to which it should be focussed on tourism infrastructure.

23. The Government also recognizes the importance of tourism to regional development. While the amount allocated to tourism differs from region to region, depending on local priorities and interests, most of the Regional Agencies, as well as Aboriginal Business Canada, are delivering financial support for tourism package development, tourism skills development and sector-specific economic research and analysis.

In 1997-98 FedNor authorized contributions of $2.1 million towards 25 tourism projects, effectively levering a further $11.2 million in investment. FedNor's tourism eligible funds include its $3.2 million Trust Fund, the $3 million, Not-For- Profit Fund and the $6 million Northern Ontario Economic Development Fund. In 1996-97, the ACOA authorized over $42 million of assistance to the tourism sector with a significant share going to rural areas where most of the tourist attractions and vacation destinations are located. WD has approved a pilot project leading to assistance for small western communities to create tourism-oriented websites and web pages for the Internet. For example, an unconditionally repayable contribution of $50,000 has been provided to the Interlake Tourism Zone of Manitoba on a pilot basis.

Small Business: Improvement in regulatory environment/access to capital

24. The Government has taken significant action to improve the small business climate in rural Canada through its level of tax support for small businesses. The New Hires Program, announced in 1996, will allow small companies to benefit from a 25% "holiday" on EI premiums in 1998 on increases from the 1996 base, along with a 100% holiday in 1997. The 1998 budget announced a premium holiday for hiring additional youth in 1999 and 2000. In the Fall 1997, a fourth successive reduction in Employment Insurance premiums was announced. In addition to these two measures, approximately $4 billion in tax assistance is provided annually to small businesses. A lower tax rate on the first $200,000 of active business income, and the $500,00 lifetime capital gains exemption (LCGE) which is available for shares in Canadian controlled private corporations encourages equity investments in small businesses. Family farms are also eligible for the $500,000 LCGE, and can benefit from the tax free rollover of farm assets to children who continue the farming business. The Canadian federal income tax system for SME's is among the most attractive in the world, particularly when compared to the USA.

25. In the U.S., the Community Reinvestment Act (CRA) states that "regulated financial institutions have a continuing and affirmative obligation to help meet the service and credit needs of the communities in which they are chartered to do business". The legislation was implemented to discourage "redlining" of low-income and minority populations - that is, taking deposits from the entire service area, but not lending in specific neighbourhoods or communities. In spite of the fact that the CRA has forced the banks to look more closely at their lending patterns, it is not clear to what extent the social benefits of increased awareness have exceeded the costs to industry, government and the public. In Canada, besides chartered banks, local financial institutions such as caisses populaires and credit unions, as well as government activity such as BDC, FCC and the Small Business Loan Act, play a significant role in the provision of services to rural Canada. Existing services and the costs of potential government regulation should be weighted against any regulatory intervention in the banking sector. The issue of community re-investment by the banks is being examined by the Task Force on the Future of the Canadian Financial Services Sector. It would be appropriate to wait for the Task Force's report before considering what future action on community investment is desirable.

26a. and 29. The FCC, the BDC and the Regional Agencies are already devoting significant amounts of resources to rural Canada. For instance, the BDC's network of 80 branches includes several small communities; as a result, approximately half of the BDC's lending is in rural Canada. BDC offers general management consulting as well as group programs in all areas of the country, and in many cases where access to such services is limited. Through customized management support and a network of consultants, plus alliances with other Crown financial institutions and private sector lenders, the Bank meets the needs of small and medium sized businesses that are looking to take advantage of new opportunities. While expanding its counselling and mentoring services would have value, as they are useful tools in helping small business develop and grow, this program is not free and expansion will also have to include service fees.

The Canadian Banker's Association and a number of federal departments and agencies are co-sponsoring a study on micro-lending to examine the issues surrounding access to capital for micro-business development in rural Canada. This may help to inform the development of options to address these issues.

26. b. Regional Agencies have rural development as an integral component of their regional development mandate, particularly in regions that are predominantly rural, such as the Atlantic and Northern Ontario. Their programs provide rural entrepreneurs with a mix of repayable contributions, training programs and encouragement of partnerships. The Government's on-going support for these services was demonstrated in the Budget 1998 confirmation of an ongoing annual amount of $20 million for the Federal Economic Development Initiative for Northern Ontario (FedNor) to ensure the continuation of FedNor services beyond its original termination date. The Government agrees that capital needs to be complemented with the management services that can provide crucial support for businesses looking to take advantage of new opportunities. AAFC is involved in this area with its Business Planning for Agri-Ventures program (BPAV). Finally, FedNor's Business Planning Initiative, delivered through 22 CFDCs provides financial loans to local small businesses to pay for professional assistance in the development of business plans.

The Government remains committed to supporting entrepreneurs and small businesses by working through community-based groups that can best define local needs and priorities. For example, Canadian Heritage and Industry Canada recently collaborated with French-speaking business representatives to organize the Second National Forum for Francophone Business People in Canada. The second Forum, which took place in Winnipeg from February 12-14, 1998, built on the success of the first Forum held in the Beauce region of Quebec in October 1996. The purpose of these events is to facilitate exchanges among Francophone businesspeople and to explore means of promoting business agreements between community institutions and the private sector. The three main themes of the recent Forum included the development of value-added industries to complement the production of raw materials, the role of main streets in economic development and the exploration of how to use green and heritage tourism in marketing Francophone and Acadian communities in Canada.

27. The Regional Agencies have extended the reach of their programs into rural Canada through funding partnerships with the Community Futures Development Corporations (CFDC), (Community Business Development Corporations in Atlantic Canada). There are currently 242 of these community-based organizations supporting local community development initiatives, providing small business counselling, administering locally controlled investment funds and covering most of rural Canada. CFDC investment funds provide loans, loan guarantees and/or equity investments to rural small businesses to create or sustain local jobs. In 1996/97, they invested approximately $124 million in rural businesses creating or maintaining more than 20,000 jobs.

In order to ensure that these organizations are not totally dependent on federal funding, the Government allows the CFDCs to use revenues from other sources for additional operating costs and community projects not covered by the Government contributions. Nevertheless, the federal government remains committed to this partnership with the level and form of funding support being determined by local conditions. Thus, ACOA topped up the budgets of the CFDC's by $8.5 million in 1996-97 to meet demands in rural areas and have extended coverage to all rural areas. In Ontario, Industry Canada has provided $15.75 million since April 1, 1996, in additional funding to CFDCs, including $10 million in contributions from FedNor in Northern Ontario.

Efforts are also in place in other parts of Canada through DEC/CED and WD. As an example of tailoring access for businesses in rural locations, WD is customizing operation funding to CFDC's based on geographic size, remoteness, investment fund size, special needs and investment fund performance.

Industry Canada's Canada Community Investment Plan (CCIP) is aimed at equipping growth-oriented firms, wherever they are located, with the skills and expertise needed to access existing sources of risk capital. As the CCIP is only in the second year of a seven-year project, its evaluation is still in the future. It is premature to consider expansion. The Business Development Bank of Canada (BDC) has developed a number of products and services that provide capital in a flexible way so that new opportunities to grow and diversify will not be missed, while at the same time ensuring that existing businesses remain viable. Venture loans and patient capital are just two examples of this.

29. (see 26.a.)

30. While the Government encourages small business to grow, particularly by providing business services, it is limited as to what can be done to alter private sector business practices. For instance, trade agreements aim to limit Government interference in the marketplace that discriminate between companies. There is, however, within the limited marketplace offered by federal government purchasing, an opportunity to increase participation of Aboriginal Business in bidding for and benefitting from federal goods and services contracts through the Procurement Strategy for Aboriginal Business (PSAB).

Rural organizational requirements: developing community capacity

31. The Government recognizes the important contribution of volunteers in rural communities and of the key role they play in community development. Budget 1998 announced specific measures to support emergency service volunteers, extending these provisions beyond volunteer firefighters to cover other emergency services. The amount that volunteers can now receive on a tax-free basis is increased from $500 to $1000. Because rural communities depend heavily for emergency services on volunteer capacity, this provision should help to address rural needs. Another important Budget announcement is the funding for a Voluntary Sector Network Support system which will provide the means for the voluntary organizations to acquire new technological skills and become more highly linked together.

32. The Government is also demonstrating its commitment to providing appropriate development structures to rural Canada through the Community Futures Development Corporations (Community Business Development Corporations in Atlantic Canada). The Regional Agencies provide funding and other support to these professionally staffed organizations which are governed by volunteer boards of directors representing the local communities served. They have a broad flexible mandate to develop and grow local businesses and undertake other initiatives designed by the communities themselves to strengthen and diversify their local economies. More information on CFDCs is contained in the material under the previous theme: "Developing Small Business and Entrepreneurship".

Federal natural resource institutions in rural Canada

33. NRCan maintains a significant presence across Canada. This physical presence is complemented by partnerships and by a wealth of information provided through other channels, including outreach activities, Industry Canada`s expanding CAP program and the Information Highway.

NRCan offices include 10 Forest Science and Technology Research Networks working through national partnerships to provide S&T support and expertise to provincial and territorial governments in their management of forest harvesting activities. An infrastructure of Polar Continental Shelf Project bases across the Arctic supports research in the far North. Seismic monitoring and satellite receiving stations are located across Canada. The National Centre for Upgrading Technology in Devon, Alberta (jointly with Alberta Research Council) carries out research on oil sands upgrading. Offices of the Legal Surveys Division provide regional services.

Partnership arrangements with the provincial and territorial geological surveys, through the Intergovernmental Geoscience Accord and associated bilateral agreements, for collecting and sharing geoscientific information about Canada, are building a stronger foundation for cooperation and collaboration across the country. This will be critical to our future success in providing geoscience information and knowledge to all Canadians on the Information Highway.

NRCan recognizes the importance of improving access to resource information in rural Canada. A key thrust of NRCan's Natural Resources Action Plan is to make the department's information and knowledge base for natural resources, including its extensive S&T knowledge, accessible through the Information Highway to Canadians everywhere. This will be accomplished through vehicles such as Community Atlas, the Canadian Geospatial Data Infrastructure and the proposed Canadian Geoscience Knowledge Network.

A coordinated and collaborative approach to research on rural issues

34. The Government recognises the need for data and information on best practices and for policy advice on rural issues. The existing rural research community is providing research and analytical capability spread across a number of institutions throughout Canada and, through organizations, such as the Canadian Rural Restructuring Foundation, researchers are undertaking cross-disciplinary and co-ordinated work focused on major rural issues. The Government is helping to focus and support this work. The 1998 Budget will further assist in stimulating research through the injection of over $400 million to the granting councils over the next three years, a portion of which is earmarked for the Social Sciences and Humanities Research Council (SSHRC). This Council provides funding support for university research, which has included community issues of interest to rural Canada.

The Government is also taking steps to ensure that information on programs and services and best practices will be readily accessible to rural Canadians. For example, the 1997 Resource Book, collectively provided information from 14 departments and agencies on over 100 federal programs and services available to rural Canadians. Under the CRP, this information will be updated and enhanced in 1998 to take into account the range of programs and services from the majority of federal departments and agencies.

Program delivery improvements

35. The Government supports the report's suggestion that the delivery of programs and services to rural Canadians be integrated to the extent possible in a "one-stop-shopping" approach, working closely with provincial and municipal partners to achieve improvements and efficiencies in delivery mechanisms. Over the last few years federal departments and agencies have been exploring and introducing such innovations. Efforts are underway to achieve an integrated and streamlined approach to the delivery of rural development activities of both federal and provincial departments. For example, in Atlantic Canada, ACOA, through a series of Cooperation Agreements with Newfoundland, Nova Scotia, and New Brunswick has put in place economic development structures that support local economic development in each province; and in northern Ontario FedNor is contributing to projects that will enhance the integration of its CFDCs with municipal economic developments efforts.

The Government acknowledges that the closure of some offices in rural areas has impacted program and service delivery and is committed to addressing this concern in innovative and creative ways. For example, federal organizations are examining how best to utilize technology to make the "single-window" concept of program and service delivery a useful and practical way of improving delivery to rural communities. The Government has a network of "outlets" in rural areas, such as departmental regional offices, CFDCs, CAP sites, electronic kiosks, Canada Post Offices, SchoolNet, and LibraryNet, which can help bring the federal government closer to rural Canadians. In addition, the Government is expanding access to the Canada Business Service Centres information on government programs and services through cooperative partnerships with existing organizations, such as chambers of commerce, in smaller communities. The CRP will provide the opportunity to explore how these "outlets" can best offer a more integrated and improved level of service and information. In addition, the Internet makes it possible for individual rural homeowners to pursue their own information requirements through government data banks and it will be just as important to ensure ease of access and facility for rural Canadians.

"Rural Team Canada": a collaborative approach to serving rural Canada

36. In February 1996, the Minister of AAFC was asked to lead a cross-departmental initiative to focus on rural development, in collaboration with his colleagues. An Interdepartmental Working Group on Rural was formed. The focus of the rural initiative has, from the outset, been broadly based and not limited to agriculture and agri-food-related issues. The rural file is a cross-cutting "horizontal policy file"; the CRP provides the "chapeau" beneath which individual organizations can provide a more integrated response to rural needs within the context of their mandated responsibilities.

The Minister of AAFC is responsible for rural affairs and is supported by the Rural Secretariat. This is a responsibility which he discharges on behalf of, and in close cooperation and collaboration with colleagues. The "Rural Lens" will allow the Minister of AAFC to be an advocate for rural issues and to ensure rural considerations are part of the Government's policy and program formulation and decision-making processes.

The CRP is cross-departmental. To ensure that the CRP finds expression in each province and territory Rural Teams are being formed. These teams have been evolving over the last year and consist of representatives from federal organizations involved in delivering programs and services to rural Canadians. The Rural Teams will play a valuable and important role in the evolution of the CRP. They will help to ensure that the unique challenges of rural Canadians are brought to the attention of policy makers and program designers. They also provide a valuable forum for integrating service delivery opportunities at the local level. The Teams are close to rural Canadians, sensitive to their particular needs and well-placed to bring together various elements of federal programming to address local community needs.

37. The Government accepts this recommendation as a constructive suggestion that will be pursued through the Canadian Rural Partnership.

It is conceptually consistent with the thrust of the CRP - which is to provide a chapeau beneath which federal departments and agencies, a variety or organizations, or levels of government, can find common ground to address rural issues.

Conclusion: Next Steps: Beyond "Think Rural"

The eight principal themes of "Think Rural" explore fundamental challenges confronting rural Canadians. They cover a variety of associated issues which describe the reality of rural Canada. The Government's Response document demonstrates tangible and concrete actions that federal departments and agencies are undertaking which address both the broader themes and the many issues raised in "Think Rural". On the majority of the recommendations, significant action is identified, while on a few others, further policy consideration is required to explore what could be done to respond to the issues they raise.

There are no simple answers to many of the issues discussed in "Think Rural". In the foreword to its report, the Standing Committee noted that "Think Rural is a call for policy-makers, both public and private, to consider rural realities". The Government has accepted this challenge and is meeting it through the Canadian Rural Partnership (CRP). It is committed to developing, under the chapeau of the CRP, an improved collaborative approach among federal organizations. The consistent implementation of this approach will bring a focus and synergy to how the federal government responds to rural Canada. Through the CRP the Government will further engage rural Canadians in a dialogue about rural issues to more fully understand how federal polices, programs and services can be better designed to address rural priorities. The results of this grass-roots exercise will be used to evolve the federal rural strategy.

The Government is pleased to attribute to "Think Rural" much credit for focussing attention on the issues of rural Canadians. The congruence between the work of the Standing Committee on Natural Resources and the recently announced the Canadian Rural Partnership should encourage more people to "think rural". Furthermore, it will ensure that the issues facing rural Canadians are addressed as an integral part of the Government's efforts to strengthen our economic and social union.

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