Relevance

WDP Alignment with Western Canada's Needs

Does the WDP (as defined by its 2003 Terms and Conditions) align with Western Canada's current economic development and diversification needs?

The WDP was found to align with Western Canada's current economic development and diversification needs. The literature/document review demonstrated that the objectives outlined in the Terms and Conditions of the program align with Western Canada's current economic development and diversification needs by focusing on diversifying a resource-based economy, and working to support community development, entrepreneurship, and innovation. Key informant interviewees support this view. The WDP is seen as a necessary tool, given the current circumstances of the western economic community. Few gaps were identified in the program model, and the program is viewed as responsive to changing economic needs.

Degree to Which Needs Align

Western Canada has led the nation in economic growth in recent years. The west's share of Canada's population increased from 26.6% in 1971 to 30.4% in 2007. The west's GDP contribution to Canada's total GDP in 2007 (35.3%) is larger than its share of population (30.4%) as economic strength within Canada has shifted westward. Although, there is diversity in terms of the west's industrial base, and over 80% of job gains have been in the service industries, the west remains a resource-based economy. Raw and semi-processed natural resource products dominate the region's exports⁹.

A significant portion of the growth in western Canada is due to rising prices for resource commodities (e.g., oil and gas, coal, and other minerals) rather than to broad-based growth across all sectors. In other words, there is a continuing dependence on resource-based industries. This reliance on commodity exports has resulted in a historical pattern of "boom and bust," as Western Canadian economies remain dependent on cyclical fluctuations in commodity prices. Notwithstanding the rapid economic growth experienced in Western Canada during the past five years, the economic base of the region is still concentrated in commodities¹⁰. Further literature review on the western economy and its resource dependence are presented in Appendix F to this report.

WDP activities are beneficial in offsetting the heavy reliance on natural resources and the community pressures resulting from the current boom in the resource-based economy. Diversification is necessary to ensure a stable future in the West. The WDP's expected results are designed to improve businesses and ensure that innovative projects are undertaken. A focus on the enhancement and sustainability of communities also aids in meeting the needs of the west.

Western needs are also reflected in a Canada West Foundation research study on the transformations western Canada can expect over the next 10-20 years. A summary of some of the key predictions from the study were:

• International trade: Likelihood of trade disputes intensifying. In order to press for freer global trade, Canada may have to abandon its system of supply management in certain agricultural products and the positions of the Canadian Wheat Board which all have a direct impact on the agricultural industry in the west. Western Canada's ports may lose business to competitors if capacity is not expanded.
• The labour force: Both employers and employees will continue to emphasize the importance of additional training and education.
• Post-secondary education and skills development: Shortages of skilled labour poses threats to certain segments of western Canada's economy. Education, skills development, language training and communication technology will be critical.
• Energy resources: Need for the west to take the lead in research and development in alternative energy sources.
• The knowledge economy: Need for the west to grow a knowledge-based economy with companies in bio-tech/life sciences, information and communications technology, and alternative energy research.
• The service sector: Exportable service industries such as legal, advertising, and business services presenting the greatest opportunities for growth, but also the most vulnerable sectors of the economy.
• Manufacturing: Continued out-sourcing of manufacturing jobs to low-cost countries like China, geographic distance from major markets, and lack of large-scale investments required to achieve competitive economies of scale¹¹.

Participants at a summit for business leaders organized in October 2007 in Calgary by Canada West Foundation echoed these predictions. Participants mentioned the following roles for governments in the western economy:

• Increase investments in the universities and the knowledge based economy;
• Increase investments in communications infrastructure;
• Increase support for technology and knowledge transfer;
• Increase inter-provincial and federal-provincial cooperation; and
• Increase support for diversification of the economy away from natural resources. ¹²

These predictions and the roles align with the objectives and the mandate of the WDP in western Canada as outlined in the program's Terms and Conditions. In support of the literature, key informants, including experts, community leaders and departmental staff and management, also agreed that the WDP's goals align with Western Canada's economic and diversification needs.

As highlighted in Graph 3-1, a significant majority (83.2%) of funding recipients agreed that the WDP makes strategic investments that are appropriate to departmental strategic outcomes in innovation, entrepreneurship and community economic development, given the current economic conditions of the western economic community.

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Alignment with innovation, entrepreneurship, and community economic development objectives

Key informants generally stated that the WDP's objectives of innovation, entrepreneurship, and community economic development align well with the current economic development and diversification needs of the West. Key informants also mention that the program possesses a broad enough mandate and a flexible enough set of practices, which allows it to evolve to meet the needs of changing economies in the long term. About 50% of key informants mention that:

• Lack of resources impact the WDP's ability to meet need. The WDP lacked sufficient resources/funding levels to make a substantial difference in the western economy. Lack of resources required that the choices be made between projects, which may result in unmet needs in areas such as the needs of rural communities, Aboriginal peoples in urban areas (for a discussion of programming for Aboriginals, see Appendix J), and work in international trade.
• Recent changes in delivery will help the program better meet need. The recent focus on improving management and accountability, and demonstrating results, will improve program delivery, as will learning from best practices.

Opinions among some community leader key-informants were mixed. While some of the community leaders mentioned that alignment was good, others reported that Western Canada's current economic development and diversification needs are not as well aligned with the WDP's objectives. Some of the community leaders indicated that the objectives were too broad and with sub-components not being flexible enough to address current or emerging needs, particularly in the area of youth, Aboriginal economic development, and skills shortages. These views are likely due to limited knowledge of respondents on all project areas of the WDP, as the file review revealed WDP projects funded and directed specifically in these areas. It should be noted that other government departments (Indian and Northern Affairs Canada and Human Resources and Skills Development Canada) cover these issues in their mandates. Other departmental programs such as Community Futures also target these areas.

Alignment with Economic Research

With regard to how well the WDP model addresses the need for economic research, key informants indicated that current work in this area was very important. Economic research, they argued, serves the following interests:

• A need to understand the current state and future trends of the Western Canadian economy;
• A need to complete impact studies on previously made investments;
• A need to bring stakeholders together;
• A need to maintain awareness of Western Canada's economic landscape, both nationally and internationally; and
• A need to ensure that Canadian governments are aware of Western economic realities.

There was a broad level of support from key informants for the economic research objectives of the WDP. Key informants identified several aspects for potential improvement, including the need to diversify the number of organizations that were utilized to conduct economic research and better publication or dissemination of the research.

Gaps in the Model

An objective of the evaluation was to identify the extent to which the WDP met the various needs of the regions/stakeholders, or whether there are currently program "gaps" that reduce the effectiveness of the program. Key informants indicated that the WDP couldn't address all the economic development gaps in Western Canada. Perceived gaps that were identified included:

Need to provide seed or start-up capital for small/medium-sized businesses.  It should be noted that terms and conditions of the WDP do allow for direct funding to businesses. Other departmental programs such as Community Futures Program and Loan Investments Program undertake are also involved in this activity.

Sector specific gaps.  Some key informants felt that departmental programs were not providing needed support to all sectors of the economy. In particular, the tourism sector and rural economy sectors were identified as potential gaps for the department.

Coordination of funding.  While the department was seen to have some partnerships with other levels of government, stakeholders commented that more could be done with respect to maximizing the leveraging of departmental investments through better cooperation with other community or government organizations.

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WDP Flexibility

Has the WDP evolved to respond to changing priorities and role of government?

Key informants expressed that the WDP has the ability to change when needed. Key informants noted that the changes speak to the program's flexibility in meeting the needs of a changing economy, and acknowledged that progress had been made in terms of modifying services to reflect changing priorities and role of government. The Visioning Process¹³ was cited as an example of the mechanisms used by the department to reassess program gaps and/or required program modifications.

Key informants were of the opinion that the WDP model possesses the flexibility to respond to change. In addition key informants cited the WDP's ability to change when needed, citing the Visioning Process as a mechanism to reassess program gaps and/or program modifications. Several examples were given of the ways the program has evolved over the years, including the following:

• Basic objectives have remained the same, while methods have altered to meet needs of changing economies, government priorities, or overall focus;
• Unsuccessful programming and other initiatives such as direct assistance to businesses have been suspended;
• The ability to refine strategic priorities (e.g., through recent Visioning Process);
• The ability to respond to economic crises (e.g., flooding, Mad Cow, and fisheries);
• Flexibility at the regional level to allocate funding based on community needs;
• A move to building capacity, and working with academia, not-for-profit organizations, business, and industry organizations;
• A greater focus on economic development, productivity, competitiveness, and international trade;
• Increased focus on disparity in Aboriginal communities;
• A greater emphasis on innovation, the knowledge-based economy, and trade development; and
• An emphasis on global competition.

Sub-Component Response to Needs

Do WDP sub-components respond appropriately to specific needs while also meeting the overall objectives of the WDP?

The WDP sub-components generally respond appropriately to the needs identified, follow funding objectives outlined in the terms and conditions of the sub-component, and reflect the overall objectives of the WDP. Projects are distributed across a wide range of sub-component areas and reflect a broad array of economic diversification objectives. Sub-components respond appropriately to the needs identified in their specific terms of reference, agreement, and/or approval authority by aligning with the needs of the various agencies and departments involved and reflecting the overall objectives of the WDP. Some sub-components have been terminated, as a result of initiatives like Visioning and previous departmental decisions to move away from providing direct support to businesses.

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Distribution of Projects Based on Sub-Component

Projects were undertaken by WDP as well as a variety of WDP sub-components. 24.2% of projects were completed under the broader WDP category. 21.2% of the projects were completed for the Conference Support Program and 19.2% for the Alberta/Saskatchewan Centenaries (most of the projects within this were undertaken in Saskatchewan) (Table 3-1).

Table 3-1
Distribution of WDP Projects by Sub-Component

Sub-Program	Number of projects	Expenditures
Western Diversification Program (WDP)	845	$189,848,691
Strategic Initiatives Program	25	$9,712,616
Conference Support Program	738	$4,915,370
AB/SK Centenaries and Canada Celebrates SK (ASC/CCS)	670	$44,955,561
First Jobs in Science and Technology (FJST)	544	$8,912,793
Western Economic Partnership Agreements (WEPA)	133	$55,696,680
Export Readiness-International Trade Personnel Program (ITPP)	277	$3,548,829
Canada Foundation for Innovation Support Program (CFI-SP)	105	$1,838,458
Urban Development Agreements (UDA) in Regina, Saskatoon, Winnipeg, and Vancouver	77	$11,430,252
Official Language Minority Community (OLMC) Internships and Pilot Projects	19	$2,356,253
Canada/SK Northern Development Agreement	22	$3,807,563
Entrepreneurs with Disabilities Program (EDP)	16	$1,356,525
Francophone Economic Development Organization (FEDO)	3	$2,769,998
Women’s Enterprise Initiative (WEI)	8	$17,106,891
Prince Rupert Port Authority	1	$30,000,000
Fraser River Port Authority	1	$2,000,000
Total	3,484	$390,256,480

Reference: Administrative Data

Sub-components such as First Jobs in Science and Technology and the International Trade Personnel Program have been terminated due to previous departmental decisions.

Projects such as the Prince Rupert Port Authority and the Fraser River Port Authority are specific projects targeted towards an organisation.

Degree to which Sub-Components Respond Appropriately

Each sub-component encompasses a variety of different activities to facilitate economic diversification and development. Sub-components are developed based on the needs of the economic community at the time. For instance, the Alberta/Saskatchewan Centenaries sub-component was developed solely for the celebration of the centenaries in Alberta and Saskatchewan. Other sub-components are formed based on need, as well. For a complete description of the sub-components, please see Appendix A. Expert opinion was quite divided on the degree to which WDP sub-components are currently reflective of the public interest. 50% of experts (4 of 8) commented that current programming is appropriate, while 75% of the experts (6 of 8) questioned the need for the Francophone Economic Development Organization and the Women's Enterprise Initiative. It was further suggested that WD "should award excellence" and avoid "political or niche program" spending.

All sub-components meet the objectives outlined in the WDP Terms and Conditions and also align with the needs of the west. Agreements are based on funding needs and can be developed with the department, other federal government departments, provincial governments, municipalities, or other organizations.

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WDP Model Links to Other Federal Priorities

Does the WDP model reflect other federal priorities related to western economic diversification and development?

The WDP model reflects other federal priorities in that projects are provincial, regional, and local (community) in nature. The majority of WDP projects have an exclusively western focus.

Representation of Project Scope

As shown in Graph 3-2, projects are western-focused but range is scope from local to national. Projects were local or community-based (44.1%), provincial (16.6%), regional (21.5%) or national (17.8%) in scope. Some of the projects had the potential to be implemented nationally or to attract other partners nationally, and so were deemed to be national in scope. All projects in the file review and in the case studies had a western focus.

Linkage to Other Federal and Provincial Priorities and Outcomes

The administrative data contained information on how the WDP projects align with other federal priorities. A total of 1,506 projects in the administrative data indicated alignment with another federal strategy. Innovation and science were more common (10.4%) than other federal strategies (Table 3-2). However, strategies related to Aboriginal issues were still strongly represented (7.6%) in the administrative data.

Table 3-2
Other Federal Strategies - Administrative Data

Strategies	Percentage
Innovation and science	10.4%
Sustainability-communities	8.5%
Aboriginal Peoples	7.6%
Business, entrepreneur related	6.8%
Community development, renewal, rural and urban	5.8%
Environment-related	5.2%
Employment, training, human resources	4.6%
Research and development, intellectual property	3.6%
Technology, technology transfer	3.6%
Commercialization, new products	3.4%
International, trade, exporting, global commerce	3.2%
Official languages	3.1%
Other responses less than 3%	34.4%
Total	100.0%

n=1,506. Reference: Administrative Data

The file review also provided information on how the WDP projects align with federal priorities. Other federal priorities identified in the file review include Innovation, Science and Technology, Trade Development, Immigration, Tourism and the Aboriginal Agenda.

The WDP model also reflects western provincial priorities. The Alberta provincial government identifies the following priorities on its website: ensure Alberta's energy resources are developed in an environmentally sustainable way; enhance value-added activity; increase innovation, and build a skilled workforce to improve the long-run sustainability of Alberta's economy; and provide the roads, schools, hospitals and other public infrastructure to meet the needs of a growing economy and population. In its speech from the throne in 2007, the Manitoba government identified innovation and competitiveness to promote sustainable economic growth as one of its priorities. The Saskatchewan government in its 2007-throne speech identified a new vision for the economy through a plan for lasting and permanent economic growth in Saskatchewan and a unique and innovative partnership between the private and public sector. The British Columbian government's 2008 throne speech provided support for a strong and growing economy in British Columbia. As a result of the linkages between the WDP and provincial priorities, initiatives such as WEPA have been undertaken with all western provincial governments. The WEPA represent a multi-year funding commitment to foster increased economic activity, and to improve the quality of life in communities across western Canada. Cost-shared agreements signed with each of the western provinces through WEPA allocate about $50 million in each province to targeted federal and provincial priorities, including innovation, entrepreneurship and community economic development.

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Complement or Supplement Other Programs

Was the WDP complementary, or did it overlap or duplicate other economic development programs?

The document/literature review revealed that there are several other economic development programs in Western Canada. However, these programs tend to focus on only one or two aspects of economic development and diversification activities that are localised, while the WDP focuses on a broader range of economic impacts that covers all of western Canada resulting in complementary programming. Programming supplements the work of other economic development programs, rather than duplicating activities. Based on interviews with economic development key-informants, it appears that while there may be some overlap in some program areas, in general, economic development/diversification activities undertaken by provincial/local authorities were considerably more limited in scope than were WD's programs, and tended to have specific sectoral or program objectives.

Other Economic Development Programs

There are several programs, organizations, and departments that work to develop and diversify the western economy. In many cases, these programs work in conjunction with municipal and provincial governments, or are themselves municipal or provincial departments. These economic development programs may often work closely with WD as well, either by receiving funding, being the delivery mechanism of a program, or collaborating on projects. These organizations include the following:

• Alberta Economic Development Authority (AEDA);
• Alberta Employment, Immigration, and Industry (AEII);
• Alberta Regional Economic Development Alliances (REDA);
• Economic Development Association of British Columbia (EDABC);
• BC Urban Entrepreneur Development Association (BCUEDA);
• Economic Developers Association of Manitoba (EDAM); and
• Saskatchewan Economic Development Association (SEDA).

Activities Undertaken by other EDPs in Comparison to WDP

Key informants involved in economic development programs were asked to discuss the activities undertaken by their organizations to deliver economic development and diversification programming

In some cases, work was focused locally, while in others the mandate was province-wide. Some organizations focused more on policy and program development, while others were mandated to provide particular types of projects: infrastructure development, tourism, research, commercialization, immigrant entrepreneurship, and brokering linkages between the business community and universities and other institutions. A few organizations reported providing client-centred services, such as business counselling. Advocacy and increasing awareness of economic issues were important objectives for a few organizations, as was overall coordination of economic development and responsibility for labour market issues.

In comparison, the WDP focuses on a broad range of issues that encompass most of the activities described and have a mandate that covers the whole of western Canada. WDP cost-shared sub-components such WEPA tend to involve collaboration with some of these organizations on projects. The file review showed provincial and municipal governments through various economic development programs working with the department on many projects

Treasury Board Policy Stacking Provisions - Avoiding Funding Duplication

Do project assessments demonstrate consideration of appropriate levels of project funding in compliance with the Treasury Board Policy on Transfer Payments?

In compliance with the Treasury Board Policy on transfer payments, stacking limits are considered for all WDP funded projects, which require a statement of other sources of funding for a project.

Stacking limits are considered when grants and contributions are provided to recipients in order to ensure appropriate levels of project funding. Prior to funding approval, the department obtains a statement of the other sources of funding for a project. Specific limits to total government assistance are considered. As many projects under the WDP are require leveraging funds, the department lends special attention to the types of other funders, and the consequent funding levels, in order to ensure that stacking limits are acceptable. On a risk basis, the department requires some recipients to audit their project funding and expenditures.

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Role for Federal Government

Is there a legitimate and necessary role for government in this program area?

Key informants agreed that the federal government has a responsibility for the national economy. The Federal government role was viewed as acting as a catalyst for diversification, partnering with provincial and municipal governments, providing funding, and leveraging with other partners. While current roles and responsibilities with respect to economic development are viewed as appropriate, there is room for improvement, including increased role clarity and role expansion, as well as increased funding and emphasis on economic diversification.

All stakeholders agreed that a further rationale for a continued role for the Federal government was the need to decrease reliance on natural resources and to diversify even those provincial economies that are currently experiencing strong growth. Literature supports this claim and the need for federal involvement in diversification and development.

Role of the Federal Government

The literature review confirmed the fact that the federal government does have a role in economic diversification and development. The Canadian Economic Observer's 2007 report on the western economy highlights strong growth and lower levels of unemployment. Carried largely by growth in the resource industries, such "rapid shifts" can have "negative consequences" like climate change impacts and higher housing prices¹⁴. In British Columbia, recent growth has been reliant on commodity prices, and while economic development associated with the 2010 Olympic and Paralympic Games continues to be an important opportunity, projects associated with the games also have a distinct time limit. Because diverse and sustainable regional economies are long-term in nature, mitigating the volatility in commodity pricing, currency exchanges and other shifts outside the region, more economic diversification is needed throughout western Canada in order to assure a strong economy in the future.

Internationally, a number of regions have seen evidence of the effectiveness of collaborative economic development that brings together different levels of government and stakeholders¹⁵. M. J. Porter's influential 1990 text, The Competitive Advantage of Nations, stipulates that innovative systems and clusters be seen as strong methods for economic growth. This emphasis has been refined to situate industry, government, and universities as key partners in the creation of "regional innovation systems."¹⁶

In western Canada, WDP sub-components, including the Western Economic Partnership Agreements, the Canada-Saskatchewan Northern Development Agreement, and the Urban Development Agreement form partnerships across federal, provincial, and municipal governments to contribute to economic development and diversification. WDP's partnership sub-components seek to address local needs within a regional framework. Other sub-components such as the Women's Enterprise Initiative (WEI) serves another important economic development need. The 2003 Prime Minister's Task Force on Women Entrepreneurs report identified the federal government as having an essential role to play in ensuring that the needs of women entrepreneurs are addressed.

Key informants agreed that the federal government has a responsibility for the national economy through balancing disparities between regions and provinces, moving economies beyond provincial boundaries and into national and international markets, and for economic development work with Aboriginal communities. The federal government role includes acting as a catalyst for diversification, partnering with provincial and municipal governments, providing funding, and leveraging with other partners. With respect to funding, it was noted that the federal government funding is critical for projects that would otherwise not go forward including community, non-profit, and private projects ranging from small and rural projects to major infrastructure projects. Key informants also suggested for the federal government to lead strategic initiatives that are needed but which industries are unlikely to invest on their own.

Overall, stakeholders suggested the following responsibilities for federal government's role:

• Supporting innovation;
• Encouraging commercialization or development of high-value industries;
• Funding research and development;
• Encouraging international trade;
• Creating an attractive and competitive environment for business;
• Increasing awareness of Western economic issues through education and advocacy;
• Providing programs to support economic infrastructure and diversification; and
• Providing programming targeted to members of minority or disadvantaged groups.

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Appropriateness of Federal Government Role and Responsibilities

The majority of the stakeholders were confident that the federal government's current role and responsibilities with respect to economic development were appropriate, although they did provide suggestions for clarifying, expanding, or reducing the role.

Key informants expressed the view that the current role of the federal government is appropriate given that it is both broad and focused, provides leadership, is not interventionist, and is capable of responding to local needs in the way a more centralized system of programming would be unable to do. Stakeholders suggested that the department seeks to achieve goals that are appropriate to its mandate, and that it makes effective use of funds within those areas government sets as priorities. Key informants cited the need for increased clarity and role expansion around the federal government's current economic development role and responsibilities.

On clarifying the role of the government, key informants provided the following suggestions:

• Improving transparency in program and process design, including administrative processes;
• Developing and refining policies;
• Complementing (rather than leading) the work of provinces and municipalities; and
• Improving coordination generally.

On expanding the role of the government, key informants provided the following suggestions:

• Expansion of programs/services to encourage diversification into international markets.
• Expansion of programs and services to address human resource needs in terms of skills shortages.

As a result of the department's Visioning exercise and the renewed focus on economic priorities, there has been shift in focus of the WDP from Community Economic Development activities to Entrepreneurship and Innovation activities in recent years. This shifting priority aligns with the following views of key informants:

• to focus WDP on economic diversification and development;
• to address strategic gaps in programming such as expansion into international trade and business productivity and competitiveness (entrepreneurship activities) in response to Western Canada's place in an increasingly globalized economy; and
• to place greater emphasis on innovation and technology commercialization.

Within the period of the evaluation (2003-2007), information from the database indicates that 59% of expenditures and 56% of projects were undertaken in Entrepreneurship and Innovation. Out of the 1,517 projects for Community Economic Development, 1,028 were from WDP sub-components that are coming to an end (670 projects in AB/SK Centenaries, 268 projects in Conference Support Program, 69 projects in Urban Development Agreements, and 21 projects in Canada/SK Northern Development Agreement). These WDP sub-components are sun-setting and will result in a reduced emphasis on Community Economic Development projects and greater emphasis on Entrepreneurship and Innovation projects in the future.

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