BDC Fact #9

This post won’t have any new facts about The Business Development Bank of Canada, although the feedback level we’ve experienced via phone, in person and email has been about as high as anything we’ve blogged about. All good things must come to an end, and this is the last post in the week-long series.

But since the topic of privatization was raised yesterday, it is worth taking a moment to reflect on that in the context of the BDC.

There have been more than 30 privatizations since 1985, in fact: Air Canada, Northern Transportation Company Ltd., de Havilland Aircraft of Canada Ltd., Pêcheries Canada Inc., Canadian Arsenals Ltd., CN, Canadair, CDC, Teleglobe, FPI, CN Hotels, Varity, Northern Canada Power Commission, Northwestel Inc., Terra Nova Telecommunications, CNCP Telecommunications and Telecommunications Terminal Systems (50% interest), Cameco, Nordion International Inc., Telesat Canada, Cooperative Energy Corporation, CN Exploration, Civil air navigation system (departmental service), Canarctic Shipping, Canada Communication Group and National Sea Product (10.5% interest).

Turn the clock back a few years and every single one of these entities was seen to be a necessary element of a particular public policy agenda. The railroad, satellite, airline, teletype, aircraft manufacturing, etc. Someone, somewhere, just couldn’t live without the state owning the firm in question.

Today, they are all private, and Canada’s economy and dollar are about as strong as they have been since the wave of privatization began in our country. There is no way to link the two, but Maude Barlow et al would certainly be shouting at the top of their lungs if the reverse were the case.

Perhaps there is a public policy role for the BDC’s lending group. If there are underserviced communities, or under-financed sectors, it doesn’t bother me that the government has a program for such things. Banks have a hard time lending on Aboriginal Reserves, for example, given the security registration challenges that are inherent in those cases. Of course it makes sense for an on-reserve entrepreneur to be able to access a loan facility if the deal stands the test. But BDC’s $9.1 billion loan book is full of a lot more than such noble ventures.

Between 1989 and 1991, the federal government of the day decided to keep BDC as a Crown Corporation as the economy wasn’t very healthy. It wasn’t that Ministers McDermid and Mazankowski didn’t discuss the idea – it just wasn’t the right time. Almost 20 years have passed, and BDC has grown in size and scope far faster than the Canadian economy.

If Parliamentarians see it as a regional development tool, so be it. But isn’t that what the current version of FORD-Q, ACOA and Western Economic Diversification are all about? If it is the vehicle to invest in venture capital, why is just 6% of the BDC’s directly deployed capital in that space?

If it is about alleviating rural poverty, why are their but two BDC offices in all of Saskatchewan, yet five in New Brunswick, for example?

If BDC wants to compete with the private sector, then the government should put it on a level playing field; no government guaranteed funding. Have the BDC raise its capital in the market like the rest of us. And if the desire is there to crystalize the investment, the federal government could probably sell it for a billion or two.

Otherwise, it makes sense for the BDC to stick to the Act passed by Parliament in 1995 and play the “complementary” lending role it was designed to fulfill.

MRM