V. Supporting economic transformation to create yet more jobs

(a) Considerable progress so far

During the century just past, Québec's economy underwent phenomenal change.

Barely 50 years ago, it was a quasi-colonial economy and we were relentlessly condemned, to quote Félix Leclerc, to the status of "hewers of wood and drawers of water in our own land".

The Quiet Revolution swept away those bad memories. Our people rose up to take control of its own destiny. Today we are reaping the benefits. One of today's most eminent economists, Professor Pierre Fortin of UQAM, has clearly demonstrated that all our vital economic indicators have improved since 1960 and that the Quiet Revolution was an enormous economic and social success.

After investing several billion dollars in education and economic development, after making immense individual and collective efforts, Québec now stands among the most advanced nations of the world.

• Our highly qualified labour force is proof of the wisdom of the huge investment we made in education. More university degrees are earned per capita in Québec than in the United States, France or Japan. Montréal vies with Boston for the title of university capital of the continent, that is, the number of university students as a proportion of the total population.
   
• We have first-class scientific and technological resources. Québec has taken huge leaps forward in terms of innovation: its rate of investment in R&D now surpasses that of Canada and the average of the European countries.
   
• Québec is well established in hi-tech industries such as aerospace, pharmaceutical, biotechnology, multimedia and information and communication technology and advanced consulting engineer firms.
   
• We have the linguistic and cultural assets required to conquer world markets: there are 80 different languages spoken in Québec. In Montréal, 50% of the labour force is bilingual and 20% speaks a third language.
   
• This does not prevent us from honouring our common, official, national language and continuing, as always, to defend it and bring it honour. This Budget earmarks an additional $2 million for this purpose. We must intensify our action in two areas vital for the future of our language: assistance to small and medium-sized enterprises developing francization programs, and language classes for immigrants in the workplace, the ideal milieu for integrating newcomers into the French-speaking community.
   
• Québec made the right choice when it opted to become open to the world. The proportion of the GDP it exports has risen from 44% about ten years ago to 60% today. Québec made the right choice when it rallied massively behind free trade, while Canada's current leaders, who sing its praises today, fought it with as much passion as lack of vision. Since that time, our exports to the United States have tripled while exports to the rest of Canada have grown by barely 28%.

We must not forget that this spectacular entrance into the modern world was achieved at a time when we were emphasizing our control over our economic space. The "Masters in our own House" slogan of the Liberals of better times has become a striking economic reality. Québec-owned businesses have become by-words for excellence and success: Québecor, the world's leading printer, Alcan, the world's second largest aluminum producer, Bombardier, third among aircraft manufacturers, CGI, fifth in North America among information technology firms, not to mention the many other companies making their mark around the world.

I want to stress in passing that the efforts we made to gain control of and modernize our economy received little if any support from the central government. Still today, as always, Québec, with 25% of Canada's total population, receives only 13.8% of R&D expenditure by federal laboratories, 16.7% of federal subsidies for companies, 18.6% of federal capital expenditures. These chronic injustices have and continue to cost us, on a cumulative basis, hundreds of thousands of jobs. It is not because a complaint is an old one that it is not a valid one. And it is not because an injustice persists that it is less unjust or that those denouncing it are less justified in doing so.

(b) Challenges to take up at the dawn of the 21st century

At the dawn of the 21st century, we must continue with enthusiasm the changes well under way.

Let us recall, in a few words, the philosophy of our government on economic and social modernity.

While globalization is an invaluable source of growth for the entire world, it is essential that its impact on the public be regulated. We saw recently, in Seattle and in Davos, that globalization is creating growing apprehension, some of which is perfectly justified.

For our government, the debate over protectionism is ended and trying to stop globalization by setting up barriers to trade would be reactionary and dangerous, especially for poor countries. On the other hand, we must learn to control, regulate and humanize the new reality rather than try to turn the clock back. A better kind of state intervention is required, nationally, internationally and supranationally. In this context, the concept of nation acquires greater relevance, given the danger of homogenization for languages, cultures, identities and lifestyles. The nation, more than ever, is an indispensable counterweight for the preservation of human diversity.

Our government believes that social justice must arouse the same passion as the creation of wealth, its necessary prerequisite. We once again provided proof of this at the Québec Youth Summit when we earmarked $246 million over the next three years for the indexation of social aid benefits received by people who are fit to work and to increase benefits for people sharing housing facilities.

Yes, we believe in the famous invisible hand of Adam Smith -- a Scottish economist. But we also believe in the clearly visible and supportive hand of collective action advocated by progressive governments. Tony Blair, the socialist Prime Minister of Great Britain, recently stated that, if socialists were wrong in trying to bring success down to a common denominator, they were certainly right to try to put success within everyone's reach. We are of the same belief.

(c) Increasing private investments

Since 1994, great strides forward have been made in achieving fruitful investments in Québec's private sector. These investments have increased by at least 60% compared with less than 50% in Ontario and Canada. The rate of growth of these investments is comparable to that of the United States, which is much higher than Canada's.

Despite this outstanding performance, we must step up the pace to better meet the competition. This Budget introduces a number of important measures to enable us to keep up the momentum.

Our corporate tax system is, in general, very competitive. But there are a number of countries and states with which it still cannot compete when it comes to attracting new companies. We would do well to follow in the footsteps of the Republic of Ireland, for instance, a small country of 3.7 million people that has experienced phenomenal growth recently. One of the factors that contributed to this success is an aggressive taxation philosophy with a 10% tax rate on corporate earnings, which translated into a direct increase in both investments and government revenues.

Having not yet judiciously opted for national sovereignty, as Ireland did long ago, we cannot imitate it completely, for we do not control all our taxes. We can nevertheless do our bit and hope that the federal government will follow suit, which it seldom does, unfortunately -- except to create overlapping and duplicate structures that are as costly as they are useless.

I am announcing two measures today whose objective is to reduce corporate taxes and create jobs, as Ireland has done.

• First of all, a full tax holiday for ten years for all major investment projects. This exemption will cover income tax, tax on capital and the contribution to the Health Services Fund.
   
• I am also extending two temporary measures that were to end on March 31: the accelerated depreciation of 125% and the two-year capital tax holiday for manufacturing investments and computer equipment will continue until March 31, 2005.

The first of these two measures alone should create investments of $5 billion over the next five years, resulting in 16 000 new jobs. Even if we do not control all our taxes, we are moving toward the Irish model. That should please a large number of our fellow citizens who trace their origins back to Erin's fair isle and to whom I would like to take this opportunity to wish a Happy St. Patrick's Day.

Since the Angus yards in Montréal closed, the community's vital forces have reacted and decided to breathe new life into the area. They plan to create a "Technopôle" to attract SMEs in the manufacturing or environmental sectors. This admirable project should create 2 000 jobs for young people in this recovering neighbourhood over the next 10 years. In order to give a helping hand, I am announcing the creation of a tax credit equal to 40% of the salaries of new employees during the first year on the job.

This Budget contains several other measures to support investment in Québec. Here are the most important.

• We are improving the budget package for PIJCPF, a job creation fund that has exceeded its objectives: its goal was to create and support 28 000 in five years. It has already created 27 000 jobs in only 21 months: obviously, it must be allowed to continue.
   
• We are improving the Garantie-PME program, which is also doing well.
   
• The immigrant investor program is being reviewed in order to increase the financial benefits available to SMEs and make the most of the economic spin-offs for Québec.
   
• We are providing financial support to restructure the subcontracting sector, particularly in the aerospace industry.
   
• Finally, we will clarify the Act respecting municipal taxation so that industrial anti-pollution equipment will be exempt from property tax in all municipalities in Québec. We will compensate the municipalities, of course, for any loss they incur as a result of this measure.

(d) E-commerce, a promising sector

As everyone knows, communication is undergoing an astonishing transformation, affecting all aspects of our economy and our society. Based on a concept that was originally developed for military communication but that had fantastic potential for the exchange of all kinds of information among people, the Internet has experienced phenomenal growth. Today, 250 million people surf the Net around the world and their numbers are growing by several million every month.

This revolution is now affecting the market economy. On-line purchases already amount to $100 billion globally and this figure doubles every year.

This veritable e-commerce explosion may be attributed to the revolutionary characteristics of the new transactions: less time, no spatial constraints and the complete decompartmentalization of world trade.

Québec must become part of this rapidly changing environment as quickly and as fully as possible. All of our businesses must adapt in order to preserve and increase their markets in a more competitive context.

We want to support Québec businesses so that they can draw every possible advantage from this new world.

• I am therefore announcing the creation of a tax credit equal to 40% of the expenses incurred by SMEs to develop a transactional web site on the Internet. The objective is to have 10 000 SMEs take advantage of this program. A sum of $126 million will be available for this purpose for the next three years.
   
• Québec must also have a leading-edge telecommunications network throughout its territory. That is why I am announcing accelerated depreciation of 125% for investments in fibre optics in regions that have been poorly served to date. It will cost $15 million for all regions of Québec to be on an equal footing in the on-going information revolution.

Any Quebecer who wants to must also be able to participate fully in this huge new cultural movement. This is not merely a business question.

So far, probably for cultural and linguistic reasons, a smaller proportion of households in Québec are connected to the Internet than in the rest of Canada. The difference is even greater among low-income families where the question of financial resources comes into play. Too many young people are deprived of a tool that is almost indispensable for to the development of their full learning potential.

That is why I am announcing an Internet connection program for families with incomes that make them eligible for family allowances. All those that hook up to the Internet as of next May 1 will be entitled to this assistance. If they hook up before April 1, 2001, they can benefit, for two years, from assistance of up to 75% of the cost of Internet access and the necessary hardware.

We are earmarking $120 million for this measure, which will have both a social and an educational impact. It could benefit close to 200 000 families. It will help many young people become part of modern society, no matter what their financial resources.

Other projects on e-commerce in general are being studied, and will be announced in due course, at strategic moments.

(e) Modernization of infrastructures

The Québec government is proud of the impact municipal infrastructure programs have had since 1994. They have made it possible to give municipalities high-quality infrastructure and to create over 25 000 jobs. But infrastructure requirements remain high, as seen in the report of the Coalition pour le renouvellement des infrastructures du Québec. This is why, in cooperation with its municipal partners, and in the wake of the federal intentions announced in this area, the Québec government will do everything to negotiate a new tripartite program for the modernization of infrastructures.

The Québec government intends to go ahead with its plans immediately, however. I am announcing the creation of a made-in-Québec infrastructure program for which we will earmark $290 million. This will serve to cover part of the costs for the construction and repair involved in a great many capital works.

Of this amount, $175 million will be set aside for municipal projects, and $25 million for environmental projects. In addition, $90 million will be earmarked for strategic projects in the transportation sector.

The Minister of Transport will also receive $5 million to relieve traffic congestion on Montréal's south shore. Because of the work being carried out on the Victoria Bridge in particular, the town of Mont-Saint-Hilaire will be linked to Montréal by a commuter train within the next few months.

Furthermore, Québec households sometimes suffer considerable damage to their property because of natural catastrophes and other accidents. Pyrite has caused just such a calamity, placing many households in an extremely precarious financial position.

We intend to help them. It is a question of standing together in the face of misfortune. We are setting up a program to help the victims of pyrite damage, particularly the less wealthy households. The government will shoulder 75% of the cost of repairs, up to $30 000. However, this 75% rate will decrease in inverse proportion to the value of the property.

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