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OECD Rural Policy Reviews Qu�bec Canada 2010 by OECD

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OECD's review of rural policy in Quebec.  It finds that in rural Québec, both population and personal income are growing, on average, and the province’s economic base continues to diversify. Land occupancy is more homogenous than in the rest of Canada, due to the presence of denser networks of small and medium-sized communities. However, mirroring the situation at the national level, the province displays large regional disparities. The sustainability of some rural communities, especially if remote and resource-based, is challenged by demographic and economic decline. In this context, Québec has developed one of the most advanced rural policy approaches in the OECD, closely in line with the framework suggested in the OECD’s New Rural Paradigm. The province’s rural policy does not have a sectoral focus, and aims at community empowerment and land occupancy.   To maximize returns on its rural policy investments, Québec needs to integrate social development more strongly with economic and entrepreneurial development, and further strengthen the supra-local level of government as the centre for rural and territorial development strategies. This should be combined with stabilisation measures in lagging areas, through the accumulation of human capital and enhanced access to land in predominantly rural territories. To address environmental challenges, natural resources should be protected both in the outskirts of metropolitan zones and in remote areas.  

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									OECD Rural Policy Reviews

Québec, Canada
 OECD RURAL POLICY REVIEWS




Québec, Canada
              ORGANISATION FOR ECONOMIC CO-OPERATION
                         AND DEVELOPMENT
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ageing population. The Organisation provides a setting where governments can compare policy
experiences, seek answers to common problems, identify good practice and work to co-ordinate
domestic and international policies.
      The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,
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Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of
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          This work is published on the responsibility of the Secretary-General of the OECD. The opinions
        expressed and arguments employed herein do not necessarily reflect the official views of the
        Organisation or of the governments of its member countries.




ISBN 978-92-64-08214-4 (print)
ISBN 978-92-64-08215-1 (PDF)



Series: OECD Rural Policy Reviews
ISSN 1990-9276 (print)
ISSN 1990-9284 (online)

Photo credits:
top right and bottom left © Government of Québec
top left © Monty Rakusen/Digital Vision/Getty Images
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                                                                                FOREWORD – 3




                                             Foreword


           With gains in agricultural productivity leading to a dramatic reduction in
       farm employment, rural regions across the OECD now depend on a wide
       range of economic engines for growth. Increasing globalisation, improved
       communications and reduced transportation costs are additional drivers of
       economic change in rural areas. Traditional policies to subsidise farming
       have not been able to harness the potential of these economic engines. In
       2006, the OECD published a thematic report The New Rural Paradigm:
       Policies and Governance, which seeks to explain the shift in rural
       development policies to account for these important economic changes and
       the need for a new approach to governance.
           Policies to develop rural places are beginning to take into account the
       diversity of economic engines as well as the diverse types of rural regions.
       On the aggregate level, rural regions face problems of decline with out-
       migration, ageing, a lower skill base and lower average labour productivity
       which then reduce the critical mass needed for effective public services,
       infrastructure, and business development, thereby creating a vicious circle.
       However, there are many rural regions which have seized opportunities and
       built on their existing assets, such as location, natural and cultural amenities
       and social capital. The success of such dynamic rural regions is evident in
       regional statistics.
           Promoting rural development poses numerous policy and governance
       challenges because it requires co-ordination across sectors, across levels of
       government and between public and private actors. OECD countries have
       therefore been undergoing a paradigm shift in their approaches to
       accommodate such important challenges. The most defining characteristics
       of this shift are a focus on places rather than sectors and an emphasis on
       investments rather than subsidies.
           The multi-disciplinary nature of rural development has contributed to
       the lack of comprehensive analytical frameworks to analyse and evaluate
       multisectoral, place-based approaches. To fill this knowledge gap, the
       OECD co-operates with stakeholders worldwide. Its work on rural
       development was intensified with the creation in 1999 of the Territorial

OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
4 – FOREWORD

     Development Policy Committee (TDPC) and its Working Party on
     Territorial Policy in Rural Areas. These bodies provide governments with a
     forum for discussing regional and rural development. In early 2006, under
     TDPC’s guidance the Directorate of Public Governance and Territorial
     Development (GOV) launched a series of national rural policy reviews, such
     as this one on Québec, Canada, to deepen international knowledge in this
     field.




                                          OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                   ACKNOWLEDGEMENTS – 5




                                    Acknowledgements


           This review was prepared by the OECD Directorate for Public
       Governance and Territorial Development (GOV) in collaboration with the
       federal government of Canada and the provincial government of Québec.
            The Secretariat would like to thank in particular Donna Mitchell
       (Executive Director, Rural and Co-operative Secretariats, Government of
       Canada) and Robert Sauvé (Deputy Minister, Ministry of Natural Resources
       and Wildlife MRNF, Government of Québec), for their strong support for
       this project.
           A team of peer reviewers participated in the research process and
       offered advice during the production of the review:
            •    Australia: Marcus James, General Manager, Department of
                 Infrastructure, Transport, Regional Development and Local
                 Government, Australian Delegate to the Territorial Development
                 Policy Committee (TDPC);
            •    France: Max Barbier, Representative in charge of Local
                 Development, DATAR, Ministry of Rural Space and Territorial
                 Development, Office of the Prime Minister, French Delegate to the
                 TDPC Working Party on Territorial Policy in Rural Areas;
            •    Switzerland: Thomas Maier, Scientific Officer, Federal Office for
                 Agriculture, State Secretariat for Economic Affairs (SECO), Swiss
                 Delegate to the TDPC Working Party on Territorial Policy in Rural
                 Areas.
           Special thanks go to Yannick Routhier (MAMROT, Québec),
       Lawrence Desrosiers (MAMROT, Québec), Christine Gosselin (MAMROT,
       Québec), René Tessier (MAMROT, Québec), Jacques Defoy (MAMROT,
       Québec), Bruno Jean (Université du Québec à Rimouski), Stève Dionne
       (Université du Québec à Rimouski), Christine Burton (Rural Secretariat,
       Canada), Christian Fortin (Rural Secretariat, Canada), Renée Fortin (Rural
       Secretariat, Canada), Clément Côté (Rural Secretariat, Canada),



OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
6 – ACKNOWLEDGEMENTS

     François Gauvin (Canada Economic Development for Quebec Regions) and
     Ray Bollman (Statistics Canada).
         The review benefited from substantive inputs by external experts. Policy
     information and data were provided by: Yancy Vaillant (Professor,
     Department of Business Economics, Universitat Autònoma de Barcelona),
     and Peter V. Schaeffer (Professor, Division of Resource Management,
     West Virginia University).
        The review was directed by Joaquim Oliveira Martins (Head, Regional
     Competitiveness and Governance Division), and co-ordinated and drafted by
     Markus Berger (Administrator) and Raffaele Trapasso (Administrator)
     under the supervision of David Freshwater (Head, Rural Development
     Programme). Erin Byrne prepared the review for publication.




                                            OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                                     TABLE OF CONTENTS – 7




                                             Table of contents


Acronyms and abbreviations ...........................................................................15

Executive summary ...........................................................................................17

Assessment and recommendations ..................................................................19

Chapter 1. Trends, perspectives and policies for rural Canada ....................41
   Key points .......................................................................................................42
   Introduction .....................................................................................................43
   1.1 Demographic trends in rural areas.............................................................53
   1.2 Rural-urban linkages .................................................................................59
   1.3 Social well-being .......................................................................................64
   1.4 Economic profile .......................................................................................73
   1.5 Environmental sustainability .....................................................................86
   1.6 Challenges and federal policy responses ...................................................94
Notes………….…………………………………………………………….….104
Bibliography ....................................................................................................111

Chapter 2. Economic profile of rural Québec ...............................................117
   Key points .....................................................................................................118
   Introduction ...................................................................................................119
   2.1 “Rural” in Québec ...................................................................................120
   2.2 Levels and sources of income .................................................................128
   2.3 Level of well-being of rural Québécois...................................................157
   2.4 Challenges and opportunities ..................................................................164
Notes…………………………………………………………………………..174
Bibliography ....................................................................................................179




OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
8 – TABLE OF CONTENTS


Chapter 3. Assessment of rural policy in Québec .........................................183
  Key points .....................................................................................................184
  Introduction ...................................................................................................185
  3.1 Evolution of rural policy .........................................................................186
  3.2 Rural policy measures and governance ...................................................188
  3.3 Multi-level governance ...........................................................................212
  3.4 Sectoral policies ......................................................................................217
Notes…………………………………………………………………………..238
Bibliography………………………………………………………………….240
Annex 3.A1………………………………………………………………….....245

Chapter 4. Policy recommendations ..............................................................247
  Key points .....................................................................................................248
  Introduction ...................................................................................................249
  4.1 Inclusive governance ...............................................................................250
  4.2 Development of lagging areas .................................................................264
  4.3 Environment and sustainable development .............................................290
Notes…………………………………………………………………………..297
Bibliography………………………………………………………………….298
Tables
  Table 1.1         Population change in rural and small town areas, Canada,
                    provinces, and territories.............................................................55
  Table 1.2         Distribution of new immigrants (having arrived during the
                    previous five years), Canada.......................................................57
  Table 1.3         Distribution of commuters by place of residence and place of
                    work ............................................................................................61
  Table 1.4         Social progress: average of CSDs by urban and rural type.........69
  Table 1.5         Distribution of physicians and total population across
                    Canada, 2004 ..............................................................................71
  Table 1.6         RST employment by industry sector, 2008…………………….74
  Table 2.1         Québec in figures ......................................................................122
  Table 2.2         Rural and urban population in Québec, 2006 ...........................126
  Table 2.3         Income distribution in Québec and gap with the national
                    average, 2005 ............................................................................129
  Table 2.4         Areas protected by the law on agricultural land, 2009 .............143
  Table 2.5         Soil fertility and altitude ...........................................................145
  Table 2.6         Number of public health-care and social-service facilities in
                    rural Québec..............................................................................160

                                                                 OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                               TABLE OF CONTENTS – 9



  Table 2.7   Number of education facilities in rural Québec ........................161
  Table 2.8   Annual rate of graduates and dropouts in secondary schools
              in rural Québec .........................................................................162
  Table 3.1 The New Rural Paradigm .........................................................190
  Table 3.2 Total budget of the second Politique nationale de la ruralité,
              2007-2014 .................................................................................209
  Table 3.3 Impact of approved CLD projects ............................................223
  Table 3.A1.1Ministerial expenditures targeting rural residents and
              territories, in million CAD ........................................................245
Figures
  Figure 0.1  Urbanisation trends in OECD, Canada and Québec between
              1996 and 2005………………………………………………….20
  Figure 0.2 Increase in household income in Québec's predominantly
              urban, intermediate and predominantly rural areas.....................20
  Figure 0.3 Employment and unemployment in Québec's rural and urban
              regions ........................................................................................21
  Figure 0.4 Change in number of jobs in predominantly rural MRCs………22
  Figure 0.5 Regional disparities among rural areas within selected
              OECD countries (GDP per capita)..............................................23
  Figure 0.6 Distance (X) and income level (Y) in Québec’s predominantly
              rural MRCs .................................................................................24
  Figure 0.7 Implementation of Québec's Politique nationale de la ruralité
              (PNR)……………………………………………………………27
  Figure 1.1 Provinces and territories of Canada ............................................44
  Figure 1.2 OECD regional typology ............................................................47
  Figure 1.3 Employment (Y) and population (X) trends in Canada’s rural
              economic regions and OECD predominantly rural regions ........49
  Figure 1.4 Employment (Y) and population (X) trends in Canada’s
              intermediate economic regions and OECD predominantly
              rural regions ................................................................................50
  Figure 1.5 Metropolitan Influenced Zones in rural and small town areas,
              2006 ............................................................................................52
  Figure 1.6 Community population gains and losses.....................................54
  Figure 1.7 Aged dependency ratios in rural and urban areas .......................56
  Figure 1.8 Immigrants as a percentage of the total population within
              larger urban centres and rural areas ............................................59
  Figure 1.9 Demographic trends in accessible and remote rural
              communities in Canada...............................................................60
  Figure 1.10 Evolution of urban land in Canada between 1971 and 2001 ......62
  Figure 1.11 Urban developments and consumption of dependable
              agricultural land ..........................................................................63


OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
10 – TABLE OF CONTENTS

  Figure 1.12 Km2 of class 1 dependable agricultural land in Canada's
              provinces, 2001 ...........................................................................64
  Figure 1.13 Household income levels in urban, rural, and MIZ areas in
              2005 ............................................................................................66
  Figure 1.14 Trends of income in RST and LUC, 1984-2004 .........................67
  Figure 1.15 Percentage of individuals in households with income from all
              sources below the low income cut-off (LICO) ...........................68
  Figure 1.16 Labour force participation rates in rural and urban areas in
              Canada, 2006 ..............................................................................72
  Figure 1.17 Contribution of agriculture to national GDP in OECD
              countries .....................................................................................75
  Figure 1.18 Contribution of agriculture to national employment in OECD
              countries......................................................................................76
  Figure 1.19 Net farm income and other sources of family income to farm
              families in Canada ......................................................................77
  Figure 1.20 Percent of Canada's manufacturing workers residing in rural
              Canada, 1976-2008 .....................................................................79
  Figure 1.21 Contribution of natural resources to Canada's total GDP and
              employment ................................................................................80
  Figure 1.22 Percentage of census subdivisions in rural and small town
              areas that are resource-dependent by sector and
              province/territory, 2006 ..............................................................81
  Figure 1.23 Tonnes of lumber produced in Canada .......................................85
  Figure 1.24 Employment trends in forestry and logging in Canada...............86
  Figure 1.25 Long-term increase of average temperature in Canada ..............87
  Figure 1.26 Canada's per capita GHG emissions compared to selected
              countries......................................................................................89
  Figure 1.27 GHG emissions by province in 2005 ..........................................90
  Figure 1.28 Installed hydroelectric capacity by province ..............................91
  Figure 1.29 Installed wind power capacity in the top five countries and
              Canada ........................................................................................93
  Figure 2.1 The écoumène in Québec ..........................................................123
  Figure 2.2 Rural classification in Québec ..................................................125
  Figure 2.3 Distribution of the population in Québec's predominantly
              rural MRCs ...............................................................................126
  Figure 2.4 Urbanisation trends in OECD, Canada, and Québec between
              1996 and 2005...........................................................................127
  Figure 2.5 Demographic trends in rural and urban areas ...........................128
  Figure 2.6 Distance (X) and income levels (Y) in intermediate rural
              areas ..........................................................................................130
  Figure 2.7 Distance (X) and income level (Y) in predominantly rural MRCs .
              ..................................................................................................131


                                                                OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                              TABLE OF CONTENTS – 11



  Figure 2.8   Median income in rural, intermediate and urban areas
               between 2000 and 2005 ............................................................132
  Figure 2.9 Level of disposable income and percentage of secondary
               and tertiary activities in intermediate MRCs ............................134
  Figure 2.10 Sectoral breakdown of the labour market in accessible and
               remote rural MRCs ...................................................................135
  Figure 2.11 Sectoral breakdown of the labour market in intermediate and
               peri-metropolitan rural MRCs ..................................................136
  Figure 2.12 Evolution of the share of GDP by sector in rural Québec ........137
  Figure 2.13 Increase in jobs in predominantly rural MRCs, by
               macro-sector .............................................................................138
  Figure 2.14 Difference between jobs at place of work and place of
               residence in rural Québec .........................................................139
  Figure 2.15 Variation in (sectoral) employment by predominantly and
               intermediate rural MRCs ..........................................................140
  Figure 2.16 Agricultural zone in Québec as defined by the law on the
               protection of agricultural land...................................................144
  Figure 2.17 Number of farms in predominantly rural MRCs, 2006.............145
  Figure 2.18 Different types of forests in Québec .........................................148
  Figure 2.19 Location of forestry firms within Québec’s écoumène, 2008 ...149
  Figure 2.20 Location of manufacturing firms in predominantly rural areas -
               absolute number (left hand) and per capita (right hand) ...........154
  Figure 2.21 Distance and increase in firm numbers according to size .........155
  Figure 2.22 Variation of the number of tertiary firms in rural Québec ........156
  Figure 2.23 Number of health-care facilities in predominantly rural
               MRCs (X) and distance from major metropolitan areas (Y) ....159
  Figure 2.24 Percentage of Canadians using a credit-union or
               caisse populaire as their primary financial institution ..............163
  Figure 2.25 Regional disparities among predominantly rural areas in
               selected OECD countries ..........................................................167
  Figure 2.26 Aggregate GDP growth rate in rural Québec, 1991-2006 ........168
  Figure 2.27. Population of Québec by age group……………………..…….169
  Figure 2.28 Projection of ageing trends in Abitibi-Témiscamingue and
               Québec ......................................................................................169
  Figure 2.29 Percentage change in the number of firms in rural Québec
               between 2001 and 2008 ............................................................171
  Figure 3.1 Causal model of rural development: the function of rural
               pacts .........................................................................................203
  Figure 3.2 Implementation of Québec's Politique nationale de la ruralité
               (PNR) ........................................................................................205
  Figure 3.3 Sources of rural pact funding since 2007..................................210
  Figure 3.4 Large farms in Québec by type and receipts
               (CAD 250 000 and over) ..........................................................221

OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
12 – TABLE OF CONTENTS

Boxes
  Box 1.1      Geography and administrative structure of Canada ....................44
  Box 1.2      OECD regional typology and rural classification .......................45
  Box 1.3      Different measures of poverty in Canada's rural areas and
               provincial performance ...............................................................68
  Box 1.4      How does the credit crunch affect rural areas in OECD countries?
                ....................................................................................................84
  Box 1.5      Community Futures in rural Québec: SADC ..............................98
  Box 2.1      Indian reserves in Canada and Québec .....................................121
  Box 2.2      Regional County Municipality (MRC) .....................................124
  Box 2.3      Structural changes in Québec’s farm society ............................147
  Box 2.4      Forest protection and participatory resource management: the
               experience of Québec ...............................................................151
  Box 2.5      Structural differences between rural and urban economies ......165
  Box 3.1      Territorial administrative divisions of Québec .........................189
  Box 3.2      A development index to determine devitalised rural
               communities ..............................................................................192
  Box 3.3      Policies for the north of Québec ...............................................193
  Box 3.4      The scope of rural policy ..........................................................194
  Box 3.5      The four partner associations for rural policy ...........................196
  Box 3.6      Jurisdiction over local governments in the Canadian
               Constitution ..............................................................................197
  Box 3.7      Experience with community development through
               place-based local partnerships ..................................................201
  Box 3.8      Sectoral commitments to contribute to rural policy ..................213
  Box 3.9      Community initiative to improve quality of life:
               Villes et Villages en santé .........................................................231
  Box 3.10     Facing demographic decline in rural schools:
               Ecole éloignée en réseau ..........................................................232
  Box 3.11     Countering out-migration of youth: Place aux Jeunes .............236
  Box 4.1      The place of rural policy ...........................................................251
  Box 4.2      Policy mainstreaming and modulation in OECD countries ......254
  Box 4.3      Rejection of a supralocal level of elected governance:
               north-eastern England, United Kingdom ..................................258
  Box 4.4      Local capacity building in Mexico ...........................................260
  Box 4.5      Federal-provincial collaboration at the MRC level...................263
  Box 4.6      Managing community transition: experience from Canada ......267
  Box 4.7      The marketing of non-timber forest products in Québec ..........270
  Box 4.8      Opportunities for local renewable energies: Totara Valley,
               New Zealand .............................................................................274
  Box 4.9      Forest biomass and rural development: experience from
               Sweden and Austria ..................................................................275


                                                              OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                               TABLE OF CONTENTS – 13



  Box 4.10        Policies to create traditions: the Telluride Film Festival in
                  Colorado, United States ............................................................276
  Box 4.11        Longevity as an opportunity: experience from Ristijärvi,
                  Finland ......................................................................................278
  Box 4.12        Broadband connections in sparsely populated rural areas,
                  Germany ...................................................................................280
  Box 4.13        Protecting skilled labour in a rural territory: the student loans
                  centre in Gaspé, Québec ...........................................................281
  Box 4.14        Active labour market policies (ALMPs) as a means to
                  create jobs .................................................................................282
  Box 4.15        In-migration to rural regions in OECD countries .....................284
  Box 4.16        Becoming a “host community” in Québec ...............................285
  Box 4.17        Service delivery in rural areas: experience from Australia
                  and the United Kingdom...........................................................287
  Box 4.18        British Columbia (Canada)’s Intergovernmental Relations
                  and Planning Division...............................................................292
  Box 4.19        Examples of protected peri-urban agriculture in OECD
                  countries....................................................................................293




OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                        ACRONYMS AND ABBREVIATIONS – 15




                             Acronyms and abbreviations


AAFC   Agriculture and Agri-Food Canada
ACLDQ  Association of Québec's Local Development Centres
       (Association des centres locaux de développement du Québec)
ASRA   Farm income stabilisation programme in Québec
       (Programme d'assurance stabilisation des revenues agricoles)
CA     Census Area
CAD    Canadian dollar
CAR    Regional Administrative Conference
       (Conférence administrative régionale)
CD     Census Division
CED-Q  Canada Economic Development for Quebec Regions
CFP    Community Futures Programme of the Canadian government
CLD    Local Development Centre (Centre local de développement)
CMA    Census Metropolitan Area
CPTAQ  Commission for the Protection of Québec's Agricultural Land
       (Commission de protection du territoire agricole du Québec)
CRÉ    Regional Conference of Elected Officials
       (Conférence régionale des élus)
CRP    Canada's Rural Partnership
CRRNT  Regional Commission on Natural Resources and the Territory
       (Commission régionale sur les resources naturelles et le territoire)
CSD    Census Subdivision
CSSS   Health and Social Services Centre
       (Centre de santé et de services sociaux)
FQM    Québec Federation of Municipalities
       (Féderation québécoise des municipalités)
IN     Intermediate areas (OECD regional typology)
LPTAA  Law on the protection of agricultural land and activities
       (Loi sur la protection du territoire et des activités agricoles)
LUC    Large urban centre
MAMROT Québec Ministry of Municipal Affairs, Regions, and Land Occupancy
       (Ministère des Affaires municipales, des Régions et de l'Occupation du
       territoire du Québec)

OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
16 – ACRONYMS AND ABBREVIATIONS

MAPAQ         Québec Ministry of Agriculture, Fishery, and Food
              (Ministère de l'Agriculture, des Pêcheries et de l'Alimentation du
              Québec)
MDEIE         Québec Ministry of Economic Development
              (Ministère du Développement économique, de l'Innovation et de
              l'Exportation du Québec)
MELS          Québec Ministry of Education
              (Ministère de l'Éducation, du Loisir et du Sport du Québec)
MESS          Québec Ministry of Employment
              (Ministère de l'Emploi et de la Solidarité sociale du Québec)
MIZ           Metropolitan Area and Census Agglomeration Influenced Zones
MRC           Regional County Municipality (Municipalité régionale de comté)
MRIF          Municipal Rural Infrastructure Fund of the Canadian government
MRNF          Québec Ministry of Natural Resources and Wildlife
              (Ministère des Ressources naturelles et de la Faune du Québec)
MSSS          Québec Ministry of Health and Social Services
              (Ministère de la Santé et des Services sociaux du Québec)
MTO           Québec Ministry of Tourism (Ministère du Tourisme)
OACFDC        Ontario Association of Community Futures Development Corporations
PNR           Québec's national policy on rurality
              (Politique nationale de la ruralité)
PR            Predominantly rural areas (OECD regional typology)
PU            Predominantly urban areas (OECD regional typology)
RS            Rural Secretariat of the Canadian government
RST           Rural and small town
SADC          Canadian corporation for the development of communities in Québec
              (Société d'aide au développement des collectivités)
SRQ           Solidarité rurale du Québec
UMQ           Union of Québec's Municipalities
              (Union des municipalités du Québec)
UPA           Union of Agricultural Producers in Québec
              (Union des producteurs agricoles)




                                         OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                       EXECUTIVE SUMMARY – 17




                                     Executive summary


            Canada has the OECD’s largest rural area. More than 90% of its
       territory is predominantly rural. However, only 29% of the national
       population lives in predominantly rural territories. The geographic
       concentration of population contributes to a large and widening rural-urban
       split and increasing regional disparities. Although the strategy of reducing
       rural-urban disparities by supporting primary activities is no longer
       effective, given the large reductions in jobs in this sector and ongoing
       structural and cyclical crises, Canada and most of its provinces continue to
       invest heavily in the primary sector, with a view to saving rural areas. The
       federal government has a long-standing Community Futures programme
       which mainly targets rural areas; it is place-based and invests in local
       projects and governance systems. This bottom-up initiative in rural areas,
       which operates through a network of business and community development
       centres managed by local constituencies, should be augmented to stimulate
       endogenous rural development. Currently, in the name of rural development,
       too many resources are allocated to sectoral policies (especially agriculture,
       forestry and fisheries). While the federal government should discharge its
       responsibilities under the Canadian Constitution, rural development would
       benefit from improved collaboration with provincial initiatives.
           To some extent, Québec mirrors the general situation in Canada, but
       there are also significant differences. For instance, despite the geographic
       concentration of the population, Québec evidences networks of small and
       medium-sized communities (over 1 100 municipalities) mostly located in
       rural areas.1 These territorial networks feed into the historic social priority of
       occupying the land as a way to protect Québec’s cultural heritage. In this
       context, the provincial government has developed a strong vision for its
       rural areas that stimulates ownership both among levels of government and
       within society. It has developed a specific rural policy (PNR) which is
       separate from agricultural and economic policy to promote rural
       development. The policy focuses on building local social capital, and its
       main aim is to build community capacity and ensure that rural land is
       occupied in a dynamic and sustainable way. The PNR is one of the most



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18 – EXECUTIVE SUMMARY

     advanced policy approaches to promote rural development in the OECD
     area.
          There is room to enhance the PNR's performance. In particular, it would
     be pertinent to improve the integration of territorial, community, economic
     and entrepreneurial development targets, and to further strengthen the role
     of the supralocal level (MRCs) in territorial governance. Québec has a lower
     rural-urban demographic split than the rest of Canada, yet there are
     widening disparities among rural areas. While rural territories located near
     urban centres attract population and businesses, most predominantly rural
     areas are undergoing structural change, especially if they are remote and
     dependent on natural resources. Unless these communities can successfully
     restructure and find new employment opportunities, their population levels
     will decline. For these areas, a rural policy focused largely on territorial
     social development may not be enough. There is a need to optimise existing
     instruments to promote regional and rural development and to integrate them
     into a common framework. In the same vein, policies linked to agriculture,
     natural resources and economic development should evolve towards an
     approach that promotes diversification of the economic base, gives access to
     the benefits of natural resources, and reduces land use constraints in
     predominantly rural areas. Finally, environmental challenges need to be
     properly managed. While “urbanisation” in territories close to cities or in
     metropolitan areas has to avoid the negative aspects of gentrification and
     protect valuable land and landscape, it is equally important in predominantly
     rural areas to guarantee sustainable use of land and natural resources and
     involve local communities in strategic decisions.




                                          Note


     1.    For this report, only a portion of Québec's rural territory is considered.
           Rural policy in Québec applies to rural territory in the southern part of the
           province. The majority of northern rural Québec has such low population
           density and such unique circumstances that policy is managed through a
           different process.




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                    Assessment and recommendations



On average, rural Québec is gaining
population, has increasing personal
incomes, and continues to diversify its
economic base

            On average, rural Québec is attracting new residents.1 In the rest of
       Canada the rural population decreases and population in urban regions
       increases at twice the OECD average, but in Québec the trend is closer to
       the international average (Figure 0.1). The spatial distribution of population
       in Québec is different from that of Canada. It is based on relatively large
       networks of small cities located in rural regions, while Canada overall
       displays a high concentration of population in larger urban areas. Thus, the
       province does not display the large rural-urban split that characterises the
       rest of Canada. Rural Québec as a whole has actually gained population
       since the end of the 1990s, owing to the concentration of people in
       accessible rural areas close to urban nodes and metropolitan regions. As in
       other Canadian provinces, these territories display the highest growth rates
       in terms of population within Québec.
           Demographic growth has gone hand in hand with an increase in personal
       income. Because of the spatial concentration of population and economic
       activity, some rural regions have developed an autonomous productive
       framework and experienced a rise in local personal incomes. Between 2000
       and 2005, median household income increased more rapidly in rural than in
       urban areas. In particular, household income increased by more than 5% in
       predominantly rural (PR) areas, while both intermediate (IN) territories and
       urban (PU) poles registered an increase of 3.8% (Figure 0.2). The main
       factors behind this positive trend are the increase in employment rates
       (decrease of unemployment) in predominantly rural areas, and the
       diversification that has taken place in many rural economies.




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20 – ASSESSMENT AND RECOMMENDATIONS

               Figure 0.1. Urbanisation trends in OECD, Canada and Québec
                                   between 1996 and 2005
                                                                                  0      0.2          0.4            0.6        0.8          1            1.2   1.4

                   Population growth in OECD urban regions (excluding Canada)

            Population growth in OECD intermediate regions (excluding Canada)

                    Population growth in OECD rural regions (excluding Canada)



                Population growth in Canada's urban regions (excluding Québec)

          Population growth in Canada's intermediate regions (excluding Québec)

                 Population growth in Canada's rural regions (excluding Québec)



                                   Population growth in Québec's urban regions

                             Population growth in Québec's intermediate regions

                                    Population growth in Québec's rural regions


                                                                                                  Percentage change in population between 1995 and 2005


      Source: OECD Regional Database (2009), internal database.



     Figure 0.2. Increase in household income in Québec's predominantly urban,
                     intermediate and predominantly rural areas
                                                                                      2000-05


                Predominantly urban - Income per household growth rate


                     Intermediate rural - Income per household growth rate


                  Predominantly rural - Income per household growth rate

                                                                                                      0          1          2         3          4          5   6

                                                                                                            Percent change in average household income
                                                                                                                       (constant CAD 2000)

      Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
      internal working document with information provided by MAMROT, Directorate for
      Public Governance and Territorial Development, OECD.




         On average, since the end of the 1980s, there have been more workers
     and fewer unemployed living in rural Québec. Between 1986 and 2006,
     rural areas (predominantly rural areas, intermediate areas and peri-
     metropolitan rural areas located on the fringes of Montréal and Québec City)
     experienced an increase in employment and a decrease in unemployment at
     a pace almost twice that of urban regions (Figure 0.3). Moreover, in OECD


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                                                                          ASSESSMENT AND RECOMMENDATIONS – 21



       regions there is evidence that employment (and unemployment) trends are
       often related to regional growth, especially in rural areas (OECD, 2009).



                                Figure 0.3. Employment and unemployment
                                   in Québec's rural and urban regions
                                                          1986-2006

                                          Rural                               Urban
                   -10.0%      -8.0%   -6.0%      -4.0%   -2.0%   0.0%    2.0%        4.0%     6.0%   8.0%      10.0%


                                                                                                             8.4%
          Employment
                                                                                             4.8%



                       -8.4%
        Unemployment
                                       -5.3%

                                         % change in number of workers, between 1986 and 2006


        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




            Québec’s rural economy is also increasingly diversified. Data on
       sectoral employment at the level of regional county municipalities (MRCs,
       the French acronym) show that many rural and, in particular, predominantly
       rural areas increased the number of jobs in tertiary activities between 1991
       and 2006 (Figure 0.4). Positive trends, although less robust, were also
       observed for manufacturing and construction activities. Owing to the
       diversification of their economic base, rural areas were able to retain and
       attract workers and reduce their exposure to external economic shocks.
       Accordingly, although data for measuring short-term trends in the last two
       years are limited, it is possible that predominantly rural areas with a
       diversified economic base and a “residential economy” 2 have been more
       resilient during the current financial crisis.




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22 – ASSESSMENT AND RECOMMENDATIONS

           Figure 0.4. Change in number of jobs in predominantly rural MRCs
                                               1991-2006

        Wholesale and retail

                   Services

              Manufacturing

              Constructions

           Primary activities

                                -1    -0.5             0                0.5             1          1.5

                                             Percent change in the number of employed



       Note: Jobs at place of residence.
       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.




There are however important
disparities, as rural areas display
contrasting performances

          Despite good average performance, rural Québec, and predominantly
      rural areas in particular, reveal diverging trends and important disparities. In
      fact, while the average performance of rural Québec is in line with that of
      OECD rural regions, GDP per capita varies significantly across rural areas.
      For instance, in spite of a relatively small and geographically concentrated
      population (some 2.5 million inhabitants living in rural areas within the so-
      called écoumène3), the standard deviation of GDP per capita in rural Québec
      from the provincial average is larger than that in the rural part of
      Scandinavian countries, Spain, France or Japan (Figure 0.5). Hence, a large
      part of the economic success of rural Québec as a whole may depend on the
      performance of intermediate rural areas and, above all, peri-metropolitan
      rural areas.




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                                                                  ASSESSMENT AND RECOMMENDATIONS – 23


         Figure 0.5. Regional disparities among rural areas within selected OECD
                                 countries (GDP per capita)
                                Standard deviation, 2006 or latest available year


                United Kingdom
                        Portugal
                         Ireland
                          Korea
                         Austria
                            Italy
                       Hungary
                         Greece
                      Germany
                        Québec
                           Spain
                          Japan
                         Finland
                         France
                         Norway
                       Denmark
                Slovak Republic
                        Sweden
                                    0      5         10         15        20        25   30



                                                                     %


        Note: The graph displays the standard deviation of GDP per capita within
        predominantly rural regions within the OECD area. A higher value indicates larger
        regional disparities. For Québec, predominantly rural MRCs have been taken into
        account.

        Source: OECD Regional Database (2009); Le Conference Board du Canada (2009),
        Les communautés rurales: l'autre moteur économique du Québec, prepared for the
        Groupe de travail sur la complémentarité rurale urbaine, June.




            In Québec, disparities in personal income in predominantly rural areas
       are mainly related not to distance from main urban centres but to internal
       factors, including outmigration, ageing and dependence on natural
       resources. Although accessibility is often considered an independent
       variable shaping rural performance, Québec's predominantly rural territories
       display a non-linear relation between distance and local income (Figure 0.6).
       The share of predominantly rural areas in which residents’ personal income
       is lower than the average in rural Québec is actually higher in areas that can


OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
24 – ASSESSMENT AND RECOMMENDATIONS

     be considered relatively close to a large urban area (regions within
     300 kilometres of Montréal and Québec City, and thus in accessible
     territories in the centre of the province).4 The economic base of less affluent
     territories often focuses on primary activities, such as forestry, mining or
     agriculture.



      Figure 0.6. Distance1 (X) and income level (Y) in Québec’s predominantly
                                      rural MRCs
                                                                              Disposable income 2007, current prices

      Central and affluent                                                                                                                               Remote and affluent
           Disposable income per capita (current prices




                                                          40 000

                                                                                                                                                      Caniapiscau

                                                          35 000
                             CAD)




                                                          30 000
                                                                                    Les Pays-d'en-Haut
                                                                                                                                                             Québec (disposable) income
                                                                                                                                                             per capita CAD 24 455
                                                          25 000       La Nouvelle-Beauce
                                                                                                  Les Collines-de-l'Outaouais
                                                                                                                           Abitibi                                                     Minganie
                                                                        Bécancour    Bellechasse
                                                                                                        Le Domaine-du-Roy                      La Côte-de-Gaspé    Les Îles-de-la-Madeleine
                                                               Nicolet-Yamaska            Charlevoix                      Témiscamingue
                                                                                   Mékinac                                   Matane Abitibi-Ouest
                                                          20 000         Montcalm                                                     Bonaventure
                                                                                             Papineau     Les Basques La Matapédia
                                                                 Le Haut-Saint-François                                                      Le Rocher-Percé Rural Québec (disposable)
                                                                                          Antoine-Labelle
                                                                       Le Haut-Saint-Laurent                                      La Haute-Gaspésie
                                                                                                            Pontiac                                           income per capita CAD 21 165
                                                          15 000
                                                                   0                    200                 400                   600                  800                 1 000


      Central and less affluent                                                                                                                          Remote and less affluent
                                                                                           Linear average distance (kms) from major metro-areas

      Note: 1. Distance is the average linear distance (in kilometres) between the geographical
      centre of the MRC and the centre of the metropolitan areas of Montréal and
      Québec City.
      Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the
      Integration of the Background Report”, internal working document with information
      provided by MAMROT, Directorate for Public Governance and Territorial
      Development, OECD.




         The global economic downturn and structural challenges reinforce the
     vulnerability of resource-based and single-industry communities in rural
     Québec. Although not a negative feature per se, specialisation of a local
     economy in resource-based industries makes it more difficult to absorb
     international crises because of rural labour markets' smaller size and lesser
     diversity. In Québec, many communities dependent on commercial forestry
     are currently affected by two crises: i) a cyclical crisis which is due to the
     sharp reduction in demand for forest commodities, especially in the United

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       States; and ii) a structural crisis related to stronger international competition,
       an increasing currency exchange rate relative to the United States, and high
       energy and input costs. International competition has contributed to the loss
       of comparative advantages in rural manufacturing, causing a decline in jobs
       and reducing the number of secondary firms. Communities specialised in
       agriculture face similar challenges, and if improving the size of farms was
       initially an effective answer, it also reduced job opportunities and later the
       local population. This in turn challenged the capacity of regional and local
       economies to diversify their economic base or to produce services at the
       local level.


Persistent regional disparities affect the
competitiveness of rural Québec

           Divergent regional trends pose specific challenges for rural
       development. In the successful intermediate and peri-metropolitan rural
       areas, urban sprawl and the inflow of new people, often former urban
       residents, cause gentrification, put pressure on the environment (through
       intense commuting to urban nodes but also to other rural communities), and
       threaten the province's best agricultural land, which is located on the urban
       fringe of Montréal. Conversely, in predominantly rural areas that are losing
       working-age population and economic activities, the challenges are the high
       cost of delivering key public services, such as schooling and health care,
       finding another use for abandoned agricultural land, and the protection of a
       minimum endowment of human and social capital necessary to guarantee
       the development, or even the continuity of the community.


Rural Québec is confronted with three
key governance and policy challenges

           Considering trends in the development of rural areas, Québec faces three
       key policy and governance challenges. First, an inclusive governance
       arrangement needs to combine social and community development with
       economic development. Second, policy has to address community transition
       in lagging rural areas through economic stabilisation, access to land and
       accumulation of human capital. Third, environmental pressures have to be
       faced in intermediate and peri-metropolitan rural areas as well as in remote
       predominantly rural territories.




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26 – ASSESSMENT AND RECOMMENDATIONS

1) Inclusive governance for rural areas

         With its Politique nationale de la ruralité (PNR), Québec has opted for
     an innovative territorial and multisectoral policy approach to rural
     development which applies to all rural areas in the écoumène. The policy
     contributes to changing the perception of inevitable rural decline and is
     largely in line with what the OECD has defined as the New Rural Paradigm.
     As a continuation of the first rural policy (2002-07), the second PNR
     (2007-14) has been widely accepted in the province as part of a strong
     societal vision of “rurality” in the province. The public endorsement of the
     PNR has in turn stimulated local ownership and cohesion around policy
     objectives. To establish the preconditions for economic development in rural
     areas, policy measures aim at strengthening social and human capital as well
     as community capacity and favour the dynamic occupancy of rural land.
     Many local and supralocal projects undertaken with funds from the PNR can
     create the social conditions in local communities that make it possible to
     avoid spending large amounts of money on unsuccessful sectoral economic
     development programmes (as is done in many OECD countries). The
     principle of dynamic land occupancy represents a political and societal
     commitment to maintain the current settlement structure in Québec's vast
     and sparsely populated rural territories, even if the delivery of many public
     services is increasingly costly.
         The policy is led by a nonsectoral ministry (department) in charge of
     municipal affairs, regions and land occupancy (MAMROT is its French
     acronym). It complements sectoral agricultural and economic development
     policies, by targeting the empowerment of local administrative levels,
     particularly the supralocal MRCs. MAMROT is at the top of an effective
     vertical co-ordination scheme involving the provincial, regional, supralocal
     and local levels of government. Besides local stakeholders, four non-profit
     partner associations contribute to policy implementation and monitoring,
     adding parallel vertical co-ordination mechanisms (Figure 0.7).




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                  Figure 0.7. Implementation of Québec's Politique nationale de la ruralité
                                                 (PNR)
                       Territorial     Government                                                      Representative/
                       division                                                                       consultant body

                                                                                                        Committee of rural
                                               Premier
                                                                                                           partners
                                           Council of Ministers
         Provincial




                                                 MAMROT                                                       SRQ

                                                                         Interministerial                  FMQ, UMQ,
                                                                        rural committee                     ACLDQ
         Regional




                            Admin.                       CAR                                   CRÉ board
                            region                (MAMROT/other ministries)                    President




                                             MRC council                                                                     Training (SRQ)
                             MRC                                                     CLD
         Supra-local




                                               Prefect


                                                                              Rural development                       Local development committee:
                                                                                     agent                           Civil society, business, officials…
                                                                              Other development
                                                                                    agents
         Local




                                          Municipal council
                        Municipality
                                               Mayor


                                                                              Citizens and organised civil society

                                        + political                                                                                       + operational


                 Note: In administrative regions, the CAR (Regional Administrative Conferences)
                 brings together the regional directors of provincial ministries, while a CRÉ
                 (Regional Conferences of Elected Officials) is a consultation body for municipal
                 elected officials.
                 Boxes in light blue indicate key actors for PNR implementation.
                 Source: OECD, based on Government of Québec, MAMROT.



           Equitable social and local community development is stimulated
       through contractual place-based partnerships (“rural pacts”) between the
       government of Québec and 91 MRCs. Rural pacts represent a bottom-up
       approach to mobilisation and investment in rural communities, and their
       impact has been significant. MAMROT plays a strong role in assisting and
       monitoring commitments made by MRCs. Although the main local
       horizontal co-ordination process is delegated to municipal elected officials,
       the participatory planning process occurs in local development committees,
       which bring together civil society representatives, institutional and business
       actors, and elected officials. Moreover, 136 rural development agents in the

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     MRCs, financed by the provincial government, are key actors. They assist
     the local committees, support the emergence of rural pact projects, and
     monitor their implementation.
         Specific measures target innovation and the development of expertise in
     rural areas. Even if programmes, such as the rural laboratories, often feature
     an experimental approach, their knowledge-sharing element can have
     structuring value for communities, particularly over a longer period of time.
     The specific rural policy budget for PNR measures is limited in its scope,
     but its long-term approach gives communities financial security for their
     local plans and investment commitments. Moreover, Québec's provincial
     budget seems to increasingly consider the spatial dimension of policies;
     targeted funding by ministries to rural areas has increased more than the
     overall level of expenditures by these ministries.


There is a need to integrate the
governance of social and economic
development in rural areas…

         Québec invests significantly more in community capacity building than
     other Canadian provinces, but returns on these investments can be improved.
     At the provincial level, government responsibilities for social capital should
     be more strongly integrated with local economic and entrepreneurial
     development. Once significant experience with the rural pact has been
     acquired over two PNRs, the increased level of social and human capital in
     communities should be strong enough to re-integrate the two streams of
     development. A single, integrated institutional counterpart for MRCs, with
     responsibilities for both rural social development and local economic
     development, was already in place before 2003. This institutional
     arrangement would facilitate the integration of the support measures of local
     development centres (CLDs, the French acronym) with the PNR, avoid
     duplication and favour holistic governance of rural policy. Although focused
     on economic development, CLDs contribute to PNR objectives, measures
     and structures. Integration would also facilitate the evaluation of rural
     policy, as social impacts may be difficult to detect and are often related to
     economic impact.
         To make use of new capacities in rural communities, policy may need to
     become more inclusive of the private sector and its organisations which are
     currently excluded from direct rural pact financing. The PNR already goes a
     long way by including multisectoral participation at the design stage of the
     policy. Moreover, the government shares responsibility with leading civil
     organisations in the committee of rural partners. However, beyond private


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       initiatives in rural laboratories and speciality products, efforts should be
       made to commit the private sector and its institutional actors from business
       and agriculture to PNR objectives. The policy may include relevant sectoral
       actors to assist empowered rural communities more proactively in
       transforming their new capacities and promising PNR projects into market-
       oriented commercial and other entrepreneurial opportunities.


…and enhance the modulation of policy
interventions in rural areas.

           Modulation of policies from other ministries can be made more
       effective. Through the clause de modulation, horizontal co-ordination has
       been introduced and puts MAMROT in charge of monitoring the adaptation
       of sectoral programmes to the specific characteristics of rural areas. With its
       interministerial rural committee, which brings together 18 government
       bodies, the PNR tries to strike a balance between integrating policies
       directed to rural areas through commitments from sectoral ministries and
       targeting specifically defined rural regions with relatively limited financial
       resources. However, although there has been significant collaboration by
       several ministries, efforts to co-ordinate their policy frameworks can meet
       with resistance. When presenting new policies and programmes, ministries
       should commit to discussing implications for rural territories. A strong
       minister or an organisation with “moral authority” over each government
       body would probably be more successful in implementing the modulation
       tasks set by the PNR.


It is important to further strengthen the
supralocal level …

            To alleviate the risk of over-using participatory local strategic planning
       exercises and tiring out participants, the functional responsibilities of
       Québec's MRCs should be strengthened, while bearing in mind the role of
       regional conferences of elected officials (CRÉs, the French acronym).
       MRCs may become the centre of rural and territorial development strategies,
       including their implementation and evaluation. As an existing administrative
       structure, MRCs have a broader view of the rural policy programmes
       implemented in their territory than individual municipalities. Given the
       difficulties of merging municipalities, MRCs are the lowest administrative
       unit with “competence” to resolve rural and territorial policies across
       municipalities. Allocating the implementation of local development policy
       to MRCs is an effective way to mesh the many sector-specific policies and
       programmes into one holistic delivery system. Also, the sectoral

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     responsibilities that are currently co-ordinated at higher levels could benefit
     from a strengthened territorial approach if MRCs obtain more competences
     and receive stronger incentives to collaborate with sectoral actors. In this
     respect, it is important to balance MRCs’ competences with those of CRÉs.
     As they have a critical mass of population, larger administrative regions can
     be a more appropriate level for the design and implementation of some
     regional development policies. In this respect, CRÉs would have to become
     proper regional governments or enlarged MRCs would have to become the
     single regional level of government.
         Empowering the supralocal level does not necessarily mean introducing
     direct elections of MRC prefects, as this may be questionable from a rural
     perspective. So far, the fact that Québec's municipal governance is non-
     partisan in nature has avoided political conflicts about rural policy. An
     electoral process risks leading to a short-term mentality in decision making.
     Moreover, whereas currently (in the absence of a single dominant
     population centre), each municipality has equal representation and voice on
     the MRC council, direct elections would concentrate electoral power in the
     MRCs' most populated municipalities at the expense of smaller rural
     communities. To avoid the potential of urban electoral weight vetoing rural
     development policies, consideration should be given to revoking the current
     veto right of dominant population centres in MRCs’ decision-making
     process for rural issues.


…enhance external monitoring and
evaluation and small communities'
capacities…

          Within this framework, civil society's role is to balance the dominant
     role of elected officials. Although the power of municipal elected officials at
     the different levels of government makes vertical co-ordination very
     effective, there is a risk that elected officials may lose sight of the local
     population's concerns, diluting citizens' influence on the system. In the spirit
     of the New Rural Paradigm, greater external monitoring and policy
     evaluation would help ensure that such threats do not materialise. In
     particular, a comprehensive evaluation, comparable to that undertaken for
     the first PNR, should be carried out by an external body regularly or over
     the whole rural pact implementation period before the end of the second
     iteration in 2014. It could include a restatement of objectives, an evaluation
     of progress towards the strategic objectives, and a review of the flow of
     funds. Concrete indicators for success that measure the long-term benefits
     for the community could avoid the potential perception of rural pacts as a
     mere mechanism for the distribution of funds.

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           To help municipalities accept responsibilities prudently, small rural
       communities should be provided with the capacity to establish a local
       development agenda and implement PNR measures. This would help ensure
       that territory-specific government objectives are addressed. In many cases,
       small rural municipalities refuse to accept further responsibilities, as they
       lack the technical competences and political support to implement
       innovative measures in their communities. Before strengthening local
       decision making, local capacities would have to be enhanced through more
       substantial and specific training to form, motivate and link rural
       development agents. It is important to monitor whether the high turnover of
       agents observed during the first PNR diminishes following stronger
       recognition by MRCs and recent salary increases.


…diversify local governments' sources
of revenue…

           Beyond the current reliance on property taxes, local and supralocal
       levels should have access to more diversified and autonomous sources of
       fiscal revenue. This would allow municipalities to enhance the services
       provided to new and established residents in light of the changing social and
       demographic composition of rural communities. To react to new service
       needs and reduce property tax pressures on poorer, long-established
       residents affected by rural gentrification, the local taxation system should
       include more taxes and municipal user fees that are directly linked to
       individuals' income and expenditures and depend less on fiscal transfers.
       More diversified revenue sources could result in increased resources for
       PNR measures, which usually require local co-financing. With enhanced
       capacity building at the municipal level, a de-concentration of revenue
       generating capacities in favour of local or supralocal institutions might be
       decided. This would however require greater accountability on the part of
       local administrations than what the PNR and its governance structure
       currently call for. Local and supralocal administrations’ freedom to bring
       policy design and implementation closer to rural residents should be
       counterbalanced by strong external evaluation of objectives and financial
       management.


…and facilitate local-level
collaboration of provincial and federal
policies.

           Vertical co-ordination of rural policy between administrative levels is
       strong in Québec, while the Canadian federal level acts mainly in parallel.

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      Owing to a constitutional arrangement, provincial governments deal directly
      with local governments. The federal government does not have an official
      rural policy, but the strategic directions of its rural development approach,
      co-ordinated through the Rural Secretariat (RS), essentially parallel those of
      Québec. With Canada’s Rural Partnership, the RS links various federal and
      local activities in rural areas. However, its effectiveness on the local level
      suffers from an unfavourable institutional setting within the Department of
      Agriculture and Agri-Food and limited resources. The Community Futures
      Programme (CFP) is a successful nation-wide federal-level local
      development initiative with a mainly rural focus. Its key strength is the
      combination of incentives for business development and local governance
      which contributes to local capacity building. CFP offices in Québec (called
      SADCs) have a role similar to that of the CLDs and are under the
      responsibility of the federal regional development agency for Québec
      regions. Their mandate is to exploit local competitive advantages.
          Local actors should be encouraged in their efforts to enhance coherence
      between federal and provincial rural development measures, given that a
      transfer of the federal government's rural and community development
      programmes to the provincial level is unlikely. These two levels of
      government are therefore left with the option of greater local-level
      collaboration between both rural development programmes to achieve
      further complementarities and synergies. As is already happening in a few
      localities, MRCs and municipalities would benefit from even implicit
      encouragement to make better use of both sets of measures as long as the
      same activities are not funded twice.

2) Development in lagging areas


Stabilisation of the local economy can
improve resilience to exogenous shocks
…

          Given Québec's exposure to international competition and the global
      economic downturn, rural policy should have strategies able to foster
      economic development and tackle specific challenges in lagging areas.
      There is evidence that fostering growth in all areas, even lagging ones, is in
      the interest of national and provincial governments as it contributes to
      overall output without affecting the opportunities for development in other
      regions (OECD, 2009). Lagging areas in rural Québec are exposed to
      specific challenges, given their specialisation in traditional manufacturing
      and natural resources. A holistic rural policy, including existing sectoral

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       measures as well as programmes targeted to single-industry communities
       and devitalised MRCs, should help alleviate the critical situation in many
       resource-based and single-industry regions, which are currently among the
       most vulnerable economic entities. Complementary financial support from
       MAMROT and the ministry in charge of economic development encourages
       communities to think about and implement revitalisation plans for industrial
       diversification, but there is room for strengthening the management of
       community transition.
            Stabilising the local economy is an important policy goal for lagging
       resource-based and single-industry communities, but it requires a long-term
       approach that also addresses demographic change. For larger rural areas, a
       more diversified economy can help ensure the vitality of single-industry
       towns. Measures that have proved helpful, and are already partly
       implemented in rural Québec, aim at optimising framework conditions for
       entrepreneurship, ensuring a competitive business environment, and
       providing incentives to invest in non-resource sectors. Given rural Québec's
       manufacturing tradition and related entrepreneurial skills, incubator services
       are important as they can provide an environment in which entrepreneurs
       and small businesses can validate their ideas and transform them into viable
       products and services. However, as diversification strategies are often
       difficult to implement in small local labour markets, policy makers have to
       consider other options to deal with the risks inherent in lagging areas. It is
       crucial for these approaches to take account of the fact that the workforce
       size in many rural areas will shrink, making diversification all the more
       challenging (although in small rural areas, re-specialisation through a single
       successful project may induce other projects or attract new residents).
            The stabilisation of a lagging area's economy should be part of a process
       of community transition which plans for industrial closure as a normal event
       in a non-renewable resource-based industry's life cycle. Stakeholders,
       including all levels of government, the departing industry and civil
       organisations, should collaborate on the effective restructuring of
       communities in transition. This requires a complex and lengthy process
       involving a variety of interrelated actions, ranging from diversification
       strategies, labour market adaptation and incentives for possible new
       industries and residents to public service delivery adjustments and municipal
       financial stabilisation. Community transition has to be accompanied by
       time-limited financial support from all stakeholders. This is relevant in
       Québec where communities dependent on property taxes are strongly
       affected by falling property values and lost employment income. Short-term
       investments could take the form of a stabilisation fund.




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…both in traditional primary
industries…

          While diversification focuses on the development of competences in
      promising industries, comparative advantages and new knowledge-based
      developments in traditional sectors should still be valued. Although
      declining, Québec's agriculture, forestry and mining sectors remain a vital
      part of the rural economy and generate additional employment indirectly
      through their demand for local goods and services, the marketing of non-
      timber forest products and new extraction technologies. However, as in the
      case of parts of manufacturing, primary industries will not contribute
      strongly to the future economic growth of rural regions, which will
      necessarily come largely from the tertiary sector.
          Québec’s agricultural support system should tie support to farm income,
      independently of the type of agricultural business and production. This
      could promote the development of agriculture and other sectors of the rural
      economy. All over Canada, the OECD estimate of government support to
      agriculture has been declining, and a decoupled system of support focused
      on business risk management has been introduced in much of Canadian
      agriculture. However, the situation varies: the output of certain commodities
      prevalent in Québec still receives strong support. Although support also
      goes to some smaller producers, many of the sectors supported have
      particularly high incomes and large-scale farms, in part reflecting higher
      consumer prices than those prevailing on world markets. A system
      decoupled from production objectives that gives producers incentives to
      diversify their operations would be in line with policies in many OECD
      countries, where support has shifted from commodity output towards
      different types of support, often linked to land-use objectives. This would
      facilitate taking advantage of emerging market opportunities in higher
      value-added sectors such as organic and other certified food and forest
      (timber and non-timber) production.
          There is room to enhance the involvement of local governments in the
      management of natural resources. Regarding the decision-making
      framework for natural resource management, the government is right to seek
      an increasing role for regional and local actors. However, MRCs and
      aboriginal communities still have little legal decision-making power
      regarding the use and management of natural resources on their territory.
      Stronger involvement of rural communities and MRCs could enhance
      opportunities for local development. Putting MRCs and aboriginal
      communities in charge of so-called proximity forests is a promising step
      towards enlarging their role and giving them a greater say in how forestry
      planning and management affects their communities. In this regard, local

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       governments (municipalities) may need support from provincial authorities
       in the form of transfer of management expertise and monitoring capacity.


…and in emerging sectors.

           The stabilisation strategy should use the crisis as an opportunity to put in
       place a framework for a new rural economy, improve local availability of
       valuable jobs, and increase the overall endowment of human capital. As an
       example, many OECD countries have been developing new sectors that can
       supplant departing industries, particularly in renewable energy production,
       rural tourism and retirement living.
           Development of the renewable energy industry offers very high
       potential for socioeconomic development in rural areas. Despite low costs
       for electricity, Québec's abundance of wind, water and forest resources
       provides a foundation for a strong renewable energy industry. Further
       developing this potential as part of rural policy will increase the
       opportunities available to local communities. Hydroelectricity and wind
       energy are the major focus of Québec's current energy strategy. Besides the
       important hydro-projects, particularly in the north, the Gaspésie wind energy
       project is a promising linking of opportunities in renewable energies with
       rural and regional industrial development. Likewise, resources in forestry
       and agriculture can increasingly contribute to the production of renewable
       energy, although policy should avoid locking in specific technologies. To
       fully benefit from opportunities in forestry-based biomass and biofuels
       necessitates stronger investments in innovation and transformation of
       resources. Other OECD countries have gained experience in these fields
       which may also be valuable for Québec.
           Rural tourism and retirement living are important growth industries.
       Tourism can help to replace lost economic activity in resource-based sectors
       and give new dynamism to communities although it is not a solution for all
       rural communities in Québec (particularly given climate constraints). To
       develop rural tourism, MRCs may need better incentives to co-operate on
       designing and implementing strategies. There have been some initiatives to
       promote specific regional tourism strategies, but a better response to specific
       rural tourism challenges and integration of strategies with supralocal rural
       activities may be required. Finally more effort should be made to benefit
       from population ageing and the settling of the elderly in rural communities.
       Contrary to practices in other OECD countries, Québec has not yet
       sufficiently considered the opportunities of longevity and an important
       resident elderly population for local development in health and health-
       related services, housing and education.


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The accumulation of human capital can
be enhanced by retaining, attracting
and creating pools of skilled labour in
rural areas…

          A pool of skilled labour gives rural areas the possibility to focus on
      innovation and develop emerging sectors at lower cost. The existing pact in
      Québec between different labour market partners is an important instrument
      for responding to specific regional labour force needs. Beyond that,
      concentration of skilled workers can be increased through support for
      entrepreneurship,      self-employment,    business     expansion      and
      intergenerational transfer of firms.
           Investments in innovation and entrepreneurial approaches have a
      stronger long-term impact on employment creation than the more common
      policy of attraction and relocation of businesses through financial incentives.
      Even if it is difficult to demonstrate that new knowledge and networks result
      in creating or maintaining businesses, policy should support these
      approaches rather than the more visible approach of recruitment of new
      employees. As part of an integrated regional rural approach focused on
      skilled labour, investments in ICT and transport infrastructure as well as
      educational and health services are also critical for economic success.
      Business and non-profit organisations can be partners in promoting rural
      entrepreneurship and innovation, as they face fewer legal and regulatory
      constraints.
          CLD support and promotion of co-operatives can be crucial for
      sustaining skilled labour in rural areas. Co-operatives are a key opportunity
      for sustainable rural development as they are mostly based on social capital
      and community mobilisation. They are active in delivering essential services
      to rural areas where private sector provision, with its different targets, is
      decreasing. They can thus help achieve the main objectives of Québec's rural
      policy.
           Another way to enlarge rural local labour markets (LLMs) is through the
      in-migration of workers, although integrating foreign migrants poses
      challenges for rural areas. Québec already seeks to renew its population by
      attracting youth and immigrants and helping them find labour market
      opportunities and better living conditions in rural areas. Since most migrants
      of foreign origin live in large urban centres, efforts of non-profit actors to
      establish a presence among immigrant communities should be strengthened.
      It is also important to assist rural communities in strategically planning to
      attract and integrate immigrants and become a “host community”. This
      requires a multisectoral approach and strong involvement of the local


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       population, which may have problems integrating new residents and
       cultures. However, the government and each rural community should also be
       aware that the creation of an environment for economic opportunities and
       jobs is more important for a successful inflow of immigrants than
       advertising the desirability of immigration. The main reason for migrants to
       settle in a rural area is not government effort but perceived social and
       economic opportunities.
           Finally, policy makers may need to prepare for a new situation in parts
       of rural Québec where the economy will be smaller and service delivery
       more difficult to sustain than in the past. The policy debate should attach
       more importance to challenges linked to adjusting infrastructure and public
       service delivery in regions where the transition to a new equilibrium is
       taking place. Despite Québec's rural policy efforts to ensure the continued
       existence of communities, demographic change will lead to even more
       strongly declining and aging populations than at present. Innovative delivery
       of health or education services can delay this trend but will not reverse it.


…while access to land in predominantly
rural areas should be enhanced.

           Québec's current system for protecting agricultural land does not
       differentiate local situations and is applied uniformly across all designated
       agricultural land. The system does not consider agriculture as a spatially
       specific activity with varying returns and opportunity costs. A law adopted
       in 1978 ensures that land valuable for agriculture is not urbanised or used
       for other activities. This law and a related commission that monitors
       compliance with the law are biased towards intensive farming, which was
       the agricultural model viewed as most sustainable when the legislation was
       designed. However, new agricultural trends such as more on-farm
       multiactivity, off-farm complementary income and part-time farming have
       reduced the need for scale in agriculture.
           As the situation of protected agricultural land in predominantly rural
       areas contrasts with that in peri-metropolitan and intermediate agriculture,
       the legislation should distinguish among different types of areas. The current
       case-by-case evaluation of requests for development on protected
       agricultural land should be replaced by a multiannual plan for agricultural
       land incorporating updated land use and development schemes and
       elaborated by the MRCs in public consultation. This plan should be
       managed in connection with the PNR's rural development measures and
       other strategic planning carried out at the MRC level. Once agricultural land
       is divided into different categories, the law should be modified for


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     predominantly rural areas that are not functionally connected to urban
     centres to promote on-farm economic diversification beyond the activities
     currently judged acceptable.
          Changing the law would also have a significant impact on off-farm
     activities and promote economic diversification. In remote rural areas where
     farming is a marginally profitable activity even with high support, off-farm
     diversification can help slow loss of farmland by increasing the income of
     farm families. In fact, in line with a trend in the OECD area, Québec farm
     families have multiple sources of income. While higher incomes may lead to
     more part-time farming, they enhance the likelihood of preserving land that
     is farmed.

3) Environmental challenges in different rural territories


Demographic growth and pressure on
rural land should be addressed by
protecting land and environmental
activities on the urban fringe…

         Unlike predominantly rural areas, intermediate and peri-metropolitan
     rural areas should be the target of a specific policy to enhance the protection
     of agricultural land, ensure the implementation of pro-environmental
     activities and preserve the natural heritage. While urban expansion should
     not be entirely prevented, it is necessary not to waste valuable agricultural
     land, the natural heritage and the landscape for urban sprawl, which has
     been intense in parts of Québec. As many peri-urban areas, particularly in
     the metropolitan region of Montréal, have particularly high-quality
     farmland, co-ordination of urban, agricultural and environmental policy is
     necessary to achieve a defensible trade-off between the protection of
     agricultural land, the natural and cultural heritage, and the consolidation and
     continued development of urban areas.
         To be able to set an adequate strategy for their urban and peri-urban
     agriculture, the Montréal and Québec City metropolitan regions must
     understand the value and functions of agricultural areas. The value comes
     from commodity production, but also from their ecological and cultural
     roles. Their functions are economic, social and environmental, and they
     benefit society as a whole. As in the case of predominantly rural areas, the
     evaluations by the commission that monitors compliance with the law have
     to be more effective. The current case-by-case evaluation process tends to



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       become judicially bogged down, favouring the rapid marginalisation of peri-
       urban agriculture in Québec.
           The current land protection legislation should be reformed or replaced in
       Québec's main metropolitan regions by a stricter policy to control urban
       sprawl. This policy objective can only be achieved once urban and peri-
       urban residents and institutions are convinced of the value of protecting
       farmland and green spaces as a collective asset for all citizens. Then, the
       provincial and metropolitan authorities, together with local farmers and
       representatives of environmental and local civic groups, should develop a
       new plan for urban and peri-urban agricultural land. Different OECD
       countries have gained experience that the authorities in Québec may want to
       take into account.


…while policy in remote rural areas
should target the protection of local
environmental amenities.

           Rural policy should guarantee that the environmental quality of remote
       rural areas, which is now strained by the exploitation of natural resources, is
       included in the government's sustainable development approach. In light of
       strong relative population decline, there is a risk that remote rural areas are
       seen as territories to be exploited rather than an integrated part of Québec's
       “rurality”. A perception that favours imprudent handling of environmental
       protection and the exploitation of natural resources could threaten the
       quality of amenities and create problems relating to the emission of
       greenhouse gases (GHG) and other pollutants. Both Canada and Québec
       have started to consider the environmental sustainability of rural and
       particularly resource-based communities later than other countries. Only
       in 2005 did Québec introduce legislation to ensure that forestry management
       will maintain biodiversity and that ecosystems will remain viable while
       meeting socioeconomic needs. In 2006, a sustainable development law was
       adopted.
           In the spirit of the efforts made by the government of Québec, rural
       policy and its local-level implementation should be more strongly involved
       in strategic decisions regarding the management of natural resources. This
       could give rural communities a role as watchdog to protect local amenities
       and facilitate their access to the benefits they can generate.




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                                         Notes


     1.    For this assessment, the OECD and the Ministère des Affaires
           municipales des Régions et de l’Occupation du Territoire (MAMROT)
           created a regional typology which classifies rural Québec into
           four categories: i) peri-metropolitan rural areas, that are outside large
           urban areas; ii) intermediate rural areas, which are rural areas close to an
           urban centre; iii) central predominantly rural areas; and iv) remote
           predominantly rural areas. The rest of the province, northern Québec, is
           not considered owing to the extremely low population density and the
           existence of agreements with native populations.
     2.    “Residential economy covers all the activities generated on the local level
           by the consumption of the population living on the territory considered.”
           In: Cohesion Serving the Regions (press kit), Informal Meeting of
           Ministers for Spatial Planning and Cohesion Policy, 26 November 2008,
           Marseille, France, www.eu2008.fr. The term is usually used as the
           opposite of “productive economy”.
     3.    An écoumène is a continuously inhabited territory. In Québec this
           includes 1 100 municipalities mainly in the southern part of Québec
           (south, northwest and along a small strip northeast of the
           St. Lawrence River basin), where the large majority of the provincial
           population resides. This écoumène alone covers an area as large as
           New England in the United States.
     4.    To assess the impact of distance on regional performance in
           predominantly rural areas, the OECD calculated the average linear
           distance of MRCs from Montréal and Québec City. The distance is
           expressed in kilometres. All rural areas with an average value of less than
           300 kilometres are considered close to metropolitan centres.




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                                              Chapter 1

          Trends, perspectives and policies for rural Canada



       This chapter broadly discusses socioeconomic conditions in rural Canada
       and briefly introduces the national strategy to promote rural development.1
       After introducing a regional typology, it benchmarks Canadian rural areas
       against other OECD rural regions in terms of economic competitiveness.
       Section 1.1 focuses on demographic trends, and sections 1.2 and 1.3 discuss
       rural-urban linkages and social well-being in the country. Sections 1.4
       and 1.5 describe the economic framework and environmental challenges in
       rural Canada. Finally, section 1.6 presents the main challenges for rural
       development, introduces the national strategy to promote rural development,
       and discusses some of the limitations of the Canadian approach.




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Key points

          •    Canada is the country with the largest rural area within the
               OECD area. More than 95% of the national territory is classified as
               rural. The rural area ranges from the Arctic territories to the
               temperate prairies at the border with the United States. Despite its
               vastness, only 29% of Canadians live in predominantly rural areas
               (according to the OECD regional typology) owing to strong
               geographic concentration in metropolitan centres.
          •    Canada’s rural regions have large disparities in terms of
               economic performance. Taking into account employment rates and
               demographic trends, some Canadian rural regions are among the
               richest in the OECD area, while others rank very low and are among
               the lagging regions.
          •    Economic disparities mostly depend on the type of economic
               base that characterises specific rural regions. The poorest regions
               are often mono-industrial and specialised in the primary activities of
               agriculture, forestry and fishing, while the richest are specialised in
               primary sectors (oil and natural gas), or tertiary activities.
          •    Resource-based industries are exposed to international shocks
               and put strain on the environment. Canada’s economy is
               relatively specialised in resource-based industries, which
               represented 13% of national GDP in 2006. These industries are
               mostly located in rural communities. Employment in many rural
               communities is largely in primary production. This specialisation
               exposes them to international shocks such as the credit crunch and
               to the fluctuation of the international demand for commodities.
               Finally, some resource-based industries put pressure on the
               environment because of high greenhouse gas (GHG) emissions.
          •    Agriculture, is still an important sector in the Prairie provinces,
               but absorbs a small share of local employment and represents a
               relatively small share of GDP. In all provinces, agriculture is
               growing in terms of GDP and volume of production. However, as a
               share of total provincial GDP, agriculture is declining. Labour-
               saving technology allows agricultural production to grow with few
               workers. Thus employment in this sector is declining.
          •    In spite of its multifaceted challenges, Canada does not have an
               integrated approach to rural development. As in other OECD
               countries, agriculture, social welfare and infrastructure policies have

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                 a strong impact on Canadian rural development. Moreover, specific
                 support to rural communities is provided through a series of
                 instruments that aim at strengthening business, local networks, and
                 community attachment.

Introduction

           Canada is the second largest country in the world and displays great
       diversity, encompassing large cities and vast, barely inhabited areas in the
       northern territories (Box 1.1). Owing to its size, the country has diversified
       landscapes, cultures and regional economies. This report focuses in
       particular on the territories that, because of their population density and
       distance from large urban centres/central areas, can be classified as rural.
       The aim is twofold: to show the opportunity for rural areas to contribute to
       Canadian competitiveness and to highlight the challenges that threaten the
       durability of such communities.
           It is widely recognised that in Canada demographic, social, economic
       and environmental trends are creating an increasing rural-urban split. Such
       trends endanger the sustainability of rural communities and even the “rural
       character” of Canada. Many rural regions, especially remote ones, are
       “emptying out” as young people leave these areas, which also have little
       capacity to attract migrants (especially immigrants).
            The economy of rural Canada is still strongly dependent on primary
       activities and manufacturing. While some analysts argue that Canada is
       moving towards a post-industrial economy with more diversification and
       growth in the services sector, resources and resource-based activities
       continue to generate a substantial proportion of Canadian GDP
       (Hessing et al., 2005). Although there has been a move in the Canadian rural
       economy away from complete dependence on resources, this has not taken
       place at the speed or to the extent that it has in other OECD countries.
       Resource-based communities do not receive the full benefits of their
       specialisations since ownership of resources, main competences and
       strategic management are often located in urban areas.2 The resource-based
       economy also puts a strain on the environment. In part because of the natural
       resource sector, Canada is one of the world’s largest producers of
       greenhouse gases on a per capita basis.




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             Box 1.1. Geography and administrative structure of Canada

           Canada is a federal state, subdivided into ten provinces and three territories
        (Figure 1.1). Canada occupies roughly two-fifths of the North American
        continent. It encompasses vast Arctic and sub-Arctic territories and is often
        considered a country of the far north. However, even if large tracts of land
        within the country’s borders are located in the Arctic, Canada extends far south
        and the peninsula of southern Ontario goes deep into the US heartland. Its vast
        size leads to an important climatic contrast between different territories.


                      Figure 1.1. Provinces and territories of Canada




        Source: OECD (2002), OECD Territorial Reviews: Canada, OECD Publishing, Paris.




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       There are several definitions of rural Canada
           Several definitions of “rural” are available for national and provincial
       analysis in Canada. This report will use more than one definition to assess
       Canada and its provinces. In the first section, rural Canada is defined in
       terms of the OECD regional typology (Box 1.2). This definition makes it
       possible to compare the performance of rural Canada with that of other
       OECD countries. The second section presents a definition of rural areas that
       is based on Canada's Census Metropolitan Areas (CMA) and Census
       Agglomerations (CA) and takes commuting data into account.




                  Box 1.2. OECD regional typology and rural classification

            The OECD has classified the regions within each member country. The
         classifications are based on two territorial levels (TLs). Across the OECD, the
         higher level (Territorial Level 2) consists of about 300 sub-national macro-
         regions, and the lower level (Territorial Level 3) is composed of more than
         2 300 micro-regions. In Canada, the provinces and territories are Territorial
         Level 2 geographic units and the census divisions (MRCs in Québec) are the
         Territorial Level 3 geographic units. This classification – which for European
         countries is largely consistent with the Eurostat classification – facilitates
         comparability of regions at the same territorial level. Indeed, the two levels,
         which are officially established and relatively stable in all member countries, are
         used by many as a framework for implementing regional policies.
            A second important issue for the analysis of regional economies concerns the
         different “geography” of each region. To take account of these differences and
         establish meaningful comparisons of regions belonging to the same type and
         level, the OECD has established a regional typology according to which regions
         are classified as predominantly urban (PU), predominantly rural (PR), and
         intermediate (IN) on the basis of three criteria:
                1.    Population density of communities within each region. A community
                      is defined as rural if its population density is below 150 inhabitants
                      per km2 (500 inhabitants for Japan to account for the fact that its
                      national population density exceeds 300 inhabitants per km2).

                2.    Settlement pattern of the population across communities within a
                      region. A region is classified as predominantly rural if more than 50%
                      of its population lives in rural communities, predominantly urban if
                      less than 15% of the population lives in rural communities and
                      intermediate if the share of the population living in rural communities
                      is between 15% and 50%.



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             Box 1.2. OECD regional typology and rural classification (cont.)
              3.   Size of urban centre(s) within a region. A region that would be
                   classified as rural on the basis of the general rule is classified as
                   intermediate if it has an urban centre of more than 200 000 inhabitants
                   (500 000 for Japan) representing no less than 25% of the regional
                   population. A region that would be classified as intermediate on the
                   basis of the general rule is classified as predominantly urban if it has
                   an urban centre of more than 500 000 inhabitants (1 million for Japan)
                   representing no less than 25% of the regional population. This regional
                   typology results in the above figure on population distribution by
                   region type in OECD countries.

        Source: OECD (2005), OECD Regions at a Glance, OECD Publishing, Paris.




      The OECD definition of rural Canada
           A very large part of Canada's territory can be classified as rural, but a
      relatively small share of the population lives in rural regions. With 96% of
      national territory classified as predominantly rural, Canada is among the
      most rural OECD countries, after only Iceland and Ireland. In spite of its
      large rural territory, the share of Canadians living in predominantly
      rural (PR) areas is only 29% of the total, while more than 50% live in
      urban (PU) regions (Figure 1.2). However, Canada’s relatively small
      population (33.9 million in 2009), its size (almost 10 million km2), and the
      geographic concentration of human settlements may bias the OECD
      territorial classification. For this reason, the OECD is currently developing a
      new territorial definition that takes also into account distance and regional
      accessibility.

      Rural Canada’s performance within OECD rural regions
          On average, Canada’s predominantly rural regions perform in line with
      other OECD predominantly rural regions, yet there are large regional
      differences. There is a large divide among rural regions in Canada when
      employment rates and demographic trends between 1999 and 2006 are taken
      into account. PR areas with higher employment rates and with positive
      demographic trends (located in the upper right hand quadrant of Figure 1.3)
      are mostly located in the areas rich in oil, or in areas with greater economic
      diversification. For instance, two PR areas located in Alberta rank among
      the 15 faster-growing PR areas within the OECD. Conversely, rural regions
      whose economy depends on the primary sectors of agriculture, forestry and

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                                 Figure 1.2. OECD regional typology
                                                  A. Territory

                                                PR        IN        PU

                              Ireland
                             Finland
                            Sweden
                             Norway
                              Austria
                            Hungary
                             Greece
                              Poland
                           Denmark
                              Iceland
                              Mexico
                              Turkey
                              France
                             Canada
                            Portugal
                        Slovak Rep.
                       United States
                            Australia
                               OECD
                               Korea
                               Japan
                                Spain
                           Germany
                                 Italy
                         Switzerland
                         Czech Rep.
                                  UK
                             Belgium
                       New Zealand
                        Netherlands
                        Luxembourg
                                         0%      20%      40%      60%      80%      100%




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                         Figure 1.2. OECD regional typology (cont.)
                                           B. Population

                                           PR      IN        PU

                           Ireland
                          Finland
                         Sweden
                          Norway
                           Austria
                         Hungary
                          Greece
                           Poland
                        Denmark
                          Iceland
                          Mexico
                           Turkey
                           France
                          Canada
                         Portugal
                     Slovak Rep.
                    United States
                         Australia
                            OECD
                            Korea
                            Japan
                             Spain
                        Germany
                              Italy
                      Switzerland
                      Czech Rep.
                                UK
                         Belgium
                    New Zealand
                     Netherlands
                     Luxembourg
                                      0%   20%     40%       60%       80%      100%



          Source: OECD Regional Database (2009), internal database.



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         Figure 1.3. Employment (Y) and population (X) trends in Canada’s rural
                economic regions and OECD predominantly rural regions
                                                                                                        1999-2006


                                                                    8.00


                                                                                                                                                          Las Vegas-Paradise-Pahrump,
              Percentage point change in employment rates between




                                                                    6.00
                                                                                                                                                                 NV (EA), USA


                                                                    4.00
                                                                                                                                   Red Deer, Alberta
                                                                                                                                                               Wood Buffalo-Cold Lake, Alberta
                                                                                                                                             Southeast, Manitoba
                                 1999 and 2006




                                                                    2.00
                                                                                                                                                  Thompson-Okanagan, British
                                                                                                                                                         Columbia
                                                                                                                                                     Centre-du-Québec, Quebec
                                                                    0.00

                                                                                North Coast and Nechako, British          -Notre Dame-Central Bonavista Bay,
                                                                                           Columbia                           Newfoundland and Labrador
                                                                    -2.00
                                                                                                              South Coast-Burin Peninsula,
                                                                                                              Newfoundland and Labrador
                                                                    -4.00                                          Jeollanam-do, Korea



                                                                    -6.00
                                                                        -6.00        -4.00           -2.00            0.00           2.00              4.00              6.00           8.00




                                                                                                   Regional demographic trends between 1999 and 2006




        Notes: Canadian “economic regions” are groupings of census divisions (i.e. grouping of
        Territorial Level 3 geographic units) and are assigned as predominantly rural,
        intermediate and predominantly urban using an algorithm similar to the one outlined in
        Box 1.2.
        The blue points refer to OECD predominantly rural regions and the black points refer to
        Canada’s rural economic regions.
        Source: OECD Regional Database (2009), internal database.


        fishing perform less well. This is due to international competition but also
        to the mismanagement of the local resource. For example, the Burin
        Peninsula, in the province of Newfoundland and Labrador, is among the
        poorer performers. It had a thriving fishing industry which was destroyed
        by overfishing, resulting in the highest unemployment rate in Canada, with
        peaks of about 30% during the second half of the 1990s.
           Canada’s intermediate regions parallel the heterogeneity of PRs
       (Figure 1.4). The richest intermediate regions are often located on the fringe
       of large metropolitan areas. Examples are the Kitchener-Waterloo and
       Barrie regions, which are close to Toronto, and the Outaouais region, in

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      Québec, which benefits from the Ottawa-Gatineau metro-region. These
      intermediate regions benefit from economic spillovers and in-flows of
      population. The poorer performers usually have a relatively small and
      isolated local labour market. Their economy is dependent on traditional
      manufacturing and primary activities. This is the case for Québec's
      Saguenay-Lac-Saint-Jean region, which is home to mining, agriculture
      activities and wood processing.



            Figure 1.4. Employment (Y) and population (X) trends in Canada’s
         intermediate economic regions and OECD predominantly rural regions
                                                                                                                    1999-2006
          Percentage point change in employment rate from 1999 to 2006




                                                                         5.00

                                                                                                                                                                                           Guadalajara, Spain
                                                                         4.00



                                                                         3.00


                                                                                                                           Edmonton, Alberta       Kitchener-Waterloo-Barrie, Ontario
                                                                         2.00
                                                                                                                                                      Outaouais, Quebec


                                                                         1.00



                                                                         0.00
                                                                                                     Mauricie, Quebec


                                                                         -1.00                                            Saguenay-Lac-Saint-Jean, Quebec


                                                                         -2.00
                                                                                                             Dessau, Germany


                                                                         -3.00
                                                                              -4.00          -2.00                 0.00                2.00                 4.00                    6.00              8.00


                                                                                                             Regional demographic trends between 1999 and 2006
                                                                                      Percentage rate of change of total population from 1999 to 2006




       Note: Canadian “economic regions” are groupings of census divisions (i.e. grouping of
       Territorial Level 3 geographic units) and are assigned as predominantly rural,
       intermediate and predominantly urban using an algorithm similar to the one outlined in
       Box 1.2.
       The blue points refer to OECD predominantly rural regions and the black points refer to
       Canada’s intermediate economic regions.
       Source: OECD Regional Database (2009), internal database.




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       The national rural typology
            While the OECD definition proves useful for benchmarking rural
       Canada’s performance against OECD rural regions, other definitions can
       give a more detailed assessment of trends in rural territories. Each of these
       emphasises different criteria (population size, density or geography) and has
       different associated rural thresholds. The size of the territorial units
       (building blocks) also varies. Each set of definitions covers the entire
       territory of Canada.
           The federal Rural Secretariat, for most of its analysis, has adopted the
       rural and small town (RST) definition.3 Each federal or provincial policy
       and programme can adopt a definition that is specifically designed for the
       given policy or programme. However, federal departments are encouraged
       to use the RST definition when undertaking research and analysis. Policy
       makers and researchers must also consider the issue of identity and social
       representation when defining rural. Another important factor in the
       definition of rural areas is the way in which communities perceive
       themselves and other communities. Local evaluations, rather than
       comprehensive ones, can spur a strong commitment to rural identity.
           According to the RST definition, rural areas can be differentiated
       according to their functional linkages with metropolitan areas. This typology
       is based on “Metropolitan Area and Census Agglomeration Influenced
       Zones” (MIZ) (Figure 1.5). MIZ is a refinement or extension of the Census
       Metropolitan Areas (CMA), Census Areas (CA) or RST concept introduced
       above.4 Statistics Canada uses MIZ to better show the effects of
       metropolitan accessibility on non-metropolitan areas (Mendelson, Murphy
       and Puderer, 2000). This classification system is applied at the Census
       Subdivisions (CSD) level and disaggregates RST Canada (or non-CMA/CA)
       into four sub-groups based on size of commuting flows:
            •    Strong MIZ: 30% or more of the employed labour force living in
                 the CSD work in any CMA/CA urban core.
            •    Moderate MIZ: at least 5% but less than 30% of the employed
                 labour force living in the CSD work in any CMA/CA urban core.
            •    Weak MIZ: more than 0% but less than 5% of the employed labour
                 force living in the CSD work in any CMA/CA urban core.
            •    No MIZ: includes all CSDs that have a small employed labour force
                 (less than 40 people), as well as any CSD that has no commuters to
                 a CMA/CA urban core (i.e. none of the employed labour force
                 living in the municipality works in any CMA/CA urban core).


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                                   Figure 1.5. Metropolitan Influenced Zones in rural
                                               and small town areas, 2006
                                                         Using the statistical area classification
         Larger urban centres
             Census Metropolitan Areas (urban core of 50 000 or
             more with a total population of 100 000 or more)
             Census Agglomerations (urban core of 10 000                                         Rural and small town areas
             to 49 999)                                                                          (showing Metropolitan Influenced Zones (MIZ))
                                                                                                            Strong MIZ
                                                                                                            Moderate MIZ
                                                                                                            Weak MIZ
                                                                                                            No MIZ
                                                                                                            Territories




       Source: Statistics Canada, Census of Population, 2006. Map produced by the Remote
       Sensing and Geospatial Analysis Section (RSGA), Agriculture Division, statistics
       Canada, 2010.


           Canada’s geography can also be defined on the basis of different
      statistical classification or provincial typologies. Census subdivisions
      (CSDs) and census consolidated subdivisions (CCSs) are among the most
      important.5 In the 2006 Census, there were 5 418 CSDs. CSDs can be
      further grouped into CCSs. The general case is a small town (i.e. a CSD)
      surrounded by rural municipalities (i.e. other CSDs). The CSDs are
      consolidated for statistical purposes to form a CCS. Finally, provinces can
      define rural regions based on Census divisions (CDs). CDs are intermediate
      geographic areas between the municipality (i.e. CSD) and the province.
      They represent counties, regional districts, regional municipalities and other
      types of provincially legislated areas. In Newfoundland, Manitoba,
      Saskatchewan and Alberta, provincial law does not provide for these
      administrative geographic areas. In co-operation with these provinces, CDs
      have been created by Statistics Canada to facilitate the dissemination of
      statistical data. In the Yukon Territory, the CD is equivalent to the entire
      territory. CDs are used to represent Territorial Level 3 geographic units in
      the OECD territorial grid.

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1.1 Demographic trends in rural areas


       Canada’s rural population has been concentrating in rural regions
       close to urban areas
           The share of the population living in rural regions has been decreasing
       over the last 15 years, but measuring demographic trends in rural areas can
       be challenging because of the evolving regional classification.6 In 2006,
       Canadians living in rural and small towns (RST) accounted for 19% of the
       Canadian population, compared to 20.6% in 2001 and 22.8% in 1991 (RST
       definition). At the same time, the size of the RST population has been
       essentially constant since 1981. Its representation is complicated by the fact
       that rural areas are re-classified when their population exceeds 10 000.
       Between 1966 and 1981, there were up to 8 million rural and small town
       Canadians and from census year to census year, the population generally
       grew. At each census year, therefore, Statistics Canada re-classifies some
       towns and municipalities because they reach the urban core density criteria
       or commuting patterns change. These reclassifications reduce the number of
       individuals living in rural areas.
           Rural regions with the largest population growth are those that are
       integrated in urban labour markets (Figure 1.6). Although the bulk of
       Canada’s RST population still lives in moderate and weak MIZ, only strong
       MIZ showed constant population growth between 1996 and 2006; weak
       MIZ showed an overall decline between 1996 and 2006.7 These trends prove
       the influence of large urban centres on rural areas (strong MIZ grew faster
       than moderate MIZ which grew faster than weak MIZ). There are however
       exceptions, such as the no MIZ RST in the territories. Their population
       increases more than the other RST, due to higher birth rates among the
       aboriginal population.8 Another exception is Alberta where weak MIZ rural
       areas saw significant growth. This trend is mainly due to the oil and gas
       sector which created some boom economies during the past 15 years.
           Demographic trends in RSTs vary considerably across the country, and
       the most populous provinces have a large impact on the national
       demographic structure. At the provincial level, only Ontario, Alberta and
       Manitoba had consistent growth in their rural and small town population
       between 1986 and 2006 (Table 1.1). Following the federal regional
       classification, Ontario had the largest rural population with over 1.8 million,
       followed by Québec with nearly 1.5 million (2006). Together these two
       provinces account for almost 53% of Canada’s rural population. In general,
       between 2001 and 2006, RST areas in Québec, Ontario, Alberta and British
       Columbia had net in-migration while Newfoundland and Labrador,

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      Manitoba and Saskatchewan had the highest net losses through out-
      migration (OECD, 2009).



                    Figure 1.6. Community population gains and losses
                                            1981-2001
                                                                    Legend
                                                                         Communities that lost population during all
                                                                         five inter-censal periods
                                                                         Communities that lost population in three or
                                                                         four out of five inter-censal periods
                                                                         Communities that gained population during
                                                                         three or four out of five inter-censal periods
                                                                         Communities that have gained population
                                                                         during all five inter-censal periods




       Note: Continuous population gain is defined as communities (Census consolidated
       subdivisions) that reported more residents in each inter-censual period: 1981 to 1986
       and 1986 to 1991 and 1996 to 2001. Continuous population loss is defined as
       communities (CCSs) that reported fewer residents in each inter-censual period: 1981
       to 1986 and 1986 to 1991 and 1996 to 2001.
       Source: Statistics Canada, Census of Population, 1981 to 2001. Map produced by the
       Remote Sensing and Geospatial Analysis Section (RSGA), Agriculture Division,
       statistics Canada, 2010.




          Demographic trends in RSTs vary considerably across the country, and
      the most populous provinces have a large impact on the national
      demographic structure. At the provincial level, only Ontario, Alberta and
      Manitoba had consistent growth in their rural and small town population
      between 1986 and 2006 (Table 1.1). Following the federal regional

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       classification, Ontario had the largest rural population with over 1.8 million,
       followed by Québec with nearly 1.5 million (2006). Together these two
       provinces account for almost 53% of Canada’s rural population. In general,
       between 2001 and 2006, RST areas in Québec, Ontario, Alberta and British
       Columbia had net in-migration while Newfoundland and Labrador,
       Manitoba and Saskatchewan had the highest net losses through out-
       migration (OECD, 2009).

            Table 1.1. Population change in rural and small town areas, Canada,
                                  provinces, and territories

                                                1986-2006
                                      1986 to 1991      1991 to 1996   1996 to 2001   2001 to 2006
         Newfoundland and Labrador      -3.0              -5.1          -10.6           -5.6
         Prince Edward Island           -0.2               2.4           -1.0           -1.3
         Nova Scotia                     0.5              -0.6           -2.3           -1.8
         New Brunswick                  -0.2               1.3           -2.7           -2.5
         Québec                          1.6               3.5           -0.8            2.2
         Ontario                         9.3               4.7            1.5            2.4
         Manitoba                        0.5               4.4            0.5            2.4
         Saskatchewan                   -6.9              -2.0           -3.5           -4.7
         Alberta                         3.1               7.8            5.5            3.8
         British Columbia                7.2              12.8           -1.1            0.8
         Yukon                          18.9              16.0          -18.9            2.8
         Northwest Territories           4.9              11.0            0.9            1.7
         Nunavut                                                                        -7.6
         Total rural                      3.0              3.9           -0.4            1.0
        Source: Statistics Canada, Census of Population 1986 to 2006.




       Rural areas display high elderly dependency rates…
           Ageing is a nation-wide trend and a high proportion of Canada’s elderly
       people live in rural areas. By 2026 one Canadian in five will have reached
       age 65, and the proportion of Canadians aged 85 or more is expected to
       grow to 1.6 million in 2041 – 4% of the overall population. In 2006,
       13% (4.07 million) of Canadians (one out of eight) were at least 65 years of
       age. Of these, 21% (871 815) resided in rural areas. Yet, since rural areas
       accounted for only 19% of Canada’s population, a high share of seniors
       lived in rural areas. Canada’s moderate MIZ areas had an older population
       relative to all other areas. The 16% (357 835) of moderate MIZ area
       residents at least 65 years of age was greater than the Canadian average
       of 13%. As a share of the population in moderate MIZ areas, seniors

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      increased by 2.5% from 1996 to 2006. As a result, rural Canada as a whole
      displays a higher (and increasing) aged dependency rate than the rest of the
      country and of course of urban areas (Figure 1.7).



               Figure 1.7. Aged dependency ratios in rural and urban areas
                                                               1996-2006

                                Total rural (MIZ definition)                 Urban           Canada
       25
                                                                                         22.07
                                                           20.58
       20       19.35                                                                                    18.87
                                                                           17.88                 18.15
                                  16.95                            17.24
                        16.36

       15



       10



        5



        0
                        1996                                       2001                          2006


       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by the Rural Secretariat (AAFC)
       and Statistics Canada, Directorate for Public Governance and Territorial Development,
       OECD.




           Out-migration of young people is common. The percentage of people
      aged 0-14 living in rural areas has been declining constantly in the last
      decade.9 In moderate MIZ areas there was a 4% point decrease in the youth
      population between 1996 and 2006 (Statistics Canada, 2006). In particular,
      it is estimated that rural areas experienced a net loss of between 12%
      and 16% of 15-to-19-year-olds between 1986 and 1996.10 In some
      provinces, including Saskatchewan and Newfoundland, losses of rural youth
      within this age cohort ranged from 21% to 25%. While youth out-migration
      is not a phenomenon unique to rural communities, rural communities have
      much lower rates of return migration than urban centres. For example, in

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       Canada only one in four rural youth who leave their community will return
       to the same community within ten years (Statistics Canada, 2006).

       ...which are not offset by in-migration of foreign workers
           On average, rural Canada holds little attraction for foreign workers,
       especially compared with urban regions (Table 1.2).11 Of the 1.1 million
       new immigrants who arrived between 2001 and 2006, only 4.9% settled in
       rural Canada. It is likely that new immigrants will continue to choose urban
       communities unless rural communities actively plan for recruitment and
       retention and are competitive. Some rural areas have done this. Labour
       needs in some rural areas of British Columbia, Alberta and Manitoba,
       combined with successful immigration programmes and extensive
       recruitment activities, put a handful of rural census divisions in the
       top 20 destinations for new immigrants between 2001 and 2006.



           Table 1.2. Distribution of new immigrants (having arrived during the
                                previous five years), Canada

                                                Percentage

                                                        1996          2001          2006
        Larger urban centres                            94.9          94.8          95.1
        All rural and small town areas                   5.1          5.2           4.9
                      Strong MIZ                         1.2          1.3           1.3
                      Moderate MIZ                       1.8          1.9           1.8
                      Weak MIZ                           1.9          1.9           1.7
                     No MIZ                              0.2          0.2           0.1
        RST territories                                  0.04         0.04          0.03
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by the Rural Secretariat (AAFC)
        and Statistics Canada, Directorate for Public Governance and Territorial Development,
        OECD.




           Foreign immigrants are essential for the sustainability of many rural
       economies, but they also raise challenges. Working conditions are often less
       favourable in rural areas, and in many cases it is difficult to recruit local
       workers for the work that is available. As a reaction to the labour shortage,
       food processing plants in Alberta and Manitoba are extensively hiring

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      immigrants and refugees from Africa, Asia, and Central America to meet
      labour requirements (Broadway, 2007; Fairy et al., 2008). This causes
      housing shortages, rising demand for social services, increases in various
      social disorders, the creation of relatively low-paying or part-time jobs, and
      a relative fall in income levels (Broadway, 2007; Donato et al., 2007). The
      host community usually lacks the experience or the social infrastructure to
      assist immigrants and this can feed into racial/ethnic tensions
      (Donato et al., 2007). While these potential problems are not unique to rural
      communities, they may be more overwhelming because a smaller
      community tax base is less able to provide resources and a smaller
      population is less able to provide assistance and may have less experience
      with cross-cultural community development (Beshiri and He, 2009).
           Some rural communities have nevertheless demonstrated the capacity to
      integrate immigrants through the establishment of specific local services
      (from groceries to music) for the immigrant and refugee population.
      According to some scholars, the capacity to integrate immigrants has
      probably enriched the local communities (Broadway, 2007). Many rural
      regions are “witnessing the reality of diversity and demographic
      transformation” (Radford, 2007). Some characteristics of the immigrant
      population may help the integration process. For instance, Ram and
      Shin (1999) suggest that the more mobile an immigrant group is, the greater
      its degree of integration into the mainstream of society. As a result, spatial
      dispersal of the population, as opposed to enclaves of immigrants, is
      indicative of socioeconomic integration (Beshiri and He, 2009). Mobility of
      immigrants into a rural community with a relatively strong sense of
      community (Mitura and Bollman, 2003) may facilitate the integration of
      immigrants into Canadian society more easily than in urban areas.
           In 2006, most immigrants in rural zones are well established pre-1986
      immigrants (3.7% of the total population) while those who arrived later are a
      much smaller share (1.6% of the total population). This contrasts to
      metropolitan areas which have fewer well-established immigrants compared
      to those who arrived later (11% versus 15%) (Figure 1.8). Overall, every
      fourth person in a metropolitan area is an immigrant compared to about one
      in 19 in RST areas. Interestingly, compared to RST areas, the smaller cities
      or census agglomerations have a similar number of immigrants and a similar
      profile of total immigrants for each period of arrival. In both CA and RST
      areas, most immigrants arrived at least 20 years before the 2006 Census
      (i.e. prior to 1986). Within rural and small town Canada, immigrants
      constitute a higher share of the population in strong MIZ than in the more
      rural zones.12




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             Figure 1.8. Immigrants as a percentage of the total population within
                            larger urban centres and rural areas
                                                                    2001-06

               Well established (pre-1986)        Established (1986 to 1995)      Recent (1996 to 2000)   New (2001 to 2006)

       30



       25



       20



       15



       10



        5



        0
                LUC           CMA            CA          RST         Strong MIZ   Moderate     Weak MIZ   No MIZ       RST
              (subtotal)                               (subtotal)                   MIZ                              Territories



            Note: Larger urban centres (LUCs) comprise census metropolitan areas (CMAs) and
            census agglomerations (CAs). CMAs have a total population of 100 000 or more with
            50 000 or more in the urban core and include all neighbouring towns and
            municipalities in which 50% or more of the workforce commutes to the urban core.
            CAs have an urban core of 10 000 or more and a total population of less than 100 000
            and include all neighbouring towns and municipalities in which 50% or more of the
            workforce commutes to the urban core. Rural and small town (RST) areas are
            comprised of metropolitan influenced zones (MIZ) which are assigned on the basis of
            the share of the workforce that commutes to any CMA or CA (strong MIZ: 30% or
            more; moderate MIZ: 5% to 29%; weak MIZ: 1% to 5%; no MIZ: no commuters).

            Source: Beshiri, R. and J. He (2009), “Immigrants in Rural Canada: 2006”, Rural and
            Small Town Canada Analysis Bulletin, Vol. 8, No. 2, Statistics Canada,
            www.statcan.gc.ca/pub/21-006-x/21-006-x2008002-eng.pdf.



1.2 Rural-urban linkages

       Commuting flows are intense, but also multi-directional
           Because of cheaper housing and good natural amenities, rural areas
       close to large urban markets attracted population between 1981 and 2001

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      (Figure 1.9). Rural areas close to larger urban centres (LUCs) attract specific
      categories of urban residents. For instance, for age groups 25 to 69 there has
      been consistent net in-migration to RST areas, as young families move to
      rural communities within commuting distance of jobs in the city and early
      retirees move to rural areas rich in outdoor and recreational amenities.13 For
      instance, in 2001, out of 14.7 million workers in Canada, 2.8 million resided
      in rural and small town (RST) areas.



                                               Figure 1.9. Demographic trends in accessible and remote rural
                                                                 communities in Canada
                                                                                                      1981-2001

                                                                       1981                1986                    1991                   1996                    2001
                                               50

                                               45

                                               40

                                               35
          % distribution of total population




                                               30

                                               25

                                               20

                                               15

                                               10

                                                5

                                                0
                                                    Less than 25 km.    25 to 49 km.   50 to 74 km.     75 to 99 km.   100 to 149 km.   150 to 199 km.   200 to 299 km. 300 km. or more


                                                                                                  Distance to nearest CMA with
                                                                                                  more than 100 000 inhabitants



       Note: Communities more than 50 km from a CMA with over 100 000 inhabitants are,
       on average, not competitive (i.e., their share of the total population is declining).
       Source: Bollman, R.D. (2007), “Factors Driving Canada's Rural Economy, research
       paper”, Agriculture and Rural Working Paper Series, Statistics Canada.




          Commuting flows out of rural communities tend to be multidirectional
      rather than merely periphery to core. Of the 2.8 million workers living in
      rural areas, about 2.3 million worked in an RST. Among them, 447 000
      worked in an RST different from their place of residence. The bulk of these

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       RST residents, therefore, contributed to the economy of other rural areas,
       while a similar amount, approximately 444 000 workers, commuted to an
       LUC.14 These results indicate that when it comes to workers commuting
       from a RST area, rural jobs were as important as urban jobs (Table 1.3).



                    Table 1.3. Distribution of commuters by place of residence
                                         and place of work

                              LUC                         RST                              All areas
                                           Commuters by place of work (number)
        LUC                 3 765 950                        163 740                       3 929 690
        RST                   443 605                        447 000                         890 605
        All areas           4 209 555                        610 740                       4 820 295
                                        Distribution by place of work (row percentage)
        LUC                   95.8                              4.2                          100
        RST                   49.8                            50.2                           100
        All areas             87.3                            12.7                           100
                                     Distribution by place of residence (column percent)
        LUC                   89.5                           26.8                               81.5
        RST                   10.5                           73.2                               18.5
        All areas            100                            100                                100
        Source: Harris S., A. Alasia and R.D. Bollman (2008), “Rural Commuting: Its
        Relevance to Rural and Urban Labour Markets”, Rural and Small Town Canada
        Analysis Bulletin Vol. 7, No. 6; Statistics Canada, Catalogue No. 21-006-XIE, Ottawa.




       Urban sprawl puts pressure on agricultural land
           In the last 30 years, urban sprawl has been intense, even though it is
       concentrated in a relatively small area of the country. Canada’s urban
       landscape is dominated by four major regions with half of the Canadian
       population: Ontario’s extended Golden Horseshoe; Montreal and the
       adjacent region; British Columbia’s Lower Mainland and southern
       Vancouver Island; and the Calgary-Edmonton corridor. In 2001,
       approximately one in every three km2 of urban land was in Ontario
       (9 800 km2). Québec (7 500 km2) had the second largest area of urban land,
       followed by British Columbia (4 100 km2). The total area of urban land in
       Canada (31 000 km2 in 2001) has increased significantly in recent decades.
       Between 1971 and 2001, urbanisation consumed about 15 200 km2 of

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      surrounding land, an increase of 96% in urban land over the three decades.
      At the provincial level, Ontario and Québec registered the largest increase of
      urban land. Ontario’s urban land grew by 4 300 km2, an increase of almost
      80% over that period (Figure 1.10).15



         Figure 1.10. Evolution of urban land in Canada between 1971 and 2001
                                                   km2

                                                   1971                          2001


                  British Columbia


                           Alberta


                    Saskatchewan


                         Manitoba


                           Ontario


                          Quebec


                   New Brunswick


                      Nova Scotia


              Prince Edward Island


        Newfoundland and Labrador

                                     0   2 000    4 000          6 000         8 000    10 000   12 000
                                                 Estimated urban land (km 2)



       Source: Hofmann, N., G. Filoso and M. Schofield, (2005), “The loss of dependable
       agricultural land in Canada”, Rural and Small Town Canada Analysis Bulletin, Vol. 6,
       No. 1, Statistics Canada Catalogue No. 21-006-XIE, Ottawa.




          Urban development has consumed important portions of Canada’s best
      farmland (Figure 1.11). In 2001, approximately 46% of the urban land in
      Canada was situated on dependable agricultural land. Despite Canada’s size,
      dependable agricultural land is a scarce resource. Limitations such as
      climate and soil quality reduce the amount of land that can be used
      dependably for agricultural activities. Only about 5% of Canada’s land
      (492 727 km2) does not place severe constraints on crop production. Urban
      uses cover 14 300 km2 or 3% of all dependable agricultural land and 7.5%

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       of the best agricultural land, classified as “Class 1” in the Canada Land
       Inventory (OECD, 2009).16 This land is, for all intents and purposes,
       permanently lost to agriculture.



                           Figure 1.11. Urban developments and consumption of dependable
                                                   agricultural land
                                                             1971-2001

                                      Urban land use on dependable agricultural land
                                      Urban land use

                           35 000


                           30 000
        Urban land (km2)




                           25 000


                           20 000


                           15 000


                           10 000


                            5 000


                               0
                                    1971        1976        1981         1986          1991   1996   2001



         Source: Hofmann, N., G. Filoso and M. Schofield, (2005), “The loss of dependable
         agricultural land in Canada”, Rural and Small Town Canada Analysis Bulletin, Vol. 6,
         No. 1, Statistics Canada Catalogue No. 21-006-XIE, Ottawa.




           The quantity of dependable land varies dramatically across Canada’s
       provinces. For instance, although Québec is the largest province, it has
       only 5% of all dependable agricultural land. Three-quarters of Canada’s
       dependable agricultural land is concentrated in three provinces:
       Saskatchewan, Alberta and Ontario (Figure 1.12). Hence, the impact of
       urban development on available agricultural land changes according to the
       province.




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          Figure 1.12. Km2 of class 1 dependable agricultural land in Canada's
                                     provinces, 2001
                                British
                             Columbia, 78                Quebec, 223


           Alberta, 6 719




         Saskatchewan
            12 282                                                         Ontario, 27 635




                      Manitoba 2 111




       Source: Hofmann, N., G. Filoso and M. Schofield, (2005), “The loss of dependable
       agricultural land in Canada”, Rural and Small Town Canada Analysis Bulletin, Vol. 6,
       No. 1, Statistics Canada Catalogue No. 21-006-XIE, Ottawa.




1.3 Social well-being

          It is difficult to measure the quality of life in rural areas in Canada, as in
      rural communities in general. For instance, rural areas have both advantages
      and disadvantages compared to urban areas. On the one hand, Canadian
      rural communities lag behind urban communities on a number of indicators
      of quality of life, such as household income, education, employment and
      health. However, they are appreciated for their social and environmental
      qualities, including lower levels of stress, crime and pollution, and higher
      levels of social cohesion. However, these are only proxy measures of well-
      being and can give only a broad idea of what may be needed to improve the
      quality of rural life.17



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       Rural areas are less affluent, but poverty is an urban issue
           In general, Canadian rural populations have lower incomes than their
       urban counterparts.18 At the national level, the income gap between rural
       and urban families is approximately USD 7 100 in purchasing power
       parity (PPP) (2005) (Figure 1.13). However, some rural disadvantages in
       terms of income disparities vis-à-vis urban regions are compensated by
       three major monetary transfers. First, as a result of lower income levels,
       rural citizens pay less tax than urban citizens (Murphy, 1992; Rupnik,
       Thompson-Jones and Bollman, 2001). Second, rural citizens receive more
       government transfer payments because unemployment rates are higher in
       rural areas (with high levels of benefits from the Employment Insurance
       programme). Third, owing to the higher share of seniors and children, rural
       areas receive more pension income and relatively more government
       transfers from the Child Tax Credit programme.
           The income gap between rural and urban areas is stable and has not
       changed notably over the past two decades (Bollman and Michaud, 2006)
       (Figure 1.14). However, the income gap varies across Canada’s provinces.
       For example, between 1980 and 2000, average rural incomes increased at a
       faster rate than average incomes in urban areas in some provinces. As a
       result, the rural-urban income gap, while persistent, declined in
       six provinces and increased in three (Singh, 2004).
            Fewer rural individuals than urban individuals live in poverty today.
       Since the late 1980s, the incidence of low-income households in rural and
       small town Canada, as measured by the low income cut-off (LICO), has
       been lower than in larger urban centres (Figure 1.15). The LICO is adjusted
       for urbanisation classes. The LICO for rural areas is lower to reflect lower
       living costs (largely, the cost of housing, but also food and clothing). This
       partly explains the lower share of rural individuals living in households with
       income below the LICO. Nonetheless, the result may change when using
       other measures of wealth or well-being. According to other approaches,
       rural areas are poorer than urban areas once local income is adjusted by
       transport costs, or urban fringe areas are those with the highest level of well-
       being (Box 1.3).




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                            Figure 1.13. Household income levels in urban, rural, and MIZ areas in 2005
                                                                   Constant USD PPP 2000

                           Median income         Average income                                     Median income              Average income
        40 000                                                                40 000


        35 000                                                                35 000


        30 000                                                                30 000


        25 000                                                                25 000


        20 000                                                                20 000


        15 000                                                                15 000


        10 000                                                                10 000


         5 000                                                                 5 000


            0                                                                     0
                        Urban total                  Rural total                       Strong MIZ   Moderate MIZ    Weak MIZ     No MIZ         Territories


       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working document with information
       provided by the Rural Secretariat (AAFC) and Statistics Canada, Directorate for Public Governance and Territorial Development, OECD.

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                                                                        Figure 1.14. Trends of income in RST and LUC, 1984-2004
                                                                                                                         Constant CAD 2000

                                                                                            Larger urban centres                        Rural and small town areas                              Gap: Urban minus rural
           Median income for families with two or more individuals




                                                                     60 000



                                                                     50 000




                                                                     40 000



                                                                     30 000



                                                                     20 000




                                                                     10 000



                                                                         0
                                                                              1984

                                                                                     1985

                                                                                             1986

                                                                                                    1987

                                                                                                           1988

                                                                                                                  1989

                                                                                                                          1990

                                                                                                                                 1991

                                                                                                                                        1992

                                                                                                                                               1993

                                                                                                                                                      1994

                                                                                                                                                             1995

                                                                                                                                                                    1996

                                                                                                                                                                           1997

                                                                                                                                                                                  1998

                                                                                                                                                                                         1999

                                                                                                                                                                                                 2000

                                                                                                                                                                                                        2001

                                                                                                                                                                                                               2002

                                                                                                                                                                                                                      2003

                                                                                                                                                                                                                             2004
        Source: Statistics Canada, Survey of Labour and Income Dynamics (and Survey of
        Consumer Finances for earlier years).


             According to a quantitative analysis of social progress in urban and rural
       areas, the highest level of well-being is achieved on the urban fringe. Harris
       and Burns (2004) developed a formula for operationalising a definition of
       social progress, which included education, life expectancy, youth
       dependency, incidence of low incomes and unemployment. In this approach
       social progress depends on: i) the percentage of the population with grade 9
       education or higher; ii) the average life expectancy in number of years;
       iii) the local population change between 1996 and 2001; iv) the youth
       dependency ratio; v) the percentage of the population below LICO; and,
       finally, vi) the unemployment rate. Using mainly census data for 1996 and
       2001, the model found that the level of social progress tends to be lowest in
       rural areas outside of CMA/CAs and highest on urban fringes within
       CMA/CAs subdivisions (Table 1.4). Average rates of social progress on
       urban fringe CSDs also showed the greatest increase over the five-year
       period, with an average that rose from .37 in 1996 to .73 in 2001. Thus,
       being located near but not in an urban core region seemed to offer the most
       favourable conditions for social progress.19



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                         Figure 1.15. Percentage of individuals in households with income from
                                    all sources below the low income cut-off (LICO)
                                                                                                                                   1984-2004

                                                                                                             Larger urban centres                                       Rural and small town areas
                                                                       20%
         % of individuals in households with income from all sources




                                                                       18%

                                                                       16%
                    less than the low income cut-off (LICO)




                                                                       14%

                                                                       12%

                                                                       10%

                                                                           8%

                                                                           6%

                                                                           4%

                                                                           2%

                                                                           0%
                                                                                 1984

                                                                                        1985

                                                                                               1986

                                                                                                      1987

                                                                                                              1988

                                                                                                                     1989

                                                                                                                            1990

                                                                                                                                   1991

                                                                                                                                          1992

                                                                                                                                                 1993

                                                                                                                                                        1994

                                                                                                                                                               1995

                                                                                                                                                                      1996

                                                                                                                                                                             1997

                                                                                                                                                                                    1998

                                                                                                                                                                                           1999

                                                                                                                                                                                                  2000

                                                                                                                                                                                                         2001

                                                                                                                                                                                                                2002

                                                                                                                                                                                                                       2003

                                                                                                                                                                                                                              2004
         Source: Statistics Canada, Survey of Labour and Income Dynamics (2004).




                            Box 1.3. Different measures of poverty in Canada's rural areas and
                                                 provincial performance
           A number of quality-of-life and social well-being reporting systems have been
        developed and applied across Canada. These systems measure and value
        economic, social and environmental well-being, taking into account equity,
        human rights and social justice. In general, techniques to measure poverty that do
        not adjust for differences in the cost of living between urban and rural areas or
        adjust the costs according to other variables than the LICO obtain different
        results.

                                                                       •        Low income measure (LIM) (i.e. individuals in households with
                                                                                household income less than one-half of the national median income,
                                                                                adjusted for household size) shows that the incidence of low incomes
                                                                                in rural areas can be higher than in urban areas (Rupnik, Tompson-
                                                                                Jones and Bollman, 2001). This result is solely due to the fact that the
                                                                                LIM makes no adjustment for differences in the cost of living between
                                                                                urban and rural areas.



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                Box 1.3. Different measures of poverty in Canada's rural areas
                             and provincial performance (cont.)
                •     Market basket measure (MBM) includes transport costs in the
                      calculation of the cost of living. Higher rural transport costs due to the
                      lack of public transit means that the minimum “market basket” of
                      goods and services costs more in rural areas. Consequently, the
                      incidence of individuals living below the MBM is similar in rural and
                      urban areas (Bollman and Michaud, 2006).

                •     The Environment and Sustainable Development Indicators
                      Initiative (put in place by the government of Canada). This is a
                      substantial effort to measure the impact of Canada’s current economic
                      activities on the environment. As of 2004, the federal government
                      committed to begin using several of the recommended indicators,
                      incorporating clean water, clean air and emissions reductions into its
                      decision making.

                •     Social progress indicators have also been explored by the Rural
                      Secretariat (the administrative body that co-ordinates rural policy in
                      Canada) as a measure of social well-being and quality of life and
                      applied specifically in rural Canada.

         Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
         internal working document with information provided by the Rural Secretariat (AAFC) and
         Statistics Canada, Directorate for Public Governance and Territorial Development, OECD.




            Table 1.4. Social progress: average of CSDs by urban and rural type

                    Territory*                           1996                   2001
        Urban core                                       0.268                  0.346
        Urban fringe                                     0.37                   0.729
        Rural fringe, in CMA/CA                          0.365                  0.563
        Urban, outside CMA/CA                            0.01                  -0.226
        Rural outside CMA/CA                            -0.127                 -0.062
        Total                                           -0.02                   0.032
        Note: Harris and Burns (2004) do not use the RST classification of rural. Their regional
        breakdowns include urban core, urban fringe and rural fringe and distinguish between
        accessible and peripheral urban and rural areas within or outside of a census
        metropolitan area (CMA) or census agglomeration (CA).



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      The rural population has lower education attainment and health
      status than the urban population
          In Canada, there is a rural-urban divide in educational attainment.
      In 2006, rural Canadians were less likely to have completed high school and
      a university degree, but more likely than urban Canadians to have obtained a
      trades certificate or diploma. More specifically, 25% of rural residents
      aged 25 to 64 had not completed high school in 2006, compared to 13% of
      urban residents. Approximately 17% of rural Canadians had obtained a
      trades certificate or diploma, compared to 11% of their urban counterparts.
      Close to 20% of both rural and urban residents held college diplomas and
      approximately 11% of rural citizens held a university degree, compared
      to 26% of urban citizens (Statistics Canada, 2008). While a rural-urban
      education gap persisted, between 1981 and 1996 educational attainment
      steadily improved in both rural and urban areas (Alasia, 2003).20
           The rural-urban education gap in Canada depends on three main factors.
      First, as in rural areas in other OECD countries, there are fewer incentives
      for rural individuals to obtain higher education since fewer local jobs require
      higher skills (i.e. university degrees). Second, attainment of higher skills
      often requires relocation to larger urban communities. Third, universities in
      Canada tend to be located in larger urban centres and technical and
      community colleges in smaller cities and towns. Taking into account
      postsecondary educational attainment by high-school graduates in general,
      rural high-school graduates are just as likely to pursue postsecondary
      education as urban high school graduates (Frenette, 2003).
          Rural areas also display lower health status than urban areas, even
      though the lower pollution and the rural modus vivendi offer some
      advantages. In general, health decreases as distance from an urban centre
      increases (Desmeules and Pong, 2006; Mitura and Bollman, 2003). The
      physician-to-population ratio displays a similar pattern (Table 1.5). Health-
      related factors such as smoking and obesity are more prevalent in rural than
      in urban areas while healthy behaviour such as good dietary practices
      (eating fruit and vegetables) and physical activity are less common
      (OECD, 2009). Circulatory diseases, injuries, poisonings and suicide
      contribute to higher overall mortality rates in rural areas and small towns.
      Citizens residing in the most rural areas are at highest risk. For instance,
      higher mortality rates from injury and poisoning in rural areas may be
      related to occupational hazards in rural-based industries such as agriculture,
      fishing, and forestry. Longer commuting distances for work and shopping
      and dangerous road conditions in rural areas may contribute to higher injury
      rates and deaths due to traffic accidents (Desmeules and Pong, 2006).21
      However, owing to less exposure to pollutants, cancer mortality rates are


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       slightly lower in rural communities. Other rural health advantages include a
       greater sense of community and lower stress levels (Desmeules and
       Pong, 2006).



                   Table 1.5. Distribution of physicians and total population
                                      across Canada, 2004

                                     Moderate
                        Strong MIZ            Weak MIZ No MIZ   Territories Total rural   Urban   Canada
                                       MIZ
        % of all
                            1.4        3.2      4.4      0.3        0.1         9.4       90.8     100
        physicians
        % of Canadian       5.6        7.6      6.6      1.1        0.2        21.1       79.3     100
        population
        Source: Statistics Canada (2004), Population Estimates (2001 boundaries); Southam
        Medical Database. Data extracted from Canadian Institute for Health
        Information (CIHI) (2005), Geographic Distribution of Physicians in Canada: Beyond
        How Many and Where.




       Rural labour markets’ demonstrate good performance, especially in
       the territories
            Rural Canada’s labour markets perform at a lower level than those of
       urban regions in terms of participation rates, but participation and
       employment rates are relatively high. In 2006 the participation rate in RST
       areas was 63.7%. At 68.5% participation rates in the rural areas of the
       territories were higher than those in urban areas and all other types of rural
       areas. Conversely, moderate and no MIZ areas have the lowest performance
       (Figure 1.16). The employment rate in rural Canada was 58.5% in 2006,
       compared to 63.3% in urban Canada. Employment rates for rural areas were
       highest in strong MIZ at 62.8% while those in no MIZ were the lowest of all
       rural and small town areas at 50.6%. The unemployment rate in rural
       communities was 8.2% in 2006, compared to 6.2% in urban centres. The
       unemployment rate in strong MIZ was below that of urban areas at 5.9%.
       Unemployment rates generally increased with “rurality” with the most rural
       areas showing the highest rates. For example, unemployment rates in no
       MIZ and the RST territories were 14.6% and 15.5%, respectively.




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          Figure 1.16. Labour force participation rates in rural and urban areas
                                     in Canada, 2006
                                            15 years and over

                                1996                   2001                  2006
        80

        70

        60

        50

        40

        30

        20

        10

         0
             Territories   No MIZ      Weak MIZ Moderate MIZ Strong MIZ   Total rural   Urban


       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by the Rural Secretariat (AAFC)
       and Statistics Canada, Directorate for Public Governance and Territorial Development,
       OECD.




          In terms of trends, RST areas performed well and in line with large
      urban centres between 1996 and 2000. Both labour force participation and
      employment rates in RSTs grew at just over 5% (Rothwell, 2001). At the
      same time, unemployment rates declined between 1996 and 2000 (although
      they declined less in rural areas than in urban areas). At the provincial level,
      labour force participation and employment rates varied notably
      (Rothwell, 2001). Employment rates in rural areas in the Atlantic provinces
      increased between 1996 and 2000, yet each province’s employment rate was
      below the overall Canadian rural employment rate. Increases in rural
      employment in Québec and Ontario were similar during the period, although
      the rural employment rate was above the Canadian rural average in Ontario,
      while it remained below it in Québec. The four western provinces had
      essentially steady rural employment rates above the national rural average;
      however, the gap between these rates and the Canadian rural average was
      closing.

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       Delivery of services can be challenging in remote rural areas owing
       to ageing and depopulation
           As longevity increases in rural areas there is a concern that seniors may
       not be able to receive the services they need, such as recreational activities,
       housing and health care. However, because of the huge differences that
       characterise rural Canada, some rural areas perform better than others in this
       respect. Distance from urban areas is likely to play a key role in the delivery
       of some specific public goods. For instance, adjacent rural and urban areas
       share jobs, labour markets and services. In other rural areas, particularly
       weak MIZ, regular population decreases have been reducing rural
       municipalities’ tax base, thus affecting their ability to deliver services.
            Distance and decreasing population also affect the capacity of the
       private sector and civil society to offer key services in rural communities.
       For instance transport and finance firms find it difficult to maintain or
       expand the level of goods and services offered on location in rural areas.
       Likewise, as the population base diminishes so too does the number of
       people available for volunteer and community service. Rural residents face
       significant additional pressures on their time and resources. These rural
       areas have had to adjust and adapt and find new approaches to procuring
       needed services. Co-operative business approaches, regional co-operation,
       asset mapping for community and economic planning, strategies for
       attracting and maintaining immigrants and migrants have all been part of the
       adjustments made in rural areas. In Manitoba, successful immigrant
       sponsorship programmes helped increase the population in both moderate
       and weak MIZ. These trends have had a significant impact on the rural
       communities involved.

1.4 Economic profile

       The rural economy is home to a diversified economic base…
           Altogether, rural Canada has been shifting from goods-producing
       sectors to services-producing sectors (Table 1.6).22 For example, the share of
       rural employment in the goods-producing sector declined from 36% in 2001
       to 35% in 2008, while increasing from 64% to 65% in the services-
       producing sector. This is primarily due to labour-saving technologies and
       declining transport/communication costs. Because primary sectors have
       adopted labour-saving technologies, they have been shedding massive
       amounts of jobs.23 Another force reshaping the rural economy has been the
       constant decline in the price of transporting goods, moving people and
       exchanging information, which have favoured the geographic spread of
       firms and services in non-central areas (Bollman, 2007).

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                                     Table 1.6. RST employment by industry sector, 2008
                                     Goods-producing sectors                                                                                                                                                                                                                                                          Services-producing sectors




                                                                                                                                                                                                                                                                                                                            Business, building and other support services
                                                                                                                                                                                                                                                                          Professional, scientific and technical services
                                                                                                                                                                                                                            Finance, insurance, real estate and leasing
                                         Forestry, fishing, mining, oil and gas




                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Accommodation and food services
                                                                                                                                                                                                                                                                                                                                                                                                                                       Information, culture and recreation
                                                                                                                                                                                                                                                                                                                                                                                                   Health care and social assistance
                                                                                                                                                                                          Transportation and ware-housing




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         All sectors
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        All services-producing sectors
                                                                                                                               All goods-producing sectors

                                                                                                                                                             Wholesale and retail trade




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Public administration
                                                                                                                                                                                                                                                                                                                                                                            Educational services




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Other services
                                                                                                               Manufacturing
                                                                                                Construction
                   Agriculture




                                                                                   Utilities




                                                                                               Number employed in rural and small town areas in 2008 ( in thousands)
Newfoundland and
Labrador                         1      9                                          1           9               9               28                            15                               5                                   2                                                  2                                                    2                                        7               13                                                    2                                   6                         6                       6             65                           93
Prince Edward
                                 2      2                                          x           3               3               11                            4                                2                                   1                                                  1                                                    1                                        2                             3                                       1                                   2                         1                       2             18                           29
Island
Nova Scotia          4   9                                                         1 10 16 40 24                     5    5    5    6      9 19        5    8     6    7 99 139
New Brunswick        5   8                                                         2 11 20 45 22                     9    6    4    5 11 22            3    9     7    9 107 152
Quebec              46 17                                                          7 54 145 269 118 39 28 24 22 40 89 22 48 42 28 499 768
Ontario             37 13                                                         19 73 117 260 117 45 28 30 30 46 96 31 47 38 39 547 806
Manitoba            26   3                                                         2 11 18 61 22                     9    6    3    3 12 23            4    8     8    7 104 165
Saskatchewan        36 14                                                          2 13          9 74 24             9    8    4    3 11 20            4    9     7    6 103 177
Alberta             53 45                                                          4 43 26 169 57 21 14 13 11 25 38 10 28 19 12 247 417
British Columbia    11 22                                                          2 35 23 92 38 14 10 14                           9 13 25 12 24 10 10 178 270
CANADA             220 142                                                        38 262 386 1 049 439 157 107 99 91 175 348 93 188 144 127 1 966 3 015
                                                                                  % distribution of rural and small town employment within each province, 2008 (row %)
Newfoundland and
Labrador                         1     10                                          1           10              9               30                            16                               6                                   2                                                  2                                                    3                                        7               14                                                    2                                   6                         7                       6             70 100
Prince Edward
                                 8      8 n.a.                                                 9               11              37                            13                               5                                   3                                                  2                                                    3                                        6               11                                                    3                                   6                         4                       8             63 100
Island
Nova Scotia               3             6      0     7 12 29 18               3    3     3     5     7 13         4      6     4    5                                                                                                                                                                                                                                                                                                                                                                                                                        71                          100
New Brunswick             3             5      1     7 13 30 15               6    4     3     3     7 14         2      6     5    6                                                                                                                                                                                                                                                                                                                                                                                                                        70                          100
Quebec                    6             2      1     7 19 35 15               5    4     3     3     5 12         3      6     5    4                                                                                                                                                                                                                                                                                                                                                                                                                        65                          100
Ontario                   5             2      2     9 15 32 14               6    3     4     4     6 12         4      6     5    5                                                                                                                                                                                                                                                                                                                                                                                                                        68                          100
Manitoba                 16             2      1     7 11 37 13               6    4     2     2     7 14         2      5     5    4                                                                                                                                                                                                                                                                                                                                                                                                                        63                          100
Saskatchewan             21             8      1     7      5 42 14           5    4     2     1     6 11         2      5     4    3                                                                                                                                                                                                                                                                                                                                                                                                                        58                          100
Alberta                  13            11      1 10         6 41 14           5    3     3     3     6     9      2      7     5    3                                                                                                                                                                                                                                                                                                                                                                                                                        59                          100
British Columbia          4             8      1 13         9 34 14           5    4     5     3     5     9      4      9     4    4                                                                                                                                                                                                                                                                                                                                                                                                                        66                          100
CANADA                    7             5      1     9 13 35 15               5    4     3     3     6 12         3      6     5    4                                                                                                                                                                                                                                                                                                                                                                                                                        65                          100
                                       % distribution of rural and small town employment within each industrial sector, 2008 (column %)
Newfoundland and
Labrador                         0      7                                          2           3               2                3                            3                                3                                   1                                                  2                                                    3                                        4                             4                                       2                                   3                         4                       5                               3                3
Prince Edward
                                 1      2 n.a.                                                 1               1                1                            1                                1                                   1                                                  1                                                    1                                        1                             1                                       1                                   1                         1                       2                               1                1
Island
Nova Scotia          2   6   2   4   4   4   6   3   4   5   7   5   5   5   4   4   6   5   5
New Brunswick        2   6   4   4   5   4   5   6   5   4   5   6   6   4   5   5   7   5   5
Quebec              21 12 18 21 38 26 27 25 27 24 24 23 26 24 26 29 22 25 25
Ontario             17   9 50 28 30 25 27 29 26 31 33 26 28 33 25 26 31 28 27
Manitoba            12   2   6   4   5   6   5   6   6   3   3   7   6   4   4   6   6   5   5
Saskatchewan        16 10    5   5   2   7   6   5   7   4   3   6   6   4   5   5   4   5   6
Alberta             24 31 10 16      7 16 13 13 13 14 12 14 11 10 15 13 10 13 14
British Columbia     5 15    5 13    6   9   9   9   9 14 10     8   7 13 13     7   8   9   9
CANADA             100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working document
with information provided by the Rural Secretariat (AAFC) and Statistics Canada, Directorate for Public
Governance and Territorial Development, OECD.

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                                                      1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA –                 75

       The relative role of agriculture and other primary activities has been
       constantly shrinking
           On average between 2000 and 2006, the primary agricultural sector
       accounted for about 2.4% of GDP and 2.7% of total employment
       (Figures 1.17 and 1.18). Although near the OECD country average in terms
       of output share, Canadian agriculture employs fewer people. Agriculture is
       capital-intensive, and in 2006 average capital per farm in Canada reached
       almost CAD 1.1 million, up nearly 36% since 2001 (OECD, 2008). Because
       of the availability of land, farms tend to be very large: in 1996, the average
       size of a farm in Canada was 608 acres (422 hectares), whereas in OECD
       countries in 1993 it was 242 acres.24



             Figure 1.17. Contribution of agriculture to national GDP in OECD
                                          countries
                                      Average 2000-05 or latest available year, percentage

                      Hungary
                       Greece
                       Mexico
                        Spain
                      Portugal
                Czech Republic
                       Finland
                       France
                      Denmark
                    Nederland
                       Canada                                                    2.49
                        Korea
                       Austria
                          Italy
                       Iceland
                        Japan
                      Sweden
                 United States
                                                                                           OECD average
                     Germany                                                               2.34%
                      Belgium
                       Norway
               United Kingdom

                                  0       0.5     1      1.5     2             2.5            3           3.5   4   4.5   5

                                                               Share of national GDP (%)




        Source: OECD (2008), OECD Economic Surveys: Canada, OECD Publishing, Paris.




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76 – 1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA

       Figure 1.18. Contribution of agriculture to national employment in OECD
                                        countries
                                      Average 2000-06 or latest available year

                  Mexico
                  Greece
                  Austria
                Portugal
                   Korea
                Hungary
                    Spain
                   Japan
                  Finland
                Slovakia
                      Italy
         Czech Republic
                  France
                 Norway
               Nederland
                Denmark
                 Canada                2.51
                 Sweden
                Germany
                 Belgium                                          OECD average 5.73%
           United States
         United Kingdom



                              0   2           4    6          8           10           12   14   16    18

                                                   Share of national employment (%)




       Source: OECD (2008), OECD Economic Surveys: Canada, OECD Publishing, Paris.




          Given the large amount of land suitable for agricultural production
      relative to its population, the agriculture sector is a net exporter. Canada is
      the OECD’s fifth largest exporter and importer of agricultural and agri-food
      products (OECD, 2008). Trade opportunities and access to foreign markets
      are crucial to good functioning and longer-term sustainability of the
      agricultural sector (Government of Canada, 2006).
          Farming activities are more and more integrated into a broader regional
      production framework, and farm families generate income from several
      sources. According to Alasia et al. (2007), between 1991 and 2001, there
      was an approximate 11% loss in the number of census-farm operators, and
      a 6% increase in the number of operators reporting off-farm work.
      Approximately 45% of census-farm operators (about 150 000) reported off-
      farm work in 2001 and over 90% of these were operators of census-farms
      that generated less than CAD 250 000 in gross receipts (Alasia et al., 2007).
      Farm families generate income from several sources, including income from
      farming activities, wages and salaries earned from work done on-farm, off-
      farm or both, and other non-farm sources. Between 1990 and 2005, the
      family’s share of net farm income declined by 16% in real dollars, while

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                                                       1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA –                            77

       other sources of family income (not including wages and salaries from farm
       and non-farm sources) increased by 21% (Figure 1.19). Income from wages
       and salaries is increasingly important to farm family incomes. For example,
       wages and salaries earned by the farm family increased by 67% to
       CAD 41 870 in 2005 (OECD, 2009).

         Figure 1.19. Net farm income and other sources of family income for farm
                                    families in Canada
                                                      1990-2005 (2005 CAD)

                 Net income from f arming           Wages and salaries from farm and non-farm            Other sources of income
        80 000


        70 000


        60 000


        50 000


        40 000


        30 000


        20 000


        10 000


             0
                 1990


                        1991


                               1992


                                      1993


                                             1994


                                                        1995


                                                               1996


                                                                      1997


                                                                             1998


                                                                                    1999


                                                                                           2000


                                                                                                  2001


                                                                                                             2002


                                                                                                                    2003


                                                                                                                           2004


                                                                                                                                   2005



        Note: Revenue received by families from operating an incorporated farm is not included
        as net farm income.
        Source: Agriculture and Agri-food Canada, taxfiler farm family data.



       Rural Canada has been increasing its specialisation in
       manufacturing and services, with small and medium-sized enterprises
       playing a leading role
           Larger manufacturers’ outsourcing to smaller, independent companies
       enhances the manufacturing specialisation of rural areas. Rural Canada has
       always had manufacturing jobs (fish processing, smelting, sawmills, pulp
       and paper plants, etc.) but some of the newer manufacturing jobs are part of
       the network of just-in-time delivery systems. In Canada, early
       manufacturing was a rural activity, much of it taking place close to the
       harvest or extraction of the raw resource, such as fish processing plants,
       sawmills, pulp and paper mills, and smelters. Also, many early

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78 – 1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA

      manufacturing activities required waterfalls, which tended to be in rural
      areas, to power waterwheels. Over the last three decades, however, rural
      Canada has been increasing its share of total manufacturing employment in
      sectors unrelated to primary activities. The share of Canada’s manufacturing
      workforce living in rural and small town areas has increased about 0.13% a
      year since 1976 (Figure 1.20). In 2004, 21% of Canada’s manufacturing
      workers lived in rural and small town areas.25 This suggests that rural areas
      may have acquired a location advantage for manufacturing activities
      vis-à-vis urban areas.
          Rural Canada displays higher rates of entrepreneurship than urban areas,
      as the number of small and medium-sized enterprises (SMEs) demonstrates.
      The statistical evidence tends to support the claim that small businesses are
      crucial to rural Canada’s economic health. Rural SMEs represented 28% of
      the estimated 1.4 million SMEs in Canada in 2004, a proportion well above
      rural Canada’s share of the overall population (i.e. just under 20%).26 This
      probably reflects both the important role of local resource-based economic
      activities (agriculture, forestry, fisheries and mining) and the fact that rural
      Canadians are more entrepreneurial than their urban peers, a hypothesis
      supported by the fact that 6% of rural Canadians owned an SME compared
      with 4% of urban Canadians. Businesses in rural Canada also tend to be very
      small. For example, a 1999 Statistics Canada study found that, in 1996,
      82% of rural Canada’s businesses employed fewer than ten people,
      compared with 74% of small businesses in urban areas. A survey conducted
      in 2004 found that 86% of all rural SMEs fall into what is known as the
      micro-business category, that is, they employ fewer than five employees. In
      urban Canada, the comparable figure is 83%.
          Likewise, the price of services provided by the telecommunications
      sector has fallen by 80% since the 1960s, thus improving rural areas’
      capacity to attract firms and residents. A typical example is the Internet, for
      which prices have been declining in recent years.27 The overall decline in
      the price of transferring information implies a decline in the price of this
      dimension of “rurality”. It is relatively less expensive for rural-to-urban
      communication. However, the price of urban-to-urban communication may
      have fallen even faster. The falling price of transferring information is a
      two-edged sword. Rural people can receive and send information faster, but
      so can urban people. The result, for example, is that rural areas have fewer
      bank tellers and fewer travel agents and there are fewer face-to-face
      interactions.




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                                                                                      Figure 1.20. Percent of Canada's manufacturing workers residing in
                                                                                                            rural Canada, 1976-2008
         % of Canada's manufacturing workers residing in rural and small town areas




                                                                                       28
                                                                                                                                          From 1976 to 1993   y = 0.1316x + 21.624
                                                                                                                                                                   R2 = 0.6503
                                                                                       26


                                                                                       24


                                                                                       22

                                                                                               From 1996 to 2004   y = 0.1344x + 16.512
                                                                                       20                                R2 = 0.47


                                                                                       18

                                                                                                                                                      From 2001 to 2008 y = 0.1547x + 14.47
                                                                                       16                                                                                   R² = 0.4875


                                                                                       14


                                                                                       12


                                                                                       10
                                                                                            1976
                                                                                            1977
                                                                                                   1978
                                                                                                   1979
                                                                                                   1980
                                                                                                          1981
                                                                                                          1982
                                                                                                                   1983
                                                                                                                   1984
                                                                                                                   1985
                                                                                                                           1986
                                                                                                                           1987
                                                                                                                           1988
                                                                                                                                      1989
                                                                                                                                      1990
                                                                                                                                             1991
                                                                                                                                             1992
                                                                                                                                             1993
                                                                                                                                                       1994
                                                                                                                                                       1995
                                                                                                                                                       1996
                                                                                                                                                                  1997
                                                                                                                                                                  1998
                                                                                                                                                                         1999
                                                                                                                                                                         2000
                                                                                                                                                                         2001
                                                                                                                                                                                     2002
                                                                                                                                                                                     2003
                                                                                                                                                                                     2004
                                                                                                                                                                                              2005
                                                                                                                                                                                              2006
                                                                                                                                                                                                     2007
                                                                                                                                                                                                     2008
        Source: Bollman, R.D. (2007), “Factors Driving Canada's Rural Economy”, research
        paper, Agriculture and Rural Working Paper Series, Statistics Canada.




       The decreasing costs of transporting people benefits accessible rural
       areas
            The rise of “agglomeration economies” is another force that is changing
       the rural economy and demography, especially in rural regions close to
       LUCs. As discussed above, between 1981 and 2001 rural populations have
       concentrated in accessible areas (i.e. areas within a range of 50 kilometres
       from large urban centres). Some of these rural regions produce speciality
       goods and services for the rich, growing and segmented metro niche
       markets. They also have easy access to highly specialised services
       (e.g. international airport, research centres and a large hospital) which allow
       them to access international markets or to maintain a relatively high quality
       of life. However, not all rural communities close to metro centres performed
       equally well between 1981 and 2001. For instance, in 5% of the
       communities within 25 kilometres of a LUC, a nearby metro agglomerated
       economy was unable to drive population growth in these communities and
       the number of inhabitants declined continuously over the period.

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      …but resource-based rural communities are still numerous…
          A large part of rural Canada has emancipated itself from primary
      industries in the energy, minerals and forestry sector, but their contribution
      to GDP is still quite large. In 2006, these sectors accounted for 13% of
      Canada’s total GDP and CAD 200 billion in exports. The forestry sector
      accounted for 2.4% (CAD 28.8 billion in 2002 constant dollars), mining and
      mineral processing accounted for 3.4% (CAD 40.9 billion in 2002 constant
      dollars) and energy (including crude oil and natural gas, electric power, and
      pipelines) accounted for 7.2% (CAD 85.5 billion in 2002 constant dollars)
      (OECD, 2009). While the energy and mining and mineral processing sectors
      enhanced their contribution to the Canadian economy, the forestry sector’s
      contribution fell from 2.4% in 1999 to 1.9% in 2006 (Figure 1.21).28
          The natural resources sector directly employed 911 000 people or
      6.5% of total employment in 2006, up from 5.2% in 1999 (Figure 1.21). Of
      the 6.5%, the forestry sector directly employed 273 300 or 1.9% of total
      employment in Canada. For the forestry sector, wood industries employed
      128 900, paper and allied industries 84 400, logging 35 500 and forestry
      services 24 500. The mining and mineral processing industry directly
      employed 369 900 or 2.7% of total Canadian employment. Of these, 40 000
      were employed in mining, 80 000 in smelting and refining, and 240 000 in
      the mineral-processing and manufacturing industries. The energy sector
      directly employed 269 116 or 1.9% of total Canadian employment.29



        Figure 1.21. Contribution of natural resources to Canada's total GDP and
                                       employment
                                                              1999 and 2006

                                 0               5       10      15                             0           2          4           6        8


       Total natural resources                                        Total natural resources


                Energy sector                                                  Energy sector


              Minerals sector                                                Minerals sector


                Forest sector                                                  Forest sector


                                     % of national GDP                                              % contribution of national employment




       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by the Rural Secretariat (AAFC)
       and Statistics Canada, Directorate for Public Governance and Territorial Development,
       OECD.


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           Canada has 1 475 resource-dependent communities (28% of total) with a
       total population of around one million (2006).30 The provinces with the
       largest share of resource-based communities are Saskatchewan and Alberta,
       and the three territories have the lowest rate of resource towns (Figure 1.22).
       The agriculture sector (37%) has the largest share of resource-dependent
       communities, followed by forestry (33%), energy (18%), fishing (8%) and
       mining (3%). Most resource-dependent communities are located in RST
       areas. Considering Canada’s rural typology, weak and moderate MIZ areas
       are more specialised in resources than strong and no MIZ areas. This
       suggests that communities located closer to urban centres (strong MIZ) are
       more diversified, while geography and transport costs impinge upon primary
       activities in the most remote (no MIZ) regions, which are usually home to a
       large public sector. Strong MIZ communities benefit from proximity to
       urban labour markets while no MIZ areas often act as centres for
       government services, such as health and education, and public
       administration (Sorensen and De Peuter, 2005).



          Figure 1.22. Percentage of census subdivisions in rural and small town
         areas that are resource-dependent by sector and province/territory, 2006

                              Canada
                              Nunavut
                Northwest Territories
                      Yukon Territory
                     British Columbia
                                                                                     Agriculture
                               Alberta
                       Saskatchewan                                                  Forestry
                             Manitoba                                                Fishery
                               Ontario                                               Mining
                              Quebec
                      New Brunswick                                                  Energy
                          Nova Scotia
                Prince Edward Island
         Newf ounsland and Labrador
                                         0   10   20    30    40   50    60    70

        Note: A census subdivision (CSD) is an incorporated town or municipality, and can be
        considered a proxy for communities. Rural and small town CSDs are outside the
        commuting zones of larger urban centres (with an urban core of 10 000 or more).
        Communities dependent on more than one resource sector among agriculture, forestry,
        fishery, mining, energy are included twice in this figure.
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by the Rural Secretariat (AAFC)
        and Statistics Canada, Directorate for Public Governance and Territorial Development,
        OECD.

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      Excessive specialisation in resource-based industries poses
      challenges to rural communities
          The importance of natural resources in the economy of some rural
      communities should not necessarily be viewed negatively, but it does raise
      challenges. First, owing to the “increasing economic value of human time”
      (Schultz, 1972), labour is more and more substituted with capital. As a
      result, employment in primary activities is continually declining. This
      challenges the capacity of resource-based communities to maintain their
      demographic size. Second, resource-based communities are exposed to
      boom and bust fluctuations which depend on the vagaries of the
      international market for resources or upon government or corporate
      decisions, rather than on local initiatives (Sheffer, 2008). When demand for
      the locally produced resources is high, the economy will be healthy and
      relatively competitive. Nevertheless, once this delicate and exogenous
      equilibrium fails, the community is endangered and under certain conditions
      may even disappear.
          Generally speaking, resource-dependent towns are small and
      characterised by simplified local labour markets. Several factors discourage
      the development of a diversified economy that would generate a more
      heterogeneous work force. These communities are usually isolated and far
      from large markets. Transport costs are high and discourage the
      establishment of other economic activities. Some resource activities also pay
      relatively high wages so that one earner’s income provides adequate family
      income and only males are employed. The share of women employed is
      smaller than in Canada as a whole. Finally, there is also the problem of
      physical appearance. Especially in older towns, the built environment is
      considered unattractive by some.31
          Canadian resource-based communities mirror all these characteristics
      and also display some peculiarities at the provincial level (Walisser, Mueller
      and McLean, 2006).32 For instance, the origin of the people living in single-
      industry towns varies. The industrial population of many of the resource
      towns of the Atlantic Provinces and Québec is drawn from the surrounding
      fishing, lumbering and agricultural population. In sharp contrast, the work
      force and management of the resource towns of Ontario and western Canada
      are drawn from non-local populations or from outside the country, so the
      “new towns” created in largely uninhabited areas are “artificial”, resulting in
      weak cultural connections between the local population and the place.33
          Because of these features, resource-based communities cannot easily
      absorb the blows to their economy when their main source of jobs and
      income faces a crisis or suddenly shuts down. The crisis activates a vicious
      cycle: irreversible direct job losses and the resulting loss of indirect industry

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       and services-sector employment; rapid population decline which creates
       further losses in employment and significant cuts in public services; decline
       of residential, industrial and commercial property values, thereby eroding
       the tax base and further reducing local services; and a sense of helplessness
       and a loss of confidence in the community's future.
           There is also increasing recognition that many primary-sector practices
       have adverse environmental consequences which should be counted among
       the costs of using resources. To date in Canada, the use of natural resources
       has mainly followed a neoclassical approach. This approach assumes that
       environmental degradation can be addressed and corrected by market forces
       and government remedies. However, “neoclassical economics avoids the
       long-term consequences of environmental degradation – the diminishing
       vitality of the resource base, the extinction of species, and the social
       consequences of excessive pollution – such as increased cost of human
       health” (Hessing et al., 2005). As a consequence, there is a need for an
       approach that internalises the ecological values of resources and avoids
       overexploitation, as happened in the example of Burin Peninsula,
       Newfoundland and Labrador, mentioned above.

       The global economic downturn clouds the sustainability of rural
       communities in Canada
            Although the global economic downturn has affected Canada as a
       whole, its effects may be particularly intense in rural regions, owing to
       difficulties in accessing bank credit and reduced international demand for
       their commodities (Box 1.4). Rural entrepreneurs face greater hurdles than
       their urban peers. First, their businesses tend to be less profitable. According
       to Industry Canada, 26% of rural SMEs were profitable in 2004, compared
       with 29% in urban areas. Second, rural entrepreneurs tend to have fewer
       options to choose from when they seek financial bridging for day-to-day
       operations or finance for starting a new business or expanding an existing
       one. This is reflected in the tendency for rural entrepreneurs to use credit
       unions and caisses populaires as their main financial institution. In 2004,
       more than one-third of rural-based SMEs used these for their day-to-day
       banking, compared with only 15% of urban SMEs. Third, rural SMEs were
       far more likely to deal with one financial institution for longer periods of
       time than urban-based SMEs. Again in 2004, 43% of rural SMEs had been
       with the same financial institution for more than ten years, compared
       with 33% of urban SMEs. Smaller firms, which are prevalent in rural areas,
       have a higher incidence of having a loan application rejected.




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84 – 1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA


    Box 1.4. How does the credit crunch affect rural areas in OECD countries?
    The recession and the credit crunch challenge the sustainability of many rural communities
 in OECD countries. Although the impact of the crisis to date has largely been felt in cities,
 rural communities are likely to see major adverse effects from the global downturn owing to a
 series of related factors:
     First, rural regions are more exposed to economic shocks because their local labour markets
 (LLMs) are small, fragmented and typically weakly connected to other labour markets. In fact:
 i) because they are small any change in demand or supply has a disproportionate effect and
 even a relatively small loss of jobs can lead to large local consequences; ii) because they are
 fragmented there are limited opportunities for people with specific skills to find employment
 opportunities that match their skills; and iii) because they are unconnected to other labour
 markets it is more difficult to relocate and find jobs in other places. Moreover, commuting
 costs are particularly high in rural areas, both in terms of time and expenditure, which tends to
 raise reservation wages. This, combined with an environment in which job prospects are
 perceived to be limited, may result in large numbers of discouraged workers who withdraw
 from the labour force. If this happens, reported unemployment rates will seriously understate
 true levels of unemployment (Freshwater, 2008).
    Second, rural regions will be also confronted with return migration and reduced remittances.
 With a lack of job opportunities, a large number of people who migrated to urban regions in
 the early 2000s are likely to go back to their rural communities. Accordingly, there will be a
 large displacement of unemployment from urban to rural regions. There are empirical
 examples of such a dynamic in some countries. For instance, China is now dealing with a
 return flow of workers from urban factories to rural areas. Mexico faces an influx of workers
 from the United States and the loss of remittances. The reduction of remittances is also likely
 to be felt keenly in the rural areas of eastern Europe, South America, and Central Asia.
    Third, the credit crunch will probably affect SMEs located in rural regions more than firms
 located elsewhere. In many rural regions SMEs act as the main local employer and produce the
 bulk of regional wealth. These firms are particularly exposed to the financial crisis. The credit
 crunch, in fact, will affect firms differently, depending on their size, location and risk features
 (OECD, 2008). In this context, SMEs are exposed to the crisis owing to their dependence on
 bank credit, their weaker financial structure, and their lower credit rating. Accordingly, even a
 momentary unavailability of bank credit can have a structural impact on rural regions by
 reducing the number of SMEs located in these areas.
    The recession thus presents rural areas with two employment-related challenges. The first
 parallels the cyclical downturn that is also being experienced by urban areas, where the main
 policy concern is buffering a downturn that will ultimately end. If firms can survive the current
 stress there are good prospects for ultimate recovery and job creation. However in many rural
 areas a protracted downturn leads to structural unemployment and lost jobs do not reappear.
 The broad-based potential for the recession to result in major permanent losses in employment
 and in the number of firms is the second rural employment challenge.
 Source: Freshwater, D. and R. Trapasso (2009), “Where Did the Rural Jobs Go”, unpublished paper
 prepared for the OECD Regional Policy Forum, “Global Crises – Regional Responses”, 30 March 2009,
 Paris.



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                                                                                                                      1. TRENDS, PERSPECTIVES AND POLICIES FOR RURAL CANADA –                                                                                                                                                      85

           Resource-based communities dependent on the forestry sector are
       particularly endangered by the current crisis because of the sharp reduction
       in the demand for lumber.34 For instance, even though Canada’s forestry
       industry started declining at the end of 2006, its worst performance was
       registered in the first quarter of 2009 and was related to the crisis in the US
       housing market, the main importer of Canadian wood products (Figures 1.23
       and 1.24). Lumber production dropped by 56% between April 2005 (one of
       the highest values of the series) and April 2009. The paper and packaging
       industry saw its net earnings reduced by CAD 492 million in 2007, followed
       by another reduction of CAD 1 595 million in 2008. Owing to the crisis,
       employment in forestry and logging declined. For instance, British
       Columbia has suffered some 20 000 layoffs in the forest industry, a 20%
       decline in employment in this sector since the peak achieved in 2004. In
       general, total employment in forestry and logging has been reduced
       by 42.8% over the period.35



                                                     Figure 1.23. Tonnes of lumber produced in Canada
                                                                                                                January 2001 - April 2009
         9 000

         8 000

         7 000

         6 000

         5 000

         4 000

         3 000

         2 000

         1 000

            0
                          Apr-01


                                            Oct-01


                                                              Apr-02


                                                                                Oct-02


                                                                                                  Apr-03


                                                                                                                    Oct-03


                                                                                                                                      Apr-04


                                                                                                                                                        Oct-04


                                                                                                                                                                          Apr-05


                                                                                                                                                                                            Oct-05


                                                                                                                                                                                                              Apr-06


                                                                                                                                                                                                                                Oct-06


                                                                                                                                                                                                                                                  Apr-07


                                                                                                                                                                                                                                                                    Oct-07


                                                                                                                                                                                                                                                                                      Apr-08


                                                                                                                                                                                                                                                                                                        Oct-08


                                                                                                                                                                                                                                                                                                                          Apr-09
                 Jan-01


                                   Jul-01


                                                     Jan-02


                                                                       Jul-02


                                                                                         Jan-03


                                                                                                           Jul-03


                                                                                                                             Jan-04


                                                                                                                                               Jul-04


                                                                                                                                                                 Jan-05


                                                                                                                                                                                   Jul-05


                                                                                                                                                                                                     Jan-06


                                                                                                                                                                                                                       Jul-06


                                                                                                                                                                                                                                         Jan-07


                                                                                                                                                                                                                                                           Jul-07


                                                                                                                                                                                                                                                                             Jan-08


                                                                                                                                                                                                                                                                                               Jul-08


                                                                                                                                                                                                                                                                                                                 Jan-09




        Source: Statistics Canada (2009).




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                Figure 1.24. Employment trends1 in forestry and logging in Canada
                                                                                                              January 2001 - April 2009
       60 000


       50 000


       40 000


       30 000


       20 000


       10 000


           0
                         Apr-01
                                  Jul-01
                                           Oct-01


                                                             Apr-02
                                                                      Jul-02

                                                                               Oct-02


                                                                                                 Apr-03
                                                                                                          Jul-03
                                                                                                                   Oct-03


                                                                                                                                     Apr-04

                                                                                                                                              Jul-04
                                                                                                                                                       Oct-04


                                                                                                                                                                         Apr-05
                                                                                                                                                                                  Jul-05
                                                                                                                                                                                           Oct-05


                                                                                                                                                                                                             Apr-06

                                                                                                                                                                                                                      Jul-06
                                                                                                                                                                                                                               Oct-06


                                                                                                                                                                                                                                                 Apr-07
                                                                                                                                                                                                                                                          Jul-07
                                                                                                                                                                                                                                                                   Oct-07


                                                                                                                                                                                                                                                                                     Apr-08

                                                                                                                                                                                                                                                                                              Jul-08
                                                                                                                                                                                                                                                                                                       Oct-08


                                                                                                                                                                                                                                                                                                                         Apr-09
                Jan-01




                                                    Jan-02




                                                                                        Jan-03




                                                                                                                            Jan-04




                                                                                                                                                                Jan-05




                                                                                                                                                                                                    Jan-06




                                                                                                                                                                                                                                        Jan-07




                                                                                                                                                                                                                                                                            Jan-08




                                                                                                                                                                                                                                                                                                                Jan-09
       Note: 1. Employment data not seasonalised.
       Source: Statistics Canada (2009).




1.5 Environmental sustainability

          There is a diffuse concern in rural Canada about climate change. All
      areas, urban and rural, are likely to experience higher temperatures, a rise in
      sea level, and more frequent heavy precipitation. The northern territories,
      which are home to a large portion of Canada’s predominantly rural regions,
      may be the most exposed to climate change. Since 1948, temperatures have
      risen by more than 1.4°C, a rate of warming that is about twice the global
      average (Figure 1.25). Over this period, the greatest temperature increase in
      Canada has been observed in the Yukon and Northwest Territories. In terms
      of precipitation, climate change has been altering patterns in Canadian
      regions since 1950, resulting in an increase in overall precipitation of
      about 12% across the country. In most regions of Nunavut, however,
      precipitation has increased by between 25% and 45%, whereas the southern
      part of the country has seen little change compared to the long-term average.




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                 Figure 1.25. Long-term increase of average temperature in Canada
                                                                                                           1945-2007
           3

         2.5


           2


         1.5


           1


         0.5

           0


         -0.5


           -1


         -1.5


           -2

         -2.5
                1948

                       1950

                              1952

                                     1954

                                            1956

                                                   1958

                                                          1960

                                                                 1962

                                                                        1964

                                                                               1966

                                                                                      1968

                                                                                             1970

                                                                                                    1972

                                                                                                           1974

                                                                                                                  1976

                                                                                                                         1978

                                                                                                                                1980

                                                                                                                                       1982

                                                                                                                                              1984

                                                                                                                                                     1986

                                                                                                                                                            1988

                                                                                                                                                                   1990

                                                                                                                                                                          1992

                                                                                                                                                                                 1994

                                                                                                                                                                                        1996

                                                                                                                                                                                               1998

                                                                                                                                                                                                      2000

                                                                                                                                                                                                             2002

                                                                                                                                                                                                                    2004

                                                                                                                                                                                                                           2006

                                                                                                                                                                                                                                  2008
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by the Rural Secretariat (AAFC)
        and Statistics Canada, Directorate for Public Governance and Territorial Development,
        OECD.




            Canada’s rural and northern communities, particularly resource-
       dependent ones, are affected by these changes and their regional variations.
       Several factors increase the vulnerability of resource-dependent
       communities to climate change. They include the high sensitivity of many
       natural resources to climate, as well as factors related to low adaptive
       capacity, including limited economic diversification, a shortage of economic
       resources available for adaptation, an ageing population, and generally more
       restricted access to services.
           Climate change will exacerbate many current climate risks and will also
       present new risks and opportunities. The consequences for communities,
       industry, infrastructure and ecosystems will be significant. Some of the
       effects of climate change have a direct impact on Canada’s rural
       communities:
                •             Snow cover: reduced annual extent and duration. A 10% decrease in
                              the extent of snow cover in the northern hemisphere between 1972
                              and 2003.




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          •    Sea, lake and river-ice cover: reduced extent and duration. The ice
               cover season on the Great Lakes has decreased by 1 to 2 months
               over the past 150 years.

          •    Plant phonology: events occurring earlier. In Alberta, there has been
               a 26-day advance in the onset of phonological spring over the past
               century.

          •    Plant productivity. The growing season has lengthened, and plant
               productivity has increased.

          •    Distribution of some animal species: increasing abundance of cool-
               and warm-water fish species relative to cold-water species.

          •    Coastal erosion: enhancement due to decreased ice cover, rise in sea
               level, increased storminess and non-climatic factors. Accelerated
               erosion and degradation of the dunes and coastline throughout the
               Gulf of St. Lawrence and in certain parts of Atlantic Canada.

          •    River and lake levels: changes in water levels and timing of peak
               flow events. A decline in summer and fall runoff in the Prairies,
               leading to lower river and lake levels at those times.


      Canada is one of the largest per capita producers of greenhouse
      gases…

      The impact of the oil industry
          Rural territories are responsible for a large share of GHG emissions in
      Canada, which are mainly due to the extraction of oil and natural gas.
      Canada signed the Kyoto Protocol but has the second highest level of per
      capita emissions of GHG (Figure 1.26). Canada accounts for 2% of world
      GHG emissions, and its emissions are growing faster than those of nearly
      any other OECD country (OECD, 2008). Alberta and Saskatchewan are the
      largest per capita contributors to national GHG emissions (Figure 1.27).
      Alberta’s oil sands alone are responsible for 4% of Canada total GHG
      emissions (OECD, 2008). Besides their climate-change effects, the oil sands
      generate large and mounting environmental costs in several areas: added
      demand for water and natural gas (use of between one and three barrels of
      water per barrel of oil extracted); the accumulation of waste; destruction of
      delicate boreal ecosystems; and air pollution in the form of acid rain.36

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       Climate change, and Canada’s commitment to joint global action in fighting
       it, requires a switch to a model of sustainable development, i.e. much less
       energy-intensive consumption and production patterns, notably in the energy
       sector itself.



                           Figure 1.26. Canada’s per capita GHG emissions
                                    compared to selected countries
                                  Tonnes of CO2 equivalent per capita, 1990-2005

         25

                  1990       2005


         20




         15




         10




          5




          0
               India     Brazil     China   France   Italy    United Japan   Germany Russia   Canada   United
                                                             Kingdom                                   States




        Source: OECD (2008), OECD Economic Surveys: Canada, OECD Publishing, Paris.




       …but it is also one of the world’s leading producers of sustainable
       energy

       Hydroelectricity
           Canada is the world’s second largest producer of hydroelectricity, and
       this is one of the pillars of Canada’s rural economy. This is partly due to


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                     Figure 1.27. GHG emissions by province in 2005
                               Tonnes of CO2 equivalent per capita

                                                        Quebec, 11.77, 3% Yukon , 13.43, 4%

                                                                              British Columbia, 15.48, 5%

                                                                                     Ontario, 16, 5%


                                                                                         Prince Edward Island,
                                 Saskatchewan, 71.62, 22%                                      16.5, 5%


                                                                       Manitoba, 17.29, 5%

                                Alberta, 71.09, 22%

                                                                                        Newfoundland and
                                                                                        Labrador, 20.43, 6%
                                                                   Nova
                                                         New      Scotia,
                                                      Brunswick, 24.25, 7%        Northwest Territories,
                                                      28.34, 9%                        21.74, 7%




       Source: OECD (2008), OECD Economic Surveys: Canada, OECD Publishing, Paris.




       the large number of rivers that drain large surfaces as they flow towards its
       three bordering oceans. Hydroelectricity represents about 11% of Canada’s
       total primary energy supply. All the hydroelectric stations in Canada
       generated about 350 million megawatt-hours in 2006. This accounted
       for 59% of Canada’s total electricity production. In 2006, Canada had
       499 hydroelectric stations, which together were capable of producing about
       73 000 megawatts (or million kilowatts). These stations include 360 small
       hydroelectric facilities, that is, with a nameplate capacity of 50 megawatts
       or less; together they are capable of producing 3 400 megawatts, about 5%
       of Canada’s total hydroelectric production capacity (Figure 1.28).

      …but it is also one of the world’s leading producers of sustainable
      energy

      Hydroelectricity
           Canada is the world’s second largest producer of hydroelectricity, and
      this is one of the pillars of Canada’s rural economy. This is partly due to the
      large number of rivers that drain large surfaces as they flow towards its three
      bordering oceans. Hydroelectricity represents about 11% of Canada’s total
      primary energy supply. All the hydroelectric stations in Canada generated
      about 350 million megawatt-hours in 2006. This accounted for 59% of

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       Canada’s total electricity production. In 2006, Canada had 499 hydroelectric
       stations, which together were capable of producing about 73 000 megawatts
       (or million kilowatts). These stations include 360 small hydroelectric
       facilities, that is, with a nameplate capacity of 50 megawatts or less; together
       they are capable of producing 3 400 megawatts, about 5% of Canada’s total
       hydroelectric production capacity (Figure 1.28).



                   Figure 1.28. Installed hydroelectric capacity by province
                                            2006, in megawatts

             40 000 000

             35 000 000

             30 000 000

             25 000 000

             20 000 000

             15 000 000

             10 000 000

               5 000 000

                         0




        Source: Statistics Canada (2007), Electric Power Generation, Transmission and
        Distribution, Catalogue No. 57-202-X, www.statcan.gc.ca/pub/57-202-x/57-202-
        x2007000-eng.pdf.




          Owing to the large number of rivers and its topology, Québec is
       Canada’s largest producer of hydroelectricity. British Columbia, Ontario,
       Labrador and Manitoba also produce large quantities of hydroelectricity.
       There still are significant untapped moving-water resources in Canada.

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      Large-scale hydroelectric projects are currently under consideration in
      British Columbia, Manitoba, Labrador, Alberta and Québec. As well, there
      is potential for small- and medium-scale developments, particularly in
      British Columbia, Ontario and Québec.

      Other renewable sources of energy
          Bioenergy. With its large landmass and active forestry and agricultural
      industries, Canada has access to large and diversified biomass resources that
      can be used for energy production. Currently, bioenergy is Canada’s second
      most important form of renewable energy and represents about 5% of the
      country’s total primary energy. The most important type of biomass is
      industrial wood waste, especially waste from the pulp and paper industry,
      which is used to produce electricity and steam. Every year, nearly
      500 petajoules of bioenergy are used in the industrial sector.37 At the end
      of 2006, Canada had 62 bioenergy power plants with a total electricity
      generating capacity of 1 652 megawatts. Most of this capacity was built
      around the use of wood biomass and spent pulping liquor, as well as landfill
      gas. In 2006, 7 million megawatt-hours of electricity were generated using
      wood and spent pulping liquor. Most of the biomass-fired capacity is found
      in provinces with significant forestry activities: British Columbia, Ontario,
      Québec, Alberta and New Brunswick.
          Biofuels are another growing form of bioenergy in Canada. The
      principal agricultural feedstocks for producing ethanol, a gasoline substitute,
      include corn, wheat and barley. Canada is a major world producer and
      exporter of these grains. Vegetable oils and animal fats can also be used to
      produce biodiesel, a diesel substitute. In 2006, Canada’s domestic
      production capacity of biofuels was approximately 600 million litres of
      ethanol and 100 million litres of biodiesel. For rural Canada, the production
      of biodiesel by farm businesses has increased considerably over the last few
      years and complements small-scale industrial production facilities. The
      federal and provincial governments have announced several measures that
      should lead to increased production and use of biofuels in the coming years.
          Wind power. Canada has large areas with excellent wind resources and
      therefore significant potential for expanding wind-generated power. The
      bulk of wind farms are located in coastal areas, where the winds are
      generally most intense. However, the diffusion of wind farms is limited
      because most of Canada’s coastline is in regions remote from the existing
      electrical grid. At the end of 2007 Canada had 1 400 wind turbines operating
      on 85 wind farms for a total installed capacity of 1 846 megawatts,
      compared with only 60 wind turbines, 8 wind farms, and 23 megawatts a
      decade earlier. The provincial leaders in wind power capacity are Alberta,

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       Ontario and Québec. Nonetheless, Canada is still far behind the global top
       five countries in terms of installed wind power capacity (Figure 1.29).



          Figure 1.29. Installed wind power capacity in the top five countries and
                                         Canada
                                                Megawatts

          30 000

          25 000

          20 000

          15 000

          10 000                                                         New 2008
                                                                         Total end of 2007
           5 000

                0




        Source: GWEC (2009).




           Solar, geothermal and tidal energy. The potential for solar energy
       varies across Canada. It is lower in coastal areas because of their greater
       cloud coverage and higher in central regions. The solar potential varies even
       more around the globe. Many Canadian cities have a solar potential that is
       comparable to that of many of the world’s major cities. For instance, about
       half of Canada’s residential electricity requirements could be met by
       installing solar panels on the roofs of residential buildings. Canada’s use of
       solar energy has increased in recent years but remains relatively limited in
       terms of market penetration. Installed capacity for solar thermal power has
       seen average annual growth of 17% since 1998, reaching 290 megawatts of
       thermal power in 2005. For geothermal energy, Canada’s steam resources
       are limited, but electricity generation projects are being considered.
       Furthermore, approximately 3 150 ground-source heat pump units were
       installed in residential, commercial and institutional buildings across Canada

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      in 2006. Finally ocean energy is a potential opportunity because much of
      Canada is surrounded by oceans. Currently, Canada has a tidal power plant
      in Nova Scotia with a generating capacity of 20 megawatts of electricity.
      Additional tidal current demonstration projects are being considered.

1.6 Challenges and federal policy responses


      There is an increasing rural-urban divide…
           Although rural regions still play a key role in Canada’s economy, the
      country faces an increasing rural-urban divide. As this chapter has shown,
      this divide is multidimensional. First, there is a demographic divide.
      Canada’s increasing population is concentrating along the border with the
      United States and in accessible, mostly intermediate, rural regions close to
      the major metropolitan areas. Conversely, predominantly rural regions suffer
      from depopulation and ageing. Second, the shrinking population in
      predominantly rural areas has weakened their social infrastructure.
      Predominantly rural communities lack key public services related to health
      care and education. Third, although Canada has evolved towards a
      differentiated economic framework, it is still an export-led economy that
      depends on natural resources (which represented some 22% of total export
      in 2003). Natural resources are extracted in the remote “provincial norths”.
      These little inhabited regions under many aspects, are not perceived as a part
      of the country and have been subject to what some would define as internal
      colonialism (Hessing et al., 2005). The intense and relatively rapid
      substitution of capital for labour in these regions has worsened the
      employment situation and reduced the possibility of integrating communities
      and territories. The rural regions that have been successful in the past in
      attracting manufacturing have been challenged by international competition
      and firms have seen jobs disappear. Finally, the rural-urban divide also feeds
      into environmental challenges that cloud the future of rural Canada. As
      discussed above, some rural regions are large contributors of GHG
      emissions owing to intensive exploitation, for example of oil sands.

      … and large disparities exist among rural regions…
          Besides the rural-urban divide, there is also a large gap between the
      richest and the poorest rural regions in Canada. For instance, while rural
      Alberta and Saskatchewan have grown dramatically because of the presence
      of oil and natural gas, rural regions specialised in more traditional resource
      industries, such as forestry, are suffering from the economic downturn
      because of the contraction of international demand for these commodities.

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       Regional disparities are also due to the performance of local manufacturing.
       Some rural areas located on the fringe of metropolitan regions attract firms
       and have enough momentum to generate local development. Conversely,
       less accessible rural regions are home to small businesses specialised in
       traditional manufacturing and suffer from international competition and,
       more recently, from the credit crunch which constrains rural SMEs’ access
       to bank loans.
           Because of the lack of job opportunities in lagging regions, rural
       populations either migrate to metropolitan regions or go to the best-
       performing rural regions. However, moving the workforce from a poor to a
       rich region is a short-term solution with many potential negative outcomes
       in the long run. It worsens the situation of the lagging regions. While this
       facilitates growth in regions that perform well, the lack of labour in lagging
       regions reduces their capacity to exploit local comparative advantages (e.g. a
       region with tourism potential), or attract new business (e.g. production of
       renewable energy). The misuse of regional comparative advantage may lead
       the overall Canadian economy to a lower economic equilibrium, as factors
       of production are not allocated optimally.

       …which need to be addressed by a holistic rural development policy

       Canada does not have an official rural policy but does have a set of
       government initiatives to support rural and regional development…
           According to the OECD assessment of the various aspects of the federal
       government's rural approach, Canada does not have an official rural policy;
       however Canada’s Rural Partnership (CRP) represents the federal
       government’s approach to rural development, and some provincial
       governments have developed their own rural policy, programme or strategy.
       The CRP is administered by the Rural Secretariat (RS) within Agriculture
       and Agri-Food Canada. With the exception of British Columbia, all
       provinces and territories have either an official rural development strategy or
       policy or a broader regional development approach. These strategies can be
       sorted according to their focus: rural development strategies and policies
       (Alberta, Ontario, Québec, Manitoba, and Saskatchewan) or regional
       development approaches (New Brunswick, Newfoundland and Labrador,
       Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island and
       Yukon). Additional federal policies aimed at enhancing regional
       competitiveness are carried out through the Community Futures
       Programme (CFP) and six regional development agencies present in
       provinces and territories.


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           Through the CRP, which is a horizontal initiative, the RS works to link
      the activities of different federal departments and agencies targeted to rural
      and remote areas and works with sub-national governments and non-
      governmental stakeholders. Since 1998, three successive CRPs have been
      implemented. The current one focuses on rural communities facing
      economic challenges and their transition to a more competitive economic
      base. This includes mono-sectoral areas such as agriculture, forestry,
      fishery, mining and energy communities. In the last decade the focus of CRP
      has shifted from knowledge development (1998) to collaboration within and
      among rural communities (2003), and in the latest cycle (2008-13) to
      equipping rural communities with the information and tools needed to
      develop local opportunities tied to competitive advantages. It is designed to:
      i) enhance rural competitiveness; ii) foster the transformation of local ideas
      and untapped assets into sustainable economic activities; and iii) facilitate
      the development of new economic opportunities from existing amenities.
      These ambitious targets have to be met with a limited budget
      (CAD 57 million for the current five-year CRP). This federal approach
      assigns responsibility for policies and programmes for rural Canada not to
      one specific body but to all federal departments serving rural citizens. This
      approach avoids a situation in which certain departments abdicate
      responsibility and point to the RS as the only body responsible for rural
      Canadians' interests.
           The CRP includes co-operation by rural teams. As intergovernmental
      and interdepartmental collaborative forums, the rural teams are an important
      feature of Canada's federal system. They are present in all provinces and
      territories to share information, build broad partnerships and facilitate
      co-ordination of different actors' strategies. However, in some regions they
      have a rather low and not very proactive profile at the local level, owing in
      part to limited resources. In general, the teams include federal and provincial
      representatives (except in the province of Québec), non-governmental
      organisations (NGOs), and other stakeholders involved in rural
      development.
          Another CRP item is the rural lens (see Chapter 4, Box 4.2), a
      mechanism to pre-assess and pre-review policy proposals that affect rural
      areas. The mission of the rural lens is to promote awareness of the
      conditions and needs of rural communities and to evaluate the impact of all
      federal policies, programmes and services on rural and remote areas.38
      Finally, the federal government has established the Rural Development
      Network for researchers and policy development practitioners which aims to
      help inform policy and research on the challenges and needs of rural
      communities.


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            Regional development agencies are another key federal institutional
       actor for rural development in Canada. There are six regional agencies, the
       first four of which were created between 1984 and 1998: Atlantic Canada
       Opportunities Agency (ACOA) for the Atlantic provinces, the Federal
       Economic Development Initiative for Northern Ontario (FedNor), Canada
       Economic Development for Quebec Regions (CED-Q), and Western
       Economic Diversification (WED) for the four western provinces. In January
       2009 two other agencies, the Federal Economic Development Agency for
       Southern Ontario (FedDev Ontario) for southern and western Ontario, and
       the Canadian Northern Economic Development Agency (CanNor) for the
       three northern territories, were introduced in the budget. The regional
       agencies were created in an effort to de-concentrate (not decentralise)
       federal power and act in accordance with the long-standing federal
       government target of reducing regional disparities and creating equal
       opportunities for every Canadian. In the case of Québec, for instance, the
       provincial government strictly enforces the constitutional jurisdiction of
       provinces to provide sole authority to deal with municipalities. Therefore,
       the federal government is not allowed to deal directly with Québec
       municipalities without provincial permission and CED-Q mainly works with
       umbrella agreements between the federal level and the provincial
       government on particular groups of projects. These projects are generally
       designed by other federal institutions and only delivered through the
       regional CED-Q bodies. This helps to respect the federal level's broad
       horizontal policies and sectoral programmes with territorial reach.

       …with a bottom-up approach to rural development…
           To promote local leadership, community capacity and business
       development in rural areas, the federal government created the Community
       Futures Programme (CFP) 1986. The CFP is a community-based economic
       development initiative delivered in rural areas by Community Futures
       Development Corporations (CFDCs). The CFDCs operate independently of
       government as non-profit organisations and are overseen by volunteer
       boards of directors which are representative of the regions and communities
       that they serve. Business development has become the dominant aspect of
       the CFP. It supports the creation, development and transfer of mostly small
       businesses through consulting, debt finance, equity investments and
       technical assistance.39 Since their creation in 1986, local CFP offices in
       Canada have provided 93 000 reimbursable loans, mostly in rural areas,
       involving CAD 2.7 billion (data from Community Board, 2009b, and
       Ontario Association of Community Futures Development Corporations
       [OACFDC]). The CFP is also active in rural Québec, where it is called
       SADC (or Société d'aide au développement des collectivités), although the

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      province has developed a similar approach to promote local economic
      development and entrepreneurship (local development centres, see
      Chapter 3). SADCs work in parallel with provincial initiatives aimed at rural
      development, but there are some exceptions (Box 1.5).



                  Box 1.5. Community Futures in rural Québec: SADC

           The Community Futures Programme in Québec in based on a network of
        57 local CFP offices (SADCs). As in other parts of Canada, the SADCs are
        governed by a board of directors that includes representatives from the local
        community. As Québec strictly enforces the Canadian Constitution which places
        local communities under the jurisdiction of the provincial government, the federal
        government only provides the framework for the programme and facilitates the
        exchange of information within the CF network. The provincial government of
        Québec has also created a similar strategy to support local development based on
        local centres (120 local development centres – CLDs, distributed throughout
        Québec). The government has not put in place any formal mechanism to facilitate
        collaboration and avoid duplication between CLDs and SADCs. Collaboration
        between CLDs and SADCs only occurs at the local level and depends on the local
        context. In few cases, SADCs and CLDs are strongly integrated and give the local
        board of directors access to a broader set of resources and tools (virtually pooled
        together) to promote the development of their community.
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by the Rural Secretariat (AAFC) and
        Statistics Canada, Directorate for Public Governance and Territorial Development, OECD.




           The Community Futures Development Corporations, like other parts of
      the CFP, have similarities with the European LEADER40 initiative. They
      recognise that before spending money on economic development for a
      region, it is important to achieve social cohesion. Locally based
      development can then lead to growth in local labour markets and thus over
      time to additional employment opportunities. The federal government is
      committed to providing long-term support and funding to local committees.
      This has allowed, on the one hand, the recruitment of local staff responsible
      for monitoring and advising (comparable to the rural development agents
      implemented by Québec's government, see Chapter 3), and, on the other
      hand, the financing of selected capacity-building projects in each
      Community Futures area. These committees are engaged in local
      development over a period of five years. This gives different local
      constituencies the opportunity to participate in setting local development
      strategies and selecting the kinds of business to develop. This programme

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       has not been successful everywhere. Success has been greatest in localities
       whose residents took primary responsibility for their economic future. Thus,
       the capacity of the CFP to develop business in a given community is
       strongly related to the level of engagement of the local community and its
       capacity to define a clear vision of the area’s economic development. As in
       the case of LEADER, the governance of CFP is decentralised and
       Community Futures offices are under the responsibility of the regional
       development agencies. This is due to the need to better co-ordinate the
       activity of CF with that of the regional development agencies, to promote
       local autonomy, and to avoid the duplication of interventions.

       …and a specific focus on resource-based communities
            The federal government’s approach to rural development places a
       particular focus on single-industry towns in rural areas. As discussed above,
       the performance of resource-based communities can be very diverse. While
       some are thriving, such as those in the oil fields of Alberta, the majority face
       a structural, probably irreversible, decline in employment and population, as
       the resource sectors continue to substitute capital for labour. To support
       employment and income, the federal government has put in place a series of
       initiatives, ranging from social redistributive measures to industry subsidies
       and regulations (Hessing et al., 2005). Strategies that have minimised the
       impact of economic downturn and community restructuring in resource-
       dependent communities include: i) anticipating and planning proactively for
       industry closure or decline as a normal event in the life cycle of a resource
       industry, before the actual event of closure or decline; ii) implementing a
       wide range of activities, including diversifying economic strategies,
       providing worker support, and maintaining community morale;
       iii) providing time-limited financial support that encourages a collaborative
       strategy for managing local revenues and services; and iv) restructuring in
       collaboration with all stakeholders (Walisser, Mueller and McLean, 2005).
           In 2008, because of volatility in financial and commodities markets, the
       government established a CAD 1 billion programme to provide support for
       small resource-dependent towns to allow economic restructuring. Areas of
       investment include: job training funds and skills development to meet
       identified local or regional gaps; measures to assist workers in unique
       circumstances facing adjustment challenges; funding to develop community
       transition plans in support of economic development and diversification;
       infrastructure initiatives that support the diversification of local economies
       and other economic development; and diversification initiatives aimed at
       helping communities manage transition and adjustment. A base amount of
       CAD 10 million was provided to each province and CAD 3 million to each
       northern territory, with the balance of the funding allocated on a per capita

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      basis. This allocation improves the capacity of all provinces and territories
      to respond to adjustment challenges. Provinces and territories have the
      flexibility to draw down funds as required over the three-year lifespan of the
      programme. Funding is administered by the provinces and territories.
      In 2009, as part of an economic stimulus package in response to the global
      recession, the government invested an additional CAD 1 billion to support
      communities affected by the economic slowdown in order to foster
      economic development and promote diversification. This fund is being
      administered by the regional development agencies.

      Other sectoral policies with an impact on rural development
           Sector-specific federal policies with rural reach are implemented, often
      in shared jurisdiction with the provinces, in agriculture, natural resources,
      infrastructure, industry, services and human resources. Investment in
      infrastructure is particularly necessary as a large deficit has eroded rural
      citizens' capacity to be engaged in society (Fairbairn and Gustafson, 2008).
      Several investment plans provide for rural and small-town jurisdictions,
      such as the “community component” of the CAD 33 billion Building
      Canada (2007-14) plan (data from Infrastructure Canada) and the federal
      government's stimulus package in the wake of the global economic
      downturn. The government has been streamlining federal approval processes
      so that more projects can start in the upcoming construction season. These
      investments can constitute significant resources for rural and small-town
      communities;41 at more than 4% of 2008 GDP Canada's fiscal package,
      which includes both spending increases and tax reductions (OECD, 2009), is
      among the largest in all OECD countries.42
          Other federal departments have programmes or components within
      programmes that affect rural development. The three major projects are:
      “Growing Forward”, managed by Agriculture and Agri-Food Canada, the
      Building Canada plan and the Municipal Rural Infrastructure Fund (MRIF),
      both managed by Infrastructure Canada.43
          •    Growing Forward’s aim is to build a competitive and innovative
               agricultural sector, to be proactive in managing risks, and to ensure
               that the agricultural sector contributes to policy priorities. GF started
               in 2008 with a total investment of CAD 1.3 billion for five years
               from federal, provincial and territorial governments. Through GF,
               governments are investing in innovation, modernising regulatory
               systems and improving regulatory co-ordination, addressing
               environment and food safety priorities, adapting programmes to
               meet regional needs and setting measures that enable farmers to be
               proactive in managing risk when faced with disasters. The funding

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                 is cost-shared between the Canadian government and provincial
                 governments on a 60:40 basis. Since 2008 new assistance
                 components focused on business risk management have been
                 implemented: AgriInvest offers producers individual saving
                 accounts to compensate for small income losses; and AgriStability is
                 a margin-based income stabilisation programme providing
                 compensation to farm operators in case of large income losses.
                 These programmes aim to stabilise the gross margins of producers.
                 Thus, producers with low margins receive no stabilisation support
                 and producers with declining margins receive declining support. The
                 result is a reduction in both the level of support and in reliance on
                 the most distorting forms of support, and a shift towards payments
                 linked not to single commodities but rather to a “whole-farm”
                 business risk management approach.
            •    Infrastructure Canada has been the government’s focal point on
                 infrastructure issues since 2002. It is currently part of the Transport,
                 Infrastructure and Communities portfolio, which includes Transport
                 Canada, the Canadian Transportation Agency, the Transportation
                 Appeal Tribunal of Canada, and 16 Crown corporations.44
                 Infrastructure Canada manages various funding programmes that
                 support infrastructure projects across the country, including several
                 new initiatives under the government’s CAD 33 billion Building
                 Canada Plan. Building Canada was launched in November 2007 to
                 help realise the federal government’s 2006 long-term economic
                 plan. Advantage Canada outlines several priority areas for the
                 government for the years ahead, including ensuring the seamless
                 flow of people, goods and services (the “Infrastructure Advantage”).
                 Both the Building Canada Plan and the 2009 economic stimulus
                 package recognise the unique infrastructure needs of small
                 communities. The CAD 1.1 billion communities component of the
                 Building Canada fund provides targeted support to smaller
                 communities (with fewer than 100 000 people). Recently, the
                 government allocated an additional CAD 500 million to the
                 communities component for targeted infrastructure projects.
            •    The MRIF was launched in 2003, with an initial budget allocation of
                 CAD 1 billion, to focus on smaller-scale municipal infrastructure
                 projects. The main aim of the project is to increase connectivity for
                 smaller and rural communities.45 In 2007, the government topped up
                 the MRIF programme with an additional CAD 200 million. To
                 ensure equitable distribution of funding and to address the
                 individual needs of smaller communities, a minimum of 80% of
                 MRIF investments was to be directed to projects that benefit

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               municipalities with populations of fewer than 250 000. To
               encourage the use of integrated asset management by small-scale
               Canadian municipalities, provinces and territories could allocate up
               to 1% of their respective MRIF contributions to a municipal
               capacity building component. Beyond the 250 000 population cut-
               off (which excludes 16 communities across Canada as of the
               2001 Census), “rural” communities are not further defined under
               MRIF. However, the federal-provincial or territorial contribution
               agreements do provide for exceptions for projects in “rural or
               isolated areas” that do not necessarily meet the mandatory project
               requirements (OECD, 2009). As of November 2007, almost 94% of
               MRIF was used for projects in communities with a population
               of 250 000 or fewer (well above the initial 80% target).46

      The federal approach implemented by the Rural Secretariat faces
      specific challenges
          As in other OECD countries, Canada's rural development approach is
      constrained by a lack of a political authority and low political attention to
      pro-rural initiatives. In particular, the Canadian approach faces the following
      issues:
          •    First, the Rural Secretariat may be in an unfavourable institutional
               setting relative to non-sectoral departments in charge of rural affairs
               (such as Québec's non-sectoral ministry, see Chapter 3). However,
               relative to other possible institutional settings, the present one is
               probably as good as possible. The assignment of the RS to report
               through the minister of Agriculture and Agri-Food Canada (AAFC)
               places it in a rather weak position, but (compared to other options)
               still the strongest possible. It is true that sectoral agricultural
               interests often conflict with the needs of rural residents, and
               experience in many OECD countries shows that locating rural
               development initiatives within a ministry of agriculture tends to
               reduce consideration of territorial interests. Also, the importance
               accorded to rural issues by this structure tends to be smaller than in
               a ministry with a territorial approach. However, subsuming the RS
               under the regional development agencies, which have a regional
               approach, may further minimise its visibility given the agencies'
               distance from policy design and budgeting, which take place in
               Ottawa.
          •    Second, the rural lens mechanism has not been very effective, as it
               lacks the political authority to enforce its views at the Cabinet level.
               Some federal government bodies are not carrying out a cross-

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                 departmental examination at a point in the policy process where
                 changes are still possible. This indicates that it is difficult for the RS
                 to gain attention for its cause from other departments. Moreover,
                 collaboration between the federal and Québec governments to foster
                 effective concentration of activities could be improved. This would
                 make sense, as their main rural policy objectives are similar.
            •    Third, there is no formal collaboration between the Rural Secretariat
                 and the CFP initiative. Although rural teams, on the local level, can
                 include CFP actors, closer co-ordination between the two local
                 development approaches is lacking. This is a missed opportunity as
                 the local CFP offices often have more comprehensive information
                 and expertise on local businesses and leaders than a government
                 agency. In this respect, CFP's long-term financial viability should be
                 ensured by the federal government (Fairbairn and Gustafson, 2008).




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                                           Notes


      1.    The OECD acknowledges the contribution of Mr. Ray D. Bollman,
            Statistics Canada, and Mr. Carl Sauriol, Rural Secretariat (AAFC), who
            provided data, detailed information and comments for this section of the
            report.
      2.    As Roy MacGregor states when talking about farming in Saskatchewan:
            “It’s not that money is no longer being made by farming in the Canadian
            prairies, it’s that the money does not stay – as a cursory look at most
            small-town Main Streets will immediately confirm.” (Canadians: A
            Portrait of a Country and Its People, 2007, Penguin Canada, Toronto).
      3.    The RST definition includes all territories that are not part of the area
            covered by a CMA or CA.
      4.    MIZ commuting flows, like those used in the delineation of CMAs and
            CAs, are calculated using place of work data from the census. In contrast
            to the CMA/CA delineation, however, MIZ recognises the possibility of
            multiple centres of attraction. Flows of commuters from a municipality in
            RST Canada to employment in any larger urban centre (of 10 000 or
            more) are combined to determine the degree of influence (strong,
            moderate, weak or no influence) that one or more larger urban centres has
            on that municipality (Rambeau and Todd, 2000, p. 3)
      5.    CSDs include municipalities (i.e. incorporated towns, rural municipalities,
            cities, etc., as determined by provincial legislation) and their equivalent in
            cases such as Indian reserves, Indian settlements and unorganised
            territories.
      6.    To meet the need of assessing the evolution of rural communities and the
            increasing functional linkages between territories, Canada changes its
            geographic limits of rural areas during each population census. So while
            some rural communities decline over time, other rural communities, close
            to metropolitan areas, grow and are then integrated into metropolitan
            areas. Other rural areas may eventually develop into an own urban core.
      7.    Owing to the territorial re-classification of rural areas, the trend in this
            decade is also affected by the changes in the definition of RSTs between
            the three census periods.


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       8.     Within RST Canada, aboriginal representation increases as urban
              influence decreases. In 2006, 8.8% of RST Canadians identified
              themselves as aboriginal (7.9% in 2001) compared with 2.4% of urban
              residents (2.1% in 2001). High birth rates are primarily responsible for
              growth of the aboriginal population.
       9.     In 2006, 17% (374 135) of the moderate MIZ area population was
              14 years of age and younger, slightly below the Canadian average of 18%.
              In 1996, the moderate MIZ area population 14 years of age and younger
              was 21% (465 600) of the total moderate MIZ area population.
       10.    This calculation takes into account changes in the statistical definition of
              rural areas (RST) as discussed above (Statistics Canada, 2006).
       11.    It is worth noting that immigration is the key to demographic growth in
              Canada as a whole. Population projections suggest that population growth
              due exclusively to demographic natural balance (i.e. births minus deaths)
              will be negative in about 2030.
       12.    Remote rural regions in the north represent an exception to the general
              trend, as they have been able to attract a relatively large percentage of
              highly skilled immigrants in resource-based industries and in key public
              services, such as health care. Attracting skilled workers is a national
              trend. In 2001, new immigrants in all regions were much more likely to
              have a university degree. However, those living in rural northern regions
              tend to be more educated and report higher earnings and higher
              employment rates. For instance, rural Canada has been able to attract
              more foreign-trained physicians than urban Canada. In 2004, 26.3% of all
              physicians in rural Canada were foreign trained, compared to 21.9% in
              urban areas (Canadian Institute for Health Information, 2005).
       13.    For the population over 70 years of age, more moved out of rural and
              small town areas than moved in, possibly seeking to be closer to specialist
              health-care services in larger urban centres.
       14.    Note that CMAs and CAs (i.e. larger urban centres) are defined on the
              basis of commuting flows, so by definition already include all of the
              surrounding neighbourhoods where 50% or more of the workers commute
              to the urban core. For details on the definition of CMAs and CAs, see
              Statistics Canada (2007), 2006 Census Dictionary Catalogue No. 92-566,
              Ottawa (background report prepared for the OECD by Statistics Canada).
       15.    By 2003, there were over 18.9 million motorised, on-road vehicles
              registered in Canada. Between 1999 and 2003 alone, vehicle registrations
              increased by over 1 million (Statistics Canada, 2003). A new urban form
              emerged, shaped by car-oriented planning (Environment Canada, 1996),
              which led to what is commonly referred to as urban sprawl.


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      16.   The total area of dependable agricultural land in Canada is defined as land
            classified by the Canada Land Inventory in agricultural land classes 1
            through 3, at a scale of 1:250 000. These classes include all land areas that
            do not suffer severe constraints for crop production. The area of available
            dependable land is estimated by subtracting the area of dependable land
            occupied for urban and other non-agricultural uses from the total area of
            dependable land in the country.
      17.   The OECD is currently developing a specific programme aimed at
            improving the statistical capacity to measure quality of life and the
            “happiness” of populations within their socio-economic ethos. Recent
            advances in the study of happiness and life satisfaction have opened new
            perspectives. Statistics are much closer to measuring how happy people
            are and to understanding more clearly other aspects of their subjective
            well-being. These advances open the door to different paradigms for
            policy making: paradigms, for instance, which view people’s happiness,
            rather than national income, as the goal which policy makers seek first to
            achieve (OECD, Second World Forum, “Measuring and Fostering the
            Progress of Societies”, June 2007, Istanbul, Turkey).
      18.   Gross domestic product (GDP) remains a standard measure of economic
            activity in Canada. However, GDP is officially estimated only at the
            provincial and national level. There have been attempts to estimate GDP
            at a sub-provincial level (i.e. in rural areas) but these ran into data
            limitations. However, GDP is estimated for some industrial sectors. For
            example, the resource-based sectors (primary industries and related
            downstream manufacturing industries) accounted for 17% of GDP
            in 2006 (forest 2.4%, minerals 3.4%, energy 7.2%, agriculture 4.0%).
            Rural Canada is important for the resource-based sector, as 95% of
            Canada’s land area is rural and contains much of Canada’s natural and
            environmental resources (OECD [2009], “Questionnaire for the
            Integration of the Background Report”, internal working document with
            information provided by the Rural Secretariat [AAFC] and Statistics
            Canada, Directorate for Public Governance and Territorial Development,
            OECD).
      19.   In particular, the model found that CSDs in the province of Saskatchewan
            had the highest average rate of social progress; CSDs in Saskatchewan
            had a social progress index of slightly less than 0.9% in 1996 and 0.65%
            in 2001. On the other hand, CSDs in Nunavut were found to have the
            lowest rate of social progress, averaging -7.6% in 2001; however, the
            authors caution that Nunavut’s result is based on a very small number of
            CSDs (N=23). Among the ten Canadian provinces, CSDs in
            Newfoundland had the lowest rate of social progress with CSDs in that
            province averaging –2.9%.



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       20.    In particular the share of individuals (25 to 54 years of age) with less than
              grade 9 education declined and the share of individuals with some post-
              secondary education increased. These trends paralleled changes for
              Canada as a whole (Alasia, 2003).
       21.    Health status varies in different MIZ areas and there is a spatial pattern of
              specific diseases. For instance, strong MIZ residents have reduced risk of
              mortality from respiratory conditions compared to residents of urban
              communities and other MIZ areas. Citizens living in strong, weak and
              no MIZ areas have a higher incidence of arthritis than their urban
              counterparts.
       22.    The primary sector includes agriculture and related services, fishing and
              trapping, forestry (logging and wood) and mining (iron, other metals,
              coal, crude petroleum and natural gas, and related services).
       23.    The main incentive to adopt labour-saving technology is the increasing
              value of human time (Schultz, 1972). For example, in agriculture, the
              ratio of the index of farm wage rates to the index of farm machinery cost
              (measured as operation and purchase costs) went from 0.20 in the
              early 1930s to around 1.00 in the early 1990s (Bollman, 2007).
       24.    In Canada farm size varies from province to province. In 1996,
              Newfoundland reported average farm size was 146 acres while
              Saskatchewan reported an average of 1 152 acres.
       25.    Obviously, some residents may be commuting to larger urban centres to
              work.
       26.    Industry Canada (2007), “SME Perspective: Canadian Rural-based
              Entrepreneurs,” Small Business Quarterly, Vol. 9, No. 3, p. 1. Note that
              “small and medium-sized enterprises” are defined as firms with 500 or
              fewer employees.
       27.    The only exception is the price of postal services which has been
              increasing since the mid-1970s (Bollman and Prud’homme, 2006). The
              price of postal services is essentially the price of stamps for letters and
              parcels. With the exception of postal services, the overall price of
              communicating information across space has been declining.
       28.    Over the long run, the contribution of the primary resource sector to
              Canada’s GDP has been growing, but it has been declining in relative
              terms because of high growth rates in the services sector. The primary
              resource sector accounted for 7.1% of Canada's GDP in 1981 but
              only 5.8% in 2002. The primary sector represented roughly 60% of total
              Canadian commodity exports in 1981, but has accounted for
              between 30% and 40% since 1993. Much of the decline in share can be
              explained by rapid growth in automotive exports to the United States,
              with some rural areas receiving direct employment benefits. Agriculture,

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            forestry, fishing and hunting have declined most rapidly, while mining,
            oil and gas exploration have been more stable. Between 1987 and 1999,
            employment in agriculture, mining and fishing declined across Canada.
            Forestry employment grew until 1995, but has declined since. The decline
            in primary resource sector employment has occurred in all Canadian
            regions, with Québec, Ontario and the Maritimes showing the highest
            rates of loss.
      29.   Excluding service stations and wholesale trade in petroleum products,
            which alone employed 96 583 people or 0.6% of total Canadian
            employment.
      30.   Communities are considered resource-dependent when at least 30% of
            their economic base is one of the five resource sectors (agriculture,
            forestry, fishery, mining, energy). These communities also tend to be very
            small, rarely with more than 10 000 people.
      31.   The built environment may change depending on the characteristics of the
            resource-based town. For instance, there are two types of resource-based
            towns. The service and supply towns, which sometimes begin as boom
            towns, and the company towns, which are generally small and static
            communities strongly dependent on the local industry.
      32.   Western Economic Diversification, Canada www.wd.gc.ca/eng/9732.asp.
      33.   Some resource-based communities, like the fishing community of Great
            Harbour Deep in Newfoundland and Labrador or Saskatchewan's
            Uranium City, are so remote they can only be reached by air or water
            during periods of good weather.
      34.   Resource-based communities suffer more than others from economic
            slowdowns. This is because commodity prices are generally procyclical,
            i.e. they  depend      on    the  international    business     cycle
            (Behrooz Afrasiabi, 2008).
      35.   Forestry, like other resource-based industry, has evolved towards a
            capital-intensive model. This partially justifies the reduction in the
            industry’s total employment. However, the period assessed is relatively
            short, so the reduction is probably entirely dependent on the reduction in
            international demand. However, seasonal changes must also be
            remembered (April is the month in which employment is lower in the
            Canadian forestry industry, because of lower activity).
      36.   Oil-sands developments are also reported to be responsible for the decline
            in a number of fur-bearing mammals (including caribou) and some forest
            birds throughout rural regions in Northern Alberta (OECD, 2008).
      37.   A petajoule is a 1015 joule. A joule is a standard measure of energy.


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       38.    The rural lens implements policy mainstreaming through a set of
              questions that is taken into account when evaluating the impact of a given
              policy on rural areas. The questions are: How is this initiative relevant to
              rural and remote Canada? Is the impact specific to a selected rural or
              remote environment or region? Have the most likely positive and negative
              effects on rural Canadians been identified and, where relevant, addressed?
              Have rural Canadians been consulted during the development or
              modification of the initiative? How is the benefit to rural Canadians
              maximised? (e.g. co-operation with other partners, development of local
              solutions for local challenges, flexibility for decision making) (Canada’s
              Rural       Partnership,      www.rural.gc.ca/RURAL/display-afficher.do?
              id=1246383722421&lang=eng).
       39.    Some local efforts demonstrate the success of CF. For instance, the
              Ontario Association of Community Futures Development Corporations
              (OACFDC) shows the benefits of integrating social and economic
              development: Ontario's 61 CFDCs offer repayable loans of up to
              CAD 150 000 to rural and northern SMEs. Between 2003 and 2008, the
              programme provided CAD 263.6 million in loans and raised a total of
              CAD 700 million in capital investment funds via owner’s equity and
              third-party funding. This created over 15 000 jobs from 2004 to 2008,
              mostly in services.
       40.    LEADER is the acronym for Liaisons entre actions de developpement de
              l'économie rurale ("links between development actions of the rural
              economy").
       41.    In the field of natural resources, the federal government targets resource-
              based communities mainly in forestry (Forest Communities Programme,
              and First Nations Forestry Programme), promoting the development of
              new forest-based economic opportunities, the engagement of communities
              in sector-transition issues, the sharing of information with other forest
              communities and environmental and energy efficiency improvements in
              the pulp and paper industry. Other important programmes target fishing
              communities.
       42.    The largest fiscal packages besides Canada’s include: the United States
              (with about 5.5% of 2008 GDP), Australia, Korea and New Zealand (all
              of which have introduced fiscal packages amounting to more than 4%
              of 2008 GDP) (OECD, 2009d).
       43.    In 2006, Canada had 16 municipal governments (i.e. cities) with a
              population of 250 000 or more. These cities had a total population
              of 11 714 548 or 37% of Canada's total population.
       44.    Canadian Crown corporations are state-owned enterprises within either
              the federal or provincial and territorial jurisdictions of Canada. Crown
              corporations have a long-standing presence in the country and have been

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            instrumental in its formation. As they are presently involved in everything
            from the distribution, use and price of certain goods and services to
            energy development, resource extraction, public transport, cultural
            promotion and property management, Crown corporations remain
            important in Canada.
      45.   The MRIF was meant to balance the CAD 4 billion investment announced
            concurrently for major infrastructure projects in metropolitan areas
            launched by the Canada Strategic Infrastructure Fund (CSIF).
      46.   For MIRF, there are some provincial differences in its application that
            should be taken into account. For instance, in Québec, the federal
            government cannot unilaterally spend money on municipal infrastructure
            without a previous bilateral agreement with Québec. As many
            investments have to be driven and partly funded by provinces, it is
            essential for rural and small-town communities to ensure that projects are
            among the Québec government's priorities. Following the launch of the
            federal government's MRIF (2003-11) Canada and Québec negotiated an
            agreement to govern both the Infrastructure Canada programme (2000-11)
            and the MRIF.




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                                              Chapter 2

                         Economic profile of rural Québec



       This chapter provides a socioeconomic assessment of rural Québec. The
       first section presents a regional typology of the province’s rural areas. Next,
       it focuses on the source of economic competitiveness in rural territories: the
       productive framework, the labour market and the sectoral contribution to
       the rural economy. It then focuses on the social well-being of rural
       Québécois, with an emphasis on service delivery. Finally, it discusses the
       main challenges to the sustainability of rural communities in Québec.




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Key points

          •   Today's rural Québec has a component of modernity and
              generates 20% of provincial gross domestic product (GDP).
              Overall, the rural population and employment opportunities are
              increasing owing to the diversification of the economic base. Many
              rural areas have been reducing their dependence on agriculture and
              other primary activities while increasing their specialisation in
              manufacturing and, above all, service activities.
          •   The rural-urban split is less intense in Québec than in the rest of
              Canada, because of a denser network of small and medium-
              sized cities. The province has more than 1 000 municipalities, the
              bulk of which are located in rural areas in the southern portion of the
              province. This supports the social aim of occupying the territory.
              Many of these municipalities are functionally linked. As a result, in
              Québec, many rural labour markets are connected and relatively
              large.
          •   On average, rural Québec displays good performance but, as in
              the rest of Canada, there are regional disparities. Rural areas
              located in the peri-metropolitan fringe and in intermediate areas
              have a diversified economic base and attract people and businesses.
              Conversely, predominantly rural areas, especially those that are
              remote and rely on natural resources, face structural socioeconomic
              change. In some cases this threatens their sustainability.
          •   The structural change occurring in rural areas is a
              multidimensional phenomenon that involves social and
              economic issues. First, in predominantly rural areas, the population
              is ageing and declining because of low birth rates, longevity and net
              out-migration. Second, some rural labour markets offer fewer job
              opportunities because agriculture absorbs a smaller number of
              workers and because the comparative advantages of resource-based
              and traditional manufacturing are exposed to international
              competition. Third, in some cases, decreasing environmental quality
              feeds into the challenges brought about by climate change.
          •   In particular, resource-based rural communities are the
              province’s most vulnerable areas. The forces that determine the
              course of these communities are often external, such as decisions
              made by the central government, metropolitan financial elites, or
              international traders. In many cases, the current global financial
              crisis is exacerbating the local decline.

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Introduction

           This report focuses on rural Québec. The choice of this province is due
       to a series of factors. First, Québec is the province with the largest land area
       and, after Ontario, Canada’s second most populated province. Second,
       “rurality” is an important component of the character and culture of the
       province.1 Although the bulk of the population has been concentrating in
       urban centres in the south of the province which contains three major urban
       regions of Montréal, Québec City and Gatineau, Québec still has a strong
       rural character, with a typically rural landscape and a relatively large
       number of rural communities, which are strongly attached to their territory.
       Third, the rural areas contribute significantly to the province’s economy.
       Québec is rich in natural resources and there are communities in some
       remote rural areas whose existence is justified by the extraction and
       processing of natural resources. Fourth, for a series of historic and political
       reasons, the provincial government wishes to ensure the sustainability of
       rural communities, including those in remote areas. Finally, it has the
       characteristic of a large territory at the frontier of human settlements, with a
       wide range of challenges and opportunities. The province’s effort to
       promote rural development represents precious experience for to feed into
       the OECD’s collective knowledge about this issue.
           Only the southern part of Québec is defined as rural by the provincial
       government, because the north has extremely low population density and
       few stable human settlements.2 In most OECD countries the only categories
       for classifying the national territory are urban and rural; Québec additional
       category is the north. This is a vast region that reaches approximately from
       the 49th parallel almost to the polar circle. However, the rural-urban
       dichotomy exists in the south of the province, in the area called écoumène,
       where human settlements are contiguous. This area alone is the size of New
       England in the United States.3
            Overall, rural Québec demonstrates good economic performance, but
       there are differences among predominantly, intermediate and peri-
       metropolitan rural areas. In particular, the rural areas closest to urban centres
       registered the strongest demographic and economic performance over the
       last 15 years (1991-2006). These areas have gained 18.5% in population,
       compared to the rural and urban averages of 1.6% and 9.6%, respectively.
       Local employment increased by 9.4% between 2001 and 2006, with a
       positive impact on rural GDP, which increased by some 3% a year
       between 1991 and 2006 (Conference Board, 2009). These peri-metropolitan
       areas are becoming a key economic and social space in Québec and support
       a process of endogenous development based on the services sector and high
       value-added manufacturing. Conversely, remote, predominantly rural

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      territories are losing population (-7.4% between 1981 and 2006) and their
      economic framework, specialised in primary activities, is under strain from
      structural change and a negative economic situation.
          Rural areas face challenges that are often due to the ongoing
      transformation of their society and economy. Within one generation, Québec
      underwent a “demographic revolution”. From having the highest birth rate
      in Canada, Québec now has the lowest in North America. Combined with
      longevity and limited immigration, this has led to an ageing and, in some
      parts, declining rural population. The population’s longevity, in particular,
      requires the delivery of new public services, yet may also represent an
      opportunity to develop new economic activities. In any case, Québec faces
      two major challenges: to create employment opportunities to attract new
      residents and immigrants and to improve amenities to achieve a higher
      quality of living in rural areas.
           Finally, the strong functional linkages between urban and rural
      territories put pressure on natural amenities, transport infrastructure and the
      environment. Urban sprawl and increased commuting are transferring
      negative urban externalities such as congestion and pollution to some rural
      areas. The “urbanisation” of some rural territories arises from successful
      rural development, but a functional approach to spatial planning is lacking.

2.1 “Rural” in Québec


      Due to the extreme variation of population density, only the
      southern part of the province can be defined as rural in its usual
      sense
          Because of the small number of stable human settlements and extremely
      low population density, a large part of Québec can be considered as a
      separate territorial component when applying the OECD regional typology
      (Du Plessis et al., 2001). The province of Québec covers a territory of more
      than 1.5 million km2 in the eastern part of Canada, more than five times the
      size of Texas and almost three times the territory of France, and it is home to
      7.5 million people. Accordingly, the overall population density is very low:
      5.1 inhabitants per km2. Yet, population density varies greatly across the
      province. The large majority of Québécois live in the south, between the
      49th parallel and the border with the United States; in the rest of the province
      (the administrative region of Nord-du-Québec and the northern parts of
      Saguenay – Lac-Saint-Jean and Côte-Nord), population density is extremely
      low. Part of this territory is also home to First Nation reserves (Box 2.1).
      Furthermore, the total territory can be divided into the écoumène

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       (188 522 km2) and territories outside of this zone (hors écoumène,
       1 260 813 km2). The former is mainly located above the border with the
       United States and along the shores of the St. Lawrence River, and it is here
       that the majority of Québécois live. The latter is composed of internal
       territories which lack continuity of human settlements (Table 2.1,
       Figure 2.1).



                        Box 2.1. Indian reserves in Canada and Québec

            In Canada, an Indian reserve is specified by the Indian Act as a “tract of land,
         the legal title to which is vested in Her Majesty, that has been set apart by Her
         Majesty for the use and benefit of a band.” While many communities refer to the
         term “First Nation”, “band” is the term used by the federal government to
         describe a “body of Indians” in a community. The Indian Act also specifies that
         land reserved for the use and benefit of a band that is not vested in the Crown is
         also subject to the Indian Act provisions governing reserves. A reserve is similar
         to a US Indian reservation, although the histories of the development of reserves
         and reservations are markedly different.
            In 2006, there were over 600 bands in Canada residing on one or more
         reserves, most of them quite small in area. The Indian Act gives the Governor in
         Council the right to “determine whether any purpose for which lands in a reserve
         are used is for the use and benefit of the band”. Title to land within the reserve
         may only be transferred to the band or to individual band members. Reserve lands
         may not be seized legally, nor is the personal property of a band or a band
         member living on a reserve subject to “charge, pledge, mortgage, attachment,
         levy, seizure distress or execution in favour or at the instance of any person other
         than an Indian or a band” (section 89 (1) of the Indian Act).
            Provinces and municipalities may expropriate reserve land only if specifically
         authorised by a provincial or federal law. Few reserves have any economic
         advantages, such as resource revenues. The revenues of those reserves are held in
         trust by the Minister of Indian Affairs. Reserve lands and the personal property of
         band members and bands situated on a reserve are exempt from all forms of
         taxation except local taxation. Corporations owned by members of First Nations
         are not exempt, however. This exemption has allowed band members operating in
         proprietorships or partnerships to sell heavily taxed goods such as cigarettes on
         their reserves at prices considerably lower than those at stores off the reserves.
         Some First Nations have self-government agreements with Canada while others
         have minimal governance structures. Many First Nations fall somewhere in
         between.
         Source: Indian Act (R.S., 1985, c. I-5), Act current to 25 November 2009; Indian and
         Northern Affairs Canada, www.ainc-inac.gc.ca; “Indian Reserve” in The Canadian
         Encyclopedia, www.thecanadianencyclopedia.com.



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                                    Table 2.1. Québec in figures

        Total surface                                      Km2                    1 438 228
            Écoumène                                       Km2                      188 522
            Hors écoumène                                  Km2                    1 260 813
        Total population (2006)                                                   7 435 805
        Absolute population densities                  In./ Km2                       5.1
            Population density within the écoumène     In./ Km2                      39.4
       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.



      Rural Québec is home to one-quarter of the provincial population
      and covers two-fifths of the territory
           The definition of “rural” used in this report is based on three variables:
      population density, the presence of an urban centre close or within the rural
      area, and the distance between a given rural area and the main metropolitan
      region.4 As a result, 42% of the province is rural. This area is organised in
      over 1 100 municipalities and unorganised territories, and 34 Indian
      reserves.5 The methodology used to define what is rural in Québec is based
      on municipalities or groups of municipalities called regional county
      municipalities (or Municipalités régionales de comté, MRCs) that represent
      the “building blocks” of the regional typology, and are Territorial
      Level 3 (TL3) regions in the OECD regional typology (Box 2.2). First, any
      area in an MRC that is part of the Census Metropolitan Area (CMA) or
      Census Agglomeration (CA) as defined by Statistics Canada (Statistics
      Canada, 2007) is not considered part of the rural area of the MRC. Second,
      MRCs whose population density is less than 400 inhabitants per km2 are
      classified as predominantly rural. Third, the other MRCs and municipalities
      are considered rural if at least 50% of their population lives in areas whose
      population density is less than 400 inhabitants per km2. This criterion
      comprises the residents of the countryside within CMAs and CAs. Fourth,
      for social and geographical reasons, six areas located in the region of Nord-
      du-Québec and six smaller cities with populations of fewer than
      13 000 inhabitants are considered rural. Fifth, predominantly rural MRCs
      are divided into two sub-categories: those in central, or accessible, areas and
      those in remote areas (Figure 2.2).6 At the end of the iterations, rural Québec
      is divided into:
          •    62 predominantly rural MRCs (divided into 31 accessible and
               31 remote areas);



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                               Figure 2.1. The écoumène in Québec




                                                                     Écoumène


          Source: Government of Québec.




            •    21 intermediate rural MRCs (MRCs with low population density
                 but with a relatively large urban centre within their territory);
            •    10 rural areas within metropolitan regions, or peri-metropolitan
                 regions.



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                      Box 2.2. Regional County Municipality (MRC)

           In Québec there are 86 MRCs (and 14 equivalent bodies). They are county-like
        administrative and geographic units. Each MRC is composed of a number of
        municipalities that control the MRC. The council of an MRC is composed of the
        mayors of the member municipalities as well as a prefect. The prefect is usually
        elected by and from the council by secret ballot. Universal suffrage is also used in
        eight cases: the local population elects the prefect, who is not necessarily a
        mayor. The prefect's mandate is two years when elected by council or four years
        when elected by universal suffrage.
           The MRC’s primary responsibility is spatial planning. In particular it must:
        manage land use by creating a “land use scheme” and revise it every five years;
        establish a plan for waste management, fire protection and civil protection
        (police); see to the proper functioning of watercourses in its territory, especially
        those used for agricultural drainage; prepare the evaluation rolls for local
        municipalities; and sell buildings for property tax default. MRCs are also
        responsible for local development and have to name or create, and fund, a local
        development centre to support regional businesses.
            MRCs, in their definition as political units, do not cover the entire territory of
        Québec. The local municipalities of Québec (and equivalent aboriginal territories)
        not belonging to an MRC fall into two categories: i) all Indian reserves; and
        ii) 14 cities and urban agglomerations which do not belong to an MRC because
        they exercise some or all of the powers which are normally those of an MRC (a
        city or agglomeration in some cases exercises only some of these powers because
        some MRC powers are delegated to a metropolitan community).
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




      Population distribution in rural Québec
          Rural Québec hosts one-quarter of the total provincial population, or
      1.95 million people in 2006. In particular, 70% of the rural population
      (18.5% of the overall provincial population) lives in predominantly rural
      MRCs. Remote and predominantly rural MRCs are home to 566 000 people,
      while 811 000 people live in accessible predominantly rural MRCs. The rest
      of the rural population is distributed as follows: 21% (5.5% of overall
      population) live in intermediate MRCs and 9% (2.2% of total population) in
      peri-metropolitan areas (Table 2.2).



                                                    OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                          2. ECONOMIC PROFILE OF RURAL QUÉBEC – 125


                             Figure 2.2. Rural classification in Québec
                                              Rural typology

                                                                       Rural typology – for analytical purposes
                                                                            Predominantly rural MRCs of remote regions
                                                                            Predominantly rural MRCs of central regions
                                                                            Intermediate MRCs
                                                                            (or rural communities in the vicinity of a medium-sized city “in the
                                                                            region”)
                                                                            Peri-metropolitan rural MRCs
                                                                            (or peri-metropolitan rural communities)

                                                                        Not covered by the PNR
                                                                            Urban sector




  Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal
  working document with information provided by MAMROT, Directorate for Public Governance
  and Territorial Development, OECD.




           In Québec, population density is strongly related to distance from the
       largest metropolitan areas. Unlike Sweden, Québec has very few large
       communities far from main urban hubs.7 For the predominantly rural MRCs,
       the areas located within a range of 150-250 kilometres from the larger
       metro-regions display higher population densities (Figure 2.3)




OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
126 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC


                                                Table 2.2. Rural and urban population in Québec, 2006
                                                                                    Number of individuals                  %
       Predominantly rural MRC                                                          1 377 455                        18.5%
                  Remote                                                                   566 320                      (41.1%)
                  Accessible                                                               811 135                      (58.8%)
       Intermediate MRC                                                                    410 920                        5.5%
       Peri-metropolitan MRC                                                               162 295                        2.2%
       Rural                                                                            1 950 670                        26.2%
       Urban                                                                            5 485 135                        73.8%
       Québec                                                                           7 435 805                       100.0%
       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.



                                                      Figure 2.3. Distribution of the population
                                                      in Québec's predominantly rural MRCs
                                                                             2006

                                           70
                                                                                                        Les Îles-de-la-
                                                        Montcalm                                          Madeleine
                                           60
         Population density (inh/sq. km)




                                           50

                                           40

                                           30
                                                                                                            y = 7717.4x -1.256
                                                                                                              R² = 0.3545
                                           20

                                           10

                                           0
                                                0        200         400         600           800           1 000          1 200


                                                       Average linear distance from Québec City and Montreal (km)


       Note: Distance is the average linear distance (in kilometres) between the geographical
       centre of the MRC and the centre of the metropolitan areas of Montréal and
       Québec City.
       Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the
       Integration of the Background Report”, internal working document with information
       provided by MAMROT, Directorate for Public Governance and Territorial
       Development, OECD.



                                                                                 OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                                  2. ECONOMIC PROFILE OF RURAL QUÉBEC – 127



           The demographic rural-urban split is less intense than in the rest of
       Canada. The spatial distribution of population in Québec tends to be closer
       to that of European countries and the OECD average. For instance,
       demographic growth in rural areas is not as slow as in the rest of Canada,
       and the pace of urbanisation is closer to the OECD average, while for
       Canada as a whole it is more than double the OECD average (Figure 2.4).
       This is due to the presence of relatively large networks of small and
       medium-sized cities in rural areas.



          Figure 2.4. Urbanisation trends in OECD, Canada and Québec between
                                       1996 and 2005
                                                                                     0   0.2       0.4         0.6          0.8           1            1.2   1.4

                      Population growth in OECD urban regions (excluding Canada)

               Population growth in OECD intermediate regions (excluding Canada)

                       Population growth in OECD rural regions (excluding Canada)



                   Population growth in Canada's urban regions (excluding Québec)

             Population growth in Canada's intermediate regions (excluding Québec)

                    Population growth in Canada's rural regions (excluding Québec)



                                      Population growth in Québec's urban regions

                                Population growth in Québec's intermediate regions

                                       Population growth in Québec's rural regions


                                                                                               Percentage change in population between 1995 and 2005


        Source: OECD Regional Database (2009), internal database.




       Rural areas are gaining population but the largest increases are on
       the urban fringe and in accessible rural areas
           After a long decline, rural Québec has gained population since the
       mid-1990s, yet there are regional differences. Between 1981 and the mid-
       1990s all rural areas lost population. The modernisation of Québec’s society
       owing to the so-called Révolution tranquille, which imposed a new set of
       values and aspirations and reduced the average size of households, favoured
       the concentration of the population in the main cities and particularly in the
       metropolitan region of Montréal, whose population skyrocketed over the
       period.8 The trend changed at the end of the 1990s, when in a reaction
       against urbanisation, rural territories started to attract new residents.
       However, this phenomenon affected mainly intermediate and peri-
       metropolitan rural areas. In fact, these rural areas increased their population

OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
128 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC

      by 11%, while remote areas lost 7.4% (Figure 2.5). The capacity of these
      territories to attract new residents depends on several factors. The most
      important are: the possibility of piggy-backing urban services; access to a
      larger labour market; and the possibility of enjoying rural amenities, a
      choice particularly popular among baby-boomers (those born in the decade
      following World War II), who leave metropolitan areas after retirement.
      Conversely, remote areas have lost population over the last three censuses.



                    Figure 2.5. Demographic trends in rural and urban areas
                                             1981-2006
       1.8


                                                                         Predominantly rural MRCs


       1.6


                                                                         of resource-based regions


       1.4


                                                                         of central regions


       1.2


                                                                         Intermediate MRCs


        1


                                                                         Peri-metropolitan rural MRCs


       0.8
             1981       1986   1991   1996      2001     2006




       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.




2.2 Levels and sources of income

      Income level in rural areas
          Mirroring the national trend (see Chapter 1), personal income in rural
      areas in Québec is lower than the provincial average and the income in

                                                   OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                               2. ECONOMIC PROFILE OF RURAL QUÉBEC – 129



       urban areas.9 In particular, rural personal income is 11.6% lower than the
       provincial average. The gap is 15% if rural is benchmarked against urban.
       Also income per household follows a similar pattern (Table 2.3). There are,
       however, differences in the distribution of income with respect to the degree
       of “rurality”. Rural areas located within the metropolitan areas of
       Québec City and Montréal have income per capita higher than the provincial
       average. When income per household is taken into account, they have the
       highest level in Québec.



                        Table 2.3. Income distribution in Québec and gap
                                 with the national average, 2005
                                                      Income per          Per capita         Household
                                    Income per         household       income as a %      income as a %
                                       capita         (CAD 2005         of the national    of the national
                                    (CAD 2005        current prices)        average            average
                                   current prices)                        (Québec =          (Québec =
                                                                              100)               100)
        Predominantly rural
                                       27 550            51 689              85.9               87.7
        MRC
                Remote                 26 651            49 868              83.1               84.6
                 Accessible            28 177            52 958              87.8               89.8
        Intermediate MRC               29 294            56 590              91.3               95.9
        Peri-metropolitan MRC          33 181            65 267             103.4              110.7
        Rural                          28 364            53 737              88.4               91.2
        Urban                          33 374            60 715             104.1              102.9
        Québec                         32 074            58 954             100.0              100.0
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




       The impact of distance on income levels
           Although regional accessibility is often considered an independent
       variable that shapes the performance of rural areas, Québec’s territories
       display a non-linear relationship between distance and economic
       performance. Among MRCs which, based on their population density, are
       classified as intermediate, some areas close to the main metro-regions have
       poor performance. Conversely, some remote areas have very high personal


OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
130 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC

      income, such as Sept-Rivières, which is located in the central part of Côte-
      Nord at the extreme border of the écoumène.



        Figure 2.6. Distance (X) and income levels (Y) in intermediate rural areas
                                                      CAD 2005
       31 000

                            Rivière-du-nord
       29 000
                                                                                                      Sept-Rivières

       27 000
                            Memphremagog
                                 Beauharnois
       25 000
                                  Salaberry                      Vallée de l'Or

       23 000                                  Lac St-Jean Est                                         R² = 0.2751
                                 Beauce Sarigan       Rimouski -Neigette
       21 000        L'Amiante              Riv-du-Loup

       19 000
                                                                                  Manicouagan
       17 000
                0    100         200           300       400           500          600         700   800        900


       Source: Based on Statistics Québec.




          A similar pattern is observed in predominantly rural MRCs which
      display income disparities that are not related to distance. On average,
      predominantly rural MRCs are Québec’s less affluent areas, but, as for
      intermediate rural areas, accessibility and distance are not the independent
      variables determining territorial wealth. For instance, considering average
      distance for the major metro-regions and average income, it is possible to
      cluster predominantly rural MRCs into four groups (Figure 2.7). The first
      consists of adjacent and relatively rich areas; 25% of the predominantly
      rural MRCs fall in this group. The second is that of adjacent and poor areas;
      with 39% they represent the largest cluster. The third and the fourth groups
      are, respectively, predominantly rural areas that are remote and less
      affluent (23%) and those that are remote but rich (11%). Hence, some
      remote rural areas display very high incomes, while many central areas have
      low incomes.




                                                                 OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                                                                                 2. ECONOMIC PROFILE OF RURAL QUÉBEC – 131


            Figure 2.7. Distance (X) and income level (Y) in predominantly rural
                                            MRCs
                                                                               Disposable income 2007 – current prices

        Central and affluent                                                                                                                               Remote and affluent
             Disposable income per capita (current prices




                                                            40 000

                                                                                                                                                        Caniapiscau

                                                            35 000
                               CAD)




                                                            30 000
                                                                                      Les Pays-d'en-Haut
                                                                                                                                                               Québec (disposable) income
                                                                                                                                                               per capita CAD 24 455
                                                            25 000       La Nouvelle-Beauce
                                                                                                    Les Collines-de-l'Outaouais
                                                                                                                             Abitibi
                                                                          Bécancour    Bellechasse                                                                                       Minganie
                                                                                                          Le Domaine-du-Roy                      La Côte-de-Gaspé    Les Îles-de-la-Madeleine
                                                                 Nicolet-Yamaska            Charlevoix                      Témiscamingue
                                                                                     Mékinac                                   Matane Abitibi-Ouest
                                                            20 000         Montcalm                                                     Bonaventure
                                                                                               Papineau     Les Basques La Matapédia
                                                                   Le Haut-Saint-François                                                      Le Rocher-Percé Rural Québec (disposable)
                                                                                            Antoine-Labelle
                                                                         Le Haut-Saint-Laurent                                      La Haute-Gaspésie
                                                                                                              Pontiac                                           income per capita CAD 21 165
                                                            15 000
                                                                     0                    200                 400                   600                  800                 1 000


        Central and less affluent                                                                                                                          Remote and less affluent
                                                                                             Linear average distance (kms) from major metro-areas


        Note: Distance is the average linear distance (in kilometres) between the geographical
        centre of the MRC and the centre of the metropolitan areas of Montréal and Québec
        City.

        Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the
        Integration of the Background Report”, internal working document with information
        provided by MAMROT, Directorate for Public Governance and Territorial
        Development, OECD.




       Predominantly rural areas registered the highest increase in
       household income in the province, yet disparities are widening in
       some cases
           Rural areas display the best performance in terms of growth of
       household income between 2000 and 2005, although regional disparities are
       widening.10 In particular, the median income for households living in
       predominantly rural areas (PRs) increased by 5.4% between 2000 and 2005.
       Intermediate and urban regions had an increase of 3.8% over the same
       period (Figure 2.8 C and D). Among PRs, a majority had increases of
       over 5% a year (Figure 2.8 A). The other PRs displayed slightly positive or
       even negative growth (Figure 2.8 B). The PRs that registered lower (or
       negative) performance of household income are also Québec’s least affluent
       areas; their income is some 10% lower than good performers. This points to
       significant and increasing disparities among predominantly rural MRCs.

OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
132 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC

       Figure 2.8. Median income in rural, intermediate and urban areas between
                                     2000 and 2005
                                                                                                                  A. PRs that registered the highest growth in income
         CAD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      in %
        80 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         20


        75 000                                                                                                                                                                                                      2005                                                             variation en %
                                                                                                                                                                                                                                                                                               in                                                                                                                                                                                                                                                                                                      18


        70 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         16


        65 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         14


        60 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         12


        55 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         10


        50 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         8


        45 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         6


        40 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         4


        35 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         2


        30 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         0



                                                                                                                                                                                                                                                                                                                                                                                                                                         Brome-Missisquoi
                                                                                                                                                                                                                                                                       Manicouagan




                                                                                                                                                                                                                                                                                                                                                                                                                                                                       La Nouvelle-Beauce
                                                                                                                  Nord-du-Québec




                                                                                                                                                                                                                                                                                                                              Charlevoix




                                                                                                                                                                                                                                                                                                                                                                               Collines Outaouais
                                                                                                                                                                                          Vallée-de-l'Or




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Montmagny
                                                                                                                                   La Jacques-Cartier




                                                                                                                                                                                                                                                                                                                  Bécancour
                                                                                                                                                                               Papineau


                                                                                                                                                                                                           Lotbinière




                                                                                                                                                                                                                                                         Témiscouata




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   La Côte-de-Beaupré
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Nicolet-Yamaska


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Bellechasse
                                Charlevoix-Est




                                                                                                                                                                                                                                                                                                  Abitibi-Ouest




                                                                                                                                                                                                                                                                                                                                                                                                    Les Laurentides
                                                                                                                                                        Kamouraska
                                                                                                                                                                     Avignon
                                                                                        Mirabel




                                                                                                                                                                                                                                   Portneuf




                                                                                                                                                                                                                                                                                                                                           L'Islet
                                                                      L'Île-d'Orléans


                                                                                                  Les Etchemins




                                                                                                                                                                                                                                                                                                                                                                                                                       Val-St-François
                                                 La Haute-Côte-Nord




                                                                                                                                                                                                                                                                                                                                                     Matawinie
                                                                                                                                                                                                                                                                                                                                                                 Bonaventure




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Argenteuil
                                                                                                                                                                                                                        La Mitis




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Les Basques
                                                                                                                                                                                                                                                                                                                                                                                                                                                            Rouville




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          La Matapédia
                                                                                                                                                                                                                                                                                       Abitibi
                                                                                                                                                                                                                                              Montcalm
                 total Quebec




                                                                                          B. PRs that registered a low or negative growth in income
        CAD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               in %
        70 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         5


        65 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         4


        60 000                                                                                                                                                                                                                                                                                                                                                                                                        2005                                                                            en
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            variation in %                                                                                             3


        55 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         2


        50 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         1


        45 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         0


        40 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         -1


        35 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         -2


        30 000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         -3




                                                                                                                                                                                                                                                                                                 OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                   2. ECONOMIC PROFILE OF RURAL QUÉBEC – 133


                   Figure 2.8. Median incomes in rural, intermediate and urban areas
                                   between 2000 and 2005 (cont.)
                          C. Intermediate areas’ level of income and growth rate
          CAD                                                                                    in %
          85 000                                                                                         10

          80 000                                                                                         9

          75 000                                                                                         8
                                         2005             in
                                                variation en %
          70 000                                                                                         7

          65 000                                                                                         6

          60 000                                                                                         5

          55 000                                                                                         4

          50 000                                                                                         3

          45 000                                                                                         2

          40 000                                                                                         1

          35 000                                                                                         0

          30 000                                                                                         -1

          25 000                                                                                         -2

          20 000                                                                                         -3




                            D. Urban regions’ level of income and growth rate
        85 000                                                                                      10
                                                   2005     variation en %
                                                                      in
        80 000                                                                                          9

        75 000                                                                                          8

        70 000                                                                                          7

        65 000                                                                                          6

        60 000                                                                                          5

        55 000                                                                                          4

        50 000                                                                                          3

        45 000                                                                                          2

        40 000                                                                                          1

        35 000                                                                                          0

        30 000                                                                                          -1

        25 000                                                                                          -2

        20 000                                                                                          -3
                                                                                                   in %
         CAD




        Source: Statistics Canada (Conference Board).



OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
134 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC

      Rural income depends on economic diversification
           Paralleling a general trend in the OECD area, the economic performance
      of rural economies in Québec depends on the degree of diversification of the
      local economic base. The correlation is strong in the case of intermediate
      MRCs, where local income is significantly related to the share of
      employment in secondary and, above all, tertiary activities. This is evident
      in the case of Rivière-du-Nord and Memphremagog. In these two
      intermediate MRCs the share of employment in manufacturing and services
      is above 85%, while the less diversified area of this group, Arthabaska, has a
      share of employment in secondary and tertiary activities close to 65%
      (Figure 2.9).



         Figure 2.9. Level of disposable income and percentage of secondary and
                         tertiary activities in intermediate MRCs
                                                                          Income level calculated as of 2005

                                                             100
         % of manufacturing and service firms of the total




                                                             95
                                                                                                                                Rivière-du-nord
                                                             90

                                                                                                                 Memphremagog
                                                             85
                                                                                           Haute-Yamaska
                                                                                     Beauce Sarigan                           Sept-Rivières
                                                             80                                              Joliette
                                                                       Manicouagan                              Beauharnois
                                                             75                                                   Salaberry
                                                                                          Bas-Richelieu      Vallée de l'Or
                                                                                                            Haut-Richelieu
                                                             70
                                                                                                      Rim ouski -Neigette
                                                                                 Riv-du-Loup
                                                             65
                                                                                                   Arthabaska

                                                             60
                                                                                                                                R² = 0.3649
                                                             55

                                                             50
                                                              10 000   15 000            20 000             25 000            30 000          35 000
                                                                                                      CAD



       Source: Statistics Canada; OECD (2009), “Questionnaire for the Integration of the
       Background Report”, internal working document with information provided by
       MAMROT, Directorate for Public Governance and Territorial Development, OECD.




                                                                                                  OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
                                                                          2. ECONOMIC PROFILE OF RURAL QUÉBEC – 135



           Economic diversification can be assessed by looking at the share of
       employment absorbed by primary, secondary and tertiary activities at the
       MRC level. In the case of predominantly rural MRCs, the share of
       employment in primary activities in 2006 involved 9% of the local
       workforce. This share rises to 12% in the case of remote predominantly rural
       MRCs (Figure 2.10). Conversely, intermediate and peri-metropolitan rural
       MRCs have a more diversified economic structure. In particular, a
       specialisation in manufacturing predominates in intermediate areas (rural
       areas with a medium-sized city), where secondary activities absorb almost
       one-third of the regional workforce; it declines in peri-metropolitan areas
       where the services sector has the lion’s share (Figure 2.11).




                     Figure 2.10. Sectoral breakdown of the labour market
                             in accessible and remote rural MRCs
                                             Percentage, 2006
                     Predominantly rural regions                                                       Remote PRs

                                                                                                                       Primary activities
                                                                                                      12%
                                                                                                                       Manufacturing and
                                                                                          25%                          construction
                                                                                                                       Wholesale and retail
                          9%                                                                                  20%
                                                                                                                       Finance, insurance, real
                                                                                                                       estate
                                                                                     6%                                Non-commercial services
          26%                                                                                                          Public services
                                                                                                           14%
                                                                                           20%
                                                   Primary activities                                                  Other services
                                                                                                      3%
                                                   Manufacturing and construction
                                    25%            Wholesale and retail
                                                   Finance, insurance, real estate                    Accessible PRs
                                                   Non-commercial services
     5%                                            Public services                                    8%               Primary activities

                                                   Other services                                                      Manufacturing and
                                                                                      27%                              construction
                                                                                                                       Wholesale and retail
                                                                                                              27%
                                                                                                                       Finance, insurance, real
           17%               14%                                                                                       estate
                                                                                     5%                                Non-commercial services

                                                                                                                       Public services
                                                                                          15%
                                                                                                        14%            Other services
                     4%
                                                                                                 4%


Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
document with information provided by MAMROT, Directorate for Public Governance and Territorial
Development, OECD.




OECD RURAL POLICY REVIEWS: QUÉBEC, CANADA © OECD 2010
136 – 2. ECONOMIC PROFILE OF RURAL QUÉBEC

                      Figure 2.11. Sectoral breakdown of the labour market
                       in intermediate and peri-metropolitan rural MRCs
                                                          Percentage, 2006

                    Intermediate regions                                                    Peri-urban (rural) regions



                      9%                   Primary activities
                                                                                                4%
                                                                                                                   Primary activities

         25%                               Manufacturing and construction
                                                                                    30%                            Manufacturing and
                                                                                                         24%       construction
                                           Wholesale and retail
                                                                                                                   Wholesale and retail

                                           Finance, insurance, real estate
                               29%                                                                                 Finance, insurance, real estate

    4%                                     Non-commercial services                                                 Non-commercial services

                                           Public services                         7%                              Public services
         15%                                                                                            16%
                                           Other services                                                          Other services

               3%    15%                                                                  15%
                                                                                                 4%




Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
document with information provided by MAMROT, Directorate for Public Governance and Territorial
Development, OECD.




             Between 1991 and 2006, rural Québec as a whole reduced its economic
         dependence on primary activities. Over this period, the weight of
         manufacturing and service activities (i.e. “commercial services” and
         “wholesale and retail”) increased as a percentage of Québec’s total GDP
         (Figure 2.12). In parallel, the relative contribution of sectors such as “non-
         commercial services” or “primary activities” to regional GDP declined.
         Manufacturing and the services sector in particular have become the largest
         employers in rural Québec. They absorbed some 25% and 40%,
         respectively, of total employment in 2006. This confirms that in Québec, as
         well as in Canada generally, rural areas attract secondary and tertiary
         activities and in some cases have enough momentum to create local
         dynamism owing to the location of firms (and related services) which are
         functionally linked (see Chapter 1).
             Economic diversification has created new and better job opportunities in
         rural Québec. New jobs grew faster in rural MRCs than anywhere else in the
         province between 1991 and 2006. In terms of employment by place of
         residence, the number of jobs in rural Québec rose from 729 300 in 1991
         to 848 600 in 2006. This 16.4% increase exceeds the 10.7% growth in urban
         Québec. Over the period, the percentage of jobs in tertiary activities
         increased the most, followed by manufacturing and construction


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            Figure 2.12. Evolution of the share of GDP by sector in rural Québec
                                                       1991-2006

                40


                                                                                                      Manufacturing and
                35
                                                                                                        construction


                30


                25
                                                                                              Commercial services

                20

                                   Non-commercial services   Finance, insurance, RE
                15
                                                                                                      Wholesale and retail
                                                        Primary activities
                10

                                                             Public administration
                5


                0
                     -40     -30            -20              -10               0         10             20                30

                -5




        Note: The size of the circles represents the size of employment in each sector. The
        vertical axis corresponds to the size of GDP in percentage.
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




        (Figure 2.13).     Better   management      (organisational  innovations),
        mechanisation, and the introduction of information and communication
        technology (ICT) played an important role in this result. High GDP per
        worker, which is a proxy for labour productivity, also indicates that rural
        Québec has been able to attract good jobs between 1991 and 2006. Over the
        period, it increased by 33.2% (from CAD 42 000 to CAD 55 900). All rural
        areas displayed values higher than or equal to those of urban areas (a
        28.9% increase in urban areas and 27.4% in metropolitan regions). The
        strongest increase was in accessible predominantly rural MRCs (34.4%);
        the smallest was in remote predominantly rural MRCs (28.9%).




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                 Figure 2.13. Increase in jobs1 in predominantly rural MRCs,
                                        by macro-sector
                                               1991-2006

          Wholesale & retail

                  Services

             Manuf acturing

              Constructions

          Primary activities

                               -1    -0.5             0               0.5            1            1.5

                                              % change in the number of employed



       Note: 1. Jobs at place of residence.
       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.




          The number of jobs available to rural residents is also influenced by
      proximity to urban labour markets, as people living in rural areas close to
      urban centres benefit from the presence of a larger urban local labour
      market (LLM). The total number of workers living in rural areas is, in fact,
      higher than the number of jobs. Between 2001 and 2006 the percentage of
      workers living in rural Québec rose from 18.8% to 19.1%. In contrast, the
      proportion of jobs located in rural areas dropped from 16.1% to 15%. In
      particular, all predominantly rural MRCs (accessible and remote) can be
      considered “residential zones” since the number of people living there is
      greater than the number of local jobs. Intermediate MRCs display an even
      larger gap between residents and number of jobs, and can be classified as
      “strongly residential zones” (Figure 2.14).




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              Figure 2.14. Difference between jobs at place of work and place of
                                   residence in rural Québec
                                                  Units, 2006

                                 Jobs at place of residence      Jobs at place of work

           700 000
           600 000
           500 000
           400 000
           300 000
           200 000
           100 000
                0
                      PR MRCs      remote PR     accessible PR                      Intermediate   Peri-urban MRC
                                     MRCs           MRCs                                MRCs


                       Residential zones                                      Strongly residential zones
                                                                                  Strongly residential region
                      Residential region



        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




           Data for predominantly rural and intermediate MRCs show that the
       increase in the employment rate has been higher in predominantly rural
       MRCs with a relative specialisation in the services sector. The rise in the
       number of tertiary-sector jobs has buffered the decline of industries such as
       manufacturing and construction (particularly in intermediate MRCs) and
       primary activities (in predominantly rural MRCs). Only 14 MRCs, out of 65,
       suffered from a net loss of local jobs. In these MRCs the reduction in
       employment in primary activities, manufacturing and construction has not
       been offset by the creation of new jobs in the tertiary sector (Figure 2.15).11




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         Figure 2.15. Variation in (sectoral) employment by predominantly and
                               intermediate rural MRCs
                                          1991-2006, aggregate trends
                                                      -2   -1     0     1     2     3     4
                       Les Îles-de-la-Madeleine
                                Le Rocher-Percé
                              La Côte-de-Gaspé
                             La Haute-Gaspésie
                                    Bonaventure
                                         Avignon
                                   La Matapédia
                                          Matane
                                          La Mitis
                                    Les Basques
                                    Témiscouata
                                    Kamouraska
                                  Charlevoix-Est
                                       Charlevoix
                                            L'Islet
                                     Montmagny
                                     Bellechasse
                            La Nouvelle-Beauce
                                   Robert-Cliche
                                  Les Etchemins
                                        Le Granit
                                         L'Érable
                                       Lotbinière
                                         Portneuf
                                         Mékinac
                                   Les Chenaux
                                      Bécancour
                                    Les Sources
                         Le Haut-Saint-François
                          Le Val-Saint-François
                                       Coaticook
                               Brome-Missisquoi
                                            Acton
                                Nicolet-Yamaska
                                     Maskinongé
                                         D'Autray
                                       Matawinie
                                        Montcalm
                      Les Jardins-de-Napierville
                          Le Haut-Saint-Laurent
                                       Argenteuil
                            Les Pays-d'en-Haut
                                 Les Laurentides
                                 Antoine-Labelle
                                        Papineau
                     Les Collines-de-l'Outaouais
                       La Vallée-de-la-Gatineau
                                          Pontiac
                                 Témiscamingue
                                    Abitibi-Ouest
                                            Abitibi
                                        La Tuque
                            Le Domaine-du-Roy
                              Maria-Chapdelaine
                         Le Fjord-du-Saguenay
                            La Haute-Côte-Nord
                                     Caniapiscau
                                        Mingamie
                               Basse-Côte-Nord
                                     Baie-James




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              Figure 2.15. Variation in (sectoral) employment by predominantly and
                               intermediate rural MRCs (cont.)
                                                   1991-2006, sectoral trends

        -15         -10                   -5                   0                   5              10                   15
                                                                                                                            Les Îles-de-la-Madeleine
                                                                                                                            Le Rocher-Percé
                                                                                                                            La Côte-de-Gaspé
                                                                                                                            La Haute-Gaspésie
                                                                                                                            Bonaventure
                                                                                                                            Avignon
                                                                                                                            La Matapédia
                                                                                                                            Matane
                                                                                                                            La Mitis
                                                                                                                            Les Basques
                                                                                                                            Témiscouata
                                                                                                                            Kamouraska
                                                                                                                            Charlevoix-Est
                                                                                                                            Charlevoix
                                                                                                                            L'Islet
                                                                                                                            Montmagny
                                                                                                                            Bellechasse
                                                                                                                            La Nouvelle-Beauce
                                                                                                                            Robert-Cliche
                                                                                                                            Les Etchemins
                                                                                                                            Le Granit
                                                                                                                            L'Érable
                                                                                                                            Lotbinière
                                                                                                                            Portneuf
                                                                                                                            Mékinac
                                                                                                                            Les Chenaux
                                                                                                                            Bécancour
                                                                                                                            Les Sources
                                                                                                                            Le Haut-Saint-François
                                                                                                                            Le Val-Saint-François
                                                                                                                            Coaticook
                                                                                                                            Brome-Missisquoi
                                                                                                                            Acton
                                                                                                                            Nicolet-Yamaska
                                                                                                                            Maskinongé
                                                                                                                            D'Autray
                                                                                                                            Matawinie
                                                                                                                            Montcalm
                                                                                                                            Les Jardins-de-Napierville
                                                                                                                            Le Haut-Saint-Laurent
                                                                                                                            Argenteuil
                                                                                                                            Les Pays-d'en-Haut
                                                                                                                            Les Laurentides
                                                                                                                            Antoine-Labelle
                                                                                                                            Papineau
                                                                                                                            Les Collines-de-l'Outaouais
                                                                                                                            La Vallée-de-la-Gatineau
                                                                                                                            Pontiac
                                                                                                                            Témiscamingue
                                                                                                                            Abitibi-Ouest
                                                                                                                            Abitibi
                                                                                                                            La Tuque
                                                                                                                            Le Domaine-du-Roy
                                                                                                                            Maria-Chapdelaine
                                                                                                                            Le Fjord-du-Saguenay
                                                                                                                            La Haute-Côte-Nord
                                                                                                                            Caniapiscau
                                                                                                                            Mingamie
                                                                                                                            Basse-Côte-Nord
                                                                                                                            Baie-James

                          Primary activities   Constructions       Manufacturing       Services   Wholesale & retail



        Note: Jobs at place of residence.
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




           The analysis demonstrates that performance (measured in terms of the
       change in the number of resident workers with jobs) of a given rural MRC
       depends on three variables: i) regional accessibility (which, in turn, depends
       on the distance from the major metropolitan areas); ii) soil fertility and
       climate; and iii) population density. Depending on the intensity of these
       three variables, rural economies display qualitative changes. Small and

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      remote predominantly rural MRCs, with low population densities cannot be
      considered a smaller-scale version of the economy that is found in an
      accessible predominantly rural area or in urban regions. Their economic
      base may have specific characteristics, such as truncated supply chains, the
      presence of large firms that employ the bulk of the local residents, and
      complete dependence on external demand. On this basis, it is possible to
      divide Québec’s rural economies into three groups with different industrial
      bases and productive features.
          •   The first category is peri-metropolitan and intermediate MRCs.
              These rural economies have a diversified industrial base. They are
              home to agricultural activities because of the fertility of their soil
              and climate. They also host medium-low-technology manufacturing
              firms, such as textile firms, or they transform raw materials from
              remote territories. As they are close to metropolitan areas, residents
              can work outside of the area, in an urban area or in another adjacent
              rural labour market. Finally, the relatively high population density
              means that they are also home to a “residential economy”, in which
              proximity services, such as retail, benefit from the presence of
              constant local demand.12
          •   When population density and distance display more extreme values,
              a structural modification of rural economies appears. In Québec, a
              first structural change can be observed in predominantly rural areas
              that are located in central areas, i.e. in a range of 200-400 kilometres
              from the major metro-regions, on the northern shores of the St.
              Lawrence River. Because of their poor soil and high transport costs
              these areas have a weakly differentiated industrial base. They
              depend on traditional manufacturing and natural resources,
              especially lumber, but intense exploitation and strong international
              competition mean that they are not as profitable as they once were.
          •   Finally, in the most extreme cases, particularly in remote rural areas,
              the local economy is usually based on highly truncated supply
              chains and specialised production entirely based on local natural
              resources. This is where large firms specialised in mining or forestry
              are located, and whose presence alone justifies the existence of the
              local community.

      Sectoral contribution to rural income
      Agri-food, crop, and livestock production
          In Québec the food industry is responsible for more than 6% of
      provincial GDP. Agri-food is also important for provincial employment. In

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       14 administrative regions (out of 17) this industry accounted in 2006 for
       more than 10% of local employment (481 000 jobs) including over
       70 000 jobs in food processing plants. Agriculture alone generated a total
       income of CAD 1.17 billion in 2006 (1.9% of total GDP). Québec has the
       second largest value of agricultural production after Ontario, Its dominant
       agricultural products are: dairy (34%), pork (15%), crops (11%) and beef.13
       Some primary activities have been converted into organic production, yet
       the proportion is still very low. The 2001 Census counted 372 Québec farms
       that were certified organic, just over 1.2% of the province’s farms. Québec
       ranked third in this area, following Saskatchewan and Ontario. In Québec,
       2 230 farms reported certified organic commodities. Four out of ten of these
       farms reported producing a certified organic “other” crop, mostly organic
       maple products. The second highest category was fruit, vegetable or
       greenhouse products.
           Despite their importance, agricultural activities cover a small portion of
       the provincial territory. What is formally considered agricultural land covers
       4% of the provincial territory and represents 34% of the écoumène. This
       area is protected by the 1978 Loi sur la protection du territoire et des
       activités agricoles (law on the protection of agricultural land and
       agricultural activities) and cannot be used for other activities, such as urban
       development or forestry (Table 2.4 and Figure 2.16).



              Table 2.4. Areas protected by the law on agricultural land, 2009

                                     Protected
                                                      Total
                                    agricultural                            Écoumène
                                                     surface
                                       land
                                        km2             km2         %          km2         %
         Predominantly rural MRC       43 195      1 312 506         3        144 455      30
              Remote                   17 094      1 245 586         1         96 190      18
              Accessible               26 101         66 920        39         48 265      54
         Intermediate MRC              13 350        115 535        12         28 830      46
         Peri-metropolitan MRC          2 144         10 188        21          4 130      52
         Rural                         58 689      1 438 228         4        177 415      33
         Urban                          4 759         11 107        43         11 107      43
         Québec                        63 449      1 449 335         4        188 522      34
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




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          Figure 2.16. Agricultural zone in Québec as defined by the law on the
                             protection of agricultural land




                                                              Protected agricultural land
                                                              Regional County Municipality




       Source: Government of Québec.




           Because of climate and soil quality, primary agriculture is concentrated
      in the south of Québec, along the shores of the St. Lawrence River in the
      most urbanised area of the province. In particular, the land below 200 metres
      above the sea level, i.e. the area south of the St. Lawrence River, is the most
      fertile agricultural land in the province. For example, the Montérégie
      administrative region, located on the border with the United States and
      within the area below 200 metres above sea level, accounts for 24% of
      Québec’s farms, the highest proportion in the province. The administrative
      region with the second highest share is Chaudière-Appalaches, which has
      about 19% of all Québec farms, and presents the highest specialisation in the
      production of maple syrup. Outside of this area, and more than 200 metres
      above sea level, the quality of agricultural land is lower as measured by crop
      heat units, which measure both climate conditions and quantity of daylight
      (Table 2.5).14 In these areas, agriculture represents a marginal economic
      activity and the area of land under production is declining constantly. In
      accessible predominantly rural areas, farms are concentrated within a
      200-kilometre radius of the largest metro-regions (Figure 2.17).




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                                Table 2.5. Soil fertility and altitude

                                               Crop heat units
                             < 200 m           > 200 m         Total       < 200 m        > 200 m
                               km2               km2            km2           %              %
Predominantly rural MRC      258 334         1 054 173      1 312 508         20             80
           remote            240 533           999 970      1 240 503         19             81
           accessible         17 801            54 203         72 005         25             75
Intermediate MRC              14 332           101 203        115 535         12             88
Peri-metropolitan MRC          2 481             7 707         10 188         24             76
Rural                        275 147         1 163 083      1 438 231         19             81
Urban                          8 415             2 692         11 107         76             24
Québec                       283 563         1 165 775      1 449 338         20             80
Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
document with information provided by MAMROT, Directorate for Public Governance and Territorial
Development, OECD.



             Figure 2.17. Number of farms in predominantly rural MRCs, 2006

 450

 400

 350

 300

 250
                                                                            R² = 0.0264
 200

 150

 100

   50

     0
         0            200              400          600           800       1 000         1 200

Note: The data only refer to the number of farms. They do not take into consideration their size, which
is usually larger in accessible areas.

Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the Integration of the
Background Report”, internal working document with information provided by MAMROT, Directorate
for Public Governance and Territorial Development, OECD.


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          Farms tend to be smaller in Québec than in the rest of Canada (see
      Chapter 1), yet the average dimension is increasing due to concentration of
      property. The average size of Québec farms increased by 35.6%, from
      194 acres in 1981 to 263 acres in 2001.15 Symmetrically, the number of
      census farms declined by 10.7% over the same period,16 and the total
      number of farms declined by 33.2% (the national average was 22.4%).
      Because of the concentration process, the number of dairy farms, still the
      most common type in Québec, has declined drastically over the past two
      decades. In 1981, dairy farms accounted for nearly half (41.3%) of total
      farms. By 2001, their number had declined to just over one-quarter of the
      total. Québec still has the largest number of dairy cows among Canadian
      provinces. However, farmers reported 407 206 dairy cows on their farms in
      2001, down by 13.7% from 1996, the largest decline in numbers among the
      provinces. These changes in the productive framework of agriculture
      parallel structural transformations in Québec’s farm society (Box 2.3).
          Farm families are increasingly involved in activities outside of their
      farm and have additional sources of income. In the 2006 Census, about 39%
      of farm operators in the province of Québec reported their main occupation
      as non-agricultural, up from 32.6% in 2001. This suggests that more
      operators are working off the farm. A higher proportion of female than male
      operators reported a non-agricultural occupation (48.7% and 35.4%,
      respectively). Among non-agricultural occupations, the top occupation for
      Québec's male operators was transport equipment operators and related
      workers, excluding labourers, while for women operators, secretarial
      occupations predominated. As a consequence, farm families have many
      different sources of income.17 In 2006, 9 020 farm families in the province
      of Québec were involved in an incorporated farm. This is considerably
      fewer than the 21 915 farm families involved in an unincorporated farm
      in 2006, down 9.6% from 24 240 families in 2001. The median total income
      for Québec farm families on unincorporated farms in 2005 was
      CAD 51 204, compared to CAD 58 675 for census families in the province's
      general population.

      Forestry and logging
           Forestry represents 3% of the provincial economy, and in 2006 exports
      reached CAD 11.1 billion with a net trade balance of CAD 9.2 billion in
      forest products. Québec’s forests account for 20% of the total Canadian
      forest and 2% of the world’s forests. In Québec, forests cover an area of
      761 000 km2 (551 400 km2 of continuous boreal forest, 98 600 km2 of mixed
      forest and 111 100 km2 of hardwood forest), equivalent in size to the
      territories of Norway and Sweden combined (Figure 2.18). Some 55% of


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                    Box 2.3. Structural changes in Québec’s farm society
             Québec's farm population continues its steady decline in numbers, dropping
         by 6.2% to 90 940 between 2001 and 2006. In 1931, when the farm population
         was counted for the first time, 777 017 people were living on a farm, i.e. 27% of
         Québec's population. By 2006, farms accounted for only 1.2% of the province’s
         population. In less than one lifetime Québec has moved from 1 in 4 inhabitants
         living on a farm to 1 in 83. At the same time, Québec's total population grew
         from 2 874 662 in 1931 to 7 546 130 in 2006. The farm population is also ageing
         faster than the provincial trend. In 2006 those aged 65 and older made up 7.2% of
         the province's farm population, up from 4.8% in 1971. Those 65 and over in 2006
         made up slightly more of the province's general population, at 14.3%.
            The language profile has also been evolving. Of Québec's entire farm
         population in 2006, 90.8% reported French as their mother tongue, 6.3% reported
         English, and the remainder (2.9%) reported a mother tongue other than English or
         French. Of those who reported another language, the largest group named
         German. The profile for the province's general population in 2006 differed, with
         80.1% reporting French as their mother tongue, 8.6% reporting English, and the
         remaining 11.3% citing another language. Of the other languages spoken by the
         province's general population, the Italian language led, followed by Arabic and
         then Spanish. The 2006 Census of Population counted 2 680 immigrants to
         Canada in the province of Québec's farm population or 2.9% of the total
         provincial farm population. In 1971, immigrants made up 1.2% of the province's
         farm population. The Swiss were a significant proportion (32.0%) of Québec's
         immigrant farm population, but they made up less than 1% of immigrants in the
         province's general population. About 14% of the province's immigrant farm
         population was from France, compared to about 7% of immigrants in Québec's
         general population. The third most common place of birth for Québec's
         immigrant farm population was Belgium at 9.0%, compared to 1.1% in the
         province's general population.
             In 2006, 7.2% of Québec farm operators had university degrees (bachelor level
         and above) up from 6.4% in 2001. As a point of comparison, approximately 20%
         of the province's total labour force had university degrees. Proportionally more
         Québec farm operators reported apprenticeship or trades certificates or diplomas
         than the overall labour force (22.2% compared with 18.1%). This may well be the
         result of a number of factors, including time required away from the farm and a
         preference for the more practical approach of college courses on animal care and
         field-cropping techniques.
         Source: 2006 Census of Agriculture, Statistics Canada, www.statcan.gc.ca/ca-
         ra2006/index-eng.htm.



        this area is productive (commercial) forest (Québec Ministry of Natural
        Resources, MRNF).18


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                                              Figure 2.18. Different types of forests in Québec




       Boundaries                                               Vegetation subzones
                      International                                  Southern arctic subzone        Continuous boreal forest subzone
                      Provincial                                     Forest tundra subzone          Mixed forest subzone
                      Québec-Newfoundland-and-Labrador border
                      (this border is not definitive)                Taiga subzone                  Hardwood forest subzone

                      Northern limit of timber allocation




       Cartographic    Lambert Conformal Conical,
       projection      standard parallels 45° and 60°

       0                      200 km




       Source: Rigorous and Adaptive Forest Management, Ministry of Natural Resources and
       Fauna, Department of Forest Inventory, Government of Québec,
       (www.mrnf.gouv.qc.ca/english/publications/forest/understanding/forest-management.pdf).



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            There are almost 6 000 firms active in Québec’s forestry sector, and the
       majority are located in the north of the province and in remote
       predominantly rural MRCs in the south. In the north (mainly Nord-du-
       Québec) the forest is public and large enterprises exploit it under a
       concession regime. The rest of the forest, some 10% of the total, is located
       in the centre-south of the province and is private. In this area a large number
       of SMEs exploit the forest resources, and within the écoumène, forestry is
       also an ancillary production for more than 25 000 farmers. Activities related
       to forestry are located in remote rural areas, and in some cases they
       represent the most important economic activity. It is the case for the MRC of
       Maria-Chapdelaine (region of Saguenay – Lac-Saint-Jean), which, with a
       total population of 25 000, is home to 125 forestry firms (Figure 2.19).



          Figure 2.19. Location of forestry firms within Québec's écoumène, 2008

                                     140
                                                                      Maria-
                                     120                            Chapdelaine


                                     100
          Absolute number of firms




                                      80

                                      60

                                      40

                                      20

                                       0
                                           0       200       400        600          800      1 000      1 200
                                           Linear kilometres (average distance from major metro-areas)


        Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the
        Integration of the Background Report”, internal working document with information
        provided by MAMROT, Directorate for Public Governance and Territorial
        Development, OECD.




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           Québec’s forestry industry presents multiple specialisations and directly
      generates more than 80 000 jobs.19 In the whitewood sector, 300 factories
      consume more than 10 000 m3 of wood a year. The sector directly generates
      more than 20 000 jobs. For the woodworking and hardwood exploitation
      sector, Québec ranks in first place among Canadian provinces with 65% of
      Canadian production (Québec Forestry Industry Council). The pulp and
      paper industry is also very important and millions of tonnes of commercial
      articles, newspaper, different kinds of paper and paperboard are produced
      annually. More than 40 000 Québec workers find employment in one of the
      numerous sawmills located in more than 200 municipalities, in which they
      are the main employer. Another emerging specialisation is in the non-timber
      forest products industry, which has four major sectors: agro-forest food
      products (e.g. wild fruits), ornamental products (e.g. Christmas trees),
      pharmaceutical and nutraceutical products (e.g. Canada yew extract) and
      manufactured products or materials (e.g. resins, alcohol, essential oils).
      In 2005, blueberry sales amounted to CAD 38 million and the production of
      Christmas trees was valued at CAD 50 million. Finally, the forest is also
      home to economic activities related to hunting, fishing, recreational tourism
      and ecotourism, which generate 32 000 jobs and had a total turnover of
      some CAD 450 million in 2005.
          Given the importance of the forest, Québec has an integrated system to
      manage and protect this resource. In 1996, the provincial government
      introduced the Forest Act to guarantee the sustainability of the forest. Under
      the law Québec forest managers must respect the Règlement sur les normes
      d’intervention dans les forêts du domaine de l’État (Regulation respecting
      standards of forest management for forests in the domain of the State). The
      aim of this regulation is to ensure the maintenance or reconstitution of the
      forest cover, the protection of forest resources, including the quality of water
      and wildlife habitats, and the compatibility of forest management activities
      with other uses of the territory. In 2005, and again in 2008, Québec’s
      legislation was amended to introduce the concept of ecosystem-based
      management. This new approach attempts to ensure that biodiversity is
      maintained and ecosystems remain viable while meeting socioeconomic
      needs and respecting social values related to the forests. To do so, new
      approaches to silviculture are tested and pilot projects implemented, in
      partnership with scientists and with the direct involvement of local
      communities (Box 2.4).




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                         Box 2.4. Forest protection and participatory
                       resource management: the experience of Québec

            Forest management plans that came into effect in 2008 provide for the
         maintenance of mature and over-mature forests. These ecosystems have special
         ecological attributes (structure, woody debris and microclimates) which are often
         essential for certain species of birds, small mammals, mushrooms and insects.
         Québec is in the process of adding a vast network of biological refuges to its
         protected areas in which there will be no harvesting of forest products. Over the
         last 40 years, Québec has carried out three forest inventory programmes: the
         network now consists of more than 28 000 ecology observation points. These
         inventories have made it possible to analyse the forest ecosystems' evolution,
         their fragility, their productivity and their wood volume; they are also essential
         for locating protected areas. By drawing a line on a map above which the
         harvesting of wood is not allowed, the government protects the northern
         territories whose special characteristics may adversely affect the forest’s ability to
         regenerate itself or grow (climate, soil, natural perturbations). The result of this
         northern limit is to exclude nearly 70% of the boreal vegetation zone from
         exploitation (including the tundra forest, the taiga and a part of the continuous
         boreal forest) yet allow other activities to take place. So far, nearly 170 000 km2
         of public and private forests are certified through a forest certification standard,
         which represents more than 40% of Québec's productive forest territories. In 2005
         Québec enacted a first major decrease in the annual allowable cut of 20% for
         softwood species and 5% for hardwoods. The decrease was 25% in the north of
         Québec. This prudent move was made to ensure the sustainability of wood
         resources in public forests, and was redefined in 2008.
            At the same time, to enhance the effectiveness of the strategy to protect the
         forest, the provincial government involves local communities in decisions that
         concern the use of their resource. There are different ways in which the
         population can express their opinions on the direction forestry management and
         development should take, under an information and consultation policy which is
         part of the Forest Act. Local and regional stakeholders (regional county
         municipalities, aboriginal communities, wildlife organisations, etc.) are consulted
         when forest management plans are prepared. Aboriginal communities also occupy
         an important place in the planning and conducting of forest management
         activities. They benefit, among other things, from special programmes to
         encourage their training and participation in these activities, to promote job
         creation in forestry and to support their communities.
         Source: Government of Québec, Ministry of Natural Resources,
         www.mrnf.gouv.qc.ca/english/publications/forest/understanding/forest-management.pdf.




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      Mining and quarrying
          Mining is another key primary sector for Québec’s rural areas. Primary
      metal processing alone represents more than 6% of the provincial economy.
      Mining activities directly generate more than 18 000 jobs and investment
      approached CAD 1 billion in 2006. Québec is one of the world’s ten largest
      producers in the mining sector.20 The province has 30 mines,
      158 exploration firms and 15 primary processing industries. Abitibi-
      Témiscamingue, in the western part of the province, was the first region to
      experience the mining boom. This region, mostly predominantly rural, has
      gold and copper. Exploration has since been carried out in the regions of
      Saguenay-Lac-Saint-Jean, Côte-Nord, and Nord-du-Québec. Between 2003
      and 2007 exploration expenditure soared from CAD 134 million to
      CAD 430 million, an indication of the province’s potential in this field.21

      Production of energy (hydroelectricity and wind energy)
          Québec has major renewable energy resources. As discussed in
      Chapter 1, Québec is strongly specialised in the production of energy, which
      contributed 3.2% of provincial GDP in 2006, and directly generates more
      than 50 000 jobs. In particular Québec is Canada's leader in hydroelectric
      energy production, which is generally located in remote rural areas and in
      the north of the province which has an abundant supply of water. It is a
      major exporter of hydroelectricity to other Canadian provinces and the
      United States and is building additional capacity. It is also installing wind
      turbines on the north shore of the St. Lawrence River and has a strong
      interest in third generation biofuels based on cellulosic processes that could
      use low-value wood supplies.
          The principal economic actor in this sector is Hydro-Québec, the
      world’s largest operator in the field of hydroelectricity. With
      59 hydroelectric and one nuclear generating station, Hydro-Québec is
      Canada’s largest electricity generator and one of the largest in North
      America. The combined capacity of its power stations was
      36 429 megawatts in 2008. Hydro-Québec generates and distributes
      electricity within the province, to Ontario, and to the United States. The
      Québec government is the sole shareholder of Hydro-Québec, which directly
      employs 46 000 people.
          Wind energy, while small compared to hydroelectricity, is a growing
      industry in rural areas. The province of Québec has 100 000 MW of wind
      energy potential within 25 kilometres of existing transmission lines that is
      economically viable in the short and medium term. In particular, the Gaspé
      Peninsula is home to the majority of Québec’s wind farms. This region has
      some of the best wind potential in Québec and is expected to lead to the

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       development of a wind energy industry able to compete at national and
       international levels. The construction of wind farms using components
       manufactured on the Gaspé Peninsula is a first step towards reaching this
       objective.

       Manufacturing
           Manufacturing activities represent a traditional specialisation in rural
       Québec. They generated 25% of GDP in rural areas in 2006, and accounted
       for more than 250 000 direct jobs. Québec has the highest specialisation in
       manufacturing activities within Canada. This is due in part to geographical
       proximity to the United States, which absorbs the bulk of provincial exports.
       For many years rural Québec represented an ideal location for firms
       specialised in traditional sectors such as textile or clothing. The workforce
       was less expensive than in the United States because of lower wages, and
       was equally skilled, and Hydro-Québec provided inexpensive electricity.
       More recently Québec has lost many of these firms because of an inability to
       compete with low-wage developing countries and the reduction of tariff
       barriers.
            There are important differences in the territorial concentration of
       manufacturing firms in rural areas. The location of manufacturing in Québec
       is strongly influenced by the availability and cost of land, the availability of
       a workforce, and transport costs.22 Thus, while intermediate and
       predominantly rural areas located in more accessible parts of the province
       are attractive to firms, remote areas are not and tend to host specific sectors
       strongly linked to the resource-based industries (Figure 2.20).
           Data on the distribution of firms in predominantly rural MRCs show that
       SMEs tend to concentrate in accessible predominantly rural MRCs, while
       remote areas are more likely to host large firms. The choice of location of
       manufacturing SMEs is probably driven by larger local markets, lower
       transport costs, particularly to the United States, and access to services.
       Accordingly, accessible areas, well connected with urban markets or major
       transport infrastructure, offer SMEs some location advantages. Where these
       externalities are not available, as in remote rural areas, firms have to
       internalise their production inputs. This leads to the higher concentration of
       large firms in this type of rural area (Figure 2.21). Data also show that the
       number of micro firms (1-4 employees) located in PRs dropped
       between 2001 and 2006. This negative trend may be due to a change in the
       registration of firms adopted by Québec in 2005. However provincial data
       show that there is a concentration of micro-firms and small firms in the
       areas surrounding Montréal and a reduction in peripheral areas.23 The
       reduction of firms has been more intense in sectors such as textiles and
       clothing, forestry, and agro-food.

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           Figure 2.20. Location of manufacturing firms in predominantly rural areas –
                      absolute number (left hand) and per capita (right hand)
                                                             2006, distance in kilometres
 180                                                                          0.007
                    Absolute number of manufacturing firms                                      Per capita number of manufacturing firms
 160
                                                                              0.006
 140

 120                                                                          0.005

 100

  80                                                                          0.004


  60
                                                                              0.003
  40

  20                                                                          0.002

   0
                                                                              0.001
 -20                                                     R² = 0.3555                                                                       R² = 0.2283

 -40
                                                                                 0
       0      200         400         600          800         1000    1200
                                                                                      0   200           400           600          800           1000    1200


Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the Integration of the
Background Report”, internal working document with information provided by MAMROT, Directorate
for Public Governance and Territorial Development, OECD.




               According to St-Pierre and Mathieu (2005), small firms in remote areas
           face structural problems relating to the availability of skilled labour and
           access to finance. Their study uses a different territorial classification from
           the one implemented in the OECD assessment and divides Québec into three
           main areas: metropolitan regions, urban regions and remote areas.
           Entrepreneurs’ answers show that the obstacles and needs of SMEs vary
           according to their location.24 In particular, firms located in remote areas
           highlight the need for external (public) help for obtaining access to skilled
           labour, identifying new possible markets/niches, obtaining access to finance
           for marketing and research and development (R&D), and getting access to
           credit (especially if the firm is going through a crisis).

           Services sector
                As discussed above, a flourishing services sector is a common
           characteristic of competitive rural MRCs in Québec. On average, rural
           Québec lost service firms between 2001 and 2008 (Figure 2.22). The
           distribution of tertiary firms is correlated with the level of population and
           with demographic trends, meaning that a rural area that is losing population
           is also losing service firms. A very clear example is the number of education
           services (schools, etc.) that have been increasing strongly in intermediate
           MRCs and in peri-metropolitan MRCs, the two areas that displayed higher

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                Figure 2.21. Distance and increase in firm numbers according to size
                                                                     2001-06
 0.1                                                                         1.4
                            1-4 employees                                                              5-19 empoyees

   0                                                                         1.2


                                                                               1
 -0.1

                                                                             0.8
 -0.2

                                                                             0.6
                                                        R² = 0.1241
 -0.3
                                                                             0.4
                                                                                                                                  R² = 0.2066
 -0.4
                                                                             0.2

 -0.5
                                                                               0


 -0.6                                                                       -0.2


 -0.7                                                                       -0.4
        0      200   400          600         800   1 000           1 200          0      200    400       600           800   1 000           1 200


 1.2                                                                        2.5
                           20-199 employees                                                            + 200 employees
   1                                                                          2

 0.8
                                                                            1.5

 0.6
                                                                              1
 0.4
                                                                            0.5
 0.2
                                                                                                                                 R² = 0.0569
                                                      R² = 0.3012             0
   0

                                                                            -0.5
 -0.2


 -0.4                                                                        -1


 -0.6                                                                       -1.5
        0      200   400          600         800   1 000           1 200          0      200    400       600           800   1 000           1 200




Note: The classification presented in this chart follows that set by Québec's ministry in charge of
economic development (MDEIE). In this classification, firms with 1-4 employees are considered
micro-firms, those with 5-19 as small, 20-199 as medium, and over 200 as large. This classification is
different from the one adopted by the OECD in which firms with fewer than 9 employees are micro-
firms, those with 10-49 are small, 50-249 are medium, and over 250 are large.

Source: Statistics Canada.




            demographic growth between 2001 and 2008. There are some exceptions.
            Public services are more numerous in rural areas, owing to the presence of a
            large number of small municipalities.
                Service firms are also becoming larger. The number of wholesale and
            retail firms has been decreasing faster than the population because of the
            growing concentration of activities. Large firms have squeezed small

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      businesses out of the market. The same dynamic of concentration has led to
      a decreasing number of financial firms (clustered in Figure 2.22 with
      insurance and real estate). In fact, the number of bank offices has been
      decreasing owing to branch consolidation and to the fact that Desjardins (the
      most important financial player in rural Québec) reduced its presence in
      small remote communities.




      Figure 2.22. Variation of the number of tertiary firms in rural Québec
                                             2001-08

             -20%   -15%   -10%   -5%   0%   5%    10%    15%


                                                                Wholesale and retail




         Rural
                                                                Finance, insurance, and real estate




                                                                Other services (transportation, restaurants,
                                                                professional services, technology, etc.)




                                                                Education
        Urban




                                                                Health and social services




                                                                Public administration



       Québec

                                                                Total




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                         Figure 2.22. Variation of the number of tertiary firms
                                        in rural Québec (cont.)
                                                    2001-08
                         -30%   -20%   -10%    0%       10%    20%     30%    40%

                                                                                    Wholesale and retail


                 PR MRCs


                                                                                    Finance, insurance, and
                                                                                    real estate




         Remote PR MRCs
                                                                                    Other services
                                                                                    (transportation,
                                                                                    restaurants,
                                                                                    professional services,
                                                                                    technology, etc.)


                                                                                    Education

       Accessible PR MRCs




                                                                                    Health and social
                                                                                    services



         Intermediate MRCs
                                                                                    Public administration




                                                                                    Total
          Peri-urban MRCs




Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
document with information provided by MAMROT, Directorate for Public Governance and Territorial
Development, OECD.




2.3 Level of well-being of rural Québécois

       The rural population’s access to key services
           In Québec, as marginal costs have increased, public and private services
       have concentrated in urban areas. Over the past 20 years, the average
       distance to visit a health facility for childbirth rose from 30 to 50 kilometres,

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      because fewer centres offer this service. This is due both to an increase in
      the critical mass needed to provide appropriate quality of service and to a
      decline in the fertility rate and thus in demand for the service. As a result,
      rural Québécois have had to accept the lack of nearby services. Recent
      research has shown that rural dwellers perceive a service as available or
      accessible if the facility delivering it is located within a one-hour trip from
      their place of residence.25 Of course, the perception may change depending
      on the kind of service and the characteristics of the user. For instance, the
      research also shows that retaining a primary school (public service) or
      grocery store in a small rural community is considered a priority to be
      satisfied through specific institutional arrangements. However, maintaining
      a small school or other kinds of key services is not always possible. Finding
      ways to rationalise service delivery (or to find alternatives) is an important
      issue in Québec, as it is in other OECD rural regions.
           Several means of lowering the marginal cost of services are currently
      being implemented in Québec. First, services are delivered through hubs
      within a territorial network. Many OECD countries have adopted this
      method of delivering health care or education, for instance. The advantage is
      that basic services that rural residents use relatively often remain close by,
      while they go to urban areas for more specialised services. Territorial
      networks, however, are not a panacea. Remote rural areas that cannot be
      integrated in territorial networks continue to lose key services, with an
      impact on their socioeconomic sustainability. Second, some large service
      facilities (library, indoor pool, but also landfills) are established by a group
      of municipalities through “inter-service agreements”. This makes it possible
      to share the cost among a larger population pool. Municipalities involved in
      the use of the facility establish mechanisms to share the costs and guarantee
      equal access to all those living in the area. Again, this solution is not
      appropriate for isolated communities. A third solution is the use of ICT. In
      some communities services are delivered online through the Internet. But
      this may create problems of access for certain categories of the population
      (e.g. elderly people), and rural Québec has a relatively low rate of access to
      the Internet, as discussed below. Finally, some rural MRCs produce services
      through the voluntary sector, civic engagement and co-operatives. The basic
      logic of the approach is that if residents of rural and small town places wish
      to retain these services, they will have to find new ways to have them
      delivered. In this context, voluntary groups have been filling many of the
      emerging service gaps (Halseth and Ryser, 2007). These services, however,
      often address complex problems, such as unemployment, community
      revitalisation, community health, or recognition of volunteers’ skills. They
      may require information, support or assistance from a range of sources and
      institutions, conditions that may not be met in rural areas.26


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       Health care and social services
           The number of health-care and social-service facilities is relatively high
       in rural Québec, yet access to specialised services may be difficult for
       people living in remote areas. The number of facilities depends on distance
       from major metro-regions and population density. This correlation is evident
       in predominantly rural MRCs (Figure 2.23). However, when normalised for
       local population, rural areas display a higher concentration of facilities than
       urban centres (Table 2.6). This reflects the presence of many small general
       service facilities in rural areas, whereas larger and specialised facilities are
       usually located in urban areas. A provincial policy implemented in the
       early 1990s increased the number of day nurseries throughout the province
       and particularly in rural areas. Therefore, large numbers may not necessarily
       indicate good access to health care and social services across rural Québec.
       The territorial organisation of health care in Québec is done at the scale of
       the 17 administrative regions; thus, each health district covers a very large
       portion of territory.

               Figure 2.23. Number of health-care facilities in predominantly rural
                   MRCs (X) and distance from major metropolitan areas (Y)
                                                   Distance in kilometres, 2006
         120

                               Les Laurentides
                            Brome-Missisquoi

         100


                        Portneuf
                                                 Le Domaine-du-Roy
         80
                       D'Autray        Antoine-Labelle

                                Matawinie
                                             Témiscouata
                                        Kamouraska                Maria-Chapdelaine
         60
                                                          La Mitis Matane

                                                                                      La Côte-de-Gaspé
                                Le Granit

         40
                                                                     La Haute-Gaspésie
                                                                                 Le Rocher-Percé
                                                                                                         Les Îles-de-la-Madeleine
                                                 Les Basques    Témiscamingue                                        Minganie - Basse-Côte-
                                                      La Haute-Côte-Nord                                                      Nord
                                Les Etchemins
         20
                    Acton                                       Le Fjord-du-Saguenay
                                                                                                                               R² = 0.0891
                                                                                              Caniapiscau


           0
               0              200                   400                 600                   800               1 000                1 200



        Source: OECD Regional Database (2009); OECD (2009), “Questionnaire for the
        Integration of the Background Report”, internal working document with information
        provided by MAMROT, Directorate for Public Governance and Territorial
        Development, OECD.

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          Table 2.6. Number of public health-care and social-service facilities in
                                      rural Québec

                                            1996-2008
                                  1996                   2008                   2008/1996
                                    n               n           n / 10 000 h.       n
       PR MRCs                     399             518               3.8          119
       Intermediate MRCs            52              68               1.7           16
       Peri-metropolitan MRCs       15              26               1.6           11
       Rural                       466             612               3.1          146
       Urban                       814           1 129               2.1          315
       Québec                    1 280           1 741               2.3          461
       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.




          A main limit, especially in the case of health-care services, is the lack of
      qualified personnel at the local level. This is a broader Canadian issue as
      well. For instance, recruitment of medical specialists and nursing staff for
      public health institutions is particularly difficult in rural and remote northern
      areas throughout Canada. Remote northern areas have the unique challenge
      of extreme social isolation, although turnover in rural and northern areas is
      reportedly low. Remote areas that have retained experienced public health
      medical staff for long periods now face the problems associated with an
      ageing workforce. Medical staff new to the north need the opportunity to
      develop the breadth of skills and depth of knowledge needed to practice
      independently. Funds and mechanisms for continuing education are
      therefore an important part of retention and career development for public
      health staff in remote areas.

      Education
          As birth rates have declined, rural populations have seen school
      accessibility decrease because there are too few students to justify keeping a
      local school open. Between 1996 and 2008, some 270 of the province’s
      primary and secondary schools were closed. A large share were located in
      rural MRCs, where an average of ten schools a year were closed. In 2008,
      there were six schools per 10 000 inhabitants in rural areas. The figure is
      slightly higher in predominantly rural MRCs, which have 11 schools per
      10 000 inhabitants (Table 2.7). The higher concentration is due to the
      presence of very small schools in remote rural communities. Tertiary
      education is mainly located in urban areas (88% of total facilities), but many

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       of the 48 CEGEPs (Collèges d'enseignement général et professionnel) in
       Québec are in rural areas. CEGEPs are comparable to a community college.
       A CEGEP diploma is a university entrance requirement. The purpose of
       CEGEPs is to make postsecondary education more accessible, as well as to
       provide proper academic preparation for university.27



                  Table 2.7. Number1 of education facilities in rural Québec
                                                 1996-2008
                                                                                    University and
                                          Primary and secondary schools
                                                                                       CEGEP
                                   1996                 2008            2008/1996       2008
                                     n            n       n / 10 000 h.     n       n            %
        PR MRCs                     1 581       1 502        10.9          -79       51       9.7
        Intermediate MRCs             326         271         6.6          -36        6       1.1
        Peri-metropolitan MRCs        151         146         9.0           -5        2       0.4
        Rural                       2 058       1 919         9.8         -120       59      11.2
        Urban                       2 658       2 509         4.6         -149      467      88.8
        Québec                      4 716       4 428         6.0         -269      526     100.0

        Note: 1. We refer here to the unit of evaluation and not to the number of higher
        education institutes or primary or secondary schools. A unit of evaluation comprises one
        property or a group of properties belonging to a single owner. A higher education
        institute or a primary or secondary school can be the owner of more than one unit of
        evaluation (property) with one building, several buildings or no buildings.

        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




           Reduced access to education and high wages in resource-based
       industries may also play a significant role in dropout rates and student
       performance. In rural Québec, around 70% of students complete secondary
       school. This is 5 and 7 percentage points lower than the provincial and urban
       average, respectively (Table 2.8). Within rural areas, predominantly rural
       MRCs have the lowest performance (69%). This may be because the lack of
       local secondary schools forces pupils to commute long distances. The
       presence of high-wage jobs in resource-based industries is generally
       considered another factor influencing the number of dropouts (especially
       males) in rural areas, particularly in the remote ones.28



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        Table 2.8. Annual rate of graduates and dropouts in secondary schools in
                                      rural Québec

                            Cumulated values, 2004/05, 2005/06, 2006/07
                                     Total          Graduates                 Dropouts
                                      n           n             %          n             %
       PR MRCs                     44 381      31 335           71      13 044           29
       Remote PR MRCs              17 474      11 976           69       5 496           31
       Accessible PR MRCs          26 907      19 359           72       7 548           28
       Intermediate MRCs           12 460       8 558           69       3 902           31
       Peri-metropolitan MRCs       4 810       3 489           73       1 321           27
       Rural                       61 651      43 382           70      18 267           30
       Urban                      170 259     131 639           77      38 620           23
       Québec                     231 908     175 021           75      56 887           25

       Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
       internal working document with information provided by MAMROT, Directorate for
       Public Governance and Territorial Development, OECD.




      Internet
          Québec displays a significant rural-urban split in terms of household
      access to the Internet. In general Québec has a relatively high level of
      Internet access. According to CEFRIO (Centre francophone
      d’informatisation des organisation), in 2008 74.6% of households were
      connected to the Internet in Québec and 61.8% had intermediate- or high-
      speed access, a situation similar to that of Norway and the Netherlands, the
      OECD countries with the highest percentage of households connected to the
      Internet. However, access is lower in rural areas, where 57% of households
      have an Internet connection and only 44% have intermediate or high-speed
      access.

      Financial and banking services
          In Québec, rural dwellers access credit and banking services mainly
      through co-operative financial institutions. Québécois use co-operative
      financial institutions more than other Canadians (Figure 2.24). These
      organisations, which also exist in other sectors to provide services in rural
      areas, were mostly the result of spontaneous efforts by people to help
      themselves and have played a key role in supporting the development of

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       rural Québec. Each financial co-operative (caisse populaire is presently
       required to belong to one of 11 federations, which in turn belong to the
       province-wide confederation, the Confédération des caisses populaires et
       d'économie Desjardins du Québec (Desjardins). The Desjardins Group is the
       largest association of credit unions in North America.29 Founded in 1900, it
       is located mostly in Québec but also in Ontario, Manitoba, and New
       Brunswick. It is composed of 536 local caisses, which serve 5.8 million
       members. In Québec Desjardins serves 80% of the population including
       children who are members of the co-operative network.



             Figure 2.24. Percentage of Canadians using a credit-union or caisse
                       populaire as their primary financial institution
                                                   1997

                 80
                 70
                 60
                 50
                 40
                 30
                 20
                 10
                  0




        Source: Department of Finance Canada, www.fin.gc.ca/toc/2000/ccu_-eng.asp.




           Due to the increasing complexity achieved by the Desjardins network,
       individual caisses have been integrated in a single structure, while the
       number of branches in rural areas has been declining. Technological
       changes continue to push the credit union movement to re-evaluate the most
       appropriate method of delivering services to members. Many credit unions
       and caisses populaires now offer services over the Internet (Sriram, 1999).
       Credit decisions are taken using a centrally developed credit scoring model.
       However, centralisation and automation have changed the relation between
       members and caisses. The personal knowledge that credit committee
       members used to have of members' finances is being replaced by computers
       and credit scoring models. At the same time, the number of caisses has been

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      reduced, and many branches located in remote rural areas have been closed.
      This process started in the late 1990s. For instance, in 1998, the number of
      branches dropped from 1 275 to 1 222. It must be said that the process of
      consolidation and amalgamation takes a consultative and collaborative
      approach to limit the impact on rural communities (Sriram, 1999).

2.4 Challenges and opportunities

      There are increasing socioeconomic disparities among rural MRCs

      A large rural-urban split…
          Although the rural-urban split is less intense in Québec than in the rest
      of Canada, some 80% of the provincial population is concentrated in urban
      areas. As a result of the uneven distribution of the population, there are large
      differences between the economic performance of urban and rural areas. The
      comparison may be unfair, however. Large differences in the scale (both of
      the population and the productive framework) may also have qualitative
      impacts that are worth considering when comparing the rural economy with
      the urban one. The rural economy, in fact, may produce different kinds of
      goods and services and local production chains may have particular
      characteristics which should be carefully considered when benchmarking
      rural against urban (Box 2.5).

      …but also large disparities among rural territories
           Besides the rural-urban economic divide, Québec also displays intra-
      rural disparities. GDP differences among predominantly rural MRCs are
      comparable to the OECD average, and there are fewer internal disparities
      than in countries with an internal economic divide such as Italy and
      Germany. However, Québec is less “equal” than Spain and France in terms
      of rural performance, and, above all, Québec’s predominantly rural areas
      display a much higher gap (standard deviation) from the average GDP per
      capita than the Scandinavian countries, which share with Québec many
      geographic and socioeconomic characteristics (Figure 2.25). As noted
      above, the level of GDP is not related to the distance from main
      metropolitan regions, although the richest areas are located relatively close
      to large cities. Differences in growth of GDP are also persistent and in many
      predominantly rural areas annual GDP growth is systematically lower than
      the average performance of rural Québec as a whole (Figure 2.26).



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          Box 2.5. Structural differences between rural and urban economies
    In broad terms the economic structure of rural areas has become very similar to that of
 urban areas. Public and private services are the primary source of employment, while
 manufacturing plays a significant but shrinking role. Primary industries are typically only
 found in rural areas, but their contribution to income and employment has declined in the vast
 majority of rural areas, so that it is no longer possible to define a distinct rural economy driven
 by resource-based activities. However, a more detailed comparison suggests that their
 economic functions are less similar to those of urban areas than aggregate indicators suggest.
 In a few key sectors, such as tourism and hospitality, manufacturing, health care, education and
 public administration, there are significant differences in terms of the types of activity, the skill
 mix of the labour force and the wage structure.
    Tourism and hospitality is a growing sector in many rural areas and appears to have much
 opportunity for expansion. A closer comparison with the same broad category in urban areas
 suggests first that tourism in rural areas is most likely to be outdoor-based (camping, water
 sports, hiking etc.) while in urban areas it involves indoor activities (theatre, museums, art
 galleries). This makes urban tourism a year-round activity while most rural activities are
 seasonal. Second, tourism in many rural areas has a critical mass of activities and providers, so
 each city serves as a self-contained magnet for visitors and can provide sufficient opportunities
 to make itself attractive. By contrast, in all but the largest parks, tourism tends to be small-scale
 and comprised of spatially dispersed opportunities that provide only a limited range of
 activities. Third, while there are some skilled positions in rural tourism (managers, instructors
 etc.), there are more opportunities for skilled employment in urban tourism (managers, chefs,
 actors, museum curator, etc.). In both types of places the majority of the labour force only
 needs limited skills.
    Manufacturing now makes a larger contribution to rural economies than urban economies
 in many OECD countries. In both urban and rural areas the composition of manufacturing has
 changed as firms producing routine items that require only low worker skills and that are not
 sensitive to market conditions have largely relocated to countries with low labour costs outside
 the OECD area. But here too urban rural differences remain. First, large manufacturing firms
 are less likely to be found in rural areas because of their smaller labour markets and because of
 the reduced range of worker skills. This means that there are fewer opportunities for high pay
 and high-skill jobs in rural manufacturing. Second, manufacturing that is tightly coupled to its
 markets has a tendency to be in more urban locations because of the benefits of proximity.
 Typically this type of manufacturing has higher value added and employs more skilled workers
 at higher wages. Third, large manufacturing firms almost always have their corporate,
 marketing, and R&D functions in urban areas, and the high-paying jobs associated with these
 functions are almost strictly urban. Rural branch plants tend to focus on the production of
 specific products and consequently have limited scope for higher levels of management.
    There are clear differences between urban and rural health care. First, in rural areas the
 majority of health-care facilities and workers offer primary care and emergency care. By
 contrast urban areas also have secondary and tertiary care facilities. Second, virtually no
 medical research takes place in rural areas. Third, the mix of occupations in rural areas tends to
 lead to a higher incidence of work-related accidents that are either life-threatening or can lead
 to physical disabilities. Given the distance between where accidents take place and care
 facilities, rural areas place a higher premium on a distributed network of emergency care
 facilities and emergency response vehicles than urban areas.

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       Box 2.5. Structural differences between rural and urban economies (cont.)
    In both urban and rural areas there are ongoing efforts to enhance the quality of education
 and provide better opportunities for students of all ages. As a result the relative role of
 education in urban and rural economies is converging in terms of broad indicators. But
 differences still exist. In rural areas there may be equivalent access to basic primary and
 secondary education on a per person basis or in terms of students per teacher, but there is far
 less access to higher education (college, university, technical schools). In rural schools the
 range of course offerings is generally smaller, and tends not to include more advanced courses
 at any given age level because there are too few students to make offering these courses
 practical. In many rural areas a large share of education expenditure is for student transport,
 which obviously conveys no direct education benefits.
    Public administration is a growing share of both urban and rural economies. However here
 too there are significant urban and rural differences. In urban regions, for a given population, a
 relatively small number of local government units provide a broad range of services and
 employ a labour force with an equally broad range of skills. Conversely in a rural area with a
 population of similar size there will be far more individual local governments but each will
 tend to provide only a limited set of functions and most will not require high levels of skill.
 Perhaps more importantly for local development, an urban area may have more opportunity to
 integrate different public service activities. This reflects the presence of a critical mass of skills
 in an urban government; many rural areas do not have equivalent skills.
    Similar observations hold for other broad sectors, such as finance, construction and retail. If
 the focus is on broad levels of employment, the sectoral composition of urban and rural areas
 almost always looks similar. However, a more detailed examination of specific functions
 reveals fairly major differences in the skill mix of the labour force and the level of
 compensation. It thus appears that because of differences in density, size and distance, rural
 areas perform different functions from urban places. This was well understood when there
 were obvious differences between the broad types of urban and rural economic activity. Today
 this is no longer the case. But just as developed countries appear to exchange the same types of
 goods with each other, in seeming contradiction to the principles of trade, rural and urban
 economies appear similar but actually engage largely in complementary functions.
 Consequently it is unlikely that they will eventually converge to a uniform economic structure
 that differs only by size. This point has clear policy implications. To the extent that a rural
 economy is different from an urban economy, care must be taken in determining the extent to
 which a government can adopt the same policy framework for both.
 Source: Freshwater, D. (2009), “Rural Urban Interaction NL: Understanding and Managing Functional
 Regions”, unpublished paper.




      Predominantly rural regions suffer from strong depopulation and
      ageing
         Loss of population is the main result of rural areas’ inability to generate
      economic growth. If people persistently have problems finding employment

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           Figure 2.25. Regional disparities among predominantly rural areas in
                                 selected OECD countries
                               Standard deviation, 2006 or latest available year

                     United Kingdom
                            Portugal
                              Ireland
                               Korea
                              Austria
                                 Italy
                            Hungary
                              Greece
                           Germany
                             Québec
                                Spain
                               Japan
                              Finland
                              France
                             Norway
                            Denmark
                     Slovak Republic
                             Sweden
                                         0    5         10       15        20      25      30

                                                                      %




        Note: The graph displays the standard deviation of GDP per capita within PRs. Data are
        calculated at the MRC level.
        Source: OECD Regional Database (2009); Le Conference Board du Canada (2009), Les
        communautés rurales: l'autre moteur économique du Québec, prepared for the Groupe
        de travail sur la complémentarité rurale urbaine, June.


        they go to areas with higher growth. As described above, demographic
        trends differ depending on the location of the rural areas. Those close to a
        large urban centre have seen their population increase over the last
        three censuses. In particular, peri-metropolitan MRCs improved their
        population by 60% between 1981 and 2006, while intermediate MRCs
        registered an increased of close to 20%. Predominantly rural areas, and
        particularly those located in remote areas, have suffered a net loss of
        population.
           Ageing is a widespread problem in Québec, the territory with the lowest
       birth rate in North America. According to the Ministry of Health and Social
       Services (MSSS), the share of the age cohort 65 years and older in Québec
       will rise from 12% in 1995 to 27% in 2030, a period of 35 years. A
       comparable rise in the elderly population spanned over 45 years in Canada
       and over 65 to 75 years in Germany, France and the United Kingdom. If one
       considers the two broad categories “urban” and “rural” there is not much
       difference in the concentration of elderly people. However, following the
       classification used here, the variations among different types of rural areas
       can be important. Owing in part to depopulation, the share of elderly


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         Figure 2.26. Aggregate GDP growth rate in rural Québec, 1991-2006




                                                     The regional performance is higher than the provincial average

                                                     The regional performance is in line with the provincial average


                                                     The regional performance is lower than the provincial average




       Source: Le Conference Board du Canada (2009), Les communautés rurales: l'autre
       moteur économique du Québec, prepared for the Groupe de travail sur la
       complémentarité rurale urbaine, June.




       population in Québec's remote rural areas increased sharply from 10.7% in
       1986 to almost 15% in 2006. also in the remote areas the population
       belonging to the age bracket 0-14 years dropped from 23% of total
       population in 1986 to 17% in 2006 (Figure 2.27).
          Projections show that the ageing of the population in rural areas will
      increase exponentially in the near future. For instance, in the administrative
      region of Abitibi-Témiscamingue the share of elderly people (more than
      65 years old) in 2000 was around 5%, significantly below the provincial
      average (Figure 2.28). According to projections calculated by Québec’s
      MSSS, Abitibi-Témiscamingue will equal the national average in 2016-17.
      After this period Abitibi-Témiscamingue will age faster than Québec,
      reaching a share of elderly people close to 30% after 2026. It is easy to see
      that a high share of elderly population will not only affect the regional
      capacity to generate endogenous development but will also affect the
      sustainability of some basic services, such as health care and primary
      education.30


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                         Figure 2.27. Population of Québec by age group

                                  0-14 years                   15-64 years                65 years +
        100%
                 10.7%       14.8%         8.5%          11.4%        8.5%         9.5%         10.0%       13.5%
         90%
         80%
         70%
         60%                               66.2%                      68.3%
                 66.4%                                   70.0%                    70.2%         69.5%
         50%                 68.6%                                                                          69.7%
         40%
         30%
         20%
         10%     23.0%                     25.3%         18.6%        23.1%       20.3%         20.5%
                             16.6%                                                                          16.8%
          0%
                  1986        2006          1986          2006        1986         2006          1986       2006
                 Predominantly rural      Intermediate MRCs         Peri-metropolitan rural            Québec
                      MRCs                                                  MRCs




        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.



                               Figure 2.28. Projection of ageing trends
                               in Abitibi-Témiscamingue and Québec
                 Percentage of persons aged 65 or more in the total population, 2000-26
                                       Abitibi-Témiscamingue                           Québec
        28%


        26%


        24%


        22%


        20%


        18%


        16%


        14%


        12%


        10%




        Source: MSSS (2005).


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          Ageing and depopulation are not offset by immigration. The influx of
      foreign workers in rural Québec remains very low. Immigration to Québec
      has traditionally concentrated in Montréal and, to a lesser extent, in
      Québec City. Since the 1990s, however, the provincial government has
      adopted specific initiatives to increase the number of foreign workers going
      to rural territories. The impact of such initiatives is still relatively small as
      immigration remains concentrated in urban areas. Furthermore, the
      integration of foreign workers in rural areas poses challenges for the cultural
      homogeneity of the local communities and the lack of the needed social
      infrastructure to facilitate the integration process.

      Rural jobs are vulnerable to external shocks
          Another factor impinging upon rural areas’ capacity to generate
      endogenous growth is the loss of comparative advantage in manufacturing
      activities, due to international competition. As discussed above, the
      industrialisation of the Québec countryside partially freed the province from
      dependence on a resource-based economy. Of course, a large share of
      manufacturing in Québec is tightly linked to primary activities
      (transformation of raw materials). It is also true, however, that the province
      exploited its proximity to the United States and relatively low wages in rural
      areas, to develop a productive framework specialised in traditional
      manufacturing such as textile and clothing.
          The internationalisation of markets has challenged this pattern of
      industrial development, causing a reduction in jobs and in the number of
      secondary firms located in rural areas. As Baldwin and Lileeva (2008) have
      found, Canadian manufactures (and particularly Québec, owing to its
      specialisation in mature activities) shifted away from the production of
      peripheral goods used as inputs in the production of their core product and
      instead concentrated on manufacturing the latter. Goods once produced
      locally are now substituted with imports from low-cost countries. This
      cannot be considered a negative impact in itself, since imports can provide
      the population higher well-being and firms can lower the total costs of their
      core product, which therefore should gain in competitiveness. Nevertheless,
      globalisation has destroyed many jobs in Québec, especially in rural areas.
      Manufacturing lost the largest number of jobs, and because of
      concentration/rationalisation some services (and especially public
      administration) also suffered from large reductions (Figure 2.29).




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             Figure 2.29. Percentage change in the number of firms in rural Québec
                                     between 2001 and 2008
                                            NAICS and ISIC denomination of sectors

                  Québec                                             Rural Quebec (93 areas)
                  Accessible predominantly rural areas (31 areas)    Remote predominantly rural regions (31 areas)



                             Total



           Other service activities



 Health and social work activities



                       Education



                     Public sector



             Wholesale and retail



                     Construction



                    Manufacturing



                 Primary activities


                                     -20%     -15%    -10%     -5%         0%        5%        10%      15%          20%   25%


Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
document with information provided by MAMROT, Directorate for Public Governance and Territorial
Development, OECD.




             The impact of these job losses is more pronounced in rural than in urban
        areas owing to the smaller size and lesser diversity of rural labour markets.
        Often, urban economies are less susceptible to such shocks because of their
        larger and diversified local labour markets. Sectors confronted with the
        crisis adjust their production and lay off some workers. Some of these are
        eventually absorbed by other sectors in which production is expanding.31 In
        rural areas, due the small size of LLMs, a worker is considerably less likely
        to be absorbed by another industry, simply because firms whose production
        is growing may be located far from the affected rural area

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      (Freshwater, 2008). Such workers may therefore leave the rural area and
      relocate where there are job opportunities. This migration enhances the
      crisis of the LLMs because it reduces it further, making it more vulnerable
      to fluctuations.

      Gentrification and urban sprawl affect the rural milieu causing
      increasing cost of living, congestion and pollution
           While gentrification helps enhance community facilities and purchasing
      power in peri-metropolitan and intermediate rural areas, it has also altered
      the social framework and put pressure on the environment. Due to the
      inflows of former urban dwellers in rural areas, many communities have
      registered an increase in the quality and quantity of services provided
      locally. Local labour markets have become larger and have a larger range of
      skills. This creates the basis for a gradual process of regional development.
      Retirees relocating in rural areas spurred the development of a residential
      economy (proximity services such as local stores, personal services, and
      tourism services). Inflows of new residents raise housing prices and property
      taxes, the main source of revenues for municipalities in Québec. However,
      the concentration of Québec’s population on urban fringes and other
      “attractive” rural areas also has some shortcomings.
          First, newcomers cause housing prices to increase as well as property
      taxes. In some cases, the increase in taxes is so high that long-established
      owners are unable to pay more taxes and decide to sell their higher-valued
      property and leave. Likewise, the less affluent younger local population, or
      even young newcomers, may be unable to buy property. Gentrification is
      particularly intense on the urban fringe and in rural areas that are attractive
      for tourism (those located close to a watercourse or a lake). The risk is that
      rural areas will become locations for second homes or will change radically
      the kind of population living there.
          Second, urban sprawl and intense commuting are increasing congestion
      and pollution on the urban fringe. As highlighted by the OECD in a report
      assessing Montréal’s competitiveness (OECD, 2004), transport congestion
      represents an important challenge for Québec’s metropolitan areas (which
      include both rural areas and an urban fringe). In Québec, because of the
      dimensions of the province, space is perceived as abundant, and people tend
      to spread out over a considerable part of the territory. At the same time,
      Québec has relatively few places that are suitable for human settlement. For
      instance, as discussed above, a very small part of the landbase is suitable for
      agriculture. As a result, the (social) impact of population sprawl is negative
      because it causes congestion and the net loss of good agricultural land, but
      also because of the increasing energy needed to compensate for distance and

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       people’s way of life.32 Finally, although Québec is the smallest producer, on
       a per capita basis, of GHG in Canada (see Chapter 1) the provincial
       population is particularly exposed to the effects of climate change. More
       than a third of its inhabitants are estimated to live less than 500 metres from
       the banks of the St. Lawrence River, and more than 90% less than
       5 kilometres away. Therefore, a change in the water level will endanger
       communities’ critical infrastructure (Lemmen et al., 2008).33




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                                            Notes


      1.    The term “rurality” is used in this report in the sense of the degree of
            being rural. Thus, the degree of rurality would be greater for individuals
            living in a place with lower population density or in a place further from
            an urban centre.
      2.    The northern part of Québec is also home to aboriginal communities that
            have a special status (First Nations) vis-à-vis the provincial government.
      3.    Écoumène is the French word indicating the continuously inhabited
            territory, organised in 1 100 municipalities, in the southern part of
            Québec, mostly south and along a smaller strip north and northwest of the
            St. Lawrence River basin, where the large majority of the provincial
            population resides.
      4.    The regional typology used in this report was elaborated jointly by the
            OECD and the Ministère des Affaires municipales des Régions et de
            l’Occupation du Territoire (MAMROT).
      5.    In Canada, an unorganised territory is a region of land, generally with less
            self-governmental power than other regions, which is controlled by a
            specific government. The term has several meanings depending on the
            exact usage and context. In particular, in Québec a given territory is
            “unorganised” if it does not have a local government and is managed by
            MRCs and the provincial government.
      6.    This report considers “remote” those rural regions classified as “resource
            regions and MRC” in the “Strategy of Economic Development of
            Resources Regions”, published by the Québec government in 2001. This
            strategy aimed at reducing regional disparities and focused on resource-
            based regions, which are located in sparsely populated areas and are not
            home to major urban centres. According this definition, all MRCs in the
            regions of Gaspésie–Îles-de-la-Madeleine, Bas-Saint-Laurent, Mauricie,
            Abitibi-Témiscamingue, Saguenay-Lac-Saint-Jean, Cote Nord, and Nord-
            du-Québec are remote. Conversely, the MRCs that are in the regions of
            Chaudière-Appalaches, Estrie, Montérégie, Outaouais, Laurentides,
            Lanaudière and Capitale-Nationale are central or accessible.



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       7.     Like Québec, Sweden is characterised by a large metropolitan system in
              the south and smaller urban centres in the rest of the country. However,
              Sweden has large cities in remote areas such as Umea, Lulea, Östersund
              or Piteau (OECD Territorial Review of Sweden, forthcoming).
       8.     The term Révolution tranquille or “quiet revolution” describes a multitude
              of social, political, economic and religious transformations which took
              place in Québec in the 1960s and 1970s. They accompanied a shift in the
              province of Québec's priorities from the defence of Catholicism,
              traditional rural life and economic conservatism to the affirmation of a
              modern, secular, French-speaking but pluralistic society. It was a period
              of intense change characterised by the rapid and effective secularisation
              of society, the creation of a welfare state (État-providence) and a
              re-alignment of Québec's politics into federalist and separatist factions.
              The provincial government took over the fields of health care and
              education, which had been in the hands of the Roman Catholic Church. It
              created Ministries of Education and Health, expanded the public service,
              and made massive investments in the public education system and
              provincial infrastructure. The government allowed unionisation of the
              civil service. It took measures to increase Québécois control over the
              province's economy and nationalised electricity production and
              distribution.
       9.     The lower income is partly due to differences in the make-up of the
              labour force in terms of skills and occupations in rural and urban areas.
       10.    According to Alasia (2003), this is also a common trend in the rest of
              Canada.
       11.    There is evidence that in OECD countries the rise in employment rates in
              rural regions has a direct impact on their overall economic performance
              and competitiveness (OECD, 2009).
       12.    “Residential economy covers all the activities generated on the local level
              by the consumption of the population living on the territory considered.”
              Cohesion Serving the Regions (press kit), Informal Meeting of Ministers
              for Spatial Planning and Cohesion Policy, 26 November 2008, Marseilles,
              France, www.eu2008.fr. The term is usually used as the opposite of
              “productive economy”.
       13.    Québec is still a modest player for beef on the Canadian scale, with less
              than 5% of the national total. However, the Québec veal sector is the
              unchallenged leader in Canada, with over 80% of overall production.
              Québec also produces more than 10% of commercial beef from cull cattle.
              The bovine spongiform encephalopathy (BSE) crisis slowed the growth
              rate of this production. However, thanks to its abundant pasture and
              forage, Québec has strong development potential. Beef production ranks
              third in Québec livestock production, after dairy and hog production. In

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            Québec, there are currently more than 14 000 farm operations partially or
            totally dedicated to cattle production. At present throughout Québec,
            cattle production generates more than 11 000 direct and indirect jobs.
            Over 910 000 cattle are marketed each year, for a farm-gate value of more
            than CAD 618 million (2007).
      14.   “Crop Heat Units (CHU) are temperature-based units that are related to
            the rate of development of corn and soybeans. CHU are used to help
            farmers select the hybrids and varieties that are best suited to their
            climatic region.” Government of Canada (2009), Natural Resources
            Canada, http://cfs.nrcan.gc.ca/subsite/glfc-climate/maritimecropheatunits.
      15.   Average farm average size was considerably smaller in Québec than the
            national average of 676 acres. Saskatchewan, which has mainly a field-
            crop-based agriculture, has the largest average size, at 1 283 acres.
      16.   Statistics Canada defines census farm as an agricultural operation that
            produces at least one of the following products intended for sale: crops
            (hay, field crops, tree fruits or nuts, berries or grapes, vegetables, seed);
            livestock (cattle, pigs, sheep, horses, game animals, other livestock);
            poultry (hens, chickens, turkeys, chicks, game birds, other poultry);
            animal products (milk or cream, eggs, wool, furs, meat); or other
            agricultural or agro-forest products (Christmas trees, greenhouse or
            nursery products, mushrooms, sod, honey, maple syrup products)
            (www.statcan.gc.ca/pub/95f0301x/notes/4064749-eng.htm).
      17.   The total income of a census family is the sum of all incomes received
            during the calendar year preceding the census by all members of that
            family aged 15 years of age and over. Income includes wages and
            salaries, net farm income, net non-farm self-employment income,
            government transfer payments, investment income, retirement pensions
            and other money income.
      18.   Québec’s boreal forest covers an area of roughly 551 400 km2. Less than
            36% of this area has been set aside for forest production.
      19.   Both forestry and wood processing and including urban centres.
      20.   Québec is Canada’s second largest producer of gold and iron, second
            largest producer of metallic substances, and second largest producer of
            industrial minerals and construction materials, as well as the world's
            second largest producer of niobium.
      21.   The claim is the only valid exploration right in Québec. The claim gives
            the holder an exclusive right to search for mineral substances in the public
            domain except sand, gravel, clay and other loose deposits, on the land
            subjected to the claim.



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       22.    In certain rural areas the land available for manufacturing activities is
              extremely constrained owing to the provincial law that protects
              agricultural land, even when it lies idle.
       23.    Data referring to the 17 administrative regions within Québec show that
              the increase in the number of SMEs (and especially micro-firms of 1 to
              4 employees) is higher in accessible rural and urban regions.
              Between 2002 and 2006, in a period of economic growth for the province,
              the highest increase in number of firms was registered in the regions of
              Lanaudiere, Laval, Laurentides and Monteregie, which surround the
              metro-region of Montréal. Outside of the direct influence of Montréal, the
              only regions that had positive values were Centre-du-Québec and Nord-
              du-Québec (Figure 2.21).
       24.    These results confirm those of Boter and Lundström (2005) who show a
              regional effect as well as the influence of enterprise size on the extent of
              firms’ use of public services.
       25.    This research on the new rural economy was co-ordinated by University
              of Concordia.The project assessed the entire country (32 rural
              communities) in collaboration with the Canadian Rural Revitalization
              Foundation (CRRF), http://nre.concordia.ca/nre_reports.htm.
       26.    The provincial and federal governments have been encouraging voluntary
              organisations to develop partnerships with government departments, the
              private sector, service providers and other voluntary organisations in
              order to qualify for funding programmes (Borgen, 2000; Bradford, 2003;
              Osborne and Flynn, 1997; O’Toole and Burdess, 2004; Zahner, 2005).
              Collaboration (see Schaeffer and Loveridge, 2000, for a classification of
              co-operative/collaborative efforts) with local government or other local
              service providers was encouraged to demonstrate that voluntary
              organisations propose activities with wide appeal and legitimacy in the
              community (Radin and Romzek, 1996; Wall and Gordon, 1999). Such
              partnerships can be an important asset for voluntary organisations that
              seek to develop and maintain services.
       27.    There are both public and private subsidised CEGEPs. The public
              CEGEPs have little or no tuition fee. The CEGEP system was started
              in 1967 by the Québec government.
       28.    Alasia (2005) summarises the “Catch-22” situation of rural communities.
              Both individuals and communities would appear to face a lower rate of
              return from investing in higher education than urban individuals and
              communities. Individuals in rural communities have less incentive to
              pursue higher education because it means that they will have to leave their
              home community. Rural communities have less incentive to offer high-
              level training and education to their residents as the individual will leave
              the community.

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      29.   In 1988, the Québec government passed new legislation governing the
            province's banking co-operatives. The Savings and Credit Union Act of
            that year enabled Desjardins to restructure its operations, grouping
            together its growing number of subsidiaries under holding companies that
            provide central direction to each specific area of operation.
      30.   It is important to note however that ageing can be looked at in two ways.
            An increase in the ratio of older persons to persons 15 to 64 years of age
            is a relative “dependency” measure, which might be interpreted as
            “demand for transport to a clinic per person able to provide transport”.
            Alternatively, ageing might be considered in terms of the rise in the
            number of older persons and thus increasing demand for services by older
            persons. Many rural areas in Canada may be ageing in the first way but
            not in the second. There is no increase in the number of older persons
            because when this cohort was younger, a large share migrated to the city
            (Dandy and Bollman, 2008).
      31.   At the regional level, the probability of an unemployed person being
            absorbed by another local sector depends on a series of factors. For
            instance, if a worker is geographically close to a firm that is experiencing
            a surge in demand for its output, he/she is more likely to be hired. Also, a
            worker who has skills that are compatible with the sector that is
            experiencing growth is more likely to be hired (and may also move up
            within a given supply chain) (Marino and Trapasso, 2009).
      32.   Québec’s economy is associated with high energy consumption because
            of its industrial base, climate, size and way of life. In 2002, the industrial
            sector accounted for 39% of energy demand, transport for nearly 25% and
            the commercial, institutional and residential sectors for 37%
            (Lemmen et al., 2008).
      33.   In the north, global warming severely curtails winter transport. All
            northern communities depend upon ice roads to transport supplies to their
            community for the whole year. A shorter period of safe ice roads
            dramatically increases transport costs.




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                                             Chapter 3

                      Assessment of rural policy in Québec



       This chapter assesses provincial policies targeting rural development and
       features good practices introduced to cope with the rural development
       challenges in Québec. The first section presents the evolution of rural policy
       in Québec. The next section assesses the policies and governance
       arrangements put in place under the province's Politique nationale de la
       ruralité (national policy on rurality). The final section broadens the policy
       assessment to include sectoral policies implemented by the provincial
       government that affect rural development.




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Key points

          •    Québec’s place-based rural policy applies to a large part of the
               territory and is focused on social development and land
               occupancy. It is part of a societal vision of “rurality” shared by
               different levels of government and the civil society. Social
               development and community capacity building are seen as
               preconditions for economic development. Dynamic occupancy of
               rural land is a societal choice to maintain the current settlement
               structure, even if efficient use of public resources for service
               provision is difficult in barely sustainable communities.
          •    Rural policy is led by a non-sectoral ministry (MAMROT)
               which is independent from agriculture and economic
               development. It co-operates with provincial partner associations to
               ensure implementation and monitoring. The supralocal
               administrative level (regional county municipality, MRC) is the core
               unit of policy implementation in order to shift decision-making
               power downward and create supralocal functional territories.
          •    Development is stimulated through three key elements: i) place-
               based partnership agreements (“rural pacts”) between the provincial
               government and MRCs that support local community capacity
               building; ii) rural development agents who are among the central
               actors for promoting the emergence of rural initiatives and
               integrating policy with other measures; and iii) innovation
               programmes such as the rural laboratories whose value is to think
               “out of the box”. The rather limited rural policy budget proves that
               decentralised territorial policies can be effective with small budgets
               if they are compatible with local aspirations. The provincial budget
               seems increasingly to consider the spatial dimension of policies.
               MAMROT has a strong position in monitoring, but external
               evaluation could be enhanced as a way to demonstrate the
               effectiveness of the approach.
          •    Multi-level governance is strong, but requires further
               integration. There is broad horizontal co-ordination by the central
               level, but integrating social and economic policy and adapting
               sectoral programmes to rural conditions remains challenging at the
               local level. The province’s vertical co-ordination between
               administrative levels is strong, but the federal level acts in parallel
               to many provincial programmes. The strengthened role of MRCs
               facilitates local-level horizontal co-ordination.

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            •    Sectoral policies affecting rural Québec pose specific challenges.
                 Land policy aims to avoid urban sprawl, but it risks constraining
                 economic activities in more remote parts of the rural territory. While
                 there have been some changes at the federal level, provincial
                 agricultural support is still partly linked to commodity output and
                 distorts markets. Local economic development measures are
                 comprehensive but the institutional separation from MAMROT
                 weakens policy outcomes. Natural resource management is only
                 gradually enhancing regional and local actors' involvement.
            •    Rural policies in a broader sense address challenges related to
                 health, education, employment and migration. While health and
                 education encounter cost and service delivery problems, mostly due
                 to demographic changes, low population density and the size of
                 Québec's territory, employment policy tries to implement a
                 territorial approach that responds to specific labour market needs.
                 The demographic challenges are also at the core of efforts to attract
                 youth and immigrants to rural areas.

Introduction

            Rural policy in Québec is strongly determined by a specific provincial
       government policy which targets the place-based vitalisation of rural areas
       and is founded on the principles of land occupancy, territorial equity and
       community capacity building: The Politique nationale de la ruralité (“PNR”
       or “rural policy”, hereafter) is a multisectoral policy which takes account of
       the diversity of rural communities. At the outset the PNR reflects the
       assumption among OECD countries that social cohesion and community
       capacity building are a precondition for strengthening socioeconomic
       development in rural areas. The central PNR policy document expresses the
       political consensus in Québec that rural communities are an essential
       element of the province’s dynamism (Government of Canada, 2006a). It
       affirms the reasoning supported by the experience of many OECD countries
       that rural regions, like intermediate or urban regions, provide valuable
       opportunities for overall growth and development.
           Responsibility for rural development is shared through a contract
       between the government of Québec (“the government”, hereafter) and
       elected municipal representatives who manage the regional county
       municipalities (MRCs). Other local, regional and provincial organisations
       and institutions are involved in this arrangement, its implementation and
       monitoring. Whereas the provincial government decides on the general
       policy directions, elected representatives at the supralocal and local level are

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      the principal actors for designing and implementing rural development
      measures.

3.1 Evolution of rural policy

      The evolution of rural policy in Québec demonstrates a societal
      consensus on “rurality”
          The evolution of Québec's rural policy shows an important degree of
      consensus among politicians, government officials at all levels, academia
      and civil society. Consultation between the government and non-profit,
      private and local public actors has long been a part of the political process,
      with a view to a broad societal consensus. However, sector-based support
      for agriculture and natural resource industries has dominated rural
      development for a long time.
          As in any country or region, the context in which Québec carries out its
      rural policy is decisive, as it constrains policy choices. With the emergence
      of the welfare state in the 1960s, during the period known as the Révolution
      tranquille, politics in Québec started to take into account the development of
      public educational, health and social services, while public attention to rural
      areas declined. As society turned towards modernisation, it turned its back
      on many of its traditional pillars, among them rural society. Reforms were
      mostly implemented in a top-down, sectoral policy approach driven by
      provincial priorities and focused on support for agriculture, fishery, forestry
      and mining, along with assistance to different types of manufacturing.
      However, with the decline of family-based farming in the second half of the
      20th century, it became clear that sector-wide economic measures alone
      could not address major public concerns about the well-being and
      sustainability of rural areas.
           In the 1980s regional development policies started including people-
      based policies through consultation mechanisms between the government
      and civil society. This was facilitated by the existence of a regional and a
      local administrative level (Box 3.1): 10 administrative regions were created
      in the 1960s and split into 17 units in the 1980s. These regions nominally sat
      over 1 300 (today about 1 100)1 local municipalities which were at the
      centre of these regional development efforts. Nonetheless, governance on an
      intermediate level remained very weak; the province and municipalities
      were the only important levels.
          To better co-ordinate territorial development, strengthen cohesion
      among municipalities and capture efficiencies through scale economies, a
      supralocal level was introduced in the 1980s with the Loi sur l'aménagement

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       et l'urbanisme. Over time, the MRCs (Box 3.1) changed citizens' idea of
       their local territory and assumed responsibility for spatial planning,
       territorial development and public services. For the first time, local residents
       and stakeholders were involved in issues that went beyond local matters. At
       the same time, the government published a policy document for regional
       development, “The choice of regions”. Its first aim was to set a bottom-up
       development approach (Government of Québec, 1983). Gradually, MRCs
       have assumed responsibility for local economic development and
       employment support. To this end, the government created local development
       centres (CLDs) as a key local economic development structure. Since 2004
       they legally depend on MRCs and are co-financed by the state (with a share
       of 71% in 2007-08; Government of Québec, 2009a) and
       municipalities (29%).
           In the 1990s a rural focus was added to this regional development
       approach. As the standard local economic development approach was unable
       to revitalise rural communities sustainably, civil society pushed public
       debate on the future of rural areas beyond the usual support for agriculture,
       forestry and fisheries. In contrast to many OECD countries, this process was
       supported by leading figures of a dominant professional farmers' trade
       union, the Union des producteurs agricoles (UPA).2 Together with non-
       agricultural organisations, co-operatives and credit unions active in rural
       areas it played a critical role in initiating this development through events
       such as the “States general of the rural world” in 1991. Again in contrast to
       other OECD jurisdictions, this organisation had the confidence and the
       strength to ensure that increases in rural development spending would not
       come at the expense of a reduction in support to farmers.
           Leading civil organisations, in particular the rural advisory body
       Solidarité rurale du Québec (SRQ), played a significant role in the
       elaboration of a specific rural policy. Several documents published by SRQ
       together with propositions emerging from the provincial government's work
       in the 1990s and 2000s set the basis for Québec's rural policy. They proved
       to be decisive in promoting a multisectoral approach towards implementing
       place-based policies instead of uniform province-wide interventions. Thus,
       rural policy was the outcome of an evolution of rural development initiatives
       that were led not only by the public administration but also by civil society.
       Contrary to institutional structures created ex post to favour horizontal
       co-ordination with civil organisations, Québec’s situation has benefited from
       civil society's sentiment of ownership of rural policy from the beginning.
           Specific rural policy measures found their way onto the government's
       political agenda. For the first time, the government budget for 1997-98
       included concrete measures for a rural policy targeting local capacity
       building. Based on this experience and the above-mentioned territorial

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      governance framework, Québec passed a specific rural policy (the first
      PNR) in late 2001. It focused on the responsibility of local representatives
      for development planning and on building social capital and cohesion in
      rural communities as a force to partner with the province on different
      territorial levels of government. A cross-party consensus to support rural
      development through a specific policy is demonstrated by the fact that the
      first PNR (2002-07) and the second (2007-14) were decided by different
      political parties.
          A single ministry was responsible for rural policy and regional
      economic development policy during the first PNR, but the institutional
      framework has changed. Jurisdiction over regional economic development
      was reorganised in 2003, with control over CLDs being assigned to the
      ministry in charge of economic development, while rural policy under the
      PNR, together with regional and local development, was placed under the
      responsibility of the ministry of municipal affairs and of regions (see 3.2.2).
      Although the CLD mandate covers more than rural areas, separating the
      CLDs from rural and regional policy involves the risk of weakening the
      subsequent PNR policy approach.

3.2 Rural policy measures and governance

          Québec has opted for a territorial approach to rural development that is
      largely in line with the OECD's New Rural Paradigm (OECD, 2006) and
      helps rural areas address the perception of inevitable decline. The policy
      integrates a number of elements that can offer lessons of good practice for
      other governments. This section analyses the main policy and governance
      issues characterising Québec's PNR, in particular the PNR for 2007-14
      (Government of Québec, 2006a) in the context of the shift leading to a New
      Rural Paradigm.
          This paradigm shift has been observed in the rural policy of many
      OECD countries, which now reflects the idea that rural areas can make
      positive contributions to national economies and to visions of society. There
      is now a common understanding that rural policy can no longer be reduced
      to sector-based agricultural policy given the dramatic reduction in farm
      employment, the diversity of rural regions, and significant opportunities for
      growth and development in emerging non-farm economic sectors and niche
      markets. To embrace the new rural policy challenges faced by many
      countries, innovative governance mechanisms have been developed to
      enhance co-ordination across sectors and levels of government, as well as
      between public, private and non-profit stakeholders. Moreover, new policy
      instruments with a significant territorial and place-based focus are being
      created to identify and capitalise on rural areas' competitiveness, local assets

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                  Box 3.1. Territorial administrative divisions of Québec

    Below the provincial level of government, Québec has three administrative levels: the
 regional level (17 administrative regions), the supralocal level (86 MRCs and 14 equivalent
 bodies), and the local level (over 1 100 municipalities):
    Regional level: The provincial territory is divided into 17 administrative regions which
 provide a framework for provincial government activities. Provincial ministries and
 government bodies have regional directorates which meet in a consultative body called the
 Regional Administrative Conference (CAR). Moreover, Conferences of Elected Officials
 (CRÉ) act in each region as the government's privileged consultative body on regional
 development matters. Most members of CRÉ boards are elected municipal representatives.
 Administrative regions vary in their geographic features, natural resources and economically
 useable territory. The smallest regions (Laval and Montréal) have a surface area of less than
 500 km2, but most have between 7 000 km2 and 35 000 km2. The four northern regions of
 Abitibi-Témiscamingue, Saguenay – Lac-Saint-Jean, Côte-Nord, and Nord-du-Québec stand
 out with a population density of less than three inhabitants per km2 and an area of between
 57 000 km2 (Abitibi-Témiscamingue) and 718 000 km2 (Nord-du-Québec, comparable to Chile
 and larger than France).
    Supralocal level: In the 1980s, Québec established a supralocal administrative level which
 groups together municipalities of different sizes in a “community of interest”. These MRCs
 have responsibilities for spatial planning and territorial development, including the
 administration of “unorganised territories” (territories outside of municipalities). MRCs are in
 charge of tasks such as: i) managing land use by creating a “land use and development
 scheme”, which is revised every seven years; ii) planning waste management, fire protection
 and civil defence; iii) watching over the functioning of watercourses; iv) preparing evaluations
 for municipalities; and v) selling buildings for property tax default. MRCs are also responsible
 for local economic development, since they are in charge of the management of CLDs. The
 population of MRCs differs greatly between fewer than 10 000 and more than 100 000 and so
 does the surface area. Out of the 100 units at this level, only 86 are MRCs, 14 are similar units
 with the same competences. The rural territory of Québec as defined for this report comprises
 91 MRCs or similar units.
    Local level: The lowest administrative division is the municipal level. In 2006, Québec had
 around 1 140 cities and local municipalities. Out of these, more than 1 100 municipalities and
 non-organised territories as well as 34 Indian reservations compose the rural territory that is
 integrated into the 91 MRCs or equivalent bodies mentioned above. Québec has significantly
 more municipalities than other Canadian provinces which might be due to local residents'
 strong sense of belonging to their territories. Previous governments have reduced the number
 of municipalities by mergers but, as a result of local tensions, some merged municipalities
 decided to reconstitute themselves into their former territory.
 Source: OECD (2009), “Questionnaire for the Integration of the Background Report”, internal working
 document with information provided by MAMROT, Directorate for Public Governance and Territorial
 Development, OECD.




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       and knowledge, as well as to tap diverse potentials for development. The
       OECD has described this evolution as a paradigm shift in rural
       development policies generating a New Rural Paradigm whose defining
       characteristics are a focus on places rather than sectors and an emphasis on
       investments instead of national transfers and subsidies (Table 3.1).


                              Table 3.1. The New Rural Paradigm

                                       Old approach                             New approach
        Objectives          Equalisation or entitlement, farm      Competitiveness of rural areas,
                            income, farm competitiveness           exploitation of local assets and
                                                                   unused resources
        Key target sector   Agriculture (sector-based)             Various sectors of rural economies
                                                                   (e.g. rural tourism, manufacturing,
                                                                   ICT industry, etc.)
        Main tools          Subsidies                              Investments
        Key actors          National governments, farmers          All levels of government (supra-
                                                                   national, national, regional and
                                                                   local), various local stakeholders
                                                                   (public, private, non-governmental
                                                                   organisations (NGOs)
       Source: OECD (2006), The New Rural Paradigm: Policies and Governance, OECD
       Publishing, Paris.



      3.2.1 Principles, objectives, and scope
          The PNR is a territorial approach to rural development based on the
      principles of territorial equity, community capacity building and dynamic
      land occupancy. With its comprehensive territorial approach, the policy
      reflects an understanding that decline is not inevitable, that opportunities for
      growth exist in all territories, and that their development should be promoted
      by central (or federal) and regional (or provincial) governments
      (OECD, 2009e). The PNR principles reflected in four strategic policy
      objectives address the challenge of mobilising and strengthening rural
      communities. Economic development measures are not a main focus of the
      policy.

      Social capital and local community capacity are seen as
      preconditions for stronger development…
          As its first principle, the PNR focuses on territorial equity associated
      with local community capacity as a precondition for socioeconomic
      development in rural areas. Québec's policy differs from that of many
      OECD countries which first promote economic development as a means to

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       enhance social capital. Because the basic unit for the PNR is the MRC, it
       was important to find a way to encourage people to think of the MRC, and
       not just their municipality, as their community. The two strategic policy
       objectives related to this principle are: to unlock the potential of all human,
       cultural and physical resources present in rural areas; and to maintain a
       balance between quality of life, social environment, natural environment and
       economic activities. The latter illustrates the focus on sustainability and the
       harmonisation of economic, ecological and social concerns. Even if this
       remains theoretical, as rural policy does not yet offer a quantifiable measure
       for an optimal equilibrium between the factors mentioned, it promotes an
       innovative perception of rural development.
            Local stakeholders commit to collaborating through capacity building
       and the participation of citizens and groups in collective projects to create a
       sense of community.3 The government tries to strengthen a sense of
       belonging and connections among people and groups as a basis for
       socioeconomic development efforts. Indeed, a sense of community and
       social cohesion can create a distinctive basis for a rural community's
       attractiveness and capacity to innovate, whereas economic success is often
       based on unique characteristics that cannot be easily transmitted to other
       areas, such as the availability of natural resources or proximity to an urban
       core.
           The benefits of a focus on territorial equity are difficult to measure. The
       government has developed a methodology for measuring local development
       through an index composed of different socioeconomic variables (Box 3.2).
       The PNR is also committed to producing a vitality index to be used by rural
       communities, which, once established, should capture the dynamics and
       mobilisation of a community.

       … and dynamic land occupancy is a societal choice to maintain the
       settlement structure.
           The societal choice of land occupancy by dynamic rural communities is
       well reflected in the PNR. In light of population ageing, out-migration of
       young people, and significant demographic change (see Chapter 2), the
       different measures aim at two strategic policy objectives: to revitalise and
       integrate rural populations; and to ensure the continuity of rural
       communities. To achieve these objectives, which are part of Québec’s larger
       societal project, key policy elements are new social, economic and cultural
       activities, a new way of using resources and the integration of new rural
       residents through in-migration. There is a consensus along the political
       spectrum and among civil institutions that the province should maintain the


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                        Box 3.2. A development index to determine
                              devitalised rural communities

           In the framework of Québec's rural policy, devitalised rural municipalities
        receive additional financial support from the government. To determine
        “devitalisation”, the government is establishing a development index composed
        of socioeconomic variables such as population change in the municipality, the
        unemployment rate, the share of income from transfer payments, average
        household income, and the share of residents over 15 years with less than
        nine years of schooling.
           Municipalities are defined as “devitalised” if their development index is
        below 0 and as “very devitalised” if it is below -5. Accordingly, an action plan
        targeting very devitalised municipalities was implemented in 2008 which focuses
        on a vision for the future and includes sectoral measures for economic
        diversification as well as infrastructure and basic public service investments.
           However, since the index is calculated at the municipal level and the
        population base is small, the calculation is rather unstable with results varying
        greatly from one year of reference to another.
        Source: OECD (2009), “Questionnaire for the Integration of the Background Report”,
        internal working document with information provided by MAMROT, Directorate for
        Public Governance and Territorial Development, OECD.




       current settlement structure in its vast and sparsely populated rural
       territories, even if delivery of many public services is increasingly costly in
       many remote communities which are difficult to sustain. This objective
       goes beyond nationalistic rhetoric and has become a distinct and stable
       policy trait which favours the successful implementation of the PNR.
           The policy does not provide explicit arguments for the government's
      strategic focus on land occupancy. It is difficult to find means of properly
      evaluating the benefits of a strategy that views territorial occupation as the
      goal of policy intervention. The application of cost-benefit analysis is
      challenging as it seems hardly possible to properly quantify the benefits of
      occupying land. Policies based on unquantifiable objectives have a higher
      risk of generating rent-seeking since it is easy for beneficiaries to lobby for
      further intervention by arguing that the objective has not yet been achieved.
      Apart from quantifiable justifications, the principle may be linked to the
      political and societal objective of strategically ensuring the conservation of
      the province's landscape or of facilitating the access to resources which are
      often located in remote rural areas (Jetté-Nantal, 2008).


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       Rural policy is a territorial approach that applies to a large part of
       rural Québec except the north
            Instead of selecting specific territories, the PNR applies to all of rural
       Québec's territory. The policy's area of application is determined by the
       government's definition of “rural territory” and in 2005 included 1 011 rural
       municipalities, 34 aboriginal communities and so-called “non-organised
       territories” outside of the continuously inhabited écoumène (see Chapter 2).
       An MRC's rural territory is defined in each rural pact (see 3.2.3) and
       discussed with its elected representatives. The total area comprises
       around 1.9 million residents in predominantly rural, intermediate and peri-
       urban territories. By contrast, like the 31 urban agglomerations, most areas
       of the vast northern region of Nord-du-Québec are not concerned by the
       rural policy, following the signing of territorial treaties in the 1970s between
       the government and three aboriginal groups (Box 3.3).



                            Box 3.3. Policies for the north of Québec

            Apart from six small localities of the region Nord-du-Québec, Québec's vast
         and predominantly rural north (regions north of the 49th parallel) is not affected
         by the government's rural policy. This is mainly because the government and
         three aboriginal groups (First Nations) signed territorial treaties during the 1970s
         which determine each party's responsibilities and have since signed
         complementary development agreements. Beyond rural policy, governments have
         outlined an overall development policy for these areas. In doing so, they have to
         consider in a sensitive way the stipulated competences of the local jurisdictions
         involved.
            Whereas plans outlined by the government to launch a development policy for
         Nord-du-Québec were finally not completed, the Ministry of Natural Resources
         and Wildlife (MRNF) is currently in charge of elaborating a new inter-ministerial
         development policy for the north (Plan Nord). It mainly targets the social
         development of aboriginal and other local populations, resource-based economic
         development (hydroelectricity, forestry and mining), and sustainable
         development. Moreover, the plan schedules collaboration between different
         government bodies on wider economic sectors such as tourism, including rural
         tourism and tourism linked to aboriginal people. The policy will apply to the
         northern territories of the province, including Nord-du-Québec and the northern
         parts of Saguenay – Lac-Saint-Jean and Côte-Nord.
         Source: OECD, based on information provided by the Government of Québec.




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           Québec's rural policy is based on the potential of people and places and
      tries to integrate the historically deep-rooted sectoral and more recently
      introduced territorial approaches to development. Its scope goes beyond a
      “niche policy” solution designed for limited rural areas such as the European
      Commission's LEADER programme, yet it does not constitute a “grand
      plan” solution which aims to integrate all policies for rural areas into a
      comprehensive strategy such as Mexico's “Special Concerted Programme”
      (on the scope of rural policy, see Box 3.4).



                             Box 3.4. The scope of rural policy

          As identified in the New Rural Paradigm (OECD, 2006), two opposing policy
        models aim to define an appropriate scope of rural policy:
           The “grand plan” solution at one extreme aims at integrating all policies and
        programmes directed to rural areas into a broad and co-ordinated strategy. This
        approach has a strong effect, and involves considerable amounts of money and a
        large number of people. However, it also involves considerable risks of failure
        and inaction, as it is difficult to have a broad policy framework that includes both
        the policy’s nature (territorial policy versus general sectoral policy) and the
        territory’s nature (rural versus non-rural). Moreover, institutional leadership and
        co-ordination raise challenges as a large number of institutions and policies are
        supposed to be integrated.
           The “niche policy” solution at the other extreme is characterised by policies
        that are designed for a limited number of regions and generally have very limited
        budgets. Besides the European Commission’s LEADER, many OECD countries
        have opted for this model. Niche policies are often separate from other regional
        policies such as urban development and sectoral policies. This and limited
        funding risks producing policy results with modest social and economic impact.
           To achieve a balanced compromise between those two suboptimal policy
        models, OECD countries have discussed a rural policy framed by a
        comprehensive and well-funded regional policy which provides an umbrella for
        co-ordinated urban and rural development policies while addressing relevant
        rural-urban linkages such as public service delivery, infrastructure, market access
        and supply chains, commuting, and flows of goods and services. This would be
        accompanied by mechanisms to assess and review sectoral policies for their
        impact on different types of regions.
        Source: OECD (2006), The New Rural Paradigm: Policies and Governance, OECD
        Publishing, Paris; OECD (2008), OECD Rural Policy Reviews: Finland, OECD
        Publishing, Paris.




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       3.2.2 Institutional framework
           The PNR's institutional framework represents a balance between central
       rule setting and decentralised implementation. It targets the mobilisation of
       local communities and the strengthening of the supralocal and local levels of
       government.

       The ministry in charge of rural policy is separate from agriculture
       and economic development…
           Québec's rural policy is institutionally separate from the ministries of
       agriculture and economic development, an unusual situation among OECD
       countries. The notion of “rural” is country-specific and often strongly
       influenced by pre-existing agricultural and economic development policy
       frameworks. In Québec, these policy frameworks are dealt with separately in
       sectoral ministries. Whereas the separation from agriculture has existed
       since the beginning of a proper rural policy, making it easier to embrace the
       inter-sectoral dimension of rural development, the split from regional
       economic development was only decided recently (see 3.1).
           The policy is led by the Ministry of Municipal Affairs, Regions, and
       Land Occupancy (MAMROT). Like the first PNR, the second was prepared
       by an inter-ministerial committee involving different government bodies,
       with consultation of local actors through field work done by SRQ and the
       participation of rural development agents recruited by local and supralocal
       administrations (see 3.2.3). The inter-ministerial rural committee continues
       its work and brings together 18 ministries led by MAMROT’s internal
       directorate for rural development.
           Beside MAMROT, rural policy also relies on local stakeholders and
       several partner associations for policy conceptualisation, design,
       implementation, monitoring and evaluation. The policy includes a network
       of publicly funded partner associations which declare, at the beginning of
       the second PNR policy document (Government of Québec, 2006a), their
       commitment to promote the policy and overall rural sustainability. Grouped
       together in a committee of rural partners (Comité des partenaires de la
       ruralité), which is headed by MAMROT, these associations include: the
       advisory body SRQ, the Québec federation of municipalities (FQM), the
       Union of Québec's Municipalities (UMQ), and the Association of Québec's
       Local Development Centres (ACLDQ) (Box 3.5).




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                  Box 3.5. The four partner associations for rural policy

           The government has concluded a formal understanding with four provincial
        partner associations to ensure implementation and monitoring of its rural policy.
        As members of the committee of rural partners, they have obligations to promote
        policy measures. This committee can make recommendations to MAMROT for
        adapting policy measures to the specificities of rural areas:
           Solidarité Rurale du Québec (SRQ) has agreed to a partnership with
        MAMROT at least until 2014 which includes CAD 5.6 million of funding under
        the second PNR (2007-14). In return, it commits to providing research and
        technical advice to the government and rural areas, to facilitating the correct
        implementation of PNR measures and to offering training to rural development
        agents. By observing government actions and interacting with the government as
        an advocate for rural interests, SRQ plays a role similar to the Commission for
        Rural Communities (CRC) in England, United Kingdom, which is the key
        supervisory body for verifying “rural proofing”.
           The Québec Federation of Municipalities (FQM) and the Union of
        Québec's Municipalities (UMQ) are the two main organisations representing
        elected municipal officials. FQM represents 950 small municipalities with fewer
        than 8 000 inhabitants, and brings together 7 000 elected representatives and
        87 MRCs. FQM and UMQ offer training to local elected representatives on local
        development, community participation and the implementation of rural pacts.
        They also call MAMROT’s attention to municipal officials' concerns, for instance
        regarding land occupancy, urban-rural linkages or Internet service delivery.
           The Association of Québec's Local Development Centres (ACLDQ)
        encompasses all CLDs, their elected municipal officials and other collective
        representatives. The association deals mainly with two governmental institutions:
        the Ministry of Economic Development (MDEIE) which is legally in charge of
        CLDs, and MAMROT. ACLDQ encourages CLDs to contribute their resources to
        the PNR, to support the work of rural development agents and to promote access
        to CLD development funds for enterprises located in rural areas.
        Source: OECD, based on interviews with the partner associations.




      … and aims to empower MRCs as the supralocal level of government.
           The 91 regional county municipalities, or equivalent bodies for the rural
      territory, are the core unit of rural policy intervention and local decision
      making. Whereas many governments have difficulties devolving power to
      supralocal or regional levels, the concentration of powers at the MRC level
      illustrates Québec’s efforts to create functional regions above the relatively


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       strong municipal level. [note reorganisation] This shift of decision-making
       power is essential for effective place-based rural policy, particularly given
       the longstanding deficiencies in local governance which have been the
       Achilles heel of the country's rural development efforts (OECD, 2002). For
       regional and local development policy to be effective, Canada has to
       overcome continuing federal-provincial jurisdictional challenges, and this is
       best facilitated by strong local governance. The federal government is not
       involved in the PNR's institutional framework, policy design,
       implementation and budget. As specified in Canada's Constitution, local
       governments have an exclusive relationship with provincial governments,
       and provinces are more strongly involved than the federal level in local
       territorial organisation, development and service delivery (Box 3.6). Among
       the provinces Québec has been the most protective of its rights under the
       division of powers in the Constitution and places the greatest limits on
       federal activity in the province.



                          Box 3.6. Jurisdiction over local governments
                                 in the Canadian Constitution

            In Canada, the federal government is not allowed to make laws relating to
         municipal institutions and to deal directly with local governments. As the
         Constitution of Canada gives provinces sole responsibility, the federal level does
         not play any role in defining the size of municipalities, their number or political
         competences.
            Accordingly, Québec’s MRCs and their elected municipal officials have an
         exclusive relationship with the government of Québec which is more strongly
         involved than the federal government in local territorial organisation,
         development and service delivery in rural areas. Federal-provincial negotiations
         are needed if the federal level plans to distribute financial subsidies to Québec's
         municipalities, MRCs and other government bodies mainly financed by the
         province.
         Source: Constitution Acts, 1867 to 1982.




            The MRCs' central role and their collaboration with municipalities
       illustrate the policy's decentralised approach. MRCs and municipalities have
       room to manoeuvre in planning and implementing policies and adapting
       them to local circumstances. To do so, they mobilise non-profit actors and
       civil society and carry out the initiatives as stipulated in a supralocal
       working plan for the period 2007-14. The municipal level is in charge of

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      implementing rural policy measures on the local level. Even if MRCs are the
      government's main counterpart for rural policy, many projects are realised
      directly by municipalities. Nonetheless, all municipal mayors meet at the
      MRC level to co-ordinate rural policy measures and plan collectively.
          MRCs are the key level for rural policy implementation, but they are
      governed and largely financed by the municipal governments that compose
      them. MRCs depend on property tax transfers from municipalities and
      intergovernmental transfers from the province. Property represents 57% of
      municipalities’ budget; it can be up to 70% if compensation taxes for
      government properties and specific tariffs are added. In rural areas, the
      relative weight of property taxes is higher owing to the lack of
      administrative authority to collect other types of revenue. The funding
      situation in MRCs reflects a tendency apparent in many countries:
      governments accept that rural development requires devolution of
      responsibility to local authorities, but are reluctant to provide direct financial
      capacity. However, if revenues at the supralocal level are unstable over a
      lengthy period of time, relevant investments may not be undertaken.
          MRCs are led by a council and a prefect elected by mayors or by direct
      election. The council is a board of mayors of all the municipalities within
      the MRC and sometimes other elected officials. One of the mayors is elected
      by the others as prefect. Given the absence of a single dominant population
      centre in an MRC, the risk that a prefect would also be the mayor of a large
      urban municipality and might marginalise smaller communities is limited: in
      almost all rural MRCs, the number of rural municipalities (and thus their
      votes in the council) is larger than the urban membership. However, if there
      is a dominant municipality with more than 50% of the MRC's total
      population, it has a right of veto in the decision-making process. Also, large
      municipalities often have better administrative capacity than smaller ones,
      and this can strengthen their influence on MRC policy. To facilitate better
      coherence with the PNR, the legislation has been modified to permit MRC
      councils to establish an alternative distribution of votes regarding rural pacts
      (see 3.2.3). For example, if municipalities with larger populations agree to
      be excluded from decisions on rural pacts, the MRC council can vote to
      allow this. In addition, 13 MRCs are currently experimenting with direct
      elections of prefects. This system which allows people other than mayors to
      become MRC leaders might eventually be extended to all MRCs, but the
      government encounters resistance as people ready to assume more
      responsibilities may be lacking.
          The empowerment of MRCs represents an effort to avoid localism and
      to encourage broader groups than municipalities to work together. Most
      (though not all) MRCs reach the critical mass required for PNR-funded
      projects, thus facilitating a focus on territorial development. MRC decision

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       making encourages political mobilisation and planning beyond the limited
       territory, population size and social capital of municipalities. Neighbouring
       communities within an MRC have incentives to work as allies and to find
       ways to link their respective interests. This is a good approach, but one that
       creates challenges as many municipalities still have a local development
       agenda that is not co-ordinated with other communities in the MRC. Small-
       scale interventions on the local level risk having limited impact on the
       regional economy if there is no common vision and insufficient co-operation
       between communities. However, this may change once the dynamics of
       community mobilisation extend beyond local borders. In a few cases,
       municipalities have implemented projects that can negatively affect adjacent
       municipalities in the MRC: this has occurred in cases where municipalities
       used public funds and rural policy measures to attract firms from within the
       same MRC instead of concentrating on local assets and mobilisation.
           Administrative regions have largely remained administrative units for
       the government and are only marginally involved in rural policy.
       MAMROT's regional directorates co-ordinate with those of other ministries
       in regional administrative conferences (CARs). Regional conferences of
       elected officials (CRÉs) have become the government's main counterpart for
       elaborating five-year regional development plans. Moreover, they provide a
       consultation role for MRCs and municipalities and administer a regional
       development fund that supports selected projects that go beyond across
       MRC boundaries. CRÉs are not a regional government but a co-ordination
       body for local governments and the civil society. As members of CRÉ
       boards are not directly elected by the citizens, they are in a relatively weak
       position compared to regional directorates. They cannot impose their
       regional development strategy on lower administrative levels nor can they
       adapt policies to place-based needs. Representatives include MRC prefects
       and mayors of large, often urban, municipalities. Given the under-
       representation of rural jurisdictions, a rural commission has been created in
       the Abitibi-Témiscamingue region to help the CRÉ and MRCs develop large
       rural projects such as high-speed Internet connections.

       3.2.3 Policies

       Social and local community development is stimulated through rural
       pacts with MRCs,…
           As an innovative tool that is coherent with the OECD's New Rural
       Paradigm, the government and each of the 91 MRCs have signed a “rural
       pact” targeting social and human capital and community capacity building.
       The second PNR's rural pacts (pacte rural) are contractual, place-based

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      commitments for 2007-14 which establish each party's responsibilities and
      involve the decentralised management of large parts of the funds by MRCs.
      Rural pacts include technical and financial support for community
      development projects in municipalities and MRCs provided by MAMROT.
      For community development, groups of citizens and representatives of local-
      level institutional actors actively participate in the well-being of their
      community (Girard, 2009). In Québec, the participatory planning process
      occurs in local development committees which bring together diverse
      groups (civil society representatives, local businesses and credit
      co-operatives, and institutional actors and elected officials) to frame and
      commit to a vision for development. Initiatives such as the LEADER
      programme of the European Commission and its national equivalents in EU
      member countries (Box 3.7) are similar efforts to promote place-based local
      partnerships beyond administrative boundaries that are coherent with the
      New Rural Paradigm (OECD, 2006).
          Québec invests significantly more in community capacity building than
      other Canadian provinces. This investment can be seen as a consistent
      reaction to the experience of many countries in which local economic
      development policies have not been successful. Failure has often been due to
      the lack of parallel social and local community development measures. The
      objective is to provide a basis for future action using existing social and
      human capital and capacity and to fill in major gaps. This is in line with the
      idea that regions should promote their own growth by mobilising local
      assets and resources to capitalise on their specific competitive advantages
      (OECD, 2009e).
            Contracts, such as the rural pact, allow for a high degree of flexibility,
      but carry the risk that policy principles may not be followed. The diversity
      of application allows governments to reorganise rights and duties without
      requiring a constitutional or legislative change. Since the policy is based on
      existing administrative structures, no legislative modifications have been
      necessary in Québec, unlike Spain, for example, which opted for a law to
      establish a new national framework for rural policy (OECD, 2009c). There
      is no provision to ensure that region-specific government objectives are
      addressed (Jetté-Nantel, 2008), although trends in rural areas demonstrate
      the need for a differentiated approach; whereas social and cultural
      development measures are often crucial in intermediate rural regions and
      those close to urban centres, economic development is more important in
      remote predominantly rural and single-industry communities, even though
      in Québec the latter also increasingly stress concern for broader quality of
      life.




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                      Box 3.7. Experience with community development
                           through place-based local partnerships

            Like Québec's PNR approach, the European Commission's LEADER
         programme recognises that a long-term commitment to programmes by both the
         central government and local communities is required, as changing outlooks on
         development takes time. In three stages (LEADER I, LEADER II and the current
         LEADER+ running from 2000-06 and from 2007-13), the LEADER programme
         is a hybrid rural/regional policy for specific target areas. LEADER works as a
         bottom-up approach to decision making and management responsibilities, adopts
         a multisectoral vision and favours multi-level governance arrangements between
         transnational, central and local governments. LEADER brings public and private
         stakeholders together in local action groups (LAGs) which are responsible for
         project selection and implementation of local development strategies as agreed
         with the Commission. Norms regulating the LAGs limit the share of public
         administrators and elected officials to no more than 49% of the LAG’s executive
         council. The European Commission provides most of the public financing for
         LEADER programmes, with a smaller share coming from national and regional
         levels of government.
            Among the national equivalents to LEADER, Germany and Spain are
         particularly interesting.
            The German Active Regions (Regionen Aktiv) programme is a hybrid policy
         approach in which the Federal Ministry of Agriculture, in addition to its funding
         and monitoring roles, is in charge of providing services and capacity building
         (technical assistance, research, communication, etc.). Regional actors define a
         community-based strategic view and programme and formulate business plans,
         and 18 model regions have participated in these partnerships with a minimum
         share of 50% for actors from NGOs. A specific structure called “regional
         management” provides day-to-day monitoring, consultancy for project applicants,
         and management of regional networks.
             Unlike LEADER, Spain's PRODER programme allows for agrarian
         investments and puts less emphasis on innovative and transferable actions. While
         its first phase was limited to regions with a GDP per capita below 75% of the EU
         average, the second (2000-06) was opened to the entire Spanish territory. Public
         funds dedicated to this second phase totalled EUR 827.7 million (of which 63%
         provided by the EU). While there are no new LEADER and PRODER groups in
         Spain for the 2007-13 European programming period, existing LAGs will remain
         and become responsible for managing the measures coming through Axis 4 of the
         Common Agricultural Policy's (CAP) second pillar.
         Source: OECD Rural Policy Reviews.




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           An internal evaluation of the first PNR (Government of Québec, 2007)
      found two different perspectives on the rural pacts at the MRC level. While
      some MRCs follow the government's view of rural pacts as a proactive
      strategy to strengthen the development capacity of actors and communities,
      others limit their role to establishing a functional mechanism for the
      distribution of funds, comparable to the modalities for local investment
      funds. Only the first group of MRCs will use rural pacts as a long-term
      approach involving a sustainable consultation process and appropriate use of
      development agents to mobilise and accompany communities in their
      development efforts. A similar phenomenon has been observed with the
      EU's LEADER initiative (OECD, 2006); some target areas perceived the
      programme as an opportunity to mobilise actors through proactive and
      place-based development whereas others saw it as partial compensation for
      their rural territories' structural disadvantages. To avoid any
      misunderstanding and react to inaccuracies in the first round of rural pacts,
      the second PNR has more explicitly included indicators for success in every
      rural pact.
          Perceiving rural pacts as a proactive strategy is an opportunity to
      strengthen social cohesion and the sense of belonging to a territory. There is
      a lack of cohesion in many territories, as factors such as family-based
      farming, the Catholic Church or large extraction companies in single-
      industry communities no longer have the influence they had in the past.
      Intensive farming and a focus on scale have led to agricultural
      concentration, which has resulted in fewer and larger farms and contributed
      to the devitalisation of rural communities. The Catholic Church was long a
      major factor of community life but has lost importance with the drop in the
      number of worshipers. And large companies in single-industry communities
      no longer possess the cultural and territorial attachment that allows them to
      structure communities as a result of closures, reductions in employment or
      transnational mergers. Measures such as the rural pacts or the annual “Day
      of Rurality” (Journée de la ruralité)4 organised by MAMROT, its rural
      partners and a selected MRC can contribute to strengthening the
      understanding of “rurality”, social cohesion and a sense of belonging.
          Québec's rural pact approach puts the mobilisation of communities and
      their sustainability at the centre of policy objectives in order to create social
      and human capital and is represented in Figure 3.1. Even though the figure
      refers to the first PNR, it is generally applicable to the role still given to
      rural pacts.




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           Figure 3.1. Causal model of rural development: the function of rural pacts

                    Economic context                Function                   Political context
                                                     of rural
                                                      pacts



                                                  Mobilisation


                                               Capacities for
                                               mobilisation:
                                               • citizen participation
                                               • local governance
               Capital                         • innovative actions
                                               (projects)                               Development
       • social and
                                                                                       Capacities for
       human capital                   U
                                                                                       development
       • institutional capital         S
       • cultural capital              A
       • financial and                 G
                                       E                                               Actions and
       economic capital
                                                                                       dynamics for
       • physical capital
                                                                                       development
       • natural capital

                                             Sustainable territorial
                                                 communities



                                              • people’s well-being
                                              • quality of life
                                              • sustainability




      Source: Based on Government of Québec (2007), Éléments d'évaluation de la politique
      nationale de la ruralité 2002-2007. Eléments de suivi de la politique 2007-2014, December.


           Private projects are excluded from direct rural pact funding, so that non-
       profit organisations are the main counterparts for project definition and
       development. Projects are multisectoral with activities ranging from
       education and training, agri-food and culture to health care and
       intergenerational linkages. MRCs and municipalities are free to choose
       appropriate and concrete implementation steps, priorities and projects. This
       encourages innovation by local actors.
           The impact of rural pacts on mobilisation and investment in rural
       communities has been significant. During the first PNR (2002-07), rural
       pacts generated more than 4 700 projects and more than 35 000 residents (to
       November 2007) participated in local development committees on the MRC
       and municipal level. With support of CAD 83.7 million, these rural pact

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      projects generated total investments of CAD 506.4 million, i.e. CAD 1
      leveraged CAD 6.1. According to the government, more than 7 600 jobs
      have been maintained or created by the projects (Government of Québec,
      2007). In the second PNR, the first 1 613 projects, with support of
      CAD 30.1 million, have generated total investments of CAD 243.7 million,
      i.e. CAD 1 leveraged CAD 8.1 (Government of Québec, 2009b).
          Many projects aim to provide non-commodity outputs in the form of
      local pure public goods. This particular category is characterised by the fact
      that the goods are non-rival, but largely excludable to outsiders, as benefits
      mainly accrue to residents of a small jurisdiction, such as a municipality
      (OECD, 2001). Most of the public and collective goods targeted by
      Québec's PNR are local in nature, given the spatial dimension of rural
      Québec. They involve a high level of social and human capital, the use and
      non-use by residents of natural and cultural amenities and the positive
      externalities linked to them (visual landscape, cultural heritage), effective
      local governance institutions, and quality of life, defined as an attractive
      place to live and work and the related positive image (Petrick, 2006).
      Although private businesses are not supported by rural pacts, the framework
      conditions and public and collective goods created by rural pacts also
      benefit firms and may spur entrepreneurship.

      … a network of rural development agents,…
           Rural development agents are essential for creating a vision for local
      development and assisting in policy implementation and monitoring. They
      support local committees and project promoters in developing rural pact
      projects, facilitate knowledge sharing, and contribute to monitoring the rural
      pact. MRCs or CLDs can hire the agents financed by the government of
      Québec's rural pact commitments. MRCs do not have to delegate project
      management tasks to CLDs, but they often do so. Many CLDs in turn assign
      these tasks to the rural development agents, who are generally
      administratively integrated in the CLD structure. MRCs make annual
      assessments of their work. The 136 current agents get annual update training
      organised by the advisory body SRQ and financed by MAMROT. This
      training includes annual meetings of agents from all over Québec but also an
      interactive online portal which facilitates the exchange of experiences.
          Figure 3.2 shows the importance of rural development agents, local
      development committees and MRCs as key local figures within Québec's
      approach to rural policy. The actors and key bodies for PNR implementation
      on the provincial level are represented in light blue.



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                  Figure 3.2. Implementation of Québec's Politique nationale de la ruralité
                                                 (PNR)
               Territorial     Government                                                      Representative/
               division                                                                       consultant body

                                                                                                Committee of rural
                                       Premier
                                                                                                   partners
                                   Council of Ministers
 Provincial




                                        MAMROT                                                        SRQ

                                                                 Interministerial                  FMQ, UMQ,
                                                                rural committee                     ACLDQ
 Regional




                    Admin.                        CAR                                  CRÉ board
                    region                (MAMROT/other ministries)                    President




                                     MRC council                                                                     Training (SRQ)
                     MRC                                                     CLD
 Supra-local




                                       Prefect


                                                                      Rural development                       Local development committee:
                                                                             agent                           Civil society, business, officials…
                                                                      Other development
                                                                            agents
 Local




                                  Municipal council
                Municipality
                                       Mayor


                                                                      Citizens and organised civil society

                                + political                                                                                       + operational



               Source: OECD, based on Government of Québec, MAMROT.


                    The commitment, qualification and experience of rural development
               agents, along with a competitive salary, are important for their success. It is
               the agents' responsibility to link local project developers with MRCs and
               municipalities, but also to develop connections between project developers
               and the funding instruments available in CLDs. Since successful local
               development depends on a community's capacity to facilitate connections
               across different socioeconomic groups (Freshwater, 2004), the agents also
               have a major role to play in building bridges between social and economic
               development and creating teams of people and groups within a given
               territory who otherwise do not necessarily interact. Finally, the experience
               collected by the network of rural agents is important for the government's

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      efforts to further develop the PNR. In this regard the network's advice was
      considered when preparing the second rural policy. The funding provided by
      MAMROT is a critical element; as determined in the rural pact document,
      MRCs receive annual funding for each agent in the amount of CAD 25 000
      (2007-08), increasing to CAD 28 154 in 2013-14. This and earlier salary
      increases may help reduce the high turnover of agents during the first PRN.
      The obligation of MRCs to co-finance this sum in order to attract qualified
      agents is crucial. After evaluating the first PNR, the government decided to
      give additional financial support to MRCs with more than ten devitalised
      municipalities (according to the development index, see 3.2.1) so they can
      hire additional agents (Government of Québec, 2007).

      …and specific programmes targeting local-level innovation and
      knowledge development.
          Specific research and development (R&D) measures in the PNR
      promote innovation, expertise and knowledge sharing in rural regions. These
      measures target private enterprises, co-operatives, the social economy and
      non-profit organisations and aim at disseminating experience about new
      ways to develop and provide services to other communities and leaders. The
      three main programmes for this purpose are the rural laboratories, speciality
      products and working groups. They are directly administered by MAMROT
      and the committee of rural partners (Government of Québec, 2007).
          Pilot projects supported as a rural laboratory are selected by the
      committee of rural partners and have to target innovative ventures in a
      diverse range of sectors, often following co-operative or community models.
      Laboratories can be supported with a maximum amount of CAD 100 000
      annually for up to six years. In 2009-10, 33 laboratories have been funded
      with CAD 2.5 million (Government of Québec, 2009b). The promotion of
      speciality products aims at stimulating the development of original local and
      regional products in the sectors of agri-food, agro-forestry (timber and non-
      timber forest products), arts and crafts, and culture. Funding should allow
      producers to better control product marketing and pricing, and ideally
      generate high value-added products which help producers keep more
      financial benefits in the rural region. Limited and partial funding, up to a
      maximum of CAD 25 000 per product, limits the risk of rent seeking by
      applicants. Since the beginning, 172 projects have been selected with
      support of CAD 3.6 million, which generated a total investment of
      CAD 22.4 million. The objective is to launch 480 products by 2014.
          Complementing the rural policy's R&D component, a rural future fund
      is managed by MAMROT to support working groups which explore future
      development in emerging sectors. These working groups, endowed with a

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       budget of CAD 350 000 to CAD 450 000 over three years, bring together
       private, public and community actors as well as academia in a search for
       promising activities. The fund (Fonds d'initiative pour l'avenir rural)
       supports the working groups' activity, a few specific R&D expenses, and
       projects to experiment with selected initiatives. Currently, working groups
       are active in six fields: local energy production; rural areas' multi-
       functionality; use of information and communication technology (ICT) in
       rural     communities;       rural-urban   complementarities;      devitalised
       municipalities; finding market niches for rural speciality products (agro-
       food, non-timber forest products, arts and crafts). The working groups aim at
       bringing new opportunities, ideas and tools to rural communities and leaders
       to trigger further local efforts.
           After adopting the second PNR, the government decided to introduce a
       programme for high-speed Internet access. This programme targets rural
       residents, organisations and enterprises and will have financing of
       CAD 24 million (2009-13). Later in 2009, the federal government (Industry
       Canada) launched a programme for high-speed Internet in rural Canada (see
       Chapter 1). Increased access to ICT and particularly to broadband Internet
       contributes to rural areas' quality of life and enhanced competitiveness.
       Besides better opportunities to attract and retain businesses, diverse health,
       educational and cultural services can be accessed through broadband
       Internet. Attracting immigrants becomes easier if migrants can access non-
       governmental offerings in their native language; this has so far often been
       limited to urban communities. Although 74.6% of Québec's households have
       Internet access and 61.8% possess intermediate or high-speed Internet
       (CEFRIO, 2008), these figures are significantly lower for the territory
       outside of the nine cities with more than 100 000 inhabitants5 and in
       particular for predominantly rural regions, where only 57% of households
       have Internet and 76% of these are intermediate or high-speed Internet
       (MAMROT).

       3.2.4 Budgets

       The provincial budget increasingly considers the spatial dimension of
       policies…
            There seems to be an increasing focus on spatial policies in the
       allocation of the provincial budget. Targeted funding by provincial
       ministries to rural residents and territories has increased more than the
       overall level of expenditures by these ministries. These results emerge from
       an accounting exercise conducted by Québec authorities in the framework of
       this report. Québec does not yet have an integrated “rural budget” given the

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      relatively recent territorial division into what is considered “rural” and
      “urban”. Several OECD countries have already combined funds coming
      from different ministries into a multisectoral “rural budget”. Countries that
      have been innovative in this respect include the Netherlands (OECD,
      2008a), Mexico (OECD, 2007) with the Special Concerted Programme
      (PEC) which groups each ministry's budget directed to programmes with a
      rural scope, and China which summarises spending on sannong issues
      concerning agriculture, rural communities and farmers (OECD, 2009b).
      These budgets can be difficult to establish as the number and scope of
      programmes change regularly, thus complicating comparisons over time.
      Nonetheless, the “rural budget” is an innovative tool for presenting the
      evolution of public expenditure and making the government's rural
      development efforts more transparent.
          In Québec, rural expenditures include narrow rural policy measures,
      such as provincial support for agriculture and agri-food businesses, and
      rural, community and regional development funding and support for
      enterprises in rural areas, but also broader policy measures affecting rural
      areas such as education, health and employment services, infrastructure,
      transport    and     housing.    Rural    expenditures   increased     from
      CAD 6 341 million in 2001 to CAD 8 027.5 million in 2006, a rise
      of 26.6%, whereas total ministerial expenditures increased by 23.9% (see
      Annex 3.A1).
          As in many OECD countries, by far the most important provincial
      transfer programmes for rural areas do not concern agriculture or rural
      development measures (see Annex 3.A1). Rather, the main expenses
      concern broader sectoral and social policies with no specifically rural
      dimension such as education, transport, health care and social welfare.
      In 2006, the ministries in charge of education and of health and social
      services together accounted for almost 80% of total rural expenditures.
      MAMROT's part in the “rural budget” has increased slightly, but remains
      very low at 2.59%. Although much of the agricultural support comes from
      the federal level, the competent ministry's (MAPAQ) share is still higher
      than MAMROT's. Surprisingly, spending on natural resources (figures
      for 2004, however) is relatively unimportant compared to both agricultural
      and rural policy, in spite of the considerable number of rural communities
      whose economy relies on forestry.

      … although the specific rural policy budget is limited in its scope.
         The government opted for a long-term PNR budget of limited scope
      which shows that effective territorial policies do not require the large
      amounts needed for sectoral approaches. The second rural policy (2007-14)

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       has a global budget of CAD 280 million (Table 3.2) which gives
       communities financial security for their local investment commitments. Its
       scope is limited to MAMROT's programmes targeting social capital and
       local community development, and in particular: rural pacts, rural
       development agents, rural laboratories, speciality products, the rural future
       fund, SRQ funding and the high-speed Internet programme. This budget,
       which is larger in per capita terms than the amounts to rural areas allocated
       by other provinces or the federal government, does not include other
       ministries' financial commitments (see 3.3.2). It demonstrates that Québec's
       approach to promoting social capital and community capacity development
       is significantly less costly than policies implemented under the European
       LEADER programme, as in Spain (OECD, 2009c) and Italy
       (OECD, 2009d). However, the exclusion of private projects from rural pact
       projects limits the budget's impact on broader economic development
       activities, although private firms have access to other government
       programmes.
           Some 85% of MAMROT's rural policy budget is transferred to MRCs,
       which manage the funds for rural pacts and rural development agents. MRCs
       do not have to spend these sums by the end of each year, but can transfer
       unspent funds to the following year within the policy's seven-year term. The
       remaining money is managed by MAMROT to finance measures to
       encourage rural innovation and knowledge and their distribution to other
       rural areas (rural laboratories, speciality products). To finance collective
       projects for high-speed Internet access in rural areas, an additional amount
       of CAD 24 million was allocated after the adoption of the second PNR.

           Table 3.2. Total budget of the second Politique nationale de la ruralité,
                                          2007-2014

                               Policy item                    Amount of funding, in million CAD
         Rural pacts                                                      213.0
         Rural development agents                                          25.3
         Rural laboratories                                                15.5
         Speciality products                                               12.0
         Rural future fund                                                  8.6
         Solidarité rurale du Québec (SRQ)                                  5.6
         Total                                                            280.0
         Collective projects for high-speed Internet
                                                                            24.0
         (announced after adoption of the second PNR)
        Source: Government of Québec, MAMROT.




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          The second rural policy (2007-14) supports rural pacts in municipalities
      and MRCs with an amount of CAD 213 million. This is more than three-
      quarters of the total amount invested in the framework of the PNR.
      Municipalities and MRCs can manage this budget on their own or involve
      the local CLDs, whose board members are chosen by MRCs since 2004.
          Apart from PNR funding, rural pact projects receive financial support
      through other provincial and federal government programmes, project
      promoters, CLDs and financial institutions (Figure 3.3). Whereas a
      maximum of 80% of total funding (in practice often much less) comes
      through PNR and other provincial or federal resources, at least 20% has to
      be provided by project promoters. Offering only partial funding through
      government programmes gives local authorities incentives to select projects
      which provide the most benefits to rural residents and avoid rent seeking.
      Financial institutions participate in the funding of projects but are rarely the
      main lender. The main institution active in promoting rural policy is the
      savings and credit co-operative Desjardins Group.6 It has been important for
      the success of the PNR that Desjardins is a member of SRQ and that its
      caisses (local branches) are present in rural communities, with managers
      often sitting on CLD boards.



                      Figure 3.3. Sources of rural pact funding since 2007

                                0.2     1.4                  Québec government (other than MAMROT)
                          1.5
                                                             Project promoters (MRCs, municipalities, local
                                                             committees, non-profit bodies)
                        11.9                                 Québec government (MAMROT)

                3.4                            30.3          Other local groups and corporations

               6.9                                           Local municipalities

                                                             Canada government

                                                             Financial institutions
                 18.4
                                              13.8           CLDs

                                                             SADCs
                                 12.3
                                                             Funding to be received


       Source: Government of Québec, MAMROT.




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           With CAD 102.8 million over five years, budgetary expenditures on
       measures in the first PNR (2002-07) were smaller. Only CAD 86.4 million
       was allocated for rural pacts and only CAD 10.4 million for rural
       development agents (Government of Québec, 2007). However, the first PNR
       also provided important direct economic development support, for example
       through a CAD 11.2 million fund targeting CLDs in MRCs with social and
       economic difficulties. As in the second PNR, other ministries' financial
       support for resource-based regions or agricultural diversification and
       transformation of agri-food products were part of the policy (Government of
       Québec, 2001).
           For rural development agents, the PNR (2007-14) provides funding in
       the amount of CAD 25.3 million. The first rural policy financed 104 agents,
       but at least 136 are funded within the current budget. With more staff,
       agents can devote time to help people assess and develop their business
       plans for rural areas. In the MRC of Montmagny, for example, the local
       Desjardins caisse collaborates in the process by funding an additional agent
       and by working closely with agents, thereby increasing the chances to fund
       promising proposals while screening out weak ones.

       3.2.5 Monitoring and evaluation
           The implementation of Québec's rural policy benefits from a
       considerable degree of liberty and flexibility, but this also creates problems
       for assessment. Flexibility has allowed local officials to mould and adapt the
       policy successfully to the characteristics of the territory. The leeway
       provided by the policy has helped communities to better reach and capture
       the desired spirit of the policy. Although no evidence of abuse has been
       detected, this leeway would nevertheless warrant the implementation of a
       strong external monitoring and evaluation system, if only for precautionary
       reasons.
           MRCs are in charge of evaluating yearly rural pact results and for
       providing pact policy planning through a working plan. MRCs have to keep
       an extranet site administered by MAMROT updated with information on the
       implementation of rural pacts and the projects involved. MAMROT's
       regional directorates give advice and watch for gaps between commitments
       and their realisation prior to the government's authorisation of funding for
       MRCs. The operation includes financial accounting information (reddition
       des comptes) towards local bodies, details on ways to mobilise the
       community and expected results. In case of shortcomings in the
       implementation of the rural pact, government sanctions range from setting a
       period for solving a problem to a complete ministerial withdrawal from a
       rural pact, which may involve reimbursement of payments. In addition,
       related guarantees and securities can also be requested from MRCs

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      (although this has not yet been applied in practice). The MRC details the
      terms of reference regarding the pact's content and budgetary management,
      means of mobilising and leading the different stakeholders, as well as the
      expected pact results and financial accounting information. With the end of
      the 2001-06 pacts (first PNR), MRCs are adopting a final report for
      verification by MAMROT's auditors. At the provincial level, MAMROT
      commits to a monitoring system with two elements: i) publication by the
      ministry of recent PNR data in its yearly report (Rapport annuel de gestion);
      and ii) responses by the ministry to a list of questions established by an
      annual parliamentary commission set up during MAMROT's budgetary
      credit acceptance procedure, including the opposition parties. Data are
      collected from MRCs through the rural pact extranet, from regional offices
      for the programme on speciality products, and from promoters of rural
      laboratories.
          However, Québec's second rural policy does not yet have provisions for
      a formalised external evaluation and monitoring system. In general policies
      implemented in the spirit of the New Rural Paradigm (OECD, 2006) require
      monitoring and evaluation to take place both at the community level (MRCs
      in Québec) and by external bodies, and to include agreements on how to
      measure successful rural development. In Québec, the main evaluation
      reports were conducted by SRQ through an ex post review of the first PNR
      (SRQ, 2006a) and by MAMROT with a team of external researchers
      (Government of Québec, 2007). These reviews provided the basis for
      changes in the second PNR.

3.3 Multi-level governance

      Despite broad upper-level horizontal co-ordination, modulation
      remains a challenge
          To demonstrate the government's political commitment, Québec's rural
      policy includes specific tasks and measures to be enforced by sectoral
      bodies. As in Finland's Special Rural Policy Programme (OECD, 2008b),
      commitments for almost 50 policy measures were made in the PNR policy
      document by 18 ministries and government bodies, brought together in an
      inter-ministerial rural committee to support the rural policy's strategic
      objectives (Box 3.8). These commitments reflect efforts to enhance inter-
      sectoral co-ordination as described in the New Rural Paradigm
      (OECD, 2006). MAMROT also deals bilaterally with its counterparts to
      ensure that they fulfil their engagements. Québec's horizontal co-ordination
      efforts have been crucial for providing a policy framework and a long-term
      vision for rural policy, facilitating other ministries' alignment with the policy
      goals, and engaging them in rural pact funding.

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                Box 3.8. Sectoral commitments to contribute to rural policy

            Besides MAMROT, 17 ministries and government bodies contribute
         politically and financially to rural policy, as described in Annex 1 of the PNR
         policy document (for a detailed assessment of these measures, see 3.3). Main
         sectors addressed by the 46 policy measures are:
            Economic development: The competent ministry commits to supporting the
         non-profit CLDs that are mandated by MRCs to work on local development and
         entrepreneurial support. Particular programmes exist to assist enterprises in the
         social economy and co-operatives through the local investment funds (FLI) and a
         microcredit network.
             Agriculture: The sectoral ministry in charge of agriculture design participates
         in the selection of rural laboratory projects and speciality products or in helping
         young farmers to establish a business and reconcile work and family. There are
         new programmes on regional and niche products as well as products with
         potential for protected designation (produits du terroir), but these sectors are still
         little developed. Financial support for the agricultural and agri-food sector in the
         form of revenue stabilisation and insurance is affirmed, though it is put in a
         perspective of sustainable development.
            Natural resources: The commitments of the ministry in charge of natural
         resources focus on: the promotion of production of renewable energy, particularly
         wind energy, decentralised energy production and small-scale energy plants;
         support for forestry products and job creation in forestry-based communities; and
         programmes targeting the utilisation of non-timber forest products.
            Public services: The policy on public transport includes targeted measures for
         rural areas such as the availability of funds for municipalities with fewer than
         20 000 inhabitants. Health measures such as Villes et Villages en Santé target
         better living conditions in rural communities. In education, technical and financial
         support is provided by the responsible ministry to the “last village school”
         programme and a project to create networks of rural schools through ICT.
         Moreover, measures aim at limiting a decrease in resources due to sinking school
         enrolment. To respond to labour market needs, local employment centres (CLEs)
         continue to support rural communities.
             Youth and immigrants: The Place aux Jeunes du Québec programme
         promotes the return and professional and social integration of youth in regions.
         Regional action plans are elaborated with sub-provincial administrative levels to
         attract immigrants to rural regions. Project promoters are supported in their
         efforts to address immigrants' concerns regarding employment, housing and rural
         communities' cultural diversity.
         Source: Government of Québec (2006), Politique nationale de la ruralité 2007-2014. Une
         force pour tout le Québec, Government of Québec, Québec.




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          MAMROT's inter-ministerial co-ordination efforts are repeated at the
      regional level. In each region, the ministry's regional director chairs the
      regional administrative conference (CAR) that brings together regional
      representatives of the different ministries present in the region. This
      conference puts in place a special rural committee to ensure the
      implementation of decentralised measures and monitor the commitments
      made by other ministries.
          Adapting the sectoral programmes to rural conditions (“modulation”) is
      a challenge for MAMROT´s inter-ministerial co-ordination. While many
      sectoral programmes show some adaptation, and although inter-ministerial
      co-ordination is by all appearances effective, there has been less success in
      convincing participating ministries to discuss implications for rural areas
      when designing new policies and programmes. Within the PNR a policy
      modulation mechanism (clause de modulation) has been introduced for
      monitoring the adaptation of laws and sectoral policies to the specific
      characteristics of different rural areas based on advice from MAMROT, but
      there are still institutional obstacles as government bodies resist the stricter
      adaptation requested by the PNR. This resistance can often be explained by
      a lack of knowledge about the real needs for and impacts of the desired
      modulation.
          With the formal entente for rural partnership, the government shares
      responsibility with key provincial stakeholders for rural development (the
      committee of rural partners). The inclusion of social partners (see 3.2.1) at
      the top of the rural policy’s institutional structure has generated a sense of
      ownership and responsibility for rural policy within Québec’s civil society
      by making civil society agents and promoters of the policy. This is crucial
      for successful implementation, as it helps instil the cultural norms and
      informal institutions required for the policy's community-based, bottom-up
      character.
          However, Québec’s rural partnership can also become a source of
      exclusion. In line with the policy’s territorial and non-sectoral ambitions,
      influential business and agrarian organisations have been left out of the
      committee of rural partners. Although they can be invited to participate on a
      subject-by-subject basis, they are less likely to fully embrace the larger
      policy objectives. As a result, these organisations do not always identify
      with the policy objectives and strategies and, in some cases, come into
      conflict with the policy’s measures. One example is the lack of support for
      rural laboratories from UPA, the farm producers' organisation, which
      contests the viability of some laboratories. Nonetheless, the annual “Day of
      Rurality” brings together stakeholders interested in rural development. More
      than 50 groups, including UPA, are invited to discuss the PNR, its
      implementation, impacts and possible improvements. Actors such as UPA,

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       Desjardins and the school board federation are also members of Solidarité
       rurale du Québec (SRQ).

       While vertical co-ordination between administrative levels within the
       province is strong, the federal level largely acts in parallel…
           The policy’s formal vertical co-ordination structure utilises mechanisms
       set by prior regional and local development efforts so as to favour
       continuity. These mechanisms (Figure 3.2) are based at the regional and
       supralocal levels and are commonly used by other ministries to carry out
       their own sectoral policies. This facilitates the linking of different policy
       measures as they are funnelled down to the local level.
             MAMROT's regional directorates play a strong role in assisting and
       monitoring MRCs' commitments. MAMROT´s regional directorates assist
       MRCs and rural communities in their tasks of implementing and managing
       measures relating to rural policy. The regional directorates also bring
       together a region's rural development agents and link them to the regional
       directorates of other ministries. Although rural policy is decentralised, in
       practice MAMROT has created a strong support framework to guide
       communities as they implement policies so as to maintain the intended spirit
       at all administrative levels.
            At the same time, municipalities and MRCs can be brought together at
       the regional level to co-ordinate their efforts within the CRÉs. The regional
       conferences of elected officials do not fall within the structure of rural
       policy but are institutions that permit vertical and horizontal consultation
       regarding regional concerns. However, in regions with a predominantly rural
       character, CRÉs can play an important part in the framework for rural
       development if they wish. Conversely weak representation of rural MRCs in
       this body can be a significant disadvantage (see 3.2.1). A possible response
       is the rural commission created in the region of Abitibi-Témiscamingue
       (see 3.2.2).
           MAMROT is well co-ordinated with the different CRÉs through the
       Table Québec-Regions and with elected municipal officials through the
       Table Québec-Municipalities. While the first format targets the presidents of
       CRÉ boards, the second brings in the two rural partner committee members,
       FQM and UMQ, which are federations of municipalities. Although rural
       policy is not the only issue addressed at these discussion tables, it does
       provide a medium which MAMROT uses to facilitate communication and
       co-ordination both vertically and horizontally across different regions and
       municipalities.



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          It is interesting to see how often the same individuals are found
      throughout Québec’s many vertical co-ordination structures. Both PNR
      documents stress the role of local elected officials as a key to the success of
      the policy and its implementation. As the ministry overseeing municipal and
      regional affairs MAMROT has placed much importance on local elected
      officials and on the presence within the committee of rural partners from
      de-concentrated organisations at the local level. This greatly favours vertical
      co-ordination of the rural policy premises, but it can also dilute the
      participatory character of the policy by excluding broader stakeholders from
      different civil society groups.
          Québec's vertical collaboration with the federal administration on issues
      regarding rural policy is limited. MAMROT’s directorate for rural and
      regional development is responsible for relations with the federal
      government and with counterpart institutions from other provinces which
      have shown an interest in the PNR, its policy design, programmes and
      implementation. Following those exchanges, the province of Alberta has
      developed a rural strategy, while Newfoundland and Labrador have put in
      place a rural secretariat.
          Finally, the permanent members of the committee of rural partners add
      parallel vertical co-ordination mechanisms to the public structure set by the
      rural policy. Apart from the formal structure established by MAMROT,
      ACLDQ, as an association for CLDs, transmits to its members throughout
      Québec the policy's strategic guidelines and vision. The same is done
      through the institutional structures of FQM and UMQ to promote,
      co-ordinate and monitor policy implementation with local elected officials
      that make up their membership base. The inclusion of social partners at the
      top of the rural policy’s institutional structure has not only generated the
      previously noted sense of ownership by civil society, but also helped to
      reinforce vertical coherence in implementing the policy.

      …and while MRCs facilitate local horizontal co-ordination, there is a
      risk of duplication with economic policy.
          Québec’s rural policy transfers a large part of the responsibilities for
      local horizontal co-ordination to local elected officials. MRCs are given
      responsibility for mobilising the population of their area and for co-
      ordinating municipal public administrations to create a shared vision for
      their territory. MRCs become a horizontal co-ordination body that brings
      together the plurality of views and interests present in rural areas, so as to
      reach a unique shared development strategy. However, attempts to
      implement modulation at the local level have not been entirely effective.
      The problem is that Québec lacks an appropriate administrative level to

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       carry out this task. MRCs are convenient, but do not have the capacity to co-
       ordinate the concrete impact of different policies, nor do they have a clear
       political mandate.
           MRCs are able to take a broader view, beyond rural policy, of the
       programmes and measures implemented in their territory. Their
       administrative structure greatly facilitates the different programmes'
       complementarity and helps ensure that the rural pact projects they promote
       are in line with the entire scope of sectoral policies affecting rural areas. An
       example of the MRCs' potential for co-ordinating programmes is their strong
       presence on the administrative councils of the CLDs. In addition, MRCs
       exercise strong control over CLDs through the legal contract that gives
       MRCs powers of decision over the allocation of money earmarked to CLDs.
            However, there have also been overlaps between MAMROT’s rural
       policy and the CLDs, which are administered by the ministry in charge of
       economic development, which potentially create conflicts and inefficiencies.
       The MRCs’ strong supervisory role and the presence of the same individuals
       throughout the structure of both policies facilitate coherence. However, even
       though the policies have different objectives, conflicts may arise. Because
       the pre-2003 government arrangement put a single ministry of regions in
       charge of these initiatives, both policies now call for participatory local
       strategic vision exercises, both require the elaboration of separate
       development plans, and both rely on their own network of development
       agents. Friction is at times observed, especially when it is time to take the
       credit (or responsibility) for local development successes (or failures).
           Like MRCs for municipalities, CRÉs are the main body for horizontal
       co-ordination of MRCs at the regional level, but cross-MRC collaboration
       on development remains relatively limited. CRÉs allow local elected
       officials, MRC prefects and representatives from regional socioeconomic
       organisations to co-ordinate their development activities. Cross-MRC
       regional initiatives also exist, for example in the case of some regional
       tourism projects, but the MRC seems to represent a better territorial unit for
       the purpose of rural policy as currently conceived. Given the extension of
       some administrative regions, it is not surprising to find that this territorial
       administrative unit is often considered too geographically large to give the
       needed sense of local identity required for the population to rally behind its
       development objectives.

3.4 Sectoral policies

           Québec has developed a common strategic vision for rural areas. It has
       found a compromise between the “grand plan” solution which integrates all

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      core sectoral policies directed to rural areas and the “niche policy” solution
      which limits the scope of policy geographically and financially (see 3.2.1).
      The policy can cope with the complementary relation between rural and
      non-rural territories as well as with regional and sectoral policies. This
      section assesses the        governance of Québec's rural policy more
      comprehensively by including sectoral approaches that affect rural residents
      and territories.

      3.4.1 Land use and agriculture

      Land use policy aims to avoid urban sprawl, but also risks
      constraining rural economic activities…
          A law protecting agricultural land was implemented in 1978 to ensure
      that land valuable for agriculture would not become urbanised or used by
      other economic activities. This legal situation is grounded in the fact that
      Québec's stock of agricultural land is relatively small and agriculture has
      played an important role in the history of the province (see Chapter 2). A
      provincial government commission monitors compliance with the law's
      agricultural zoning regulations.7 While a zoning approach makes it possible
      to maintain green space, the cost of this approach is borne exclusively by
      landowners who lose the right to develop their land.
          In OECD countries, land policy is an important issue which affects
      regional development. Strong protection of agricultural land can result in a
      shortage of land for urban expansion, while high demand by urban dwellers
      for second homes can drive up rural land prices beyond values justified by
      their agricultural yields. Both issues have to be addressed in Québec, as
      most of the agricultural land is concentrated in the plain of the St. Lawrence
      River, near major urban populations.
           Today, MRCs cannot decide on the use and potential conversion of
      agricultural land for other purposes, and this risks limiting their
      development potential. Two different types of rural territories are concerned:
      i) communities in the metropolitan regions of Montréal and Québec City
      where the quality of farmland is particularly high but suburbs are running
      out of land zoned for development; and ii) predominantly rural areas with
      potential for economic diversification. Southern rural communities are most
      affected by the arrival of urban residents whose demand for second homes
      has led to a significant increase in land prices. In addition in some rural
      communities there is insufficient land for business development, especially
      if a firm requires a relatively large parcel of land or is involved in an activity
      that is not suited to being in the middle of the town. The fact that

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       communities’ development potential is limited by strict protection of
       agricultural land intensifies this problem. Even for farmers, acquiring land is
       restricted to those whose main occupation is agriculture. Young people who
       often start with part-time farming can neither buy additional land nor to
       build a house on their land.
           More flexibility regarding land policy is being considered. In reaction to
       the development constraints mentioned above and following
       recommendations in several reports (Ouimet, 2009; Pronovost, 2008),
       discussions are under way to strengthen the MRCs' responsibilities for land
       use and planning, and to allow economic diversification and a more flexible
       use of agricultural land in areas not threatened by urban sprawl.

       … while support for agriculture is partly linked to the output of
       selected commodities.
           Farm operators in Québec receive compensation for the loss of land
       development rights through extensive safety net programmes and market
       regulation that raises commodity prices. Because of the dual federal-
       provincial jurisdiction, agricultural policies are delivered through a policy
       framework that shares the cost of support. Vocal interest groups defend this
       agricultural subsidy which has reinforced the trend towards fewer but larger
       farms (OECD, 2008c). In 2006, 26% of all farms in Québec had annual
       gross income of more than CAD 250 000 and represented 80% of total gross
       agricultural income (Saint-Pierre, 2009). The situation is similar in other
       OECD countries where financial support for agriculture continues, but it is
       rarely viewed as a means to achieve major rural development objectives. At
       the same time, Québec's system does not favour the multi-functionality of
       agriculture, as there is no compensation mechanism for farmers providing
       public goods (landscape) and services (recreation, environmental
       protection).
           Owing to high world market commodity prices and policy changes, the
       OECD estimate of government support in Canadian agriculture (percentage
       Producer Support Estimate or %PSE) declined from 23% in 2006 to 18% in
       2007. Less than one-fifth of farm operators' gross receipts are now provided
       by support policies. The level of Canada's support is now significantly
       below the OECD average of 23% (OECD, 2008e). Total support in Canada
       declined from 1.8% of GDP in 1986-88 to 0.8% of GDP in recent years
       (OECD, 2008c) and is, as in the OECD area, at its lowest level since
       1986-88. With Canada's recent “Growing Forward” initiative replacing the
       previous Agricultural Policy Framework (see Chapter 1), the federal
       government has modified its agricultural legislation by introducing a


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      decoupled system of support focused on business risk management which
      has reduced both level and the most distorting forms of support.
          However, progress varies significantly across sectors. Whereas meat and
      grain farmers (particularly barley and wheat producers in western Canada)
      are outward-oriented and have accepted more market mechanisms, there has
      been little liberalisation in other sectors. Milk, for which Québec has a
      market sharing quota of almost 50% among Canadian provinces
      (OECD, 2008c), remains the most highly supported PSE commodity
      (OECD, 2008e). While only some farms have development potential, all
      covered producers get income support with little concern for market forces.
      Similarly, eggs and poultry production, which are also major commodities in
      Québec, are also subject to supply management regulations that raise prices
      paid by consumers.
          Two main mechanisms provide protection and support for the output of
      selected Québec commodities. First, a common supply management system
      is operated across the various provinces of Canada, with import and
      domestic quotas at its core. Second, there is an extensive, complementary
      farm income stabilisation system (ASRA) administered by the Québec
      government, which ties payment to production rather than to market
      demand. Both mechanisms entail higher prices for covered producers and
      lower their financial risk, making dairy farmers but also poultry and egg
      farmers highly profitable (OECD, 2008c). Although support also goes to
      some smaller farms, many of the producers covered by these mechanisms
      have substantially higher income than other farmers (OECD, 2008c) and,
      within Québec, are among those farmers with the largest scale (Figure 3.4).
          The first mechanism, the Canadian supply management system, limits
      the working of the market mechanism and results in higher consumer prices
      and resource misallocation. Through a quota system largely controlled by
      provincial commodity marketing boards, it provides covered commodities
      with significantly greater producer support than other products. It aims to
      match supply and estimated demand by restricting production of dairy, eggs,
      poultry meat (chicken and turkey), maple syrup and rabbit in order to
      achieve a target price for the product. While this system reduces price
      fluctuations, consumer prices are much higher than those prevailing on
      world markets, forcing domestic consumers to pay for the protection
      enjoyed by the sector. For example, before the increase in world prices,
      prices of dairy products such as butter and cheese, which are Québec's main
      agricultural production (34% of total), have often been more than double
      those prevailing on world markets (OECD, 2008c). The share of single
      commodity transfers (SCT) to producers has decreased significantly since
      the 1980s (from 71% of PSE in 1986-88 to 55% in 2005-07), but SCT as a
      percentage of receipts remains high for dairy (48%) and eggs (39%)

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                    Figure 3.4. Large farms in Québec by type and receipts
                                    (CAD 250 000 and over)
                                             Percentage, 2007

          80

          70

          60

          50                                                       CAD 1 million and over

          40

          30                                                       More than CAD 250 000
                                                                   and less than CAD 1 million
          20

          10

           0




        Source: Statistics Canada, Canadian Farm Financial Database – Report.




        (OECD, 2008e). Recently there has been a partial shift away from large
        programmes to less expensive ones that share costs with producers and give
        them some influence on how funds are spent. Yet, this shift has not stopped
        discussion of an even more efficient agricultural support system.
           The second mechanism, the farm income stabilisation programme
       ASRA, inhibits the regulation of production by the market, encouraging
       maximum output and overproduction. According to 2007 data from
       Financière agricole du Québec (FADQ), ASRA compensated agricultural
       producers in 17 enterprises (hogs/piglets, veal, grain corn and commercial
       crops) with CAD 748 million, forcing FADQ to run an operating deficit and
       requiring it to borrow money. The long-term insurance against price risk
       which the system has provided has contributed to a sometimes excessive
       level of debt of covered producers. The benefits have been capitalised into
       quota values and land prices so new entrants effectively have to prepay for

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      the support provided, leaving them no better and possibly worse off. ASRA
      creates disincentives for market actors not covered by the system who want
      to move towards higher value-added sectors such as horticulture, speciality
      products or organic food, but who have difficulty accessing credit. The
      amount in subsidies and the cumulative deficit are expected to increase
      considerably in the years to come (Saint-Pierre, 2009). Finally, since ASRA
      is a very significant part of the agriculture budget, there is a lack of money
      for research, innovation and other expenditure that could contribute to a
      more diversified agricultural sector and overall economic diversification.
          In many OECD countries there has been a shift away from support
      linked to commodity output and towards different types of payments, often
      coupled with land-use objectives. In many cases, this shift has been intended
      to contribute to rural areas' economic and social revitalisation, and is not
      simply a means of maintaining farm incomes. However, there have been
      concerns about the sector-specificity and economic costs of many of these
      policies, which call into question their effectiveness for addressing non-
      agricultural objectives, including rural development (OECD, 2009a). When
      adapting its agricultural support system to a broader range of policy
      objectives, including land use and economic diversification, Québec's policy
      makers will have to keep these experiences in mind.

      3.4.2 Economic development, natural resources and environment

      A weak integration of economic development measures with rural
      policy can affect outcomes…
           Several economic development programmes support activities in rural
      areas. Besides broad economic development strategies for Québec (2007),
      its resource-based regions (2001) or specific sectors, the approach of
      Québec's Ministry of Economic Development (MDEIE) includes: the work
      of CLDs, particularly through the local investment funds (FLI); help for
      single-industry communities, often located in rural forestry-based areas;
      self-employment through micro-credits; and support for co-operatives,
      mostly outside of the urban centres.
          Rural CLDs combine various means of financial support mainly focused
      on individual firms. In both rural and urban areas, CLDs aim at: promoting
      entrepreneurship by offering support services for start-ups and existing
      companies; developing and monitoring a local action plan for business and
      employment; and acting as an advisory body for local employment
      centres (CLEs) whose representatives sit on CLD boards. A total of
      120 CLDs provide loans, loan guarantees and other investments to

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       enterprises through three initiatives: local investment funds (FLI), financial
       help for young entrepreneurs (FJP) and financial help for firms active in the
       social economy (FDEÉS). CLD support is complemented by investments
       made by the federal and the Québec government, private funding and
       financial institutions. Between 1998 and 2006, the measures involved total
       investments of CAD 3.80 billion (the CLD share was CAD 346 million;
       ACLDQ data). Table 3.3 shows the impact of the three support programmes:



                             Table 3.3. Impact of approved CLD projects

                                                                                               Financial help for
                                                                     Financial help for
                                          Local investment                                     firms active in the
                                                                   young entrepreneurs
                                            funds (FLI)                                          social economy
                                                                          (FJP)
                                                                                                    (FDEÉS)
        Jobs (1998-2006)                     60 461                      16 895                    39 131
          newly created                      23 111                      15 991                    12 667
          maintained                         37 350                          904                   26 464
        Enterprises (1998-2006)                5 962                       6 442                    4 565
          newly created                        2 696                       6 308                    1 592
          consolidated or expanded             3 266                         134                    2 973
        Investment                             2 037.4                        752.2                 1 006.8
        (in million CAD,
        1998-2006)
          CLD contribution                        202.2                         45.1                    98.9
        Average CLD support per               38 195                       5 088                   21 218
        request approved
        (in CAD, 2004-06)
        Main sources of investment                 CLDs: 10%                     CLDs: 5%                CLDs: 9%
        (2004-06)                  Financial institutions: 39% Financial institutions: 44% Québec government: 32%
                                           Private funding: 23%      Private funding: 25% Financial institutions: 19%

        Source: Government of Québec (2009), Bilan triennial des centres locaux de
        développement 2004-2006, ministère du Développement économique, de l'Innovation et
        de l'Exportation, Québec; ACLDQ data.




           Québec's single-industry communities, most of which are in forestry, are
       supported through special measures and two complementary funds. Many of
       these communities are affected by industry closures or restructuring. They
       are supported for establishing revitalisation committees and for diversifying
       their economic base. Different administrative regions participate in the
       ACCORD project “niches of excellence” (créneaux d'excellence), which
       specialises in the value-added wood industry or in technologies for
       underground mining. A recent bill on the occupancy of forestry land also

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      involves support for affected single-industry municipalities. Moreover,
      MAMROT and MDEIE are implementing two complementary financial
      support programmes: i) CAD 15 million has been earmarked for
      54 communities that are currently in a crisis situation to develop a
      revitalisation plan for industrial diversification; and ii) CAD 60 million can
      be spent by single-industry MRCs on firms in order to develop activities
      scheduled in the revitalisation plan (data from MDEIE). Firms are supported
      through the CLDs in collaboration with the authorities for employment
      (Department of Employment MESS and, at the local level, CLEs).
          The community micro-credit programme is a public-private
      partnership (PPP) activity for supporting self-employment which is not
      related to CLDs. Programmes target private capitalisation and public
      functioning which includes micro-credits and training programmes.
      Investing in self-employment is a particularly relevant and economically
      viable measure for economic development in rural Québec, particularly
      when linked to traditionally disadvantaged groups such as rural women,
      immigrants or First Nations people. CAD 1 invested through the network of
      community credits in 14 bodies situated in rural areas generated CAD 6.2 in
      additional investment, a better ratio than for all community credit bodies
      (MDEIE data).
          Support for co-operatives is another way to empower rural areas through
      social and human capital and community development. An MDEIE
      programme to develop co-operatives has created over 6 000 jobs (2002-06)
      mostly outside of big urban centres. The survival rate of co-operatives is
      significantly higher than for enterprises overall. This may be due to the fact
      that the co-operative process requires people in the community to commit
      themselves collectively to starting the co-operative and they are therefore
      more likely to continue to support it.
          However, this policy framework for diversification presents a series of
      challenges:
           First, the weak integration of social and economic development
      measures at the provincial level hampers community transitions and
      sustainable land occupancy. An approach which aims to strengthen social
      cohesion prior to spending on local economic development is promising, but
      the PNR's institutional separation from local and regional economic policy
      limits the development perspectives of businesses, particularly in areas
      struggling with demographic change and sluggish economic growth. The
      integration of proactive economic support measures and rural policy in a
      place-based development strategy is a challenge, especially given the
      institutional separation between MAMROT and the MDEIE, which is in
      charge of CLDs since the 2003 government reshuffle. Moreover, many

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       economic development policies are implemented not at the supralocal but
       the regional level and are more difficult to co-ordinate with MRCs.
            Second, the CLD approach is not particularly proactive. Its different
       support measures are not part of a strategy for key industries that would
       promote the clustering of economic activities as does the ACCORD project
       which mostly targets urban areas.8 The rather passive case-by-case approach
       is in part due to the fact that much of rural Québec seems to lack the basic
       structure needed for a cluster approach because of an often weak
       entrepreneurial tradition and a lack of core small and medium-sized
       enterprises (SMEs) to create clusters of firms in the many small and widely
       dispersed rural communities. Many rural areas do not have a dominant
       industry, and if they do, it is often a large branch plant.
             Third, neither MAMROT nor the Department of Tourism (MTO) has a
       clear strategy for supporting rural tourism. Rural tourism and other amenity-
       based activities are acknowledged in the PNR as sectors with promising
       growth opportunities. However, an explicit development strategy involving
       policy and economic support measures is lacking. Tourism projects are often
       organised at the regional level (regional tourism associations, ATR) with
       little integration of rural topics and it is difficult to convince MRCs to
       co-operate on particular fields of rural tourism.

       … while natural resource management only gradually involves
       regional and local actors…
           As discussed in Chapter 2, an important part of Québec's GDP depends
       on natural resources and related exports. Most resources are located on
       public land as more than 92% of Québec's territory is publicly owned and
       government-controlled. The economic returns from natural resource
       industries in forestry, mining and energy are estimated at 10% of the
       provincial GDP. This represents up to 15% of investments and over
       175 000 jobs throughout the province (data from MRNF). An important
       share of these results directly affects Québec's rural areas and their
       communities.
            The decision-making framework has evolved towards both de-
       concentration and decentralisation.9 The government aims to increase
       regions' and First Nations communities' autonomy with regard to their
       natural resources. To do so, the ministry in charge (MRNF) has adopted an
       “integrated regionalised approach” (AIR) that allows administrative regions
       to play an active role in the development of their natural resources and
       territory by delegating certain planning and management powers and
       responsibilities to the regions.


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          The government gives an enlarged role to regional actors through
      commissions on natural resources and the territory and local round tables,
      but the MRCs' role in these activities is limited. The commissions work with
      CRÉs and First Nations communities to formulate regional plans for the
      development of resources and the territory (PRDIRT). These plans try to
      define the optimal degree of use and protection of an administrative region’s
      natural resources by integrating economic, social and environmental
      considerations into a “sustainable development” approach. The PRDIRT
      promotes coherence among public and private actions and delegates specific
      competences to the regions. MRCs and municipalities participate in local
      round tables on integrated management, but still have little legal decision-
      making power on the use and management of natural resources. The
      government is reluctant to further decentralise responsibilities because of the
      large number of jobs in forestry which, if put at risk, might destabilise local
      labour markets.
          The enlarged role of CRÉs is part of a new approach to the forestry
      sector which stresses the participation of local and regional actors. The
      recent bill on the occupancy of forestry land tries to enlarge the role of local
      and regional development actors but also to consolidate the province's role
      as an intermediary to ensure more sustainable and higher value-added
      exploitation of forests. Moreover, First Nation communities are encouraged
      to participate in the newly established regional bodies and, like the MRCs,
      can become responsible for the management of so-called “proximity forests”
      within or close to municipal borders. In general, the government tries to
      strengthen the local forestry industry by increasing the use of wood in
      Québec, particularly in public buildings, other non-residential construction
      and multifamily housing. Using wood for “green construction” is one of the
      four cornerstones of the industrial development strategy which also includes
      wood as an energy generator, “green chemistry”, and a modernised primary
      processing industry. Reacting to the recent crisis, Québec has approved
      several forestry support programmes. Already, the 2006 Support Plan for the
      Forestry Sector (Government of Québec, 2006b) involves CAD 722 million
      to support workers (e.g. assistance to find a new job), communities
      (e.g. financial support within a contract on diversification), forestry
      management and business development. More recently, the federal and the
      provincial governments have agreed on a joint effort (CNW Group, 2009) to
      support public and private forestry and affected communities with measures
      in the amount of CAD 200 million (2009-11), with a view to maintaining
      and creating around 8 000 jobs. In the mining sector, the government
      promotes more sustainable and diversified exploitation, which can result in
      stronger benefits for local and aboriginal populations. In this respect, the
      new Mineral Strategy of Québec targets the growth of the mineral sector
      through enhanced geo-scientific knowledge, training and support for

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       entrepreneurship so that more local firms can participate in the exploitation
       and transformation of resources that are currently mostly controlled by large
       multinational companies. A new mining fund endowed with
       CAD 200 million over ten years and financed through mining fees paid by
       the companies contributes to these objectives. Importantly, the new strategy
       aims at stronger involvement of local and aboriginal populations through
       financial and job training efforts as well as consultation mechanisms. To
       ensure more sustainable exploitation, the strategy commits to restoring
       abandoned mining areas and introducing stricter rules for environmental
       impact assessments.
           Hydroelectricity and wind energy represent the major investments in the
       current Energy Strategy 2006-15. According to the MRNF, there are
       hydroelectricity projects for 4 500 MW until 2010 with a total investment of
       CAD 25 billion, mostly by the province-owned electricity generator and
       distributer Hydro-Québec. In contrast, wind-energy projects include an
       investment of CAD 10 billion until 2015 for 4 000 MW. A study has
       confirmed that over 70% of the economic benefits from wind energy
       investments would remain in Québec, with over 62 000 direct and indirect
       jobs generated over an exploitation period of 25 years (Hélimax, 2004).
           The government also supports small-scale hydro (maximum 1 MW) and
       biomass-based energy production. A recent working plan (Government of
       Québec, 2009c) explores the potential of forestry biomass as a basis for
       energy production. This is coherent with the government's strategic
       objective to include up to 5% of ethanol in transport fuel sales by 2012,
       most of it from ligneous biomass. Also, a working group supported through
       the PNR's rural future fund conducted research with out-of-use sawmills
       whose boilers produce energy with biomass on a small scale. The rationale
       of this policy is to develop new businesses in suffering resource-based
       regions and to make small communities independent from other sources of
       energy. In return, Hydro-Québec can export more electricity, mainly to the
       US northeast.

       … and environmental measures are mostly excluded from rural
       policy.
           Québec's Ministry of Sustainable Development, Environmental Affairs
       and Parks (MDDEP) is among the ministries with the broadest inter-
       ministerial governance approach. Based on the Government Sustainable
       Development Strategy 2008-13 (GSDS), the ministry's Sustainable
       Development Action Plan 2008-13 (SDAP) is implemented through the Loi
       sur le développement durable (sustainable development law) and explicitly
       involves all ministries and public organisations in its responsibilities for

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      environmental protection, sustainable development and the management of
      natural parks. Although it adopts a mostly top-down governance structure,
      the MDDEP has extended its co-ordination structure to reach all public
      administration bodies down to the most remote municipal council.
            The SDAP calls for greater involvement of communities and local
      participation, integrating the sustainable development imperative within all
      local and regional development strategies. The SDAP places the need to
      encourage collective participation at the local level both to mobilise citizens
      around common interests for their community and to bring people closer to
      their local and regional environment by creating a sense of stewardship.
      Community mobilisation and participation go beyond specific water and air
      quality management issues as this is seen as the foundation for a holistic
      view of sustainable development. Although the PNR is already compatible
      with sustainable development principles, it could benefit from a similar
      approach. Some rural communities or MRCs have already put in place
      approaches close to the Agenda 21 framework, e.g. by including in the rural
      pact action plan a vision of what to leave to future generations. Given that
      little decision-making authority over the management of the environment
      exists at the rural community level, compared to natural resource
      management and enhancement, this territorial development approach is
      challenging. It is of special interest for rural and small-town communities as
      more power would help all actors involved in territorial planning and
      visioning to gain awareness of the principles underlining sustainable
      development. The SDAP offers advisory support to local development
      actors and organisations in areas of sustainable development.
          There is limited co-operation on rural areas' sustainable development.
      Although the MDDEP sits on the inter-ministerial rural committee and has
      much of its field of intervention in predominantly rural areas, no
      commitments by this ministry have been included in the PNR. Moreover,
      the SDAP does not make much use of the MRC in its implementation
      structure but concentrates on regional and municipal bodies. This goes
      against a growing trend in many OECD countries to consider environmental
      protection measures within a narrow rather than broad rural policy. Spain
      has gone even further in this respect, by integrating rural and environmental
      affairs under the same ministry.




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       3.4.3 Health and education

       Broader rural policy addresses cost and delivery challenges in health
       services…
            Québec has built its health policy on the premise that services are
       universal, accessible and publicly managed. However, a recent ministerial
       report (Castonguay, 2008) recommends quantitative and qualitative
       restrictions to ensure the public health system's viability. The rapid growth
       in demand for health services, mostly owing to the increasing cost of
       treatments and services as a result of technological evolution and ageing, is
       placing unsustainable financial pressures on the system. A new approach to
       health care is recommended which may affect the quality and accessibility
       of these services in rural areas.
           The Castonguay report proposes to limit health care investments so as to
       adjust cost increments to the growth rate of Québec’s collective wealth. To
       do so in a context of projected accelerating health-care costs, it is
       recommended to make the health system more efficient and to make greater
       use of private insurance schemes working in parallel with the public system.
       Due to rural ageing, health-care needs and cost per capita are expected to
       increase at a faster pace than in urban centres. If implemented, the impact of
       the report’s recommendations will have to be well monitored, as similar
       policies in other OECD countries have tended to be detrimental to rural
       service provision (Castonguay, 2008).
           Québec’s health services are currently experiencing important shortages
       of both medical specialists and nursing staff. These shortages affect the
       entire province, but especially rural areas. Urban health service centres,
       although not prioritised by the government, are often the first to fill their
       vacancies (Association québécoise des pharmaciens propriétaires, in
       La Presse, 24/02/2009).
            The government has some innovative solutions for dealing with the lack
       of health professionals in rural areas. One is to resort to “nomadic” doctors
       and specialists who make rounds to different health centres (CSSS) across
       the territory and offer services that are otherwise not available in rural health
       institutions. This may be a better solution than bringing rural patients
       systematically to a city for specialised treatment. Unfortunately, the shortage
       of medical staff has forced the ministry in charge (MSSS) to resort to using
       “nomadic” medical doctors not just as a complement to local physicians but
       to allow regional centres to fill their basic needs in health personnel.
       Because they receive higher wages, these “nomadic” doctors tend not to be
       interested in permanently occupying vacancies in regional health centres
       (Association des anesthésiologistes du Québec, in La Presse, 14 June 2009).

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      Québec also offers incentives to medical school graduates to practice outside
      of metropolitan areas. This programme called PREM (“Regional medical
      workforce plan”) is a tool that has received positive reports in other OECD
      countries. Québec does not have a study evaluating its impact on rural
      health-care provision. However, according to the Fédération médicale
      étudiante du Québec, PREM is one reason why Québec is experiencing out-
      migration of its medical school graduates who undertake residency in other
      provinces. Because they receive better pay elsewhere, they often do not
      return to Québec once they have finished. For its part, Québec has been
      unable to attract resident doctors from other provinces (La Presse,
      16 June 2009).
           Another MSSS initiative with better results in rural areas is the Réseau
      québécois de Villes et Villages en santé (RQVVS). This community-based
      initiative (Box 3.9) was launched by civil groups to promote the local
      population's well-being through community involvement and activities. It
      mobilises the community's resources to strengthen citizens' capacity for self-
      help activities, favouring a local climate that maximises “gross municipal
      happiness”. Initiated in the community of Rouyn-Noranda, the initiative was
      quickly copied by many other rural and urban municipalities throughout
      Québec. Today these groups are linked through a network, their activities
      are partly supported by the government, and many of their actions have been
      integrated in the MSSS service delivery mechanism.

      … and education…
          In Québec, delivering education to rural communities can be extremely
      expensive because of distance and declining school enrolments. After
      decades of success in enhancing access to public education, the sector is
      experiencing a crisis which disproportionately affects rural Québec. In 2009
      public primary and secondary schools registered some 20 000 students fewer
      than in the previous year and some 84 000 fewer over the last five years.
      Since 2003, 134 public schools have been closed in Québec mostly due to
      the lack of enrolments as a consequence of demographic change (data from
      the Ministry of Education, MELS).
           Many institutions situated mostly in remote rural areas face dramatic
      reductions in student numbers. This results in greater costs per student
      which are often difficult to meet and justify. On the other hand, in some
      urban centres authorities are unable to cope with the growing demand for
      educational services and the necessary infrastructural investment. As a
      result, Québec has realised that its capacity to maintain the education
      system's quality, accessibility and geographical dispersion throughout the
      territory is under threat. Some stakeholders predict that the current

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                  Box 3.9. Community initiative to improve quality of life:
                               Villes et Villages en santé

             The Villes et Villages en santé initiative (Healthy Towns and Villages,
         RQVVS) aims to improve citizens' health, happiness and quality of life. It does so
         not through medical intervention, but by stimulating a sense of community,
         collective initiatives, and a feeling of belonging and self-realisation among local
         populations. RQVVS incites municipal decision makers to be aware of the
         importance of their long-term strategic planning and day-to-day decisions for
         citizens' health. It encourages them to work with a network of partners from the
         health sector and all community actors involved in projects that target citizens'
         quality of life and the establishment of healthy lifestyles and living habits.
            The concept behind the RQVVS network is to co-ordinate the different
         municipal services offered, by the public health network, the school system, the
         business sector, by community organisations or any other civil group. The actions
         undertaken by RQVVS vary from region to region. Some organise community
         kitchens, youth centres or other means of helping the needy. For others, their
         projects aim at improving or preserving the local environment for example by
         organising community-driven clean-ups of local green spaces or planting trees.
             The originality of this movement and the reasons for its success are related less
         to the community projects carried out than to the process of encouraging the local
         population's active participation in community life by working together on issues
         of local concern and bringing them to prioritise their needs and welfare choices as
         well as those of their community. Altogether, the RQVVS network has
         177 members, of which 165 municipalities, four arrondissements, seven MRCs
         and one neighbourhood. The network membership represents over 50% of
         Québec's population.
         Source: OECD, Réseau québécois de Villes et Villages en santé.




        generation of students will not benefit from the same access and quality as
        previous generations. This has become a concern for local and regional
        development actors.
            The government has developed innovative initiatives to protect and
       maintain the quality of educational services offered in rural areas. It has
       recognised that resources should not be distributed based entirely on the
       tally of students in an area, but that a critical mass of staff and services must
       be maintained to guarantee access to quality educational services. Vertical
       co-ordination boards (Tables interordres) that link the agents of different
       school levels within a region are promoted to drive optimisation of the
       education system's resources. They also co-ordinate with local actors,
       including the local employment centres (CLEs), to adapt services to the

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      area's needs. Prior to any decision to close a village school, parents and the
      local community must be consulted, a reflection of the government's effort
      to include them in the debate on quality of and access to local education
      services. Together with Québec’s school boards, programmes have been put
      together which allocate resources to school boards to maintain rural
      educational services. These include projects to maintain the “last village
      school” (dernière école du village) and to create networks of rural schools
      through ICT. The latter project, Ecole éloignée en réseau (Box 3.10), is a
      commitment made by MELS within the PNR. It is comparable to a project
      implemented in Alabama (United States) where in 2008 more than
      22 000 courses were offered through the Connecting Classrooms Educators
      and Students Statewide (ACCESS) initiative (The Economist, 18 July 2009).



                 Box 3.10. Facing demographic decline in rural schools:
                                École éloignée en réseau

           To meet the challenges of demographic decline in parts of rural and remote
        Québec, the government strives to innovate and reorganise educational services.
        The Ecole éloignéee en réseau (“remote schools network”) project aims at
        revitalising and re-professionalising small rural schools through networking, the
        use of fibre optics and information and communication technology. Collaboration
        at a distance and joint development of what is taught in classes contribute to
        meeting the project’s objectives.
           Evaluation studies made by CEFRIO show that this can ensure a future for
        some small rural schools and enhance students' school achievements. The
        involvement of different actors, from MELS to school boards, teachers, students
        and local/regional development authorities, has been crucial to identify their new
        roles and responsibilities. Teachers and the local communities have become
        aware of the opportunities provided by ICT and broadband technologies and their
        possible effects on the quality of education. Moreover, the newly established
        networks offer possibilities to get in touch with experts located elsewhere and to
        enhance the quality and quantity of other rural services.
           The programme which is part of MELS' commitments to the PNR was
        launched in 2002 and is scheduled to end in 2010. The government of Québec has
        invested about CAD 10 million of public funding to cover expenses ranging from
        research to the management and technological resources.
        Source: CEFRIO (2008), Fiches de projet du CEFRIO, paper prepared for the OECD.




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            Although they have slowed the trend, such initiatives have not been able
       to stop school closings across Québec’s mostly rural territory. The main
       obstacle is financial: Québec appears to have made the societal decision to
       maintain and encourage access to quality educational services throughout its
       territory, but this comes at a price and Québec is mostly looking towards
       federal transfers to cover the cost. However, as education is a provincial
       responsibility, this may be risky. The federal-provincial equalisation
       payments, which are written into the Constitution, exist to enable each
       province to provide a reasonable common level of services such as
       education, but the level of funding reflects the relative fiscal position of the
       various provinces. Consequently, Québec has no direct influence on the
       amount of money it receives through equalisation. The federal government
       does however play a major role in funding training programmes and
       postsecondary education programmes.

       3.4.4 Employment and migration

       … while implementing a territorial approach to employment and
       labour market issues…
           Québec’s Ministry of Employment and Social Solidarity (MESS)
       implements a territorial approach. MESS has de-concentrated its service
       delivery to 147 local employment centres (CLEs) distributed throughout the
       inhabited territory. However CLEs in rural areas cover relatively large
       geographic areas with relatively small populations so it is much harder to
       provide services that improve the local labour market. CLEs work with
       employers and the labour force to balance employment demand and supply
       and avoid local labour market mismatches. CLEs are well co-ordinated with
       the economic (CLDs) and social development institutions present in rural
       areas. MESS strives to ensure the equilibrium of local labour markets,
       fighting against poverty and social exclusion while supporting community-
       based initiatives and local volunteerism.
           A “pact for employment” helps to achieve these aims at the local level.
       This pact, implemented through a decentralised commission of labour
       market partners, is an agreement between the government, partners
       representing the workers’ organisations, employers, the education sector, the
       business community and local organisations. The pact helps to co-ordinate
       the efforts of its signatories around similar premises:
            •    Improve labour market access for those who want to work. This
                 includes interventions to better prepare job seekers for the labour
                 market and to help individuals seek out appropriate employers. The

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               pact for employment promotes support and training activities for
               youth, immigrants and members of minority groups, and for
               members of the workforce with physical or mental disabilities. have
               also been set up with schools to facilitate simultaneous work and
               study and to help prevent young people from dropping out of
               school.
          •    Make work a more valued activity. The pact wants to make
               employment more attractive to the unemployed by highlighting the
               advantages of work and improving the incomes of low revenue
               workers. This involves several different initiatives, from fiscal
               breaks for workers with lower revenues and the establishment and
               monitoring of minimum wage legislation, to the development of
               employment revenue simulators that help illustrate the benefits of
               work and income to those living on social welfare benefits.
          •    Improve workforce training and business productivity. This
               encourages the workforce’s continuous human capacity
               development by supporting training opportunities and offering tax
               credits to businesses in certain sectors. The pact for employment
               attempts to increase the supply of training opportunities and make
               them available throughout Québec, including in rural areas.
               Employers are encouraged to give greater recognition to the training
               achievements of workers.
          •    Adapt to specific local and regional labour-force needs. Regional
               committees have been set up to co-ordinate efforts and strategies for
               employment, training, business needs and economic development
               with local actors. Through these committees, a labour force
               adjustment plan and a work management plan are developed that
               take into consideration each regional labour market's characteristics.
               Co-operation between the business sector and local schools should
               encourage a better prepared workforce and give opportunities to
               graduating students.

      … and fighting demographic issues through the in-migration of youth
      and immigrants.
          Whereas poor labour market outcomes are not a major problem for
      young people in Canada, youth living in remote rural areas as well as young
      people from the First Nations are over-represented in this group
      (OECD, 2008d). It is important for policy makers to address the issue by
      designing special programmes to help young people to move where job
      opportunities exist and to better inform them about labour market
      opportunities and living conditions. In this regard, Québec puts special

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       emphasis on outreach: instead of waiting for young people to visit
       employment service centres, policies try to reach out directly and assist them
       in their efforts.
            The Québec government has created a Youth Secretariat to react to poor
       labour market outcomes and out-migration of youth. Its main mandates are
       to ensure the coherence of policies affecting youth, to co-ordinate actions of
       different youth organisations and to ensure correct implementation of
       Québec’s youth policy. Among the main challenges set by the second
       edition of the secretariat's Youth Action Strategy (2009-14) are also
       “regions”. Youth are placed at the heart of regional development to alleviate
       their problems in rural communities. The objectives are to encourage the
       active presence of youth in regions and local democratic institutions and to
       support the involvement of First Nations' youth in their communities and
       within Québec's society. The strategy has also set up measures such as tax
       credits for recent graduates who take up jobs in remote resource regions. It
       includes a regional youth investment fund that supports youth-driven
       projects in the region. In Québec, as in all OECD countries, there is a
       tension between encouraging youth to leave rural areas to improve their
       personal situation in terms of career development and education and trying
       to retain them in the community to ensure its long-term survival.
           An initiative promoted by the Youth Secretariat that is having a positive
       impact in rural areas is the Place aux Jeunes programme. This assistance
       programme (Box 3.11) was created to counter the out-migration of youth
       from rural regions and help them to return by facilitating their integration
       into the community. Migration agents in 70 MRCs are in charge of
       implementing this approach locally. The initiative promotes awareness of
       possibilities for migrating to rural regions so as to encourage more youth to
       find residency, to initiate their career and to ultimately establish their home
       in rural areas. Place aux Jeunes is innovative, but to avoid potential
       duplication should collaborate with the federal government's Youth
       Employment Strategy (YES) and its Skills Link component which helps
       young people with multiple barriers to employment (of which coming from
       rural areas) through longer-term assistance (OECD, 2008d).
           Because immigration rather than natural growth is the source of
       population growth in Québec, as in most highly industrialised countries,
       rural Québec needs to find a way to recruit, attract and retain more
       immigrants. If Québec, which has significant legislative powers regarding
       immigration,10 fails to do so, the demographic structure of rural areas will
       become even more unfavourable to growth, opportunities might go untapped
       for lack of entrepreneurs and labour, and the persisting gap in the ethno-
       cultural diversity of rural areas compared to metropolitan regions will
       further expand (Beaujot, McQuillan and Ravanera, 2007). In reaction to the

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            Box 3.11. Countering out-migration of youth: Place aux Jeunes

           Place aux Jeunes du Québec (PAJQ) was designed to address the factors
        driving youth out of their rural areas. It has expanded across Québec to include
        70 member MRCs and an important number of supporting partners.
           The mission of PAJQ is to encourage youth to migrate to rural areas, to take
        up residency in these communities and to maintain these young migrants in rural
        areas. To do this, PAJQ pools together and co-ordinates the resources and
        capabilities of its many partners along with those of the municipal, regional and
        provincial administrations. The main objective is to stop rural out-migration of
        youth to urban centres. It also aims to favour the social engagement of rural
        youth; to facilitate their professional integration in rural areas; to raise public
        awareness of the local impact of ongoing out-migration; and to stimulate youth-
        driven entrepreneurship and business creation.
           The activities promoted by PAJQ take different forms: exploratory journeys
        are organised to bring youth from cities to rural areas where they are given
        opportunities to network with local socioeconomic agents, entrepreneurs and
        potential employers. PAJQ also acts as a link between rural employers with job
        openings and youth wishing to migrate to the region through its job bank website
        (Accro des régions). A CyberBulletin aims at rural youth who have left their
        communities for the city. The objective is to make sure that they do not lose
        contact with their places of origin. The CyberBulletin reports current events but
        also communicates services and potential job and business opportunities in the
        readers' region of origin. Another PAJQ activity is to work with adolescents in
        rural areas in order to orient their educational career choices to make them
        compatible with a professional life in the region. Finally, PAJQ holds information
        sessions in schools, universities, youth organisations and job placement offices in
        mostly urban centres to promote rural regions as an alternative career destination.
           According to PAJQ’s latest annual report (2007-08), 875 youth participated
        that year in the exploratory journeys, 252 of whom were potential entrepreneurs.
        PAJQ’s job bank held 16 431 offers and it was estimated that over
        23 000 adolescents became aware of rural careers through PAJQ’s activities. That
        year, 965 youth decided to migrate to rural areas with PAJQ’s assistance. Some
        802 migrated in order to occupy a specific job and 59 set out to start their own
        business. Of to the total number of migrants to rural areas under PAJQ, a little
        over half (501) did not originate from the MRC to which they migrated.
           The Canadian federal government has recently taken interest in PAJQ,
        replicating the experience in other parts of Canada. The Rural Secretariat (RS) in
        collaboration with Canadian Heritage has set up pilot projects in Manitoba, Nova
        Scotia and Yukon. PAJQ is having an active advisory role in the establishment of
        these new projects.
        Source: OECD, Place aux Jeunes du Québec.




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        fact that most international immigrants have gone to urban areas (see
        Chapter 1), Québec can use its legislative competences to facilitate
        immigration to rural areas by attracting international migrants with the
        trade, artisanal or entrepreneurial skills needed in rural areas. Reduction of
        the technological gap through modern ICT also offers opportunities to reach
        out to new groups of migrants previously less tempted to move to rural
        areas. The Québec government has developed regional action plans that
        help immigrants access local labour markets. SRQ and some MRCs have
        established a presence among immigrant communities in cities to persuade
        second-generation immigrants of the desirability of opportunities in a rural
        setting.
           Policy efforts to attract and integrate migrants can be strengthened
       through enhanced co-ordination. Apart from the government bodies
       mentioned above, many actors have not yet considered making in-migration
       a goal. This is especially true for foreign immigrants. Despite the
       government's efforts to promote the positive impact of migration, readiness
       to accommodate immigrants of ethnically and culturally diverse origins may
       not be as strong as the government suggests (Nieguth and
       Lacassagne, 2009). Initiatives at both the federal and provincial level are
       complementing MAMROT's efforts, such as the Bouchard and
       Taylor (2008) report, which has increased awareness of immigrants' impact
       and how to benefit from increased diversity.




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                                           Notes


      1.    The decrease in number of municipalities is due to municipal mergers.
      2.    According to the 1972 law on agricultural producers (Loi des producteurs
            agricoles), the UPA has the exclusive right to represent the agricultural
            profession in Québec. Under certain conditions, the trade union can
            collect compulsory fees and contributions from farmers (source: UPA).
      3.    In this report, the term “community” includes the following related
            elements: a specific geographic territory; the individuals who occupy that
            territory; and the set of social relations that link those individuals
            (Freshwater, 2004).
      4.    Bringing together a great variety of actors involved in rural development,
            the “Day of Rurality” highlights the most innovative achievements. The
            Grands prix de la ruralité are awarded to individuals and bodies as well
            as promising initiatives that resulted from the PNR. MRCs can apply to
            organise this event.
      5.    The nine cities are: Montréal, Québec, Laval, Gatineau, Longueuil,
            Sherbrooke, Saguenay, Lévis, Trois-Rivières.
      6.    The Desjardins Group is the largest co-operative financial group in
            Canada and by assets the country's sixth largest financial
            institution (2008). It has 513 local caisses mainly in Québec, but also in
            Ontario and affiliated branches in New Brunswick and Manitoba. The
            caisses are autonomous legal entities with a common service offer, shared
            support services (IT and other) and mechanisms for financial stability.
            Loans to agriculture represent a large part of Desjardins' business.
      7.    The regulations included in the law on the protection of agricultural land
            and activities (Loi sur la protection du territoire et des activités agricoles,
            adopted in 1978 with an important amendment in 1997) are the core of
            the provincial land use legislation. The law is administered by a
            Commission for the Protection of Québec's Agricultural Land (CPTAQ).
      8.    The government promotes the clustering of economic activities through
            its ACCORD project and related funding. This project identifies and
            develops regional clusters of excellence. Given the small and often


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              dispersed character of rural Québec, many communities lack the
              conditions needed to take advantage of the ACCORD approach.
       9.     Whereas “de-concentration” describes the shift of certain administrative
              decision-making powers to agents located throughout the territory who
              are linked to the central power by hierarchical subordination (in Québec
              often the regional directorates), "decentralisation" implies a hierarchical
              transfer of responsibilities to lower levels, including the control of
              funding sources, public election of leaders and significant flexibility as to
              the choice and assignment of necessary competences (Arbour, 2007;
              SRQ, 2006b).
       10.    The Canadian Constitution Act gives the federal government and the
              provinces concurrent legislative powers over immigration. However, with
              the 1991 Canada Québec Accord, Québec has obtained responsibility for
              the selection, reception and integration of immigrants to Québec and has
              implemented its own selection criteria with a strong emphasis on
              establishing facilities for learning the French language.




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                                                Annex 3.A1
    Table 3.A1.1. Ministerial expenditures targeting rural residents and territories, in
                                      million CAD
                                                  2001                                  2006
      Ministry or organisation                   % of total                            % of total
                                      Rural1                     Total2       Rural1                   Total2
                                                  rural                                 rural
Affaires municipales, régions et
occupation du territoire (MAMROT)      138         2.18        1 475.1     208.3          2.59       1 519.0
Agriculture, pêcheries et
alimentation (MAPAQ)                   192         3.03         651.3      229.9          2.86        693.2
Culture, communications et
condition féminine (MCCCF)
                                                                491.3                                 598.2
(culture)                               39.3       0.62                     39.1          0.49
MCCCF (women)                            0.6       0.01                      0.6          0.01
Développement économique,
innovation et exportation (MDEIE)
(CLD)
                                       22.2        0.35         206.6       21.5          0.27        519.2
MDEIE (FLI)                           n.d.          n.d.                     3.0          0.04
MDEIE (enterprises)                   n.d.          n.d.                    51.6          0.64
Éducation, Loisir et Sport (MELS),
(education)                          3 652        57.59       10 621.9     4 387        54.65       12 638.0
MELS (leisure)                           3.6       0.06                      3.6         0.04
Emploi et solidarité sociale
(MESS)                                204.3        3.22        4 066.8     183.2          2.28       4 084.7
Santé et services sociaux (MSSS)
                                     1 583        25          17 197.9    1 979.0       24.65       22 452.5
Ressources naturelles et faune
(MRNF)3                                158.7       2.5           382.2      149.2        1.86          462.8
Tourisme (MTO)                            9.8      0.15           65.6       20.7        0.26          143.4
Transports (MTQ)                       168.6       2.66        1 412.2      493.8        6.15        2 003.7
Jeunesse (SAJ)                         n.d.         n.d.           9.3        7.6        0.09            9.4
Habitation (SHQ)3                      168.9       2.66          248.7      210.7        2.62          340.5
Infrastructures locales (SOFIL)        n.d.         n.d.          n.d.       38.7        0.48          148.9
Total                                6 341       100          36 828.9    8 027.5      100          45 613.5
Change 2006 versus 2001                                                     +26.6%                     +23.9 %
1. Expenses targeting rural residents and territories include the following support sectors, per ministry:
MAMROT: infrastructure, village renewable, regional and rural development, and financial support for
municipalities; MAPAQ – agricultural and agri-food businesses, fisheries and aquaculture; MCCCF:
improvement of cultural offerings, regular credits for regional directorates, gender equality and
improvement of the status of women; MDEIE: CLD funding, FLI loans to CLDs, enterprises,
innovation and market development; MELS: educational services, Unités régionales de loisir and
handicapped people; MESS: employment of individuals and enterprises; MSSS: health services and
community development; MRNF: exploitation of natural resources (mainly forestry); MTO: tourism
projects by firms and associations; MTQ: road network, land, maritime and air networks; SAJ:
initiatives targeting needs and civic engagement of youth, Place aux Jeunes; SHQ: housing and
habitation (including federal spending); SOFIL: local and rural infrastructures.


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  Table 3.A1.1. Ministerial expenditures targeting rural residents and territories (cont.)
2. Total expenses represent those included in the public accounts (comptes publics), Volume 2,
published annually by the Ministry of Finance. They comprise all ministerial expenses for a given year.
Contributions made by the Canadian federal government are not included. Besides expenses targeting
rural and urban residents and territories and ministerial internal expenses, the total expenses also
include (depending on the ministerial mission and portfolio composition): financial expenses (debt
service); transfers to state corporations and ministerial bodies (such as Financière agricole du Québec),
commissions, research and technology centres, museums and educational establishments; amounts
attributed to a national fund (such as the one on heritage) or a research fund; financial support for
students (scholarships); transfers to public pension systems; public health service system expenses; etc.

3. Expenses of Ressources naturelles et faune (MRNF) refer to 2004 instead of 2006. They do not
include support measures for the forestry sector decided in the framework of stimulus packages
reacting to the forestry crisis. Expenses of the Société d'habitation du Québec (SHQ) refer to 2003
and 2007, respectively, and included some transfers from the federal level.

Source: Government of Québec, MAMROT.




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                                              Chapter 4

                                 Policy recommendations



       This chapter addresses the critical issues discussed in Chapter 3. It puts
       forward policy recommendations and provides additional information on
       current good practice in Québec and specific international examples which
       show how other countries are coping successfully with challenges similar to
       those in Québec.




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248 – 4. POLICY RECOMMENDATIONS


Key points

          •   The current governance arrangement for rural policy is strong,
              but may require a series of adjustments. Institutionally
              integrating the Politique nationale de la ruralité (PNR) with
              economic and entrepreneurial development would make the
              approach more holistic. This should be accompanied by: stronger
              incentives to modulate provincial policies, consideration of the
              impact on rural territories, and external monitoring and evaluation
              of rural policy. Integration of sectoral policies requires
              strengthening functional responsibilities at the supralocal level. This
              should include more diversified sources of revenue for local
              government and enable MRCs to design and implement territorial
              interventions. Finally, collaboration with the federal level should be
              facilitated at the local level.
          •   Enhanced governance would favour the implementation of
              targeted interventions to promote development in lagging areas:
              i) Improving regional resilience to exogenous shocks. This is
              particularly relevant for resource-based and single-industry
              communities. Lagging and declining areas should be part of the
              broad process of community transition. ii) Strengthening existing
              and emerging sectors. This would require efforts to capitalise on
              modified agriculture and other primary activities, while supporting
              the development of emerging sectors such as renewable energy,
              rural tourism and retirement living. iii) Diversifying the rural
              economy. To achieve this objective, factors of production need to be
              improved. The use of land should be more flexible in predominantly
              rural areas. The local community should be involved in planning
              and it should be possible to develop productive on- and off-farm
              activities. Diversification would also benefit from the presence of
              skilled labour in rural areas. Human capital should be attracted,
              retained or created through targeted training.
          •   An integrated rural policy should also promote sustainable use
              of rural amenities and respond to different environmental
              challenges. For instance, urbanisation in rural areas located on the
              urban fringe poses problems revolving around competition for land,
              congestion and intensive agriculture. These challenges require a
              stronger focus on the protection of valuable land and landscape.
              Conversely, remote rural areas risk being perceived as territories to
              be exploited instead of as possessed of comparative advantages


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                                                            4. POLICY RECOMMENDATIONS – 249



                 within a regional economy. Québec’s authorities may need to tackle
                 these issues through stronger involvement of local communities.

Introduction

       The current rural policy is widely accepted as part of a larger
       societal vision
           The example of Québec shows that a key factor of success for rural
       policy is its correspondence to a country or region’s larger societal vision.
       This simple but important lesson emerges from the analysis of Québec's
       rural policy and could greatly improve rural policy formulation in other
       provinces or OECD member countries. The lesson does not apply solely to
       rural policy, nor does it say anything new to policy theorists. Yet innovative
       rural development policy initiatives much too often do not reach their full
       potential because they are designed in isolation from a broader societal plan,
       especially one that looks beyond the rural population. Policy ownership is
       often maintained within the department or public body in which it was
       formulated. This makes it difficult for other parts of government and civil
       society to understand its purpose and work towards its implementation,
       thereby reducing the likelihood that they will support the policy. It also
       makes it hard to mobilise the general (and mostly urban) population in
       favour of such efforts.
           A society needs to have a widely accepted vision that is strong enough
       to stimulate ownership and cohesion around shared objectives. The role of
       rural areas in meeting these objectives and the contributions of rural
       development to society's shared vision must be readily identified and well
       understood by the population and its public administrators. This can be
       facilitated by giving a prominent role to academia and civil society actors
       involved in rural development as was done in Québec. The importance given
       to both civil society and academia by Québec's national policy on
       rurality (PNR) is mirrored in Finland's rural policy approach, another
       successful case of policy ownership (OECD, 2008b). Both examples show
       that rural policy is successful if it recognises civil society and academia not
       only as providers of local and technical knowledge, but as active participants
       with the government in programme implementation.
           Moreover, the importance attached in Québec’s rural policy to social
       and community capacity development is innovative, and its emphasis is
       unique in Canada. It is reasonable to see social capital and capacity building
       as a precondition for sustainable economic development, and experience
       with the federal government's Community Futures has shown that business
       development projects were most successful when they were able to create or

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250 – 4. POLICY RECOMMENDATIONS

      strengthen a sense of local community (Freshwater, 2004). In contrast, there
      are many examples of failures in OECD countries to stimulate economic
      activity through costly investments in particular industries. In Québec, many
      projects undertaken at the local and supralocal level with decentralised funds
      from the PNR create the social conditions in local communities that make it
      possible to avoid spending large amounts of money on unsuccessful sectoral
      programmes. These projects also provide opportunities for young people and
      migrants to develop their own initiatives. This is particularly valuable for
      rural communities in demographic decline and for those in which youth
      have difficulties finding promising economic avenues.
          The strengthening of social capacity at the local and supralocal level is a
      sensible reaction to decreased public service expenditure in rural and small-
      town communities. Local partnerships favoured by the policy measures can
      facilitate the provision of services that are no longer offered by public
      authorities. This is particularly relevant in localities facing economic
      decline, such as many resource-based and single-industry communities.

4.1 Inclusive governance

      Governance should integrate rural policies for social and economic
      development…
          Québec's rural policy should allow for greater integration of
      responsibilities for territorial and community development with those for
      economic and entrepreneurial development. These jurisdictions are highly
      interdependent and at the heart of rural policy in many OECD countries. By
      separating them, the PNR is less than optimally effective, particularly given
      the lack of differentiation in parts of rural Québec’s economic base (see
      Chapter 2). While there may have been a good argument for separation in
      the past, when the lack of community capacity was the major obstacle to
      development, the effects of two rounds of PNR have raised the level of
      social capital enough to allow reintegration of the two elements of
      development. A single government body with a territorial approach should
      have responsibility for both rural social development and local economic
      development. Although the appropriate place of rural policy within
      government is a long-standing debate in OECD countries (Box 4.1), such an
      arrangement could favour a more holistic governance structure in Québec.
      Their integration would also allow local development centres (CLDs) to
      return to a ministry in charge of regional development policy and the PNR,
      as was the case under the former Ministry of Regions. This would facilitate
      rural development agents' bridge-building function between social and
      economic development. Even if regional county municipalities (MRCs) try

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       to link the two approaches, an integrated institutional counterpart for local
       authorities would enhance governance. Once the policies are integrated,
       MRCs could be put at the centre of a broad strategy for rural development,
       targeting rural-urban linkages, single-industry communities and rural
       competitiveness, and allowing rural agents to work on a more
       comprehensive basis.



                                 Box 4.1. The place of rural policy
             There is a long-standing debate in many OECD countries on the place of rural
         policy in government. Discussions have taken place on the administrative
         importance, the budget and tools of rural policy, and they have often resulted in
         second-best solutions. The results have been affected by the inertia of
         administrative arrangements or by exogenously defined funding rules (as in EU
         member countries which receive rural development funds as a “second pillar”
         under the Common Agricultural Policy). Many countries have created a division
         in charge of rural development in the Ministry of Agriculture, which has
         traditionally dealt with rural areas (e.g. Canada's Rural Secretariat within
         Agriculture and Agri-Food Canada or the US Under Secretary for Rural
         Development within the Department of Agriculture). In this arrangement,
         ministries have strong incentives to disregard the inter-sectoral dimension of rural
         development. This tendency is reinforced by the fact that agricultural interests are
         often better organised than rural development interests. Other countries have
         created a new body with expanded scope and explicit jurisdiction over rural
         development policies or have assigned this jurisdiction to another ministry. The
         first type can be found in both the United Kingdom (where DEFRA is the
         department in charge of environment, food and rural affairs) and Spain (where the
         Ministry of Environment, Rural and Marine Affairs was created by merging
         jurisdictions for agriculture and for environment). The second can be found in
         Australia, where the Department of Transport and Regional Services (DOTARS)
         is in charge of regional (rural) policy.
         Source: OECD (2006), The New Rural Paradigm: Policies and Governance, OECD
         Publishing, Paris; OECD (2008), OECD Rural Policy Reviews: Finland, OECD
         Publishing, Paris.



            In a related aspect, the policy should become more inclusive of the
       private sector and organisations currently excluded from rural pact funding
       projects. In principle, Québec's rural policy is place-based and multisectoral,
       largely in line with the OECD's New Rural Paradigm. The policy already
       goes a long way towards including cross-ministerial and multidisciplinary
       participation from the policy design stage. However, beyond private
       initiatives in rural laboratories and the funding of speciality products, efforts

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252 – 4. POLICY RECOMMENDATIONS

      should be made to commit the private sector and institutional actors from
      business and agriculture to support PNR objectives. Closer incorporation of
      rural business and agrarian-based organisations would allow private actors
      to help use the new capacities of rural communities to increase
      entrepreneurship and take advantage of economic opportunities. Bringing
      private actors into promising rural pact approaches and innovation-related
      measures such as rural laboratories and speciality products should be
      encouraged and better integrated with business development policies than is
      currently done through the rather passive CLD approach.
           Rural laboratories often take an experimental approach, but their
      knowledge-sharing component can help structure future rural development.
      They offer support for many independent projects throughout the rural
      territory, many of which are valuable for testing the viability of ideas and for
      encouraging individuals and rural communities to think “out of the box”.
      Efforts to better link the laboratories, announced by the government
      for 2010, will be important to encourage knowledge sharing and expand
      business opportunities. Since innovation is a long-term process and a
      positive influence on regional growth only appears after several years
      (OECD, 2009c), knowledge sharing may have important benefits over a
      longer period of time. In this regard, the seven-year term of the second PNR
      is helpful because it provides a window for the effects of innovation to
      emerge. Many OECD countries share the difficulty of sensing new
      economic opportunities for rural areas, and the laboratories are a promising
      approach to this problem.

      … while there is a need to modulate policy interventions in rural
      areas.
          For the second PNR, Québec is on the right track by including
      commitments from other ministries. Like Finland, it tries to strike a balance
      between committing all sectoral ministries’ policies directed to rural areas
      (“grand plan”) and specifically targeting certain rural areas with relatively
      limited financial resources (“niche policy”). Unlike OECD countries such as
      Mexico or Spain,1 whose laws on sustainable rural development bring other
      ministries into rural policy at the co-ordination and implementation stage (an
      approach that is already advanced compared to other countries), Québec has
      chosen to fully involve ministries early in the policy design and planning
      stage. This shows greater understanding of the policy principles in favour of
      compromise and ownership. Consequently, when rural policy has a cross-
      ministerial character from the start, the concerns and perspectives of other
      ministries can be better integrated into the policy. This improves coherence
      and makes it more likely that inter-ministerial commitments will be
      honoured.

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           To optimise public resources, policy design and implementation has to
       take into account the particular conditions of rural areas. Rural areas are
       strongly heterogeneous in terms of population, density, size and distance
       between communities. Valuable lessons can be learned from Finland's Rural
       Policy Committee, Canada's rural lens programme, and the rural proofing
       mechanism in England, United Kingdom (Box 4.2). All three governments
       have pioneered the introduction of a modulation mechanism that monitors
       the adaptability of legislation to specific rural characteristics. However, they
       have also recognised the limitations of their respective approaches. Lessons
       learned in these and other cases have shown that cross-ministerial adaptation
       must occur early in the policy process and will have substance if an
       authority at the cabinet level has the political authority to insist on a rural
       assessment and review in each policy document. In recent times Québec has
       benefited from the fact that the Minister for MAMROT was also a Deputy
       Premier. This combined function made MAMROT a more politically
       powerful force than it would be if the Minister was not a Deputy Premier.
            In Québec, an assessment and review via modulation of the policies
       from other ministries should become more effective. Through the clause de
       modulation and the inter-ministerial rural committee, the need for horizontal
       co-ordination has been taken into account, and many sectoral policies and
       programmes have been adapted in a flexible way to the conditions of
       different rural areas. The fact that the inter-ministerial committee is chaired
       and monitored by a non-sectoral institution with a territorial policy approach
       is important. However, co-ordination has yet to be completely implemented.
       So far, some of MAMROT's efforts have met with resistance from other
       ministries. As the PNR document indicates, ministries should account for
       the impact of new policies and programmes on rural territories in the inter-
       ministerial committee but this is not yet enforced. Other OECD countries
       have also found that ministries tend to be reluctant to adapt to requests from
       one of their peers, especially if it involves additional expenditures.
       Moreover, there is an ongoing debate in many countries on whether to focus
       on ex ante assessment and review (policy mainstreaming and rural proofing)
       done by each government body during the policy design stage or on ex post
       regional and rural assessment and review (evaluation) done by a specific
       internal or external agency (Box 4.2). In some countries, policy
       arrangements allocate responsibilities for assessments and reviews to
       organisations that are not under the direct authority of any specific ministry.
       In Québec, a strong minister or an organisation with “moral authority” over
       each government body such as the Office of the Premier may have more
       success with implementing an ex ante review. The rural advisory body SRQ
       and the other partners could provide an ex post review but would be unable
       to access cabinet documents for an ex ante review. SRQ also may have


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      difficulties addressing topics related to broader regional development or
      rural-urban linkages.



         Box 4.2. Policy mainstreaming and modulation in OECD countries

           Several OECD countries have implemented mechanisms to strengthen
        coherence of sectoral policies through ex ante ministerial assessment and review
        (“policy mainstreaming”) or to evaluate the impact of different ministries' policy
        decisions on rural areas through ex post assessment and review (“rural proofing”)
        by a specific agency. The overall goal is to draw attention to the specific needs of
        rural areas and integrate these into central government decision-making in
        different sectors:
          Rural proofing by the Commission for Rural Communities (England,
        United Kingdom)
           Rural proofing undertaken since the early 2000s by ministries in England,
        United Kingdom considers the impact on rural communities of a policy decision
        and its design and implementation. Through an annual “rural proofing report”
        published by the independent supervisory body Commission for Rural
        Communities (CRC), knowledge of and interest in rural proofing have spread
        from the central government. It is becoming a tool for analysing and improving
        services among local authorities, by making public sector bodies aware of rural
        issues. At the CRC's head is a non-executive “rural advocate” who has the
        authority to bring evidence of policy impact directly to the office of the Prime
        Minister. However, there has also been criticism of rural proofing's lack of
        indicators on progress. Clear criteria are still to be developed for judging the
        success of rural proofing.
           The rural lens system (Canada)
            Established at the end of the 1990s, the rural lens includes a checklist for
        determining if a new policy initiative or programme addresses rural priorities
        (e.g. it asks how the benefit of an initiative for rural Canadians can be maximised
        by measures such as co-operation with other partners, place-based solutions or
        flexibility for decision-making). The officials responsible for the rural lens can
        advise their minister in the Agriculture and Agri-Food Department (AAFC) on
        whether or not to support a new initiative in the Cabinet. The rural lens has been
        somewhat successful as it has led to changes in several federal departments that
        have improved their services to rural regions. However, experience with the rural
        lens also shows that it is crucial to carry out a cross-ministerial examination early
        in the policy process. The rural lens mechanism is often implemented when a bill
        is already considered by the cabinet, which is generally too late to assess rural
        issues. This may also be linked to the Rural Secretariat’s (RS’s) location within
        the sectoral AAFC which gives little attention to rural issues from other
        departments during the governmental decision-making process.


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                          Box 4.2. Policy mainstreaming and modulation
                                   in OECD countries (cont.)

             The Rural Policy Committee (Finland)
            In a consensus-building approach to decision making, the Finnish committee
         brings together nine ministries, other public organisations and federations, as well
         as research centres and private stakeholders. Importantly, the committee is linked
         to the Finnish parliament through the Rural Network of the Parliament.
         Elaborated by the committee, a National Rural Policy Programme that is revised
         about every four years also includes a regional section which seeks to reinforce
         the position of rural policy in the government's work on regional development.
         Ministries involved need to report twice a year on actions undertaken with respect
         to the issues contained in the National Rural Policy Programme. Although until
         recently, assessment and review (rural proofing) has only been dealt with in a
         working group within the Rural Policy Committee, there has been more
         experience with broader assessment and review at the regional level. The
         Ministry of the Interior (in charge of regional policy) formally and periodically
         requires sectoral ministries to assess the regional impact of their policies. This has
         enhanced the regional perspective of sectoral policies and decision making.
         Source: OECD (2006), The New Rural Paradigm: Policies and Governance, OECD
         Publishing, Paris; OECD (2008), Rural Policy Reviews: Finland, OECD Publishing, Paris;
         OECD Rural Policy Reviews: England, UK (forthcoming), OECD Publishing, Paris.




       Québec needs to strengthen supralocal political power…
            There is a need to strengthen the functional responsibility of the
       supralocal level as the centre of rural and territorial development strategies
       while keeping in mind the role of regional conferences of elected officials
       (CRÉs). Participatory local strategic planning is one of the most valuable
       tools available for rural development. It has been shown effective for
       increasing rural communities' capacity to optimise local assets and create
       cohesion around specific development goals. Therefore, a growing number
       of sectoral policies affecting rural and territorial development are
       incorporating public strategic planning exercises within their programmes,
       and local communities and their institutions are starting to be saturated with
       visioning exercises and the development of strategic plans. Such a tool
       creates a risk of over-use: it can tire out participants, lead to reduced citizen
       participation, and become less powerful as participants begin to perceive
       strategic planning as a bureaucratic burden. Québec can avoid this by co-
       ordinating the strategy, policy design, implementation and evaluation of
       comprehensive local development at the supralocal administrative level,

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      while keeping in mind that the administrative regions, with their critical
      mass of population, may be a more appropriate level for the design and
      implementation of some territorial development policies. For broader
      regional policy, transforming CRÉs into proper regional governments
      (i.e. with directly elected representatives) might be considered to give them
      a stronger role. A more radical, but promising long-term option would be to
      replace the two administrative levels between the provincial and the local
      level by a single regional level which could be constituted of enlarged
      MRCs.
           Empowering MRCs as the level of government responsible for rural
      development, including cross-ministerial sectoral responsibilities, is
      consistent with the principle of subsidiarity. It is a sensible reaction to the
      difficulties encountered when trying to merge municipalities. It can promote
      a greater sense of inter-municipal collaboration, rather than competition, for
      development initiatives. In a spirit of subsidiarity, MRCs, roughly
      representing functional regions, are an appropriate lowest and least
      centralised administrative unit with “competence” for rural and territorial
      policies across municipalities. Allocating local development policy
      implementation to MRCs is an effective way to draw many sector-specific
      policies and programmes together into a co-ordinated, holistic delivery
      system. This becomes an even more obvious solution with the growing
      number of provincial sector-specific policies not only implemented at the
      supralocal level but also defined in part through bottom-up and participatory
      policy formulation mechanisms. In the case of the government's Sustainable
      Development Action Plan, steps should be taken to ensure the compatibility
      and co-ordination of rural and sustainable development policies on the
      supralocal level.
          Strengthening MRCs as the level responsible for evaluating and
      assessing local trends would also include using the PNR's development
      index at the supralocal level. To avoid large variations in the results for
      devitalised municipalities in different years of reference (see Chapter 3), the
      index's MRC measures may be more valuable, since they would stress this
      level's importance as a functional unit for rural policy.
           Sectoral responsibilities co-ordinated at higher levels could benefit from
      a strengthened territorial approach if MRCs (and CRÉs) get more
      competences and incentives to collaborate with sectoral actors. This applies
      to administrative boundaries that do not yet overlap with MRCs, particularly
      for health (CSSS) and education (school boards) services. But it also applies
      to regional economic development issues such as rural tourism, a policy
      field in which a cross-MRC approach to promote place-based rural tourism
      concepts makes sense. Although CLDs are invited to participate in regional
      partnership agreements between the Department of Tourism (MTO),

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       administrative regions and the 22 regional tourism associations (ATRs),
       giving MRCs more authority could help develop a coherent tourism image
       for a particular rural area, which would be more marketable in terms of size
       than a large administrative region. In general, the PNR approach of
       encouraging people and communities to co-operate on social projects should
       gradually create the conditions for co-operation on more complex cross-
       MRC economic development issues.
           Empowering MRCs does not necessarily mean transforming how
       prefects are elected (see the case of England, Box 4.3). The current pilot
       project on direct elections seems appropriate as it prepares institutions at the
       supralocal level for added responsibilities. As many rural municipalities may
       not yet have sufficient human capital to carry out this role, political power
       would probably best be kept at the municipal level. For Solidarité rurale du
       Québec (SRQ), the justification for popular elections at the MRC level
       (SRQ, 2006) is to help “alert” the population to local collective governance
       and to increase citizen participation. However, it seems more likely that an
       electoral process will take power away from municipalities and further
       detach MRCs from the rural population. Whereas rural voters currently have
       a direct relationship with elected municipal representatives, moving the
       political power up to the supralocal level could impede enforcement of rural
       interests and the allocation of resources from MRCs. Finally, while each
       municipality currently gets equal representation and voice on the council (in
       MRCs without a single dominant population centre), direct elections for the
       prefect could democratically concentrate the electoral power within an
       MRC's most populated municipalities, at the expense of smaller rural
       municipalities.
           To avoid the possibility of an effective veto by the urban electorate on
       rural issues, consideration should be given to revoking the current veto right
       of dominant population centres within the MRC's decision-making process
       for all rural development issues, as is now the case for votes on rural pacts
       (see Chapter 3). Veto rights were introduced to favour a balance of power in
       line with the demographic distribution of the MRC. However, several cases
       of abuse by elected officials of the dominant population centres have had
       detrimental effects on rural MRCs’ development objectives. As long as the
       veto right remains, it will be difficult to establish a supra-municipal
       development vision in MRCs which have a single dominant population
       centre, regardless of whether or not there are popular elections for prefect.




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            Box 4.3. Rejection of a supralocal level of elected governance:
                      north-eastern England, United Kingdom

           Experience in England shows that a directly elected regional government
        institution may not always be the best governance approach in the eye of voters.
        In the late 1990s, the UK government introduced two new regional institutions:
        regional chambers/assemblies as future regional government bodies, and mainly
        business-led regional development agencies (RDAs). However, the plan
        presented in 2002 to create directly elected regional assemblies was rejected in a
        referendum held in the north-east.
           As a consequence, most assemblies will gradually be abolished and their
        functions passed to RDAs, thereby strengthening these units' competences.
        Currently, in both rural and urban areas RDAs are in charge of promoting:
        economic development, business and competitiveness policies, employment,
        skills required by the local labour market and sustainable development. Working
        in partnership with local and national bodies, they bring together business
        representatives, but local governments, trade unions and voluntary organisations
        also sit on the board. Following the failure to introduce directly elected
        assemblies, RDAs will have more responsibility for co-ordinating and integrating
        a ten-year regional economic strategy and a three-year corporate plan. They are
        also in charge of larger transport and regional planning. RDAs' previously limited
        powers and restricted budgets have increased gradually but substantially and they
        have received resources to meet specific rural socioeconomic objectives.
        Source: OECD (2008), OECD Reviews of Regional Innovation: North of England, United
        Kingdom, OECD, Paris; OECD (2006), OECD Territorial Reviews: Newcastle in the North
        East, United Kingdom, OECD, Paris.




           Getting voters involved risks bringing decision-making dynamics back
      to a short-term mentality. One of the factors that have prevented the
      governance of Québec’s rural policy from derailing into civil exclusion and
      political conflicts is the fact that its municipal governance is non-partisan in
      nature, and political parties are not present in the electoral process. This has
      had a positive impact on the capacity of local institutions to operate in a
      sustainable manner. Non-partisanship can also be linked to the superior
      horizontal and vertical co-ordination process around the PNR that Québec
      benefits from. Politics does not appear to be an obstacle to working together
      and collaborating in Québec’s rural areas. Through the PNR and other
      policies, MRCs have been gradually trained to make decisions within a
      medium- to long-term strategic vision of the territory. With direct elections,
      it is likely that instead of a strategic decision-making process, prefects and
      their councils would resort to making decisions based on the immediate
      political popularity of these choices.

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       …include external actors in monitoring and evaluation…
           More civil society participation in the governance of rural policy and its
       monitoring and evaluation mechanisms would help reduce the role of
       elected officials. In contrast to EU norms which regulate the composition of
       LEADER's Local Action Groups (LAGs) and limit the share of public
       administrators and elected officials to no more than 49% of the LAG’s
       executive council (see Chapter 3), Québec’s MRCs are strongly dominated
       by public officials. Given their dominant role in the governance structure for
       rural policy, vertical co-ordination, especially between the municipal,
       supralocal and regional levels, is very effective. However, despite local
       development committees' participatory approach, there is a risk that elected
       officials may lose sight of the local population's concerns, diluting citizens'
       influence on the system. Although such behaviour has not been observed,
       there is still the danger of excluding civil participation, especially as the
       PNR self-assigned monitoring instruments are predominantly internal and
       again rely mostly on elected officials, MAMROT and the committee of rural
       partners. In the spirit of the New Rural Paradigm (OECD, 2006a), a greater
       presence of external monitoring and policy evaluation would help ensure
       that such threats do not materialise.
            A comprehensive evaluation carried out regularly or ranging over the
       whole implementation period should be conducted by an external body
       before the end of the second PNR. Such an evaluation, comparable to the
       one undertaken at the end of the first rural policy, should include: i) a
       restatement of the policy objectives; ii) an evaluation of progress towards
       strategic objectives; and iii) a review of the flow of funds. Concrete
       indicators for measuring successful performance over the long term could
       reduce local communities’ potential impression of rural pacts as simply a
       mechanism for the distribution of funds. As suggested in the second PNR
       policy document, possible qualitative and quantitative indicators could be:
       the variety of proximity services offered locally; the types of rural strategies
       implemented locally; the number of volunteers; the number of rural pact
       projects in different sectors; the flow of migration in rural municipalities;
       and the number of jobs generated and investments. The outcome of the
       evaluation process should be shared with local communities to inform rural
       residents about the impact of the PNR and involve them in setting strategic
       choices. In comparison, the example of Mexico is instructive: Apart from
       the establishment of two indices (Index of Human Development and
       Marginalisation Index), policy in Mexico also contracts an annual external
       evaluation of its rural policy to obtain an unbiased appraisal of the successes
       and failures of the rural development law (LDRS). The agency that has been
       contracted to carry out this external evaluation in the past has been the Food
       and Agriculture Organization of the United Nation (FAO) (OECD, 2007).

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           Attention should be paid to providing rural municipalities, especially
      smaller ones, with the capacities necessary to set a local development
      agenda. Whereas the PNR relies on strong MRCs able to manage policy
      implementation, Québec should give municipalities with few resources and
      capabilities more guidance for implementing PNR measures (after having
      first enhanced their local funding capacity, see below). This will help
      municipalities that are reluctant to take on new responsibilities because they
      lack various types of capacity. Local capacity could be strengthened through
      better training of rural development agents. Although SRQ trains the agents
      and helps them create a network for knowledge sharing, there is a need for
      more substantial and specific programmes to train, motivate and link agents,
      elected local officials and volunteers. The first PNR suffered from a high
      turnover of agents (25% in 2007). The situation should be carefully
      observed to see whether it improves following stronger recognition by
      MRCs and the introduction of higher salaries. A similar situation occurred in
      Mexico as the government attempted to implement its decentralised
      Sustainable Rural Development Law (Box 4.4).



                        Box 4.4. Local capacity building in Mexico

           Mexico's Sustainable Rural Development Law (LDRS) established municipal
        rural development councils responsible for developing and implementing locally
        devised rural development plans. Many rural municipalities lacked the experience
        and capacity needed to successfully carry out these new responsibilities.
        Therefore, formal training instances and programmes were established through
        the Sistema Nacional de Capacitación y Asistencia Técnica Rural Integral
        (SINACATRI) in order to help construct the law's institutional architecture at the
        municipal level. SINACATRI involves the resources and infrastructure of
        different agencies in local training programmes.
           A set of co-ordination agreements has been established between the federal,
        state and municipal governments, including horizontal co-ordination at each
        level. It operates through the training arm of Mexico's Secretary of Agriculture,
        INCA Rural, which is in charge of co-ordinating the implementation of the LDRS
        at central level. The contribution of INCA Rural to the process of
        municipalisation of rural development policy has been crucial. In terms of
        capacity building for effective social participation, workshops organised by INCA
        Rural have been instrumental in creating municipal rural development councils
        and municipal development plans.
        Source: OECD (2007), OECD Rural Policy Reviews: Mexico, OECD Publishing, Paris.




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       … and diversify revenue sources for local governments.
           Beyond the current focus on property taxes, more diversified and
       autonomous fiscal revenue sources should be available at the local and
       supralocal level. The fact that taxation is largely based on property, rather
       than linked to individuals' income, does not take into account new social
       realities. Rural gentrification (in principle very positive) and related
       increases in real estate prices and property taxes put financial pressure on
       poorer, long-established rural residents and younger people who cannot
       afford to settle there. According to the model suggested in OECD (2004),
       reform could include a reduction of the property tax share and an increase in
       locally selected municipal user fees. This would counter the general
       tendency in Canada to reduce the financial role of municipalities. Whereas
       on average, local governments' tax revenues in all OECD countries (data:
       OECD) accounted for 4.1% of GDP in 1996 and for 4.4% in 2006, the
       corresponding figures for Canada were 3.4% and only 2.8%, respectively.
            Diversified revenues would allow municipalities to enhance service
       provision for new and established residents, taking into account the
       changing social and demographic composition of rural communities. Rural
       municipalities challenged by ageing and in-migration of the elderly are
       urged to provide new human services in sectors such as health care, seniors'
       housing and transport. To deal with these new service needs, the current
       local taxation system might move from relying exclusively on property tax
       and fiscal transfers to include other means of taxation more directly linked
       to individuals. However, in the United States, where municipalities are often
       financed through sales taxes, thereby intensifying their sensitivity to cyclical
       fluctuations and favouring an increase in the amount of commercial
       infrastructure, it is clear that depending too much on sales taxes also carries
       risks. A diversification of the municipal revenue base seems to be an
       appropriate solution to these problems.
           With better local capacities, greater revenue sources could translate into
       enhanced resource allocation to the PNR’s programmes, which usually
       require local co-financing. This should not be done, however, by directly
       increasing the fiscal burden of the local population. Rather, a de-
       concentration of existing fiscal measures in favour of local or supralocal
       public institutions' capacity to generate revenues might be decided.
       However, an essential prerequisite would be prior municipal capacity
       building. If transfers are used to augment local budgets, they should strictly
       follow the vertical chain of governance by passing first through the MRCs to
       avoid removing from the MRCs the influence and power associated with the
       flow of financial resources. This is a valuable lesson from Mexico's rural
       policy where direct transfers from the federal to the municipal public
       administrations negatively distorted the vertical governance and policy

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      co-ordination mechanisms established by that country’s Sustainable Rural
      Development Law (OECD, 2007).
          New fiscal responsibilities would require better accountability on the
      part of local administrations than what the PNR and its governance structure
      currently ensure. This is not only linked to fiscal responsibilities, but also to
      growing decision-making power, which has been handed down to local and
      supralocal administrations in hopes of bringing policy design and
      implementation closer to those individuals who stand to be most affected by
      Québec’s rural policy. Municipal administrations and MRCs are given
      significant leeway to “bend” established procedures to make them best fit
      their strategy and its implementation. This has greatly facilitated
      implementation of the PNR so far. However, such freedom should be
      counterbalanced by a strong external evaluation of objectives achieved and
      financial management. The confidence accorded to local elected officials
      should be accompanied by a greater sense of accountability.

      Collaboration between provincial and federal policies should be
      facilitated at the local level
          For their own benefit, local actors should be encouraged in their efforts
      to enhance coherence and collaboration between federal and provincial rural
      development measures. Currently, the two structures carry out their policies
      in a largely parallel fashion, and duplications and inefficiencies can occur. It
      can be challenging for a parallel federal structure that is not co-ordinated
      with the Québec government, such as the federal rural teams, to display its
      effectiveness, particularly given the dominance of PNR programmes at the
      local level. Yet, as the Constitution is not explicit on rural development
      responsibilities and given the federal level's interest in maintaining a
      presence in local economic development, a transfer of rural development
      programmes to the provincial level is very unlikely. On the local level, the
      parallel situation is sometimes viewed as favourable as it leads to
      competition that can enhance local authorities' bargaining power. The two
      levels of government therefore have an option to allow for greater local-
      level collaboration between both rural development programmes and
      encourage complementarities and synergies.
           MRCs and municipalities would benefit from better support for use of
      both sets of measures. This should be encouraged as long as activities are
      not funded twice. Given the similar approaches to local development carried
      out through the Community Futures initiative (SADCs), there is a strong
      rationale to co-ordinate territorial bodies that implement similar
      interventions. The respective roles of CLDs and SADCs are very close and
      their approaches to economic development can complement each other. In a

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       number of cases, federal and provincial officials are co-located or
       collaborate through joint financial participation on a project base. A more
       institutionalised integration has been implemented in the remote MRC of
       Témiscamingue (Box 4.5). Another example is broadband Internet access to
       rural and remote regions: both the federal (Industry Canada) and provincial
       (MAMROT) levels of government have launched programmes. The main
       difference in the criteria for project selection is that the federal level
       involves private business in tenders, whereas Québec provides funding for
       the public and non-profit sector, limiting its programme to the PNR
       territory. In cases such as the MRC of Montmagny, projects are funded and
       implemented jointly. This increases efficiency and helps avoid duplication.



                Box 4.5. Federal-provincial collaboration at the MRC level

            The large rural MRC of Témiscamingue (19 200 km2, almost half the size of
         Switzerland, but only around 16 000 inhabitants) in remote western Québec is the
         only example of local actors having agreed on an institutionalised collaboration
         between the Québec government's CLDs and the federal government's SADCs.
         The results of this arrangement are very promising.
            The two local development bodies collaborate on projects through a specially
         created entity called Témiscamingue Development Corporation (SDT or Société
         de développement du Témiscamingue). The different administrators meet on the
         SDT board and often do not strictly separate staff working for one or the other
         unit. Nonetheless, the evaluation and accounting of projects is made separately to
         the two levels of government, often using different indicators, according to the
         different requirements of the higher levels.
            Enhanced collaboration between the two local development bodies is essential
         to avoid duplication of approaches and inefficiencies in financing projects.
         Because of political considerations at both the provincial and the federal level,
         such a model has remained exceptional. But it proves that the different levels of
         government should be encouraged to trust in the principle of subsidiarity and give
         political responsibility to the lowest or least centralised authority competent to
         resolve an issue.
         Source: MRC of Témiscamingue.




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4.2 Development of lagging areas

      Improving regional resilience to exogenous shocks…
          In light of Québec's exposure to international competition and the global
      economic downturn, rural policy should foster development and tackle
      specific challenges in lagging areas. Although it is usual for a country’s
      regional differences to be greater than differences between countries,
      economists and policy makers have tended to pay more attention to national
      growth than to regional development. However, wherever policy
      investments have an expected positive rate of return, fostering growth
      throughout the territory is in the interest of governments. This contributes to
      overall output without affecting development opportunities in other areas
      (OECD, 2009c). As previous chapters have shown, lagging areas in rural
      Québec face difficulties given their specialisation in traditional
      manufacturing and natural resources. A priority for rural policy should be to
      shield communities from external shocks and boom-and-bust dynamics
      while providing framework conditions that facilitate market access for rural
      dwellers. However, these conditions may not be enough in the context of
      crises that reduce international demand for goods produced or extracted in
      Québec. Therefore, rural policy also needs strategies to tackle specific
      challenges.
          A holistic rural policy has to provide answers for resource-based and
      single-industry communities, as these are among the most vulnerable
      economic entities. External shocks due to the global economic downturn
      combined with stronger international competition and labour-saving
      technology have intensified the vulnerability of resource-based rural
      economies and hastened the decline in primary resource-sector employment
      (see Chapters 1 and 2). Consequently, many communities based on forestry,
      fishing, mining or smelting have suffered firm closures and unemployment.
      With the economic downturn, many of these small rural communities risk
      entering a spiral of decline marked by environmental decay, demographic
      decline, diminishing demand for goods and services, falling property values,
      an eroding tax base, and subsequent cuts in public service provision. These
      problems hinder efforts to ensure such communities' sustainability,
      accelerate rural depopulation, and increase economic and social pressures on
      urban centres (WD, 2009). To maintain employment levels in these rural
      communities, local producers have to find ways to reach new export
      markets. A holistic rural policy should therefore combine existing sectoral
      measures with programmes for single-industry communities currently
      managed by the Ministry of Economic Development (MDEIE) and with



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       measures put forward in the governmental action plan for devitalised
       municipalities (Government of Québec, 2008).
            Stabilising the local economy is an important policy goal for lagging
       communities, but it requires a long-term, inclusive approach which takes
       demography into consideration. One way to deal with the risks enumerated
       above is a more diversified economy which can help maintain single-
       industry towns affected by economic difficulties. However, diversifying the
       economic base is only an option for larger territories that can more easily
       focus on a number of exports to various niche markets outside their
       communities. Many local labour markets in rural Québec are too small to
       support a diverse range of firms or industries, in terms both of number of
       workers and mix of skills. Diversification strategies create further
       challenges: First, the allocation of talent in natural resource-based
       economies is often biased in favour of the resource sector, as skilled workers
       try to benefit from resource rents. Consequently, workers may lack the
       entrepreneurial approaches necessary to build businesses in other sectors.
       Second, fostering diversification is a long-term process that requires the full
       commitment of public actors and the community. Many diversification
       strategies imply a transition from a “capital-intensive” economy (as in the
       case of modern forestry or agriculture) to a system that uses more “labour”,
       which is typically a scarce factor in these rural areas. Third, there are many
       examples of failed diversification policies, but less agreement about what
       works, as successful policies are often linked to place-based particularities
       (Ahrend, 2006).
           Nonetheless, several policies have proved their effectiveness in fostering
       economic diversification, at least within the framework of larger areas.
       These include policies to optimise framework conditions for
       entrepreneurship, ensure a competitive business environment and provide
       sufficient incentives to invest in non-resource sectors (Ahrend, 2006).
       Measures to achieve this can range from tax policies to financial sector
       reforms. While taxes should specifically target the resource industries and
       lower general tax rates, successful changes in the financial sector's
       framework conditions create mechanisms for efficiently allocating
       investment resources across different economic sectors. Given rural
       Québec's manufacturing tradition and related entrepreneurial skills, a
       venture capital industry and incubator services are important. In particular,
       business incubators can provide a nurturing environment through a range of
       business support resources and services, where entrepreneurs, start-ups and
       small businesses commercially validate and transform their concepts into
       viable products and services. As for-profit incubators are less likely to be
       located in the most lagging areas (Cheng, Schaeffer and Middleton, 2009),


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      support for non-profit incubators, and particularly incubators affiliated with
      universities and technical colleges, is recommended.
          However, policy makers also have to consider other options for dealing
      with the risk inherent in lagging resource-based and single-industry areas.
      Given the difficulty of implementing diversification strategies in small local
      labour markets, it is crucial to consider that the workforce size in many rural
      areas will shrink in the future and thus make diversification all the more
      challenging (although in small rural areas, re-specialisation through a single
      successful project may induce other projects or attract new residents). One
      promising way to deal with this situation can be the inclusion of different
      options in community transition management.
          Indeed, the stabilisation of a lagging region's local economy should be
      part of a larger process of community transition. Dealing with the risks of
      the local economic structure and better anticipating and planning industrial
      closures are crucial components of such a process. The Canadian
      Intergovernmental Committee on Urban and Regional Research
      (ICURR, 2005) has identified the roles of key actors in community
      transition and recovery processes. These experiences are also partially or
      wholly applicable to other OECD member countries with declining
      resource-dependent communities, although their different systems of
      government and economic and social conditions have to be considered. In
      particular, four main strategies (WD, 2009) will have to be implemented at
      the appropriate moments of action (Box 4.6).
          First, community transition management strategies have to anticipate
      and plan for industrial closure as a normal event in the life cycle of a
      resource-based industry. From the beginning of industrial activity,
      community stakeholders should start to plan for the future closure. This
      facilitates an early beginning of transition management and diversification
      efforts, starting well before the actual announcement.
           Second, all stakeholders have to collaborate to restructure communities
      in transition after an industry closure. Collaboration includes efforts by five
      key stakeholders: i) the federal government, which sets the policy direction
      and prepares communities for the consequences of closure; ii) the
      provincial/regional governments, which facilitate planning, help
      communities anticipate and plan closure, and co-ordinate collaboration and
      funding; iii) the local governments, which promote community participation
      and manage closure-related local issues; iv) the departing industry, which
      communicates its intentions and provides support to affected workers and
      the local community; and v) civil organisations, which contribute with
      practical support.


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            Third, resource-based communities in transition require a lengthy
       process involving interrelated actions, including economic diversification
       strategies, labour market adaptation and support for affected workers,
       incentives for possible new industries and migrants, adjusting public service
       delivery to an appropriate level but still allowing for attracting in-migrants,
       stabilising municipal finance and motivating the community.
            Fourth, community transition requires time-limited financial support by
       all stakeholders. This is particularly relevant in Québec where communities
       dependent on property taxes are strongly affected by falling property values
       and lost employment income. While avoiding dependency on outside
       financial resources, communities need short-term investments that could for
       example take the form of a stabilisation fund that can help keep skilled
       labour in the community and retrain other workers. The money can be
       justified by the community's past contributions to regional and national
       economic strength, the need to take advantage of past investments, and the
       chance to seize new development opportunities.



           Box 4.6. Managing community transition: experience from Canada

            Given employment decline in Canada's primary resource sector, provinces and
         territories have had significant experience in dealing with industry closures and
         the transition of communities. Actions can be separated into a pre-closure phase,
         an immediate closure phase and a long-term closure phase.
            Pre-closure phase: Before making decisions that affect resource-based
         communities, the federal government consults with provinces/territories and local
         actors and provides early warning of closure so that employees and communities
         have time to adjust. Provincial and territorial governments provide funding and
         advice to vulnerable communities to develop diversification plans well in advance
         of industry closure. Ideally, they promote municipal efforts to co-operate more
         broadly in order to capitalise on regional strengths and work towards
         arrangements with industry and the community on the post-closure process. Local
         governments play a key role for advancing planning of future economic
         development and diversification, co-ordinating civil and community
         organisations, and exploring partnerships with neighbouring municipalities (and
         MRCs) and aboriginal groups. They should seek assistance from the departing
         industry to ensure ongoing communication and better anticipate the effects of
         resource depletion and closure.
            Immediate closure phase: The federal and provincial/territorial levels give
         local communities autonomy with regard to decisions and funding during the
         revitalisation process; they offer employee assistance that provides transitional
         income and sets models for good corporate behaviour; and they add extra, time-
         limited assistance services during the transition period. Beyond this, provinces


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                          Box 4.6. Managing community transition:
                             experience from Canada (cont.)
        empower local communities through tools such as flexible municipal legislation
        and financial, administrative and communications support. They decide on a case-
        by-case basis on transferring land use rights to local governments if this can
        improve the community's economic and social capacity. Local governments,
        while collaborating with upper levels of government and their MRC and regional
        counterparts (e.g. on sharing service delivery costs), try to maintain a decent level
        of service delivery, co-operate with civil organisations to soften the impacts of
        closure, attract new business and residents, and communicate positive messages
        during the transition process which affirm that the community is resilient. The
        departing industry provides retraining and job placement services to its workers
        and transfers capital assets (e.g. industrial land or useful equipment) to the
        community.
            Long-term closure phase: The federal and provincial governments provide
        long-term support through economic development authorities or corporations.
        The federal level monitors the departing industry to ensure that it deals with its
        environmental hazards and aesthetic impact on communities. Community closure
        is considered when it is in the community's best interests, but can only be
        determined collaboratively by the community and provincial governments. While
        local governments have to review their budget regularly to adjust it to
        demographic and tax base changes, they also look for region-wide service
        delivery opportunities (including restructuring) and evaluate residents'
        expectations. This can help to find out what type of new residents can be
        attracted. Civil organisations including from aboriginal groups participate in
        developing business strategies and market opportunities and act as economic
        drivers for the areas.
        Source: ICURR (2005), Facing the Challenge of Industry Closure: Managing Transition in
        Rural Communities. A Report by the Provincial and Territorial Departments Responsible
        for Local Government, Resiliency and Recovery Project Committee, edited by Catherine
        Marchand, ICURR Press, Toronto.




           Fostering social and human capital in lagging resource-based
      communities has to be accompanied by efforts to reduce tax reliance on a
      single industry. Québec has recognised this challenge in its policy
      framework and specific funding programmes target the revitalisation of
      communities through industrial planning (the economic development
      strategy for resource-based regions) and individual support to emerging
      economic sectors (the ACCORD project targeting mostly urban areas). A
      strategic plan for revitalising resource-based communities calls for strong
      local leadership, elected representatives and a community capable of
      framing a multisectoral vision of future development. These needs are

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       addressed in the PNR's participatory planning approach, which demonstrates
       opportunities for stronger integration of rural policy and support measures
       for resource-based communities. In this respect, the success of Québec's
       resource exploitation plans in the northern mining areas will depend on
       enhanced participation of and stronger benefits for local and aboriginal
       communities.
            Stabilisation and economic diversification is particularly urgent in
       lagging communities dependent on the commercial forestry sector. Forestry-
       based communities are often affected by two crises: first, a cyclical one due
       to the global economic downturn, softwood lumber disputes with the United
       States and the loss of US demand for newsprint and dimension lumber; and
       second, a structural one related to stronger international competition and
       high energy and input costs. It is particularly necessary for these
       communities to reduce the risks linked to the instability of their local
       economy. Some opportunities may be found for marketing of non-timber
       forest products. Québec's rural policy has started to recognise the
       unexploited potential of products, such as mushrooms, wild fruits or
       essential oils. Also, the regional commissions on natural resources and the
       territory (CRRNTs) work on the development potential of these products in
       their regions. This includes possible medical or cosmetic uses of forest
       plants (Box 4.7).

       … and strengthen traditional industries as well as emerging sectors.
           Diversifying rural economies does not mean abandoning valuable
       structures: comparative advantages and new knowledge-based developments
       in traditional industries should be valued when developing new
       competences. Although in decline, Québec’s agriculture and forestry remain
       a vital part of the rural economy and indirectly generate employment
       through their demand for local goods and services. They have shaped rural
       landscapes and are pillars of “rurality” in Québec. However, employment
       has declined in these sectors for several decades and, in the case of forestry,
       production has also contracted. Hence, in many places traditional industries
       will be unable to contribute strongly to future economic growth and the
       development of rural territories. The same is likely for parts of
       manufacturing, which has a strong and specialised presence in Québec's
       rural areas. Agriculture, forestry and manufacturing all feel the impact of
       low-cost foreign competition. Future economic development will therefore
       largely have to come from the tertiary sector, which includes government
       and other services in health and education, tourism and recreation, and
       possibly, finance, insurance and real estate, as well as other service sectors.



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           Box 4.7. The marketing of non-timber forest products in Québec

           In reaction to the forestry sectors' crisis, resource-based communities try to
        diversify their economic base. One path embarked upon by local actors in the
        framework of Québec's PNR is more effective use and marketing of non-timber
        forest products. Several communities have received government funding through
        the rural laboratory programme to develop these products, with the aim of higher
        value added and direct marketing to consumers. A broad range of products are
        marketable, including mushrooms, blueberries and other wild fruits, pine
        branches and essential oils. There is also potential for pharmaceutical plants. A
        challenge encountered by many initiatives for developing non-timber forest
        products is the lack of technical training of people involved (biologists,
        technicians, pickers, etc.), competition by informal workers, and a high turnover
        rate.
             •     Municipality of Girardville: In its rural laboratory project, this
                   remote location in the region of Saguenay – Lac-Saint-Jean combined
                   a marketing effort with research and development plans targeting the
                   study of various plants in order to determine those with the strongest
                   economic potential and to develop derived products (e.g. balms).

             •     MRC of L'Islet: To professionalise their non-timber forest
                   production, local actors created a co-operative including workers,
                   users and supporters. Funding through the PNR's rural laboratory
                   programme totalled CAD 500 000, about half of the total financial
                   support earmarked for the co-operative.

        Source: Government of Québec and OECD.




      Capitalise on agriculture
          To allow the development of diverse sectors in rural Québec it is
      important to modify the current agricultural support system. The
      mechanisms that support agriculture have contributed to the development
      and financial autonomy of products covered by the existing system, but they
      are less suitable for reducing regional disparities and achieving objectives
      linked to broader rural development. Both the Canadian supply management
      system and Québec's ASRA income stabilisation programme (see Chapter 3)
      have facilitated the modernisation of farms and resulted in a higher standard
      of living for producers and their families. Within Québec, supply
      management has allowed important commodities facing structurally low
      prices to survive, but there is reason to question some of these farms' long-

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       term viability. Both policy systems result in rigidity within agriculture and
       impose high costs on non-farmers. In contrast other parts of Canadian
       agriculture policy focus on business risk management and support normally
       profitable businesses in cyclical crises with far less distortion of farmers'
       decisions. Today's situation, with high incomes and profitability of farm
       operators covered by existing risk management systems, raises the question
       of why some particular commodity producers that operate under supply
       management policies should continue to be strongly protected from market
       forces.
            The agricultural support system should progressively introduce market
       forces, tying support to farm income rather than production. To stop
       inducing dependency behaviour and allow for adjustment of consumer
       prices to world-market prices, the ASRA programme should be further
       adapted. In light of successful trade liberalisation in other OECD countries
       (liberalisation in New Zealand and Australia also included the dairy sector)
       and other agricultural sectors within Canada such as barley and wheat, it is
       difficult to justify continued special treatment for a group of farmers whose
       situation does not seem fundamentally different from that of producers of
       grain or livestock. In the medium term, reform is inevitable, particularly if
       the current Doha Round is successful. The transition to a new system will be
       easier if reforms start in a timely manner (OECD, 2008c).
           The ASRA programme should be gradually replaced by a system that is
       no longer linked to the production of a particular commodity, but which
       supports farm income independently of the type of agricultural business.
       The current system risks penalising sectors with higher-quality output by
       reducing their ability to compete internationally. As argued by Saint-
       Pierre (2009), a new risk management programme should strengthen the
       world marketplace's role as a regulator of production, while allowing
       adaptation mechanisms that take into account regional development
       objectives.
           A system decoupled from production objectives gives producers
       incentives to improve and diversify their operations. This makes it easier to
       take advantage of new production methods (including in the food-processing
       sector) and market opportunities in higher value-added sectors such as
       organic and other certified food and forest (timber and non-timber)
       production. New government programmes have been implemented, partly in
       the framework of the PNR, to support organic farming and certified
       protected designations such as speciality products and regional produits du
       terroir. However, overall development of these sectors remains modest and
       there is significant potential for further diversification. Québec's young
       producers of mostly hand-crafted cheese are an example of the market
       potential of new types of production linked to the terroir.

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          A way to promote organic and certified food is better marketing, which
      would also benefit producers without direct access to large markets. The
      success of high value-added farming products depends on their location
      relative to markets. Farms close to large metropolitan regions or located in
      popular tourist areas have more opportunities for direct sale. Successful
      direct marketing efforts that combine selling fresh products with the
      experience of visiting a rural area are often the result of co-operatives or
      organisations with a similar purpose working together to market their
      products. But more remote areas may still be able to benefit, as indicated by
      the growing demand for organic products linked to environmental or
      consumer protection concerns. In Québec, the organic food market is still
      relatively young and not yet fully established, but it has interesting
      development prospects. Making access to organic food easier is one step in
      promoting its consumption: as an example, in the United States, organic
      food stores have joined to establish a website with information on the
      location of stores all over the country (http://organicstorelocator.com/).

      Promote emerging sectors
           Location and geographic features are key determinants of emerging
      economic opportunities. A small mining town without assets in other
      resource-based industries will find it more difficult to grow, whereas
      accessible communities with natural or cultural amenities such as landscape,
      recreational facilities or historical buildings can try to promote rural tourism
      or attract retirees to settle. However, many communities without particular
      amenities may still have assets in wind, water or forestry, and thus a
      potential for renewable energy production. In general, growth occurs more
      in regions that successfully mobilise their local assets, rather than depending
      on transfers and subsidies from national and provincial governments
      (OECD, 2009c). In rural Québec, although renewable energy, particularly
      hydroelectricity, has long been generated, communities can become more
      involved. Moreover, opportunities for rural employment and income have
      emerged through more recent methods of energy production such as wind
      power and biomass, and rising cost for fossil fuel may boost these sectors.
          In many OECD countries, new sectors that can supplant departing
      industries have been developing, particularly in renewable energy
      production, rural tourism and retirement living.
          Québec's abundance of wind, water and forest resources provides a
      foundation for a renewable energy industry, and its strong integration with
      rural policy can increase opportunities for local communities. The
      production of renewable energy is an important element of Québec's and
      Canada's efforts to reduce greenhouse gas (GHG) emissions and address

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       challenges related to climate change, but renewable energy should also be
       seen as a source of new employment and income for rural areas (although
       this potential is affected by the low cost of hydroelectricity in Québec which
       lowers the profitability of some renewable energy projects). The
       government's Energy Strategy focuses on the dominant hydroelectricity
       sector and, to an increasing degree, on wind energy. In this respect, the
       government should strongly involve rural policy actors and require that
       research and development (R&D) activities for projects provided by Hydro-
       Québec or emerging companies take place close to rural communities. This
       facilitates the pooling of skilled labour in rural regions and maximises
       communities' benefits from these industries. The fact that Hydro-Québec is
       owned by the province provides opportunities for the company to act as a
       “social enterprise” and play a key role in the development of rural areas.
            Prospects for further developing wind energy in rural Québec are
       promising. There is an overall technical potential to produce almost
       100 000 MW within 25 km of an existing power transmission line
       (Hélimax, 2004). Wind energy development in rural Québec and other
       provinces with strong potential could contribute to the Canadian
       government's efforts to catch up with world leaders in wind power capacity,
       particularly the United States, Germany, Spain and China (GWEC, 2009).
       An example of linking opportunities in wind energy with regional industrial
       development is found in Québec's eastern region of Gaspésie. Given the
       decision to require wind-energy investors to manufacture for example wind
       turbines locally, this industrial development project mobilises regional
       leaders under the ACCORD project to train the current workforce, attract
       skilled labour to the region and trigger further local investment. For similar
       projects in other areas, the production of the equipment in Gaspésie is a
       condition of public funding. Experience in OECD countries such as
       New Zealand confirms rural communities’ opportunities to generate enough
       electricity from local renewable energy resources to meet their own
       demands and sell the excess to the grid (Box 4.8).
            Likewise, forestry and agriculture resources can increasingly contribute
       to the production of renewable energies. Wood is the largest biomass energy
       resource, but other sources of biomass can also be used. They include food
       crops, grassy and woody plants, residues from agriculture or forestry and the
       organic component of municipal and industrial wastes (NREL, 2008).
       Whereas many OECD countries have to balance biofuel and food
       production, this trade-off is less pronounced in Québec owing to its rich
       forest resources. Waste products of its large forestry industry may produce a
       large quantity of input to be transformed into energy. However, to fully
       benefit from opportunities in forestry-based biomass and biofuels,
       exploiting resources necessitates stronger investments in innovation and

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                  Box 4.8. Opportunities for local renewable energies:
                             Totara Valley, New Zealand
           A study of the farming community of Totara Valley in New Zealand's North
        Island exemplifies how a small rural location can exploit a local renewable
        energy system and export excess power to the grid. After 2013, trust-owned or
        private electricity distribution companies in New Zealand will no longer be
        required to maintain unprofitable sections of their lines to rural areas (Electricity
        Act 1993). Therefore, rural communities try to develop a decision-making
        methodology to identify local energy resources that can meet local demands for
        heat and power. Since it is not cost-effective for a community with limited
        resources to undertake a detailed analysis over a long period, the Totara study's
        objective was to develop a rapid method of assessing local renewable energy
        resources.
           Research partners and electricity companies joined together to monitor Totara
        Valley and developed a series of electricity profiles related to power demand and
        seasonal and daily variations of wind and solar data. Small hydropower
        opportunities were also assessed based on the flow available from streams
        within the community. Since wind and solar are intermittent and not all
        properties have a reliable stream with micro-hydro potential, matching power
        supply with continually varying demand often requires electricity storage.
        Methods available after 2013 to match potential generation capacity with
        demand include: i) independent generation systems in houses/farms which
        combine wind and solar with battery storage and a small petrol generator as
        back-up; ii) several sources of small-scale generation in a community with a
        mini-grid connecting all generation plants and supplying all buildings, which
        could make the community independent; iii) if already connected to the grid, a
        community could continue to use power, but with the risk of increasing fixed
        supply charges to cover costs; and iv) if companies agree to maintain the supply,
        the grid could also be used as a “battery” when power demand exceeds supply
        from the power generated on site.
           Ongoing research focuses on the production of a decision-making tool to
        assist rural communities in identifying economic, social and environmental
        benefits of introducing small-scale generation systems. Further analysis
        concerns the potential interest of line companies in becoming a joint venture
        partner in such a scheme.
        Source: Sims, R.E.H. and P.E. Murray (2005), “Power to the people – a New Zealand
        rural community study”, plenary paper for the ISES 2005 Solar World Congress, Orlando,
        8-12 August.


      transformation. Swedish and Austrian experience with forest biomass
      provides promising business opportunities for forestry-based rural areas
      (Box 4.9).



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                       Box 4.9. Forest biomass and rural development:
                            experience from Sweden and Austria
    Pitea (Sweden): This small northern Swedish town (22 600 inhabitants) has decided to take
 advantage of its specialisation in the forestry industry. In a project it focuses on dimethyl ether
 (DME), a gas which can be obtained from direct gasification of biomass. The project aims at
 producing environmentally optimised synthetic biofuel from lignocellulosic biomass at
 industrial scale. DME has the potential to become a competitive renewable alternative to fossil
 fuels and is seen as a highly efficient energy carrier with low exhaust emissions, reduced noise
 externalities and minimal climate impact. The BioDME project started in 2008 and aims at
 building the world's first BioDME plant by 2010. A field test to verify DME technology in real
 applications will run from 2010 to 2012 with 14 trucks in ordinary customer operation, in order
 to check technical standards, commercial possibilities and engine compatibilities. The project
 is co-financed by a private consortium, the EU’s Seventh Framework Program (FP7), and the
 Swedish Energy Agency, with a total estimated cost of EUR 28 million. Its impact on the
 regional economy has yet to be evaluated.
    Güssing (Austria): In 1990, local authorities in this small and relatively poor Austrian town
 of 3 700 inhabitants set a target of energy self-sufficiency, abandoning fossil fuel use in the
 municipality in order to reduce public spending. Through investments supported by the
 European Union's regional funds, this objective was achieved: the municipality installed a large
 biomass heating plant, followed by a biodiesel production plant and a biomass power plant. To
 use the rich local forest resources (45% of the municipal territory), appropriate wood logistics
 were built up together with a wood drying facility which helped to use the heating plant all
 year long. To produce energy, the plant gasifies wood chips by excluding air and adding steam.
 The result is a high-quality gas which can be used not only for heat and electricity, but can also
 be processed to synthetic natural gas and fuel. With more than 50 new businesses in town, the
 local authorities have more than tripled their annual revenues to EUR 1.4 million and reduced
 their energy costs by over 50%. A centre for renewable energy has realised several pilot
 projects and offers its local experience to other localities planning to link local natural
 resources, energy production and regional development. Moreover, eco-energy tourism is
 developed, with a common regional label (ÖkoEnergieland) and guided tours show the
 different forms of energy production and other cultural and natural assets of the region.
 Source: Solander Science Park / Marcus Öhman, Lulea University of Technology; European Center of
 Renewable Energy G