COVID-19 – Economic Policy Options for Managing and Recovering from the Crisis in Quebec and Canada

HENRI҃PAUL ROUSSEAU

COVID-19 – Economic Policy

Options for Managing and

Recovering from the Crisis

in Quebec and Canada

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ISSN 1701-9990 (online version)

HENRIͲPAULROUSSEAU,C.M.,Ph.D.

AdjunctProfessor,HECMontréal

VisitingProfessor,ParisSchoolofEconomics InvitedFellow,CIRANO

SeniorFellow,C.D.HoweInstitute

HenriͲPaulRousseauholdsaBachelorofArtsandaBachelorofEconomicsfromthe UniversitédeSherbrooke.HecontinuedhisstudiesattheUniversityofWesternOntario, wherehereceivedaPh.D.andtheT.M.BrownAwardforthebestthesisineconomics.

WhenhereturnedtoQuebec,hebegananacademiccareerin1973attheUniversitédu QuébecàMontréal,andthen,in1975,atUniversitéLaval,wherehebecameChairofthe DepartmentofEconomicsin1984.HealsoactedasanadvisortotheCanadianandQuébec governments.Morespecifically,hewasDirectorofResearchandcoͲauthoroftheReport onSavingsinQuébecreleasedin1980.AsanexpertadvisortotheHouseofCommons StandingCommitteeonFinance,TradeandEconomicAffairs,healsocoͲauthoredaneconomicimpactanalysisreleasedin1985 aspartoftheWhitePaperonPersonalTaxation.

In1986,HenriͲPaulRousseaujoinedtheNationalBank,whereheheldseveralstrategicpositions,includingSeniorViceͲ President,TreasuryandFinancialMarkets.FromSeptember1990toApril1991,heservedasSecretaryoftheBélangerͲ CampeauCommissiononthePoliticalandConstitutionalFutureofQuébec.HewasheadofBoréalAssurancesfrom1992to 1994andthenbecamePresidentandChiefExecutiveOfficerofLaurentianBankofCanadabeforebeingappointedPresident andChiefExecutiveOfficeroftheCaissededépôtetplacementduQuébec,apositionheheldfromSeptember2002toMay 2008.

FromJanuary2009totheendofDecember2017,heservedasViceͲChairmanoftheBoardofDirectorsofPowerCorporation ofCanadaandPowerFinancialCorporation.HeisalsoaDirectorofseveralcompanies,includingGreatͲWestLifecoandIGM Financialandtheirsubsidiaries,aswellasPutnamInvestmentsintheUnitedStates.HewasaDirectoroftheGlobalFinancial MarketsAssociationfromOctober2010toJuly2014.

HenriͲPaulRousseauhasservedontheboardsofSantanderBanksince2015,SantanderHoldingsUSAsince2017andBanco SantanderInternationalsince2020;hehasbeenChairmanofNooveliasince2018.

In2004,ConcordiaUniversityawardedhimanhonorarydoctorateandhewaselectedtotheAcademyofGreatMontrealersin theEconomicSectorin2006.Thatsameyear,onthefringeoftheEntretiensJacquesCartierͲaforumforexchangesonmajor societalissuesͲtheUniversitéLumièreLyon2awardedhimanhonorarydoctorate.In2007,theUniversitédeSherbrookeand UniversitéLavalawardedhimthesamedistinction.HereceivedthemedalofCommanderoftheOrderofMontrealin2016and wasnamedamemberoftheOrderofCanadain2018.

HenriͲPaulRousseauhasbeenpersonallyinvolvedwithseveralsocialandculturalinstitutionsandintheeducationandhealth sectorsbyleadingseveralfundraisingcampaigns.Inaddition,hehasbeenavolunteerwiththeMontrealHeartInstitute Foundationformorethan20years,includingnineyearsasChairmanoftheBoardofDirectors,apositionhehelduntilJuly 2018.HewasamemberoftheselectioncommitteefortheApogeeCanada2015and2016ResearchExcellenceFund.

Since2012,HenriͲPaulRousseauhaschairedtheTremplinSantéFoundation,whichhecreatedtoencouragehealthylifestyle habitswithyoungpeopleinQuebecandCanada.Since2010,hehasbeenfoundingcoͲchair,withbusinessmanCharlesSirois,of RéseauQG100,aprivatenonͲprofitorganizationwhosegoalistocontributetothegrowthofwinningcompaniesinQuebecby acceleratingtheirgrowthworldwide.

TableofContents

Abstract 1. PreliminaryConsiderations:TheCrisisandItsAftermath

1.1 TheCrisis 1.2 PostͲCovidͲ19:FiveFindings 2. ALongͲTermVisionofaCrisisRecovery 2.1 A“StrategicReserve”Plan 2.2 RobustandEfficientRegionalandSectorͲBasedEcosystems 2.3 A“Smart”GovernmentDecentralizedAmongDifferentRegionsandSectors 3. InitiativestoHelpManagetheCrisisWhilePreparingfortheFuture 3.1 TheMedicalandParamedicalSuppliesandEquipmentIndustry 3.2 ASmartandSafeAgriͲFoodIndustry

Conclusion AppendixA–AStrategicReservePlan

5 7 7 9 12 12 13 16 21 21 23 26 27

Abstract

This document reflects proposed economic policyoptionsformanagingandrecoveringfrom thecrisisinQuebecandCanada,withatrifold purpose:helpmanagethehealthcrisis,support oureconomiesintheshortterm,andcontribute tobuildabettereconomicinfrastructureinthe longerterm.

Amidst theCOVIDͲ19 crisis, governments are urgedtotakesignificantactionsinthelivesof citizensthrough:

1. Supportingthehealthcaresystemtomeet thehealthcaredemand,whichtheyattemptto reducethroughcontainmentandprecautionary measuresinthehopeofflatteningthevirus spreadcurve;

2. Introducingmeasurestosupportworkers andbusinessesforcedtoshutdownduringthis healthcrisisandtostabilizethefinancialsystem;

3. Implementingpoliciestopromoteahealthy reboundineconomicactivitybeyondthecrisis andthusacceleratethereturnto“anormallife”

assoonaspossible.

Medicalbreakthroughsorawarmerclimatemight overcomethecurrenthealthcrisis;however,the entireplanetwillbeverylikelycaughtinafunnel andfallintoalonganddeeprecession.

InthepostͲCOVIDͲ19world:

Ͳ Governmentswillbebothmoreindebtedand morepresentinsocietyandtheeconomy;

Ͳ EͲcommerce, teleworking and digital governanceactivitieswillhavetakenonhuge proportionsandwillshiftoursocietiesintothe digitalagefasterthanexpected;

Ͳ “Deglobalization”willtaketheformofapush towardlocalandnationalmarkets;

Ͳ Environmental concerns, coupled with new socialtensions, will make collective decisions morechallengingandcomplex;

Ͳ Newformsofcooperationandcollaboration between the private and public sectors will prevail, due to financial constraints and the scarcityofspecificresources,chieflyinthehealth careandfoodbusiness.

According to the main thrust of this paper, designing policy responses, for Quebec and Canadaaswell,soasto“killthreebirdswithone stone”,i.e.tomanagethehealthcrisis,support theeconomyduringthiscompulsorypauseand bouncebackquicklyintheaftermathoftheshock, ispossibleifouractionsarebasedonalongͲrange visionofsociety.

6

INTRO

Basedonthisvision,oursocietywillbe:

setupwitha“strategicreserve”todealwith futurecrises;

supported through robust and efficient regional and sectorͲbased ecosystems, capableofmanagingthetrifoldtransition Ͳ demographic, ecological and digital Ͳ our worldisfacing;

drivenbyadecentralizedgovernment,with regions relying on digital and artificial intelligencetoolstoreachouttocitizens,to providethemwithservicesandtorevamp democratic engagement while respecting theirprivacy.

Four immediate publicͲprivate initiatives are proposedtodesigntheseactions.

Thefirstinitiativeisintendedtostrengthenand evendevelopourQuebecandCanadianindustry inthemanufacturingofmedicalandparamedical equipment, in cooperation with the other provincesandthefederalgovernment.

Thesecondinitiativeisdesignedtoreinforceour localagriͲfoodindustry,throughanacceleration of its digital shift, thereby fostering the implementation of highͲlevel food safety, traceabilityandlogisticstandards.

Thethirdinitiativeispurposedtoexpeditedigital and robotics shift of our transportation and logisticinfrastructures.

Inadditiontothesethreeinitiatives,afourth projectisintendedtosetupa“strategicreserve”

todealwithfuturecrises.

Wecanmoveforwardstraightawaywiththisset ofrecommendationstohelppositionQuebecand Canadaamongthesocietieswhohavemanaged toovercomeCOVIDͲ19.

Thisunprecedentedhealthcrisisprovidesuswith agreat opportunitytopositionQuebecasa modern,inclusiveanddemocraticeconomy.We definitelycannotmissthisopportunity.

Acknowledgements

IwishtothankBernardDorvalforhiscommentsandforwritingAppendixAonthestrategicreserve.Iwouldalso liketothankthefollowingpeoplefortheircommentsandsuggestions:VincentBarnard,ClaudeGénéreux,Louise Letendre,ClaudeMontmarquetteandJulieVerdy.Iremainsolelyresponsibleforthecopyandforanypossible errors.

P

O

Preliminary Considerations:

The Crisis and Its Aftermath

1.1 T

C

Hopefully,withinafewmonths,drugswillturnthesituationaround,andthiswould beabetteroutcome!However,itwouldbewisertokeepthishopealivewhile managingthecrisisbyassumingdisruptiveeconomicscenarios,orevenadeepand longrecession.ThelatterwouldbelargelycausedbythefailureoftheUnitedStates Ͳandperhapsothercountries Ͳtomanagethehealthcrisis.IntheworstͲcase scenario,thiscouldhaveadestructiveimpactonourtradewiththeUnitedStates andwithourothertradingpartners,loweringthedemandforourproducts,reducing thesupplyofmanygoodsandservices,andbreakingupsupplychains.

Thecurrenthealthcrisisishurtingeconomies,astheonlyeffectivewaytoflattenthe virusspreadcurveispartialortotalcontainment,which,bydefinition,eliminatesthe foundationoftheeconomyitself,whichistheexchangeofgoodsandservices betweeneconomicagents,betheyindividualsorbusinesses.

Obviously, the most affected sectors are tourism and travel, airlines and transportationcompanies,theoilandgasindustry,theautomotivesector,real estate,restaurants,education,arts,culture,recreationandsports,andconsumer goodsofallkinds.Ontheotherhand,demandforfoodproducts,cateringservices andhealth,medicalandparamedicalproductsisbooming,asaretheneedsfor Internetservices,telecommunications,logistics,deliveryandtransportation.

Thecurrenthealth crisisishurting

economies,sincethe onlyeffectivewayto flattenthevirus

spreadcurveispartial

ortotalcontainment,

which,bydefinition,

eliminatesthebasisof

theeconomy.

8

Itispossibleto developless pessimistic

scenarios,butan economicpolicy mustnowbe establishedby killingthreebirds withonestone:

managingthecrisis, investingnowto strengthenkey sectorsofthe economy,and preparingforthe futurewithalongͲ termvisionofour society.

Thefirstlineofdefenceofhealthcaresystemsistestedinallitscapacitiesand functions.Althoughsupplychainshavesofarbeensuccessfulindelivering essentialgoodstothepopulation,therearealreadybottlenecks,stockͲouts andexorbitantpriceincreasesinhealthͲrelatedsectors.Inafewweeksandat mostafewmonths,thesedisruptionsofallkindswillbemorewidespreadand willaffectseveralsectors.WewillhavetowatchtheAmericans’response whentheconsequencesoftheirfailuretomanagethecrisismaterialize.Our supplysourceswillthenbedecreasedforthemanyproductstransiting throughordeliveredfromtheUnitedStates.Already,manyimportedgoods aremuchmoreexpensive,mostlyasalowerCanadiandollarsignificantly reducesourabilitytopayfortheseimports.

Inaweekortwo,economicandfinancialdatatobereleasedworldwidewill confirmmanyofthefearsofdisruptivescenariosanticipatedbythestockand bondmarkets.Theseupcomingdatawillbealarmingandwillfurtherreduce consumerandbusinessconfidence.

Thevirussharpriseandtheslumpintheeconomywillcompeteformedia headlines,andthehealthcrisiscouldbecomeaneconomiccrisisthatwillslide intoaconfidencecrisis.Therewillbegreatpressure,notablyintheUnited States,torelievepreventivemeasures,whereaspreciselytoughdecisionswill havetobetaken,forexample,toshutdownmanypublicandprivateservices forseveralweeksormonths,ortoclosenonͲessentialfactories,asItalyand several other countries have just done. Already, in the United States, prominentcolumnistsareproposingcrisisrecoveryscenariosandtargeted verticalstrategiesofcontainmentandsocialdistancing,ratherthanthe horizontalstrategyadoptedbyallaffectedcountries.

Onceagain,developinglesspessimisticscenariosisfeasible,butaneconomic policymustbeestablishednowbykillingthreebirdswithonestone:managing thecrisis,investingwithoutdelaytostrengthenkeysectorsoftheeconomy, andpreparingforthefuturewithalongͲtermvisionofoursociety.

1.2

Admittedly,intheaftermathofthiscrisis,thingswillneverbethesameagain.

Inthisrespect,fivefindingsalreadyprevail.

MoreGovernments

Asmuchasgovernmentswillbeheavilyindebted,theywillbeomnipresentin oursocietyandintheeconomy,asthecrisiswillhaveurgedthemtotakeon moreresponsibilityforhealth,foodandlogisticsregulations,andintheoverall privatesector.

MoreEͲCommerce,Teleworking,DigitalandRobotics

Justasanecessity,oursocietywillbecomemoredigital.Manyeconomic sectorswillbeforcedtoswitchtoteleworkingandInternetmeetings.EͲ commercewillbesuccessfullytestedinalmosteverysector,fromeducation andhealthcaretogovernmentservices.Manybusinessfunctionswillhave experimentedwithnewwaysofdoingbusiness;theentirefoodsectorwillbe propelledintoeͲcommercemuchfasterthanexpected;these“discoveries”

willforeverchangethebusinessmodelsofallorganizations.Toeffectively support this digital activity, logistics, inventory management and the transportationoffoodandfooditemswillrequiretheuseofstateͲofͲtheͲart digitalmanagementtools,whiletakingadvantageofrobotsanddriverless vehicles.Supplychainswillnecessarilyhavetobemorerobustandefficient.

Forexample,Amazonisahighlyefficientdigitalcompanybecauseitisalsoa largelogistics,transportationanddistributioncompany.

Asmuchas

governmentswillbe heavilyindebted, theywillbe

omnipresentinour

society,inthe

economy,asthe

crisiswillhaveurged

themtobecome

moreinvolvedin

health,foodand

logisticsregulations,

andintheoverall

privatesector.

10

APushTowardDeglobalizationandPossiblyInterͲProvincialTrade

Although it has a variable structure based on sectors and regions, deglobalizationhasalreadybegun.Alleconomieswillseektobecomeless dependentonotherregionsforessentialgoodsandservices.ForQuebec,as for the other provinces and the federal government, this will be an opportunitytoreviewthecollaborationandgovernancemodes.Forexample, theAtlanticprovinces,liketheWesternprovinces,couldbeprompted Ͳor evenforced Ͳbytheirfinancialconditionstomergeanumberofpublic services.Newtradingplatformsintheenergyandfoodsectorscouldemerge inCanada.AfederalͲprovincialstrategyinthemedicalandparamedical equipmentsectorwillberequiredtoreduceourdependenceontheUnited Statesandotherforeigncountriesinthissector.AndtradewithinCanada shouldbecomemuchmoreimportant.

StrongerEnvironmentalConcerns

Theecologicalmovementandthedebateonenergyandeconomictransition willreturninforce.Thescarcityofeconomicandfinancialresourceswillcast adifferentlightonconsumption,productionandtrade.Asitoccurredduring theGreatDepression,thecurrentcrisiswilltakeitstolloncitizens'attitudes andbehaviours.Peoplewillbecomeawareofthevalueofmoderationand restraint,oftheimportanceofsavingsandreserves,andofourabilityto obtainsuppliesclosetohome.Inanutshell,wewillhavetakenasteptoward greatercollectivevoluntarysimplicity,whichwillhaveadefiniteeffectonthe levelofdemandand,therefore,oneconomicgrowth.Also,thiscrisiswillhave expectedlyhighlightedinequalitiesintermsofwealthand,unfortunately, survival,andiscausingmajorpoliticalandsocialdisruptions.

NewFormsofPrivateandPublicCooperation

Thechallengeswillbesogreatandsomuchmorecomplexinnaturethat societieswillinventformsofprivateandpubliccollaborationtomovefaster and use the tools of the digital world and artificial intelligence. Not surprisingly,newpublicͲprivateprojectsin villages, townsanddistricts, numerouspublicͲprivatejointventures,andnewplatformsforexchangeand sharingbetweengovernments,businessesandusersͲconsumerswillemerge.

ThewaragainstCOVIDͲ19willgiverisetoseveralinnovations.

12

P

T

A Long-Term Vision of a Crisis Recovery

Basedonthisvision, oursocietywillbe:

Ͳ setupwitha

“strategicreserve”

todealwithfuture crises;

Ͳ supportedby robustregional andsectorͲbased ecosystems;

Ͳ drivenbya decentralized government.

Itisthereforeimportanttomanagethecrisiswithavisionofhowtorecover fromit.BeforereviewingsomeshortͲterminitiativeoptions,wewilladdress threecomponentsofalongͲtermvisionforQuebec’sfuture.

Basedonthisvision,oursocietywillbe:

- setupwitha“strategicreserve”todealwithothercrises;

- supportedbyrobustandefficientregionalandsectoralecosystems, capable of managing the trifold—demographic, ecological and digital—transitionourworldisfacing;

- drivenbyagovernmentdecentralized,withregionsrelyingondigital andartificialintelligencetoolstoreachouttocitizens,toprovide themwithservicesandtorevampdemocraticengagementwhile respectingtheirprivacy.

2.1A

“S

R

”

P

Theicestormcrisis,theSeptember11,2001shock,theconflictswithour Aboriginalnations(OkaandWet'suwet'en),the2008financialdepression,the 1996floodsinQuebec'sSaguenayregionandthe2019floods–whichaffected morethan300municipalitiesinQuebec–andnow,thishealthcrisis...These eventsareadmittedlyrecurringandfrequent,andeventhougheachofthese crises has its own features, they eventually share many common characteristics.Infact,theyallrequireasimilarsetofresponses,sincetheyall relyonthesamesetofsolutionsaimedatcoveringthebasicneedsofthe population:security,shelter,healthcare,food,energyandheating,economic means.However,sincewemustrebuildourcrisismanagementcapacities witheachoccurrence,ourresponsesareneitheroptimalnorfast,andare oftenverycostlyinmanyways.AppendixAofthisdocumentbrieflydescribes themainparametersofthisplan,anditsimplementationmustnowinfluence someof

theshortͲtermcrisisrecoveryinitiatives.Theintenthereistoprovidestrategic reserves,inadditiontothelogistical,organizationalandhumancapacities neededtoexecutetheplanasrequired.

2.2. R

E

R

S

ͲB

E

Beforeexperiencingthefullblowofthedigitalrevolution,theindustrial developmentpoliciesofWesterncountrieshadevolvedformorethansixty yearsaroundtwosuccessiveapproaches.Untiltheearly1990s,government industrialdevelopmentpolicieswereprimarilydesignedtoboostthecreation ofnewbusinessesandthegrowthofSMEsaroundgeographicorindustrial clusters,withthemainemphasisongovernmentassistanceintheformof grants,taxcreditsorfinancialsupport.Thepolicieswerealsoaimedat stimulatingthegrowthofventureanddevelopmentcapitalfundsthroughout the territory while promoting research and development of innovative products through subsidies. Intellectual property policies and overall economicpolicieshadafavourablebiastowardnewtechnologiesinan approachthatsoughttoestablishafiscalandregulatoryframeworkfostering thedevelopmentofstartͲups,inthehopethatthiswouldbeconducivetothe emergence of highͲgrowth businesses, and eventually mediumͲsized companies,andthenlargeandthenperhapsverylargecorporations.

14

Thefocusofan industrialbusiness developmentpolicy hasshiftedfromthe businesstothe development ecosystemofa sectororregion whereabusiness evolvesfrombirth tomaturity,and evento

sustainability.

However,inthelightofacademicresearchandtheexperienceofseveral countries,thesecondphaseofindustrialpoliciesquicklyturnedaroundthe keyconcept ofthebusinessdevelopmentecosystem¹.Thefocusofan industrialbusinessdevelopmentpolicyhasshiftedfromthebusinesstothe developmentecosystemofasectororregionwhereabusinessevolvesfrom birthtomaturity,andeventosustainability.Thus,afterseveralexperiences, anecosystemforthedevelopmentofasectororevenaregionhasbeen recognizedtoextendto:

- aspecificnumberoflargecompanies“connected”withtherestofthe worldbecausetheyareworldͲclassbusinessesandideallyoperatein highͲvalueͲaddedindustries;

- anumberofpublicinstitutionsanddepartmentalagencies;

- anumberofpublicinstitutionsanddepartmentalagencies;

- auniversityandsomeuniversityandcollegeͲlevelresearchcentres;

- acommunityofventureanddevelopmentcapitalinvestors;

- agroupofsuccessfulandunsuccessfulentrepreneurs,andtherefore, experiencedbusinesspeople;

- institutionscapableofhostingandonboardingimmigrantswhoare adding to the student community, the labour force and local entrepreneurs;

- qualityconsultingfirmsandexpertswhoparticipateinanumberof localandinternationalexpertnetworks;

- excellent local and regional suppliers for precision machinery, prototypeconstruction,sophisticatedtesting,etc.;

1 Mason,ColinandRossBrown(2014).“EntrepreneurialEcosystemsandGrowth OrientedEntrepreneurship”.Discussionpaperpreparedfortheworkshophostedby OECDentitled“LEEDProgrammeandtheDutchMinistryofEconomicAffairs”.

Retrievedfromhttps://www.oecd.org/cfe/leed/EntrepreneurialͲecosystems.pdf.

- incubatorsandacommunityofstartͲups;

- qualitysocial,sportsandculturalinstitutionsinvolvingleadersfrom allareasofcivilsociety;

- soundphysicaltransportationandcommunicationinfrastructures;

- acalendarofeventstorecognizethesuccessandcontributionof individualsandorganizationstothedevelopmentofasectoranda region.

IfakeyconceptbecomestheregionalorsectorͲbasedecosystemofbusiness development,thentheroleofpublicpolicyistoconnectthecomponentsof thisecosystemandsupportitsdevelopment.Moreover,inthecontextofthe knowledge economy and digital transition, it is now recognized that ecosystems conducive to the emergence and development of digital entrepreneursmustbestructuredinsuchawayastofosterfastͲgrowing businesseswhich,preciselybecausetheyhavegonedigital,canmorequickly accesstheglobalmarket.ThefocusisnotonlyonstartͲupsassuch,butalso andratheronscaleͲupsandevengrownͲups.Regionsandsectorsareseeking toattractthese“digitalentrepreneurs”,toestablishconsistentandproductive relationshipsbetweenthestakeholdersinthisecosystem,andtoprovide strategicsupport,mentoringandadvice;theyalsoneedtoattractseveral diversifiedfundingsourcesandfacilitatetherecognitionofdigitalinnovations.

Thistypeofecosystemprogressesbestwhenitisdrivencentrallybyoneor twocompanieswithstrongtechnologicalanddigitalcontent,andcanbenefit fromthepresenceofthesesuccessfulentrepreneurswhowanttosharetheir experiencewithyoungerpeople.Inaddition,thebackandforthbetween academicresearch,companiesandsuppliersnormallycreatesadynamicof sharingdiscoveries,whileensuringahighlevelofconnectivitybetweenthe membersofthisecosystemandtheirpartnerselsewhereintheworld.

16

EachQuebecregion alreadyhasa

development ecosystem;all

regionsarehometo severalinterlocking sectorͲbased

ecosystems.For example,several regionsbenefitfrom thepresenceofone ormorelarge

companies,a universityor

collegesandquality suppliers.

Infact,eachQuébecregionalreadyhasadevelopmentecosystem;allregions arehomestoseveralinterlockingsectorͲbasedecosystems.Forexample, severalregionsbenefitfromthepresenceofoneormorelargecompanies,a universityorcollegesandqualitysuppliers.TheMontrealregionalreadyhas verywellͲstructuredecosystemsinsuchsectorsasartificialintelligence, finance,aeronautics,lifesciencesandothers;theQuebecCityregionhas establishedahighͲqualityecosystemintheareasofinsurance,opticsand related technologies; the SaintͲHyacinthe and Mauricie regions are undeniablywellequippedintheagriͲfoodsector,asaretheBeauceandBoisͲ Francsregionswiththeirexportingmanufacturers.Theseregionalecosystems wererolledoutthroughgreateffortsfromtheregionsandwiththehelpof ourgovernments,butinacontextthatwasnottheoneweareintodayand thatisnowcharacterizedbyarealracebetweencountriesandregionsto attractand retain talented people anddigital and artificialintelligence entrepreneurs,whoareessentialplayersinaknowledgeͲbasedeconomythat isfacinganecologicalemergency.

2.3. A“SMART”GOVERNMENTDECENTRALIZEDAMONGDIFFERENT REGIONSANDSECTORS

Thecurrentcrisisisforcingustodistanceourselvessocially,urgingusallto realizetheimportanceofourregionsandlocalmarkets.Thisiswhereasmart decentralizationofcertaingovernmentfunctionsamongregionsandsectors makessenseandhelpsuswintheracetomakethedigitalworldasourceof growthanddevelopment.Inaddition,asasociety,wemustsuccessfully managethechallengesofthetrifoldͲdemographic,digitalandecologicalͲ transition.

Forallthesereasons,wemustshiftfromaverticaleconomicdevelopment approach,wheregovernmentagenciesareatthetopofthepyramidand regionsandotherecosystemcomponentsareatthebottom.Rather,wemust benefit from the necessary and unavoidable digital transition of the governmentanditsagenciesanddepartmentstofocusontheuserͲcitizenand to“decentralizeanddeconcentrate”alargenumberofresponsibilitiestothe regions.Muchoftheremoteworkeffortsduringthecrisiswillhaveservedto change cultures and working models. Through a digitization of the relationshipsbetweenitsagenciesanddepartmentsanditsusersͲcitizens,a government can aptly improve decentralized management, because digitizationproducesalltherelevantdatatocarryoutthemanagementand auditcontrolsrequiredforasoundaccountability.Governanceexperiments usingdigitaltechnology(GovTech)elsewhereintheworldarerelevanthere.

Thedigitizationplanforthedecentralizedandregionalizedgovernmentmust considerthecomponentsandarchitectureofthedigitaleconomyandartificial intelligence,inordertobenefitfromthisshiftandreinforcetheexistinglocal playersand,eventually,tocreatenewplayersaspartnersoflocalplayers,or evenascompetitorswherenecessary.

TheprocurementpolicyofadigitalͲbasedgovernmentisauniqueopportunity toboosteconomicdevelopmentthroughadefinitionofthispolicyintermsof itsindustrialpolicyobjectivesandastrategicincorporationinthearchitecture ofthedigitaleconomyandartificialintelligenceproviders.

Inadditiontocountriesandnumerousclients,thisarchitectureofproviders tothedigitaleconomyincludessixtypesofstructuringplayers².

Rather,wemust benefitfromthe necessaryand unavoidabledigital transitionofthe governmentandits agenciesand

departmentsto focusontheuserͲ citizenandto

“decentralizeand deconcentrate”a largenumberof responsibilitiesto theregions.

18

a. First,verylargecompaniesinallindustrialandservicesectors.These include large financial institutions, large manufacturing groups, transportationandothercompanies,andlargelogisticsandservice companies.Eachofthesemajorplayersisacentreofexcellencein digitizationandartificialintelligencetomeetitsownneeds,butmost oftheseorganizationsworkinpartnershipwithotherplayersintheir industrytosellthemsolutionsandapplications.

b. Digitalandartificialintelligencesolutionprovidersbyindustry,suchas healthcareandagriͲfood,education,transportation,legal,finance, etc.,haveawiderangeofapplicationsintheirindustries.Theyare referredtoas“vertical”vendorsbecausetheyareindustryͲoriented.

c. Suppliersprovidingsolutionstobusinessesinallsectors.Includedin thiscategoryarespecialistsinapplicationsforcustomermanagement, humanresourcemanagement,cybersecurity,specializedtooling,etc.

Theyarereferredtoas“horizontal”vendorsbecausetheyspecializein businessfunctionsacrossallsectors.

d. Modeland algorithmvendors specializedin the development of functionalitiessuchasfacialrecognition,optics,voicerecognition, semantics,inshort,thoseattheheartofresearchanddevelopmentin artificialintelligenceandbigdata.Asarule,therearemorescientists andresearchersherethanwithotherproviders.

Retrievedfromhttps://towardsdatascience.com/theͲsecretsͲofͲsuccessfulͲaiͲ startupsͲwhosͲmakingͲmoneyͲinͲaiͲpartͲiiͲ207fea92a8d5.

e. Providersofplatformsandinfrastructures:theysupply,forallthese stakeholders,cloudcomputinganddataprocessingservicesofall kinds.

f. Finally,suppliersofsmartchipsandothercomponentsessentialtothe developmentofdigitalandAI.

Itwillberelevantheretoclearlyidentifythecomponentsofthisarchitecture inwhichQuebecandCanadianplayershavearole,sothegovernment digitizationbecomesanopportunitytoreinforcethelocalplayerswhile supportingregionalandsectoralecosystems.

Eachregionmustbesupportedtoadoptastrategicplantostrengthenits ecosystemsoastocreateavirtuouscircleofinnovationanddevelopment, capableofretainingandattractingthetalentedpeoplearegionneedsto appealtomediumandlargebusinesses.

DigitizingtheactivitiesoftheGovernmentofQuébecbydecentralizingand deconcentratingthemwhileaskingtheregionstoadoptastrategicplanto reinforcetheirdevelopmentecosystemsandanecologicaltransitionplan means launching several pilot projects requiring a strict and dynamic managementaction.However,thisexercisewillresultinnewcollaborations between businesses from here and elsewhere and will increase the connectivityofeachregionofQuebecnotonlywithotherregions,butalso withseveralcountries.Allwillwanttobenefitfromforeignexperiencesto succeedintheirprojecttodecentralizeandenhancetheirecosystems.Infact, thisregionalprocessofcreationandinnovationwillleadaregiontoadigital shift.Eachregionwillthenfinditsnichesandcomparablesanddetermineits ambitions.Cooperationandinterconnectivitywillbeatthecoreofthe regionaldigitalandecologicalshift.

Obviously,movingtowardatrueregionalizationanddeconcentrationofthe

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roleascitizensinthedigitalandecologicaltransitionandinreinforcing economicand social development ecosystems.Suchanexercise should thereforecontributetoasounddemocratichealthofourregions,inbringing thecitizenclosertothetaxpayer,thetaxpayerclosertotheuserandtheuser closertothecitizen.

P

T

Initiatives to Help Manage the Crisis While Preparing for the Future

The four proposed initiatives share the common features of providing immediateassistanceinmanagingthecrisis,supportingoureconomiesin almostallregionsandbetterpositioningsomekeysectorsoftheworldwhen COVIDͲ19isbehindus.Theseinitiativesarethereforetargetedprojectsto strengthenthestrategicreserveintimesofcrisismanagement,reinforceour regionalandsectorͲbasedecosystems,anddecentralizeanddeconcentrate governmentactivitiesthroughadigitizationofalargerpartofgovernmental activity.

3.1. T

M

P

S

E

I

Ifthewaragainsttheviruslastsseveralmonthsorevenquarters,ourfirstline ofdefencewillbeunderfireineveryrespect.Thedemandforstaffwillbe booming,aswillthedemandforhygieneproducts,medicines,beds,blankets, roomsforthesick,artificialventilators,andsoon.

Identifyingthechangeinthisdemandbyregionandbyservicecentrewillbe essential,aswilltheneedtoanalyzethegapsbetweenthesemultiple requirementsandthesystem'scapacitytodelivertherightthingsattheright timeandintherightplaces!

Boththissupplychainresponseandthecapacityofthefirstlineofdefence willneedtobemanaged.Thismanagementeffortisinitselfahugechallenge

Theseinitiativesare targetedprojectsto strengthenthe strategicreservein timesofcrisis

management, reinforceour

regionalandsectorͲ basedecosystems, anddecentralize anddeconcentrate government

activitiesthrougha

digitizationofa

largerpartof

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Mostimportantly,assoonasthecrisisisover,allpublichealthsystemswill needtobemoreautonomousandlessdependentontheUnitedStates, GermanyandChina.Theywillallwanttohavea“breadbasket”ofhealth productsandtoolstodealwithfuturecrises.

Agenuinelocal publichealthand medicaland paramedical suppliesand

equipmentindustry willberequired.

Agenuinelocalpublichealthandmedicalandparamedicalsuppliesand equipmentindustrywillberequired.Wenowneedtocreatea“viruswarfare industry”,whichwillbeasignificantcomponentofourfuturepublichealth sector.Weneedtostrengthenourlineofdefencewhileatthesametime reinforcingourhealthsectorandacceleratingitsdigitalshift.

Withafewrareexceptions,themedicalandparamedicalequipmentindustry inQuebecandCanadaisrelativelysmallandwehavetoimportaverylarge portionofourequipmentfromtheUnitedStates,GermanyandChina.

Initiative1:TheMedicalandParamedicalSuppliesandEquipmentIndustry

Clearly,aninitiativemustbeimplementedinQuebecwiththecooperationof otherprovincesandthefederalgovernment,toestablishapublicͲprivate strategy through which this industry can be developed and reformed.

Productioncapacitymustbebuiltandareal“breadbasket”ofequipmentand suppliesmustbebuiltuptobeusedtomanagethenextcrisis.

3.2. A

S

S

A

ͲF

I

Whenconsumerconfidenceisshakenduetojoblosses,lackofincome, financiallossesand,inthiscase,themanylossesoffreedomrelatedto containment,wecanexpectadropindemandforgoodsandservices.After replenishing their supplies of essential products, consumers will adopt behaviours marked by prudence, moderation and savings. These new behaviourswillhavelongͲlastingeffectsonconsumptionandspendinglevels, buttheywillalsochangethevaluessoughtinproducts.Inadditionto increasedmistrustandmoredoubtsaboutthequalityofproducts,therewill beagreaterquestforqualityand,aboveall,agreaterdemandforfoodsafety.

Thischangeinbehaviourswillforceallgovernmentstoreviewtheirfood safety,securityandtraceabilitystandards.Therewillbezerotolerancefor foodfraud.Inaddition,associalmediahavealreadymentioned,terrorists maybetemptedtoresorttofoodpoisoning.

Asanormalreaction,consumerswillwanttotracetheoriginofproductsand their composition. Failing detailed information to trace the origin and components,weshould,hereaselsewhere,witnessanincreaseddemandfor localproducts.Thisquestforfoodsafetyandlocalproductswillalsooccur amongCanadiansinotherprovincesandintheUSA.

Thiswillcreatefertilegroundforevenmoreprotectionistbehaviourswith politicalleaders,andthereopeningofourborderscouldproveverydifficult andcouldevenbedelayedforseveralquartersafterwewinthewaragainst COVIDͲ19.

Thischangein

behaviourswillforce allgovernmentsto reviewtheirfood safety,securityand traceability

standards.

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Inshort,thetraceabilityofgrownandprocessedfoodwillnotonlybeanasset butanecessityifwewanttosellourproductsinQuebecandelsewhere.This traceabilitywillprovidecustomerswiththeplaceoforigin(local),thelistof ingredientsused(safety)aswellasproductionmethodsandanyother relevantinformation.

PartofouragriͲfoodindustryhasalreadyadoptedtraceabilityinstruments, butmanysectorsandbusinesseshavenotyetgonedigitalandarenot robotized.

Initiative2:ASmartandSafeAgriͲFoodIndustry

Similar to otherCanadian provinces, Quebec can capitalize on a wellͲ developedagriͲfoodindustry;however,thisindustrymustquicklygodigital andintroducestrictersafetyrulesforqualitycontrolandfoodtraceability.In summary,itmustintroducerulestomakesupplyanddistributionchainsmore efficientandallowasafetransitiontoelectroniccommerceinthefoodsector.

Ataskforcemustbesetuptoaddressthisproject.

Therobustnessofour supplyand

distributionchains willbetestedduring thiscrisis.

InadditiontothesetwoinitiativesinthemedicalandagriͲfoodsectors,two otherselfͲprevailingprojectswill be added:onewilldealwithlogistics infrastructureandtheotherwiththestrategicreserve.

Initiative3:AMoreRobustandSmarterLogisticsInfrastructure

Therobustnessofoursupplyanddistributionchainswillbetestedduringthis crisis.Ourtransportationcompanies,harboursandlogisticssystemswillbe overloaded.Meanwhile,thereisagreatopportunitytodigitize,robotizeand makeeverycomponentofoursupplyanddistributionchainssmarter.Atask forcemustbeformedtoaddressthisproject.

Initiative4:TheStrategicReserve

ThisstrategicreserveshouldbeviewedasawebofpreͲidentifiedand consolidatedresourcesinthemasterplanforour“reserve”andshouldbe managedundertheleadershipofEmergencyPreparedness.Consistingof food, equipment and various human and material resources, this

“breadbasket”wouldbepartlyvirtual;wecouldalsorelyonwarehouseswith specificcontentsand,notably,onthewarehousesofmajorsuppliersand distributors,inadditiontostrategic“shielded”supplycontractswithexternal suppliers.This“breadbasket”wouldtoalargeextentbedecentralizedinthe regionstobeascloseaspossibletothepopulationstobeserved.AppendixA setsouttheworkplanforthisproject,whichshouldbesetinmotionassoon aspossible,sinceitisnotimpossiblethatitcouldbeusedinthecoming quarters.

Thisbreadbasket wouldtoalarge extentbe

decentralizedinthe

regionstobeasclose

aspossibletothe

populationstobe

served.

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C

Oneofthesectorsthatwillbemosttransformedbythiscrisiswillbethepublic sector,bothintermsofthehealthcareandeducationsystemsandinterms ofservicestocitizensandbusinesses.Duringthiscrisis,remoteworking, remotelearningandremoteservicedeliverywillhaveadvancedmorethan ever,asnewwaysofdoingthingswillhavebeendiscovered,testedandeven improved.Returningtonormalcannotandshouldnotmeantoresumethe samebehavioursandbusinessmodelsasbeforethecrisis.

ThisstateofaffairsprovidesanopportunitytoacceleratetheState'sdigital transitioninallpublicserviceswhilereinforcingspecifickeyindustriessuchas equipmentmanufacturersinthefieldsofhealthcareandmedicalresearch, theagriͲfoodsectorandthelogisticsandtransportationsector.Buildinga strategicreserveisalsoavaluableresponseintheshort,mediumandlong term.Thiscrisisalsoprovidesuswithanopportunitytodevelopaplanand mandate the regions to consolidate and promote the development ecosystemsoftheirpublicandprivatesectors,throughanaccelerationofthe governmentdigitaltransitionandtheregionalizationofseveralofitsfunctions andactivities.Thisunprecedentedhealthcrisisprovidesuswithagreat opportunityforeconomicanddemocraticdevelopment.Wedefinitelycannot missthisopportunity.

AppendixA–ASTRATEGICRESERVEPLAN

ByBernardDorval,B.Sc.,Act,FCIA(retired) March25,2020

Afterexperiencingcrisescausedbyicestorms,terrorists(September2001),AboriginalNations(Oka andWet'suwet'en),thefinancialmarket(2008)andfloods(Saguenayand2019),wearenowfacing anunprecedentedhealthcrisis.Thetimehascometorealizetheseeventsare:

- recurringandfrequent;

- buttheyallhavetheirindividualspecificities,andsowemistakethemasuniqueevents;

- therefore,theyhavealotmoreincommonthanwhattheymightsuggestatfirstglance.

Actually,theseeventsrequireacommoncoreofsimilarresponsesandallrequiresolutionstocover thebasicneedsofthepopulation(security,shelter,healthcare,food,energyandheating,economic means).However,eachtime,theresponsehastobelargelyrebuilt,whichisneitheroptimalnor quick,butcostlyandinefficient.

Thesecrisescanbedividedintofourcategories:

- Naturaldisasters(wind,ice,floods);

- Geopoliticaldisasters(wars,terrorism,socialorethnicinstability);

- Economicdisasters;

- Healthdisasters.

Whateverthenatureofthesecrises,theyrequirecommonresponsesbecausetheireffectsatthe highestlevelaffectthesixbasicneedsofthepopulationmentionedabove.Inaddition,thereare moresubtleneedsspecifictoeachevent,suchassandbagsinfloodevents.

Basedonthisrealityandtheexperienceofthecurrentcrisis,werecommendamajorpostͲcrisis initiative:thecreationofa“strategicreserve”toatleastpartiallyprotectusfrombreakdownsor decisionsmadebyothers,whilespeedingupourabilitytorespondtothecrisisͲandprobablyata lowercost.This“strategicreserve”wouldinvolvethecreationof:

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c) Areserveofhydrocarbons(oil,gas)andallthatisrequiredfordriving,heatingandproduction;

d) Alistofessentialitems,i.e.:

i. Specific real estate resources (hotels, sports centres, universities or educational institutions);

ii. Productioninfrastructure (factories, refrigerated warehouses, etc.) andsupply chain infrastructure(callcentres,transportationcompanies)thatcanberequisitionedandused temporarilytomanageacrisis;

iii. Thenecessaryintermediaries,systemsandinfrastructurethatwillactasconveyorbeltsfor themoneythatistobemadeavailabletoindividuals(banks,cashregisters,postoffices, etc.).

Theownersofsuchequipmentandfacilitieswouldreceiveastandbyfeeorareimbursementof partoftheirdevelopmentcostsfortheircontributiontothiseffort.

e) Abankofactiveworkersandretireesclassifiedbyspeciality(akindofvoluntaryand compulsorycivilianserviceintimesofcrisis)whichwould,ineffect,constitutea“reserve”of humanresources;

f) Finally,asystemforprovidingmoneytocitizensquicklythroughdigitalmeans.

This“strategicreserve”shouldnotbeseenasaseriesofwarehouses,computerbackͲupcentresor parkedfleetsoftrucks,althoughatleastsomeofthisinfrastructuremayberequiredtoestablishthe reserve.Rather,itshouldbeseenasawebofthesepreͲidentifiedandconsolidatedresourcesinthe masterplanforthe“reserve”andmanagedundertheleadershipofEmergencyPreparedness.The

“breadbasket”ofcommodities,equipmentandotherhumanandmaterialresourceswouldinfact bevirtual,acombinationofdedicatedwarehouses(butmostlythoseofmajorsuppliersand distributors)andstrategic“shielded”supplycontractswithexternalsuppliers.Thisbreadbasket wouldalsobelargelydecentralizedamongtheregionstobeasresponsiveaspossibletotheneeds ofthepopulation.

Thisapproachhasacost,butitalsooffersseveralbenefits:

a) Economically,itentailslowercrisismanagementcostswhich,aswehaveseen,arerecurrent andseemtobebuildingup;

b) This investment effortcan also be usedto provide Quebec and Canada with better infrastructureandgreaterproductioncapacity.OurAmericanandFrenchneighboursdonot hesitatetoindirectlysubsidizemanyoftheirstrategicindustriesthroughtheir“wareffort”.The

“strategicreserve”canbeseenasameansequivalenttothistactic;

c) Atasociallevel,thisprojectcanhelpreinforcetheconnectionsbetweenindividuals,businesses andgovernmentbybringingthemtogetheraroundasocialprojectandacontinuousactivity,rather thanrallyingsocietyonlyintimesofcrisis.Thisisanimportantbenefitintermsofcohesionand accountabilityoftheoverallsociety,nottomentionapotentialeconomicassetinpositioningitself asaleaderincrisismanagement.Wecanciteasexamplestwocountrieswithalargerpopulation thanQuebec,whohavebuilttheireconomiesonakindoffabriclikethisone:IsraelandSwitzerland.

Economicallyandpolitically,thesecountriesaredoingmuchmorethantheirweightonthe internationalscene.

Tothosewhowouldbetemptedtodismissthisconcept,wecansuggestthinkingoverthefollowing question:whatwouldhappentoourworldtomorrowmorningifaneventcompletelydifferentfrom theonewearefamiliarwith—althoughaveryrealpossibility—occurred,suchasamagnitude7.8 earthquakealongtheSt.LawrenceValleyfaultline?

Therefore,wewouldbewelladvisedtohaveaplanfora“strategicreserve”torecoverfromthe crisis,whichisaproductivewaytoinvestthemoneythatwillbeneededtorestarttheeconomy anyway.

Wearenotatallsuggestingthatdetailedcrisismanagementplansarenotalreadyontheboardsof thecivilauthoritiesandthatleadershipresourcesarenotprovided.Rather,the“strategicreserve”

referredtoservestofacilitateandincreasetheseresources,andtotransformtheeffortfromaoneͲ offsprintintoalongͲtermmarathoninaworldwhere,unfortunately,crisesarelikelytoincrease.