LEGISLATIVE ASSEMBLY OF MANITOBA TUesday, 8 July, 1986. Time - 8:00 p.m. CONCURRENT COMMITTEES OF SUPPLY SUPPLY - INDUSTRY, TRADE AND TECHNOLOGY MR. CHAIRMAN, M. Dolin: Committee, come to order . We're on Page 104, Resolution 103, 1. (

b) Executive Support - the Member for Portage. MR. E. CONNERY: I think this may be the area we talked about labour statistics. Would this be the area we could talk about that just for a second? A MEMBER: There's no specific category. it's more in the philosophical end of it, and this would be the area. MR. CHAIRMAN: You might want to wait for the Mini ster's Salary and discuss it as a general issue. Why don't you wait for 1. (

a) and deal with it then since it's not un der any specific column? 1. (b )(1) - pass; 1. (b)(2)-pass. 1. (

c) Strategic Planning - the Member for Sturgeon Creek. MR. F. JOHNSTON: Mr. Chairman, last year we spent some time ques tioning the Stra tegic Planning Department. We have a situation of $740,700 in Salaries and I would ask, first of all, the numb er of people involved in that department. MR. CHAIRMAN: The Honour able Min ister. HON. V. SCHROEDER: There are 16 staff years in the department in that area. MR. F. JOHNSTON: 16 staff years. HON. V. SCHROEDER: Plus two TAP's, Temporary Assignment Program people. MR. F.

JOHNSTON: Last year when we were discussing it, the Min ister at that time while we questioned, he said that we were talking about: "The 370,000 . . . "- this is the Min ister speaking - ". . . that I mentioned is for strategic studies and it includes such things as a study that we did on the manufacturing sector in Manitoba, that was done by the Institute of Social and Economic Research, Mr. Mason. lt also includes other studies that we do with respect to investment researc h.

Also we've done some work on the telecommunications indu stry area." Further on, he says: "lt provides for the ability to do work on contract of a broader strategic nature in terms of the economy and specific ind ustry sectors in the province." Again later on: "There was the man ufacturing sector one that I referred to. There was one dealing with technology delivery mechanisms which was related to the restruc turing of the Manitoba Research Council and the technology programs in the department. There was a joint investment research in itiative.

There was the additional one dealing with telecommunications issues," etc. Then there was a small study of $10, 000 done by IBI Group which was looking for a number of investment opportunities in Manitoba. I wonder if the Mini ster could relate to us the number of studies that are being done by this Research and Strategic Planning Comm ittee. They obviously are working on strategic planning. Are they doing strategic planning - first a question I would ask - are they doing strategic planning for companies in the province? HON. V. SCHROEDER: Mr.

Chairman, if I might just quickly go over the ones that had been done last year and then get into '86-87. Would the member be . ? MR. F. JOHNSTON: Yes. HON. V. SCHROEDER: Okay . Last year there were a couple of studies to investigate the possible implications of a bilateral trade agreement. That was Barber, Duncan and Wazny. The cost was $19 ,100.00. There was an agriculture equipment study by David Tait, $21 ,900.00. That was to develop a strategy for the medium and long-term development of Manitoba's agricultural equipment sector and that was undertaken with the Ind ustry Branch.

There was a telecommuni cations strategy study which was an in ter-dep artmental ini tia tive with Cr own Inv est ments and Cu ltur e to look at potential telecommunic ations development oppo rtunities and prospects for Mani toba in light of de reg ula tion proposals in North America as part of the ongoing development of the telecommunications policy and strategy for the province. That was Communi cations Management Incor porated. lt was a $60,000 stu dy.

There was a lease purchase study of costs and benefits, including economic implications of various options for secu ring go vernment office space, compari ng, especially , lease pu rchase possi bilities presently used extensively by the Federal Government with construction and leasing options. This study was init iated in'8 4-85 but was concluded and paid for in '85- 86. That was Appin and Associates, $19 ,300.00. There was a Western Transportation Study where we contributed to a joint provincial cost-shared study to investigate the implications of changing rates on agri­ food dev elopment.

That was the Tr ade and Transportation group and the cost was $7,500.00. There was a joint investment search ini tiative. That was a final payment for completion of a project begun in'8 4-85, and that was IBI Incorporated. it was a $2,000 cost. There was an Economic Strategy Review undertaken, again the previous fiscal year, by Dr. Tom Gunt on, 1590

Tuesday, 8 July, 1986 involving an up-to-date of his independent analysis of the gover nment's overall economic development strategy and a presentation of a departmental semin ar. There was a Strategic Information Study by Decima. Not Decima, no. The firm con tracted was PAl Incorporated, and that was $26,000.00. There was a strategic information firm contracted, TCS PR Limited. The cost was $26,000.00. In '86-87 there's a total of $3 1 0,000 for the Strategic Studies Program, and that's appropriation 1. (c)(2).

This has been estimated as follows: One large study , $50,000; four mediu m-sized studies for $25,000 each; three small studies at $5,000 and interdepartmental studies, $95,000; and ongoing contracts for strategic information, $50,000; total $310, 000.00. MR. F. JOHNSTON: Mr. Chairman, there are 16 staff members in this depart ment. In going through the studies that were just given to me, I only find three that were done by the department; the rest were all consultants that were hired to do them. Is the staff not in the position to be able to do these studies? HON. V.

SCHROEDER: There are a numb er of other things, of cou rse. I could go through a whole list of things that the staff has been doing and studies the staff has been doing. The rationale for the program is that there are occasions when, for a variety of reasons, it's advisable to have a team of profes sionals outside the public sector research a planning or policy-related issue. That may happen when special expertise is not available, in-house is required, when an independe nt view on an issue is desirable, or when there is an overload on in-house capacity .

In general, the program would be utilized only when at least one of those three conditions would apply. MR. F. JOHNSTON: The other studies, then, with the work that the staff is doing, are the staff doing strategic studies for ind ustry or for business in Manitoba? HON. V. SCHROEDER: There's a numb er of areas. Just as an example, on the Canada-U.S. bilateral trade agreement, they're working in fairly close liaison with the Trade Branch of IT and T in terms of policy and strategy relating to bilateral trade and undertaking research on the impact and implications of trade liberalization.

There's the service sector strategy . There's a follow­ up request from the Economic Resou rces In vestment Committee of Cabinet to the division, and it's in the process of reviewing the role of the service sector in Manitoba and of developing a strategy and policy for us regarding the service sector. So the regional policy analysis is another area in conjunction with other departments and agencies. We maintain a constant review of federal policies, programs and intentions to assess their regional development implications or impacts.

There's the intergovernmental task force on regional development, and, as the member knows, that issue of regional development has been fairly prominent in all of the provinces and with the Federal Government in the last several years. We've been trying to make sure tha t in polic y formation in this coun try, on any issue, be it a finance 1591 issue or an education issue or a cultural issue, whatever, that the regional development aspects be conside red, so we're involved in that task force and it does well. We're involved with the review of existing interprovincial barriers and investment programs.

In fact, the division has assumed a lead role on the interprovincial barrier working group. There's evaluation of the development agreements program. Again, the development agreements we had referred to earlier . There's a numb er of those agreements we have entered into over the last several years with companies, we feel, would by their presence or by enhancing their operations or protect ing their operations, they can be of benefit to Manitoba.

At the same time we think it is important that occasionally people other than the people di rectly involved with that program take a second look to ensure that what we're doing really provides for incr emental investment as opposed to an automatic "gimme" for someone who would have come here without the agreement. There are a number of those areas that they are involved with. I would estimate, though, that the trade arrangements are fairly high up in terms of the time taken by people in that branch. MR. F.

JOHNSTON: Can the Min ister advise us of what the strategic plans are going to be for the Province of Manitoba? We've had this department now for, well, it's nearly six years. lt was just being developed back in 1981 and it was put into development, I believe, in 1982 or'83 and to date I don't believe I've ever seen advertised or presented to the people of Manitoba a strategy that the government is going forward with, with the manufacturing people of the province and the business people of the provin ce. I can recall there was a strategy before that di rected us into five or six dif ferent sectors of the economy.

There were groups of people set up from those parts of the ind ustry to advise and work on it and the department development officers were instructed to work towards building up those types of ind ustries within the province because we had felt, because of our information and studies that were given to us, that those were the ways to go. What have we got at the present time as far as the strategy in Manitoba for the types of ind ustries that we are looking forward to having here? HON. V.

SCHROEDER: We are not in a position where we're going to focus in on one, two or three specific projects as a strategy. it has developed over the years in specific sectors in di fferent areas, be it in technology, commercialization, be it in food processi ng, agricultural implement manuf ac turing, and so on, in the sense that, and as the member knows, there are and were, when he was in office, those people who were involved with the various sectors. We have been building the planning group to be giving backup in all of those areas.

We don't view any of those areas well, to put it from a dif ferent perspective - we see our diversification as an economy as our major strength in this province, and we must continue to build a di versified economy . That means that we may not be putting as much effort into one specific area as some might have us do. Of course, that spreads our

Tuesday, 8 July, 1986 research somewhat, as well, across the whole range of the economy . MR. F. JOHNSTON: We used to have, and I think it was there four or five years ago, a di rect - the word "direct" is wrong - we used to have a strategy for the transportation indus try in the Province of Manitoba. The Province of Manitoba has been serving Western Canada in the transportation ind ustry with our centres here and our trucking and what have you. We have a very good ind ustry to be developed in this area. The agricultural equipment area is to be expanded because of the new technologies that were coming forward.

The electronics ind ustry - as a matter of fact, everything was sort of revolving around the electronics ind ustry and has been for the past few years. Your furniture ind ustry in the Province of Manitoba, your fashion ind ustry in the Province of Manitoba, your health indu stry in the Province of Manitoba, all had studies done on it with the Federal Government, as a matter of fact. and the direction to expand those ind ustries was there. Those ones that I've mentioned have mu lti-small ind ustr ies or service ind ustries attached to it.

What is going to be the drive for the Province of Manitoba as far as indu stry is concerned? We have to be in a position at the present time to say that this is where we've got to go because this is natural for Manitoba. Our labour force can handle it. We are strategically located to be able to bring in the raw resources competitively and ship them out competitively. The other one I would mention is the aerospace indu stry, which we were 10 percent of and where are we on that? The aerospace ind ustry in the Province of Manitoba is one that nearly everybody believes should be developed.

We had the proper geographical position for air training. We should be into testing and we should be into manufacturing of all parts of the aerospace indu stry. Has there been a report given to you on the basis of, should there be a test stand in the Province of Manitoba so that we can do the testing on the F- 18 engine or the overhaul of it when Bristol gets involved with it? If we had that test stand, could the other companies be working on the larger jet engines which are going to have to be overhauled in this country or in other countries?

Where do we stand on a strategic plan for the Province of Manitoba at the present time? HON. V. SCHROEDER: The member has ind icated precisely the point I was making earlier, that we have a very diversified economy. We are working in all sectors of that econ omy. He is aware, he's referred to the trans portat ion sector. I'm no t sure whether he menti oned the bus es, but certainly in every area of transportation we have been working on development. We have entered into an agreement with the Federal Government on the Urban Bus Initiative.

We are talking with several bus manuf acturers with respect to how we can access those funds in order to strengthen the industr y here in Manitoba. In the area of the health ind ustries, we have a Health Industry Development Initiative which has been going on for the last several years, and indeed is producing results. We've brought companies to Manitoba, and we're in the process of dis cussion with other companies we were hoping to make arrangements with. So that area is fairly healthy and I think working reasonably well.

The area of furniture manufacturing again, we're having ongoing discussions with some of the major operators in the field and as the member probably knows there's been significant expansions by some of the employers here in Manitoba. I'm just getting some information on the aerospace ind ustry . I was at a convention recently of the aerospace ind ustry here in Winnipeg, people here from across the countr y, and there was a tour of some of the local plants and people were very impressed with the facilities we do have here in the city.

I'm told in terms of the engines that we unfortuna tely don't have the capability to do the research and development on the engines; that Standard did look at it and decided against it. The member refers to Bristol, which as he probably knows but possibly other members of the committee don't, they are the prime agent of a consortium of five companies which have submitted a proposal to Ottawa for the con tract he's ref erring to; the two other competitors, or consor tiums headed up by Canadair , Montreal; and IMP, Halifax; and we do expect that the awa rding of that major contract is imminent.

In fact I've had discussions with the Federal Government as late as Monday of this week with respect to that contract. We believe that the review team called Cast 18 will be favouring the Bristol consor tium. MR. F. JOHNSTON: I'm aware of where the F-18 overhaul and repair stands. Tony Bowden has been a long-time friend and he's very anxious about it, in fact Jake Epp mention the F-18 contract on the news tod ay, but he just said it might be coming.

The thing about that is, Winnip eg has made their submissions and we always felt that because of our loss of some of the contracts on the F-18 as far as the construction of it was concerned, that Winnip eg because we have had the overhaul on the Voodoo, the F-105, that to take that from Western Canada, let's put it that broadly and Manitoba especially would be dis astrous.

I'm aware of the other companies coming forward to go after it but as a matter of fact I had somebody from Quebec in the aerospace indu stry say to me one time that they were very foolish to go after it because it certainly should be Manitoba's and they felt that it would go that way. Your consortium that you're working with will be doing some work in Eastern Canada if they get it, if the Manitoba consortium gets it, and you say you're expecting the order imminently. What is the date? Is there a date set for the determ ination of letting that contract? HON. V.

SCHROEDER: No, my understanding is that the Cast 18 review team will be making a recommendation and then it goes up for consideration by the government. MR. F. JOHNSTON: Ha ve th ey made the recommendation as yet? HON. V. SCHROEDER: it's my understanding that the review team has made a decision but it is unofficial, 1592

Tuesday, 8 July, 1986 and we have good reason to be optimistic about that recommendation. MR. F. JOHNSTON: You mentioned health companies, what health companies have come here? HON. V. SCHROEDER: The first one that comes to mind is St. Jude's from Min neapolis, who are developing heart valves. There's a German company , Otto Bach from Hamburg. MR. F. JOHNSTON: Now, Mr. Minis ter, I turned the sod on that - I turned the sod and I opened it. HON. V. SCHROEDER: I can't say I reca ll the organization. I certainly do recall St. Jude's. MR. F. JOHNSTON: You were there when it opened. I turned the sod.

Oh, it's had an expansion. HON. V. SCHROEDER: I should add there are some active di scussions ongoing with several Israeli companies, graphic controls. Toronto secured orders for Manitoba firms to produce limb bands and cables and lead wires, orders to date about $10 0,000.00. North American potential for one product alone, $200,000; impact in near term five to seven jobs. There's the AVI Technology, $4 million capital secured research and development facility established, staff rec ruitm ent under way.

Synthetic hu ma n gr owth hormones and synthetic Factor Eight research under way; that plant opened Feb rua ry, 19 86. I don't have a date on Graphic Controls. But on AVI the impact in the near term is 20 jobs; Ambutec, we're negotiating access to handi cap-related products, secured a $20,000 order for bath security grip with a potential market of $500,000; assisting with marketing of cane investigating potential for lightweight walkers; three jobs; 3M, St. Paul, negotiations to encourage location in Manitoba of 3M production activi ty.

The y'r e transf erring selected health produc ts activities to Morden, Manitoba. In addition, they've placed an order for EKG related products with another Manitoba firm; the expected impact in the near term, 20 jobs, with important future possi bilities. There are, as I've ind icated previously , a whole host of areas where we're having ongoing discussions, some of which could lead to fairly significant employment, others of which could lead to fairly significant benefits to the province in terms of the delivery of our health care which is certainly a very important consideration for us. MR. F. JOHNSTON: Mr.

Chairman, we've kind of led to it and we get into the area of industr y, I believe, of what has come or coming to Manitoba. it's nobody's fault; we just got to it. But the Strategic Planning again, and what I would like to come back to is which ind ustry - I mean the Strategic Planning is taking a lot of time working on the free trade negotiations and being involved with them and the effect they' ll have in Manitoba.

Is there a specific ind ustry - and there's always the advancement of a supply of our great agricultural indu stry - is there a specific indu stry or ind ustries that Strategic Planning says that we should be zeroing in on in the Province of Manitoba? In other words, if they're going to be coming and looking at us, we're going to be considering any grants or any favours or any tax breaks as we have done for other companies, etc. If we're going to go out and compete with them against other provinces, which ind ustries would we be zeroing in on or which would we be favouring to come to Manitoba? HON. V.

SCHROEDER: Mr. Chairman, we would not look at it on an ind ustry basis. We would look at it on a "why not" very simply because we looked at it on a firm basis. We want div ersificat ion. Just because somebody happens to be in a particular ind ustry shouldn't give them some kind of a ticket if in fact the numb ers show that in another industr y, which may not be on that list, by provi ding some benefits we could create more employment and more economic activity in Manitoba, we are not going to wind up at this stage declaring that some ind ustry is the winner and another is the loser in this province. MR. F.

JOHNSTON: I don't think I referred to something being the winner or the loser. I referred to ind ustries that we would prefer because of geographical reasons, because of training of our labour force; let's say the avai lability of resources, etc. What ind ustries would we be trying to look for in that respect? Nobody's going to turn down or tell somebody to go jump in the lake, we're not going to dis cuss it with you.

But we also have a situation where if we were just waiting for them to come to us, fine, but are we not in the situation where the Strategic Planning people are saying that we should be having our development officers look to a specific type of ind ustry because we think it's very suitable for Manitoba? Does that make sense? I've been trying. A MEMBER: Sure, yes. HON. V. SCHROEDER: Well, now that the two of you are agreed, maybe the rest of us could get in on it.

We basically are operat ing more on a geographic special ly, you might say, than an ind ustrial speciality in that we have targeted, as I'd ind icated previously , certain parts of the U.S. nort hwest. We're also looking at the U.S. west, and I've ind icated Hong Kong is an area where we've done a fair bit of work. We've had a number of people coming here from there; Eastern Canada as well. MR. F. JOHNSTON: That's where the markets are. I won't dwell on it and I don't seem to be getting anywhere with the answer of what busi nesses, because of resources and geographics and labour forces, we're going after.

Let me give you an example. We have the best Black Island sand in the world sitting up there on Black Island, which makes light bulbs, glass, bottles, anything you want to make as far as glass is concerned. We have been for years - and I asked the Min ister last year - and the gentleman who's sitting down there, I used to ask him every two weeks, "When are you going to 1593

Tuesday, 8 July, 1986 use the Black Island sand for manufacturing in the Province of Manitoba?" Have we had anybody in the Strategic Planning Department come forward with a plan to try and use that product in the Province of Manitoba and how close are we coming to it? HON. V. SCHROEDER: Mr. Chairman, I'm told there is nothing going on in terms of the Strategic Planning people with our sand right now.

I'm also told that they attempted, or that the department and the government and the province have attempted for many years to do some marketing with that sand to turn it into windo ws and all those other kinds of thin gs; and I'm sure Steel Brothers would be as happy as anybody if you could get something happening. A couple of years ago - was it a year-and-a-half ago? - it looked as though we had something going, whether it was going to be in Gimli, Selkirk or I think Altona, where the three locations for - was it AFG? MR. F. JOHNSTON: lt was. HON. E.

KOSTYRA: The view expressed to me was that we probably will get a bigger bang for our buck working on a geographical basis and looking not on the basis necessarily of an industrial sector but looking at any indu stry that might see significant benefits to itself of settling here which could at the same time provide us with the benefits that we're looking for. MR. E. CONNERY: In your Strategic Planning, do you go after companie s or do you wait for the companies to come here? HON. V.

SCHROEDER: I just point out that's in the Industry Branch as opposed to Strategic Planning, but certainly we go after individual companies. We go into cities, we invite people for meetings, seminars, one­ on-ones, anything we can do to push or pull people into looking at Manitoba. MR. E. CONNERY: Does the Strategic Planning then - I'll take McCain Foods in Portage la Prairie, which is what the Member for Sturgeon Creek was saying - you look for industries that are logical to an area?

Are they on the lookout to see what ind ustries are on the expansion and what would be a logical one for Manitoba and for various areas of Manitoba? When McCain Foods came in, and they came into the proper area for growing potatoes, and they were in the expansion market, is the Strategic Planning Committee looking for this sort of thing, or is this not in Strategic Planning? HON. V. SCHROEDER: We view for many reasons - to put it from a di fferent perspective because really it is the Indu stry Branch where we should be discussing that - (I nterjection) - pardon me? MR. E.

CONNERY: We could discuss it there, if that's where you want to dis cuss it. MR. CHA IRMAN: 1t wou ld be probably more appropriate under 2.( b). The Member for Portage. MR. E. CONNERY: Last year in the Estima tes, you had budge ted $797,100 for Salaries, and you spent 746,400, which is a 51, 000 decrease in Salaries. At the same time, you're doing work on the free trade area, which is under Strategic Planning. With that sort of a reduction and another reduction this year, how are you doing all of the work that needs to be done? HON. V.

SCHROEDER: We've tran sferred an economic research ana lyst to the In formation Tech nology Program. That would make up for the dif ference this year down from the overall of last year. In terms of why last year we were below what we originally budgeted, I would presume that it has to do with vacancy rates, tur nover. When you have several people, as I understand it, resigning, one person on leave of absence, those things can count up fairly quickly. MR. F. JOHNSTON: Well, Mr.

Chairman, if I were to research Hansard of 1982, I believe, maybe 19 83, I know that I would find the statements about Strategic Planning that went as follows, that Strategic Planning was being developed in this department to analyze what would be the best ind ustries for the Province of Manitoba as far as geographic is concerned, as far as the resources are concerned, as far as labour force is concerned. Also, the Strategic Planning people would make the recommendations as to what the long-term economic situation in the Province of Manitoba would be in the future.

Now we find that the Strategic Planning has not really done any of that whatsoev er. We find that the Strategic Planning is not saying what is good or not good. We're not turning down anything, whatever comes to us, etc. We're not targeting on anyth ing. And we don't have anything dif ferent than we had seven years ago as far as building the economy of this department. I might say that the group of people who do the research in the Small Busi ness and Development under Bill Cruse could probably put this group to shame from what I've heard here tonight.

I don't like to be that way in committee in front of staff and what-have-you, but I have not had any thing put in front of me or told me as I asked the questions, what the strategy for the development of the economy as far as man ufacturing and large ind ustries are in the Pr ovince of Manitoba at the present time. I don't see any change from eight or nine years ago. I've been asking the Minis ter if he could just give me one or two or three ind ustries that we are targeting for, and the strategy that we're using to go for it. He hasn't been able to do so. HON. V.

SCHROEDER: Well, maybe I can come at it from a dif ferent perspective. We have done the work, which shows to us what the strengths of Manitoba are. I think members probably, seeing the booklet, "Inv esting in Manitoba, Manitoba Aerospace Group, Helicopter Capabil ities," just as an exa mple - for another example, we know that we obviously in North America have an advantage when it comes to any firm which uses a great deal of hydro-electrici ty. We have a good 1594

Tuesday, 8 July, 1986 work force. There are a lot of those kinds of advantages to Manitoba. The cost of land is relatively inexpensive for firms wanting to establish here. The firms which we would be looking for - if we started out from scratch in a city looking - and as I've said before, it is to a large extent a geographic strategy - we would be looking at all the - well we would try to fish in the whole lake basically to start off with, but we would be looking at the kinds of companies that would fit in Manitoba. I don't know how better to describe it, and I know I'm not satisfying him. MR. F.

JOHNSTON: Well, I'll leave it, but I'll just say the kinds of companies that were good for Manitoba, what are those kinds of companies? What do you see as those kinds of companies? When you say you'r e fishing in the whole lake, you're using bait to catch the big one. So what are we doing to bring the big one that is suitable for Manitoba? What does the Strategy Department say is the best indu stry for us to expand or bring here? HON. V. SCHROEDER: I would say our strategy is not based again on ind ustries. Ifs based on firms.

We would look to firms where we see signi ficant growth potential and investment in the province. MR. E. CONNERY: What is the relationship between the provincial and the federal Strateg ic Planning Committees? Do you have a relationship with the federal? HON. V. SCHROEDER: I'm told th ey' re closely coordinated, and they basically think very much along similar lines. MR. E. CONNERY: Then you're satisfied that the degree of fed-bashing that's going on hasn't hurt us in our relationship with the federal department? HON. V. SCHROEDER: There has been no fed-bashing.

There's a lot of province- bashing, but there has been no fed-ba shing. If the member wants to get into that, we can get into that. But when we have agreements with the Federal Government that go back over many many years and one party continuously changes them and it's not us and we're accused of fed-bash ing, I quite frankly get a little bit annoyed. MR. E. CONNERY: That's ali i heard all the way through the election and everything else, was fed-ba shing so I can't see a healthy relationship with the Federal Department. I think the Strategic Planning Committee should analyze what damage has been done.

Thank you. MR. CHAIRMAN: 1.(c)( 1)-p ass; 1. (c)(2)-p ass. MR. F. JOHNSTON: No, I didn't say pass. MR. CHAIRMAN: Oh, sorry . The Member for Stur geon Creek. MR. F. JOHNSTON: What is the position of the Provincial Government on the free trade at the present time? If the Strategic Planning Department is working on that parti cular strategy , what are th e recommendations at the present time? HON. V. SCHROEDER: I'm sure the member has seen a number of documents we have put out on the issue. We have continued to have meetings with indus try in Manitoba.

There has been no official evolution of that position from the last federal-provi ncial conference of which I'm aware, so that officially we are still where we were with the last First Minis ters' meetings - was it at Hal ifax - in any event, if you want us to go . . . MR. F. JOHNSTON: Wasn't there a position after the Western Premiers' meeting in Swan River? HON. V. SCHROEDER: In Swan River there were no changes in the Manitoba position from where we had been previous to that. MR. F.

JOHNSTON: The Manitoba position is that they are for free trade providing there are things written in the agreements with the United States - or that Canada negotiates, let's put it that way - from a point of view that there is some funds or plan avai lable to help people that could be dis placed or companies that might be harmed. Am I close? HON. V. SCHROEDER: That's part of it. But clearly the Federal Government has said what they want is an agreement where every region of this country will benefit. Clearly there would have to be net benefits to Manitob a.

We have said, before you get in to an agreement, it's very hard to be for or against it until you've seen the document, it's just like any other agreement. We have always had the caveat of - and I think the Federal Government agrees with us, no compromis e on Canadian sovereignty - a consultation process must be full with the provinces, with labour, with farmers, with business.

There must be adequa te safeg uards which the member referred to; an appropriate period of adjustme nt; proper adjus tment prog rams; social programs such as U.l. and Medic are non-negotiable - and that's in accordance as well, as I understand it, with the federal position; agricultural stabil ization programs; orderly marketing arrangements are not negotiable; cultural ind ustries are to be protected; and very, very strongly we feel - I mentioned regional development previously - that regional development should be an aspect of every basic decision in this country and we, in no way, want to see the ability of Canada to ensure that the regions which aren't as well off, can be helped along.

In no way do we want to see that right which we now have, diluted in any way by an agreement with another countr y which may well not have simil ar programs, but has other programs such as its procurement policies, in terms of the military as an example, which it can use in those fashions; and it does use procurement in that fash ion. Those are things that we feel fairly strongly about. We believe our Research Department and the work they have done has pursuaded us that the benefits of trade liberalization will be modest. So to us it's very 1595

Tuesday, 8 July, 1986 important that Canada not concede too much in the negotiations and that trade liberalization again, not be seen as a substitute for strong job creation efforts or regional economic development policies. You've seen, I'm sure, the research papers on free trade and the results of a su rvey of Manitoba man ufacturers, and if you don't have them, I would be pleased to provide them to you. MR. F. JOHNSTON: Does your Strategy Committee jus t take a look at the basics regarding the market?

Man itoba has a market of one million; Western Canada probably has with B.C. another market of five or six million. In Canada we have 26 million, approximately . We don't have much hope of shipping into Ontario and we just won't be able to, to any great extent. What does your Str ategic Planning people say about having a market of 226 million people to supply? HON. V. SCHROEDER: As I've ind icated , they view the likely overall benefits of trade liberalization to be, and I'm quoting, "r ather modest".

I emphasize that we already have a whole host of areas where trade is going on quite nicely between the two countries. Agricultural implements are obviously one of the big items. There's a whole host of - no, I think there are some tariffs on furniture - but we're still able to ship into the American market.

I've met with a number of people in the fashion indu stry, some of whom can ship into the U.S. notwithst anding tarif fs of 25 percent and up to 50 percent; others of whom say that even tarif fs as low as 12 percent would prevent them from exporting and of course, there is always the other side of when you take the walls down, will the flood come the other way. But I emphasize , all the research we've seen ind icates that benefits would be rather modest. MR. F. JOHNSTON: Manitoba wouldn't have to have any manufacturing plants whatsoever to speak of if we jus t supplied a million people.

We have been an exporting province to Western Canada and to Sout hwestern or Central United States and we have been export ing to places in other parts of the world of mainly agricultural equipment that we're famous for. If we don't expand our markets with the technology of plants today, a plant that used to be - a plant can be one-quarter of the size it used to be and still produce more with the technologies we have tod ay. If we're going to keep up with technology and we don't have expanded ma rkets, where do es the Str ategy Department say we're going to go? HON. V.

SCHROEDER: We've said all along that the research organization has been telling us we should be, as a first priori ty, viewing the multilateral talks as an important area for Canada, and certainly we're not asking to go backwards in terms of our relations with the U. S. We're working hard in that area, to certainly keep it where it is, or as we've ind icated, more open. Certainly modest benefits are better than negative benefits and that's why we have attempted to encourage the Federal Government to walk carefully. MR. CHAIRMAN: 2.(c)( 1) -p ass; 2.(c)(2)-p ass. 2.(

d) Communi cations Creek. the Member for Sturgeon MR. F. JOHNSTON: I haven't seen any communications or pu blications to speak of from this department regarding programs and policies that Manitoba has for them to be known to investors. Now, are you advertising in magazines, or what is the Communi cations Program of the department at the present time?

The development officers are continually going out, working with people, but advert ising, as this particular statement says, "Provides professional support to assure that departmental policies and programs are made known to investors and clients." Thank heavens I don't see expensiv e television ads and what have you from this department, but the communications are to clients and investors. What are we doing in that respect? HON. V. SCHROEDER: There's a whole host of things that we are doing.

There's a film presentation produced of Manitoba -made farm equipment and components, and that supports the trade branch market initiatives, especi ally in the United States Mid west, but also in Western Canada and in targeted offshore markets. We produced a major indus trial development booklet and film on investing in Manitoba, to attract investment interest to the province. They produ ced a brochure on health indus try capabilities.

There's adver tising, printed literature, and public relations requirement for programs admin istered by the depar tment, including development agre ements, the lnfoTech Centr e, Inf ormation Tech nology in Deer Lodge; Tech nology Commercialization Program; the Strategic Research Support Program; the Technology Advocacy Program; and Technology Dialogue Program. There were also targeted ind ustry sector ads to p romote the sale of Manitoba goods and services in ou t-of-province markets.

They coordina ted the second annual Manitoba Export Award Program to recognize outstan ding export perfo rmanc e by Man itoba companies. There were a numb er of exh ibi ts and di splays produced for trade shows, and they include West Patch (phonetic) Three in Edmonton, Alberta; Chamber of Commerce Busi ness Show in Winnipeg; the Manitoba Economic Conference; Mont real International Software Market; Western Canada Farm Show in Regina; Ag Quip in Aus tralia; Centrex, Winnip eg; Agri- Tr ade, Lethbridge; Canada Farm Show in Toronto; Agri-Trade Exposition in Billings, Montana; and so on.

There were a number of other trade shows. They're continuing to develop targeted ad campaigns to support the Industry Branch activities, including, as ind icated previously , wher e we'r e working on Min neapolis and Chicago, so they're supporting that program.

They're providing Canadian overseas postings with inf ormation packages on trade and inv estment opportunities in Manitoba, and we think one of the more positive things that are happening outside of this country is that our federal people are putting trade­ type individuals into our embassies and consu lates overseas, and looking specifically at working with the provinces at developing trade and investment. Agricultural equipment, food products, electronics, health products and other priority sectors have received 1596

Tuesday, 8 July, 1986 and will continue to receive promotional support using appropriate media, given whatever particular attempt is being made at a given time. Tha t's some of what they're doing. MR. E. CONNERY: That sounds to me more like marketing than communi cations. If they're going to trade shows and that, that's marketing. Is marketing within this sec tion? HON. V. SCHROEDER: I'm sorry, maybe I didn't explain that well enough. They produce the visuals and whatever is to be set up at the trade shows, the exhibits and the displays.

They're not the people who go to the trade show; if it's an agriculture show, Mike Wallace, or whoever might be avai lable. You send the people who are knowledgeable in that particular field. MR. E. CONNERY: These films and so forth, are they to show the potential in Manitoba for investors to come into Manitoba, or are you showing people what is being produced in Manitoba and can they purchase it? HON. V. SCHROEDER: Both. There was a film produced several years ago in a numb er of different languages, including Japanese, Chinese, German, French, and so on, and it was very much an investment in Manitoba movie.

I think it was an excellent movie which, in fact, I think would be a good idea if we could show it sometime so members of the Legislature could see what we're doing. We don't really do it in Manitoba. lt's happe ning in other parts of the world and one of the reasons members don't see our ads flooding the market is that we find our research says that general national outlets are not cost effective. MR. E. CONNERY: Could we get copies of what brochures and so forth that you have put out?

Then last year, I think out of this area, there was a major indu strial de velopment bookl et prepared at the beginning part of this fiscal year. Was that booklet prepared? lt would be nice to have copies of the various brochures and folders th at you have to ha ve an understanding of what you're doing . HON. V. SCHROEDER: The one the member is referring to, we happen to have here; and we have several others I'd be delighted to pass over to you. MR. E. CONNERY: So then in this area, you are selling the potential for ind ustry to come to Manitoba, rather than selling the goods produced in Manitoba.

Am I correct in that? If you'r e doing both, then you have a marketing aspect to it, and I wonder if this is where marketing should be. Maybe it is. HON. V. SCHROEDER: The member can take a look at some of those pamphlets and get a pretty good idea as to what we're up to. MR. F. JOHNSTON: Well, the Minis ter named off a very large area of activities of this department.

Then he said that this department only prepared the dis plays and did the dis play work because, if they were to do all of the things like the software, the show in the Agri Equipment, the software show, the fashion ind ustries and display ads, I don't think $21 2,000 would do it. So this really boils down to the group of people who put this material together for the department and development officers, etc. HON. V. SCHROEDER: Well, Mr. Chairman, the things I've listed off are the things that they do, and I'm told that although there are only several people there there are three SY 's - they're very good. MR.

CHAIRMAN: 1. (d)(1 )-pass; 1. (d)(2)-pass. 1. (

e) Financial and Admin istrative Services the Member for Sturgeon Creek. MR. F. JOHNSTON: I really don't have anything on this. I note that they're still doing the Ind ustry, Trade and Technology, and the Busi ness Development and Tourism admin istra tion. The only question I would have is that the Salaries are up. I don't know whether that's just the increment or not, but the Other Expenses are down. As a matter of fact, we see the Other Expenses situation down in most areas. Can the Minis ter give me some explanation of that? HON. V. SCHROEDER: There's an additional Clerk 3 posi tion.

There have also been two reclassifications, and the rest of it is related to the general salary increase and the annual increment. MR. E. CONNERV: This is the department that I assume the Minis ter is working on to improve. lt's the one that supplies information for the Estima tes that the Auditor referred to? HON. V. SCHROEDER: Yes. MR. CHAIRMAN: 1. (e)(1 )-p ass; 1. (e)(2)-pass. 2.(

a) Indus try and Trade Division, Admi nistration, 2.(a)(1) - the Member for Sturgeon Creek. MR. F. JOHNSTON: Now, I'd just like to be clear on the admin istration group in this depart ment. We asked some questions on it briefly last year. Just what does this group do? I know the development officers are working on their own, are working up through the Ind ust ry, Trade and Health Departments, but what is the adminis tration group here? Is it secretaries? HON. V.

SCHROEDER: This is my Assistant Deputy Mi nister and a secretary. it's the adminis tration of the Indus try and Trade Division to coordinate and initi ate the development of policies, proposals and programs in the In dustry and Trade Branches, and to provide the overall management function for the Indus try and Trade Division. MR. F. JOHNSTON: Who is the Assistant Deputy Mi nister in this department? HON. V. SCHROEDER: That's Hugh Eliasson. If I could possibly , just so the member can see exactly what it's about, pass the organizational chart to him. I think it would make more sense. MR. F.

JOHNSTON: That would be a good idea. 1597

Tuesday, 8 July, 1986 MR. CHAIRMAN: 2.(a)( 1) - pass; 2.(a)(2)-pass. 2.(b) - the Member for Portage had some questions in this area, 2.(b)? MR. E. CONNERY: No. MR. F. JOHNSTON: Well, this is the area that we kind of branched into when we were talking about Strategic Planning. How many development officers do we have at the present time? HON. V. SCHROEDER: We have 13 in the department here, and I'm just checking to see whether the SY for the Hong Kong office is included in that. Yes, 13. MR. F. JOHNSTON: Well, there are 13 development officers, and then there's the support staff. How many are they in there? HON.

V. SCHROEDER: There are five, Mr. Chairman. In addition, there's a di rector. MR. F. JOHNSTON: Who is that? Who is the dir ector? HON. V. SCHROEDER: Bob McLeod. MR. F. JOHNSTON: Now, are the development officers assigned to specific ind ustries? I wonder if we could have the rundown, if they are; or if there's a chart which shows who they are. HON. V. SCHROEDER: Yes, I have a chart here. You can keep that. MR. F. JOHNSTON: All right, thank you. HON. V. SCHROEDER: lt's just Ed's. MR. F. JOHNSTON: I wonder if I could just have a minute to read this. MR. E. CONNERY: What's the role of the development officer? HON.

V. SCHROEDER: They become quite knowledgeable. I think one could classify them as experts on the specific indu stries they are put - I guess, in charge of, is not the correct terminology - but they work with, as an example, someone in the food processing sector would be knowledgeable of processes, be it in meat packing or potatoes, drying, freezing, fryi ng, whate ver, and all of the areas in the whole food processing indu stry in the province.

They would be expected to know the indus try, its stren gths, its weaknesses, what's happening, who's thinking about expanding, where are the problems, what might be done to solve them, where can we be looking in terms of attracting people from the outside, or encourag ing people who are already here to expand who might be in the mood for whatever internal or external reasons. MR. E. CONNERY: Would Mike Wallace be one of these development officers? Is that the type of person you're talking about? HON. V. SCHROEDER: Yes, he would be in that specific area. MR. E.

CONNERY: Yo u have programs, in clud e meth ods to attract U. S. and targeted offshore companies in Manitoba. You've talked some about that. What role is the Jobs Fund playing here now? Have you got certain areas targeted with the Jobs Fund? HON. V. SCHROEDER: The Jobs Fund would come into play after discussions with someone who shows interest in Manitoba. We feel that the only way we can get them to come here is if we negotiate a development agree ment. We prefer to attract people, obviously, without that. MR. E. CONNERY: Would the Jobs Fund be on top of DRIE money and that sort of thing? Would they tandem them?

HON. V. SCHROEDER: Yes, it would ordinarily be DRIE. lt would ordinarily be on top of that, but it would also be coordinated with them. That is, the agreement arrived at by DRIE with a business would generally stipu late that provincial assistance could not be greater than a specific amount and there would be discussions by staff. In fact, one of the first things we would do, as suming an ind ustry is eligible, is start them off with DRIE before we would get involved in terms of any discussions of a development agreement. MR. E.

CONNERY: The local RDC's are - I know the one in Portage is working with the Federal Government and it was called LEAD and they changed it to something "Communiti es," - are you familiar with that? We have the Federal Government looking to encourage ind ustry and I know Portage has a $1 00,000 gr ant from the Federal (Go vernment) to work to analyzing the communities within the Central Plains region. Is the province work ing ... HON. V.

SCHROEDER: Actually, all our money is going into Flin Flon. - (I nterject ion) - Serious ly, as the member knows, we do provide fairly significant funding for the RDC's, but not from this department. lt's from Busi ness Development and Tourism, so we don't have, with this department, a dir ect involvement with them. MR. F. JOHNSTON: Looking at this chart, we have a busi ness analysis for the development officers, obviously. What area is that in, versus the Strategic Planning area? What's the dif ference?

A business analysis - is he working with the busi nesses, or is he making an analysis of expansion that the development officer's on? What is that particular category? HON. V. SCHROEDER: We have an expert here in financial assessments, an ex-banker who would work with our development officers in shaping any deve lopment agreement or deter mining whether a development agreement is necessary in the first place, and obviously making sure that anyone we enter into tha t kind of an agreement with, the company is financially sound and that the proposal is one that is going to work in the province.

So it's very much a project oriented kind of service. 1598

Tuesday, 8 July, 1986 MR. F. JOHNSTON: Just in the Resource Indus tries, Don Elliott, and he's the fellow I asked about the sand every two weeks - we were close two years ago to a very large company and we've been close all around and I know that they're working hard on it - they always have. Has there been anything brought forward to the Min ister over the past couple of years that is showing the reason why we can't land one? In other words, all efforts have been made.

I'm not criticizing that; I know that's happened, but is there some little quirk somewhere, a burr in the saddle, as you call it, that's stopping that type of an ind ustry from developing in Manitoba? Has anybody come up with that reason? HON. V. SCHROEDER: The bottom line for AFG was that they, after looking at our offer and the DAlE offer and so on and the advantages, felt that overall their minimum financial return objectives would not be achievable. Obviously, that's why they said they couldn't proceed with the glass plant here.

I have not seen anything from staff, and I think they're indicating by shaking their heads, that they haven't done any work on this since AFG. MR. F. JOHNSTON: You mean they've given up? Did AFG locate anywhere else? HON. V. SCHROEDER: Yes. I'm not sure exactly where, but it was in California. MR. F. JOHNSTON: We mentioned the aerospace ind ust ry. I'm aware that Standard Aero were looking at the overhaul of jet engines. They must have done studies, and did you do them with them on the basis that it was not economical to have a test stand for jet engines here? HON. V.

SCHROEDER: We did not assist in the funding of the study , but I'm told the department did work closely with them and that they're actively involved at the moment with some U.S. companies, and obviously the busine ss is building engines. MR. F. JOHNSTON: You say actively involved with U.S. companies. Our development officers are, or Standard are? HON. V. SCHROEDER: Both, and in discussions. MR. F. JOHNSTON: The Min ister says building engines. That gets into one big area. That's a Pratt and Whitney type of thing, or bigger. Standard Aero, I don't believe, build engi nes.

I believe they repair and overhaul many types of engine s but the capacity to overhaul a large jet engine, or a jet engine without a test stand, is almost impossible. Now I ask the question, if we are not going to work our way into the overhaul and test of jet engines, what effect is that going to have on the aerospace ind ustry from the point of view that that seems to be the way we're going all the time. I know there's a lot of the other engines still around to be overhauled, but the more scarces they get, the further you've got to bring them. I'm meaning from countries all over the world.

Where do you stand, not just with Standard Aero, but where do we stand in the aerospace engine overhaul business at the present time? Is it being worked on to have a future, or do we see some problems? HON. V. SCHROEDER: Mr. Chairman, I'm told that there are major studies going on, but that it is basic ally a private sector decision to be made and the decision has not been made yet. MR. F. JOHNSTON: The food indu stry, you know, we have the centres, the food centre in Portage la Prairie, which is down here under Technology.

Have we had any new food processors, or food manufa cturing ind ustries in the past couple of years? I'm aware of expansions of some smaller companies, etc ., and smaller plants throughout the rural areas. We had a good one come to Morden. We've had the Portage la Prairie situation of food plants. We've got some pretty good ones in Winnipeg and we were starting to establish a fairly good food processing ind ustry in the province that was shipping through Western Canada, a lot of it going south, too. Has that been advancing in the past couple of years? We talk about the economy that's moving forward.

I mentioned manufacturing is down, or projected to be down 4.3 percent. What have we done in our food indu stry? I'll just expand on it a bit. Here we have an area where we grow many marvelous products in the Province of Manitoba. We do have a situation in Portage la Prairie that is processing those products but it seems to me that we have a larger potential for it. How is it moving or how is it going? Are we advancing in the food indu stry? HON. V. SCHROEDER: Mr.

Chairman, there are a number of areas - I guess we should just start off with meat packing, where I think we'v e done fairly well to survive with the strength we have, given what's happened across North America in that ind ust ry. Right no w, of cou rse, Springhill Farms in the Town of Neepawa, the sewage plant is the subject of a Clean Environment Commission hearing which commenced a few days ago, but that building is under way, the hog-killing plant in Neepawa. Canada Packers are finalizing plans for Western Canada and we have reason to be optimistic about their plans.

Burns has recently been pu rchased from Union Enterpr ises by Mr. Child and Ronald Faithful! and Ronald Jackson, I believe. We had a meeting with them recently and the question of ownership now having been settled at Burns, they are examining long-term developments needed by them and they are certa inly quite inter ested in Manitoba. There are a number of other areas. Somebody mentioned to me the tofu operation. There's an instant noodl e operat ion. Pizza pop, which apparently is developing into something national, from Manitoba, developed at the Canadian Food Products Development Centre at Portage.

There's a number of those things that have been going on. There are also dis cussions going on in the area of potato processing which, if something could happen there, it would certainly be a great thing for agriculture, if more farmers could move into potato production from grain and that sort of thing. 1599

Tuesday, 8 July, 1986 MR. E. CONNERY: What is happening in the food proces sing? McCai n's, at one time, had shown interest in doing some frozen food, frozen vegetables. Is there any progress along that line or any other companies to be coming in? There has been lots of inqu iries. HON. V. SCHROEDER: Mr. Chairman, I un derstand McCain's is planning an expansion at Portage. I don't know that it is into - I believe it is potatoes and not other vegetables.

The item I was referring to was not that one and would provide for a significant incr ease in addition to that, but in terms of vegetables, I don't have any information for the member as to anyone wanting to get into freezing, but certainly that would be nice. MR. E. CONNERY: Is there any more work on alcohol production in Manitoba? HON. V. SCHROEDER: Well, there are some who say there is a fair bit of it out there, but we have not been doing anything new with the operation at Min nedosa. I'm not aware of any other operation of which one should speak. MR. E.

CONNERY: Minn edosa is a fuel plant, strictly; the other one is at Gimli which is for alcohol. I'm talking about, one is you drink and the other one you put in your car. They are different alcohols. HON. V. SCHROEDER: I'm not aware of any changes with the distil lery other than what has already taken place being that they are now producing Crown Royal at Gimli. I don't know of any other recent changes. MR. E.

CONNERY: In your activity sector under the Ind ustry Branch in your annual report, you show some indus tries; you show 18 projects that were assisted and I don't see them in the back under "Grants." What type of assistance do you give to these companies? lt's on Page 8 of your annual report. HON. V. SCHROEDER: Could you possibly name one or two of the companies? MR. E. CONNERY: Okay . . . Medical for one. What did you do to assist it? HON. V. SCHROEDER: Frequently when we're dealing with corporations whom we would like to have come to Manitoba; we go out there or expand for that matter, of course.

We have material such as we've given to the member tonight. Of course, they say, well, that's all fine and good. You're putting the best light on the province, and obviously there is some truth in that. We are somewhat su bjective, probably . And we do have money available to cost-share feasibility studies for people who might take a look at what we are sayi ng. They would hire a consultant of their choice and we would cost-share a study which hopefully would back up what we've said in our material and lead to an investment decision.

When people are in a position where that offer is made, I'm told by our development officers that it is something that does tend to very much attract people who would otherwise not pay quite as much attention to what we're telling them. MR. E. CONNERY: So this has nothing to do with grants to get them going or this at all. Any grant money would come through the Jobs Fund? HON. V. SCHROEDER: The development agreements would come through the Jobs Fund.

I don't know of any other grants, so the answer to the question would be, yes, grants would come through the Jobs Fund, grants to start up a company where we'd enter into a development agreement. There may be a portion of forgivable loan or low-interest loan or that sort of thing. MR. E. CONNERY: Do you have a figure of what took place through the Jobs Fund in assistance? Is it here somewhere? If it is, I could have read it; I don't remember where. HON. V. SCHROEDER: There are 11 agreements. There is one that has not yet been finalized, but it is included because we believe it is right down to the last end of it.

The total assistance has been to date $8,930,625.00. MR. E. CONNERY: What companies were assisted with the Jobs Fund? HON. V. SCHROEDER: I'll name all those who are finali zed except that 11 th one. Sherrgold, Simon-Da y, Canadian Occidental Petroleum, Canada Wire and Cable, Rock Lake Oi lseeds, Arc tic Co-Op, Vico n, Gr avure Graphics, Westeel, and Toro. That goes right back to the beginning of the development agreements. MR. F. JOHNSTON: Mr.

Chairman, under the Electrical and Mechanical Division, is this department the one that is working with the group of people - I believe it's Manitoba money that has been put together, and I think you are using some of the money out of the Commun ications Grants with the agreement with the Federal Government and I'm not just sure that's where you'r e using it - but this is a meter-read ing process that can be done through the telephone or done through some system that is going to revolutionize the meter reading in the province? lt has been done in other areas in North America.

There are companies, I believe, in New Jersey that have looked at it to make a proposal, but I believe they've gone along with the Canadian one because the Federal Government money is involved in a very large way. The Federal Government would have a lot to say about the decision on this particular program, but I believe the province is involved with one of their agreements. Where does that stand at the present time? HON. V. SCHROEDER: Mr. Chairman, as I understand it, the name of the company is No rth American Telemetry. lt is going ahead; there's been a lot of work put into it. There are a whole number of areas.

The in vestment is $14 million. ERDA will be investing 2.4 million of that 14 million. I believe they were going or have gone to the U.S. capital markets with Lessard Fairs (phonetic). I'll just leave it at that. I should say, as well, that a number of local investors have put sign ificant amounts of money into it. MR. F. JOHNSTON: And how much has the province put into it through the agreement? 1600

Tuesday, 8 July, 1986 HON. V. SCHROEDER: it's our portion of the ERDA, Economic Regional Development Agreement, one-half. That's 50-50. MR. F. JOHNSTON: So you're half of the 2.4 million. HON. V. SCHROEDER: That's correct. MR. F. JOHNSTON: Well, as you say, you mentioned it's going ahead. Are we going to have a manufacturing plant here? When you talk $14 million, are we going to have significant jobs? By the look of it, it's mostly private money that's moving in on it. I understand from the boys around town that there's a bit of a line-up to get in on it because it appare ntly is a fairly good system.

You say it's going ahead. When can we expect this to go ahead? When can we expect people to be confronted in their homes as to putting this in, or will the utility then be buying it? When does this program move along? HON. V. SCHROEDER: The company has started prototype manufacturing, and they do expect to have about 60 people working for them within the year. We had an individual seconded from our shop to basically do the legwork to put the project together. MR. F. JOHNSTON: Yes, I understand. I know the person who did the legwork; I also know he won't be the president of the company .

Anyway, where are they working from? Are they working from one of the modu les out in our research centre or are they working in their own building in Manitoba? HON. V. SCHROEDER: Mr. Chairman, they're in our "C" building. MR. F. JOHNSTON: That 's out on La gi mod ier e Boulevard? HON. V. SCHROEDER: No, no, this is the one on Ellice, the National Research. MR. F. JOHNSTON: Doesn't that sound tremendous? The NRC Building is open and has a $14 million indu stry ready for Manitoba. HON. V. SCHROEDER: lt had absolutely nothing to do with the NRC, absolutely nothing. MR. F.

JOHNSTON: Well, they're in the building and it is new technology and it is research that has gone on in Manitoba and other places for a while. That's fine, Mr. Chairman. I just wanted to know about that particular indus try. Now the electronics is the one that we've always sort of targeted to. Because we have the hydro in Manitoba, it seems to be an indu stry that we should be up front on. Ha ve we had any others in the electronic ind ustry expand or have we had any develop? HON. V. SCHROEDER: There are a couple of programs in the development stage.

There's an agreement between the province, Sperry and Sperry No rlus, supported with ERDA funding for language translation by means of artificial intelligence. There are some computer-assisted . MR. F. JOHNSTON: That's above me, I don't know. Computer-assisted? I'm getting too old to unde rstand computers. I just und erstand human beings; computers I don't understand. HON. V. SCHROEDER: This is one that claims to speak in several languages. MR. F. JOHNSTON: I think that's marvellous if it does, but that is being developed. You say that Sperry is working to develop that with another company? HON. V.

SCHROEDER: Well, actually, it's a professor at one of our un iversities who is really head ing it up in terms of doing the actual researc h, and Sperry and the ERDA arrangements are putting additional funding into it. MR. F. JOHNSTON: Is that working with Dr. Kisner (phonetic)? HON. V. SCHROEDER: No, it's Dr. Young. MR. F. JOHNSTON: Dr. Young. The frigate program that Sperry is involved in, is there going to be expansion at Sperry in Mani toba because of their involvement in the Canadian Forces Frigate Program? 1601 HON. V. SCHROEDER: Yes, there will be. MR. F.

JOHNSTON: An expansion in their plant facilities and numbers of people? HON. V. SCHROEDER: Yes, certainly , they will need more space than they have in the particular plant they're occupyi ng, but they may well be using space in the other operat ion, in the Burroughs operat ion. MR. F. JOHNSTON: The amalgamation of Sperry with Burroughs, is that going to mean any expansion in Manitoba from the Burroughs point of view? HON. V. SCHROEDER: No. MR. F. JOHNSTON: The fashion ind ustry, we've had some problems, it seems, of losing the corporate office of one of the largest ones.

The fa shion in dustr y, regardless of what some people may think about it, I have read in Hansard where the government members have called it "sweat shops," but I go through their plants, most of them now in Manitoba, and they're all brightly lit, air conditioned and working conditions are exceptionally good. The fashion industry in Manitoba has been one that has just battled to get its position in Canada and in North America, and one that is very important to the economy of Manitoba. Are we having any problems or are we solving the problems with the fashion industry at the present time?

Tuesday, 8 July, 1986 The fashion ind ustry was very concerned about some of the labour legislation in Manitoba. Has Reg been working with them to try and overcome those problems so that we won't lose any more of that valuable indu stry? HON. V. SCHROEDER: He and the department have been working closely with that industr y. He recently took me on a tour of several of the operations of immigr ants to Manitoba from Hong Kong, and they're very technologically modern and up to date.

They've got facilities which are certainly going to allow them to compete in Canada, and at least in two out of three of the cases very clearly in the United States, and the third one, the belief was also there that they would be able to compete there. The ind ust ry, in general, in Manitoba is a good ind ustry with a fairly young ownership, aggressive ownership. In fact, the average size here, I believe, is something like twice the size a firm that it is in the rest of the count ry. We have every reason to believe that they will at least maintain their current strength.

As I understand it, we're back up now to a point where basically the people who were trained in that field are basically all working now. There is a bit of a problem, from an industry perspective, that when they're hiring, they are now again, as they were some years ago, hiring people who are not familiar with the field, but that's something that can be overcome, I'm sure. MR. F. JOHNSTON: Now, is this Mr. R.M.G. Walker located in Hong Kong? HON. V. SCHROEDER: Yes. MR. F. JOHNSTON: The obvious question is how often do we see him or how often does he see us?

Is he back and forth, and what staff does he have over there? HON. V. SCHROEDER: Mr. Chairman, Mr. Walker works at our Hong Kong office on his own. Support is provided through Richardson Greenshields' office where he is located. He's been back for Christmas. Other than that, he is in regular communication by telephone and telex and computer hookup with staff here and it seems to be paying off very nicely for us.

As an example, in the last year, our volume of exports to Hong Kong improved by the greatest proportion of any province in the countr y, not large nu mbers, but at least there's some movement and, of course, in terms of attrac ting investment from there, we also have been moving up quite consid erably. We're quite pleased with it. Just to add, Mr. Chairman, I could provide the member with a computer printout of information that he is providing to us so you get an idea and maybe a bit of the flavour of what he's doing there. MR. F. JOHNSTON: You know, it was last Estimates when we dis cussed this Hong Kong one.

I asked the question if he was working both ways. Would he not only be encouraging investment to come to Manitoba, but would he be working to sell Manitoba products or put Hong Kong people in to uch with Man itoba manuf acturers? Obviously, they weren't doing that then. They have now started to do it and he's now working then as an investment officer or an officer that is encouraging Hong Kong people to come and invest in Manitoba, but he's also a development officer in Hong Kong. HON. V. SCHROEDER: Yes, in addition to that, he is our China watcher. MR. F. JOHNSTON: He what? HON. V. SCHROEDER: Our China watcher.

That is, from there, if there's anything happ ening that might be useful from a Canadian perspective, he would let us know. MR. F. JOHNSTON: We did have repres entation in Mexico at one time. Have we got represe ntation or are we intending to have represe ntation in any other countries? HON. V. SCHROEDER: There is nothing in Mexico. The first area that we would put someone into would be Minne apolis. MR. F. JOHNSTON: Well, the only reason I mentioned Mexico is that we have had repres entation there.

So what you're sayi ng is th at you are considering repres entation outside the country and it would be Min neapolis if you did that. Is there any intention of taking a look at Western Canada? I know the economy and the oil busi ness is not booming there right now, but has there been any thoughts of taking a look at representation in that area? HON. V. SCHROEDER: No. MR. CHAIRMAN: The time being 10:00 p.m., what is your wish? Committee rise? MR. F. JOHNSTON: Let's move committee rise. Mr. Chairman, I would estimate that we would be fini shed on Thurs day night.

I don't think there'll be Estimates tomorrow to speak of. MR. CHAIRMAN: Okay. Committee rise. SUP PLY - FINANCE MR. CHAIRMAN, C. Santos: Committee, please come to order . This

section of the Committee of Supply has been considering the budget Estimate for the Department of Finance. We are now on item no. 3.(c)

(1) Comptroller's Division, Disbur sements and Acc ounting: Sala ries - the Mem ber for Morris. MR. C. MANNESS: Mr. Chairman, this department maintains that when it comes to the government, it prepares quarterly financial reports in the annual Public Accounts. I would ask the Min ister whether the government will be supporting the Private Members' Bill brought forward by the Member for St. Norbert 1602

Tuesday, 8 July, 1986 with respect to legislative requirements, with respect to the qu arterly report forcing it to be laid before members of this House in a certain period of time. MR. CHAIRMAN: The Minis ter of Finance. HON. E. KOSTYRA: Thank you, Mr. Chairman.

Ob viously the position of the govern ment, with respect to the government caucus with respect to that bill, will be provided at an opportune time in the debate - and if appropriate voting on that particular bilL I would just announce to the member that there are only a few provinces that do provide information in the manner that is provided in Manitoba through the quarterly repor ting sys tem. There are no provinces that I am aware of that provide qua rterly reports to be tabled within a specific period of time. In fact, those reports have been prepared and tabled as soon as possible.

I wonder if I could just take the opportunity to ans wer a number of questions that were asked previously that I couldn't provide responses to.

In terms of the qu es tions aske d ju st before adjournment on the payment of bills by government, the departments that are signif icantly above the average and are of a concern to the government are the following departments: Attorne y-Gen eral, Consumer and Corporate Affairs, Government Services - I would just that point out because it's one of the larger ones, it's just slightly over the average - Ind ustry, Trade and Technology , Education, Health, Energy and Min es, Environment and Workplace, Business Development and Tourism, and Employment Services and Economic Securi ty.

Also earlier there was a question with regard to a line in the budget with respect to severance pay, and some suggested that I was using the wrong term. That is the correct term; it is the term that's contained in the Collective Agreement between the Government of Manitoba and the Manitoba Government Empl oyees' Associ ation.

I won't read the sections but there are th ree sect ions govern ing th at in the Col lect ive Agreement 23.0 1, 2, and 3, which we are just fulfilling our obligations in terms of that agreement, where we know that there will be costs associated with potential severances or, in those specific cases, retirement. MR. C. MANNESS: Mr. Chairman, I thank the Min ister for replying to those questions.

I would ask him, though, given that Health and Education are the two largest departments on that list which he read to us, is there active at this time a group either within the department or a gr oup lia ising between Fin ance and those departments that are trying to find out the proper courses of action that they may take so as to improve upon the speed with which they prepare their cheques in supp or t of the bills th at come in to th ose departments? HON. E. KOSTYRA: There has been some work done just recent ly. I guess I should have introduced the staff, the change in staff. With me now is Mr.

Fraser, of the Department of Finance. He has recently written to all of the departments that are experiencing some difficulty, indicating that department's ranking in terms of the overall government, showing to them that they are out of sync with the majori ty, that there is a move, an intention by government to improve the situation, suggesting that the staff of the Comptroller's Division is prepared to work with the department. One other thing that is under consideration, and I stress "consideration" at this point, is whether or not there should be some decentralization of the small bill payments.

One of the suggestions is that bills under $10 0 be paid for directly through the departments, with them having some access to fund dir ectly so that they don't have to go through the centralized system, so the bulky number of small bills might be paid quic ker. That's something that's under consideration at the present time. A decision will be made on that. MR. C. MANNESS: Mr. Chairman, we're prepared to pass this appropriation at this time. MR. CHAIRMAN: 3.(c)( 1) - pass; 3.(c)(2)- pass (I nterjection) - There is a 3.(c)(3) - we don't have to pass that one. 3.(d)

(1) Treasury Board Su pport and Fina ncial Analysis: Salaries - the Member for Morris. MR. C. MANNESS: Mr. Chairman, I would ask the Mini ster what is the policy with respect to Treasury Board and the passing or the acceptance of spending? Do all decisions with respect to expenditures beyond $5,000 have to come before the Treasury Board? What is the policy in effect now with respect to all government departments and also with respect to Crown corporations? HON. E. KOSTYRA: In terms of Crown corporations, they are autonomous and are not subject to Treasury Board guidelin es.

In terms of the government proper, all expenditur es over $250,000 have to go through Treasury Board and be app roved by Treasury Board. All contracts for agreements for services over $5,000 have to be appr oved by Treasury Board. All grants to whatever organizations that are paid for by departments to outside agencies have to go through Treasury Board for formal approvaL There is also a reporting system called the Pre-clearance Appr oval which flows through Treas ury Board on a post-ex penditure basis for all expenditures that are below those lines. MR. C.

MANNESS: I would ask the Minis ter to repeat his comments with respect to expenditures, not the contracts and not the grants, but the first. I'm sorry, I didn't catch it. HON. E. KOSTYRA: Over $250,000 have to get Treasury Board approvaL Now that, of course, is on a day-to-day or throug h-the-year basis. Treasury Board does the overall reviews of departmental expenditu res; indeed, Cabinet as a whole reviews them prior to the finalization of the Estimates for the year. MR. C. MANNESS: The Min ister says that Crown corporations are not subject to these guidelines.

Is he meaning that in the sense that consulting contracts, any type of cont racts entered into by Crown corpora tions, do not have to receive appro val at Treasury Board level? 1603

Tuesday, 8 July, 1986 HON. E. KOSTYRA: Ye s, that's tr ue. All Cr own corporations are autonomous and have their own authority and do not require Treasury Board approval. Just the own appr oval mechanisms that were set up by the boards of dir ectors of those Crowns or under whatever legislation exists for Crown corporations. The only exception to that is with respect to the employment of auditors for the Crown corporations. That's still a Treasury Board approval process in order to keep consistency between the Crowns on those matters. MR. C. MANNESS: Mr.

Chairman, the Minister is saying then that a Crown corporation such as the Manitoba Energy Authority, once it has established a global figure for expenditures and been established, it has the right to spend those funds in any way it sees fit. Is that correct? HON. E. KOSTYRA: Yes, I'm in formed that Crown corporations have never in the his tory of functioning, been subject to Treasury Board approval, whether in this current admin istration or previous adminis trations. MR. C.

MANNESS: Well, is the Min ister then reversing his answer that he made about a month ago when I asked the question in question period whether or not one specific contra ct between the Manitoba Energy Authority and - what was the name of that? SOME HONOURABLE MEMBERS: WMC. MR. C. MANNESS: . . . contract, whether that type of contract would have to come before Treasury Board for approval. The Min ister at that time ind icated yes, it would have to. Is he now changing that answer? HON. E. KOSTYRA: I'm sorry, I'd have to get the specific reference.

I never said that contracts of any Crown corporation had to be su bject to the Treasury Board approval. There was the one contract that is part of the judicial review that was appro ved by the Manitoba Energy Authority that was paid for through the funds of the depar tment, because at tha t particu lar point, the funding source for the MEA was still contained in the Department of Energy and Mine s. They are merely acting as the financial source for the Energy Authority at that one point in time. MR. CHAIRMAN: The Honour able Mem ber for Pembina. MR. D. ORCHARD: Mr.

Chairman, the Min ister is giving us some answers now on Treasury Board's role in terms of Crown corporations. I want to take a position with the Mi nister that I know will not meet with his favour. The normal Crown corporations that we talk about in what the public un ders tand as being Crown corporations is Manitoba Telphone System, Manitoba Hy dro, and most recent ly, the Manitoba Publi c Insu rance Corporation. Those Crown corporations, Mr.

Chairman, have the unique role in Manitoba wherein they are basically monopoly corporations and the senior management in those Crown corporations is responsible for the day-to-day decisions, and I can und erstand in Manitoba Telephone System, Hydro and Autopac where a reference to government always for cont ract approval th rough Treasury Board would be an un wieldy cir cumstance. lt would be in most cases un necessary because there is a Minis ter responsible for each of those Crown corporations that ultimately if decisions are made that are bad for the people of Manitoba, the Min ister, hence the government, bear the brunt of that.

I have a concern over a Crown corporation like Manitoba Energy Authority, the way it's structured right now. lt doesn't have revenues in which it can be self­ sustained. lt relies entirely on an appropriation of government. Most recent ly, it's been a di rect payment through the Department of Energy and Mines through an arrangement which I believe has been described in the newspaper, at least, as being a unique arrangement.

This is not the place where we're going to find out what that arrangement is, but we certainly are going to pursue it with the Min ister of Energy and Mines. it's not a self-sus taining Crown corpora tion, it has no revenue source, and it is making some substantial decisions on behalf of the people of Manitoba.

In the case where a Crown corp like Manitoba Energy Authority has to be voted its monies by either a line department like Energy and Mines or dir ectly through another appropriation that we may deal with in capital spending, etc., etc., I believe that there has to be Treasury Board approval of some of the cont racts that are signed. I find it to be not good government to lodge with the chairman of the Manitoba Energy Authority, regardless of who he is. Not with the chairman of the board, but as executive di rector of the Manitoba Energy Author ity, Mr. Eliesen has a $500,000 signing author ity.

That is a very substantial signing authority without reference to Treasury Board of funds which must be di rectly appropria ted from the ministry of Energy and Mines or by this Asse mbly. That's not as if Mr.

Eliesen has signing authority to spend revenues which are coming in as in the case of Manitoba Hydro, where the chairman of Manitoba Hydro and the president of Manitoba Hydro makes investment decisions on behalf of the corporation and takes line authority for those decisions, and the same thing with Manitoba Telephone System where the general manager and his senior management make decisions on how to invest some several hundr eds of millions of dollars of revenue to that corpora tion. We're talking Manitoba Energy Autho rity which depends on this Ass embly to fund it.

Yet we have given - not we - this government has given the chair man or the executive di rector of the Manitoba Energy Authority a half million dollar signing limit. Mr. Chairman, just trace what has happened with this signing authority that was granted to Mr. Eliesen. lt has turned out to be in all appearanc es as a method of making sure that contracts get placed where they'r e beyond the political attachment of this government, and whether one wants to argue about the case in point, there is no question that Mr. Eliesen, the Member for Transcona, Mr. Davidson are all one big happy family.

Here we have a circumstance where this government has allowed the executive dir ector a half million dollar signing authority so that contra cts that normally go from any line department would have to go to Treasury Board to get approval, so that there is a political, an elected official, making those decisions. That is not the 1604

Tuesday, 8 July, 1986 case with the Manitoba Energy Authori ty, and I believe that that is wrong given the ci rcumstances that this Assembly provides all of the dollars that Manitoba Energy Authority will spend. I believe there should be Treasury Board scrutiny and approval. Because what we have is the ability for a group, an old boys' club if you will, to be able to get away with contracts, without tender, by choosing them and then using the justification that in the case of Mr. Davidson he was the most appropriate person to do it. And then the further implication of having the same Mr.

Eliesen as Chairman of the Board of Manitoba Hydro. A MEMBER: Is there an in quir y? MR. D. ORCHARD: lt is before the inquir y, you bet. A MEMBER: Is this another inquir y? MR. D. ORCHARD: No. I'm just laying some facts on the line that you should be cognizant of. - (Int erjection) - That's right. Well, take a look at your Planning Secretariat back in the Schr eyer years and find out if you don't see a whole bunch of common names in there.

And take a look at the employment throughout the Civil Service with Linda Jolson and where she's been associated, and then conveniently getting a job with Manitoba Hydro that her husband's contract said was an appropriate way to go. I mean, you can't avoid it, it is there. Sur e, you can sit back and say th at it was appropriately done, etc. etc., but what you have done is cast publi c doub t on your own cred ibili ty as government when you have that kind of appearance of insider training and an old boys' club looking after each other.

And you can't avoid it, it's there, the tarnish is there, and I maintain that if you would have had Treasury Board app roval for some of these contracts, there might have been some second politic al wisdom put in Treasury Board. I give this Min ister of Finance credit for having political smarts. He doesn't get himself into trouble to doggoned often. But his scrutiny was not available in the case of Mr.

Eliesen's contracts that he's let and I suggest that that has helped to create a political problem, an aura that not all is well, and it's there because there is no Treasury Board respo nsibility for scrutiny of contracts let by Mr. Eliesen and the Manitoba Energy Authorit y. And when it is dir ectly funded by this Assembly, by the Department of Energy and Mines up until a few months ago, I believe the Treasury Board should have been involved because then we wouldn't have the circums tances of Min isters being able to say, well, I knew nothing about that. But you know he has the ability to do that.

Well, certainly he has that ability because it was conferred on him, conferred on him by the Cabinet. Conferred on him by the Board of Directors which the Cabinet approved and passed, and named to the Board of Directors of the Manitoba Energy Authori ty. But it doesn't wash in terms of public credibil ity. And you'r e not damaging us in Opposition, politically we haven't been tarnished by all of this.

As a matter of fact, we've had an issue to make of it, but you are tarnishing your own political image, and I suggest that if you were politically astute about it you wouldn't allow it to continue and you'd bring some of the Treasury Board controls in place on the Ma nitob a Energy Authority for the very reason as I've suggested several times now that it is not like the Crown corporations MTS, Hydro and all of that wherein they are monopolies with revenues that they generate themselves with adminis trative decisions they make themselves.

They're virtually self-sus taining with the exception of the infusion of major capital for expansions to their physical plants. You know, these Crown corporations are not in the same category as the Manitoba Energy Authority, which is a sibling of government and which would not have any money to spend if it weren't for the vote of this Legislative Assembly. That's why I believe the Treasury Board should be approving those contracts. You should not be giving Mr. Eliesen a half million dollar signing authorit y.

That is an incredible amount of power to lodge in a non-elected, politically appointed ind ividual such as Mr. Eliesen; and already the wisdom in what I'm saying, his methods of control, is showing because you've already had a casualty of a senior Min ister res igning because of allegations of conflict of interest; you've got an inquiry ongoing, and you 've got the people of Man itoba ask ing very serious and legiti mate questions about what is going on internally with this government. What are the interstaff relationships that allow these kinds of accusat ions to be made?

And you've caused yourself significant problems because you've given one individual, non-elected, politically appointed too much author ity, too much power and too much money to spend without app roval from Treasury Board or anybody else. So, Mr. Chairman, the position I take would be one which would help the government not hinder it but, more important ly, it would help the people of Manitoba because it might bring more responsible spending, responsible letting of contra cts to the Manitoba Energy Authority if the advice were followed. HON. E.

KOSTVRA: The procedures that are in place are longstanding procedures with respect to Treasury Board and how it relates to departments.

The member sugge sts tha t th ere is some thin g dif ferent with regard to one agency, but I would just remind the member, using his logic in terms of agencies or Crown corporations, call them what you will, that are dependent on government, on appropriations app roved by this Assembly either dir ect or via The Loan Act, that there are a number of others that are in the same situation as the one that the member describes, that are not either in a monopoly situation as he suggests with the Manitoba Telephone System and Manitoba Hydro, nor are they in a position that they generate their own revenues.

But ther e are agencies like the Workers Compensation Board that relies on levies on employer and, on occasion, a subsidy from the government. There are agencies like CEDF, which rely on authority given to it by this Assembly in terms of its operations; agencies like the Manitoba Agricultural Credit Corporation that not only get loan authority but, from time to time, have to get a subsidy in order to ensure that farmers have loans at reasonable interest rates and we've had to, as the member is aware, subsidize that. So they're in 1605

Tuesday, 8 July, 1986 the same position. Those procedures are the same for all those organizations. Ther e is, through the Department of Crown Investments which we are not reviewing here - it comes under the Min ister of Energy and Mines - a process that we put in place for the reviewing of management controls of capital plans on a yearly basis and other issues th at report through to the Economic and Resource Investment Committee of Cabinet to get direction. So there is that monitoring that goes on with respect to the portfolio of Crown corporations and agencies through Crown Investments. MR. D. ORCHARD: Mr.

Chairman, the Min ister has ind icated a numb er of Cr own corporations. The Manitoba Agricultural Credit Corporation operates semi-autonomously from government, but within some fairly structured loan limits that are imposed presumably by the Min ister of Agricultur e and by Cabinet. So there is no half million dollar signing authority for the general manager of MACC. The Workmens Compensation Board, again semi­ autonomous, it uses and establishes theoretically an actuarily sound Workmens Compensation Program, basically an insurance against inju ry.

But once again, you haven't given the dir ector or the head person of that, the chairman of that, a half million dollar signing author ity. You can go on and on throughout all the Crown corporations. CEDF is an umbrella group to provide loans to various Native and Metis organizations and others in specified regions of the province, once again, very highly structured rules of the game that CEDF must go by. Anything that exceeds those rules must go to Treasury Board, to Cabinet for any loans that exceed the limits.

But with the Manitoba Energy Authority, you neither have outside revenues, and you don't appear to have any controls over what the corporation or its executive di rector, general manager , chairman of the board can do. You' ve simply gi ven him and the Manitoba Energy Authority a half million dollar blank cheque with no reference to Cabinet, no reference to the democratically elected people in Treasury Board or in Cabinet. You've simply given him a carte blanche half million dollar signing authori ty.

That is extremely unu sual. lt's uni que to my knowledge in terms of Crown corporations. lt's caused you problems. lt will cause you further problems as more information, no doubt, comes out, and it would be in your best interests but, more importantly, in the best interests of the people of Manitoba if you brought some kind of Treasury Board control to Manitoba Energy Author ity. The Minis ter's defence is simply not a defence, because those other Crown corporations he mentions are not, in any way, shape or form, analogous to the Manitoba Energy Authority and what it's doing right now.

I su ppose I could be extremely blunt and I could say, it would be to our political advantage on this side of the House that the Min ister takes none of this advice because the activities of Mr. Eliesen and the Manitoba Energy Authority and as chairman of the Manitoba Hydro Board will certainly get this government into trouble, because he's a man with too much power and too much spending authority and he's almost beyond reproach from this Ass embly and even inde ed from members in the Treasury Bench, because he does not need your approval.

If you want to talk about his activities, I mean, how can you politically tolerate a chairman of the board putting a gag order on the entire Manitoba Hydro system of employees? That's what your chairman of the board did. I mean, these things will get you in political trouble. Not taking the advice will help us, and over the long haul will help us immensely.

But I simply say that you're not responsibly serving the people of Manitoba in fostering proper spending and the appearance of proper spending by not having some kind of controls imposed on the Manitoba Energy Author ity, its chairman of the board and executive di rector. MR. C. MANNESS: Mr. Chairman, I have found that portion of Hansard to which I referred earlier, and the Minis ter last Friday did ind icate to me that, and I quote his words: "C ontr acts th at are entered into by department are su bject to that process.

Contracts that are entered into by agencies such as the Manitoba Energy Authority or other Crown corporations are not su bject to that process." I would ask the Min ister, because I don't believe the question has ever been put to him before, did Treasury Board ratify the agreement made by the Manitoba Energy Autho rity, even though it was paid by the Department of Energy and Mines and, therefore, should have received endorsation from the Treasury Board? Did that specific contract ever come before Treasury Board and did it receive the endorsation of the Treasury Board? HON. E.

KOSTYRA: As far as staff can recollect, no, it didn't. That's something that is being reviewed right now with respect to that cont ract and all contra cts ente red into with tenants of th e building at 11 5 Banna tyne. So if there is anything there, it will come up in the Audi tor's Report. MR. C. MANN ESS: Mr. Chairman, the Minis ter says it will come forward in the Auditor's Report. Now, is he saying indeed, if the Auditor finds the reason how it was that this particular cont ract was not brought forward before Treasury Board, it escaped its attention, the Auditor will tell us why that happened?

Or is the Mini ster saying that the Auditor will recommend a system to ensure that it doesn't happen again? Or is he really saying both? I'd like him to expand on his answers. HON. E. KOSTYRA: I'm informed that the Auditor's department does a pre-audit of all expenditu res before they are ac tually approved at the time of disbur sement. If there is any question about the authority to provide for those payments, then those requests are bumped back. So taking that in the context of this specific area, then that expenditure would have had to be approv ed by the Auditor through the pre-audit process.

What I was saying is that we don't believe - the staff doesn't recollect it - I wasn't on Treasury Board 1606

Tuesday, 8 July, 1986 at the time, but the staff doesn't recollect that that was before Treasury Board. I just add that in any case, the Auditor is reviewing that and if there is anyth ing that is not acc ording to procedure, he will obviously raise that in his report. MR. C. MANNESS: For clarification, Mr. Chairman. The Mini ster talks about the Auditor's Report. Is this the one that's to be made public or is this an internal one? HON. E. KOSTYRA: No, public. MR. C. MANNESS: The Min ister ind icates, for the record, Mr. Chairman, it's the one that is to be public. I'm prepared to pass this sect ion, un less there are additional questions. MR. CHAIRMAN: Hearing none, 3.(d)(1)- pass; 3.(d)

(2) Other Expenditures-pass. 3.(e)

(1) Information Systems Support: Salaries - the Member for Morris. MR. C. MANNESS: One question, Mr. Chairman, with respect to Other Expenditures; I'll ask the question now. I notice in the Supplementary Information provided, on Page 38, there was a major incr ease in equipment purchases, roughly $1 7,000 or $1 8,000.00. What's the reason for this major . . . ? HON. E. KOSTYRA: This is additional information, systems equipment, like microchip computers and word processors.

This section, and the member may be aware - well, it's contained in the comments above, provides assistance not only to Treasury Board , but also provides training assistance to other government departments, so the equipment was pur chased for their own use, but also the use of other staff in other departments and agencies in the training role that they play with respect to the information assistance. MR. CHAIRMAN: 3.(e)(1) - pass. We'll take up 3.(e)(2) and 3. (e)(3) together , Other Exp enditur es, Less: Recoverable from Other Appropriations- pass.

Resolution No. 69: Resolved that there be granted to Her Ma jesty a sum not exceeding $4,488,000 for Finance, Comptroller's Division, for the fiscal year ending the 31s t day of March, 1987-p ass. Item No. 4.(a)( 1) Taxation Division, Admini stra tion: Salaries - the Member for Morris. MR. C. MANNESS: Mr. Chairman, I'd like to know from the Min ister specifically how much the Scientific Research Tax Credit ha s cost the Provi ncial Government.

A year ago, the Mini ster ind icated - at the time, the former Minis ter ind icated that there were not hard figur es - he did not have hard figur es with respect to the loss represented to the Province of Manitoba. I'm wondering today if the Min ister could provide us with the figur es associated with that loss of revenue. HON. E. KOSTYRA: The department - my mike seems to be off when I'm speaking and on when I'm not spe aking. Is there a problem? it's on now.

The department has asked for that information from the Federal Government but, to date, we have not received any information in terms of what impact it's had. MR. C. MANNESS: Mr. Chairman, the department asked this question of the Federal Government a year ago. Is the Mi nister trying to tell me that there's been no in formation forth coming from the Federal Government over the space of a year and two months since the former Min ister ind icated in May, 19 85 that at tha t tim e they were requesting of the Federal Government an ans wer to that question?

Certainly we had the 1984 tax year past us, and the 19 84 taxes were paid in May, 1985. We're now over a year after that point. Surely we must know the answer to that question with respect to 19 84. So I would ask the Min ister what has taken so long for Ottawa to reply to tha t qu es tion? Surely the department, provincial ly, must have some preliminary figures with respect to that number. HON. E. KOSTYRA: We have no rationale to give the member in terms of why we haven't received that information from the Federal Government.

The staff have suggested that part of the problem is that the majority of those issues would have been involved well into 1985 and, indeed, into 1986, so some of the impa cts in terms of the filing of the tax returns, I presume, have not been totally accou nted for by the Federal Government at this point. I have no other reason to give the member other than the department has asked the Federal Government for that information, but to date has not received it. MR. C. MANNESS: Well, I ask the Min ister , Mr . Chairman, whether or not that's a priority issue?

Is it a numb er that's relevant to the government for whatever purpose to know because again, it would seem to me that given the fact that all the exemptions that were used basis that, that ... - (inaudible) - ... that were applied for and used in the 19 84 tax ... - (inaudi ble) - ... certainly be able to be monitored and furthermore, I would ask the Mini ster whether he's been in contact with other Provincial Governments to ascertain what the total loss was to the provinces as a whole. Mr.

Chairman, I have some suspicion that the greatest uptake under that tax credit scheme was within the Province of Manitoba, and I would think that the Mi nister of Finance would want to be in a position to dis credit my comment or to say, in fact, that's not correct. So I would ask him again firstly, whether or not the greatest uptake in a percentage basis was in Manitoba; and secondly , has he di scussed it with other provinces?

Have they experienced the same type of uptake and, if not, can the Min ister tell us or staff tell us why the experience of investors who rush to use that may not have been as great on a percentage basis or on a proportionate basis in other provincial jurisdictions? HON. E. KOSTYRA: Well, I don't have the answers to the questions that the member asks. In terms of is it a priority for us to get that information, obvious ly, we'd be interested in that information, but given that situation 1607

Tuesday, 8 July, 1986 doesn't exist anymore outside of those that were grandf athered at the time of the change, I wouldn't say it's a critical priority that we have that information from the Federal Government immediately. Items that are of a mor e cri tical na tur e to us with the Federal Government is the situation with respect to the farm gas. We see that as a more critical issue for the Federal Government to deal with, so I can't say that it's a priority to get that information. Su rely, we want some of that information.

In terms of the percentage uptake being higher here than other jurisdictions, I can't quantify that. We know from information we've been able to receive generally with respect to that kind of activi ty, through the Securities Commission there was a lot of activity here in regard to that area.

Whether or not that's higher than other provinces, whether or not that relates to the level of taxation in the Province of Manitoba, whether that relates to the amount of money available for those kind of investments, I don't know what any of those factors may have played in the amount of takeup in the province, nor do I know whether or not our takeup here under that is higher or lower than other jurisdictions on a capita or on any other basis. MR. C. MANNESS: Well, Mr.

Chairman, it would seem to me that would be critical information on this . . . because obviously then in a global sense there was a much greater uptake than the Province of Manitoba by people who are resident here who have to file income tax and being resident here, it would ind icate to me as a casual obs erver in a qua litative sense one of the reasons for that might be, as the Mini ster used in his own words, the fact that our provincial rate of taxation in a relevant sense is higher than other provinces.

I would think, therefore, the Mini ster would want to see whether or not there was a major increase relative to other provinces in the uptake by investors within this province. So I had heard, Mr. Chairman, that close to $1 billion was lodged in the province, that possibly the loss to Manitoba in a revenue sense might be upwards of $10 0 million. These are numb ers that are floating around now for a year. I would think that the Min ister of Finance would want to know whether there is any accura cy, whether there's any foundation for those types of rumours as they float around the marketplace. HON. E.

KOSTYRA: Well, again, I can't give any defi ni ti ve an swer because we do no t have th at information. If we had it, I would present it to the member. What we can say is that the growth in income tax revenue has been modest in terms of overall growth. Whether or not part of that shortfall, if there is a shortfall, if it's due to that factor or due to other factors, we can't at this point ascertai n.

The fact - and the member made out like it was some revelation from me that I suggested that one of the factors may be the taxation level to the extent that that particular tax break, tax dodge - whatever term you want to use - is of benefit to people who are at higher tax brackets, if that would hold true, then the fact that Manitoba has for higher income tax brackets, a relatively high level of taxation, then that may indeed cause more people here to look at that.

I don't deny nor do I apolog ize for the fact that at higher income levels there's a high level of income taxation here in Manitoba than there is in most other jurisdictions, and then at the lower levels that there's a lower level of income taxation on low incomes. I don't deny that nor do I apologize for that.

So the fact that given that situation that this particular tax break or tax dodge would have greater interest to those and have some impact on the amount of takeup in the province may well be a scenario, but using the member's terms of the loss of income tax revenue of 100 million in the province, I don't believe we can su bstantiate any thing near that in terms of a decrease in revenue growth out of the income tax. MR. C. MANNESS: Mr.

Chairman, I won't belabour the point, but obviously in due course, the Federal Government and Revenue Canada would be able to probably provide a num ber to the Provincial Government with respect to that whole area.

I would ask the Min ister, once this Scientific Research Tax Credit became an issue, whether or not he felt any urge or he felt any desire to question officials from the Department of Finance as to whether or not they had partaken in that type of activity or did he feel that was strictly a personal financial matter on behalf and chose not to make it an issue with people within the Department of Finance or, indeed, other senior people in other departments of gover nment. HON. E. KOSTYRA: Well, I was not in a position of being Minis ter when that situation was put forward there.

I've not asked staff of the department whether or not they had partici pated in that . . . MR. C. MANNESS: Mr. Chairman, I would like to move on to the whole area of tax reform. The Min ister and the First Min ister have ind icated on a number of occasions and other members opposite have indica ted that they would like to see major tax reform. They even have a resolution before the House which we began to deba te today dealing with that issue in one form or anot her.

I would ask the Min ister what his government is doing in a policy sense or in an attempt to work toward some government position that they may lay before either the Federal Government, or in the form of a White Paper from the members opposite to the people of the Province of Manitoba, which would include, of course, the government's basic beliefs, the changes that they would like to see brought towards this whole tax regime. I've asked the Min ister this question before and I would pose it again.

Will the government be preparing a policy decision with respect to tax reform, seeing it's very close to their hearts, seeing as a member debated from their side, who said earlier tod ay, the former Min ister of Finance who would bring this su bject up almost in every federal-provi ncial meeting at which he would atten d, talking, of course, at that time in very general terms, oh, specifi cally pointing out the exemption under capital gains that this government finds offensive at this point in time?

But I would ask the Minis ter if his government is going to go further on the issue and provide a comprehensive program or document which will lay out 1608

Tuesday, 8 July, 1986 some of their considerations, some of their beliefs, as to how we should begin to, or how the evolution of the tax regime could develop to its next chapter. So, Mr.

Chairman, I think the question is critical because members opposite keep using that term over and over again, and I think it's incumbent upon them if they believe it's such an important solution to the problems as sociated with debt and, of cou rse, accumula ted deficits and, of course, to the threat as they see it, indeed as many other people see it, threats to social services in support of the needs of the province and the population of the Province of Manitoba. So I would ask the Minis ter what the government will be doing in this whole area? HON. E.

KOSTYRA: Well, the government has been suggesting to the present Federal Government, and indeed the previous Federal Government, that there ought to be a comprehensive look at tax reform in Canada. As the member is well aware, the majority of taxation comes under the Federal Government's control, or control in terms of the mechanism even though that there's a provincial income tax system in all provinces in Canada and only one of which is delivered di rectly.

There hasn't been much inclination by any of the recent Federal Go ver nm ents to look at any comprehensive tax reform, though I might add I note from provincial Minis ters that there seems to be more concern or at least additional provinces that are sharing that concern. I note recently that the Province of Ontario, that the finance people there are suggesting that there should be a look at comprehensive tax reform in the countr y. We will continue to raise that issue and to press the Federal Go ver nment to do tha t in cooperation with the provincial governments in Canada.

In terms of Manitoba, we are committed to look at the full range of taxation measures within the province's control and those that are outside or admin istered through the federal system, to look at how we can bring about greater fairness in the system. it's our intention to be able to share with members, to share with the public of Manitoba, later this year, the latter part of this year, some public documentation in terms of the philosophy and the options that government might be able to consider in terms of bringing about reform within the provincial context and also to look at what we might be suggesting at the federal context or in the federal arena.

So I would expect the latter part of this year to be able to have that kind of document or report that the member refers to for the information of members and for their input, comment, and that of the larger public in Manitoba. MR. C. MANNESS: I am wondering if the Minis ter could ind icate whether this is being presently dr afted , drawn up, within the department, or is this document using the expertise of outside resources, or a combination of both. HON. E.

KOSTYRA: The driving forces within the staff of the government internally, but there are consultations taking place with other governments in Canada to review their experiences and whatever work they may have done in this area so that we don't redo all that work in the province. I certai nly intend, as Min ister, when time permits, to have consultations with those within the communi ty that have a greater deal of interest or knowledge with respect to taxation from a variety of quarters to get some input prior to looking at a public document for comment. MR. C. MANNESS: Mr.

Chairman, in debate today on the resolution dealing with income tax, the Member for Kildonan ind icated that it would be his desire, if the Federal Government were not prepared to see to the wishes of this province with respect to major reform in taxation, that we, as a province, should go alone in the collection function similar to what takes place today in Quebec. I would ask the Minis ter whether or not this is the general policy of the government, or was the Member for Kildonan expressing his personal views? And I guess I would go further than that.

I would ask the Minis ter, who may or may not debate that resolution, to ind icate what his personal views are on that matter. HON. E. KOSTYRA: Well, I intend to join that debate hopefully when the occasion permits. The positions that I provide to this House as Min ister of Finance are that as Minis ter of Finance and on behalf of the government. That area is one that I have specifically asked to be reviewed. I think we have to look at what are the costs of setting up a provincial system.

I think the last time it was reviewed some years ago it, the review ind icated it would be much more costly than the present federal­ provincial situation. We certainly want to review that again to see if that is the case and also to look at whatever advantages and dis advantages may happen if one does set up their own taxation system. I would say in a general way that the position of this government is to support a common system throughout Canada, provided that that system is one that has the degree of fairness that we believe should be in the system.

So it would be our desire to maintain a national system so we that don't have separate systems in each province because, by nature, that not only incr eases the cost and the paper burden on individual taxpayers but also I believe in a country like Canada I don't think it is a desirable thing to have a proliferation of dif ferent basic tax systems in an area like income tax in each of the respective jurisdictions. But it is an area that we are exa mining and intend to review as part of the review that I spoke of earlier. MR. C.

MAN NESS: We're a year down the tracks since the Province of Saskatchewan brought in their version of a minimum tax. I'm wondering if the Min ister can ind icate whether his deparment staff have liaised at all with Saskatchewan and whether they can report as to the success or the failure of that new approach to taxation one year later , and whether or not the government is actively contemplating introducing that type of a system into the Manitoba tax regime. HON. E. KOSTYRA: There cer tainly has been discussion with officials in Saskatchewan to get a better 1609

Tuesday, 8 July, 1986 under standing of what they're doing. I don't think there's any evaluation to date on their system, either that they've done or that outside groups have done. lt is an area that is part of the large list of options that we'll be looking at in terms of the review.

I might also state that I had some discussions with the Federal Finance Min ister about that concept, and he ind icated that the Federal Government only approved it as a trial project. lt was his terms for the Province of Saskatchewan for a two-year period and until there was some experience with Saskatchewan, he ind icated that he would want to have discussions with other Finance Minis ters prior to looking at whether or not to extend that beyond that trial period or to extend that to other provinces.

In fact, he had ind icated that it was going to be dis cus sed at our last meeting and it never did reach the agenda, so I presume it will come up at a future meeting. Part of the problem with the Saskatchewan system is the fact that the Federal Government will only allow that minimum tax, or flat tax - whatever you want to call it - will only allow the Provincial Government to go so far up the income tax form so that there's a lot of deductions that are allowed prior to the imposition of that flat tax.

Unfortun ately, a lot of the deductions that general taxpayers, ordinary taxpayers are eligible for, fall after that level. If the Federal Government were agreeable to allow for that minimum tax to be placed in an earlier part of the income tax form then I think it would provide greater fairness. But apparently with Saska tchewan there was a great deal of difficulty in getting it to the point it was with respect to the allowable deductions. MR. C. MANNESS: Mr.

Chairman, I'd ask the Min ister whether or not his government has a position with respect to the business transfer tax that's being named now, and is it being consider ed by the Federal Government, and whether or not there will be some commentary with respect to that tax, the methodology and the application within this comprehensive document that he says may be coming down by the end of the year?

Furthermore, whether he will be asking groups in the provincial scene to make comments specifically to that, or will the Government of the Day be coming out in some position on that tax, as stated in the document at that time? HON. E. KOSTYRA: We have been watching that development from the Federal Government, from their initial interest in the so-called flat tax, to the Canadan version or the Wilson version, called the Business Tran sfer Ta x, which is a form of that tax without calling it that.

We did receive a fairly extensive confidential briefing at the request of the Federal Minis ter at the recent Finance Min isters' meeting and we raised a number of questions in terms of potential impacts of that tax on the province because it is, by nature, some what of a revolutionary tax system, tax change that would impact in a numb er of di fferent ways that I think requir es some further thought and discussion.

At that time it was ind icated that we will be provided with further inf orma tion and there will be further discus sion with the Provincial Finance Min isters prior to the release of some form of public paper on that tax later this year by the Federal Government. As I think we see it, the implementation is still some time down the road after the Federal Government has a process of public consultation, as I understand their plans at the present time. So we have not formed, as I said to the member in the House not that long ago, we have not formed a position.

We are reviewing it, looking at what it would mean in the Manitoba context, and we'll not form a position until we have the opportunity of seeing the more final proposals and have some of our questions answered. I would certainly invite comment on that, in terms of helping the province form a position vis-a-vis that tax when the time is opportune and that information is available for public comment. But of course it's up to the Federal G