May 9, 2002 RESOURCE COMMITTEE

Pursuant to Standing Order 68, Wally Andersen, MHA for Torngat

Mountains, replaces George Sweeney, MHA for Carbonear-Harbour Grace.

The Committee met at 9:00 a.m. in the House of Assembly.

CHAIR (Mr. Walsh): Order, please!

(Inaudible) our deliberations this morning. Before we begin I would like to

welcome all participants. I will ask the minister to have the staff introduce

themselves in just a moment. There are a couple of housekeeping duties first. I

would like to move the minutes of our previous meeting.

On motion, minutes adopted as circulated.

CHAIR: This morning I will ask our members of the committee to introduce

themselves and then, minister, we will go to you.

For the sake of the guests of the minister this morning, just a reminder that

in order for you to be recorded - because you are now, in theory, witnesses

before the House of Assembly. All questions of course through the minister, and

the minister may indeed direct the question to a specific staff person with him

for further clarification.

I would ask each individual to identify themselves into the microphones,

bearing in mind that when you begin to speak - the people in Hansard tend to

recognize our voices having heard them, unfortunately for them, day in, day out,

week in and week out, year after year - they may not know yours. In order for

them to know who it is that made a presentation, watch for the red light to come

on in front of you. When the red light is on you can begin to speak, but begin

by identifying yourself by name and then go into your answers.

With that in mind, we will do our introductions. We will start with Mr.

Hunter.

MR. HUNTER: Ray Hunter, MHA for Windsor-Springdale District.

MR. T. OSBORNE: Tom Osborne, MHA for St. John's South.

MS M. HODDER: Mary Hodder, MHA for Burin-Placentia West.

MR. BUTLER: Roland Butler, MHA for Port de Grave District.

CHAIR: Jim Walsh, Chair.

Minister.

MR. PARSONS: Thank you, Mr. Chairman.

Kelvin Parsons, Acting Minister of Industry, Trade and Rural Development.

I have with me this morning, from the department, the following persons. I

will name them and perhaps they could identify, for the benefit of the committee

members, who they are. Mr. John Scott, who is the Deputy Minister; Mr. Larry

Guinchard, who is the Assistant Deputy Minister responsible for regional

operations back here. Maybe you can hold up your hand so everybody knows who you

are, as I say your name. Mr. Phil McCarthy, the Assistant Deputy Minister for

Strategic Industries and Regional Development. The Assistant Deputy Minister for

Trade and Investment is Donna Kelland, who is not with us this morning. We have

with us, in her place, Paul Morris, who is filling in for Donna Kelland, the

Assistant Deputy Minister. Terry Johnstone is the Executive Director of

Technology Development and Corporate Planning; Bill Stirling is the Executive

Director of Regional Economic Development; Ted Lomond, who is the Executive

Director of Federal/Provincial Agreements; and Mr. Ken Curtis, who is the

manager of Financial Operations, Central Administration Division.

CHAIR: Minister, it is customary to begin with an opening statement and

if you wish to do that, by all means do so. Then I will ask for someone to move

1.1.01. and we can begin our questioning.

MR. PARSONS: Thank you, Mr. Chairman.

CHAIR: I am sorry. Minister, I probably should do that first because your

opening statement will be part of the estimates.

Subhead 1.1.01. moved by Mr. Andersen, seconded by Mr. Hunter.

Minister, by all means.

MR. PARSONS: Thank you, Mr. Chairman.

As indicated in my introduction, I am in an acting capacity here. I certainly

would like to take this opportunity, if I might, in very short order and give a

brief introduction. It is a pleasure to be here this morning.

Let me begin by saying that job creation and economic growth remain key

priorities for this government. Over the past four years our economy has been

growing. It has become much more diversified. Employment is increasing and, in

fact, reached an all-time high in 2001. Unemployment is falling. Out-migration

is slowing. The trend line for all economic indicators is moving in the right

direction. These gains are being realized throughout the Province across a

number of sectors and are not just confined to the St. John's area. In fact,

63 per cent of the 24,300 new jobs that have been created since 1996 have been

created outside the St. John's area. All regions from the Province are

benefitting from our economic progress, although not all at the same level yet.

This government has an aggressive and clear plan for economic growth and job

creation. It is called The Renewal Strategy for Jobs and Growth and was

released as a companioned policy document to last year's Budget. It is an

action oriented agenda with over 130 specific priorities for action, and fully

two-thirds of the priorities for action focus on the challenges confronting

rural Newfoundland and Labrador, making it a strong rural agenda as well.

Continued support for the implementation of The Renewal Strategy for Jobs and

Growth is a major part of the 2002 Budget, as it was in last year's

Budget.

The Department of Industry, Trade and Rural Development is being allocated

$47 million to lead its implementation to build on the strong foundation and

economic momentum we have established in recent years. This includes an

additional $2.8 million in a new program and operational funding to strengthen

its capacity to advance and diversify the economy and create new jobs throughout

the Province.

Among other priorities, these new resources will support the strategic

partnership initiative between business, labour and government that was launched

in January of this year, as well as a new business investment attraction

initiative that was announced in the Throne Speech. This new initiative will be

modeled after and emulate the success achieved by Network Newfoundland and

Labrador in attracting new call centres and new jobs to the Province in recent

years.

Small business development will also continue to play a major role in

government's overall economic development agenda. A small business advisory

council will be established in 2002 to provide ongoing advice and support to the

Minister of Industry, Trade and Rural Development on appropriate new measures

that can help grow this vital and dynamic part of our economy.

Funding, in the amount of $2.6 million, will be renewed for the Strategic

Enterprise Development Fund in the department to directly encourage new small

business startups and expansions in all areas of the Province. The significant

resources being allocated by the department reflect government's strong

commitment to an action oriented and progressive economic development agenda.

This morning I will respond, if possible, to the particular inquiries that

might be put forward. However, I realize my limitations as well in terms of a

knowledge base. So I will, in many instances, if and when needed, defer to the

officials of the department to provide the information that you might require.

Thank you.

CHAIR: Thank you, minister.

We will begin questioning. Which has been customary in our committee, we have

allowed the Opposition to begin and pretty well a free-flow between our

colleagues and the Opposition, and the minister and the department. A reminder

to our own members, of course - if there are any questions I tend not to look in

that direction. I tend to stay with the Opposition for the first hour and-a-half

or so.

Who would like to begin?

MR. PARSONS: Excuse me, Mr. Chairman. I was delinquent in my

introductions. I also have with me, on my left, Mr. George Sweeney, who is the

MHA for Carbonear-Harbour Grace. He is the Parliamentary Secretary to the

department.

CHAIR: And apparently the longest sitting politician over there since

this new government started.

MR. SWEENEY: It seems that way.

CHAIR: All right then. Mr. Osborne, would you like to begin?

MR. T. OSBORNE: Thank you, Mr. Chair.

I will start with some of the budget items. I will get into some general

questions later.

In the Minister's Office there was an increase from $316,000,

approximately, to $350,000 in Salaries. I am just wondering if there was another

person hired on there or what the reason is for that increase?

MR. PARSONS: That was last year. Yes, there was an extra special

assistant hired due to the Minister, at that time, of Industry, Trade and Rural

Development also being the Deputy Premier. Given the additional duties that he

had as Deputy Premier there was an extra assistant hired to help him with that.

MR. T. OSBORNE: Under Transportation and Communications; transportation

is $230,000, approximately. Salaries for the Minister's department was only

$350,000, and that included extra staff or an extra assistant. That is quite an

amount for transportation for the Minister's Office. Can you give us a

breakdown on what comprised that allocation?

MR. PARSONS: There were three reasons, really, for the increase from

$84,500 to $229,000. One involved the - there was more extensive travel both

throughout the Province and outside the Province as part of trade missions that

the minister took

part in. There was also additional travel that the then

minister incurred in his role as Deputy Premier which were charged off under

this heading here.

As you are probably aware, the Deputy Premier played quite an involved role

in the ongoing White Rose negotiations. So that involved quite a substantial

amount of extra travel. Also, I believe for the first time in some years, there

was a parliamentary secretary to the minister during that time period and the

parliamentary secretary's travel costs would also be reflected there as well.

MR. T. OSBORNE: Under 1.2.01., Executive Support, there was an increase

in Salaries there as well, from almost $800,000 to $910,000.

MR. PARSONS: There was a temporary assignment of two individuals on the

Communications section. They came from Communications and they were over here

under Executive Support, which led to the increase here. Now they have been

budgeted, in this year, over in another section; 2.1.01.

MR. T. OSBORNE: In total there is over $2 million in travel for the

Industry department which is higher than - for example, I believe there was

approximately $1.5 million for Mines and Energy, which was obviously a very busy

department with negotiations with Inco and the Lower Churchill, and so on and so

on. Can you give us some indication or some explanation as to the reason for the

high travel budget in this particular department?

MR. PARSONS: I will make a general comment and then I will pass it on to

the deputy who certainly has more in-depth detail.

You will notice virtually every heading under Industry, Trade and Rural

Development has a fairly substantial transportation budget associated with it,

because virtually everything under it requires transportation. For example, if

you are talking trade missions you are talking quite a bit of travel which is a

substantial part of the department's work. If you are talking industry, when

it comes to Voisey's Bay or being anything that has industrial benefits

associated with it - White Rose, the Lower Churchill, Voisey's Bay - anything

of that nature would require substantial travel by department officials.

Rural development, even within the Province - we have twenty zone boards. So

keeping in contact with every zone board and development agencies in the

Province alone requires a lot of staff travel. Because we just cannot be

confined provincially, of course, a lot of our travel is extra-territorial. In

fact, quite a bit of it is even international, which is quite expensive. John

Scott can certainly give you a more detailed breakdown on that.

MR. SCOTT: The minister has summarized it very well. The focus of the

department's effort, particularly from a trade and investment point of view,

is promoting the Province's advantages to the investment community within

Canada but significantly outside of Canada, both in Europe, in Asia and in the

United States. That is achieved through trade missions, as the minister

referenced, investment missions and one-on-one sessions with potential investors

who are interested in looking at Newfoundland and Labrador as a location to do

business. That is the essence of the department's mandate from a trade and

investment point of view, and that is a very expensive business to be in. If we

are not in that business however, than we are not going to be competitive and

our approach is to be very proactive, be very targeted at the same time and

focused, but to be very proactive on that front. It does cost money to do that

part of the business.

The department's budget on travel, when you look at the two former

department's - Development and Rural Renewal, and Industry, Trade and

Technology - has been about $2 million over time. That has not increased or

decreased dramatically over the last three or four years. What we see this year

is fairly typical of our approach.

We have also published openly, on our Web and otherwise, our full list of

trade and investment missions for the year. We do it about a year in advance so

that we have a well organized plan in that regard. That is in the public domain,

and there is twenty-odd missions that we organize every year on a very

structured basis.

MR. T. OSBORNE: Under 1.2.02., Administrative Support, under Salaries;

there was a slight decrease in Salaries under the estimates for last year and

what was actually spent. Was there a change in positions within that department?

MR. PARSONS: Actually, it was budgeted $74,100 based upon including

summer relief. The summer relief required was less than originally anticipated;

hence, the payouts became less.

MR. T. OSBORNE: This year it is budgeted at $73,000.

MR. PARSONS: Again, it is budgeted. We think we will have the same relief

necessary this year as we had in prior years. That may well turn out again to be

down. It depends upon how things transpire, whether you do or do not need to

hire any summer relief.

MR. T. OSBORNE: Under Transportation and Communications, one of the areas

where the allocation was actually lower than what was estimated. First of all,

if you could give us some idea as to the reason for a transportation budget

under Administrative Support. Secondly, why the amount spent was actually lower

than the estimated amount.

MR. PARSONS: I can certainly address the second part. I will leave the

first part of that to the deputy. It is one of those things where advances in

technology have actually paid off here. The amount that we spend, normally, in

postage and telephone costs have declined substantially in that area as a result

of e-mail. There was quite a substantial savings as a result of using e-mail.

Now, regarding the transportation thing, again, the deputy could certainly

give you the rationale for why we had transportation needs there.

MR. SCOTT: Most of this allocation is not for transportation as much as

it is for communications. For example, all of our telephone costs or most of our

telephone costs and postage costs in the department are centered in this

activity, administratively, as opposed to transportation for staff.

As the minister noted, we have been able to achieve some very effective

savings through the use of electronic Web sites, e-mail and what not,

particularly with a very decentralized department such as ourselves. So, it is

really not transportation for staff so much as support costs: telephone, e-mail,

postage.

MR. T. OSBORNE: The Information Technology portion of this particular

department, subsection 12.. There was almost $600,000 spent on Information

Technology. I am just wondering if you can give us some idea of what that money

was spent on in this particular area and some explanation as to the increase in

the budget?

MR. PARSONS: The increase from $470,000 there to $598,000 - $600,000

roughly - was due principally to enhancements to the Success~Works computer

program. There was a particular program that we had begun in the department.

That is where most of the costs came from, as well as replacement and upgrading

of hardware and software that we had. The needs vary from year to year. You

anticipate what you think you may need based upon the projects that you have

gotten approved; but, throughout the year there may be a hardware or a software

need which arises that you have to address. We anticipate this year we are going

to be more in the range of the $377,000 that is referred to there. But, the

reason for last year was principally the Success~Works computer program.

Ken, would have any additional details as to the types of IT projects that

were approved.

MR. CURTIS: The Budget for 2002-2003 covers a number of system

development projects mainly, and the ongoing maintenance of the department's

computer network.

In terms of new or enhancement to existing systems, there is money there to,

again, maintain the Success~Works program, the portfolio known to the

administrator, and the department's management information system. As well, as

I said, just ongoing maintenance of existing systems and just small allocations

in case there are some system breakdowns there.

The amount under Information Technology tends to vary from year to year,

depending on the level of projects that are approved and planned to be

undertaken in that year.

MR. T. OSBORNE: Thank you.

Under Policy and Strategic Planning, the estimated amount last year for

Transportation and Communications was approximately $57,000. There was an

increase there, as with most areas within the department. I am just wondering if

you could give us some indication as to the reason for the increase?

MR. PARSONS: Yes, I will actually ask Terry Johnstone here.

In fact, the reference to employee benefits; you will notice Employee

Benefits were up quite a bit from $4,300 to $21,300, the line above that, and

Transportation and Communications went from $56,700 to $81,500. There was an

interdepartmental transfer there. I will ask Terry Johnstone, because he is

quite familiar with the details, as to what happened here.

MR. JOHNSTONE: The primary reason for the increase relates to the

Organizational Development Initiatives that are undertaken on behalf of

government. There is $2 million provided to hold, in aggregate, for departments

to undertake organizational development initiatives. Our allocation was $65,000.

It was put in after the budget year. It primarily went into Employee Benefits,

Transportation and Communications and there was a small increase in Purchased

Services as a result of that $65,000 added.

MR. T. OSBORNE: Okay. Thank you.

Under Professional Services, this year there is $505,000 allocated for

professional services. Could you give us some idea as to what that will be used

for?

MR. PARSONS: You are aware of the Peritus project that was referred to;

in fact, referred to here in the House earlier. That is the Work Culture

Research Project that is being undertaken. It was sole-sourced to a firm in

Winnipeg. This is budgeted money in the event that there is a need for Phase II.

We do not have the report back, in fact, yet from Phase I. We anticipate having

it in late May, early June. Depending upon what that Phase I says, we will or

will not need to move to a Phase II. So, the money has been budgeted in the

event that we need to. Obviously, we will make a decision once we know what

Phase I has indicated to us.

MR. T. OSBORNE: Under the subheading, "Appropriations provide for

the research, development, coordination, monitoring and evaluation of strategic

policies, programs and initiatives...". I am just wondering if you can give

us a more in-depth explanation as to the type of research and development and

programs that are administered under this particular section?

MR. PARSONS: I defer it to Terry Johnstone here.

MR. JOHNSTONE: Sorry, I did not catch all of the question.

MR. T. OSBORNE: My question was if you could elaborate on the subheading

as to the type of research development and the programs and initiatives and so

on that this particular area of your department is responsible for?

MR. JOHNSTONE: Sure. We would look at other jurisdictions and see what is

going on from an economic development perspective to see if there are lessons

that we could learn from other jurisdictions. We would look at various

monitoring and evaluation frameworks that have occurred in different

jurisdictions, not only in Canada, but internationally, and see what is

applicable to us here in Newfoundland.

MR. T. OSBORNE: Thank you very much.

Under 2.1.01., Export and Investment Promotion, it says, "Appropriations

provide for activities which encourage increased exports of goods and services

by provincial industries and businesses in the national and international

marketplace as well as activities which encourage increased investment generally

within the Province."

I am just wondering if you can elaborate on the types of initiatives, the

types of programs, that are funded under this particular part of your

department?

MR. PARSONS: I will call upon Paul to respond to that one.

MR. MORRIS: The divisions of the department, the Trade and Investment

Division, undertakes a variety of activities to help Newfoundland and Labrador

companies export their products and services from the Province and to introduce

those companies to new markets. So, we would undertake a number of trade

missions to new and emerging markets, to take those companies there and

introduce them to perspective clients.

MR. T. OSBORNE: I am sorry, I cannot hear you very well. I am not sure if

your mike is on or not.

MR. MORRIS: Yes, the mike is on. Can you hear me better now?

MR. T. OSBORNE: Yes.

MR. MORRIS: The department undertakes a number of activities on the trade

front and on the investment front. A large part of our mandate is to introduce

Newfoundland and Labrador companies, who are new to exporting and want to get

into the export marketplace, to introduce them to new markets. We would

undertake a variety of trade exhibitions and trade missions to those new markets

and also attend a number of events to help increase investment into the

Province.

MR. T. OSBORNE: Would they be in the form of advertising campaigns

internationally and so on, or how would you attract outside investors to the

Province?

MR. MORRIS: Yes, advertising campaigns would certainly be part of the

mandate of the division. We would undertake advertisements in national and

international newspapers. We advertise. We have a Web site that we have a lot of

promotional materials on. We also undertake very targeted and focused missions,

and we do research on companies that may have an interest in investing in the

Province.

MR. T. OSBORNE: Would the Province actually subsidize an outside investor

to the Province as opposed to a trade mission leaving the Province, sort of the

other way around? Does the Province actually fund outside investors to the

Province to see what we have to offer?

MR. MORRIS: Generally speaking, no. We do not fund companies to come to

the Province on a prospecting mission per se; to have them come and take a look

to see if it is worthwhile investing in the Province. We would not pay for those

expenses.

MR. T. OSBORNE: The trade missions that leave the Province, what type of

financial assistance is provided to companies who leave? Are they responsible

for the cost of the booths, their transportation, their accommodations? What

type of financial assistance does government offer to companies that they bring

along on trade missions?

MR. MORRIS: We offer a variety of assistance. In the case of a trade

exhibition, the department normally acquires floor space and provides the main

booth for the Province and the department. Companies are expected to contribute

financially towards the cost of that booth to offset the cost of the booth, in

some cases. That fee may range anywhere from $500 to $1,000, depending on the

sector and the type of companies that would be participating. We would also

offer, in some cases, particularly to small and emerging companies that are

going to the marketplace for the first time, we offer a small amount of travel

assistance to help them offset their travel costs. That is generally up to a

maximum of 50 per cent of the travel costs. Usually to a maximum of about

$2,000, depending on where the market is and where the exhibition is.

MR. PARSONS: If I might add to that, as well. It is easy to quantify the

cost of the trade missions and so on. It is more difficult, of course, to

quantify what economic or monetary benefit that we get back as a Province from

those expenditures. Just to give you some idea, in the last three years we have

had 141 companies and public sector agencies that have participated in these

missions. Sixty-two of those 141 have either signed specific commercial deals or

MOUs which led to commercial activity. Its cost, in three years, is about

$850,000 in terms of our expenditures for these trade missions, but the return

from the deals that have been struck are estimated to be $135 million. So it is

a substantial cost to do this - for example, $850,000 - but the returns from

those investments are far greater even based on the estimates and the

information that we have in the past three years.

MR. T. OSBORNE: Other than oil exports from the Province and, I guess,

the increased level of iron ore leaving Labrador over the past couple of years,

can you give us an indication as to the export value of products leaving the

Province? Again, discounting the oil and minerals from Labrador, are those

export values up or down, or have they virtually remained the same?

MR. MORRIS: Export values are generally up. The main areas that you see

in the export figures, as you mentioned, would be the oil exports, the fish

exports, mineral exports and newsprint exports. The exports of the sectors of

the economy that this department, in particular, is working with do not appear

in terms of large numbers, but those numbers are increasing over the last couple

of years, albeit modestly.

MR. T. OSBORNE: Do you have any idea of the dollar value of exports and

how they have increased? Would that be something that is available?

MR. PARSONS: I have some information here that may be of assistance.

Exports have almost tripled since 1992. They reached $6.2 billion in 1999.

MR. T. OSBORNE: Again, that includes the oil and mineral sectors, I

believe.

MR. PARSONS: Yes, this is exports generally; all exports for the

Province. The manufacturing value, manufactured items, was $2.21 billion in

2001, which was down slightly from the $2.22 billion that was reached in 2000.

Since 1992 there has been an increase in all exports, including manufacturing

which you are alluding to here, breaking it out from oil and gas and breaking it

out from iron ore shipments. Even the manufacturing sector has been going up,

but there was a slight dip down in 2001, from $2.2 billion to $2.1 billion; but

overall, in the last ten years they have been increasing.

We can certainly get more specifics and provide you with the actual sector

exports and the value for the past ten years. That is not a problem.

MR. T. OSBORNE: Okay. That would be quite beneficial if I could have a

copy of a breakdown of the export values and, I guess, whether they are oil,

paper products, minerals, fish products; I guess by sector. Do you have that

available, for like a five or a ten-year period? You just mentioned since 1992,

so perhaps for a ten-year period?

MR. PARSONS: We may have to consult with the statistics branch of Finance

because all of the information may not be in this particular department. But,

between our department, we will certainly undertake to get that information for

you. If we have to consult with Finance, we will do that as well. We will make

that available to you.

MR. T. OSBORNE: I know in 1997, I believe, the department - I am not sure

if the survey was conducted in 1997, but the information was available in either

1997 or 1998 on the number of jobs created in the Province as a result of

imports versus the number of jobs created, for example, in Ontario as a result

of export to that province. Are there any figures available - more recent

figures - on the value of our raw resources, the numbers of jobs that are

created in other provinces as a result of raw resources versus the number of

jobs created here as a result of imports?

MR. SCOTT: I am not familiar with what may have been done in 1997 when it

was the Department of Industry, Trade and Technology at that time, but we will

review our files to see whether we have any of that type of comparative

analysis. Whatever we have we would be pleased to provide to members of this

committee.

MR. T. OSBORNE: Okay, thank you.

Under 2.1.02., Investment Prospecting, there is an increase in the allocation

for Transportation and Communications this year up from $2,600 last year to

$16,100. I am wondering if you can give an indication as to the reasons for that

increase?

MR. PARSONS: In the prior year, the transportation costs were offset with

funding that we received from the Economic Renewal Agreement. That agreement, of

course, is terminated. So, we will not have the benefit of that money coming in

this year from those other sources. We had to put in from other sources

ourselves.

MR. T. OSBORNE: I wonder if you can give me some idea as to the Grants

and Subsidies appropriation there, or allocation? I wonder if you can give us

some idea as to where those grants and subsidies go?

MR. PARSONS: Fifty percent of that budgeted amount there is for the

operating cost of NETWORK Newfoundland and Labrador. The other 50 per cent of

that NETWORK Newfoundland and Labrador, of course, is covered by Aliant. The

budget this year is revised downwards due to a reduction in NETWORK Newfoundland's

operating costs. Last year it was $194,500, now it is $183,000. That is the

principle operating costs of NETWORK Newfoundland and Labrador. I am not sure if

you are familiar with that program. It is cost-shared by government and Aliant.

MR. T. OSBORNE: The investment prospecting part of the question that I

asked just a few moments ago about what we do to bring investment to the

Province, I guess that would be covered under this particular section?

MR. SCOTT: Yes, that is exactly right. This is the activity for the very

proactive targeted team that goes out and seeks new investment opportunities

and, as the minister noted, focuses in terms of a grant contribution to NETWORK

Newfoundland and Labrador for attracting our call centres. We do it through a

public/private partnership. In part we do it through the department; but, you

are absolutely correct in terms of your observation of the purpose of this

activity.

MR. T. OSBORNE: I guess some of the industry that would have resulted

from this particular allocation would have been - such as the call centres that

have been attracted, would that be part of what you target under this particular

section?

MR. SCOTT: Yes, that is exactly it. Call centres are a major part of our

targeted approach. As well, as announced in the Throne Speech and the Budget, we

intend to strengthen our capacity in this area and focus on other targeted

sectors of the economy. Just to give you a sense of what we are thinking about,

we are talking about aerospace, we are talking about specific niche markets in

manufacturing and in Information Technology. We want to take the success that we

have had through NETWORK Newfoundland and Labrador and call centres and emulate

that success, that model, into others areas. This activity will focus on those

other opportunities.

MR. T. OSBORNE: Okay. I am going to defer momentarily to the critic for

the area.

CHAIR: I would like to welcome the Opposition House Leader, but indeed,

the critic for the Department of Industry, Trade and Rural Development.

As has been the custom - at least in committees that I have Chaired - we have

afforded virtually whatever time the critic would require to ask questions

direct of the minister and the department. We will follow that format again this

morning. I say that just so that our guests would understand the committees -

well, not the committees, but I guess the way that I conduct my own committees.

With that in mind Mr. Byrne, if you would like, in your capacity as critic,

we will give the floor to you.

MR. E. BYRNE: Thank you.

The Chairman told me yesterday that there was not going to be very many staff

around this morning because some were out of town, so whatever questions were

asked that could not be answered or provided - but I said to him when he came

in: It is a good thing, you're all here.

Anyway, good morning. Thank you for the opportunity, Mr. Chair, to ask a few

questions.

Under the subsection, in the budget, dealing with Advanced Technologies,

Research and Industrial Benefits, page 130, subhead 3.1.01. It talks about

appropriations. The brief explanation is: Appropriations provide for the

identification, assessment and promotion of industrial benefits from major

resource development projects.

Last year $448,000 was spent. Could you give a more detailed explanation on

what those projects were, that were spent last year under this heading?

MR. SCOTT: This division is responsible for, as the note indicates,

looking at benefits and maximizing benefits. The primary focus of this group is

in the offshore oil and gas area. They focus, for example, on a number of

avenues in that regard. They are responsible for promoting the Province in

national and international market places in terms of business opportunities in

our emerging offshore oil and gas domain. For example, this group, or part of

them, are at the offshore technology show in Houston this week with the Premier.

They would also attend other international trade shows in Stavanger, in Britain,

in Calgary, in the Canadian context. They have a very strong presence at those

shows to both promote the Province's resources and industrial capabilities,

but also in terms of attracting new business opportunities for local firms on

joint ventures and the like.

This group is also responsible, under the direction of the minister and the

deputy, for negotiating benefits regimes in respect of offshore oil and gas

resources. This group was into, if you will, the White Rose negotiation very

intensively over the past year or so. This group also has the primary

responsibility of liaising with the Canada-Newfoundland Offshore Petroleum Board

in terms of monitoring the targets that are established in respect of benefits,

both on an industrial basis and employment basis for the offshore oil and gas

sector.

The other area that they are responsible for is the aerospace sector, and

take a similar approach in that regard in terms of promoting the capabilities of

local companies, strengthening the capacity of local companies, participate in

international and national opportunities. When you look at the aerospace sector

you are intrinsically tied to the defense industries. So, we look at major

procurement opportunities nationally in terms of new helicopter programs on a

national basis or other defense procurement activities in which Newfoundland and

Labrador companies may have a capability or an interest. They promote that

sector as well. That is the nub of the activities of this group, from a business

development point of view.

MR. E. BYRNE: In terms of this year, you have targeted approximately the

same amount of money. In terms of identification, I will focus in on that for a

moment. You can answer to the extent that you can, I suppose. What development

projects has this

section of the department identified vis--vis the

development of projects associated with our major resource development

industries? Whether it be offshore oil and gas, whether it be mining, whether it

be forestry, I guess all would be inclusive in that. Have there been any

specific projects that you can talk about this morning, either that were

identified last year as being underway or new projects that you are in the

process of identifying this year, and what sort of involvement the department

has in those projects?

MR. SCOTT: In terms of the major priorities for this year, it is to

follow up on White Rose to ensure that there are maximum opportunities for local

businesses to take advantage of those emerging opportunities, because they are

targeted in terms of the level of benefits for the Province. There is a lot of

followup work required with companies to make sure they are attentive to that

and have the right capabilities. That is a major part of the work for this year.

The other areas in which this group is engaged in is with respect of the

potential in terms of the Lower Churchill and certainly in terms of the Voisey's

Bay Project from a business-industrial benefits point of view, presuming that

there is an agreement on both of those projects. That would be a targeted

priority for this group, this year, on those two projects. Outside of the that,

I have referenced the aerospace sector in which we have targeted some

international opportunities. But, in the main, it is White Rose, Hebron/ Ben

Nevis. We always try and keep one step ahead. While Hebron/Ben Nevis has been

that the project and the project owners have put the pause button on, we

anticipate that it is only for a short period of time and we want to be

positioned to deal with that.

The other opportunity that has arisen which will require a great deal of

attention by this group is the resolution of the Nova Scotia/Newfoundland and

Labrador boundary; the South Coast. The opportunities that will create in terms

of exploration, in the first instance, in potential development and ensuring

that our companies are well positioned in that regard because that is a major

new opportunity of economic activity that will generate, again, new business

opportunities for our local industry. So, those are the areas in which we are

focused on for the next year.

MR. E. BYRNE: What opportunities of the department, minister, are

associated with White Rose, whether it be local procurement - you know, working

with the department of Advanced Studies, the ministry there, dealing with a

labour force training plan or education plan? Is the department involved in

that? Specifically, what opportunities do you see for the Province associated

with the development of White Rose as it plays itself out, as compared to the

local benefits that were signed under the Terra Nova agreement? Obviously, they

are two separate agreements but the philosophy and the rationale behind the

signing is completely different too, in terms of local benefits. So, if you

could elaborate, I guess, in terms of how the department is pursuing local

opportunities for local business and people generally, and how it is going about

that; elaborate.

MR. PARSONS: On a very general level, from my own perspective, obviously

White Rose will be a boom in terms of the Burin Peninsula area. When it comes to

Marystown, the shipyard and what was the shipyard, now I guess is going to be

more focused as a fabrication yard in terms of the direct employment in the yard

in that particular area. That will probably be one of the major beneficiaries of

the White Rose benefits to the area; the spinoffs that it will, in turn, lead to

in terms of the general economic well-being of the Burin Peninsula area.

We are also, of course, going to have the spinoffs that comes from

transhipment, which might be involved in that. No doubt there is also going to

be crewing involved, whether it is in the shipping point of view on the

transhipment issues or whether it is on the rigs themselves. Of course, you have

the general activity that accompanies - you have engineering. You have major

engineering firms that are involved in it. For example, SNC Lavelin, and a whole

group of other engineering type firms that are involved. So, we will certainly

see those benefits coming here. The good thing, I guess, about White Rose is not

only in the Marystown case, but we are also going to have some of the

fabrication done in the St. John's area, at the NEWDOCK facility. It is good

in the sense that it is activity, not only in the capital region, but it is in

one of those areas where we certainly need it, which is outside of the Northeast

Avalon area, in the Burin Peninsula area.

WITNESS: Terra Nova (inaudible).

MR. PARSONS: I have just been handed a reference sheet here on the

overall project management and engineering activity. This Province will have

about 82 per cent of this particular work compared to 44 per cent, which was

coming from the Terra Nova project.

Topsides fabrication and installation activity; we will get a minimum of 80

per cent of this work as compared to 46 per cent in the Terra Nova project. This

is great in terms of what the Province had hoped for, which was to maximize the

most benefits it could from these offshore oil projects for the Province and to

develop our capabilities as a Province, both from a fabrication perspective but

also from an engineering perspective.

MR. E. BYRNE: Has the department generated or participated in generating

an assessment of the skill levels of what those projects - White Rose, for

example - what the skill levels of that project will require? In an attempt to

identify, do we have the numbers of the skilled labour force readily available?

If not, where are those skill deficiencies that we can try to compensate it,

whether through proper labour management training issues (inaudible)? Has there

been an assessment done of the skills that will be required specifically for

this project and, I guess generally, the industry as it grows and emerges

further for other areas? Has it participated in such an assessment, and what are

the results? If you have, what have you found to be the results of that

assessment?

MR. SCOTT: In respect to White Rose, our approach has been to work with

the proponents, the companies: Husky and Petro Canada. As they work through

their own development planning of the project to ensure that the form and nature

of the development is in keeping with our ability to get maximum benefits -

which includes looking at the availability of a skilled workforce - and if there

are gaps, the ability to train them up within the required timelines.

The targets that have been established by the companies, agreed to by the

government, and will be enforced and applied by the Canada-Newfoundland Offshore

Petroleum Board take into account all of that. At this time we have not

identified any significant gap, either at the development phase or the

production phase of White Rose, which would suggest that we have any significant

deficiencies. The companies, obviously, are the ones that will be responsible in

the final analysis. It is a telling sign, in our view - in respect of the

fabrication, the topsides - that the company has entered, for the first time,

PKS into a fixed price, lump sum contract. They have assured us that they have

great confidence in the workforce, not just in Marystown but within the

Province, to met those targets.

MR. E. BYRNE: They have a history here in terms of salvaging the Hibernia

project singlehandedly. So they understand the workforce, yes.

MR. SCOTT: Yes. So, on White Rose we have a great deal of confidence with

the companies and all other players, including the Post-Secondary Education,

that there should not be a significant issue in that regard.

On the longer term basis we have been engaged with the industry association,

NOIA, to look at the longer term needs on a skills basis and identifying both

short-term, interim, and long-term gaps. Then working with the university, CONA,

and others to ensure that there are training programs available in sufficient

time to meet those anticipated gaps.

MR. E. BYRNE: Are there any reports or studies related to that, that you

may be in a position to release, for water consumption? Certainly, I am not

looking for information that would be either injurious to private sector sort of

companies or to the public interest, generally speaking, but any reports,

assessments, or studies that the department would be in a position to release

dealing with that topic.

MR. SCOTT: The report that we undertook jointly with NOIA, I believe is

already in the public domain, but I will check that.

MR. E. BYRNE: I have that one, but any others related to that.

MR. SCOTT: We will review our files, and provided that there is no

commercial sensitivity, we will be more than happy to share those.

MR. E. BYRNE: Yes, I understand.

MR. SCOTT: Our general approach is that the post-secondary institutions

need to be aware of that, both public sector and private sector; and the supply

companies need to be aware of that. So, we have taken a general approach that

whatever we have, in terms of forecasting our labour needs, is in the public

domain as a matter of course. But, we will check our records of recent times and

provide whatever we have available on that front.

MR. E. BYRNE: In terms of the Marystown Shipyard and Cow Head Fabrication

Facility and the recent transactions that have gone on, that has certainly been

in the public's mind and debated publicly. I am told that some of the

infrastructure in the fabrication facility, the crane for example, and others,

were part and parcel of Friede Goldman in terms of them taking some of the

equipment, infrastructure down there with them. Is there any truth to that, in

terms of some of the infrastructure that was put there, so that we could take

advantage of emerging, or position ourselves to take advantage of emerging

opportunities? I wonder if you could outline, to the extent that you can - not

necessarily transaction and the cost price, that has already been in the public

domain - anything associated with the capital investment originally that was

down there, by the public, in terms of (inaudible) equipment that is going to

be, from what I understand, taken from those facilities?

MR. SCOTT: PKS, when they were reviewing the asset base, looked at every

nook and cranny and determined in their own minds what was necessary to make a

successful long-term venture.

The crane that you are referring to is a very significant mobil crane that

Friede Goldman did bring to the yard. PKS has indicated, both to Friede and to

us during the negotiation phase, that that crane did not suit their particular

needs, both in respect of White Rose and their longer term plans. Part of the

negotiation they undertook with Friede Goldman was to leave that asset in the

hands of Friede Goldman. They have entered into an arrangement though that that

crane will stay on down there for, I cannot recall the period of time, but it

may be up to a year or more on a transitional basis. PKS intends to acquire new

cranage to meet its needs. That particular asset down there is not sufficient to

deal with the White Rose project. They are going to either lease or replace that

crane with other infrastructure.

MR. E. BYRNE: Based upon need, I guess.

MR. SCOTT: Based upon need.

To the best of my knowledge, all other infrastructure that was in the yard on

divestiture a number of years ago with Friede, and since acquired by Friede,

will remain with the yard. There was some inventory of steel and what not which

was of no value to PKS that Friede was free to take and dispose of. It was of

minimal value down there for a number of years. I am not aware of any other

asset, other than the crane, that is an issue.

MR. E. BYRNE: Under subheads 3.2.02. and 3.2.03., page 131, Research and

Development-Offshore Fund, and Special Initiatives-Offshore Fund. I had the

occasion to be on the West Coast about a year ago in the District of St. George's,

down around St. George's. There was a project that was funded there. I do not

even know the name of the project. It was funded there under one of these

development funds. I am not sure which one. You may be more aware of it in terms

of when it was funded and how it came to be funded in terms of docking

facilities and offshore loading facilities. One of the reasons I happened to be

down there was that I was invited down by a local company that had appeared in

the paper - I think it was 1997 or 1998 dealing with the shipment of aggregate

to the Boston-New York sort of marketplace. From what was indicated to me at the

time, this was a facility that had a million or $1.5 million spent on it. Are

you aware of the project I am talking about?

WITNESS: (Inaudible).

MR. E. BYRNE: Okay. I wanted just an explanation of some of the - how is

that going? What did it initially cost? Is it being utilized for what it was

supposed to be utilized for? There were a lot of questions from the local

community that came to me. I was not aware of it before I was there, but became

aware while I was there.

MR. PARSONS: The principal company was called Newfoundland Aggregate. It

was owned by a gentleman named Ron Callahan who is in St. George's.

MR. E. BYRNE: Were they involved with the project? They were not involved

with the Canada-Newfoundland project, from what I understand.

MR. PARSONS: There were two pieces, actually. One was the actual, shall

we say, mining of the aggregate, which was Newfoundland Aggregate's on land.

The other piece was to put the wharfage and so on in place so that they would

have the docking facilities and the roads to get it from the mine to the dock

and ship it out.

MR. E. BYRNE: They were two separate companies, is that correct?

MR. PARSONS: Two separate companies. The latter, the dock facility was, I

believe, a gentleman by the name of Dennis Dolomount. The idea was, of course,

you would have the infrastructure there, they would have the product. They would

cooperate and you would ship it off to - New Jersey, actually, had some

shipments sent and there were some markets being refined and actually shipments

made to P.E.I.

MR. E. BYRNE: It seems like a great opportunity because we have an

abundance of aggregate that we could, you know - in areas that do not have it.

MR. PARSONS: That company, Newfoundland Aggregates, also got into, not

only aggregate for construction materials down in New Jersey, but they got into

sand and salt for road purposes and so on in the wintertime.

I will be very careful from hereon in because it is a sensitive issue. I

understand there was a breakdown between the two companies; the aggregate

company and the wharf company. One was denied access to the dock. That has

become a legal battle. That is now before the courts. Government monies, of both

provincial/federal, went into both undertakings; but, the proponents there have

had a difference of opinion as to what their commercial arrangement was. That is

currently before the courts. I understand that the wharf person has engaged in

other aggregate ventures so that he can utilize the facility. But, Mr. Callahan,

who is involved with the Newfoundland aggregates, is taking some moves maybe

towards an injunction to stop that from happening. So, it is all before the

courts right now.

MR. E. BYRNE: I do not want to get into the details of that because it is

not relevant really to the discussion. I guess my questions come from the point

of view that it seems like a significant opportunity for the West Coast of the

Province. The availability of material, on the one hand, and a tremendous need

on the other hand for that material. I was just interested in how government

either tried to facilitate or facilitated the development of a potential

opportunity for people in the area. I guess that is the premise from which I am

coming from.

MR. PARSONS: Government has facilitated, and the parties have taken

opportunity of it. It is a case now of letting them iron out their differences

and see if they maximize their opportunity.

MR. E. BYRNE: Fair enough, yes.

Mr. Chairman, I have to step out of caucus for about fifteen minutes. I

wonder if I could take probably another fifteen or twenty minutes of questioning

when I get back at about 10:30, if that will be okay with everybody?

CHAIR: Mr. Byrne, more than appropriate. I am sure your colleagues will -

Mr. Hunter has not asked any questions as of yet. So I do not think there will

be any problem filling that fifteen or twenty minutes.

MR. E. BYRNE: Okay. I will be back in fifteen or twenty minutes.

Thank you.

CHAIR: Mr. Osborne.

MR. T. OSBORNE: I thank the Chair for the little bit of latitude there,

and we will carry on. I will entertain you for another fifteen or twenty minutes

until my colleague gets back.

CHAIR: Carry on.

MR. T. OSBORNE: Under 3.1.01., Industrial Benefits, on page 130:

Appropriations provide for the identification, assessment and promotion of

industrial benefits from major resource development projects.

I was just wondering where the staff for that particular area of the

department are located ? I guess another question would be, how many staff are

working in that particular area of the department?

MR. SCOTT: They are based in St. John's on the fourth floor of

Confederation Building West. There are nine people in total assigned to the

division, which are reflected in the budget estimates here. It is headed up by a

director and a number of staff officers, including one secretary. There are nine

in total in that division.

MR. T. OSBORNE: Under 3.2.01., Advanced Technologies Development. There

was an increase in salaries from the amount budgeted last year to the amount

actually spent. I am wondering if you could give us some detail on what the

reason for that is? Was there a changeover in staff?

MR. PARSONS: There was an additional temporary industrial development

officer hired during that last year to deal with the higher-than-anticipated

workloads associated with the Marconi Wireless Conference that was held here.

That was a temporary position.

MR. T. OSBORNE: Under Transportation and Communications, there is an

increase of about $20,000 for transportation.

MR. PARSONS: That was due to increased travel out of the Province to

participate in trade shows, conferences and meetings.

MR. T. OSBORNE: It would be technology trade shows, IT trade shows?

MR. SCOTT: Biotechnology trade shows, basically.

MR. T. OSBORNE: Under 3.2.02., page 131, there were Grants and Subsidies

under the Research and Development-Offshore Fund of $800,000 budgeted for this

year. Last year there was $750,000 spent. I wonder if you could give us some

indication as to where those grants and subsidies were allocated?

MR. SCOTT: Just to give you a sense in terms of the projects that are

budgeted for the current fiscal year. They are budgeted under the Offshore

Development Fund, which is a cost-shared agreement between ourselves and the

federal government. So there is joint decision making on what actually gets

approved.

The Seascape development of offshore lifeboats - a project on the south

shore, the southern side of the harbour here - is budgeted as an ongoing basis

for Phase I and Phase II through that fund. As well, there is support to

Memorial University to pursue some research on offshore designs for ice

environments. The National Research Council and Memorial are collaborating on

another project dealing with offshore evacuation safety in which there has been

an allocation toward. There has been an allocation approved for Helideck Safety

International, a new simulation capability that is being developed by the

private sector in collaboration with Memorial in the Province; an allocation has

been approved for that purpose.

Another initiative that has been approved is a local IT education company

called Pathfinder Offshore E-Learning, which is a collaboration with a number of

private sector companies in the Province to look at how we can adapt IT to the

learning needs of the offshore on an ongoing basis on platforms and the like,

rather than bringing people back onshore for that training. Beyond that, we have

an allocation of approximately $250,000 for projects pending of which no

decisions have been taken of to date, of that $800,000.

Those are the typical types of projects being funded under this agreement for

some period of time now.

MR. T. OSBORNE: Okay. We heard some news recently on Seascape 2000

Limited, the testing that they have been doing. Can you give me an update on

what has been happening with Seascape?

MR. SCOTT: Seascape has been in a period, in terms of the development of

their technology, in terms of testing at various levels. They started with some

very early stage engineering and testing of scaled models at the National

Research Council's Institute for Marine Dynamics. They have now moved to

full-scale, real life testing with full-scale models of lifeboats and the

evacuation system. The contributions that we are making through this are R and D

fund are to assist them leverage money from the private sector and from

international sources to complete that testing which would ultimately lead to,

hopefully, certification internationally of that new lifeboat evacuation system

which would become the standard for all offshore platforms around the world.

They are at the final stages of that process of becoming certified on an

international front. It is a very rigorous process and one that takes a great

deal of time and resources. That, in a nutshell, is where Seascape is right now.

MR. T. OSBORNE: My understanding is that they have partnered with a

company, I believe, in Great Britain?

MR. SCOTT: They have partnered with a number of companies both in the

offshore oil industry here and abroad. The system that they have developed is of

interest internationally to the multi-national oil companies and to other safety

consortiums. They have entered into, for example, through the Johnson Foundation

locally, and through consortiums in Britain, the United States and Canada to

advance the development phase of this effort. So, they have attracted

international interest and opportunity in that regard.

MR. T. OSBORNE: Thank you, John.

Under 3.2.03., Special Initiatives-Offshore Fund. We have just over $2

million this year budgeted for Grants and Subsidies. I wonder if you can give me

some idea as to where that is allocated?

MR. JOHNSTONE: This year we have four projects that will be funded out of

that $2 million. One is a project that has been ongoing for the last two years

with the Canadian Centre for Marine Communications called Marine Geomatics

Initiative. It is designed to develop local technologies in seabed mapping.

We are also proceeding with an initiative to greater promote and utilize the

so-called Centres of Excellence that we have established in the marine

technology sector over the last ten or fifteen years. That would be the centre's

facilities such as a simulator at the Marine Institute, the Institute for Marine

Dynamics, and the other marine technology facilities we have in the Province.

That would be the second project.

The third ongoing project would be a continuation of the Bull Arm Marketing

Initiative. The final project that is proceeding for the third year is the

C-core Harsh Environment Initiative.

MR. T. OSBORNE: What was the third project again, I am sorry?

MR. JOHNSTONE: The third project was Bull Arm Marketing Initiative.

MR. SCOTT: Just as a point of clarification, the Offshore Development

Fund does provide money for marketing of Bull Arm. The Bull Arm Site Corporation

and the Department of Mines and Energy actually is responsible for implementing

that initiative. We are the funding agency for that program.

MR. T. OSBORNE: Thank you.

On page 132, item 3.2.04., Advanced Technology Initiatives - Economic Renewal

Agreement. I see that there are no allocations at all this year under that. Can

you give us some idea as to what the mandate of that agreement was and why there

is no funding for it this year?

MR. LOMOND: There are no funds budgeted for this fiscal year because the

agreement ended March 31, 2002. So, we are only in doing monitoring evaluation

at this point. There are no new projects. The Economic Renewal Agreement was a

five-year, $100 million federal-provincial agreement funded on a 80/20 basis

with the federal government being eighty and the Province being the twenty. It

was signed in June of 1996 in response to the collapse of the groundfish stocks.

The agreement expired, as I said, on March 31, 2002. The objective of the

agreement was to increase the opportunities for economic development and enhance

the growth of earned incomes and employment opportunities in Newfoundland and

Labrador. There were several components of the Economic Renewal Agreement and

housed in different departments. There was a piece under the Department of

Tourism, a piece for Aquaculture. Advanced Technologies had a number of

components to it, including the Ocean Technology Fund and bid-matching.

MR. T. OSBORNE: Thank you, Ted.

Under 3.2.05., Industrial Research Assistance Program. I noticed there that

the Transportation and Communications

section - there are no salaries allocated

there, only some employee benefits. Where would that be operated out of, or who

would oversee that particular program?

MR. GUINCHARD: This is an agreement that we have had for an ongoing

number of years now between the provincial government and the NRC. It was prior

to ENL with the Newfoundland and Labrador Government through the Newfoundland

and Labrador Development Corporation. The purpose of that agreement is to

provide technical expertise to small and medium sized businesses. These are

professional engineers who are on a contractual basis versus an employee basis.

They are contractual employees. We pay 5 per cent as the Province towards the

overall agreement, and 95 per cent is funded by the federal government.

MR. T. OSBORNE: Where would that 5 per cent show up, under Professional

Services? Can you give us some idea as to which small businesses took advantage

of this particular program, or is that information not able to be released?

MR. GUINCHARD: Without getting the specific names for you, sometimes

people come up with new technologies and things like that which would require

specialized expertise. These engineers - one is an electrical engineer and

another would be a civil - provide support to businesses all throughout the

Province. It may be somebody coming up with a petroleum product for cleaning up

oil spills, things like that, and may need research on the company that is

bringing the technology into the country. They can take clients on visits to

these places and things like that.

MR. PARSONS: I would also point out that the particular persons and

companies to whom these monies were paid is listed in the documents that I

tabled here in the House some time ago. All of these professional services

contracts, we actually tabled the specifics of who the parties were and the

amounts that they were paid.

MR. T. OSBORNE: On page 133, under Strategic Business Development. There

is a significant increase in Salaries over what was actually spent last year;

over $250,000. I was just wondering if you can give some idea as to the number

of employees, additional employees, who were hired on or as to the reason for

the increase?

MR. SCOTT: Maybe I can (inaudible) but this one is a bit of an anomaly in

the department. This activity encompasses a division called Strategic Business

Development, which is under the charge of Phil McCarthy; but this is where our

Jobs and Growth Investment Fund is also budgeted. The department is responsible

for coordinating government's overall Jobs and Growth Initiative. We are also

responsible for the Strategic Partnership Initiative that was announced in

January between business, labour and government. That initiative is budgeted in

this activity as well.

The increase in Salaries that you see here reflect $100,000 that have been

allocated to support the Strategic Partnership Initiative. There are two people

engaged on that initiative and an additional $85,000 for Salaries under the Jobs

and Growth Initiative, of which we plan on retaining one individual to

coordinate that across government. So that reflects the salary adjustment over

time.

MR. T. OSBORNE: John, I wonder if you can elaborate a little on the

subheading there? What exactly a Strategic Business Development division of the

department does?

MR. SCOTT: Sure, I would be happy to.

The focus on this group is to take the leadership role in looking at sectors

of the economy that have significant growth opportunities outside of what we

would call the new economy industry such as IT and biotech. This group is

responsible for championing and leading the charge on the non-resource based

manufacturing industry and the value-added components of our traditional

resource industries. Our department takes the lead, for example, in looking at

value-added opportunities in the wood products industry, in the dimension stone

industry, in the aquaculture industry, and in terms of upstream and downstream

benefits. This group has the primary responsibility of charting, with industry

associations, the strategies to take advantage of those opportunities,

developing new initiatives, seeking out federal/provincial cost-shared agreement

money, and to implement those initiatives in a (inaudible) manner throughout the

department in partnership with regional economic development (inaudible) and

industry associations.

MR. T. OSBORNE: Basically, I guess, you reach out to a cross-reference

between this department and a number of other departments?

MR. SCOTT: Exactly.

MR. T. OSBORNE: Thank you.

CHAIR: Mr. Byrne.

MR. E. BYRNE: Thank you, Mr. Chair.

Just to continue some of the issues I want to talk about. I guess as a lead

economic department for government, the department's overall responsibility is

that you are involved in every aspect of the economy across all departmental

lines. That would be a fairly accurate statement, would it not? Yes, no?

MR. SCOTT: Yes.

MR. E. BYRNE: In terms of involvement with the Department of Agriculture

or the development of the agrifoods sector, the department has been involved in

an initiative related to cranberries, in terms of the cranberry development.

Potentially, it is an area of the Province's economy where there are

significant opportunities there, if it is used properly in that direction. Could

you give an update on the project? The department's involvement with

cranberries; how much money has been invested, both provincially and federally;

where the project is now; when it started; how many people are employed; where

you see it going.

MR. SCOTT: We do not have the specifics here before us in terms of the

investments made over time, but that is a very good example of a value added

activity that we have been focusing in on Agrifoods and jointly with the

Department of Forest Resources and Agrifoods. With a number of regional economic

development boards, we did chart that and identify that, probably, three years

ago. I do not have the details before me, but I would be more than happy to

provide a background note as to what we have invested over time and the key

players.

MR. E. BYRNE: Any ballpark figures?

MR. SCOTT: The funding sources - I am a bit reticent to hazard a guess

right now because the funding sources have been both from ACOA (inaudible) as a

department from federal-provincial agreements and safety nets. So, I want to

ensure that I am as complete and as accurate as I can.

MR. E. BYRNE: Yes.

MR. SCOTT: I think it is fair to say though (inaudible) a multi-million

dollar investment made to date at the very early developmental stages of it

across the Province. The precise amount I cannot honestly recall offhand, but I

would be pleased to get the background for you.

MR. E. BYRNE: Okay, fair enough.

MR. SCOTT: It is at the development stage at present. Cranberries have a

cycle of - once you make a decision to seed them, it takes a period of up to

five years to get a product in the marketplace by the nature of the biology.

MR. E. BYRNE: I understand that, yes.

MR. SCOTT: We are still at that development stage yet. I am not aware of

any product, actually, reaching the market to date because we were just on the

verge, I think, of reaching that first stage.

MR. E. BYRNE: This is my understanding, I could be wrong, but 80 per cent

to 85 per cent of what we consume we import, in terms of the agrifoods and food

industry consumption of it. It seems like a significant opportunity, but it is

costly. I understand that, in terms of the infrastructure. For example, the

minister of the projects going down in Burgeo that was reported in the media

last week, and we did not want to - I understand the necessary investments that

are to be made in that industry. I represent an agricultural area and I

understand some of the deficiencies that it has in terms of necessary

infrastructure to, you know, equal out supply and demand of products,

particularly new crops and others like that. How is that project going in terms

of - you know, people seem generally positive. Like any new project, it will

experience some hiccups, I suppose. Could you give an update on that?

MR. PARSONS: Sure. They are very pleased, actually. There are three

individuals in town who had the idea to grow tomatoes. Tomatoes, of course,

being the first item they wanted to start with to see if it would work.

MR. E. BYRNE: Yes.

MR. PARSONS: They started in a development basis. They had one Quonset

hut that produced, I think it was 18,000 pounds on their first go around. They

had federal-provincial funding to help out and put that hut there. They sold all

of the product that they produced in Newfoundland to Sobeys and Dominion. Even

on the first go around, their big cost was their heating cost. They were using

oil furnaces, so the cost of the energy was very expensive. Notwithstanding

that, they looked after, even in the first phase, all of their operational

costs, except for the wages of the three who were getting subsidized by HRDC.

So, that was pretty positive. Now they have moved on to what they call the

pre-commercial stage. They have five huts instead of the one. They are already

pre-sold to Sobeys and Dominion. Everything that they can grow they have already

terms of the quality at least. They were very pleased with the quality.

The heating costs; they have also gotten approval from Environment to use

recycled oil. They had to have a particular kind of furnace. When they moved

from the one hut to the five they bought this specifically designed furnace to

use, which cut their oil costs from something like fifty-three cents per gallon

or litre that they were using, down to fourteen. It was a very substantial cost

in their energy costs.

The other thing we believe may help them, believe it or not, is a spinoff

from the softwood lumber, because once the Americans put the duties on softwood

lumber one of the retaliatory things that Canada did was increase the tomato

tariffs back by 29 per cent - actually, the same amount as the softwood - which

in effect means that you will not get the Mexican/American tomatoes going into

Central Canada; which means Central Canada will not be sending their surplus

down to Atlantic Canada. It looks good in terms of the costing because it all

comes down to - producing it is one thing but can you produce it at a reasonable

cost, sell it and cover your cost? They knew in this first stage that they were

going to have - because of their capital costs that they had - difficulty in

meeting their operational needs.

Given those combined factors: energy savings, the market is good here, the

product is fantastic from all accounts of taste tests and everything that they

have done. In fact, here in the St. John's region Sobeys cannot keep up with

the demand. In fact, they asked for Burgeo tomatoes because they are that good

from a quality perspective.

MR. E. BYRNE: It is their goal, from my understanding, that at some point

it would be privatized or sold commercially. Is that the plan?

MR. PARSONS: Actually, the individuals in it - it is a private company

now and they have partnered with the Burgeo Diversification Board. Down the

road, once they become viable, they hope to have about ten to twelve people

there full-time. Right now there are three of them, but they hope to end up with

ten to twelve people working full-time at it, because it is full-time.

Notwithstanding the winter weather, it is full-time in these huts. At that

point, of course, they hope to eventually buy out the development board because

the development board will have fulfilled their role of getting them up and

running.

MR. E. BYRNE: These are legitimate opportunities that could be created. I

want to be on the record as saying that.

Was the department involved, down in the Musgravetown area, in terms of the

cold storage facilities that were created for the root crop industry? For

example, Sobeys and Dominion - once it was done - said the biggest problem we

have in displacement of other root groups is that we do not have the

infrastructure, cold storage facilities to provide year round supply. Was the

department involved in that? How do you see the project going? Are there other

opportunities within the Province to develop that? These are significant in

terms of creating five to six to seven month jobs year-over-year in displacing

products that we are now consuming ourselves from outside the Province.

MR. SCOTT: That is an initiative of the department. In fact, it dates

back probably five years ago when, in the context of looking at strategic

business development opportunities in the agrifoods sector, it became really

apparent that we had a captive market already in the Province. The department

partnered with both Sobeys, Loblaws/Dominion, and with the Federation of

Agrifoods, as well as the Department of Forest, Resources and Agrifoods, and

after a planning period, focused in on some key opportunities that would be

private sector driven by farmers and whatnot. That led to the cold storage

facility in Central Newfoundland.

In the Lethbridge area we have recently launched, with the cooperation of the

federal government, a similar initiative there. There is significant

opportunity, there is no question. We are really starting to develop it, for the

first time, on a business-like basis. We have been successful in convincing our

federal colleagues to make a modest investment to see those initiatives in the

same manner that the minister has described with respect to Burgeo, such that

the private sector ultimately can take responsibility. The models that we have

been successful in applying to date have been a cooperative model among farmers.

MR. E. BYRNE: Root crop producers are actually producers, owners, et

cetera, et cetera.

MR. SCOTT: Exactly. We see significant new opportunity over time in that

area and we are drawing some attention or we are focusing some effort now on

truly value-added opportunities. For example, in supermarkets if you see small

bags of carrots and whatnot, those are extremely valuable products to our

producers. We are focusing on that opportunity in Central Newfoundland and in

the Lethbridge area as well, and hope to expand those opportunities across the

Province. The two projects in Lethbridge and Central are pilots. Our intent is

to hopefully demonstrate their success and then the private sector will respond

accordingly.

MR. E. BYRNE: Is the department involved with the dairy industry, where

it was recently successful in negotiating an industrial milk quota to the

Province? It is a pretty successful industry. In 1985, 90 per cent of the milk

consumed by people in the Province was reconstituted milk, powdered milk. Almost

twenty years later there are 1,100 people employed in the industry; completely

self-sufficient. It created 1,100 direct, full-time jobs across the Province. We

now have access to an industrial milk quota that could displace other products

from outside the Province: cottage cheese, cheese products, yogurt, et cetera,

which is completely value-added in the processing.

Is the department involved in that area, either with the Milk Marketing

Board, the Federation of Agriculture or the Department of Agriculture, or all of

the above, in trying to identify some of the obstacles they have in developing

this; whether it be access to land mass, whether it be necessary equipment

infrastructure that would be required? Singlehandedly, that quota - probably in

the next four to five to six years, from what people in the industry tell me -

could create upwards to 2,500 to 3,000 direct jobs. Is the department involved

in assisting and nurturing that area, which is obviously a potential for huge

employment, particularly on the West Coast of the Province?

MR. SCOTT: The short answer to your question is yes, we see that as a

significant opportunity. My best understanding is that the agrifoods branch in

Forest Resources and Agrifoods was the lead in negotiating that quota, and to

their credit.

From a business development point of view we sit down with our colleagues in

that department and the industry and look at what is necessary from a business

point of view to take advantage of that opportunity. So, yes, we are very keen

on that opportunity to the point where we have been successful in acquiring some

additional resources in the agrifoods area to champion those various specific

opportunities.

I don't know Phil, if you can add anything more to that in terms of our

current plan.

MR. MCCARTHY: We certainly intend to work with the department of

agriculture and all the stakeholders - the Milk Marketing Board, the Dairy

Association, everybody - to seize the opportunities that are out there in this

area. That is one of our plans for the future.

MR. E. BYRNE: Did the industry come forward with any specific requests or

proposals related to this, that they are looking for government involvement,

government facilitation, government help, however you want to describe it? Have

they actually sat down with any officials in your department, minister, to

discuss this in more detail and say: Look, we have identified the following? I

know they have identified some of the requirements that they need. In so doing,

I mean whether looking through federally or provincially, or a combination of

both, to try to make sure that we get full advantage of the assignment of that

industrial quota. Have they sat down directly with officials in the department

yet?

MR. MCCARTHY: I am not aware of them sitting down directly. We have been

talking to both of the processors. Both of the processors have raised

opportunities that could arise from the industrial milk quota. We have had some

very preliminary discussions with both of the processors. The dairy people, the

dairy farmers and the Milk Marketing Board, I have not seen anything yet where

they have come forward with any specific plans for anything.

MR. E. BYRNE: Okay.

MR. SCOTT: If I can just add one comment. Going back to your cranberries,

there was $780,000 put into cranberries under the "FRAM-ED" Post-TAGS

Agreement. I do not know what agriculture may have put into their safety nets.

MR. E. BYRNE: In terms of - like we are talking about displacing products

and economic opportunities and producing it ourselves. Sobeys, Dominion, and the

larger chains have agreed, for example, to look for tomatoes, small baby

carrots, et cetera, those sort of market opportunities. Does the department get

directly involved in - when companies, who have a comparable product, may be

selling at loss leader with our products in terms of what may be considered

unfair practice. Does the department become involved in running down any

complaints they receive related to that? Juice is an example. Juice that we

produce here compared to juices that are imported here.

MR. SCOTT: If there is an issue that any individual company or an

industry association raises with us that we constitute unfair trading practices,

yes, we have a mandate because we do have a responsibility for the trade policy

mandate across government. I am not aware, at this juncture, of any significant

issue that has been drawn to our attention, anyway, on that front. Certainly,

anything that would be brought to our attention would be reviewed; bearing in

mind, of course, that it is a very competitive environment. But, if a bonafide

case could be demonstrated that there was an unfair trading practice contrary to

the Internal Trade Agreement or Competition Laws, yes, we would take up the

charge on behalf of local producers, with the view of trying to take advantage

of that opportunity ourselves.

MR. E. BYRNE: So, to your knowledge there has been no issuance of

complaints or complaints coming to the department per se from anyone in the

private sector or associated to that complaining of, or outlining any concerns

or issues surrounding that issue has there?

MR. SCOTT: On juices?

MR. E. BYRNE: Generally.

MR. SCOTT: Generally, oh.

MR. E. BYRNE: Juices, jams, whatever. Local products competing in the

traditional outlets, in the bigger grocery store outlets.

MR. SCOTT: We do, from time to time, get representation from producers of

that nature. We try and work through the Sobeys and Loblaws of the world to deal

with it. It is not unusual for us to get that representation. I am not sure what

might be on our files in all of our twenty-two offices right now, but it is not

an unusual type of thing for us to deal with on an ongoing basis. I do not know

if any of my colleagues could make any specific comment of something that is on

the table now.

MR. E. BYRNE: Within government's own budget and spending of its

budget, what sort of - demands is probably the wrong word. Are there any

conditions or criteria that you would impose, or you would like to see or that -

I would say demand, I guess, in some cases. Within your own spending, whether it

be through contractual services in a cafeteria or in terms of what some of the

goods and services that government may require, what is the policy of the

department, vis--vis, in terms of the promotion, actual buying of local

products through government's own budget?

MR. SCOTT: The general policy approach, from a business development point

of view, is to focus on supply or development. In other words, making suppliers

locally aware of opportunities; helping them become more competitive on a niche

basis or otherwise.

In terms of actual government procurement, we are bound, of course, by the

Public Tender Act and the Financial Administration Act to the extent that those

Statutes apply in terms of our procurement activities, whether it be inside the

department or beyond the department. We would be governed by that of course.

MR. E. BYRNE: But that should not prohibit companies from having access.

The Public Tender Act and the exemptions that are acceptable under the law, and

the Financial Administration Act, those would not be seen as impediments to

local business.

MR. SCOTT: No.

MR. E. BYRNE: Those would just be seen as things that we normally do and

how we conduct ourselves, appropriately or accordingly.

MR. SCOTT: Another proactive measure we take, beyond supplier

development, is to ensure that in the specifications for any public tenders

there is a level playing field established, such that local producers have a

fair advantage and level playing field in competing against, perhaps, a

traditional product that has been secured from Nova Scotia or Ontario over time.

We have a role to play in that regard, from a procurement management point of

view, to ensure that the specs are appropriately structured, both in terms of

the substance of the specs. But oftentimes, in terms of major projects, if we

break down the projects into smaller bits but still under the ambit of the

Public Tender Act, it is obviously an opportunity for some of our smaller

companies to compete. Where there is a multi-million dollar tender issued on

(inaudible), it may lend itself to an award outside the Province. Without

tilting the playing field on a competitive basis, we play a role with our

colleagues in other departments to ensure that the manner in which it is

approached is fair to all and is sensitive to the opportunities that exist among

our local producers to make a fair bid on a tendered basis.

MR. E. BYRNE: On page 133 of the Estimates, under subhead 4.1.02.,

Comprehensive Economic Development. It says: Appropriations provide for joint

federal-provincial economic development initiatives and projects to support

growth and diversification opportunities in the Province, cost shared under the

Canada/Newfoundland Comprehensive Economic Development Agreement (CEDA), as well

as provincially funded projects to support these objectives.

Just a couple of questions specifically to the vote that is required here and

then a couple of more general questions. In terms of Grants and Subsidies,

$7,715,400: Obviously that number was arrived at through some means. Have you

identified the projects that you are looking at and the costs associated with

those projects?

MR. PARSONS: I will pass it off to Ted Lomond for the details of it, but

as a general comment, it is my understanding that these agreements are all

winding up come March 31, 2003. What we are seeing here is money that is already

committed and it is to follow through on what has already been committed in one,

two, three years prior. I will have Ted confirm what those projects were and if

that is, in fact, the case.

MR. LOMOND: What you see under Grants and Subsidies would be the money

that we would pay to ACOA to cover off the provincial share of federally

administered projects. That number would have been arrived at by looking at the

list of projects which we had allocated funding to and what their anticipated

cash flows would be for this fiscal year. Examples of projects which have been

announced and whatnot would include the Labrador Trails. Basically any project

where an applicant is non-government, ACOA would be doing the administration on

it, they would be doing the payments so we would be paying a share to them.

MR. E. BYRNE: The decision making process on projects, how does that

work? If it is totally administered, I assume it is jointly decided. How does

the decision making process work, from somebody who submits an application and

meets the criteria and qualifications under the CEDA agreement? How is it then

decided if the project is funded or not and who decides it?

MR. LOMOND: Those projects would require federal and provincial

agreement. So there would be a negotiation process, officials at our level with

officials at the Atlantic Canada Opportunities Agency. We would be looking at a

list of competing demands and keeping in mind the various sectors and objectives

of the agreement, as well as the other considerations such as the Province's

jobs and growth strategy, trying to accomplish some of those goals through the

use of cost-shared funds.

MR. E. BYRNE: Last year, when former Minister Tulk announced the

Emergency Employment Program, I know you were responsible for it because I would

assume it was based upon the rationale; they said they were able to identify the

money from - I am just going from memory of what was in the press release -

unexpected cash-flow surplus from these CEDA agreements. It was three point odd

million dollars. I guess it came from projects that were approved but were not

yet in a position to be funded. That is where the cash came from, which meant

that at some point those projects would have to be refunded.

What were the projects, I am asking, that that money - a legitimate program,

the Emergency Employment Program, came from an unanticipated extra cash flow

from the CEDA agreement, is my understanding. Has that money been put back into

the program?

MR. PARSONS: The money was budgeted for the last fiscal year.

MR. E. BYRNE: Which means that some projects would be expecting that

money this year, in this fiscal year. It is just a question of how that is been

managed.

MR. PARSONS: At the end of the day, the ratio still has to balance out.

So, in that sense, yes, the Province is still responsible for $13.45 million of

the $44 million top-up to CEDA. The list of projects per se: There would not be

a list identified saying this particular project did not start. In some cases

there would be. There were two primary reasons why projects did not start on

time. The first was that the top-up did not come down until February 2 of last

year. We had to go through this negotiation process with the federal government

on determining what our priorities were. We had to do that. That was further

complicated, I guess, in the context that some agreements were ending so there

were going to be other demands we would have to consider.

The second major reason for delay was on significant capital projects. Once

we had identified what the priorities were the projects had to go through a

fairly rigorous assessment process, part of which was the Canadian Environmental

Assessment Act process where they had to comply with those guidelines. That came

out roughly the same time as the Canada/Newfoundland Infrastructure Program and

all the water and sewer projects around the Province. All of those projects, for

a period of time, were being sent to Halifax, to Public Works and Government

Services, to be assessed. Part way through the year we recognized that problem

and hired somebody locally - not we, but the federal government - at the John

Cabot Building to work with ACOA to clear up those things. There were some

significant capital projects that did not start on time.

MR. E. BYRNE: I understand that. In terms of the actual $7,715,000 vote

here, have you identified - I know it is coming to an end in 2003. Has that

money already been earmarked for specific projects and, if so, how much? Do you

know that? Do you have that information there and, if so, what are the projects?

MR. LOMOND: Yes, the entire CEDA agreement, at this point, has been

allocated. Not all projects have been formally announced.

MR. E. BYRNE: (Inaudible) announce some here. Leave that to the minister,

boy.

Unless there are any projects being announced in the Kilbride-Goulds area,

you can certainly (inaudible).

MR. LOMOND: Are you looking for specific projects or types of projects?

MR. E. BYRNE: No, I am just wondering. You have answered my question this

way, that all of the money has already been allocated and earmarked, and some of

the projects have not been announced. I understand you cannot announce them here

this morning. That is fair enough.

In terms of the Purchased Services there, $1.4 million approximately: What

would that area be? What would be viewed as Purchased Services in that area?

MR. LOMOND: Purchased Services, under current accounts, that would

include ongoing purchased services costs associated with new projects approved

in 2000-2001. That would include the Ambassador Program, International Student

Marketing and Tourism Marketing. The driver in that number is Tourism Marketing.

We did a $2.5 million approval for the Department of Tourism and, by far, the

bulk of that is print and tv advertising.

MR. E. BYRNE: I am done, Mr. Chair.

CHAIR: Thank you, Mr. Byrne.

MR. E. BYRNE: We still have the Concurrence Debate, is that correct?

CHAIR: Yes, we do.

MR. E. BYRNE: Thank you, Minister and staff.

CHAIR: We will revert back to Mr. Osborne.

MR. T. OSBORNE: Thank you, Mr. Chair.

I only have a couple of more questions and I will defer to my colleague, Ray

Hunter.

Minister, under 4.1.01., on page 133, under Professional Services, item 05: I

wonder if you can give some indication as to what that allocation would go

towards, some $485,800?

MR. PARSONS: I am showing two pages 133. I must be on the wrong page

here.

MR. T. OSBORNE: Pardon me?

MR. PARSONS: I am showing two pages 133 here. I must be on the wrong

page. Under 4.1.01.?

MR. T. OSBORNE: Yes, it is, Strategic Business Development.

MR. SCOTT: In terms of the Professional Services vote, we have announced

in the Throne Speech and Budget Speech a new initiative to focus on our

investment prospecting agenda more aggressively. We have blocked a sum in total

of $500,000 for that; $200,000 of which would be professional services and that

would be to retain expertise internationally to help us target business

attraction opportunities and investment opportunities. It is a block fund at

this point in time and has not been allocated to specific initiatives or

contracted. That is the intent of part of that money.

MR. T. OSBORNE: So, that $200,000 again - I am sorry, John.

MR. SCOTT: That would be in association with our enhanced investment

prospecting effort.

MR. T. OSBORNE: It would go to purchase or to pay for, I guess, a

consultant, an international consultant?

MR. SCOTT: Yes. It would not necessarily be one. It would be depending

upon the areas that we are targeting. For example, we are going to target

manufacturing, we intend to target IT, and we intend to target aerospace. If

there is an aerospace opportunity from a market point of view in Europe, we

would attempt to retain a knowledgeable consultant or individual who knows that

marketplace and knows that industry, to help us focus on the companies that may

be interested in investing in Newfoundland and Labrador. So that would be part

of our Investment Prospecting Initiative in that regard. We have a block of

funds allocated for that purpose.

We also have a block in support of our Strategic Partnership Initiative. We

have, in that regard, $150,000 allocated to the Strategic Partnership Initiative

for professional services. What we have committed to do to help the organized

labour and business community deal with the Strategic Partnership Initiative is

to give them $75,000 each for two years to help them develop their own internal

capacity to participate effectively with government in that form. So, $150,000

of that will find its way to organized labour and organized business in the

fiscal year. That is pretty much the bulk of that money, of that $485,800.

MR. T. OSBORNE: Under Grants and Subsidies, 4.1.01.10, John, I wonder if

you could tell us what the allocation is for?

MR. SCOTT: Sure. In the Budget Speech in details, there was reference to

new initiatives to advance jobs and growth and to focus on some other new

initiatives in the department. It relates, basically, to some of the same

activity. For example, in the Jobs and Growth Investment Fund which has been

budgeted at $1 million we have allocated approximately $500,000 to support the

Jobs and Growth Investment Fund.

To give you an example of the types of initiatives that we have been pursuing

under that over time: For example, the World Expo in Gander was financed under

the Jobs and Growth Investment Fund last year. We are pursuing a number of pilot

projects to advance strategic sectors of the economy such as agrifoods, such as

dimension stone. We are targeting some opportunities in that regard through

industry associations and through cooperative ventures with the private sector.

We intend on advancing some funds through grants and subsidies to those third

parties to support those efforts.

Under the New Initiatives Fund, the department as a whole intends to engage

industry associations much more aggressively to help us deliver the mandate. As

a third party organization all those funds would (inaudible) as grants and

subsidies.

MR. T. OSBORNE: Under 4.1.02, Professional Services, almost $1 million

allocated to professional services there. I wonder if you can elaborate on what

that would be utilized for?

MR. LOMOND: This would reflect the increased professional service

requirements associated with projects such as - if I could maybe step back a

bit. We work with a number of development associations like the Chamber of

Mineral Resources, the Newfoundland Alliance of Technology Industries, NEAA, the

Alliance of Canadian Manufacturers. We employ all of those agencies on a fee for

service basis to provide business brokerage type services, industry development

and whatnot. Those initiatives would all be covered under this heading as well

as support for things like aquaculture studies and the recently announced

International Student Marketing Program. So, there would be professional

services associated with all of these.

MR. T. OSBORNE: On page 134, 4.1.04, Comprehensive Economic Development:

There are purchased services there of $3,206,000. I wonder if you can give some

indication as to the allocations.

MR. PARSONS: That is provided for the construction of the Gaultois Ferry

Terminal and the development of the Cartwright wharf.

MR. T. OSBORNE: On page 135, 4.2.01, Regional Economic Development

Services, "Appropriations provide for planning and organizational

development support for Regional Economic Development Boards and other community

economic development organizations, as well as for coordination of government

support for regional and community economic development activities," there

is almost half a million dollars allocated there for salaries. I am just

wondering if you could give me some idea as to where those positions are located

throughout the Province, under item 01.

MR. STIRLING: Those positions are located here in St. John's on the

second floor of Confederation Building, West Block; eight positions in total.

MR. T. OSBORNE: On page 136, 4.2.03, Canada/Newfoundland Agreement on

Economic Development and Fisheries Adjustment, under Grants and Subsidies, this

year there is still $1,217,000 allocated for Grants and Subsidies. I wonder if

you give me some idea as to what that allocation is for.

MR. LOMOND: The $1,217,000 is the provincial share of federally

administered projects which are ongoing. All projects have already been started

and there are no new projects being approved at this time. These are all

existing projects that have been underway for a period of time. Based on project

cash flows, this would be the provincial share of those projects.

MR. T. OSBORNE: What would the difference be under 4.2.03. and 4.2.04,

the Grants and Subsidies there?

MR. LOMOND: 4.2.04 would be the capital count and that would be for

projects which were capital in nature and provincially administered, things like

the Charlottetown industrial water supply in Labrador.

MR. T. OSBORNE: Page 137, 4.3.02, Strategic Enterprise Development Fund,

under Loans, Advances and Investments, I wonder minister if you can elaborate on

what that $2,621,500 is allocated for?

MR. MCCARTHY: That is for two small business programs that are run by the

department. One is the Small Business Seed Capital Equity Program where we

provide equity of up to $50,000 on a matching 50/50 basis to small companies

that are new startups who are looking to expand. The other one is our Small

Business and Market Develop Program where we can provide assistance up to

$25,000 on a matching 50/50 basis.

MR. T. OSBORNE: Thank you.

On page 138, 5.1.01, Business And Economic Development Services, I wonder if

you can elaborate on the subheading there or give me some idea as to the

activities and services that are provided under this subheading?

MR. GUINCHARD: We have five regional offices throughout the Province and

about twenty-two satellite offices. These people provide business counselling,

support and advice to existing business or people who are interested in starting

a business. They, of course, may provide financial assistance directly from the

departmental programs, but a lot of it is involved in brokering money from ACOA,

the community development corporations, the LMDA group and things like that. So,

it is what we call the private companies and the non-governmental organizations

that are out there, the stakeholder groups. They provide support to both

organizations. The economic development boards get support from these people on

the ground, as well. So, you have the private sector and the public sector

supported by these organizations, these groups, these people in the field and in

the satellite offices. We also have some specialized expertise in each region

which provides support to the people in the satellite offices in the outlying

regions of the Province.

MR. T. OSBORNE: Okay. Where are the five offices located?

MR. GUINCHARD: We have one in St. John's, the Avalon regional office.

There is one in Clarenville which is the Eastern regional office. We have

another one in Gander which covers the Central region. We have one in Corner

Brook for the Western region and one in Goose Bay which covers the Labrador

region.

MR. T. OSBORNE: Thank you.

Under 5.1.02, Investment Portfolio Management, the Grants and Subsidies

there, I wonder if you can give some detail on what those grants and subsidies

would be for?

MR. PARSONS: That is the fisheries interest subsidy program. Different

fisherpersons have loans and so on. This is an interest subsidy program that the

department offers.

MR. T. OSBORNE: Okay, so that would be considered a grant as opposed to a

loan?

MR. PARSONS: Yes, it is a subsidy on their interest payment.

MR. T. OSBORNE: Interest relief on the fisheries loans?

MR. PARSONS: Yes, and also, as I understand it, if your interest rate may

be, for example, 8 per cent normally, you can get assistance. Instead of being 8

per cent, we can buy into it and it might end up being 6 per cent. It is a

subsidy for your interest. It is not offered anymore. It is on older loans that

already existed on the old fisheries programs.

MR. T. OSBORNE: Why would that be administered through industry as

opposed to fisheries, I wonder?

MR. PARSONS: Because all of the various lending, as I understand it, all

the old programs, fisheries programs, have been put under this management

corporation which is now operated out of Marystown. The Farm Development Loan

Board - the government had a number of different loan boards in different

departments. The idea here was to put it all under one management portfolio so

that you knew what you had in terms of outstanding loans and one collection

point.

MR. T. OSBORNE: Okay.

Thank you, Minister and staff.

CHAIR: Mr. Hunter, did you have a few questions?

MR. HUNTER: Thank you, Mr. Chairman.

Most of the questions that I did have in mind were already answered, but

there are few things here that I have questions on. It will not be long. I will

ask the minister and his staff a few questions on it.

Subhead 3.2.01.10, Grants and Subsidies.

MR. PARSONS: What page is that Mr. Hunter?

MR. HUNTER: Page 130, subhead 3.2.01.10, Grants and Subsidies.

Could the minister and his officials tell me where these grants go, who they

are issued to?

MR. SCOTT: This was an annual grant provided in prior years to Operation

ONLINE Incorporated, which was the federal and provincial government's

industry and technology development arm. That corporation has been in the

process of winding up. What we intend to do with this money on an ongoing basis

is to redirect it towards our new investment prospecting agency, which I

referred previously will be focused in part on IT opportunities. We expect that

these monies will be directed towards that endeavor on a go forward basis.

Historically, it has been Operation ONLINE support.

MR. HUNTER: Thank you.

On page 133, subhead 4.1.01.10, Grants and Subsidies again: In the year

2001-2002 it was budgeted at $1.4 million and only $356,000 was used. Could the

minister tell me what happened there that the budgeted was not spent? Were there

any changes in the programs? Why was the funding only allocated to $356,000?

MR. PARSONS: The funding originally budgeted ended up being reallocated

to Transportation and Communications and Professional Services in order to cover

project related costs and other activities in the Jobs and Growth. We thought we

would use it there, originally budgeted there, but throughout the year we had to

allocate it to other Transportation and Communications.

MR. HUNTER: So, does that mean that some people who applied for grants

and subsidies did not get accommodated?

MR. SCOTT: No. The intent was that, on an annual basis, we were allocated

$1 million for our Jobs and Growth Investment Fund and depending upon what the

priorities were and how they evolved throughout the year, we moved money between

various activities to fit the emerging priorities. It is not an

application-driven program. It is a program which we offer on a discretionary

basis.

For example, as I outlined a few moments earlier, we do support our Industry

Associations in terms of advancing our Jobs and Growth endeavour. At the

beginning of the year, we had a plan to move down that path in certain areas,

but the resources were acquired from ACOA and otherwise. So we took the

opportunity to re-profile some of those funds. For example, some of those funds

that you will see under Grants and Subsidies last year were re-profiled to carry

out RuralEXPO 2001 in Gander in Transportation, in Professional Services and in

Purchased Services. So, that is the type of flexibility that we have within that

activity.

MR. HUNTER: Under 4.2.01, again Grants and Subsidies, page 135: It was

budgeted in 2001-2002 at $760,000, but it went to over $4 million. Can the

minister tell me how come that was increased and where did it go?

MR. PARSONS: Yes, that was, as we referred to earlier, the special

employment initiative, the monies that we had saved, as we indicated, on the

CEDA program. It actually came about due to savings on the federal-provincial

agreements. This is where it ended up getting spent, on the special employment

initiative that came about last fall. I have those figures. I think they are

already public knowledge. They were published on the website as to how this

special employment initiatives incentive was spent in the Province last year,

what districts and so on. I have that information available if you want that. We

have some copies here. The total amount spent was $3,786,000. Of the forty-eight

districts in the Province, thirty-four districts actually received some funding.

We even have the breakdown there as to whether they were Conservative districts

or Liberal districts. Eleven Opposition districts received funding and

twenty-three government districts, which is about two to one in terms of

government districts receiving funding versus the Opposition districts, but if

you look at the average spent per district the average in government districts

was $98,000

whereas the average spent in Conservative districts was about

$140,000.

MR. HUNTER: Minister, (inaudible) ask a couple of questions. Most of the

questions that I have were already answered. With respect to some of the

projects that have been ongoing, and I do not know if they are still ongoing,

but the heli-logging project that you had, is that project finished? Could you

bring me up to speed on the status of that?

MR. LOMOND: The heli-logging project was funded through the Newfoundland

and Labrador training centre. The project is at a stand still for now. There are

discussions taking place with the federal government as to whether or not we

will continue with the project. The objective of the project was to use

helicopters, as is done in other jurisdictions including British Columbia and

Alberta, to harvest timber that would otherwise not be accessible in remote

areas, hilltops essentially, things that would normally be done by cable

logging. The project is not active at this time but there has been no decision

made with respect to continuation.

MR. HUNTER: Is your department looking at - if not heli-logging, if that

is not successful enough to continue, what about cable logging? Are you going to

be doing any research into that?

MR. LOMOND: The Department of Forestry is the lead department in that

respect and they have actually been providing on the ground supervision and a

type of technical support in that regard. They have identified the areas where

to harvest. They have been working with the proponents with regard to what we

call clocking the turn times with the helicopters, that type of information,

payloads that type of thing. They have been engaged in all of that and they are

looking at other forestry projects, other sources of timber that are not

currently accessible.

MR. HUNTER: Wasn't the funding supposed to come from Industry, Trade

and Rural Development to do these pilot projects?

MR. LOMOND: No. The only project which I am aware of right now in that

regard is the heli-logging project which was funded through the Fisheries

Restructuring & Adjustment Measures program. There are other forestry

related initiatives which we have under consideration. With regards to accessing

currently inaccessible timbers, is that -

MR. HUNTER: I guess the overall project, the funding, I understood, came

from your department, that the actual research would be done by Forestry but the

funding for the project would be coming from Industry, Trade.

MR. LOMOND: The provincial share of the project was coming from Industry,

Trade, but again it was funded under the Fisheries Restructuring &

Adjustment Measures Agreement and is cost-shared with the federal government,

with ACOA.

MR. HUNTER: Okay.

Could you tell me in which part of the Estimates we would see funding for the

development associations?

MR. LOMOND: Regional Economic Development Boards or development

associations?

MR. HUNTER: No, not the boards. Is there any funding in the Budget for

development associations?

MR. PARSONS: There is no funding in this Budget for development

associations. The department funds the regional offices of the department which

are in five centres and provides funding to zone boards, but not to regional

development associations.

MR. HUNTER: None at all?

MR. PARSONS: No.

MR. HUNTER: Minister, I get a number of calls from people interested in

starting small businesses and I direct them all to the development corporations

and your staff at the different regional offices, and 99.9 per cent of the

people come back saying government doesn't have any financial support for

small businesses, especially family operations. It is very frustrating dealing

with government. I know that you cannot go out and give funding to them because

they have a business idea, but where in the Budget do you deal with Grants and

Subsidies for a small business with one and two employees?

MR. PARSONS: First of all, I guess a general response to your question,

in terms of being able to help or not help: As indicated by Mr. Guinchard, we

have five regional offices in the Province and twenty-two satellites where we

put people who have the expertise to advise small businesses, whether they be

mom and pop operations or otherwise. That is one of the biggest focuses of this

government. Unlike previous years, where things might have been done from the

top down, in the last number of years the intention has been to do things from

the bottom up. That is why we have twenty zone boards and that is why we have,

on these zone boards, representatives of development associations,

representatives of Chambers of Commerce and representatives of municipal

councils, so that the whole system is premised on a partnership between

everybody in the Province. We do not dictate anymore to anybody what their

strategic opportunities ought to be.

That is the context in which the overall program works when it comes to

economic development in this Province. We have put the manpower in place in

terms of economic development officers, in terms of having our regional offices

with our expertise in those offices and those satellite offices in conjunction

with funding zone boards, so that when mom and pop or anyone else walks off the

street we can give them the necessary focus, first of all, for the idea that

they have. Most of these people have an idea, a germ of an idea, but do not know

how to formulate it when it comes to a business plan or where to take it to find

our what funding options there may be. We do have actual monies available in

some instances and that is referred to under the Strategic Industries and

Regional Development

section on page 137 of the Estimates.

A lot of these initiatives, of course, again, are federal-provincial funding.

So the idea takes shape. Our personnel are there to help them make it take shape

in terms of a business plan, what the idea is, what is necessary to make it

successful, and what funding opportunities are available. If it cannot be done

in a satellite office, for example, that is why we have the regional offices, so

that the regional office then has the expertise to help the person, again, to

find out what funding is available, do they meet the criteria, and if they do

not what do they have to do to meet the criteria of these programs, most of

which, in the last number of years, have been federally/provincially funded

programs.

The days of, I have a great idea, you give me a grant and I will go see if it

works, is not the premise anymore. The premise is this is a partnership thing

between us and you. We are there to give you the expertise and advise that we

can give you. In some instances we can help you, if you need exposure, for

example, to a market outside of here. We are going on an Atlantic Trade Mission

to New York City next week, for example. I met a young lady who manufacturers

her own spices and sauces for food sauces. She is going on that mission and she

is receiving some assistance from government to help her do that. There is

assistance available to help you put your plan together and find out what your

funding sources are, to help you market your products in a lot of cases, to find

out where your niche is and what you need to do to take advantage of it. The

days of the grant, here is your money, go do it, that is not on, on a federal or

provincial scale.

MR. HUNTER: I understand that, but the confusion and the frustration that

I am hearing is from very small business ideas, and it does not seem like staff

has the interest in pursuing help for these people or they would not be asking

questions. It seems like priority is given to the bigger projects, the bigger

ideas, rather than the smaller ones. It could be only just because I am hearing

from the individuals, the smaller operations. The big ones I probably would not

hear from anyway. I wonder what your take on that is?

MR. PARSONS: Again government, and certainly this department, does not

decide what should be the economic priorities of a regions. The zone boards have

been mandated and consultation with everybody in a particular zone to do their

own strategic plan. They have all done those, twenty boards in this Province,

which consist of the thinkers, the doers in those zones as to what is best for

their areas. They shape the priorities for their particular area. We do not have

a one fits all type of scenario. Different areas of this Province have different

priorities because they have decided what their priorities are. What comes out

of any particular area, it is irrelevant to government whether it is a big idea

or a small idea, but we have to be cognizant and listen to the people of that

area because they are the ones who know what is best for them.

That does not take away from the small operation that has a business idea,

that needs some help in finding out what is available to them from a funding

point of view and what is available to them from putting a plan together point

of view. If anyone in this Province, any area of this Province that is serviced

by an economic development officer from the Department of Industry, Trade and

Rural Development, has ever gotten a nay answer, that they were not prepared to

help them with their initiative, I would be most interested in knowing about it.

Because if we have people in this department who are not doing their job, we do

need to take action with those individuals. I would be more than pleased to have

the specifics of any case you are referring to.

MR. HUNTER: I do have specifics, I will not mention them now, but it

seems like these people are frustrated because they are not getting

encouragement because their business is only a one and two employee operation.

They are not being encouraged the same as someone with a ten or twenty employee

operation. There are problems with respect to that. I know each region has

different priorities, but if we are going to encourage small business we have to

take these one and two employee operations and build on them.

MR. PARSONS: I just want to make it clear again that the zone board has

their five-year strategic plan. If we, as a government, are going to spend

monies, whether it be provincial monies or in a joint federal-provincial scheme,

we have to listen to the zone boards that represent that area in terms of what

their big priorities are. Otherwise the whole zone board premise that we have

here is going to be shot in terms of priorities.

MR. HUNTER: I understand that, Minister, but you missed the point.

MR. PARSONS: I do not think I am missing the point at all. I think you

are missing the point in -

MR. HUNTER: You missed the point of people being frustrated when they are

dealing with Industry, Trade and Rural Development to try and get some advice-

not always financial, because a lot of people say to me that they do not want

financial assistance, they want someone who they can sit down with, to encourage

them and give them some direction. It does not seem like these small operations,

one and two employee operations, are getting the same advice and encouragement

as someone who goes in with bigger commitments. I know the zone boards have a

mandate for each region, and separately as they see it. The point is, these

small individuals do not seem to get the same treatment.

MR. PARSONS: I would like to make a point here, affirmatively. I have no

problem, I do not think I am misunderstanding at all, but if you are making the

suggestion that there are people in this department who do not take the concerns

of those people seriously, I do not think it should be dealt with in the form of

generalities because that casts a negative aspersion on anyone who works with

this department. If you have a beef, put your beef, put your specifics, in

writing. You should not be making general negative aspersions towards the

employees of this department. That is all I am saying. You have said