1993 Legislative Session: 2nd Session, 35th Parliament HANSARD

The following electronic version is for informational purposes only. The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

MONDAY, MAY 31, 1993

Afternoon Sitting

Volume 10, Number 14

[ Page 6677 ]

The House met at 2:06 p.m.

Prayers.

Hon. D. Miller: It's with pleasure that I introduce to the chamber the deputy chief of the Lax Kw'alaams Indian band -- some people know that area as the Port Simpson Tsimshian reserve -- Victor Kelly; council members Leonard Reece, Rufus Reece and Gerry Sampson; and the band manager, Rodney Thur. I would ask all members to make them welcome to Victoria.

Hon. T. Perry: I'd like to ask members of the House to join me in welcoming Caroline Ashby, who's the coordinator of interpreting for the Island Deaf and Hard of Hearing Centre. She will be interpreting a little later for a ministerial statement, for me and for respondents from the opposition. Would the House please make her welcome.

G. Wilson: It's a pleasure to welcome into the House today two people from North Island: Mr. Dan Cooper and Ms. Charlene Pehrsson -- and I defy Hansard to get that spelling without me giving it to them. These two people are longtime, dedicated Liberals and both elected now to the riding association up there as president and secretary. I wish the House to make them welcome.

J. Beattie: In the House today is a constituent from Summerland, British Columbia: Dr. Juergen Hansen, who is a doctor of agriculture. He spent 27 years working at the Summerland research station. He also spent three years on the B.C. Round Table on the Environment and the Economy. He's now our local coroner. He's on his way up to Lake Cowichan to draft, with the Ministry of Forests and the Ministry of Environment, the guidelines on biodiversity. I'd like the House to make him welcome today.

G. Farrell-Collins: I'd just ask the members of the House to make welcome about 50 grade 5 students from James Kennedy Elementary School in the Walnut Grove area.

P. Ramsey: Joining us in the gallery today is Mr. Harley Chingy from the McLeod Lake band in the northern part of my riding, and with him is Bill Ewing. Would the House please make them welcome.

Oral Questions

PREMIER'S USE OF TED HUGHES LETTER

C. Serwa: My question today is to the Premier. Yesterday the Premier inappropriately invoked a passage from Ted Hughes's letter, in support of Bill 31. By doing so, the Premier either (

a) unintentionally abused the independence of Ted Hughes's office and the privileges of this assembly or (

b) deliberately misused the letter in contempt of this assembly. Which is it, Mr. Premier? Come clean.

Hon. M. Harcourt: The letter, with leave of the Legislature, was tabled in the Legislature. It was a public document. I quoted two passages of the letter from Mr. Hughes without giving any comment or opinion on what Mr. Hughes thought of the legislation that was before us. I did that to reinforce the importance to all MLAs in the assembly, as a matter of public interest, of being able to participate in the debate on Bill 31.

C. Serwa: This is a very serious matter, Mr. Premier. What you have just tendered is an incredibly feeble defence of an action that is indefensible. Will the Premier now apologize to Mr. Hughes and to all the members of this assembly for compromising their privileges as he has done?

The Speaker: Thank you for your patience, hon. member.

The Chair's concern is how the question falls within the responsibility of the office of the Premier. However, the Chair appreciates that members are responsible for documents tabled in the House, and I will allow an answer to the question on that basis. But I would ask the Premier to keep that distinction in mind.

Hon. M. Harcourt: I thought my explanation was very straightforward. What I find disturbing is that the member for Okanagan West didn't even hear my response; he just went on to read his written second question, which shows the interest he had in my response.

The Speaker: I will allow the final supplemental and ask the hon. member to keep the Chair's comments in mind.

C. Serwa: I think the supplementary question was that an apology was necessary. I note that the Premier has refused to tender that apology. I'm surprised that the Premier is so insensitive...

The Speaker: The question, please, hon. member.

C. Serwa: ...to the independence of the commissioner of conflict of interest that he doesn't understand that what he did was wrong. Does the Premier not understand that he has offended the House? Does the Premier want us to believe that it was just an honest mistake?

The Speaker: I'm going to declare that question out of order. I think the hon. member knows there are other means to use if he wishes to make that kind of inquiry. I do not believe I can allow that question in question period.

[ Page 6678 ]

CONSIDERATION FOR GRADE 12 STUDENTS AFFECTED BY LABOUR DISRUPTIONS

K. Jones: My question is to the Minister of Labour. The minister's Bill 31 does absolutely nothing to get the 44,000 students in Surrey back into school. Will the minister make a commitment today, to grade 12 students in particular, that they will be back in school before the end of this week?

[2:15]

Hon. M. Sihota: The best way for students to be back into schools before the end of this week is for the negotiations to be concluded and an agreement arrived at. The government has every interest in making sure that that occurs, and that the children are back in school before the end of this week. I should advise the hon. member that I've had the opportunity to talk to representatives of parents' associations from Surrey, this afternoon around 12:30, to discuss their concerns and their views with regard to this matter. I should also let the hon. member know that the parties have convened with the special mediator, effective at 1 o'clock today. I'll be awaiting his report.

K. Jones: This is again to the Minister of Labour. The clock is ticking for grade 12 students. Provincial exams start in 18 days. The appointment of a special mediator yesterday does not guarantee that this strike will be short-lived. Will the minister confirm that the members of this assembly will be sitting again next Sunday to deal with the strike in Surrey?

COST OF SPECIAL SITTING OF LEGISLATURE

K. Jones: This is to the Premier. If this government had its act together, the assembly could have dealt with Bill 31 any day last week or the week before. Will the Premier indicate to this House the total cost to the taxpayers of yesterday's special meeting?

Hon. M. Harcourt: Yesterday's sitting was no more costly than the overnight sitting on interim supply.

PREMIER'S ROLE IN DEALING WITH LABOUR DISRUPTIONS IN SCHOOLS

W. Hurd: Hon. Speaker, my question is for the Premier. Can the Premier explain why he waited until virtually the last moment to obtain a ruling from Ted Hughes on whether he could involve himself in cabinet discussions to end the teachers' strike in B.C.? Why do we have this leadership by paralysis?

Hon. M. Harcourt: We were hoping that the collective bargaining process would be concluded. The Minister of Labour gave every opportunity for the collective bargaining process to be concluded in Vancouver. You heard me outline yesterday all the steps the minister had taken. We had....

Interjections.

The Speaker: Please continue, hon. Premier.

Hon. M. Harcourt: We found it very difficult late Friday to see how collective bargaining was going to satisfy the Vancouver situation. It became apparent, then, that the cabinet and the government were going to have to bring in legislation because the collective bargaining process had concluded. We had asked Mr. Hughes previous to that -- as a matter of fact, I think about a week previous to that -- for a ruling in case that situation arose. We were able to obtain that verbal discussion between my deputy and Mr. Hughes....

The Speaker: Thank you, hon. Premier. I regret that I must go on to the next questioner.

W. Hurd: The remarks attributed to the Premier this morning indicated that B.C. has been functioning without a Premier when it comes to the education crisis. Can the Premier confirm that over the past two or three months, while this crisis has been unfolding, the Minister of Finance and the Premier have absented themselves from discussions to end this strike? Have we been functioning without a Premier when it comes to education strikes in the province of British Columbia?

Hon. M. Harcourt: I have two points. First of all, it's very clear that the opposition does not respect free collective bargaining; in many ways, it wants to get rid of free collective bargaining. They made that very clear in the debate yesterday, and they have made that very clear over the last three weeks. On top of that, most people in this province realize that the collective bargaining process was working and that two-thirds of the agreements were concluded through the collective bargaining process. That's the way this government wanted to proceed.

FAIR WAGE POLICY AND CAPITAL CONSTRUCTION COSTS

G. Farrell-Collins: My question is for the Minister of Labour. He has repeatedly stated inside and outside this House that the government's fixed-wage policy wasn't costing us one dime and that each project has been coming in under budget. Can the minister tell us whether it's the policy of the government to include the cost of the fair wage policy as part of the contingency funds in setting the preliminary budgets for capital construction by his government?

Hon. M. Sihota: No, it's not the way it works. The way it works is as follows: we, as a ministry, make some decisions in terms of the estimated cost of projects. In fact, in the 108 projects that were completed as of March 1993, the cost of those projects was estimated to be about $487,525,000. The actual cost of the projects was determined to be $470 million. As a consequence, general construction projects have come in about 3.4 percent less than pre-tender estimates. Inasmuch as school boards or hospital districts may make some assumptions with regard to contingency.... With

[ Page 6679 ]

regard to cost of projects, they have come in at about 3.4 percent less than pre-tender estimates.

G. Farrell-Collins: Once again this minister doesn't know what's going on in his own government. I have a document from BTY Group, the government's cost consultant for the Prince George jail. They indicate a contingency of 3 percent -- $818,000 -- in that contract for fair wages alone. Can the minister now deny that his policy and that of his government is to include the cost of these settlements to the unions in this province in the initial estimates of these projects?

Hon. M. Sihota: I can't explain to the hon. member what some group does in terms of how it....

Interjection.

Hon. M. Sihota: Just hang on. I can't explain to the hon. member what some group may want to do in terms of how it plans to calculate in the fair wage policy.

G. Farrell-Collins: It's BCBC.

Hon. M. Sihota: I'm trying to answer the question, if the hon. member would just settle down for a moment. I can tell the hon. member that when a project is tendered, it is up to any group to make any kind of estimate on whatever basis it wants to. We look at what we believe the cost of the project to be, and then we watch to see what the project comes in at. In the case of the fair wage projects that have gone out to date, they have been coming in at about 3.4 percent less than the estimated cost. When anyone puts their bid together, they can make a calculation of whatever they want in whichever way they want with regard to the fair wage component.

The Speaker: I must ask the hon. minister to conclude his reply.

Hon. M. Sihota: We monitor the difference between what we anticipate the pre-tender estimate to be and the actual cost of the project.

G. Farrell-Collins: That's very interesting, because in the Prince George jail scenario all six bidders came in exactly $1 million over budget and the Attorney General had to kick in an extra $1 million to pay for the fixed-wage policy.

Clearly the Minister of Labour does not know the impact of his policy. In this House the other day the Minister of Economic Development promised to initiate socioeconomic impact studies of policies that were clearly not working. That request has been put to the minister today by the independent contractors.

The Speaker: Your question, please.

G. Farrell-Collins: Will he commit to do a socioeconomic impact study of the fair wage policy before this minister revises it this summer?

Hon. M. Sihota: A number of studies have been done on fair wage....

G. Farrell-Collins: Where? Table them.

Hon. M. Sihota: I will tell the hon. member where they've been done. A number of studies have been done throughout North America with regard to a fair wage policy. As the hon. member may know, the policy exists in a number of jurisdictions to the south of us and here in Canada. In terms of drafting any fair wage policy, one has to take a look at the experience elsewhere in North America. A number of studies have been done. For example, a recent study out of Kentucky demonstrated that when they lowered.... They looked at eliminating their fair wage policy.

They in fact outlawed their prevailing fair wage policy at that time. Hon. member, wages were cut by 47 percent as a result of the elimination of that policy, but bids were only lowered by 7 percent.

The Speaker: Thank you, hon. minister.

Hon. M. Sihota: Hon. Speaker, the evidence is clear.

The Speaker: Thank you, hon. minister.

The bell signals the end of question period.

Ministerial Statement

ACCESS AWARENESS WEEK

Hon. T. Perry: I rise to make a ministerial statement relating to the proclamation of Access Awareness Week. The opposition has been given notice and will be responding. I'm making the statement today, proclaiming Access Awareness Week in British Columbia, on behalf of my colleague the hon. Minister of Government Services, who is absent today. As you know, the minister also has responsibility for the Premier's Advisory Council for Persons with Disabilities. She would have liked to have been here, but she has asked me to take her place.

As most of you know, this is National Access Awareness Week. This week we join our fellow Canadians in acknowledging our responsibility to promote access for persons with disabilities, so that we may all participate fully in every aspect of Canadian life. National Access Awareness Week grew out of the support that tens of thousands of Canadians gave to Rick Hansen's Man in Motion World Tour. After encouraging Rick's commitment to raise awareness of the abilities of persons with disabilities, Canadians wanted to continue that task at the grass-roots level.

Thanks to partnerships between public, corporate and voluntary sectors, along with national and provincial associations of and for people with disabilities, National Access Awareness Week organizers provide all Canadians with a chance to re-examine how they and their communities can develop strategies to promote a more independent lifestyle for persons with disabilities.

[ Page 6680 ]

Here in B.C. we are proud of the year-round commitments made by our community, labour and business leaders as well as government to assist an estimated 400,000 British Columbians to participate more fully in every aspect of the social, economic and cultural life in our province.

I am honoured, therefore, to present this proclamation -- signed by my hon. colleague, acting for the Attorney General during his absence last week -- which reads as follows:

These days we might say our "sibling provinces."

"...and territories in recognition of the achievements that have been made and the challenges which remain, and

whereas Our Lieutenant Governor, by and with the advice and consent of the Executive Council, has been pleased to direct by Order in Council in that behalf that a Proclamation be issued designating May 31 to June 6, 1993, inclusive, as `Access Awareness Week' British Columbia;

"Now know ye that We do by these presents proclaim and declare that May 31 to June 6, 1993, inclusive, shall be known as 'Access Awareness Week' in the Province of British Columbia."

The Premier earlier today commended the provincial organizing committee for National Access Awareness Week and people in communities throughout our province for their dedication in promoting access for people with disabilities. I want to draw your attention to but a few of the activities planned across B.C. to mark Access Awareness Week. Hopefully many members will be participating in their own ridings in some of these events.

[2:30]

To these and all communities participating in Access Awareness Week activities across British Columbia, I say on behalf of my colleague, the minister responsible for the Premier's council: very good work, well done. Simply giving British Columbians a chance to see the world and its limitations from the perspective of persons with disabilities will go a long way to meeting one of the key objectives of Access Awareness Week. I know that each member of this House endorses the proclamation I have just read and hope that they will carry on with those sentiments throughout the year.

As you know, my colleague the Minister of Government Services -- as I've told you -- has responsibility for the Premier's Advisory Council for Persons with Disabilities. She recently had the opportunity to meet with the council's chair, Wolfgang Zimmermann of Port Alberni. I will quote my hon. colleague. She points out: "Mr. Zimmermann's challenge to all members is for us to lead the way in turning awareness into actions which will help integrate persons with disabilities in the workplace, in our institutions, and in all facets of life in British Columbia." Mr.

Zimmermann is calling upon all of us as individual legislators to show that leadership, not only here in the House but in our own constituencies in our own communities.

We can all agree with what the Premier has said in a letter today to the organizations of National Access Awareness Week -- a letter which will be included in their wall of commitment, a collage of dedications and commitments from municipalities, labour organizations, universities, schools, businesses and governments across Canada. The Premier wrote: "With the cooperation of all levels of government, access for persons with disabilities will improve. We in British Columbia have committed ourselves to do our

part in this continuing effort."

To this end, the Minister of Government Services joins me in urging every British Columbian to recognize and encourage Access Awareness Week activities that will be taking place in every one of our communities.

The Speaker: The sign language interpreter is making her way to stand alongside those who are responding to this statement. I think all members recognize that while televising our proceedings has brought them into many households, there remain people who cannot hear our debates. We are presently seeking ways to make our proceedings more accessible and available to all British Columbians.

K. Jones: On behalf of the official opposition, it is a pleasure to follow the statements of the Minister of Advanced Education in recognition of this week dedicated to access awareness for persons with disabilities.

We have to be careful about the word "disabilities." Some people mistake it and talk about disabled people. That is not the case. We are really talking about what all of us have: varying degrees of abilities. If we were to put it into that context, we would have a much better

[ Page 6681 ]

understanding of what this about. I think each of us can relate to a difficulty we may have had in finding access to an office, access to a job, access to hearing what's going on, access to visual factors and access to educational opportunities. There is a whole litany of areas where we have all run into difficulties in getting access.

Recognition of this will help us all to be alert and aware of the need to care about our fellow citizens in Canada and British Columbia -- as legislators and as individuals -- to make sure that we do whatever we can to eliminate any factor that limits access to any of us. According to the statistics, in Canada something like 14 percent of the population 15 years and older has been identified as having disabilities. In the lower mainland that ratio is closer to 22 percent. I would like to emphasize that this is only the visually identifiable, or those identifiable by test. A lot of people in our communities with lesser abilities are not visually identifiable.

I think it's important that everyone be sensitive that each one of us has some factor we have to take into consideration in living a full and fruitful life in our society. The physical barriers, as I say, are one of the easily overcome factors. To many, the disabilities that are the real problems we have to address are the mental disabilities of each one of us in not recognizing that everyone can lead a fulfilling and fruitful life and hold down a job, just like anybody else. It's just a matter of dealing with the particular tools or approaches that all of us can modify to make it possible for this to be a very suitable recognition of concern.

At this time, we have to recognize our need to be aware. Starting today and throughout this week we have an opportunity to put in extra effort on something that should be done on a daily basis all year long.

H. De Jong: It gives me great pleasure to respond to this ministerial statement. It's certainly one of great importance, not only to us here in the House but to all British Columbians.

The mid-seventies were, I understand, about the first time that more emphasis was placed on the needs of the disabled. Certainly when I served on a local council, there were many expenditures made in terms of physical access for the disabled, but that has expanded considerably since. We talk today not only about physical access -- which is important -- but also access to education and a number of things that help those who have an infirmity of one sort or another.

Access to education also provides access to a profession. Many of the people who have a disability of one kind or another have many abilities which have been underestimated for years and years -- not necessarily wilfully ignored, but to a degree, they haven't been recognized. I'm really pleased that over the last 20 years, much emphasis has been placed on this. When we look at what a person can do, whether he's healthy or somewhat infirm, one of the greatest satisfactions in life is the opportunity to make a contribution to society and the economy.

All the efforts so far, I believe, have achieved those desires of those special people. I know that within our own community there are some real cases of infirmities -- sometimes it's a combination of physical as well as mental. It can be a great sacrifice on the part of parents to look after them. We have some special parents within our community who either have their family grown up or haven't got children and have taken the opportunity to take those particular people into their homes a couple of days a week. They are not always children any more; they can be 20 or 30 years of age, but they still need that continued care.

I believe that we owe a debt of gratitude to those people who make those special efforts. I know that there is also within our community -- on occasion -- three, four, five or six from a group home who will go with the person who looks after them to another home for supper at night. It's a great opportunity to provide such an evening for them. The love and response shown by those who have enjoyed that supper is so great, it would want to make you do it every night if possible. So there is a lot to be learned.

A lot has been learned, and I believe that we can learn a whole lot more in order to make life a little happier for those who don't have the opportunities most of us have. We have to remember -- and I believe British Columbians do -- that we are not our own maker. Therefore, these people need help, and we should give them all we can, personally as well as through government services.

Presenting Reports

S. Hammell: I have the honour to present a report from the Select Standing Committee on Parliamentary Reform, Ethical Conduct, Standing Orders and Private Bills. I move that the report be read and received.

Motion approved.

S. Hammell: With leave, I move that the rules be suspended and that the report be adopted.

Leave granted.

Motion approved.

Clerk of the House: The report is that the

preamble to Bill Pr402, intituled Vancouver Foundation Amendment Act, 1993, has been approved, and the committee recommends that the bill proceed to second reading as amended.

The Speaker: Thank you, Mr. Clerk. I missed that reference to "being read."

[2:45]

Orders of the Day

Hon. M. Sihota: I call Committee of Supply.

I would advise hon. members that in the Douglas Fir Room, Committee of Supply A will deal with the estimates of the Ministry of Environment, Lands and Parks.

The House in Committee of Supply B; E. Barnes in the chair.

[ Page 6682 ]

ESTIMATES: MINISTRY OF ECONOMIC DEVELOPMENT, SMALL BUSINESS AND TRADE

(continued)

On vote 23: minister's office, $347,800 (continued).

Hon. D. Zirnhelt: We're happy to proceed with questions from members of the opposite benches.

A. Cowie: I have a number of questions for the minister. It's quite obvious that forestry is the leading industry in the province and that tourism is a very close second. I have a couple questions on forestry to start with.

I think we all agree that the value-added industries are very important in this province. It was mentioned in the papers this morning that the cut in the national forests in Washington and the west coast of the U.S. will probably be some 60 percent of what they're used to cutting in those forests. This means, I think, that there will be tremendous pressure on Canadian forests to produce raw wood products for value-added industries south of the border. Several years ago, a number of companies in areas such as door and window manufacturing went south of the border. They're doing very well.

Along those lines, I wonder what the minister is doing to ensure that those industries, as much as possible anyway, will stay on this side of the border?

Hon. D. Zirnhelt: We are doing a number of things. First of all, as you know, we have a standing committee looking at timber supply for value-added industries. I understand they're prepared to argue that they need some kind of security of supply before they can do long-range business planning. What this ministry does, in partnership with the Ministry of Forests, is look at the condition of an industry in any particular region and in the province as a whole. We encourage the value-added manufacturers by working with them on studying their costs and markets and by working with B.C.

Trade on promoting markets oversees. It's our general feeling, looking at this particular phenomenon, that there's considerable evidence that it is cost-effective to maintain operations on this side of the border. Some of the people expanding south of the border are doing so because of a normal expansion of their business operation. Speaking about industry generally, some people choose to operate on both sides of the border.

[M. Lord in the chair.]

A. Cowie: Over the last couple of years there's evidence to show that Canadian companies can do very well; they have in fact almost tripled their value. I was just concerned that a lot of manufacturing industries -- like doors, windows and other things to do with house building -- tend to be going south of the border, primarily because of land and labour costs. In Bellingham, for example, some industrial parks offer three-year tax-free incentives to get industries going. I wonder what the minister thinks of that.

Hon. D. Zirnhelt: The tax incentives provided by municipalities across the line is something that's outside of our jurisdiction. We feel that tax concessions are not the major obstacle to productivity and competitiveness. If, in fact, somebody can provide evidence that this unlevels the playing field between those operating across the border and those operating in British Columbia, we would be happy to look at that and work on policies that may restore the playing field.

In order to encourage manufacturing here, we are very firmly restricting the export of raw logs. The issue of semi-processed timber, for example, is a more difficult problem. We considered it a serious enough problem that we referred it to a legislative committee. When it reports, government will take some time to respond in a holistic manner. There may be some opportunity there to look at some of our policies.

Some of the companies working in this area attest to the fact that B.C. is a good place to do this kind of business. Mitsui Homes Ltd., for example, is building an $11 million lumber processing plant in Langley and creating 25 jobs. So it cuts both ways. You have to look at the reasons why companies operate in one place or another. From my travels to the Pacific northwest, I know that transportation is a factor. As a result, they don't really fear the competitiveness from Canada, because the biggest factor is transporting the goods into that same market.

It is also the considered opinion of a lot of people in the industry that as a region, the Pacific northwest is competitive with other regions. It is not so much competition within this region but the significant fields of competition between this region and other regions.

A. Cowie: About five years ago the Socred government of the day came up with the idea of establishing free industrial areas where there would be no duties. I wonder if the minister has thought about continuing that. The Socred government never did implement the legislation they had. I wonder if the minister is putting any kind of priority on that sort of thing at all.

Hon. D. Zirnhelt: If there is evidence that that is the way to go, we would be happy to look at it. I suspect the reason the previous government didn't implement it is that if you look at the enhanced taxes.... If it had been a great idea, I'm sure they would have been trying to implement it. Because you are forgoing taxes in a tax-free port, it probably doesn't balance in favour of reducing the taxes in order to get the industry there. So it is better to have no duty-free port and have the industries operate and collect the taxes.

F. Gingell: If it is convenient for you, I would like to spend a little time on the special accounts. The first one that comes under your jurisdiction is the industrial incentive fund. Just to get our bearings, perhaps we could go back to what happened in 1992-93, where you had originally anticipated disbursements in the region of $58 million and receipts in the amount of $4.88 million. The difference between the net receipts and disbursements and the amount that actually was

[ Page 6683 ]

disbursed was some $43 million. I presume that that was a reduction of the $58 million you had originally anticipated in disbursements. Could you tell me why there was such a dramatic reduction?

Hon. D. Zirnhelt: The difference between the $58 million, which is the original disbursed estimates, and $14,577,000, which was the revised estimates disbursement.... The revised estimate disbursement number was calculated in February '93 and provided to Treasury Board staff for inclusion in this year's blue book. Does that answer your question?

F. Gingell: The next part of the question -- which I'm not sure if I asked -- is: why was it reduced by some $43 million?

Hon. D. Zirnhelt: It really is a cash flow. We made the offer and booked the disbursements as probable or possible, and there was only so much uptake on them.

F. Gingell: Do you estimate that the disbursements made prior to March 31, 1993, will in fact be substantially greater than the $14.5 million?

Hon. D. Zirnhelt: We really don't know. It depends on the projects and when their financing closes and so on, and it can easily take a much longer period of time. You were asking about this year coming up.

Interjection.

Hon. D. Zirnhelt: Do you want to explain for me what you mean by starting point?

F. Gingell: For the year 1992-93, which we discussed at this time last year, you had anticipated expenditures under the industrial incentive fund of some $58 million. When you got to February of this year, for purposes of getting the new estimates done, your ministry must have advised Treasury Board that they anticipated they were only going to spend about $14.5 million last year instead of $58 million. So my first question really deals with why it was only $14.5 million when there must have been some very substantial carryovers from the previous year.

Hon. D. Zirnhelt: The simple answer is that we anticipated the possibility. We wanted to be ready in case we found a comfortable way to open up the loans and disbursements program again. So some of them would be for making new commitments. That we haven't done; and as a result, we have put the brakes on a lot of the loan disbursements.

F. Gingell: You anticipated spending $58 million; you in fact only spent $14.5 million, because, as you say, you put on the brakes. There was some $43 million or so of pent-up demand, because the $58 million didn't come out of the air. What kind of carryover do you think your putting on the brakes last year has caused in your 1993-94 estimates? Has that created a whole bunch of projects, which you would have liked to support and weren't able to at that time, being carried forward into this year?

[3:00]

Hon. D. Zirnhelt: I think the simple answer, again, would be that there was less demand than we expected. But also, we were basing it on previous years' estimates, and we just took a best guess. By not actively putting in things that might have some subvention, we reduced the demand. We said we wanted to move toward a more commercial basis for any financial participation by the government. I don't think we can say there were projects that didn't go ahead because we didn't disburse this.

There weren't projects on which there had been any amount of due diligence, with their private sector funding in place, that were held up because we weren't going to make a disbursement. But the capacity was there. As you know, projects can come up. It depended a little bit on how fast we climbed out of the recession. I think we probably climbed out of the recession more slowly than was anticipated when we were making some of these estimates.

F. Gingell: So the reason for the reduction in expenditures wasn't anything to do with the Minister of Finance's proposals or pushes -- I can't think of the right word -- to reduce government expenditures? There was a lot of push; there was budget savings exercise No. 1, budget savings exercise No. 2 and budget savings exercise No. 3, where all ministers were asked to reduce the expenditures. The industrial incentive fund didn't fall victim to any of that?

Hon. D. Zirnhelt: I'm going to try to give you a non-technical answer for that, because it's.... As you know, there are new accounting principles where we have to book any bad debt provision. As a result, that has to go right on the deficit. That forces us to just book the amount. Had we been able to come to a financing arrangement with some firms, then we would have had the capacity to do that booking. But because projects that were commercially viable and needed the financing we were prepared to even consider weren't there, there wasn't the uptake. The answer as to whether it was the pressure of the Minister of Finance is a qualified no. In general terms, we were trying to be cautious.

F. Gingell: Do the industrial incentive fund loans or advances normally carry concessionary arrangements, either with interest rates or forgiveness of principal?

Hon. D. Zirnhelt: As a rule, within my term, no. Sometimes it's negotiated as part of an economic plan by the job protection commissioner. If he feels concessionary terms are necessary, he makes the argument and negotiates that with us as one of the parties to the economic plan. But as a rule, we are trying to keep as many projects as possible on a commercial basis.

I would like to say that with respect to the JPC, the Job Protection Commission also had a bit of reduced

[ Page 6684 ]

business last year, because we had gone through the cycle and appeared to be pulling out of it, so he didn't put as much demand on these provisions as we had anticipated. We're happy about that.

F. Gingell: Can you give me some idea of the major portions of the slightly over $14 million that your ministry did loan out in 1992-93?

Hon. D. Zirnhelt: For example, there was a disbursement for Cassiar Mining, one to Evans Forest Products, one to Newstech Recycling and one to Stork Craft. Those are on ad hoc projects of the total of $4,121,000. Under job protection, these ones have all been announced: the Cape Mudge resort; the Fibreco Export -- no, that hasn't been drawn down; industrial development agreement, $512,000; business expansion program, $4,268,000. These are all disbursements. All of those commitments were made previous to us becoming government.

F. Gingell: You mentioned the business expansion program and another industrial development program. That's not who the money went to, but is it a description of a large number of relatively small dispersements or a small number of large dispersements?

Hon. D. Zirnhelt: There's quite a number of industrial development agreement loans. The $512,000 is about 20 projects.

F. Gingell: After doing all the adjustments in the special account and the estimated dispersements that you anticipate to the end of March, you finish with a balance of $41.5 million. As I understand it -- government really does have the most complicated accounting system that the world ever devised -- it's just a notational account. It doesn't mean anything, except that you do have the ability to spend it without its coming through this Legislature and being voted. For the purposes of this discussion, I would just like you to confirm that this is true.

Hon. D. Zirnhelt: Yes, that's correct, as I understand it. They are financing transactions -- loans -- that are expected to come back. The Legislature is not approving individual loans that are administered under programs, but the line items and the provision for booking those loans -- a bad debt provision, for example, or the cash flow needs -- are things that are debated.

F. Gingell: Make sure you've got the right answer.

The Chair: If we could address our remarks through the Chair, it would be helpful for all members of the committee.

F. Gingell: Yes, I understand. We do have the opportunity for debate.

The point I was trying to make is how complicated and cumbersome the accounting system is. There are means by which Treasury Board can decide to make expenditures that we would think of as being general revenue fund expenditures -- i.e., they are not for the purpose of government but for the purpose of some private enterprise industrial development corporation, etc. -- without coming through this House.

We started with a balance of $41,490,000 in this notational account. For the beginning of 1993-94, you've decided to increase it by $10 million. Could the minister advise us why that has been done?

Hon. D. Zirnhelt: That's the amount by which we may increase the total commitments under this program. In other words, if we want to do additional business through the Job Protection Commission, we will need to raise the limit. That's why we've raised it by $10 million.

F. Gingell: Yes, I understand that, but a conscious decision was made to increase the balance that you hadn't spent last year. In fact, you underspent last year by some $43 million. That balance was still available to you, because that's the way a special account works. Even so, you decided to increase this borrowing or asset purchase total by $10 million for the start of this year. There must have been something in someone's mind to have made that decision.

Hon. D. Zirnhelt: I think I partially answered the question before. If the government decides to become more proactive in this, as we pull out of the recession there is probably going to be more demand for participation in some kinds of financing. We wanted to have the provision available so that we weren't hamstrung in being able to provide it. In other words, we are probably more optimistic than we were last year about something happening in this respect, but there is no guarantee that we will conclude that. As you know, we have some major restructuring going on.

The job protection commissioner is working on any number of projects, and if even a good number of them come to maturity, in terms of agreeing on an economic plan this fiscal year, we would probably need this provision.

F. Gingell: So the $10 million additional financing availability was put in there, and that resulted in a balance of some $11.5 million yet to be carried forward to the following year. Instead of just leaving that final balance at $1,490,156, you put the extra $10 million in so that you'd be able to have funds available for the year following. Is that it?

Hon. D. Zirnhelt: The opening balance was $41 million, and we added $10 million, for a total of $51 million.

The Chair: The Chair recognizes the hon. member for Abbotsford.

The Chair recognizes the person who rose. I apologize, hon. member. Please continue.

H. De Jong: Hon. Chair, I don't want to upset the procedures here. If the member who was previously

[ Page 6685 ]

asking questions wishes to finish off his area of questioning, I would allow him to do so.

F. Gingell: Actually, the reason I didn't get back up was because all you did was repeat the fact I had stated. You didn't tell me why the $10 million was added in, when there still would have been a balance of $1.5 million without the $10 million being added to the opening balance. You just repeated what I had said. So I was waiting for a response.

Hon. D. Zirnhelt: The reason for the confusion is that I'm not sure where you get your $1.5 million, because I was saying that it was $41 million, not $1.5 million.

[3:15]

F. Gingell: The anticipated balance in the industrial incentive fund at the end of March 31, 1994, will be $11,490,156. The point I was making was that you didn't need to transfer in $10 million, because you would have had a balance of $1.5 million. I'm not really sure why all this is taking place. I'm interested in the answer.

Hon. D. Zirnhelt: This year we anticipate disbursements of about $20 million under the JPC and $20 million for other strategic projects. That uses the $40 million right there. As a result, we will have to fund a number of other projects under the small business incentive programs and the industrial incentive fund. So we need a provision for some of those smaller funds as well.

F. Gingell: Are you saying, Mr. Minister, that you expect to spend more than $40 million under the industrial incentive fund?

Hon. D. Zirnhelt: It could well be that we only spend $40 million, but we want sufficient provision there so that we don't have to come back for a special warrant if we have to go over that amount. The conservative side of the cash flow would be, say, $40 million, and the more liberal side would be $51 million. We are trying to do a careful job of leaving enough room so that we are not hamstrung by not having the ability. I'm admitting that we may not, as we did last year, have a full take-up here. As we come into recovery out of the recession, I think there may be considerable demand.

F. Gingell: I was very happy to hear your description of the liberal limit being the upper one. Actually, the Liberals would be much more careful with the taxpayers' money. That brings us to where this next question leads to.

In your estimates there is a $7,820,000 provision for the cost of concessions on interest, principle repayments and bad debt allowances. When we were discussing the industrial incentive fund at the beginning, you were saying that these are all made at commercial market interest rates and that in the normal course of events these types of loans tend to be reasonably well secured and a little safer than the portion of them that comes under the JPC. Can you advise me what that $7,820,000 provision covers?

Does it cover just the industrial incentive fund, the Natural Resource Community Fund and the small business incentive program, or are there any other places within your ministry that give rise to this provision?

Hon. D. Zirnhelt: The three items covered under this are the industrial incentive fund, small business incentive program and strategic loan guarantees for the Job Protection Commission under the Financial Administration Act. We expect that there will be some concessionary financing in some of those loans. That's how we get the $7.8 million.

F. Gingell: When we deal with the type of work that the job protection commissioner does, if it were a case of the government putting up funds, would they come from the industrial incentive fund? If they were in the form of guarantees, would they go through the Ministry of Finance under the Financial Administration Act? There are two separate routes, is that correct?

Hon. D. Zirnhelt: Loans over $500,000 will be made under the industrial incentive fund. Loan guarantees are done under the Financial Administration Act.

F. Gingell: Perhaps we could turn to the small business incentive program, which I suspect is a similar type of program. I was wondering if you could explain to me the criteria that pops it into the industrial incentive fund or pops it into the small business incentive program.

Hon. D. Zirnhelt: Just so it's clear, the small business incentive program is for projects under $500,000. In terms of criteria, they have to be the subject of the job protection program economic plan. The smaller ones are JPC loans. Under this program that we're talking about, any loan guarantees are kicked in by the Job Protection Commission.

F. Gingell: So if they're less than $500,000, then they're in the small business incentive program; if they're more than $500,000, they're in the industrial incentive fund?

Hon. D. Zirnhelt: Yes, that's correct.

F. Gingell: Have you considered folding the two into one and not having a separate account? They're doing the same thing; it's just more accounting, more bookkeepers, more cost.

Hon. D. Zirnhelt: Yes, but the reason we haven't changed it is simply that this provision was provided for by the previous government when they did have a program other than JPC. The reason we would not roll it into the other fund is simply that we find a convenient break to be above half a million. So for simplistic reasons, rather than change all the rules and

[ Page 6686 ]

regulations as we are assessing -- and we continue to assess the loan program, the financial participation by the province in loans and loan guarantees -- we don't see a need to change right now. It's not an administrative inconvenience.

F. Gingell: I noted that in 1992-93 where you had originally anticipated a possible expenditure of $10 million, you in fact expended $4 million, or that's what you expected it to be by the end of March. Can you give us a very quick rundown on the particular projects that were included?

Hon. D. Zirnhelt: The amount that was disbursed is just slightly over $2 million. The components of that were $1.8 million, which was disbursed under the small business assistance program, and the job-protection-approved small business loans of $223,000. That's a total of $2,030,000.

F. Gingell: That takes us up to the end of March, basically. So you're actually only going to have spent a little over $2 million in '92-93, and you've budgeted $5 million for '93-94. Is there anything that's happened in the first two months of the year that indicates that the $500 million may be substantially not enough or substantially overbudgeted? How's it going, in effect?

Hon. D. Zirnhelt: At the present time, if we projected the past three months' experience, we'd probably come in under $5 million. But it's awfully difficult to add and we want to be on the high side, so we think this figure is safe. As you see, we came in way under last year, partly because we were being cautious and because there were no new small business programs up and running. But we want the provision to be there so we're not caught without being able to assist where necessary.

F. Gingell: Moving now, if I may, to the natural resource community fund, an even stranger special account because, like the municipal revenue-sharing fund, it isn't there. It has all these shares of certain revenue streams, but they don't actually give to it; they just write down a notation in the accounts for the future rather than paying out. But with the natural resource community fund, which gets 0.5 percent from petroleum, natural gas, minerals and forest revenues, you were in fact anticipated to be overbudgeted by $4.8 million out of a total of $4.6 million in expenditures and $5.6 million in revenues.

Can you give me a rough idea how much of that $4.8 million was revenue greater than budgeted and how much of it was expenditure shortfall?

Hon. D. Zirnhelt: Basically, all of it was expenditure shortfall.

F. Gingell: I take it that actually nothing was paid out of the natural resource community fund in 1992-1993?

Hon. D. Zirnhelt: Yes, you're right. As a matter of fact, the guidelines had been finalized; it took over a year to finalize the guidelines. The reason was simply that the demand on this fund could well have exceeded, depending on how wide your criteria were.... We handled the projects for which we anticipated making expenditures by another means. We handled Cassiar, for example, in a special way. Cassiar could easily have used up everything that came into the fund, so we have given ourselves some breathing time to allow the fund to get up to its level.

F. Gingell: I note that for 1993, in this year's estimates, you anticipate revenues of almost $7 million and expenditures of $3 million. As of May 31, are there any particular communities that you're expecting to be able to help from this fund in the near future?

Hon. D. Zirnhelt: We have a number of inquiries that I'd be happy to share with you. We have about eight local governments and seven others that are requesting some kind of assistance. We're going through them now to see just who qualifies. As you know, there has to be an emergency or an impending emergency. So if the emergency is quite a few years out, we're not very close to making any disbursements here.

Just before I do that, I want to clarify that I was a bit in error. Last year there was actually a $200,000 shortfall in revenue; that's the difference between the $4.6 and $4.8 million.

[3:30]

The local governments that have applied to us are Houston, Granisle, Sparwood, Creston, Port Hardy, Stewart, Tumbler Ridge and Port Alberni. They're all ones that we've had continuing discussions with. To answer whether we expect to disburse, it's too early to say if any on this list will qualify, but we certainly expect that the Elk Valley will qualify. Again, we have to see the nature of the requirement there. This is not job replacement; it's not an infinite safety net for communities that will guarantee jobs. It's for the people who fall through the cracks, people who are not caught by the existing industrial adjustment services in the area.

F. Gingell: When you read the purposes of this fund and the types of things it's intended to accomplish, and you think about the types of things that are intended under your Build B.C. 21 fund, there are some similarities there. We talk about job training and about some job creation. Is there a relationship between the natural resources community fund and Build B.C., the type of committee that is dealing with Build B.C. project?

Hon. D. Zirnhelt: There's a little bit of difference. The natural resource community fund is intended to deal with the consequences of closures; Build B.C. will deal with moving the economy, or training, or public infrastructure, in a different direction. It might be part of the diversification efforts in the community. The natural resource community fund is designed to pick up where there are shortfalls. It's very specific and very

[ Page 6687 ]

targeted to program shortcomings in those communities. So they are complementary. Like any program, you could argue that there's a certain amount of overlap. But if you looked at a community that had some need to diversify economically, and there was a major reduction in employment in a primary industry, then you could actually see both programs being used, although for different purposes. They wouldn't be used for the same purpose in the same community.

F. Gingell: The direction I was heading with the question was to make sure that Build B.C. didn't get their hands on this money. It's not because I don't support the kind of things that Build B.C. wants to do. We discussed that at some length. We just argue about the way you want to do it. But this fund is for a very specific purpose, and is an important starting safety net for many communities. That was the point I was trying to make.

One last question on this particular fund. As you can see, it's titled "Special Fund," rather than "Special Account," so we think of it as a fund. There is by legislation a requirement for one half of 1 percent of three revenue streams to go into the fund plus the interest on the account. I'll bet you can guess what is coming now, because we continually hear the Minister of Finance say: "There isn't any fund. There isn't any bank account." That's the problem with the municipal revenue-sharing special account, and the municipal revenue-sharing fund: there isn't any money there.

Because of the specifics of this account, is this not a situation in which you do set up a bank account, you do transfer over the one half of 1 percent of these various revenue streams, you do have the money invested and you do have the interest and the investment earnings come into the bank account so that in the future the ability of the government to use these funds that have been set aside for this purpose is in no way jeopardized by other financial restraints that the government could be facing because of employment problems.

It's those kinds of things that happen that cause a reduction in government revenues and even greater problems. Those kind of problems have resulted because these communities are in trouble to start with. This may be the one occasion when it would be appropriate to actually set up a bank account so the Ministry of Finance couldn't go around saying, "Well, we couldn't find the account. There wasn't any money there."

Do you think this is perhaps the exception, Mr. Minister?

Hon. D. Zirnhelt: I won't say it is the exception; I say it could be the exception. I think the intent of the legislation was clear. I have every confidence that this targeted revenue is there, that the interest will be paid and that the funds are available should we find qualifying projects.

As to the need to establish a separate bank account, I'm not prepared to accept that until I see that the funds are not available. I guess I would have to answer that had we seen a necessity for these funds last year, I'm sure we have seen drawing down more pressure to bring them about. We were able to accommodate most natural resource communities that required a bit of assistance under other programs. But it's there. We're learning as we go. We took a while to develop the guidelines. One of the problems is that the demand could be huge, depending on what you allow to be caught up in the guidelines.

In case you hadn't had the opportunity to read the guidelines, I'd be happy to send you a copy; we've just published them.

F. Gingell: Thank you very much, Mr. Minister. I want to thank you for dealing with the special account questions.

H. De Jong: It has been a rather interesting discussion. I actually have a couple of questions leading out of the previous discussion. One area here says: "Reserves for doubtful accounts and concessionary loan expenditures." Apparently there was $10 million estimated for that in 1992-93. This year it's $7.82 million. My question really is twofold. First of all, what exactly is meant by concessionary loan expenditures? It would appear to me that those have been agreed-upon concessions. Also, the doubtful accounts.... If I'm right in my

interpretation of the concessionary loan expenditures, then I have difficulty seeing why they are put into one account in this budget document.

Hon. D. Zirnhelt: Perhaps I can start by giving the member a description of the concessionary expenditures. That might help clarify things. Under the new accounting policy adopted by the province in 1992, loans are considered to be concessionary when they are provided at an interest rate that is below the government's cost of borrowing. The difference between the loan interest rate and the province's cost of borrowing over the life of the loan is viewed as an interest expense to the government.

The new policy requires the ministry to calculate the net present value of the interest expense each time a concessionary loan disbursement is made and to record it as an expenditure. The doubtful account reserve is the bad debt provision; this is the cost of the concession.

H. De Jong: Yes, that is an explanation. However, I have difficulty still in lumping these two together, because, as the minister just read from his statement, these concessionary loan expenditures are th expected things. The government has made a concession on interest towards a loan. I fully realize that the government has to pay the full price for borrowing that money, but at the same time, if that was a concessionary loan expenditure, why is it included in the total figure of doubtful accounts? That's what I have the difficulty with. Why not separate the two, hon. minister?

Hon. D. Zirnhelt: I don't know where the member is going with it, but the reserve for doubtful accounts accounting policy is the one the government had when we took over, and we have added the concessionary loan expenditures to that. Conceptually they're similar -- they're a cost or a potential cost -- so we book them together.

[ Page 6688 ]

H. De Jong: Undoubtedly, either the minister doesn't understand or he doesn't want to admit how much of this $7 million or $8 million has been agreed upon through concessionary loans versus those of doubtful accounts, because doubtful accounts, in my opinion, are those that are considered to be doubtful in the repaying.

However, I'll get on to another area: administration and support services. This amount has dropped by about $3 million from the previous year to this year, but within brackets it says "net of recoveries." Is there less expenditure on administration, or have the costs risen in terms of recoveries -- either costs of applications or whatever it may be -- made through the minister, so that the cost of the operations is now cut by $3 million?

Hon. D. Zirnhelt: I'm having a little difficulty hearing -- partly because I'm trying to answer before I've heard the full question. Let me give you a partial answer to your question. If I don't answer your whole question, you can come back and I'd be happy to do that.

Under the doubtful accounts and concessionary loans, the reserves for doubtful accounts are estimated at $6.14 million. We've also estimated the concessionary loan interest at $1.68 million, for a total of $7.82 million. These are projections based on our knowledge of the past. So that's the breakdown.

H. De Jong: That's the answer I wanted to hear. The second part of my question deals with the administration and support services being estimated at $3 million less than last year, but it says "net of recoveries." Are the recoveries expected to increase or is the cost of administration $3 million less?

Hon. D. Zirnhelt: Where we charge, we have about $28,000 of recoveries. That's all the recoveries are -- is part of this.

H. De Jong: That would mean, then, that the cost of administration is expected to be lower than the previous year.

Another question concerns the area of the regional offices. I understand that there was a substantial change in the operation of these offices and that the people running them had to bid for the position. I'm not sure whether there is still a regional office in New Westminster. There used to be a very well run office. I understand that part of this office is now in Chilliwack. What specific functions do these regional offices now carry? Which are the predominant programs provided through these regional offices?

Hon. D. Zirnhelt: Basically there is no substantive change in the role of the government agents' offices. What we have done is to make the government agents' offices one of the programs of government that is responsible to regional operations, which include the economic development function.

Whereas before, government agents reported directly to a centralized administration, now they report to regional offices.

[3:45]

You mentioned bidding. We did not bid out, change or restructure the government agents' offices in a substantive way. The exception is that we have taken 17 deputy government agent positions and converted them, roughly speaking, to regional economic development officers. We also moved a number of positions into these regional management units for ease of administration.

Whereas some of the administration was done in each government agent's office by the deputy agents, some of that function was transferred to regional units. We tried to economize by regionalizing operations. The functions of the regional offices include the functions of the government agents, which you're familiar with. There's a long list of those. The regional economic development officers, some of whom are in government agents' offices for convenience, because they're the same ministry, are continuing to do the work.

It's a combination of what you're familiar with, which is the former regional analysts and managers. A hybrid of those two functions is now provided by a beefed-up number of economic development officers in regional offices.

H. De Jong: I haven't heard an answer from the minister on the important part of my question. That is, of the programs that are provided through these offices, which ones are used most by the business community -- be it the small business program, or whatever?

Hon. D. Zirnhelt: Women in business, young entrepreneurs, the business information centres, the COED program -- the community economic development program -- which funds local economic development commissions. They're substantially the same programs that existed before, with the exception that when your government ceased the funding of the small business loan program it dropped off the table. While it isn't a program that's available to business people, there is advice on the regional economies. That's part of their function.

They're looking at access of the business community to those services or assisting them in understanding the regulations by putting an economic development spin on the project to help it through the regulatory maze.

H. De Jong: I suppose everything has to have a start, but there was a time when many of these community economic programs were put together here in Victoria and had little or no meaning for communities in the various parts of British Columbia. During the last couple of years that the Socreds were in government, a substantial effort was made to change that and to make these programs more community-oriented by involving the local economic development commissions.

If a community or a group of business people within a community anticipated an economic undertaking, the programs would be geared more towards the initiatives of the local community. The various programs provided a greater variety of options, you might say, to accommodate those communities. Is that still the case, or have we returned to a more centralized type of operation?

[ Page 6689 ]

Hon. D. Zirnhelt: I think we've advanced that concept by decentralizing the administration. Rather than have those programs administered in the region but controlled by the centre, we have moved the administration into regional centres where they can fine-tune the programs to meet the needs of the communities. We have done this by putting financial spending authority with our regional directors. Before, we didn't have regional directors. There are five regional management units. Some of them have more than one economic development region; nevertheless, the administrative decision-making is much closer.

When we're fully staffed we have a greater capacity. Just in the last few months -- since the first of the year -- we've actually transferred the spending authority, so that if a program is administered locally the managers in the field have the ability to do the fine-tuning necessary to make it more effective.

H. De Jong: The minister spoke earlier about funds that were available for projects maybe needing funding in terms of job protection. Of course, against that is the job creation type of industry. Does the minister have any comment on job creation and whether any type of industry is excluded when job creation or, for that matter, job protection is at stake?

Hon. D. Zirnhelt: I'll give you at least a partial substantive response. The Job Protection Commission, as you know, deals with critical industries. The idea is that they are critical to the community or in a sector, so there are some limits. They have to be strategic to that community.

With respect to other job creation projects that we will assist, I would say that the emphasis is on sustainable projects, not short-term projects. With respect to the Working Opportunity Fund -- that's one program that we helped get up and running -- they're targeting not primary but secondary industry as the area of growth that the financing is necessary for. While we don't administer that program, it is a limit in that we provided the tax concessions to make the Working Opportunity Fund happen. It is targeted, but we don't administer that. But basically any commercially viable industry of a job creation project would be eligible for the services of the ministry.

H. De Jong: I'm sure the minister would agree that job creation and sustainable jobs are very much appreciated, not only by the people who are involved and have the jobs but also by the entrepreneurs who are providing the jobs. I'm sure that the minister also agrees that the best jobs are provided through the entrepreneurial system, because those are usually lasting jobs. They're not short-term jobs, as we used to know under the job creation programs that were provided by both federal and provincial governments.

They were usually of a three-month or six-month nature, then the job was gone and the people were back where they started off before. But we do have the odd opportunity. That's actually why I asked if there was any specific category of business that may be excluded from those privileges.

I can appreciate the minister's answer that he has given so far, but at the same time -- and I haven't got the letter with me -- I had some correspondence from a farmer in the Columbia Valley. He wanted to expand his fruit farm. It grows a number of fruits. He's the type of entrepreneur who wishes to do as much processing of those fruits on the place as possible, and also, because it's adjacent to Cultus Lake, it's a good tourist attraction. The combination of that does provide jobs. It would appear that the entrepreneur himself is very confident that such an operation would be successful.

I haven't seen any of the figures at all, but the farmer got a rather disappointing reply from your ministry that that kind of application would fall within some program that was of a federal nature, and that it was provided through the Ministries of Agriculture provincially and federally. Having heard the minister's comments earlier that there are no exclusions, I'm rather disappointed that this kind of letter would come from this ministry.

I am also convinced that what this farmer is anticipating doing does not fall within the actual Agriculture programs that are normally available. He's processing these fruits and vegetables beyond what the normal farmer would do when he picks his fruit or cuts his cabbage and puts it at the farm gate for pickup or delivery to stores. So there is an expanded opportunity there. I would like to hear the minister's comments as to whether there isn't a better way to deal with that particular situation than to send the person off. In his letter he clearly indicates that if he does not get this type of assistance....

He's not asking for anything free. He's only asking for a loan or a loan guarantee to construct those facilities; I'm not even sure which it is. But it's going to provide about a dozen jobs, and it certainly would be a benefit not only to the community but also to many visitors that will come into the Cultus Lake area. It all ties in with more economic growth through agriculture and business as well as tourism.

Hon. D. Zirnhelt: I don't have the letter here either; I'll try to get some details on it. There may be a difference of opinion as to whether he qualified, because I know that some of the federal-provincial programs actually deal with processing. If it's the establishment of a marketing activity that doesn't fall into the categories permitted under the federal-provincial agreement, then he would have assistance that we provide.

We don't have a small business loan program. I've said that if we are involved in any kind of loan guarantee, it's mostly for ad hoc projects of a strategic nature that are much larger than this. So to the extent that we have a program that that person qualifies for, we'll provide him the assistance. I'd be happy to have a look at it. As I say, I don't have the details. But if you can provide me with those details -- or we'll do the research; I think we've got enough details to check it out -- we will provide you an answer as to why we aren't providing a service. But it may be that we don't have a program that fits his need.

We know there's a need out there for commercial ventures that are related to some of the primary

[ Page 6690 ]

industries. One of the problems is that the banks are not making as many loans to commercial businesses. They've moved away from that, and that may be part of the problem as well. If there is a reason why the private sector capital markets won't provide assistance, we have to have a good look at our particular reason for being involved. As you know, this is an area where you have to very carefully fill a niche that's not filled already by the recently expanded federal business loan program.

[4:00]

H. De Jong: I appreciate the minister's answer and his willingness to look a little further into this. I would add that the processing of fruit, vegetables or anything that's produced on a farm is in fact allowed under the Agricultural Land Commission. It is a longstanding policy, which has always been supported by local municipalities and regional districts, that the produce that is grown on a farm can in fact be manufactured on the same site. So that is not a deterrent.

But I certainly would hope that the Ministry of Economic Development, with its programs, is available to all sections of various industries if they make sense and provide lasting jobs, which is usually the case. Then I think we can overcome what the minister said earlier this afternoon about no new or small businesses being up and running. It was in one of the comments the minister made to the earlier question that apparently there was a surplus because not enough new businesses were up and running. I am sure that must be a concern to you, Mr. Minister, and it's a concern to me.

I'm sure it's specifically a concern to those whose applications have been turned down, such as the one I've been talking about. Thank you.

Hon. D. Zirnhelt: Of course I would be concerned if there is a small business that is viable and has been turned down by any financing source. We deal with a lot of advanced manufacturing. The value-added to the primary sector is an area where we do a lot of work, although in some cases the line Ministry of Agriculture may be involved, because it is food processing and they tend to take the lead there.

If any business has failed because of a lack of financing, then that's regrettable, and would point to a need out there. I'm saying that the need is very difficult to fill when you have the commercial banking establishments moving away from commercial lending. So the government didn't create that problem. Whether the government can fix that problem is something that we're actively examining right now to see if we can use an existing delivery mechanism out there in terms of providing some kind of guarantee to financial institutions. That may pick up this particular case. But without having the details, I'm not sure where it fell through the cracks. If it has, it's regrettable.

One of the areas of large expansion right now is food processing. We're very competitive in a lot of those areas, and we will encourage them.

R. Chisholm: Along the same line as the previous member was talking about is the value-added in agriculture. I realize that a lot of this is going to be overlapping, but I guess we have this debate to find out exactly who is responsible for what and who is doing what.

There are an awful lot of value-added products that can be produced from agriculture products. Take a look at the bill I introduced on ethanol -- the grain growers. Now that one there, for instance, will decrease pollution and put all the grain growers in this province back to work. We need an ethanol plant developed.

I was just wondering if you are looking into these types of areas where we give incentives to an industry to develop a plant. Or are you going out and actively finding people who will participate in a program of this nature? Are you just strictly there for them to come to you, or are you actively promoting?

Hon. D. Zirnhelt: Well, it varies. Sometimes people come to us, and sometimes we have feasibility studies there. There is an alternative fuels task force that's operating within the government, and they haven't reported yet. But our examination of ethanol would show, on a preliminary basis, that there are other more cost-effective means of getting into alternative fuels. So you are looking at -- to this point in time -- higher fuel production. The concessions required here are considerable, and we have not decided if we will provide a subsidy for that industry.

But as you know, the agriculture community in the Peace River area, in particular, where most of our grain is grown, is looking at an agriculture strategy. If, in the process, they identify this as a feasible part of their strategy, then we'll have to look at it.

R. Chisholm: Other products can also be made from agricultural products, such as ink from soybeans and that type of thing. Are we trying to get people to come in to develop an industry or markets here for these agricultural products? Can you name a few that we're actually working on at the present time?

Hon. D. Zirnhelt: I will just back up a bit, which might help you; it will certainly help me. The idea of industrial development within the agricultural sector is something the Ministry of Agriculture has been taking the lead on. So unless the minister has directed you to us, I would direct you back to the minister for the specifics on products.

Where our role comes in is that our Investment Office is looking for investors. If we know there's an area we have highlighted, such as value-added in agricultural products, the B.C. Investment Office will be actively looking for opportunities to direct investors into these kinds of projects; or conversely, if they have trouble -- they have a project but no investor -- they will then seek out an investor and shop that particular product around.

R. Chisholm: What products are we investing in now in the agriculture and fisheries areas? Are we investing in any at all?

[ Page 6691 ]

Hon. D. Zirnhelt: I am going to give you a couple of examples. We were actively pursuing an investment in the pork industry in the Fraser Valley. We are also looking at a continued development of processing hake. Again, the Ministry of Agriculture is looking at that. We get involved in these usually because of the investment or the regional impact. Those are two examples. I don't have an exclusive list. You would have to get that from the Minister of Agriculture.

R. Chisholm: I understand the hake industry. But we're still sending 35 percent of our product outside the country with the value added on. Other than hake, what are we adding value to? Are we doing anything in the salmon or herring area, or are we strictly working on hake at the present time?

Hon. D. Zirnhelt: I could take a guess, but I think I would have to refer it to the Minister of Agriculture.

Clearly, where a line ministry has a history and an interest and some resources being spent on the industrial development part of a primary industry, they will take the lead. We tend to pick up all the rest or work together with them. However, if there is a need to add value to or develop primary industry in a particular region, as is characteristic of our regional economies, then we will take that because we have a regional focus. We will say that of all the possible products to be produced, these are some in this region. We take an interest on an advocacy basis, but we will work with the line ministries.

I don't mean to put you off, but I don't have the answers. We could ask to get them for you, but I would suggest that the Minister of Agriculture will have them.

R. Chisholm: Thank you, hon. minister. That clarifies where I was going. I will go to that minister for those answers.

Going on to the area of interprovincial barriers, does your ministry have any effect on that? Are you doing any negotiations with other provinces on interprovincial barriers? According to some figures, we have a 13 percent disadvantage with Alberta in agriculture, for instance. I'm trying to pinpoint exactly who is doing the negotiations on interprovincial barriers and whether people in your department would be the ones to talk to.

Hon. D. Zirnhelt: Yes, earlier in the estimates I did explain some of this, but I don't mind explaining it again. We have the lead in future negotiations on interprovincial trade barriers. There have been some sectoral negotiations, and I'll get the list of the sectors we've been negotiating with independently, one by one. The beer and wine sector is an example, and we are looking at financial institutions. There are some on agricultural products, I understand

We are proposing to have the provinces and the federal government come up with a comprehensive set of negotiations, similar to the approach taken under the free trade agreements -- in other words, to possibly allow some trade-offs and to try to get agreements to eliminate or reduce real barriers where they exist. In June -- in about three weeks' time -- the federal and provincial ministers will be sitting down to try to agree on a list of areas that we want to negotiate, and we will work with the responsible line ministries.

If they are agricultural trade barriers, the Minister of Agriculture will work with us on that, and he will have somebody on the negotiating team. We have not yet agreed on the method of negotiation. We are currently discussing that with the provincial government.

With respect to your figure of about a 13 percent disadvantage in agriculture, I guess you are looking at the cost of production in B.C. compared to Alberta. If one of those constitutes a trade barrier, then presumably that could be on the table. If one of those costs exists because it is a resource management cost such as water or something like that, and the cost is there because we are managing and conserving that resource, I'm not sure that that's a trade barrier. The spirit is to take legitimate barriers, which are there for public policy reasons, and try to find a common ground with other provinces.

But there are no negotiations taking place under my ministry right now in the field of agriculture.

R. Chisholm: With reference to the same question, I'll give you some information that might help you answer it. This is a comparison of the 13 percent disadvantage with Alberta -- the grain growers, for instance. We were talking about the Peace River area. He is talking about some provincially funded fuel tax rebate programs, so this would be a provincial jurisdiction. Would you have any involvement there, considering that we don't get it and Alberta does?

A 4 cent rebate on gas and a 10 cent rebate on diesel is given in Alberta. The rebates translate into roughly an $8- to $10-an-acre penalty between the two provinces. About 10 percent of the $85 per acre average it costs to produce wheat, barley or canola is due to fuels and then taxes. These are strictly provincial jurisdictions. Would this be part of this negotiation? Would this government put that on the table, or would it not be part of it?

Hon. D. Zirnhelt: It is highly unlikely that that would be part of the internal trade barriers. There is no question that internal trade barriers do have an effect on competitiveness, but things like fuel taxes, fuel tax rebates and those kinds of costs are competitiveness issues, not trade barriers to the movement of capital, people or goods. I'm not sure of the connection between these competitiveness issues and the trade barrier issues, but it is my understanding that those matters won't be on the table.

[4:15]

R. Chisholm: If these are not on the table, we are not going to defeat the problem we have with trade barriers, because some of them are self-inflicted by this province. If they aren't on the table in these negotiations, would you be approaching your government and your cabinet to try to decrease the cost to farmers? Otherwise, the barriers are still there, and they are self-imposed barriers. Maybe that is part of the problem.

[ Page 6692 ]

Hon. D. Zirnhelt: If the higher cost of production in any particular province is a result of regulations that exist for environmental or social reasons, we would be looking to levelling up. Michael Wilson, the federal trade minister, who is coordinating the federal input into this, says that they would like to see a levelling up of standards. So it's a matter of standards. If it's a matter of taxation and competitiveness, then by themselves these don't constitute a barrier to trade.

R. Chisholm: They may not constitute a barrier to trade according to the federal government and other provinces, but if we've imposed a 10-cent-per-litre increase in B.C. on top of the normal Alberta price, we've imposed our own barrier and put our agricultural people at an added disadvantage. That's why I'm asking whether this government will take that into account when they negotiate it. Otherwise, we will still have barriers after you're finished the negotiations, and the barriers will be imposed by ourselves.

Hon. D. Zirnhelt: I still don't see it as a barrier to trade. It may be a disadvantage. It's a competitiveness issue. The way we're handling competitiveness issues is to look at it sector by sector and industry by industry, trying to get all the costs of production. In the part of agriculture that I'm most familiar with, the cattle ranching industry, taxes and fees are a small portion of the change in profitability. Other input costs are rising and are a bigger problem. Those are things that the government doesn't have control over. We do of course look at competitiveness.

We have an interest in the industry being competitive. If you can show me the relationship between a production cost and a trade barrier, I would be happy to take that under consideration.

R. Chisholm: If the rebate translates into $8 to $10 an acre between Alberta and British Columbia, we're obviously at a disadvantage if we're paying $85 and they're paying $75. Competitiveness is gone as far as B.C. producers are concerned. I understand what you're saying -- that the barrier itself will have to be negotiated -- but will this government take a look at its own agenda and policies as to what puts us at an added disadvantage, no matter what comes out of the negotiations with the federal government, Alberta and British Columbia?

Hon. D. Zirnhelt: As I said, we do look at competitiveness. This is an area where the Ministry of Agriculture, in looking at each sector, looks at the contribution to competitiveness of the tax structures and so on. There may be an $8 to $10 difference with respect to fuel rebate, but in the case of the pricing of our range, for example, we're significantly less than the province of Alberta. It varies with the commodity product. I understand the argument in and around grain farming. Probably the biggest thing that affects grain farmers, though, is the world price.

Unless we see some change in the way Europe and the United States subsidize their exports, there's nothing we can do. We could pay them to produce, and they won't be on the same playing field.

R. Chisholm: Hon. minister, you've just justified why we should be producing ethanol. One reason to produce ethanol is that we will never win the battle with the EEC and the United States over grain. But if we produce grain and turn it into ethanol that we put in our gas tanks, we'll clean up the pollution in the Fraser Valley and B.C. and our grain growers will be back to work. Also, the effluent from that industry is used in flour for biscuits and cookies, and for fertilizer and animal feed. That justifies a system like ethanol. We should be developing an industry that will take our agricultural product to the end. We will then be viable.

I'm not going to argue anymore about interprovincial barriers. There's a problem here, and some of it is self-inflicted. I just hope the government will look at it.

Turning to the Buy B.C. program for a minute, does your ministry put any money into the Buy B.C. program, or is it completely an agricultural institution?

Hon. D. Zirnhelt: The funding is entirely within the Ministry of Agriculture. They have the lead on that program. It has a primary focus on food, as you know. What our ministry does and has done, though, is work with communities on looking at any import substitution. If somebody sees that there's a product that can be produced, we're happy to work with them to find a market or understand the requirements of producing that product.

R. Chisholm: Does this ministry work with the British Columbia marketing council to develop products or markets for the agricultural industry through the industrial base, rather than another government agency?

Hon. D. Zirnhelt: Yes. You've picked a field where the Ministry of Agriculture has the lead and does substantially all of the work in that area.

R. Chisholm: Hon. minister, I'm going to quote to you what you said about NAFTA. You were worried about the impact of NAFTA, which will see Canada, the U.S. and Mexico become a giant free trade zone. It says here that you're especially concerned about its impact on B.C. fruit and vegetable processors. With Mexico's cheap labour and production costs, it will be virtually impossible for locally produced goods to compete, he says.

Seeing that you see this problem, is your ministry working on any solutions to this, considering that we've lost an awful lot of our food processors -- Royal City Foods, for instance -- and some of our fish processors in the last year? Are you developing a plan to ensure that this industry remains viable and industrious in this province?

Hon. D. Zirnhelt: We're still working on the problem. The NAFTA is not signed off yet. As you know, there are major problems. By supporting the NAFTA and voting for it, your party is helping to create the problem. We're trying to deal with the fundamental

[ Page 6693 ]

problem, but if we are stuck with it, of course we'll look at those areas and try to assist them. We will find ways in and around the trade agreements that are legitimate tools for supporting the development of industry within B.C.

But with respect to competitiveness of particular industries in the agricultural area, the Ministry of Agriculture has been working actively. There's a very successful wine industry in British Columbia; the Ministry of Agriculture worked with them there. The same thing goes for the food processing. We have examined a lot of these areas, and we've identified this as one area that will suffer under the NAFTA. We've argued that if the federal government is going to go ahead with that, there ought to be specific adjustment programs for sectors that would be negatively affected.

To date, the federal government has refused, as they did under the free trade agreement, to look at specifically targeted adjustment programs. Without those, we're left trying to do what we can to assist those industries. Again, that assistance will come primarily from the Ministry of Agriculture.

R. Chisholm: The B.C. Trade Development Corporation, as you know, develops markets overseas for us. What products are you pushing overseas for British Columbia at this present time, and how successful have we been in the last year with this program?

Hon. D. Zirnhelt: I will ask you a question. Are you referring to agricultural products or products generally?

R. Chisholm: Agricultural.

Hon. D. Zirnhelt: That's what I thought. I don't have a list of the products. It's extensive. Again, with the Minister of Agriculture, we'd be happy to provide that information to you. I don't have it with me here. Generally speaking, though, the B.C. Trade Development Corporation does promote a whole range of products. If somebody provides B.C. Trade with a product, they take it and shop it around through the overseas offices; it is featured on the trade mission. I do know that there are products that we assist, in terms of the export rules and the trade rules and laws.

We assist in interpreting what tariff rates can be imposed, and so on, so we provide quite a bit of assistance. On a product-by-product basis, individuals often come directly to our officials. Nothing flows through, and we don't say: "This ministry is looking at X number of products." We leave it open to the marketplace to come to us for information.

R. Chisholm: I'd like to change the subject to the corporation capital tax how involved your ministry was in the application of it. Over the past number of years governments have advised farmers to incorporate themselves, and lately we have had this corporate capital tax and what it does to farmers at this stage of the game. My first question is: was your ministry involved in advising the government whether to apply this tax?

Hon. D. Zirnhelt: The decisions to apply or not apply a tax are made exclusively within the Ministry of Finance in and around budget time. Sometimes we are asked about impacts, and we provide information, if we have it.

With respect to advising farms to incorporate, I'm not aware that we are promoting the incorporation of farms. Every business has to look at whether there is an advantage to them. In the case of a lot of farms, it depends on the nature of your production and how diverse your products are.

R. Chisholm: It wasn't just this government that promoted that; it was previous governments, too. The problem is that a lot of farms did incorporate themselves. When they did incorporate themselves, they then came under the corporation capital tax, which has a ceiling of $1.25 million. But you and I both know it doesn't add up to very much when you're getting into farming, and it is a definite disincentive for young people to get into farming. I was just wondering if you had any input into this with the government when this tax was passed.

Hon. D. Zirnhelt: While I didn't have the opportunity to address that subject in any substantive way, the Minister of Agriculture and I both attended the B.C. Cattlemen's Association last week, and we indicated that the reason for the tax is for deficit-fighting, not for any other reason. When we have substantially handled the deficit in this province, we will be in a position to examine these kinds of matters. You need to point to the fact that there were changes. The threshold was lifted by 25 percent from $1 million to $1.25 million, and that substantially assisted that industry. Some 30 more farms are now exempt from the corporation capital tax, so the move was in the right direction.

R. Chisholm: I'd like to move to cross-border shopping. As we know, it is very detrimental to the economy of British Columbia. A recent survey said that $1.6 billion worth of sales were lost to cross-border shopping, and there were roughly 15 million visits to the United States. This means that 27,000 jobs were lost. As we know, the gasoline tax is one of the reasons for this. Seeing that cross-border shopping would come under your ministry, what are you doing to try to keep the gasoline taxes down? What are you doing to ensure that the government takes the gasoline taxes down further once you do succeed?

So far, we have seen an increase in gasoline taxes with the new Build B.C. program. With that, everybody is flocking south of the border, and I would like to know what your ministry is doing about it.

[4:30]

Hon. D. Zirnhelt: As a ministry, we don't have the total responsibility for all the actions and all the policy areas of government. The other side of gasoline

[ Page 6694 ]

taxes is that if you reduce the taxes, you also increase consumption, and that contributes to pollution. So there is taxation on these things not only for revenue purposes but also to assist in reducing consumption.

Cross-border shopping, as you know, is actually down. It declined by 8 percent in 1992 from 14.2 million trips in that year compared to l5.4 million in 1991. This led to stronger retail sales. What we have done in the whole cross-border shopping field is to assist retailers in promoting their products and to counter the advertising from across the line. We do recognize that gas is an issue, and we are very anxiously waiting to see what happens with the federal taxes in the state of Washington. We think the differences will be greatly diminished.

For now, we don't want to prejudge what will happen in the United States. We will have a look at it, and we would advise the Minister of Finance if we saw an area to enhance the development of retail sales in B.C. by reducing taxes. But, again, the taxes are there for revenue purposes, and we feel that the general climate of business is going to be enhanced if we can deal with the deficit. That's what those taxes are doing.

R. Chisholm: That's not the same conclusion reached by some organizations. They called it a tax revolt, and I tend to agree with them. You said that cross-border shopping was down. It was, due to the fact that the monetary rates had changed, not due to gasoline at that point in time. When the gas tax went up by 1 cent per litre under the Build B.C. program, I phoned the border that same evening and found that places like Sumas were full -- I brought it up in the Legislature the next day -- of people buying gasoline. And when they go over there to buy gasoline, they are of course buying milk, cheese and whatever other products they can get cheaper down there because of the taxes here.

Whether we want to blame somebody else and talk about the Minister of Finance, this is still business, and it's money being lost to business -- $1.6 billion worth. You want to talk about 14.2 million trips south of the border. Well, 14.2 million trips is probably 25,000 jobs instead of 27,000 jobs. Either way, it is an incredible loss to this province. Somehow or another this government and this ministry has got to take it in hand to correct the fault if at all possible. I realize that it's not an easy thing to do. But we cannot keep putting taxes on gasoline. The minute we do, we send people further south, and that costs more jobs in this province.

I would like to know, hon. minister, where you see us going from here. The Build BC Act gives the right to raise those taxes again without coming to the Legislature. That just means more people going south of the border. All I'm asking is what you see in the future with the gasoline tax sending people south of the border.

[E. Barnes in the chair]

Hon. D. Zirnhelt: There is a substantial tax being proposed in the United States. Until we see what happens in the U.S., I think it would be premature to look at lowering our taxes or even rolling back any taxes that have recently been put on.

With respect to the issue of cross-border shopping generally, as I explained, the Minister of Agriculture is looking at the purchasing of agricultural products. To a large extent, it is the price of agricultural products that attracts people, and, as you have argued, gas is another part of that. We don't fully understand why three-quarters of the people who live around the border don't cross-border shop. So we want to reduce it by finding the reasons that keep them home and reinforcing those.

As you also recognized, when the value of the dollar goes down, in all the studies that have been done, that's really the only factor that significantly changes cross-border shopping. So we could reduce the taxes considerably. If the Canadian dollar goes up, cross-border shopping is going to increase. The major determinant -- and I'd be happy to provide you with copies of the studies -- is the value of the dollar, not the price of gas.

R. Chisholm: I'm not going to argue about what draws the people down there, but if you can go down to the States and it costs you $18 to fill up your gas tank and it costs you $28 in Canada, and you can pick up all your milk and cheese with that extra $10, obviously there's a reason for going down to the States. It is because that $10 difference is quite a chunk in a person's budget every week.

But since we're not getting anywhere with that one, hon. Minister, let's go on to other things -- for instance, the removal of tariffs in NAFTA. The NAFTA provides for national treatment between Mexico and the U.S. on marketing standards, which will allow for bulk importation between the two countries by processors of horticultural products. However, the NAFTA provides no similar arrangement between Canada and the U.S.

As a result, British Columbia processors may become less competitive, because they will continue to be constrained in their ability to import products in bulk while at the same time facing increasing competition from imports of processed horticultural products. Do you see any solutions coming out of your ministry to help offset this problem?

Hon. D. Zirnhelt: As I said before, if we had the support of the opposition in opposing it and were successful in that, we would be eliminating the problem. We protested very vigorously, and agricultural products were continuously listed throughout the consultation that the federal government held with the provinces through the negotiating process. With respect to specifically helping this sector, I have to refer you to the Minister of Agriculture who is doing the work, has the lead and is looking at the impacts.

We continue to argue with the federal government that in any area where there is a displacement or dislocation by the trade agreements, there ought to be a specific transition plan or an adjustment program in place for that sector.

R. Chisholm: Increased access to Mexican markets may present new opportunities for British Columbia investors under the NAFTA. The investor state dispute

[ Page 6695 ]

settlement process affords a greater degree of protection to B.C. investors purchasing assets in Mexico. Now we may be faced with our food processors and other industries moving to Mexico, where labour and land are cheaper, causing Canada's loss of investment and employment. This is in relation to the last question I asked you about firms like Royal City Foods and this type of thing. Are you doing anything at all to stop these industries leaving this country and ending up in Mexico?

Hon. D. Zirnhelt: Yes. We are opposing the implementation of this agreement. As recently as last week, the Premier reiterated the untimeliness of approving this program. I wasn't here to witness what went on, but I understand that there was some concern that maybe we should wait longer before we took some position. We took a strong position on that, and when I introduced the resolution, you voted against it. So you helped create the problem.

With respect to dispute settlements, one of the reasons we were opposed to the FTA and to NAFTA is that there's a downhill slide with respect to dispute resolution. We have no confidence that either agreement will give us the dispute resolution mechanisms that we need to have fair trade between the countries. So with respect to specific programs, again we say that the problem is created not by this government but by the federal government. Therefore the responsibility for mitigation and adjustment measures, which the federal government failed to provide under the FTA, has to be provided under NAFTA.

They consistently refuse; they say existing programs are satisfactory. So what any party can do is lean on the federal government to provide a comprehensive package of adjustment programs. But the best thing that can be done is to say to the federal government -- and I'd like to see the Liberal Party put it in writing -- that you are opposed to the implementation of NAFTA, because it does not help the agricultural industry in British Columbia.

R. Chisholm: I don't think it does us any good to debate what the federal government is doing. Personally, I know that the federal Liberal Party is not in support of the way that deal is going and the way it stands right now; they want it changed. You are against it. That's immaterial to me at this point in time. I'm asking about a provincial responsibility. If this goes through -- which it has a great possibility of doing -- what are you putting in place to ensure that our industry survives and that it stays here? If the federal government is not going to do anything about it, what are you, as Minister of Economic Development, going to do about it?

Hon. D. Zirnhelt: This government will insist, and is insisting, that the federal government cost-share any adjustment programs sector by sector. We are working with those sectors that have been negatively affected by the FTA -- and NAFTA is an extension of that. The Ministry of Agriculture is also working on that. They are taking the lead in areas they are responsible for.

I indicated to you that the wine industry was virtually decimated by the FTA, and the provincial government worked very effectively there. We're also working with a number of food processing firms and trying to enhance their ability to compete by substantially assisting them in marketing, through B.C. Trade. Again, you can get specifics on that when the Premier's estimates come up. I would suggest that you discuss specifics on NAFTA-related agricultural mitigation measures with the Minister of Agriculture.

R. Chisholm: Turning now to the aquaculture industry, how much money is this ministry investing in new businesses starting up? Considering that we have had seven new licences in the last year, I'm wondering if your ministry has invested in any of those licences or fish farms that are now developing, or if it has invested in any in the past?

Hon. D. Zirnhelt: We aren't spending any money; the Ministry of Agriculture, Fisheries and Food is doing it. We have an interest in some of the remote coastal communities. If fish processing or some kind of aquaculture program is essential to growth and development in a particular community, then we will assist in getting them to the right agencies. If there is a case where they're looking for an investor, we will do our part to ensure that there is some investment capital available to the entrepreneurs in the area.

R. Chisholm: Are you assisting any of these businesses in that category now?

Hon. D. Zirnhelt: There are no new projects that we're assisting. However, the previous government had a program called the aquaculture incentive program, and as of March 31 we have disbursed just over $4 million under that program. I have to say that that is a field where a lot of the loans went sour, and a lot of them were written off as well. We're approaching it with considerable caution. We hope we're through the worst of it.

R. Chisholm: Considering that one of the promises of this government was to have a moratorium on aquaculture before there was any further investment, why have we continued to invest in it? There's no sense in me asking you the question. There have been seven new licences, and we still have not seen a moratorium. Considering that we do not know what we're doing to our ecosystem or whether we're going in the right direction, I'm wondering why you've continued to honour these. Were you obligated under contracts to honour them?

[4:45]

Hon. D. Zirnhelt: Yes, these are programs where the contract had already been signed and there was a disbursement schedule. We have had no new approvals under this. As you acknowledged, the actual permitting should go to the minister responsible for the permits.

[ Page 6696 ]

D. Jarvis: As you're probably aware, the wharf in North Vancouver was part of the settlement in the unfortunate Cassiar mining fiasco of about a year and a half ago. Many ministries were involved in this situation. Was your department involved in it, and where is the wharf? What happened to it?

Hon. D. Zirnhelt: The disposal of assets or the treatment of anything that's put up as security is administered by the loans administration branch. I can dig into it, but once the loan is made, it's administered by the loans administration branch. They are responsible. I refer you directly to the Minister of Finance on that.

D. Jarvis: Is there an international trade division in the B.C. economic development department that would be looking specifically after the export of minerals and coal and things like that?

Hon. D. Zirnhelt: Yes, this ministry has a responsibility for trade advisory services. In other words, we try to ensure that there is specific legal advice with respect to the policy and what's possible under all trade policy areas. A ministry like Energy, Mines and Petroleum Resources may have some in-house expertise in this particular field. But we only provide trade advisory services. In other words, what is the policy? How can we enhance our trade under existing trade rules? What are some of the impediments? We do provide that. We have a shop that specializes in trade policy.

D. Jarvis: Do you provide them with leads or contacts or anything along that line?

Hon. D. Zirnhelt: B.C. Trade is the operational wing that does the export promotion. As you may remember, that was one of the changes. Part of the international division of this ministry that was operational was transferred to B.C. Trade to boost their capacity to provide those services as a Crown corporation.

D. Jarvis: I appreciate that the resource development department of Economic Development is for businesses that are going down, but do you get involved at all with, for example, a smelter that's being proposed for the Kitimat area? Are you in the development end of that?

Hon. D. Zirnhelt: Yes, industrial development is an area where we are very much involved. We are quite involved in the value-added on the mineral side. A direct reduction iron facility is something else that we're actively working on. You mentioned the copper smelter. We have done a number of feasibility studies of industries, and we shop them around. The B.C. Investment Office is very active in taking these proposals and trying to find investors.

D. Jarvis: Have any conclusions been reached on that smelter in the Kitimat area at this point? There were lengthy discussions with the Japanese for awhile.

Hon. D. Zirnhelt: We have been actively promoting this. Given the amount of copper that's available in B.C. and the world, we feel that a world-class facility like this has a place in our economy. There's room for one in the western hemisphere. To this point we don't have the private sector investors committed to being a partner in the feasibility study. We conducted the pre-feasibility study. We've shopped that around.

The Premier has taken it over on two occasions, and the Minister of Energy, Mines and Petroleum Resources has also been discussing it with a number of prospective investors -- normally people who consume or trade in copper. But we are still shopping the feasibility study around. We continue to promote the opportunity to potential investors through the B.C. Investment Office.

D. Jarvis: As we all know, our copper is pretty low in quality, so we have to really shop around to get it. You were mentioning that you weren't involved too much in the interprovincial trade thing. I was wondering if you are involved, for example, in the transportation of copper and coal to the salt water. Are you involved in the setting of trade rates? Do you have input into having B.C. Rail lower the cost of moving the concentrates and coal to the salt water?

Hon. D. Zirnhelt: There are two parts to my answer. First of all, if the job protection commissioner is involved, for example, in the case of Cominco, the southeast coal problem generally or northeast coal and rates are an issue, one of the parties could contribute to the economic plan by reducing their rates. We can get involved that way, and we do assist the job protection commissioner in doing the evaluation. Usually there would be some kind of corporate team put together to try to draw in the Crown corporations if there's a Crown corporation.

Obviously we would try to lean on them to see if they can come to a commercial deal that they can live with as part of their business plan but one that is also good for the industry as a whole. If we're looking at a green field project -- for example, a mine somewhere in the north -- and there is a need to have a certain threshold price for transportation to make the project feasible, the government could get involved in suggesting that maybe the provision of infrastructure to get the railhead, barging facilities or whatever....

Then we can get involved in doing some of the preliminary economic benefit studies that would justify the projects.

We're not a regulatory agency; we tend to be an advocacy ministry. We try to take the firm-specific, project-specific proposal and run it and assist the private sector investor to get the financing or regulatory approval they need. In some cases, direct infrastructure assistance is appropriate. So we are involved to that extent. We have a very broad mandate that tends to get more specific when you zero in on a project. If in the process we identify that there is a general competitiveness problem with respect to rail transportation, then of

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course we would draw that to the attention of the agency that controls that and try to make some suggestions in and around what can be done.

D. Jarvis: As you're probably aware, the cost of shipping coal back to eastern Canada through the United States is about 30 percent cheaper, ostensibly due to our interprovincial fuel rates. There is no general overall plan for the government to try to assist.... I'm specifically talking about the Elk Valley. It's up and down any moment now; hopefully it's going to remain up. But there's no overall plan for the government to try to assist them by either dropping the rates on fuel taxes to go east or dropping the rates to ship the coal to the salt water through B.C. Rail, for example?

Hon. D. Zirnhelt: In the case of the Elk Valley, there are lots of things that we're working on with respect to the restructuring. We have been more involved in the past than we are right now, but we were looking at the whole industry and competitiveness issues there. A lot of the things that we do centre around productivity. But as far as competitiveness in the fuel rates, this is a problem all across Canada, as you know. I am personally very concerned about the growing north-south linkages as a partial result of the free trade agreement, which tends to threaten the east-west connections in this country. I think that is an area we have to deal with.

The Minister of Transportation and Highways is actively working with his colleagues in western Canada to examine some of these issues at the present time. But transportation-mode-specific questions should be directed to him, because he's up on it. We recognize the problem, but we also recognize that if there's a cost to reducing the fuel rate, it may not be offset by the benefits. That's usually what happens; usually the costs of making a change are greater.

D. Jarvis: On that aspect, free trade might be a benefit. We might just throw a spur down there and ship our coal 30 percent more cheaply through the Yankee rates.

In any event, I want to go to another subject: power and cogeneration. For example, you're probably familiar with Lytton Lumber up in the interior. I was wondering if there was any allocation of funds from your ministry for them. They're having problems getting approval for a cogeneration plant to burn their waste, and they have fluctuation of power and all the rest of it.

Hon. D. Zirnhelt: We are very anxious to see that whatever co-gen projects are commercially viable get up and running. One of the problems we have with respect to the Lytton project is that at present B.C. Hydro doesn't need to purchase any more power. There is an argument, I know, about whether or not there's adequate supply to the Lytton area, but Hydro maintains they can service that area and are servicing it adequately. Lytton Lumber has had considerable assistance in making their business viable through the Job Protection Commission.

We realize that if they were to add a co-gen facility, the viability would be enhanced; but what would make that possible is the underlying probability of a subsidy.

Right now the consultations we did through the Energy Council indicate that communities generally throughout B.C. don't want to see the general taxpayer, the hydro consumer, pick up the subsidy for local economic development. That's a very big policy area: providing a local benefit but transferring the cost to all of the province of B.C. If the greater premium that B.C. Hydro might pay any given project were transported across the ten or 20 other similar projects in the province, the cost would be substantial. The cost for any given co-gen would be very small on your and my hydro bills; but if you add them all up and you have a fair program, you've got a bigger problem.

[5:00]

We have said that we are open to power exports. So if Lytton Lumber can find a market for power at competitive rates, then B.C. Hydro would undertake to wheel that power down there. This is a very complicated area. Were it possible for us to get dozens of these up and running in every community, we would be more than willing to do that. In fact, we are constantly studying the economics of these projects, constantly trying to find an angle where there doesn't constitute a large subsidy on behalf of taxpayers to that specific company or that community.

D. Jarvis: You mentioned B.C. Energy. Did you make a proposal for cogeneration plants throughout the province with the Energy Council?

Hon. D. Zirnhelt: No, we didn't make a presentation to the Energy Council as such, but as an agency within government, responsible for economic development, we have constantly been studying these; in fact, some of the original feasibility studies were funded through our ministry. We have taken those and carried them within government. The obstacle was energy exports, so now that we've cracked that nut, we have the potential there for some of these projects, if they can find a market. One of the problems with a lot of these proposals is that they don't have a market. People assume that B.C.

Hydro has an infinite capacity to purchase electricity, and right now we have a surplus to about the year 2000. The economics are difficult, because they would have to come in at under the avoided cost of B.C. Hydro providing that out of existing sources.

We recently provided Lytton Lumber with a $382,000 loan guarantee under the Job Protection Commission and that substantially assisted that particular firm.

D. Jarvis: There was added value in ANG and Fording in the Elk Valley, for example. The information given to me was that they had contracts with the United States and that if we had given them approval for cogeneration plants at that time, we wouldn't have had to use the gas being shipped out of our Peace River into the United States -- in Washington, where they built four electrical plants and there goes our added value.

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But they had contracts, from what I understand. Am I not correct in that?

Hon. D. Zirnhelt: Yes, it's my understanding that you're correct. I'm sure about the ANG one. As I understand it, the roadblock is out of the way for them so they now can apply.

One of the problems around natural gas though is that as a rule it remains cheaper to transport the gas in pipeline and generate the electricity across the border than to generate the electricity here and run it across the border. The economics are in favour of the cheaper transportation of gas across the line. We're not in a position to put an export tax on gas under the trade agreement, so the economics have to be in our favour. There has to be some regulatory way that it's trade defensible -- FTA-proof and now NAFTA-proof -- in terms of creating an incentive here. It's more and more difficult to do that.

The economics have to be clearly in favour of the type of production you're talking about, but we agree that if it is possible to encourage the added value on this side of the border, then we will do that.

Again, I'm in a field that is both the responsibility and within the knowledge of the Minister of Energy, so you should pursue it a bit there, although I think they are finished their estimates, so...

Interjection.

Hon. D. Zirnhelt: No they're not? Okay, there you go.

D. Jarvis: Do the economic development officers that you have, for example, up in the Cariboo area -- say Quesnel and all the rest of it -- organize or assist the placer miners at all? Do they have some input into developing markets for them?

Hon. D. Zirnhelt: They certainly can. We've had two people in the Cariboo and they're going to be replaced by probably five in the Cariboo development region. They aren't all in place; there