April 28, 2010

RESOURCE

COMMITTEE

The Committee met at 5:10 p.m. in the Assembly Chamber.

CHAIR (Harding): Good evening everyone.

We have the signal now to begin our meeting. I would like to welcome you all

as we debate the Estimates for the Department of Business. Before we do, you

have a copy of the minutes for our meeting yesterday evening, the Department of

Tourism, Culture and Recreation, so I would ask for a motion now to adopt the

minutes as circulated.

MR. BAKER: So moved.

CHAIR: Moved by Mr. Baker.

Seconded?

MR. VERGE: So moved.

CHAIR: Seconded by Mr. Verge that the minutes, as circulated, be adopted.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'

Motion carried.

On motion, minutes adopted as circulated.

CHAIR: We will begin, as usual, with the Committee members identifying

themselves.

MR. VERGE: Wade Verge, Lewisporte District.

MR. BAKER: Jim Baker, Labrador West.

MR. DALLEY: Derrick Dalley, The Isles of Notre Dame.

MR. HUNTER: Ray Hunter, Grand Falls-Windsor-Green Bay South.

MR. KELVIN PARSONS: Kelvin Parsons, Burgeo & La Poile.

CHAIR: We have some observers too, so if you would identify yourself,

please.

MR. LONO: Simon Lono, Researcher with the Office of the Official

Opposition.

MR. MORGAN: Ivan Morgan, Researcher with the NDP.

MR. WOODMAN: Ron Woodman, Legislative Assistant with the NDP.

CHAIR: Thank you very much.

We also have a person in the gallery. Members from the general public are

welcome to these meetings. I just want to welcome you.

We will follow our usual procedure. We will have the minister begin debate

after the Clerk calls the first subhead. He will have up to fifteen minutes to

introduce his departmental officials and give an overview of his department's

Estimates for the year.

Following that, the first speaker will have fifteen minutes and then we will

see if there are any other Committee members who want to ask questions. I ask

the Clerk now for the first subhead.

CLERK: 1.1.01.

CHAIR: 1.1.01, shall that carry?

Minister Wiseman.

MR. WISEMAN: Thank you, Mr. Chair.

It is my pleasure. This is my first Estimates Committee as the Minister of

Business. This is a real pleasure for me to be able to, this year, speak to the

Estimates of the department, to talk about some of the program areas that we

have, and hopefully provide the insight to the Committee that they will find

necessary to support the department's budget.

Before we get started, let me introduce the people who are with me. On my

immediate left is Ray Dillon who is the Deputy Minister of the Department of

Business, and Julia Mullaley who is the Assistant Deputy Minister.

Then we have Linda Vaughan who is the Director of Financial Operations. Linda

is shared with three or four, six or seven

OFFICIAL: (Inaudible).

MR. WISEMAN: Five other departments, so she is a busy woman. She supports

both ourselves and several other departments.

Directly behind me is Mark King who is the Director of Communications. Next

to him is Susan Clarke. Susan is the Director of Brand Development. Next to her,

on my far left, is Harman Khurana who is the Director of Business Analysis.

The Department of Business is, I will not use the word new any more, but

relative to some of the other departments in government that have been

long-standing and a part of pretty well all previous government structures, the

Department of Business is a relatively new department in that it was established

in 2004. Really, we started analyzing some of the work that we had done in the

early years, it was focused around brand signature development and around the

whole regulatory reform piece. It has only been really late in 2007 that we, as

a department, have had a set of guidelines that have provided us with some

direction as to how we may want to use some of the Business Attraction Fund that

we have.

The department's primary focus is attracting new investment to the Province,

but it also has a business leadership role in that we provide and have a

responsibility as well for the branding of the Province from a business

perspective. We will talk a little bit about that as we talk about some of the

programs and some of the budget initiatives this year.

Also, the whole piece around regulatory reform - you have heard me say in the

House, and the previous ministers, celebrate some of the successes that we have

had in reducing the amount of red tape and the cost of doing business in the

Province. That is a government-wide initiative that has been led by our

department. Some of the other involvements we have had in this year's budget,

you may recall there was a commentary about an Air Access Strategy that we have

been providing the leadership on, on behalf of government. We have an Investment

Attraction Strategy that is across government departments that we provide

leadership on.

Areas of input into which, I guess, speak to this whole piece around the

business climate and (inaudible) input into issues around tax policy. Some of

the work we have done as a government around the Skills Task Force and looking

at the kinds of things that make us an attractive place to invest, an attractive

place to do business, we provide some input into those processes, provide some

leadership and commentary from a business perspective to ensure that as a

Province we have an economic circumstance that makes it an attractive place to

invest. Also, the tax policies, the regulatory regime, all form a part of that

in having a skilled, competent and now appropriate supply of skilled workforce

is another critical piece of that. In some of those areas, we provide some

strong leadership within government and from a perspective of enhancing and

improving the investment climate.

This year, the Province has - there have been many discussions in this House

about our fiscal position. The Minister of Finance has very eloquently talked

about the fiscal realities that we face as a Province and some of the successes

that we have enjoyed. This past year-and-one-half or so has been a challenging

time in many parts of the world. As much as this Province has weathered that

economic storm much better than many other jurisdictions and we are rebounding

much faster, in our line of work, though, when we talk about inward investment

and trying to bring new investment to the Province, the work that we have been

doing has been somewhat influenced by what is happening worldwide. The people we

talk to are predominantly people who are living outside of Newfoundland and

Labrador now and our objective is to get them to look at Newfoundland as a place

to invest. As the world economy rebounds, we would like to think that we will be

well positioned to be an attractive place for them to start re-growing their

businesses, and as they look at the impacts of the downturn of their local

economy had on their business and their future, they will see a much more stable

climate here. Hopefully, we will continue to have success in being able to

attract their interest and eventually get them to invest in the Province.

We have the assistance to do that; we have a couple of funds that we have

established. We have a program that is made up - from a business attraction

perspective - of an equity position and the other one is a grant position that

we have and provide some loans of some $25 million fund that we have available

for lending purposes and a grant program that we have.

There are two other funds that we have established that are short-term in

nature. One is an Aerospace and Defence Development Fund. We are trying to build

additional capacity in the Province in the aerospace and defence industry. The

other one is in around oil and gas. We have an Oil and Gas Manufacturing and

Service Export Development Fund. Again, with a focus of working with indigenous

companies to help them grow their companies and make them much more competitive

in the oil and gas business, not just for the Newfoundland oil and gas business

but to position them to be international players. These are two funds that we

have established over the last couple of years that have a defined time period.

They are administered by our departments as well.

That is a very broad overview, Mr. Chair. I do not want to spend a lot of

time talking about the programs that may come up in the questions, so I will now

conclude my comments and turn it back to you to have the Committee explore the

Estimates on some of the issues that we are doing as a department.

CHAIR: Thank you very much, sir.

Before we begin the questioning I just want to remind the officials that if

you need to call on any of your department people to answer a question if they

would identify themselves because it is being recorded down in the media centre.

Mr. Parsons.

MR. KELVIN PARSONS: Thank you, Mr. Chairman.

Also, a reminder that usually we ask for undertakings from time to time,

information that might not be readily available. Whenever we ask for such an

undertaking, it is usually meant that it will be provided not only to the person

who asked but also the other Opposition parties as well. That way you do not get

the Official Opposition asking for something and you not send it to the NDP and

vice versa.

MR. WISEMAN: What we will do, anything that falls in that category, we

will distribute it through the Chair. That way the Chair will be - through the

Clerk, no doubt - responsible for the distribution.

MR. KELVIN PARSONS: Thank you.

Just a couple of line items, Minister, first on page 105, item 1.2.01.

MR. WISEMAN: Under the Minister's Office, correct?

MR. KELVIN PARSONS: Yes, under Executive Support.

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: The Purchased Services, I am just wondering if you

can explain there. There was $31,500 budgeted, $16,500 spent. This year we have

budgeted $239,000. I am wondering if you can explain why such an increase this

year? What is anticipated?

MR. WISEMAN: You are talking about the Minister's Office, 105?

MR. KELVIN PARSONS: Yes, 1.2.01., Executive Support.

MR. WISEMAN: Okay, I am sorry. I am looking at 1.1.01 - subhead 1.2.01.

MR. KELVIN PARSONS: Yes, Executive Support, item 06.

MR. WISEMAN: Purchased Services, yes.

MR. KELVIN PARSONS: It is like a sevenfold increase sort of thing. I just

wonder what is anticipated for that.

MR. WISEMAN: What we are doing this year, you may recall in the Budget we

talked about an Air Access Strategy and a piece of which is about to be

released. We have made a provision in here associated with that strategy. That

is what this allocation is for. The detail around the construct of that program

will come out when we do the public release. That allocation is there to assist

us with the implementation of the Air Access Strategy.

MR. KELVIN PARSONS: What is the Air Access Strategy?

MR. WISEMAN: You may recall we made some public commentary. We had a

consultation process and government engaged a consultant a couple of years ago

to assist us in identifying opportunities that may exist to expand and improve

demand for air access service in the Province.

What we have been doing is working with industry, the airport authorities,

airlines and municipalities; Hospitality Newfoundland and Labrador, as well as

others, who have contributed to a process to help us develop and identify a way

forward to improve demand for air access service in the Province and try to

improve flight services, increase the number of flights coming in and out of the

Province, increase air travel in the Province to be able to improve the access

to air services.

MR. KELVIN PARSONS: Is this, I take it, in relation to Purchased

Services, advertising campaigns you mean?

MR. WISEMAN: It could be the - we are trying to talk about, look at how

we promote air routes, how we promote airlines and promote the Province to

airlines to come into the Province and establish their service or to establish

new routes or to work with existing airlines to establish new routes in the

Province. Within the airline industry there are a number of trade shows, for

example, and conventions and conferences and events such as that that gives us

an opportunity and a forum to actually promote Newfoundland and Labrador,

promote the opportunities that exist and work with that industry to improve and

increase the capacity that we have.

MR. KELVIN PARSONS: I am just curious, why would it be under Executive

Support as opposed to Business Attraction, for example, 2.1.01.?

MR. WISEMAN: That is an accounting piece. I do not know if Julia or

anyone might want to comment on the placement of it. I can tell about what we

propose to do but how it gets categorized I will leave that to someone else.

MR. KELVIN PARSONS: Yes, or even 1.2.02. Strategic Planning and

Communications, it just seems if it is attraction assistance to a strategy, it

seems to be misplaced by having it in Executive Support.

MR. WISEMAN: Maybe Julia or Linda may want to comment on that for me, if

you would.

MS VAUGHAN: It probably - I am not really certain about the placement of

it but I guess it is in the planning stages and we are just undertaking how the

strategy is going to be input. So I think for the time being it is put under

Executive Support. If we need to transfer the money during the year we will do

that.

MR. KELVIN PARSONS: That is a very honest explanation, usually when you

do not know what to do with it you stick it somewhere until you figures it out.

MS VAUGHAN: Well, it is in the planning stages, so.

MR. KELVIN PARSONS: Is that the only thing that is included in the

$239,000, the Air Access Strategy or are there other plans?

MR. WISEMAN: The other substantial piece to that is, associated with that

also - to help us, obviously, promote and to show that there are opportunities

here - there is a database that is out there, maintained by the airline industry

that we want to be able to tap into to access information to do some analysis of

the data, the flight travel plans and patterns of people so we are able to

identify opportunities that we can try to highlight for the airline industry

that there is a business proposition for them. So we have that kind of trade

show kind of thing that we talked about, together with using some of that money

to be able to access the kind of data and do the analyses of that data that will

help us market the Province. That is what we are talking about. That is the

increases associated with that.

MR. KELVIN PARSONS: Moving on, page 106, 1.2.02., Strategic Planning and

Communications; last year we had $855,000 for Professional Services. What would

have been involved in that? I notice you only spent $205,000.

MR. WISEMAN: Professional Services, last year we would have spent it on,

one of it would have been - I just talked about the consultant that we used to

help us do some work with the Air Access Strategy, and some work that they had

done for us as a part of that service. That would have been included in that

expenditure.

We spent some money with m5 Communications; we spent some money with some

writing consulting services that we purchased; we spent some money with Total

Group, which is a consulting firm, to be able to do some work for us on some

sectors that we were working in; we had a couple of contracts doing some market

research for us. That is the kind of areas that we spent that money on last

year.

MR. KELVIN PARSONS: I notice quite a substantial albeit you only spent

$205,000 last year, you are anticipating $1,455,000 this year.

MR. WISEMAN: One of the big things that we are trying to do differently

this year that we had not been doing in previous years - you may recall a couple

of years back, one of the early pieces of work that the department had done was

launch the provincial Brand Signature. The second piece of that, or building on

that piece, is a piece of work that we now want to start branding the Province

differently as a place to do business and a place to invest. We have had

tremendous success as a Province with our marketing campaign and branding the

Province as a place to visit.

The tourism ads, for example, have gotten some international recognition and

have done a tremendous job in promoting the Province as a place to visit, and

our tourism numbers reflect the success of that campaign. The accolades that the

ads themselves have gotten has really demonstrated clearly that when you invest

the money and you provide a quality campaign, but at the same time have a

quality product to sell and market, then you get the desired results.

What we are trying to do now is to start branding the Province more

aggressively as a place to do business and a place to invest. The significant

amount of money that you see, the increases that we are seeing here now are tied

to that brand piece of work that we are going to be doing together with the I

mentioned earlier about the Investment Attraction Strategy that we are working

through as a cross government initiative. So, the monies that we are putting in

this year - the increase in this category here reflect movements on those two

fronts.

MR. KELVIN PARSONS: On page 107, Business Attraction. In Professional

Services you had budgeted $750,000 roughly and spent $17,000, and $270,000

slotted for this year. I am just curious -

MR. WISEMAN: I am just trying to find the

section before you - that is

2.1.0.1?

MR. KELVIN PARSONS: 2.1.01., Professional Services.

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: This particular

section is "for the promotion of the

competitive advantages of the Province in target markets for the purpose of

attracting inward national and foreign direct investment" You had $750,000

budgeted, you spent $17,000. It does not seem like you did much in terms of - I

would think Professional Services there would have been ads or whatever, if that

is what you are trying to do. It does not seem like you would have bought very

much for $17,000.

MR. WISEMAN: Maybe I can just add Julia, the distinction on the

advertising, that is not covered off in this Professional Services piece here is

it? No.

MS MULLALEY: (Inaudible).

MR. WISEMAN: Yes, okay.

The advertising that you are talking about would not have been captured under

this particular piece here.

MR. KELVIN PARSONS: Okay. Where would that be?

MR. WISEMAN: Under Purchased Services.

MR. KELVIN PARSONS: The $96,200?

MR. WISEMAN: What category would that have been purchased under, Julia?

This is not under 2.1.01., is it? Under the Strategic Plan cost centre, which

would have been 1.2.02.

MR. KELVIN PARSONS: So that was the $673,600?

MR. WISEMAN: Yes, that category.

MR. KELVIN PARSONS: Yes. Can we get a breakdown of exactly how the

$673,600 was spent last year, who you paid for whatever advertising programming?

MR. WISEMAN: We can get that for you.

MR. KELVIN PARSONS: Yes. Again, I am a bit lost here, why would you put

what you pay for your ads for Business Attraction over in a different section?

MR. WISEMAN: I will let Julia speak to the accounting piece again but

just as a general commentary, regardless of how we cost it and what cost centre

it appears in, everything we do to promote the Province as the place to do

business, we will obviously contribute to that end result, which is to actually

promote Newfoundland and Labrador as an attractive place to invest. With that

general commentary, I will let Julia give you the answer as to why the

distribution is under one head versus another.

MS MULLALEY: Actually, under the 1.2.02., Strategic Planning and

Communications, if you look under the activity descriptions underneath, that is

where the marketing for Business Attraction takes place.

The piece of the Professional Services under the other Business Attraction,

you were referring to, is usually used for consultants to help with the due

diligence process on some of the business plans and so forth. It would have been

budgeted for $855,000 but now the department is fully staffed up. We have taken

a good look at that budget this year and we have actually dropped it, as you can

see, for the current year. We have revised all of that, but that is what that

would have been for under the Business Attraction piece.

MR. KELVIN PARSONS: For example, if someone gave you a proposal, you

would purchase services by way of due diligence?

MS MULLALEY: That would be under Professional Services under Business

Attraction. That may be hiring certain firms to help us with the due diligence

process. That is what that would have been.

MR. KELVIN PARSONS: Okay, so

MS MULLALEY: Again, it went down quite significantly last year because we

are fully staffed up and we do the due diligence internally for the most part

now.

MR. KELVIN PARSONS: In that regard, how many employees are there right

now in the Department of Business?

MR. WISEMAN: Thirty-eight I think it is; thirty-eight.

MR. KELVIN PARSONS: Is that permanent employees?

MR. WISEMAN: There are some contractual employees in that number. I will

get the break down for you now.

MR. KELVIN PARSONS: What I am looking at, the staff details show

twenty-eight.

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: That is all permanent, according to this list.

MR. WISEMAN: These are the permanent positions. We have some contractual

positions currently there as well, bringing a total of thirty-eight.

MR. KELVIN PARSONS: Can we get a list of who the additional ten are and

the nature of their contracts?

MR. WISEMAN: You can, yes. There are twenty-eight who are permanent and

you have three who are temporary, and there are seven that are contract.

MR. KELVIN PARSONS: Okay. The ten, for example, the three and the seven,

if we could get the details on who they might be.

MR. WISEMAN: You can, yes.

MR. KELVIN PARSONS: Back to the question again, you spent $17,000 last

year in that. That was all that was spent in a due diligence process?

MR. WISEMAN: It would have been. Last year, as Julia just indicated, the

early stages when we were staffing up, we frequently needed to purchase that

service outside. Last year with the staff we had in place we were able to

actually do that internally.

MR. KELVIN PARSONS: What would the Purchased Services be, $96,200? If the

$17,000 Professional Services was for the advice, vis--vis due diligence, what

would the $96,200 be under that category?

MR. WISEMAN: We would have had some advertising; we spent $23,000 on

advertising. We would have had some $8,400 in training, some printing, and there

is a broad category there of general purchased services of $29,000.

MR. KELVIN PARSONS: Maybe it is easier

MR. WISEMAN: Some of those would have been advertising in The Telegram .

We would have done sponsorships in a couple of conferences that we had attended.

We had a sponsorship role in those conferences to profile the Province and some

of those costs would have been captured under this expense category.

MR. KELVIN PARSONS: Can we get a break out of that?

MR. WISEMAN: You can, yes.

MR. KELVIN PARSONS: What was paid to whom?

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: Back again to Professional Services, I am just trying

to follow

MR. WISEMAN: It is still under the Business Attraction category?

MR. KELVIN PARSONS: That is right, under 2.1.01.05.

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: I am just a little bit lost in the logic here. We had

budgeted $750,000 last year, vis- vis, for help with due diligence. You tell me

because we had the department staffed up now we only had to use $17,000, but

then you still budgeted $270,000 for this year. So, what is the thought on what

is missing? Why are you anticipating we are still going to need $270,000 for due

diligence?

MR. WISEMAN: I think one of the things that we need to as we get into

some of the markets that we have been trying to penetrate - recognize that there

are certain skill sets that we are going to need periodically to help us to

better understand those and to help us to bring some more expertise to the due

diligence and evaluation that we would do. So, we want to make sure that we have

made an adequate provision to be able to do that for us.

MR. KELVIN PARSONS: So, is there anything in particular or - I realize

the budgetary process is a lot of guessing game as to -

MR. WISEMAN: That is what we are trying to do. We want to try to make

sure that we radically budget ourselves for the expertise that we may need and

we may find ourselves getting periodically.

MR. KELVIN PARSONS: Is there anything in particular on the horizon that

required you to put this in?

MR. WISEMAN: Nothing that I can share with you today; no, nothing that I

can think of.

MR. KELVIN PARSONS: On the Special Initiatives there on page 107, I just

want to clarify the comments you made in your introduction. You said there are

two programs, the oil and gas one, and you made a comment about - maybe it is

just the wording you used that caught my attention I guess. You said they have a

defined time period. I was just wondering what you meant by that?

MR. WISEMAN: Yes, let's just take one as an example. We have an Aerospace

and Defense fund to help us build capacity in that industry and when we decided

that this was something we wanted to do, an initiative government would

undertake, we felt that this would be a two-year limited period. We are

establishing it as a two-year fund and then when that is over, it is over.

The oil and gas fund as well, we are looking at a $3 million fund over the

next two years. When we launched it, we launched it as a pot of money that we

were going to earmark for that for a very specific period of time. So those two

funds would have been a very specific period of time.

Now, the Business Attraction Fund and the granting portion of the Business

Attraction Fund is one that was established - when the department was, not first

established but when we first established a pool of funds to be used for the

Business Attraction Initiatives this business attraction pot was established as

a core piece of the department's funding.

Whereas these other two programs,

Aerospace and Defense and the oil and gas development fund were considered to be

very specific projects for a very specific purpose and for a limited period of

time.

MR. KELVIN PARSONS: The budget allowed for $7.5 million, you spent $3

million. Could you provide us with the details exactly where we spent the $3

million?

MR. WISEMAN: We could. These would have been - over the course of the

last year there would have been several announcements where we would have spent

that. Looking at the last year - under the oil and gas fund, for example, there

was a company, Argentia Metal Works that we would have provided some out of

this pot here, the non-repayable portion would have been $500,000.

There was a company, Petroforma that we would have advanced them - $500,000

from as well. There was a company called Rolls-Royce no, that is the other

one. These were the new ones announced last year but they would have been A.H.M.

Fabricators Limited, there would have been Dynamic Air Shelters Ltd., Other

Ocean Group Inc. would have been there, PanGeo Subsea would have been there and

Petroforma. That would have been the total of allocations from this pot last

year.

MR. KELVIN PARSONS: Okay. Can we get a list exactly of those names and

numbers?

MR. WISEMAN: We can do that, yes.

MR. KELVIN PARSONS: Thank you.

The Rolls-Royce one you alluded to, I take it that did not come out of this

Special Initiatives pot that came out of the Business Attraction Fund?

MR. WISEMAN: Exactly.

MR. KELVIN PARSONS: Okay.

Under the Business Attraction one, it shows $6 million of $25 million being

spent.

MR. WISEMAN: Yes. That would have been Other Oceans, and Rolls-Royce

would have been the two big ones from that one.

MR. KELVIN PARSONS: What was the name of the first company?

MR. WISEMAN: A company called Other Oceans.

MR. KELVIN PARSONS: Other Oceans?

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: What is the nature of that business?

MR. WISEMAN: Maybe I will ask Harman to give you an overview of that

company. Harman, do you think you could do that, Other Oceans and what we did

there?

MR. KHURANA: Other Oceans is a video game development company based out

of California that in 2008 opened up a development studio in St. John's. We

provided funding in the previous years' budget from the Business Attraction

Fund.

MR. KELVIN PARSONS: Again, when you say the previous year's budget, do

you mean 2008-2009?

MR. KHURANA: It was approved in 2008-2009 but our funding would overlap,

carry forward into the next year as well. It was based on reimbursements, so

certain portions were dispersed in the previous year and there was some money

that was left over for this year.

MR. KELVIN PARSONS: So, how much of the $6 million spent last year went

to Other Oceans?

MR. WISEMAN: It would have been $948,000.

MR. KELVIN PARSONS: How many people are they employing?

MR. WISEMAN: The targets that they have right now, they created to date

twenty-eight.

MR. KELVIN PARSONS: What was the target?

MR. WISEMAN: Over a five-year period the target was sixty-two and that is

a piece of work that was done the year before last. So their targets were spread

over a five-year projection.

MR. KELVIN PARSONS: Okay. They are still in existence and everything?

MR. WISEMAN: They are.

MR. KELVIN PARSONS: Okay. The other one you say was Rolls-Royce.

MR. WISEMAN: Yes. There was $500,000 paid out to them last year.

MR. KELVIN PARSONS: In Mount Pearl, I believe, they set up?

MR. WISEMAN: Mount Pearl, yes.

MR. KELVIN PARSONS: What are the details there in terms of what it is

exactly they do and how many employees they have?

MR. WISEMAN: They are a marine service centre. At the time they started,

they had half a dozen employees and they were projected to grow that to thirty.

The number of new jobs that they have created to date would have been seven.

MR. KELVIN PARSONS: What were their anticipated jobs?

MR. WISEMAN: Thirty.

MR. KELVIN PARSONS: Thirty. What was the target to have thirty?

MR. WISEMAN: Over a three-year period.

MR. KELVIN PARSONS: Just to go back for a second to the special

initiatives you mentioned, and you are going to provide me with the complete

list of the $3 million expenditures. The Argentia piece, obviously, I guess,

that is taking place in Argentia, is it?

MR. WISEMAN: It is, yes.

MR. KELVIN PARSONS: What was given under the Aerospace pot? When you give

me the details, could you give me the details showing of the $3 million that was

spent, what came out of the Aerospace Defence pot and what came out of the oil

and gas industry pot?

MR. WISEMAN: We will do that, yes.

MR. KELVIN PARSONS: Could you also show, besides the numbers of what went

to each of these, where they are located and how many employees they have to

date, and what they said in their proposal the number of employees they were

going to have?

MR. WISEMAN: We will add also the number of employees they would have had

over a particular period. So we will share that with you as well.

MR. KELVIN PARSONS: Yes, okay, and likewise on the $6 million for the

Business Attraction Fund.

MR. WISEMAN: Okay.

MR. KELVIN PARSONS: If we could get a break out as to the companies.

Maybe we can pursue that for a little while here. You said the two major

components of the $6 million is Rolls-Royce and Other Oceans?

MR. WISEMAN: Right.

MR. KELVIN PARSONS: That looks like $1.5 million roughly, that those two

have taken up. Where would the other $4.5 million of the Business Attraction

Fund have been spent last year?

MR. WISEMAN: These would have been the only two that would have been paid

out of this fund last year. When these Estimates were done and the forecast -

the Revised budget figures would have been done, we had a couple of other

projects that we had in the hopper that we had thought we would have paid out

when we provided those revised Estimates to the Department of Finance that did

not materialize by year end. The total payout of this fund last year would have

been the Other Oceans and Rolls-Royce.

MR. KELVIN PARSONS: This figure of $6 million here as Revised is not

correct?

MR. WISEMAN: By the time we reconciled year end the total amount that we

had paid out would have been only $1.5 million.

MR. KELVIN PARSONS: Okay. We have $1.5 million under the Business

Attraction Fund paid out, which you are going to provide the details on, and we

had $3 million under the Special Initiatives.

MR. WISEMAN: Yes.

MR. KELVIN PARSONS: Minister, the two you mentioned under the Business

Attraction, both established in the St. John's area - Northeast Avalon we will

call it - does that cause you any concern that that does little to impact rural

Newfoundland?

MR. WISEMAN: Obviously, the work that we do, we are trying to bring new

investment to the Province and in some cases, under these two separate funds,

facilitate the additional growth and expansion of two sectors of the Aerospace

and Defence. Any time that we are speaking with any company about expansion

plans or coming into the Province we want to make sure that we market the entire

Province, the Island portion and the Labrador portion, so they fully understand

what is available to them, markets they can move in and the benefits and

opportunities that exist in all regions of the Province.

So, inasmuch as we are sometimes able to highlight the significance and

importance and benefits of being in certain parts of the Province, at the end of

the day they make their business decisions based on what they believe is in

their best interest and we then try to work with them to facilitate that. We

make every effort we can and continuously promote the entire Province, not just

the Northeast Avalon, but the entire Island portion and Labrador, and many of

the times when we are entertaining clients who visit the Province looking at

perspective areas to invest, we showcase many parts of rural Newfoundland.

MR. KELVIN PARSONS: Notwithstanding that, we obviously have not been very

successful or we were not successful at all last year in doing that.

Is the program still existing there used to be a program in the Province

whereby corporations would get a preferred tax rate depending on where they set

up. If they were in the Northeast it was a certain percentage, if they were in

Central or rural Newfoundland they got an increased tax credit or benefit. Does

that still exist?

MR. WISEMAN: It still exits. As you went through the Estimates with

Innovation, Trade and Rural Development they would have talked about some of

their program areas. That is a program that is housed with that department, but

it does still exist, you are right.

MR. KELVIN PARSONS: From what I understand, that was a fairly substantial

incentive.

MR. WISEMAN: It is, yes.

MR. KELVIN PARSONS: Tax benefits of up to 50 per cent or whatever

difference and that is still not enough to attract them to rural Newfoundland.

MR. WISEMAN: I think each individual client will make their own decision

based on their business plan, their business model, and what area they think

will best serve them to locate.

As a government, we have made available to them, through tax incentives,

through financial incentives, through grants and loan programs, the kind of

enticements that we believe would be beneficial to them. We can try to encourage

and coax, but at the end of the day though, it eventually becomes their decision

and they make it based on what they believe is something consistent with their

business plan. We have tried through our ensuring that we highlight and market

the benefits of other parts of the Province, other than the Northeast Avalon.

Then, as you have just very appropriately pointed out, some of the special

incentives through taxation measures that we will provide. Some of these

initiatives that we are talking about here now through the Business Attraction

Fund, those sorts of initiatives, all of it together is a part of a suite of

initiatives and services that we can provide. At the end of the day, though, it

becomes their decision.

One of the things you might we talked about one of the funds. We talked

earlier about, Dynamic Air Shelters is a real good example of an entity that had

some real success in rural Newfoundland and we were only too happy to be able to

support them last year with some additional financial incentives to expand their

operation. We are able to sometimes point to organizations like that, that have

had a real success operating in rural Newfoundland.

MR. KELVIN PARSONS: I noticed the if you look at the totals here, your

department is authorized for investment purposes, attraction and so on, $32.5

million, of which you put out the door $4.5 million last year. We had an issue

which was raised - the same issue was raised last year in Estimates as well. It

does not seem to be very if you want to measure success and how well you spent

your money, I guess you can flip it around and say that we are pretty prudent

because we did not spend all of our money, but given what the intention and

purpose of your business department existing, it does not seem to have been very

successful when you do not spend one-eighth of your money; one-sixth of your

money.

MR. WISEMAN: Just to speak to that point - and you have used one measure

of success, how much money you are actually able to fund. The other piece of

this, and I will just put a couple of things in context for you because some of

the work that you obviously, when you start talking about travelling outside

the Province or making contact with organizations that are outside the Province

and trying to introduce yourself to them, introduce your Province, talk about

the benefits of being here and convincing someone that they should pack up their

bags and leave where they are now, where they have an established business or

have some experience in a particular jurisdiction and you are convincing them to

relocate, that does not happen overnight.

For example, I think there are five deals we are now concluding that over the

course of the next short term we will be making some public announcements about.

There are two of them that have been worked on for a couple of years and

recognizing - in my introductory comment I said that we are a relatively new

department. It was not until the fall of 2007 that we had, as a department, a

set of guidelines that will help direct the department as to how that money

should be disbursed, what kind of criteria we use and the process for evaluating

the requests that we get. If you consider the time period in question, it is

really from the fall of 2007 to now. So, two-and-a-half years where we have had

an ability to go outside and to start promoting what we have, promoting the

Province, and using these funds as a tool to entice people to invest here.

Considering the time lag in opening doors, making introductions and getting

someone to a point where they want to take an action and to give you a business

plan that you can evaluate and then concluding that deal, we have - over the

course of that period we talked a little bit about the things that those we have

given money to - in that same period of time there has been a number that we

have had proposals from that we have not been able to assist. On an annual basis

we get a bunch of those. I think there is probably ten or twelve there right

now, requests that we have had and we have not been able to do.

There are some seventy-odd open and active files that we have in the

department now that we have been working on. Some have been recently opened, but

some of them we have been working on for an extended period of time. So, when

people are making decisions to relocate to your Province and to invest, these

decisions are not made lightly, not made easily, and not always made quickly.

Most of the work that we have done has been through our own prospecting. Not

everyday you get people coming knocking on your door and saying: Here I am, can

I get some money, and I want to come here. A lot of it comes about as a result

of the Business Attraction team out doing a lot of prospecting, a lot of legwork

identifying potential people to talk to in various sectors and then making the

approach, making the introduction and building a relationship and convincing

people that this is where they should do business. So that takes a bit of time.

So when the life of a program with that kind of mandate, and functions in

that fashion, two-and-a-half years is not a long period of time. Given the

momentum that is built over that period like I said, we have been successful

in assisting some companies, and that is the money we have talked about earlier.

There has been a number that we have had proposals from that have not worked

out.

I am encouraged by the fact that we have some seventy-plus files that are

open today that we are working on. As we measure success, you throw all that on

the table and talk about what we have done. That is on the Business Attraction

side. That is some of the other criteria that you may want to throw on the table

for consideration when you start talking about success.

MR. KELVIN PARSONS: Minister, rough calculations would show that between

your office, your Executive Support, your Strategic Planning and Communications

and your business promotion, you spent $6.5 million to operate and you only put

$1.5 million out the door. Now, some would suggest that is not a very good bang

for our buck that we are paying out $6.5 million just to put $1.5 million out

the door.

MR. WISEMAN: Again

MR. KELVIN PARSONS: That is another measure of success, isn't it? How

much are we paying to try to attract business? That does not seem like a very

good return.

MR. WISEMAN: I think, once again you obviously, we can debate this for

quite some time and I appreciate your comment. However, in the same context that

I just made my comment a moment ago, if you are going to measure success in a

twelve-month period, what we do, you do not measure success in a twelve-month

period. I think if we want to -

MR. KELVIN PARSONS: Maybe not Minister, but why do we need to have a

Minister of Industry, Trade, a Minister of Business? Why do we need two

ministers? Why are we duplicating? Why can we not, under the existing Department

of Industry, Trade, do what your department is doing that costs $6.5 million and

get rid of some of the duplication we have? Why do we need two DMs, ADMs? Do we

not have the resources now that we can do this within ITRD without trying to

duplicate we are trying to reinvent the wheel here? Are there not some

economies of scale, if we took the Department of Business and what its mandate

is? I am not suggesting at all that we do not do it. I think it is a great

thing. I think you need to have business attraction funds. I think you need to

have some way of attracting businesses to this Province. I am just concerned

about the model you are using.

So far, whether it is one year or two years, it seems like we are paying out

an awful lot of money to put out $1.5 million. We did not have a good rate last

year. I think we had $32 million in the pot last year again and the numbers were

very, very low. I am just suggesting, isn't there another model? Does there come

a point in time, or at what point in time is it do you realize that we do not

need to have or try to have a second wheel, we can do it with the wheel we

already have called ITRD?

MR. WISEMAN: You and I could probably debate this for quite some time,

and the whole process here is to - you propose a question and I give you a

response. I guess at the end of it, we may have differing views in terms of how

you measure success and over what period is reasonable to measure that success.

The rationale for setting up the department in the first place, if you look

at some of the things that we have done in success; we have been able to lead a

process that has reduced the cost of doing business in Newfoundland by some-$30

million, as recorded by the Canadian Federation of Independent Business, that is

attributer to the value that we have contributed to as a department and been

able to direct a process that resulted in a - when you are able to have open

files of about seventy-plus active files that you are working on now, people who

are perspective future investors in the Province, not all of those will be

successful in establishing themselves here but some will.

If you look at the level of activity that we have had in the last twenty-four

months versus the first period of time that we were in operation, there is

increased activity on the investment attraction side, increased activity on a

number of active files we have and the clients we work with. If you look at the

success we have had in branding Newfoundland and Labrador as a place to invest

and the efforts we have made there, whether or not those efforts have resulted

in companies that have established themselves here in the Province and have not

needed financial assistance from us, then you had to factor that into the work

that we do and how successful we would have been. So, what you are doing is

taking a total expenditure of the department and measuring its success on how

much money it assists other people with, how much money you give away or assist

people with through loans or through grants to come here.

The work we do has made a major contribution in bringing companies to the

Province. I will just use a couple of examples. If you look at the number of

companies that are operating in the Province today versus those that operated

four or five years ago, there are untold numbers of new companies that have

established and moved into the Province. It has nothing to do with money we have

been able to give them. The fact that we have been able to brand the Province

and market the Province as a place to invest would have had some impact. The

fact that we have been successful in reducing the cost of doing business in the

Province because of the activities of our department, that has contributed to

their coming and staying and making it a place in which to continue to grow your

business. What you are doing is taking the total expenditures and looking at it

as a contribution to only one aspect of the department.

Now, speaking to the very specific department you are talking about, which is

the funding piece, if you want to look at how successful that program might be,

I think you need to provide a reasonable period of time for that to to answer

your question in two years time might be a lot easier than answering it now and

we would have a longer period of time to determine success. Given my comment

earlier about the length of time it sometimes takes from the first time you

introduce yourself, from the first introduction you make to the company until

they actually make a decision, some of that might be eighteen months,

twenty-four months, and some of the people we have deal with, it has taken them

a little longer than that to make it become a reality. So, trying to measure it

over twenty-four or thirty months is an impossible task. It would be premature

to make that kind of observation.

MR. KELVIN PARSONS: Minister, in addition to the monetary piece I have

just outlined here, $6.5 million last year and to put out $1.5 million, my

question, of course and like you say, we can and will disagree as to the

effectiveness or need for your department. I suggest we could do it much cheaper

by doing it through the existing ITRD, but besides that, just the money piece,

even the set up of the mandate seems somewhat confusing to the public. I have

had this question put to myself many times.

For example, my understanding was that the difference between ITRD and

business departments, basically, was ITRD would deal with things within the

Province - expanding, encouraging, attracting business from one area, whatever,

expanding it within - as opposed to Business, which would attract from outside,

new businesses. Yet, probably one of the most successful things we have done as

a Province in terms of attracting, call centres comes under ITRD. It seems to be

so inconsistent. That was a great business attraction initiative, yet it has not

been shifted over to your department to keep tabs on it, to run it or whatever,

or to continue to try to attract call centres. Even the mandate seemed to be

inconsistent.

MR. WISEMAN: I appreciate your question, obviously, but I and

periodically, you have raised this question a couple of times, but I think

clearly when we start talking about what it is we need to do to aid our efforts

in trying to attract new investment from outside the Province, and sometimes we

are able to work with local companies to actually leverage inward investment. I

think the Argentia Metalworks is a read good example, where in working with a

local company, D.F. Barnes, they were able to form a partnership with a

Calgary-based company. They brought new investment to the Province and we were

able to work with them to help with that transition, moving into the Province

and establishing an operation here. So that new inward investment piece will

sometimes require us to work with local companies and some of those joint

partnership, as an example, but it is about bringing new investment to the

Province. We have had some success in working with local companies to help them

with that process. Some more times it is working directly with companies that do

not have any base of operation and no connection to the Province at all now.

When we start framing this as being work that we do, it is about trying to bring

new investment to the Province.

MR. KELVIN PARSONS: Thank you.

Minister, can you give us some idea of how many applications are on your desk

as we speak?

MR. WISEMAN: I think there is a little over seventy files that are open

right now.

MR. KELVIN PARSONS: Any anticipation or expectations of how many of those

look promising?

MR. WISEMAN: There are five that we will be announcing in the next - I do

not want to put a time on it because you will phone me the day after that and

ask me where they are, but in the very near future there are five announcements

that are pending. There is probably Ray, there is half a dozen business plans

that we have right now that we have to evaluate?

We have about five that we have pending announcements on, half a dozen or so

business plans that we have before our desk. To pick up some concept papers,

because in terms of the early stages we have kind of a concept paper that gives

us a sense of what the initiative is about and then when we work with the client

there is a detailed business plan that we will work with. Sometimes when we do

the analysis of the business plan we are very delighted with the fact that it is

a viable business proposition and we are able to provide some support, but on

occasion we find ourselves getting business plans that may not be as prosperous

as we thought they might have been and we are not able to help the project to

move forward. It does not mean the project does not necessarily move forward but

we ourselves may not have gotten involved with it.

MR. KELVIN PARSONS: Minister, I wonder, we hear a lot from your

department in terms of the Red Tape Reduction Strategy - and I do not need you

to go into what it is because I have addressed probably fifty or sixty

ministerial statements in the House in the last two years dealing with the Red

Tape Reduction Strategy, to the point where I suggested to the former minister

that he was creating if not red tape at least a paper jam because he was putting

out so many press releases.

MR. WISEMAN: We just like to celebrate success.

MR. KELVIN PARSONS: Yes, I know.

Could you tell me, where is the financial component, or is there any

financial component in your budget to do the Red Tape piece? I know you have

taken it over; it has nothing to do with business. It is a project, as it was

explained to us, that your department took on that transcends all government. I

realize that, but where in the budget dollars, cents wise how many people in

your department are involved in the Red Tape piece? What does it cost annually

to do that? Somewhere we can put our finger to say that is what it is costing.

MR. WISEMAN: While I am looking up that for you, just to respond to a

comment. You said it had nothing to do with business. It has a lot to do with

business really, because I think I mentioned a second ago that this past year

the Federation of Independent Business commended and this is one of the

ministerial statements that you referred to earlier that you always like

responding to. They had suggested in their analysis that the work that we have

done as a government, we are leading the country. It, in fact, had saved

businesses some $30 million to operate in the Province as a result of those

initiatives. The Fraser Institute again, acknowledged the leadership that we

provided nationally.

It does have a big impact on business because what we are doing is reducing

the cost of doing business in the Province, which means both those companies

that are looking at investing here see it as an attractive place to invest.

Those that are already here, we have reduced the cost of them doing their

business. Therefore, it creates a greater opportunity for them to invest and

expand their operations to generate more economic activity. So it has a lot to

do with business.

Just so that you - there are three positions that are in that division. It

has an annual budget of there is $317,000 in the budget allocation for that

2010-2011.

MR. KELVIN PARSONS: Where would we look to find that and what page?

MR. WISEMAN: That is under strategic policy. That would be 1.2.02.

MR. KELVIN PARSONS: Okay.

Just a general comment, minister, if you would; you talked about Canadian

business supporting of the Red Tape Reduction piece and so on. They are also

very outspoken about the payroll tax. Any thought being given to if you are

looking for another tool of attraction instead of just getting rid of red tape,

they have suggested that one of the good things to get rid of would be a payroll

tax. Your thoughts?

MR. WISEMAN: I think the Minister of Finance has addressed that numerous

times, both in the House here and in public commentary. Taxation issues and

issues to reduce taxes are always a balancing act. The tax incentives we have

built in this year are injecting some $49 million I think back into the economy.

We have taken the Small Business Tax and reduced it from 5 per cent to 4 per

cent in this year's Budget.

It was our Administration that made the adjustments in the threshold for the

payroll tax. It has eliminated a large number of companies that now have to pay

the payroll tax and a reduction in the tax burden for many others. So, we have

made some progress on that front. Taxation evaluations are something that has

been an annual process. We have always, as a government, each and every budget

cycle the taxation regime gets considered. The series of fees and operating

costs are considered. So, it is subject to an annual review as part of the

budget process. The payroll tax is one piece, and there are always balances.

Where do you have the biggest impact and how do you position yourself to have

the greatest effect on the people that you intended to target, and how does that

blend in with government's overall tax policy?

MR. KELVIN PARSONS: Minister, I wonder if we could also get a copy of all

of the Red Tape Reductions. We have had lots of announcements as to what has

been done. I wonder if you could give us a listing of all of the red tape - what

red tape you have gotten rid of, I guess, specifically, rather than just getting

a general release saying we have sixty-two things done here. Could we get a list

of all the Red Tape Reduction pieces that has been done since the policy was

created?

MR. WISEMAN: Just so I understand your question, you want - when we

accounted for a 27 per cent reduction that was obviously as a result of a count

that was done at day one and a count that was done at the end of the process,

and all the transactions in between is what you are looking for?

MR. KELVIN PARSONS: Yes.

MR. WISEMAN: Okay.

MR. KELVIN PARSONS: I have no further questions, Mr. Chairman.

CHAIR: Thank you, Mr. Parsons.

Are there any further questions from the Committee? No.

Before we have the vote on the Estimates, I just want to request the minister

that any further information provided to the questions as put forward by Mr.

Parsons, any of that additional information that is coming after this meeting,

could you also provide it to the other members of the committee?

MR. WISEMAN: I think what we should probably do is, we can direct it

through the Chair and then you can be responsible for the distribution, if that

is okay with you?

CHAIR: Yes, I will distribute it then.

Okay, thank you.

I ask the Clerk now to call the subheads.

CLERK: 1.1.01 to 2.1.03 inclusive.

CHAIR: 1.1.01 to 2.1.03 inclusive.

Shall that carry?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, subheads 1.1.01 through 2.1.03 carried.

CHAIR: Shall the total carry?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, Department of Business, total heads, carried.

CHAIR: Shall I report the Estimates for the Department of Business

carried without amendment?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, Estimates of the Department of Business carried without amendment.

CHAIR: Before we conclude, I just want to thank the members of the

Committee, the House of Assembly staff, and also the minister and his officials.

I do not know if you have any concluding remarks you want to make?

MR. WISEMAN: No, no. I think as long as we have answered the questions of

the members of the committee that is fine. That is our role and responsibility,

but I want to thank them for the nature of their questions. Obviously, it

reflects a keen interest in what we are doing. I think as we progress and do

these Estimates in future years, I think the committee will see the progress

that the department is making, the advances we have made and also the

contribution we have made to continue growth in the business sector. So, I thank

you for the questions.

CHAIR: Thank you very much.

Before we adjourn, I would like to inform the Committee members the next

meeting for the Resource Committee will be on Monday, May 3. We are debating the

Estimates for the Department of Environment and Conservation.

A motion to adjourn.

MR. BAKER: So moved.

CHAIR: Moved by Mr. Baker.

This meeting now stands adjourned.

On motion, the Committee adjourned.