May 11, 1999

RESOURCE ESTIMATES COMMITTEE

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

Assembly.

CHAIR (Reid): Order, please!

I would like to welcome the Minister of Industry,

Trade and Technology and her staff, who she can introduce. Minister, we usually

give fifteen minutes for a

preamble. I am sure you do not need all fifteen. We

will call the head after the fifteen minutes, will we?

WITNESS: (Inaudible).

CHAIR: We will call the heads first, 1.1.01.

Take it away, Minister.

MS KELLY: With me this morning I have Gerry

Crocker from our Finance Division.

CHAIR: Could your officials say their names for

Hansard before they speak, please?

Thank you.

MS KELLY: Thank you.

Gerry, go ahead.

CHAIR: No, whenever he speaks.

MS KELLY: Oh, whenever you speak, okay.

We also have my assistant deputy minister, Keith

Healey, who will be arriving with the deputy minister shortly, Bruce Hollett.

I would like to thank you for the opportunity this

morning to have a discussion about my department and the finances therein. I

guess I should just say that the total gross budget of my department is

approximately $17.3 million with related revenue of $4.8 million included in

that. The provincial portion of it is approximately $12.5 million. The rest of

it comes from the various funding agreements and everything that are under my

department.

I guess I should tell you first of all what the

vision of the department is. I will just take five minutes to go down through

the lines of business and the mission so that you will know in an overall way

what the department is all about.

The vision of the Department of Industry, Trade and

Technology is of a Newfoundland and Labrador with internationally recognized

excellence in key sectors characterized by businesses successfully competing in

the global economy.

Newfoundland and Labrador will be recognized as the

administrative and technical leader in the East Coast oil and gas industry, and

will be known as a location of choice for conducting business profitably.

The people of Newfoundland and Labrador will enjoy

a high quality of life supported by skilled, well-paying jobs. That is the

overall vision of the department.

I will welcome my two officials whom I have already

introduced. They will be able to figure out which one you are. I have already

explained why you might be a little bit slow coming along.

I think as we advance towards this vision we can

certainly see, with the Province's Strategic Economy Plan that was done five or

six years ago, that we are on the way toward fulfilling this vision and that we

have a budget that is helping us do that. While I think we can always use higher

budgets, I think that with the priorities that we have set for the $17.3 million

investment within the division that we are able to accomplish this vision.

The mission of the Department of Industry, Trade

and Technology is in partnerships with other governments and private sector to

facilitate growth and employment in the Newfoundland and Labrador economy

through the focused delivery of programs to promote and encourage business

investment and to grow and diversify our industries. I guess when we say

partnerships with other governments we mean the federal government and municipal

governments because if you look at our EDGE legislation in that, that certainly

has a large municipal involvement.

The lines of business that the department delivers

in accomplishing its mission are five main lines of business, actually:

(1) Industrial benefits from the development of the

Province's natural resources. I guess one of the major documents that we would

work through there would be the Atlantic Accord in the administration of our

offshore.

(2) Export development for local businesses in

selected markets. We have certainly been working on that quite a bit in the last

four months as we have headed trade missions that have been planned for the past

few years into Chile, Argentina, Ireland, and in particular the one that I am

quite excited about, the Northeastern United States, that we did approximately a

month ago.

(3) Investment attraction for opportunities in

strategic sectors. There is no doubt that this is a large part of our department

also, in particular as it relates to the corporate development group that was

put in place about a year ago.

(4) Promotion and strategic positioning of the

Province as a location of choice for conducting business profitably. That is

something that we have spent quite a bit of time on lately and in particular as

we prepare the huge program we have, called Success~Works, that this will be a

very strategic tool for us in particular as it develops, being able to work with

site selector teams for companies that come in looking to expand businesses, or

start.

(5) Information and advanced technology, industry

development and promotion, is something that is being administered, I think, in

an area of excellence in this Province in that Operation ONLINE has been very

successful; but the whole focus of the department through developing the IT

sector, I think, has been very successful, with a 23 per cent growth rate.

Almost all of us know and are quite proud of the IT sector as it relates to

education. All of our schools are on Internet. I think that the various

educational programs that we have put in place, and the development that the

government, really, when they privatized our computer services that led into

NewTel, that led into xwave recently, and xwave is now the fourth largest

Canadian owned IT company in the country, proves that in particular this sector

is doing very well, and doing well nationally and internationally.

The key strategic issues and some significant

challenges we have in the department relate to resource development

opportunities in our oil and gas deposits both offshore and onshore in

Newfoundland and Labrador; Labrador hydro potential which is enormous and

significant mineral deposits such as Voisey's Bay.

I guess as this relates to the budget of our

department it is particularly through the Industrial Benefits Division and the

Voisey's Bay Secretariat, which is in my department, and the Offshore

Development Fund spending.

Several other programs that we administer, CEDA and

the ERA, certainly help us in the area of competitiveness of Newfoundland and

Labrador industries, both in the regional, national and international

marketplace. These programs are also useful in preparing our companies for

export readiness and also for market identification for Newfoundland and

Labrador services and products.

Of course, through our corporate development group,

which I referred to, that is out there really into prospecting businesses,

opportunity identification of new businesses to establish in Newfoundland and

Labrador is one of the main challenges of this group.

I guess another challenge for us is cyclical

resource prices and their willingness and impact on the willingness and ability

of major resource developers to invest in exploration production and processing

capacity. In some areas it has turned out to be a major challenge. If you look

out in my area, for instance, with the antimony mine that was just up and

operating, and the price of antimony went way down, there is very little we can

do with that. Just knowing that the company is there, everything is developed,

as soon as the price of antimony rises they will immediately be open again.

It is also encouraging to us that our offshore

sector is continuing to develop and exploration is continuing in spite of the

challenges of the low price of oil in the last year or so. We are pleased to see

it going up somewhat again, but all of this impacts on the development of our

offshore.

I think it proves that people have great faith in

the future of our offshore when you look at the downsizing of the oil industry

in Western Canada and around the world, but to continue exploration and

development of ours, I think, proved the great faith that the major companies

have in our resource.

Capital availability for business start-up and

expansion, including shortages of venture and working capital in competition

with other jurisdictions in attracting new businesses. Of course, that is part

of the reason that the EDGE program was put in place, why we try to work as

partners with ACOA and HRDC to ensure that all of the availability of capital to

ensure strong business start-ups is there, and the Atlantic capital funds. I

think just this past year we have had one major investment made from that fund.

That is a combination of government and bank funding.

Then the innovation and technological capabilities

of Newfoundland and Labrador business and labour - I think, as we look at it, we

are finding that more and more our businesses are recognizing that because of

our huge geography it has always been such a challenge to us, and by having

advanced technological capabilities it overcomes the challenges of our

geography.

Awareness, both nationally and internationally, of

the Province's products, advantages and capabilities, that has certainly been a

problem for us especially, I think, in the last decade, with the huge difficulty

we have had in our fishery and the high unemployment rate here, that most people

in the rest of the country - and I blame some of the media for that - do not

view Newfoundland as a place that is competitive to do business. It is only now

that they are recognizing there is a very skilled labour pool here and a very

industrious workforce. We are starting to see, with the low price of land and

the other advantages that we have, that companies are looking very seriously at

us now. We are finding, with the marketing we have done of the Province in the

last three to four years, that people are now recognizing that the dismal scenes

they see on the national news every night are not true of Newfoundland and

Labrador. While there are challenges here, like in every other province, this is

also a province of incredible opportunity.

Attitudes - I would have to say both internally and

externally - as I have just said, in particular externally regarding our

capacity to compete on the international stage, is a problem. I think, as we

look at the advantages that we have in this Province, that many times it is the

attitude, it is not really what underlies the real reality.

I think, as in particular when the Irish were here

a couple of years ago - as many of you know, we have had a partnership with the

Irish and we have been looking at some of the development over there knowing

that we have many similarities. Their attitude to us was: What are you waiting

for? You have the education system; you have the infrastructure, both municipal,

transportation, and all the rest of it. That is why we have to move forward in

the direction we are going, and being out there selling this Province on trade

missions, which we have already demonstrated over the last three or four months

are bearing great fruit for us.

To close off, I would just like to outline some of

the - if we are successful as a department - things you will see happen in

Newfoundland. In particular, full and fair benefits from sustainable natural

resource development certainly is one; an increased level of national and

international exports; increased competitiveness; increased external investment;

strong and growing information and advanced technological industries that can

compete locally and internationally; increased national and international

awareness and recognition of Newfoundland and Labrador and its advantages and

capabilities; increased confidence of Newfoundland and Labrador business and

labour in our ability to compete nationally and internationally; increased

levels of innovation and entrepreneurship that would be supported by strong

professional industry associations.

I think, when you look at NEIA and NOIA and all the

other industry associations that work with my department, there is certainly no

doubt that we have some of the strongest in Canada right now and, of course,

overall an improved quality of life for Newfoundlanders and Labradorians through

increasing opportunity for skilled, well-paying employment and a strengthened

provincial tax base.

Underneath all of that $17.3 million, that is what

we hope to accomplish with it.

Thank you very much.

CHAIR: Thank you.

Mr. Rideout, would you or one of your colleagues

like to respond for a few minutes before we get into the headings?

WITNESS: (Inaudible) Mr. French.

MR. FRENCH: I would like to ask you a question,

Minister, concerning xwave. You said they are the fourth largest company now in

the world.

MS KELLY: No, in Canada, Canadian-owned; the

fourth largest Canadian-owned IT company in Canada.

MR. FRENCH: We just extended their contract

here in the Province of Newfoundland and Labrador. Did we go to public tender

with that? I believe, and I am talking from memory, it said that it would not

cost us any more than an extra $1 million. Why would we be putting another $1

million into xwave? Could you explain that to me?

MS KELLY: Well, I think mostly what you must be

alluding to there is the Success~Works contract, would it be? Keith, would you

know?

MR. HEALEY: To the best of my knowledge there

was no extension to the contract. I believe that the $1 million that you may be

referring to in fact is a reduction in the commitment of government, under the

service level agreement, that we had with xwave to a minimum of - I believe it

is $16.5 million from $17.5 million.

MR. FRENCH: So it has gone down and not up?

MR. HEALEY: It has gone down, yes.

MR. FRENCH: My understanding was that it had

gone up $1 million.

MR. HEALEY: No.

MS KELLY: We can certainly check that for you

but do we not interact with xwave on several avenues in the department through

both Success~Works and also other programs within the department?

MR. HEALEY: Certainly as a user yes, we do, but

we also have some responsibility under the IBA or the Industrial Benefits

Agreement -

MS KELLY: Yes, that is right.

MR. HEALEY: - which was part of the sale of the

former Newfoundland and Labrador Computer Services. I believe there were some

amendments made which were done through your colleague in Treasury Board.

MS KELLY: Yes, that is right.

MR. HEALEY: However, there was no extension to

that date actually of covering services for government.

MR. FRENCH: So we are not giving them an extra

$1 million?

MR. HEALEY: No. As I say, in fact, the

commitment that government has made to minimum services, defined in terms of

dollars, has actually been reduced by $1 million.

MR. FRENCH: Yes, because we have written you a

letter under Freedom of Information. I do not know who the letter went to; the

person in her office who looks after that was not in this morning. If they had

been there I would have gotten a copy of it from them. We have not received a

reply back yet, but it has to do with xwave. My understanding was that we would

be giving them an extra $1 million. Again, talking from memory, I was under the

impression that we may have either extended their contract or given them more

work.

MS KELLY: I think what you are referring to

there is the agreement that was put in place, as Keith had said, when the

computer division was privatized. There was a set way that had to occur over the

first few years: what business government would give, what they would bring to

the table as a result of this privatization.

If I remember correctly, there was a committee put

in place but they had agreed over the couple of years of implementation in it

that some changes needed to be made. There was one area that they were

outperforming and another that was under-performing. Government wanted to make

sure that all of the advantages that we were supposed to receive from this

privatization would have been received, and I think that is where the change was

made. We can find that out for you but it was to the Province's advantage that

this was renegotiated.

MR. FRENCH: Under their original contract, I

believe, they were to come up with so many jobs. Have they lived up to their end

of -

MS KELLY: My understanding is that yes, they

have. That was one of the reasons, I think, that we went back to rework the

contracts to make sure that - I think there were four or five different sectors,

different pieces to that contract. There was one, I think, with a consulting

company that it was unrealistic to expect - I cannot remember if it was the

number of jobs or the amount of business to accrue from it - so the contract was

reworked, but reworked in a way that we would receive the same but I think

actually enhance business from it.

We would have to get you the information on that

but that information, I think, is readily available.

MR. FRENCH: Could somebody get that and send it

over to my office for me?

MS KELLY: Well, I assume we would be giving you

that information now in our response to your letter, through Freedom of

Information. We will check on that when we go back.

MR. FRENCH: Minister, as well, I have been down

to Marystown and met with Friede Goldman. They are talking about closing their

main yard in Marystown and moving all their facilities out to Cow Head. I have

some concerns about the synchro-lift there. Are we going to be able to continue

the usage of that? Are we now moving in the direction to make this yard a repair

yard only, or are we still moving in a direction where we would see shipbuilding

as probably one of the primary concerns now?

They also told us they would meet their contractual

obligations to the Province this year in total person hours - and I am certainly

glad of that - but is there any move that you would know of as minister to take

that yard now from shipbuilding and go strictly to a repair facility?

MS KELLY: No, there certainly isn't and we have

been meeting with the companies. As a matter of fact the Premier, just this past

week, met with J.L. Holloway and Mr. Holloway is coming to the Province in June.

There is certainly no indication.

I think what is happening from the situation with

the shipyard and the Marystown facility in Cow Head is that the Quest, which was

their major contract, has been completed as of about ten days ago, April 30, and

now there are no other big contracts in the yard at the moment.

Naturally, you cannot keep running it if there is

no business in the yard, but they have very clearly stated that they are out

looking for contracts and that as the contracts come in and there is a need to

open that part of the yard, they will.

One of the things they have told us is that the

offices for the office staff will now, with the move to Cow Head, stay in Cow

Head. That is with the concurrence of the staff, because the offices in that

facility are much better than the offices in the Marystown facility.

In regard to ship repair and shipbuilding, the

company has indicated to us that they certainly have no intention of getting out

of that business. As a matter of fact, they are looking at the synchro-lift and

the capabilities of it and what needs to be done with it, or do they need a new

one. All of that I think the company are assessing at this time.

The company has also been lobbying very strongly

that Canada needs a national shipbuilding policy, as does the Province, and

certainly that company has good experience because they are an American-based

company and, as we know, one of the most protected sectors in the US is the

shipbuilding industry. They see a great difference. I think it is the -

WITNESS: The Jones Act.

MS KELLY: - the Jones Act down there, and it is

very hard for anyone to compete for shipbuilding business in the US in light of

the Jones Act. NAFTA was put in place and the Jones Act was left in tact, so

this is no small challenge to overcome.

MR. FRENCH: I fully realize that it is very

interesting to note that in the United States any shipbuilding that they do,

they are fairly heavily subsidized and, as well, whatever goes on the oil rigs

that they build - and this is Friede Goldman - that 100 per cent of what goes on

these vessels has to be US, has to come from the US. I found that to be very

interesting.

MS KELLY: If the ships are built to do business

in the US, I think, is the main criteria in the Jones Act. If they compete

internationally for a contract, the same subsidies and regulation do not apply -

if, for instance, they received a contract from Korea somewhere, or from some

other part of the world - but if the ship is to do business within the US, all

of these criteria have to be met.

It is fair to say that over the years, if you look

at the history of the Marystown Shipyard, I think it would be very difficult to

say that there has never been any subsidy there to make them competitive. It was

one of the difficulties in this Province, could we afford to carry on that level

of subsidy?

I think all of you are aware of the budget

restraint that we have in this Province, that there is no way we can sink

millions of dollars every year either into Marystown or into some of the other

businesses that we were in. I think, as we have proceeded to privatize some of

them, that is one of the success stories down there.

If you look at the computer company we just talked

about - xwave - the beginning of that very successful company was a

privatization effort.

MR. FRENCH: In regards again to Marystown, I

believe the Province of Newfoundland and Labrador is responsible for an

environmental cleanup. From talking to the people at Friede Goldman on the day I

was there, they said they were now into, I think they called it stage 2,

whatever stage 2 was.

MS KELLY: Yes, that is right.

MR. FRENCH: Do we have any figures as to what

the overall environmental cost is going to be to this Province for the Marystown

Shipyard?

MS KELLY: No, we do not at this time because

stage 2 identified what needed to be done, the scope of the work. I think stage

3 is supposed to move towards the cost of, and the priority of, on the list of

what urgently needs to be done and what the costing of everything is. Is that

correct? Bruce has been very involved in this.

MR. HOLLETT: We are in stage 2 of that process.

What the earlier stages have done is essentially done what is called, I guess, a

background study or a base level study to determine what is on the site in terms

of whether it is hydrocarbon contamination, which is basically spilled oil and

gas, that sort of thing. The next phase now is to access what is required to

bring that to an acceptable standard for an industrial site, and what it will

cost to remediate it. That is the process we are in now.

MR. FRENCH: I just have one other thing,

Minister. It came up the other day in tourism, and it may be more of a related

thing to tourism but I believe it relates to industry as well. I talked to a lot

of truckers in this Province who are having a helluva time with CN Marine. I

just wonder if there was anybody in your department from the business side who

has had any discussions with CN Marine about the possibility of a ferry that

would deal - or deal mainly - with heavy trucks transporting goods into this

Province, if your department would have had any discussion with CN Marine

concerning that.

I believe there is a great need out there from the

industry side to do something in Port aux Basques so that - especially in the

summer months when tourism is at its peak - we are not being left, or the trucks

that are bringing food items or other things into this Province are not being

left, on the wharf in North Sydney. Has you department had any discussions with

them in that regard?

MS KELLY: Yes, we certainly have. Of course,

there is a government-wide effort, as you know, spreading over five or six

government departments to deal with this issue both from tourism and

transportation initiatives. I started the process, actually, when I was in

tourism. Just recently, actually, at the Newfoundland and Labrador Chamber of

Commerce annual meeting, I was the guest speaker there and it was one of the

discussion points that we had.

We have committed to work with the various groups

because there are two or three that are working towards coming up with some

solutions to work in a partnership sort of way with Marine Atlantic, pointing

out the very serious problems.

One of the things right now Marine Atlantic is

looking at is that the Atlantic Freighter does need replacing. They have

to make a decision about what type of replacement they will be looking at. They

have had a consultant going about the Province meeting with various people and,

of course, the provincial government have met with this consultant. It seems

they can consider various options there. They can replace the Atlantic

Freighter with a better truck-only facility or boat, but they could also

look at doing, like you see in some European countries, having a super ferry

that is mostly built for trucks but also has excess cabin facilities on it. That

is one of the big problems that we have both from a tourism point of view and

our own people needing to leave the Province.

On the whole - I have travelled on the ferries

myself, and I have travelled on ferries all around the world - the big

difference in our ferry capacity... We have two problems: the truck capacity

that you have talked about, having to leave trucks on the wharf on either side

but mostly on the North Sydney side sometimes, and the impediment that is to

business, but also the fact that when you get on the boat there are not enough

sleeping facilities. That is probably the major problem that we have with the

whole ferry service.

Now they are studying: Could there be a solution to

both problems in the replacement of the Atlantic Freighter ? Of course, we

would we very interested in both of those problems being solved, as well as the

declaration of an essential service.

It is something that both the department and the

government as a whole views as a priority and is working both with Marine

Atlantic but also with the private business community here and the hospitality

community to solve both of the major problems we have.

MR. FRENCH: Okay, thank you. I don't have any

more.

CHAIR: Mr. Hunter?

MR. HUNTER: Minister, I was a small business

operator before I got involved in politics. I started my business back in 1975.

Back in those days it seemed like there was a lot of interest by the government

to encourage small businesses to start, develop and grow. I am finding in the

past couple of years that most government policies and government departments

are encouraging big businesses to carry the same type of work that some of the

smaller businesses did years ago. I am finding that a lot of the big businesses

are starting to squash the smaller businesses, in particular in rural

Newfoundland and Labrador. I am finding that the small businesses are not being

encouraged such as they were back years ago.

I know a commitment was made a few years back, by

the Premier, that his government would be encouraging small businesses and that

the public sector, or the government, cannot be the main job creator in our

Province any more, that it is going to have to be on the backs of small

businesses and private businesses.

It seems that in the past year or so it has been

pretty quiet in encouraging the development of small business in rural

Newfoundland and Labrador. I was wondering if your department has any plans to

get the interest back in the people of the Province to develop small businesses

again and encourage small business, not only by just doing radio advertising,

media advertising - which was done first when the Premier announced it back a

couple of years ago - but also to keep people in place to help eliminate some of

the paperwork, red tape and roadblocks that are there for small businesses.

I think there are a lot of good ideas in our

Province. A lot of people that I talk to want to start small businesses but they

do not know where to go. I do refer them to certain people but they are coming

back and saying: Sure, I have to have a lawyer, an accountant and an advisor and

I don't have anything. I have me to put into this business, my hard work and

long hours. I will dedicate that to a business, but where do I go from there?

It is very frustrating for anybody who has a good

idea. A lot of these people are not educated people but they are smart people,

and I think, by their commitment, they could be very successful.

My view on small businesses: I would rather see a

lot of small businesses with one and two employees than some of these big

businesses that are crushing independent business, particularly in the wholesale

businesses, with some of the bigger companies like Sobeys and TRA. There are

very few independent grocery operators in Newfoundland. I could only find one in

my district. The rest of them are tied in with these bigger businesses. They are

being dictated to every day on how to run their business, what to buy, what to

sell, and they are working very hard trying to make a living at it.

I think somebody - I don't know if it is your

department or not - should pay more attention to smaller businesses and probably

come up with some newer policies so that these big companies do not come in and

crush the smaller ones, put them out of business, and then have total control -

which is where we are headed in the near future, total control by a handful of

big businesses.

I can see it in the forestry industry in Central

Newfoundland. I can see it in the services with some of the big chain stores,

Wal-Mart and places like that, and then the Sobeys and TRA groups. They are

crushing all the small businesses in rural Newfoundland. They are going to

control the market.

I don't know how aware you are of that but I am

wondering if your department could look into these situations with the small

businesses and come up with some policies so that these big businesses will not

reap all the profits and send them down across the border somewhere and we are

left here working - our business people are working hard and long hours - and

seeing our profits being taken away somewhere else.

I would like to see your department - I guess it is

the right one to do it; I don't know, you could probably tell me that - at least

look at these rural Newfoundland areas, encourage small businesses, and come up

with policies and probably people in your department dedicated only to these

small business, because a lot of them get shuffled away and big businesses come

in and squash them.

I have seen it over and over again where small

businesses cannot survive and make it because the bigger guys come in and be the

bullies. I think it is time that if we are going to keep our rural Newfoundland

and Labrador successful and keep people in the rural areas, then we have to step

in and put some rules in places to protect our small businesses, Minister.

MS KELLY: I think one of the issues you are

identifying there is a global problem. It is a problem that - it is the choice

of the individual. Many times while government, as you have said - I cannot

think of more than what this government has done by putting a department in

place, the Department of Development and Rural Renewal, to work with rural

businesses and so on, but I have to say that I have experience in rural

Newfoundland. My parents are from there and I go there quite a bit. In the area

where my parents are from, there isn't a little store left there now because

everybody shops in the bigger centre.

In many ways, I think, it has to be a choice of

individuals, that if we want to have our communities survive we have to support

the businesses that are in our communities. I think when you look at programs

like Manufactured Right Here that has been done - the government has been trying

as much as it possibility can to do this, but it is our choice as individuals.

We live in a democratic country. When our people choose to shop where they do,

we can only point out to them that these are the repercussions of what you would

do.

By the same token, you mention companies like

Sobeys as big companies. Sobeys is a family-owned company out to the Atlantic

region.

I had an interesting experience when I made a

comment exactly as you did earlier on. I was the Minister of Tourism and Sobeys

was one of the corporate sponsors in a big way for the Cabot cerebrations. I was

out on one of the Matthew visits in a small community, and that small

business person was outlining to me that they had been an independent before but

now they were into one of the Needs convenience stores - I think the company has

three different tiers of grocery chains - and how much better his business was

and how much more money he earned and the more employment that was there.

It is something that while we have lost something,

the independence in some instances, sometimes there have been advantages too.

It is very difficult. It is like the problem you

outlined in the forestry sector. If we are to be a part of the global economy

and be able to compete, sometimes these disadvantages come with it. It is fine

for us to say that we are not going to do it that way, but sometimes when we

make the choices not to be a part of the global economy it means that we do not

have the extra employment that we would.

The other thing that I have noticed over the last

few years, and government has worked very strongly with some of the bigger

companies, especially the offshore companies and companies like NewTel, to do

more of their procurement here. If you look at the Iron Ore Company of Canada,

NewTel, and a lot of the offshore companies, many small companies have been

spurred from the procurement of these companies.

NewTel, I remember, several years ago started a

process that they went out around the Province into the regions and put off

trade shows and said: This is what this company needs. This is what we are

presently importing into this Province. If you can supply it in a competitive

way, we would be very pleased to buy from Newfoundland companies.

That program was extremely successful. If you look

at procurement rate now for NewTel - and the same thing with the Iron Ore

Company of Canada - they have been very supportive of small companies. While in

some instances and in some sectors, like the grocery chains, it meant that we

have lost the small independent wholesalers and store front operators, in other

sectors it has been a great boon to businesses.

If you look at the number of companies that have

expanded since the Hibernia platform was built, the number of companies that are

here in St. John's compared to ten to fifteen years ago, that have been spurred

by the offshore and by the Atlantic Accord, that says the opportunity must be

put in Canada but specifically as much as possible in Newfoundland.

Some of what you are describing is true, but a lot

of it, I think, without the large companies would be very difficult. We only

have half a million people here with approximately 600 communities. We cannot

survive selling to each other. There is not enough business here. Any person who

has been in either small business or large business for any number of years

would readily admit that. That is why we have to be export ready and we have to

go out and get the markets. That is exactly what this government has been doing

for the last few months.

Our first trade mission for many a long year was

into the New England area just last month. They have full employment down there

and there are help wanted signs everywhere. I spoke with businesses and said: We

do not want to do like we did in the past, and have our people go to Boston to

work. What we want is for you to subcontract the work back to Newfoundland, to

our engineering companies, to our architects, and to whatever service it is that

you need.

We actually have an entrepreneur in the Boston area

who has four restaurants down there. Because of the problem of getting cooks and

so on in these restaurants, and enough service people, the food for that

restaurant is being cooked in Newfoundland, here on Duckworth Street, and being

sent to these Boston restaurants.

It is an amazing opportunity and one that as a

government we have been very supportive of and willing to work with small

business people. It would do your heart good in some ways to talk to many of the

small business operators who went to New England area with us, and now all of a

sudden they realize the incredible potential that is down there and are very

willing to work with us to develop these export opportunities.

MR. HUNTER: Minister, I agree with you 100 per

cent. In urban Newfoundland, particularly the East Coast, I agree that what you

are doing is great for businesses, but I am talking about rural Newfoundland,

rural areas. I agree with you that a lot of the services that we need pertaining

to offshore and mineral development, that we have to expand and bring in other

people and expertise to do that - I agree with you 100 per cent - but I am

talking about rural areas, small communities, places where the big businesses

are coming in now and saying: We not only want to take over St. John's area. We

want everything. We want the small communities' business. We want the dollars

and cents, and they are going to shake the Province to shake out those dollars

and cents. I think it is time.

I do not know your policy on it, but I am finding

now there are companies coming in from Quebec, into small rural areas, taking

away contracts from local businesses that normally get these contracts in our

Province. We cannot compete. Small business cannot compete with these bigger

companies coming in from other parts of Canada. I don't know; I believe you have

an open-door policy for competition from other Provinces, as I understand, in

the last couple of years. It seems like these companies are being encouraged to

come here.

MS KELLY: If we don't allow - what you are

describing I understand completely, but we live in a country called Canada. If

we do not allow other provinces to do business in our Province, we cannot do

business elsewhere. If ever there was a time that we have to do business

elsewhere... As I have said, this Province cannot prosper on selling to each

other; there are not enough of us.

MR. HUNTER: I realize that.

MS KELLY: We would have to a 10 million to 15

million population in order for that to ever happen. Even then, Canada is an

exporting country and the other provinces have the same difficulties that we do.

We also live in a democratic country and we cannot

tell people where they have to buy their goods and services.

I beg to differ with you on that it is only the

urban areas that are benefiting from some of the initiatives of this government.

When I was in the New England area, the vast majority of the businesses that

were with me were from rural Newfoundland. I think the one that got probably one

of the biggest contracts was a brand new water bottling company from - if not in

your district, very close to it - South Brook. Out of the ten businesses that

were with me, I think seven of them were probably from rural Newfoundland.

MR. HUNTER: There is no other water bottling

plant out there so I encourage that. I am talking about existing small

businesses that are being squashed by bigger business coming here and competing.

I do not discourage any new business coming in and

providing new technologies and new services that we do not have.

MS KELLY: Well, what would you suggest that

government would have to do, being a democratic government, being a part of

being a Canadian province, that we would be able to, if we disallowed other

provinces from coming in here, their businesses coming in here, they would have

to reciprocate and say that our companies cannot go to the mainland and sell.

That, I can tell you, would have a huge, terrible impact on rural Newfoundland.

Many of the businesses in rural Newfoundland could

not survive if they were not able to export their products to other parts of the

country and to other parts of the world. I think that trade openness has been

the order of the day and is really one of the things that gives us the ability

to prosper in the future, and in particular as it relates to the IT sector. We

have successful IT companies that are in rural Newfoundland because frankly it

does not matter where you are in the IT sector.

MR. HUNTER: I encourage that, too. I agree with

you 100 per cent, but it seems to me that they were using the rural small

business sector the same way the federal government is using our fishery, to

benefit other provinces, to give our resources away so that some other provinces

can benefit from it.

We are doing the same thing to rural Newfoundland.

We are using outside of the overpass, sacrificing too much of our small

businesses outside of the overpass, to encourage more development inside the

overpass.

I do not know the answer to it, Minister, but I

think that we should be more dedicated to smaller businesses in rural

Newfoundland. Probably there is something that your department or somebody could

do to encourage somebody to seek out the business ideas.

MS KELLY: Well, it is the mandate of the

Department of Development and Rural Renewal, but we have offices all across this

Province and we have business specialists to work with small business. It is a

very, I think, sophisticated network that we have put in place to work with

small business. One of the difficulties in our small business sector in many

areas is that they have not adapted to change; but I have to say very proudly

that in the last couple of years I think that small business in Newfoundland has

adapted to change more quickly than in many other rural areas of this country,

and are now moving ahead. In some instances, I think, that is partly a problem

of the cod fishery collapse in that many of our fishers did not realize that

they were in fact small business people, and some of them were even a bit more

than small business people. Now that the fishery is diversifying, they are

recognizing the business aspects of the fishery that they are in and doing the

fishery in a way that certainly is much more beneficial to them; realizing that

it is not just the going out and catching of the fish that is important for my

livelihood and the livelihood of my family and the longevity of my community.

I recognize what you are saying. Some of it, as I

have said, is a global problem, but some of the rest it this government is

addressing through the Department of Development and Rural Renewal.

The zonal boards - if ever there was an instance

that we are out there trying to work with small business and to address the

problems that they have. I do not think you will find a better example anywhere

in the world than the work that the volunteer zonal boards are doing in bringing

these issues... There is a direct link now between government and people on the

ground. People said: We want to have our problems addressed from the ground up.

I think that is exactly what is happening through the zonal boards.

MR. HUNTER: I am just saying that I would like

to see it be a bit simpler for people who have good ideas. People are telling me

they go into the zonal board, they go into the development associations, and

unless you are prepared to go in with lawyers, accountants and strategists, and

unless you have the money to hire these people to go in there, you are going to

walk through the door and you are going to walk out again more frustrated and

less determined to start a small business. I would like to see it a bit simpler.

Probably some of the people in these boards are not trained to handle small

business. I am talking about people who want to start a small business too.

CHAIR: Excuse me, Mr. Hunter and minister. This

seems to be getting into a more philosophical discussion that probably could be

better addressed in our meeting on Monday night with the Minister of Development

and Rural Renewal. I think it is outside the realm of the minister's department.

I am sure we could discuss this for the next two or three hours, no problem. If

you want to pursue that for the next couple you can, but I think you

(inaudible).

MR. HUNTER: I think I got my point across.

CHAIR: Any further comments or questions?

Mr. French?

MR. FRENCH: I would like to move into some of

the headings, if that is okay.

CHAIR: Yes, go ahead.

MR. FRENCH: On page 146, Minister, 1.2.02.01.

Salaries in 1998-1999 were budgeted at $62,700. We only spent $30,900 but in

1999 we are going up to $105,500. Why would that be?

MS KELLY: I think I have that here, actually.

Actually, you probably have it there more immediate than I.

MR. CROCKER: During 1998-1999 there was a

requirement to reallocate a portion of that funding in another division so we

only spent $30,900. During the 1999-2000 budget process - this is all temporary

dollars - there were some other temporary dollars in other divisions. There were

a couple of temporary positions that were more appropriately budgeted under

administration, so the allocation was increased to $105,500.

MR. FRENCH: What kind of temporary positions

are we talking about here?

MR. CROCKER: Just basically temporary

assistance that could be required in the administration area. Probably a small

portion of that would be additional help during summer leave. You need people on

the front desk, you need people to process payments, the payroll area - mostly

administration.

MR. FRENCH: Okay.

On page 147, 2.1.02.06., Purchased Services, in

1998-1999 we spent $1,204,200 - or that is what was budgeted - and we went up to

$1.4 million and this year it is going to be $1.3 million. What type of things

would we be doing in Purchased Services?

MR. CROCKER: A large portion of the $1.2

million relates to the agency record, which is the marketing agency. It is

approximately $950,000.

During the 1998-1999 fiscal year there was a

requirement to have some additional work done, so it was increased. Some funds

were reallocated from savings within the department, which brought the projected

expenditure up to $1.4 million.

The variance for the 1999-2000 year, there was an

additional $120,000 put in over and above what was there for 1998-1999. That was

part of the program review process. The third year of the program review

increased the amount for the marketing campaign by $120,000.

MR. FRENCH: In this trade investment - and I

might be in the wrong area here - in this area here, would there be funding

there to help Newfoundland businesses? Because awhile ago I listened to the

minister talk about some of these companies bringing stuff in and I also know of

some small businesses that are growing themselves but with little or no help. I

know some of these businesses that are now shipping goods into Quebec and other

places.

I know in one particular case, in my district, a

fellow bid on a job in Goose Bay over a year ago - and it has nothing to do with

your department but it does with ACOA - and he lost the job. Well, he said, that

is fine, I did not bid low enough. Lo and behold, about three days later he

found out that he and the same guy buy steel from the same company in Montreal.

So the steel was the same price. Maybe to the guy in Goose Bay it was more

expensive because he had to get it shipped in, but yet he lost the tender. When

he came to really get into the nuts and the bolts of it, the guy who he was

bidding against had ACOA money. So this fella just didn't have a hope in hell of

winning this bid. It was not the shipping from, say, the Island to Labrador that

killed him. The guy could do the work so much cheaper because his overhead costs

were not the same because this fella had gotten an ACOA grant, you know, which

really is bothersome to me.

In this part of it here, in Trade and Investment,

do we have funding in there that would assist local small business in this

Province to expand, or would it be found somewhere else in that?

MS KELLY: Not specifically under Purchased

Services, but there are programs through the ERA and CEDA. We have a program

like, for instance, the trade mission that I went on to New England. There was

funding from a federal-provincial agreement that was put together as a result of

the New England and Atlantic Premiers' meeting the year before that forty

businesses - ten from each Atlantic Province - went on. A good part of that

mission was funded: the small businesses that went, I think their airline

tickets and their transportation when they were in the U.S., I believe, was paid

for through that agreement, wasn't it?

So it just depends. There are various programs. We

have a program, for instance, that helps a small business, if they need to go

off to a trade show, to help identify markets and that sort of thing. There are

small programs throughout the department that do assist small business in that.

I agree with your statement about ACOA and competitiveness. That is one of the

difficulties many of the small businesses that the previous member described

encounter, that when they go in to the various programs they get very turned off

because ACOA has to say to them: I'm sorry, what you are looking at doing is

competing with someone else.

What may have happened with this one is that the

realization wasn't there that if a business is in Goose Bay and a business is in

your area, are they competing? I guess if you were looking at interprovincial

business - you know, if that business in Goose Bay was set up to service Goose

Bay, and the one in your area to serve the Island - it would not have been, but

when they are looking for out-of-province and international business, and one

has received government assistance and the other has not, I agree with your

statement. It is something that ACOA have been trying to overcome.

Let me tell you, there is a lot of adversity within

the business community when you walk in the door and ACOA says: I'm sorry, we

cannot fund you because there is a business up in Labrador already in that

business, or I'm already in it. It makes it very difficult. I mean, it is a very

complex situation.

MR. FRENCH: People in my area, when they

started some years ago, went to ACOA and were told in no uncertain terms: We

can't help you because there are other people in this Province in the same

business you are in. Yet he could name off a dozen companies that were in the

same business he was in that had gotten grants from ACOA. The playing field

certainly was not level. Before he went into business for himself, he had

actually worked for companies that were probably partially surviving on ACOA

money. Now he finds himself in a very awkward position, and he is bidding

against the same companies that he worked for, but he is at a disadvantage.

I guess the question I am asking is this. In order

for these individuals to expand their businesses - if they want to build

buildings or this type of thing - is there anything within your department where

they could apply for assistance in loans or loan guarantees that would help them

expand?

MS KELLY: There are various government programs

but none that would, I think, cover what you have just described. Most of our

programs are to help businesses be export ready and that. Keith, you could

probably describe the programs in relation to the question that the member has

asked better than I could.

MR. HEALEY: No, we don't have any programs in

our department whereby we provide direct or indirect loans of any sort to

businesses.

MR. FRENCH: What about grants?

MR. HEALEY: We have a small allocation of money

there that would help some businesses from time to time to attend meetings or to

go to missions, but that is a very small amount. It is not the kind of funding

that you are talking about. I would suggest that what our department has done in

the past, and certainly would continue to do in the future, is where a case is

brought to our attention where the client feels that he is being unfairly or

inequitably treated by one of the federal funding agencies, we will certainly

sit with that client and that federal agency and try to iron out the

differences. We have done that in the past as well and certainly would continue

to do that in any case that comes to our attention.

MR. FRENCH: Could somebody send me over a list

of grants and what they are for? Could somebody send my office a list of the

different type of grants you people would have available to businesses? Like, as

the minister says, on some of these trade missions and so on, and other things

that the department might have?

MR. HEALEY: Certainly we could do a list of all

the federal-provincial agreements. The minister mentioned one of those

agreements (inaudible).

MR. FRENCH: Yes, but what I would like to know

- even though it may be a federal-provincial agreement - are the ones that the

minister would administer in her department provincially and not get run up a

flagpole to some federal agency where you have to go through forty-seven

different people to get a yes or a no answer.

MS KELLY: I think all of our programs, though,

are mostly federal-provincial agreements, aren't they?

MR. HEALEY: Yes.

MR. FRENCH: Yes, but -

MS KELLY: We work very well. I don't think the

people that we help through some of these very small programs feel they have to

go through any great loops. I mean, if we are going on a trade mission we put an

ad in The Telegram and everybody knows that we are going and you apply

for it.

MR. FRENCH: This is what I want a list of.

MS KELLY: Okay, we can give you a list of the

programs that are within the department, no problem.

MR. FRENCH: Also, programs that might assist

businesses in expansion, marketing or whatever.

MS KELLY: Yes.

MR. FRENCH: On page 148, minister, it says

Research and Development-Offshore Fund, 3.1.03. It just says Grants and

Subsidies, .10. We budgeted $1.2 million last year but we only spent $777,800,

and this year we have budgeted again almost $1 million. I know there is some

revenue that goes in there federally, but again, why have we dropped? In one

year we dropped $500,000 and now we have gone up a couple of hundred thousand in

this year.

MS KELLY: There is a set amount of money in the

Offshore Development Fund and it depends on the uptake in a particular year how

much is spent. Some of the projects are quite big and it depends on how much the

person or the company or the association that has been awarded, how quickly they

spend the money.

There are several sectors within the Offshore

Development Fund, from Technology Transfer, Special Initiatives, the R and D

block Fund, the Industry Development Fund, and the Offshore Development Fund as

a whole.

A major portion of the money that was put in when

the Atlantic Accord was put in place and we developed the offshore, I suppose -

are we up to 75 per cent or 80 per cent of the fund is gone, on the whole, at

least?

WITNESS: More than that.

MS KELLY: More than that? You will see that

really what is left there has been pretty well committed on the whole but it is

just that the money is being spent now, the last parts of it. Is that correct?

WITNESS: Cash flow.

MS KELLY: Yes, cash flow.

MR. FRENCH: On page 150, under Industrial

Assistance, 3.3.02.10, Grants and Subsidies, last year we had $3,500,000 and

this year we do not have any. What is our reasoning for that?

MS KELLY: I think the same rationale I just

outlined, that the fund is coming to an end. Are you looking under Industrial

Assistance?

MR. CROCKER: The $3.5 million was to pay the

interest subsidy for the Marystown Shipyard.

MS KELLY: Okay.

MR. CROCKER: That has been refinanced now

through the provincial debt. It has been transferred to the Department of

Finance under Debt Management.

MR. FRENCH: Okay. In 3.3.03, Industrial

Infrastructure-Offshore Fund, we budgeted $1,350,000 in 1998-1999, we spent

$1,201,300, but this year again there is nothing.

MR. CROCKER: Yes. There were no capital

projects approved this year. There was only a small portion available, actually,

I think, out of the $1,350,000. I guess you probably could not do a project for

the balance that is left there. There were only two projects that were approved.

I think one was for Turf Point and the other was the marine seismic project.

They were the major ones that were done in 1998-1999. They are complete. There

are no more capital projects.

MR. FRENCH: Okay. On page 151, under 3.4.01.10,

Grants and Subsidies last year was $1,470,000. We spent $1,458,700 and this year

we are going to spend $1,699,300. Can you tell me exactly what type of grants

and subsidies that would be?

MR. CROCKER: A major portion of the Grants and

Subsidies would be the payments we make to meet our share of the cost of

projects to ACOA. Basically, as you can see, we had $1,601,100 and we

anticipated spending $1,601,100. There was a slight reallocation among the other

main objects of expenditure. The $1,831,000 that is budgeted for next year is

based on the various projects that are approved. Again, the major portion of it

would be to meet our 20 per cent share of the projects that are funded directly

by ACOA.

MR. FRENCH: This would be assistance you would

give to businesses that would receive ACOA funding. Could you just give me an

idea of what type of business we would be talking about here?

MR. CROCKER: Most of the advance payments

through ACOA - say, probably, $1.3 million - would represent our 20 per cent

share. There are a few projects that are administered by the department. We have

Operation ONLINE. Last year I think there was $100,000 allocated to them. We

also have Library Best Practices and Bid Matching-Industry Partnering. I do not

have a lot of details on the particular projects that were done by ACOA but they

were some of the ones that were administered by the department.

MR. FRENCH: When you say Bid Matching-Industry

Partnering, exactly what do you mean?

MR. HEALEY: What was put in place there was a

project that was approved under the Economic Renewal Agreement, which is a

federal-provincial agreement. Both the province and the federal government

co-chair that at the management level and at various implementation committee

levels and working committee levels. We accept projects into that under a

variety of different headings, if you will. Again, just to give you some further

examples of that, the Genesis Centre, which members may be familiar with,

operates out of Seabright Corporation Limited where we house spudding

businesses, if you will. One of the things we provide to them there is office

space at no cost to them.

Another program we do in conjunction with that is

called a mentoring service whereby we get - I will call them world-class

mentors. There are senior business leaders both in the Province and around the

world who agree to mentor young entrepreneurs who are resident in the Genesis

Centre and help them work through their business plan and so on and so forth,

and grow to a point where they can stand on their own. I believe it is a

three-year period that the businesses can actually stay in the Genesis Centre.

That is the type of thing, and it does go back to

your earlier comment about support for businesses. That is a good example

actually of the kind of support through these federal-provincial agreements that

we do offer to local businesses.

MR. FRENCH: Okay. In 3.04.02, Economic

Development, .06, Purchased Services, in 1998-1999 we did not have anything

budgeted but we spent $1,468,000. This year we only have $500,000 budgeted.

Could you tell me what the $1,468,000 was spent on? If it took just about a $1.5

million last year, why are we down to $500,000 this year?

MR. CROCKER: It relates again to the

distribution between the main objects of expenditure. We had the $3,030,000

initially budgeted under .10, Grants and Subsidies. It ended up that this

particular program, Economic Development, was opened up to line departments

also. To charge expenditure to the appropriate area, it ended up that we have to

move the dollars to other areas like Transportation and Communications,

Purchased Services, Professional Services, what have you.

That is also why we ended up putting in probably an

additional $1.6 million, because some line departments had projects approved and

then the Department of Industry, Trade and Technology had to fund the project

100 per cent. Then we recovered 70 per cent from ACOA, so the related

Revenue-Federal, .01, of course, went up from zero to $2,194,000.

For next year, the allocation there of $4.7 million

total is just based on our anticipated expenditure on various projects.

MR. FRENCH: Under .06, Purchased Services, what

type of businesses would have qualified for any portion of the $1,468,000?

MR. CROCKER: Most of the $1,468,000 would

probably relate to a project that was approved for the Department of Tourism,

Culture and Recreation for Soiree '99, the marketing.

MR. FRENCH: Why have we reduced it then? If

that was one singular project, again under .06, Purchased Services, we now only

budgeted $500,000 this year. Can you tell me what the $500,000 will be used for?

MR. CROCKER: The allocation basically is just

an estimate. During the year that will be reallocated to the appropriate areas

of expenditure. I guess we do not really know exactly where the appropriate main

object of expenditure will be during the year. If you have a project approved

for $500,000 it may not be broken down so finely that you know exactly what you

are going to spend in Transportation and Communications, Supplies, Purchased

Services. It is just a token allocation we put in there. We could have allocated

a portion of the $4.7 million into every main object but we would still have to

reallocate.

MR. FRENCH: What type of business would qualify

for the $500,000 under Purchased Services?

MR. HOLLETT: When you are looking at the

Economic Development money here, particularly under the Comprehensive Economic

Development Agreement, the Department of Industry, Trade and Technology manages

that fund on behalf of government so the full value of the program flows through

us. What we do is we have allocated, as the managing department, a certain

amount of money to be available for each fiscal year.

It is open to all departments of government which

can identify during the year projects they think would or should qualify for

support under the Comprehensive Economic Development Agreement. Then line

departments - Tourism was mentioned, for the Soiree '99 initiative. Departments

can come to the Department of Industry, Trade and Technology and ACOA as the

joint managers of that and say: We believe this is a worthwhile project to

support for economic development. Then that will considered and then funded.

Essentially, these funds just flow through the department and we manage them but

these are not necessarily ITT initiatives in and of themselves.

MR. FRENCH: Yes, but that is not the question I

am asking.

MS KELLY: I think maybe one of the examples

that could be given would be the development of the theatre for Rising Tide

Theatre out in Trinity. That is one that will be done this year. That is the

type of initiative that comes in under the ERA. I am trying to think of some

other examples that have been done probably -

MR. FRENCH: But I am just referring to the

$500,000 for Purchased Services.

MS KELLY: Until they come in, you really don't

know what they will be. I am just looking at, I guess from own department's

point of view, some of the things that are funded, like the Scottish MOU that we

have; the site selection forum that was just done to bring people in from around

the Province to look at how a US company, or a North American company, if they

were in an expansion mode, what they need to know if they are going to look at

various areas of the Province for site selection; the Department of Education

higher learning project.

One of the ones I guess that would be coming in and

is happening now this year is the Department of Argifoods, the cranberry project

that is taking place in five different sectors around the Province, in five

different areas around the Province. Those are the types of things that come in

through these agreements, but until they are there and ACOA, the Department of

Development and Rural Renewal, the Department of Tourism, the Province and my

department - they all sit on the committee and make a joint decision of which

ones will receive priority.

I am trying to find some other examples here that

would -

WITNESS: (Inaudible) Getting the Message Out.

MS KELLY: Okay, the funding of Getting the

Message Out, the publicity program through Department of Development and Rural

Renewal; the shrimp harvesting initiative through the Department of Fisheries

and Aquaculture.

MR. FRENCH: That would all be part of Purchased

Services? I am not talking about the total vote. I am just -

MS KELLY: Yes, it could be because we do not

know... That is the amount of money that is put there this year. We do not know

which way it is going to be spent, but that is the amount that we project this

year will be spent.

MR. FRENCH: In Purchased Services.

MS KELLY: No, as Gerry has said, it could be

allocated into another part of the agreement but we really do not know. You have

to put some money in there that is available for this year, and that is the

amount, because many of these agreements now are coming to an end. I think the

ERA is at the very end, actually. It is a three- to five-year agreement and this

is the fourth year of it.

MR. FRENCH: Again, I am not fully understanding

why there is $500,000 for Purchased Services. Why is it in there? At the end of

the day, I do not want to know that we are going to take that and give it to

Tourism or give it to somebody else. I want to know what kind of services...

Purchased Services, to me, is a service that you purchase. What kind of services

are we going to purchase with $500,000 under this heading? That is what I want

to know.

MR. CROCKER: I guess if you want to get into

some object of expenditure under Purchased Services, you would be looking at

advertising and promotion, say, for argument sake.

MR. FRENCH: Well, that is what I want to hear.

MR. CROCKER: Okay. If, for example, under

shrimp harvesting, they decided to lease boats, it would be a Purchased Services

charge. If they turned around and decided to buy the boats, then it would be a

charge against Property, Furnishings and Equipment.

We do not really know until the expenditures are

made, where the appropriate charge should be.

MR. FRENCH: Next year we could come back and,

if we are doing this heading, we could say it was probably budgeted at $500,000

but we may have only spent $10,000 and the rest of it could have been allocated

somewhere else.

MR. CROCKER: The same for 1998-1999, the full

amount was under Purchased Services. It was $3 million there but, as you can

see, at the end of the year the anticipated expenditure was split out between

Salaries, Employee Benefits, Transportation and Communications, Supplies, right

on down through, because we do not know the makeup of the project until we are

sort of into it.

MR. FRENCH: Okay.

On 3.5.01., Voisey's Bay Project, in 1998-1999 we

budgeted $189,600 for Salaries and we did not quite spend all of that but this

year we are going up to $313,700. Why would that be?

MR. HOLLETT: If you recall, the Voisey's Bay

Secretariat was in Executive Council last year and the staffing of that was sort

of built up during the fiscal year so you do not see a full year's Salaries in

1998-1999.

The other part of that is that the person who was

leading the negotiations, Bill Rowat, was on loan to the Province from the

federal government so the federal government was actually paying his salary. The

staff complement there now within the Voisey's Bay group is completely funded by

the Province now. That is the difference.

MR. FRENCH: If I understand this correctly, to

me it is an increase in salary. So have we brought in somebody new to run the

Voisey's Bay Project?

MR. HOLLETT: No, we have not brought in anybody

new. The Voisey's Bay Project group reports to me so I am essentially heading

that, but we do have one additional person in that group now that we did not

have last year. There is also a vacant position - in fact, two vacant positions

- within the Voisey's Bay group that are not filled at the moment.

If we had a full staff complement in the Voisey's

Bay Project team for the full fiscal year, then that is where you would see the

$313,700.

MR. FRENCH: So if we do not fill those

positions we will not spend $313,700?

MR. HOLLETT: If we did not fill the positions,

yes.

MR. FRENCH: Is there a plan to fill the

positions?

MR. HOLLETT: Well, I guess we would like to

fill every position that we have available in the department.

MR. FRENCH: So what type of position would not

be filled?

MR. HOLLETT: One position that is not filled

now is the Assistant Deputy Minister of the Voisey's Bay Project. That is a

position that I held up until last fall. That has not yet been filled.

MR. FRENCH: And what is the other one?

MR. HOLLETT: The other one would be essentially

a senior analyst position.

MR. FRENCH: Okay. Thank you.

I don't have any more questions, Mr. Chairman.

CHAIR: Mr. Rideout.

MR. RIDEOUT: I think most of the heads that

need to be covered have been covered. There might be a few questions on a few

heads that I would like to ask.

Can we go back to page 145, Minister, and begin

with the Minister's Office? Again, Purchased Services, you budgeted $5,600 and

you spent $11,600. What necessitated the doubling of the Purchased Services

budget in the Minister's Office last year?

MR. CROCKER: The overall operation of the

Minister's Office, when you take into account employee benefits, Transportation

and Communications, Supplies, and Purchased Services, the full amount was

$99,600. We anticipated spending $86,600, for a difference of $13,000. So it is

actually a $13,000 saving overall projected under the Minister's Office. It is

just a sort of reallocation again between the various main objects.

Under Purchased Services you would have items such

as advertising and entertainment. There would be -

MR. RIDEOUT: Mr. Crocker, you are going to be

answering the questions, how much was spent on advertising? How much was

budgeted and how much was spent on advertising?

MR. CROCKER: Actually, most of the information

that is in the Estimates is at the (inaudible) main object level and I don't

have the details for each sub-object of expenditure.

MR. RIDEOUT: Well, you come in here to justify

an expenditure increase from $5,600 to $11,600 so I think we are entitled to ask

for the breakdowns.

MR. CROCKER: I will have to access a

sub-objects report. I will have to get back to you.

MR. RIDEOUT: Okay.

What else is included in that amount? You mentioned

advertising. You don't have the breakdown for that. Entertainment?

MR. CROCKER: No, we don't have the activity

sub-object breakdown. Under Purchased Services you would have printing,

advertising and promotion, entertainment, repairs and maintenance to equipment,

items like that.

MR. RIDEOUT: So you are making an undertaking

now to provide the Committee with a breakdown of that $11,600?

MR. CROCKER: Sure.

MR. RIDEOUT: Okay, thanks.

The same thing happened down in Executive Support.

Again, this is in the Supplies area. You budgeted $6,600 and you actually spent

$11,600 in the fiscal year just passed. Can you give us some indication what

additional supplies were purchased to double the budgeted amount to the actual

expenditure amount?

MR. CROCKER: Again, under Supplies you are

looking at stationery items, you would be looking at food items for meetings,

machinery and equipment supplies, and personal household items. It would be spit

out a number of different ways to make up that $11,600. If you want to break it

down exactly we can provide that.

MR. RIDEOUT: Okay.

Over in 1.2.03, Policy and Strategic Planning, page

146 in our Estimates - I do not know what it is and what you have in front of

you, Minister - there is a little amount of $9,000 for Grants and Subsidies in

.10. Nine thousand dollars was budgeted last year, $9,000 was spent last year

and $9,000 is budgeted again this year. Can you give us a breakdown of where

those Grants and Subsidies go? Obviously, they cannot be very big and I do not

know what they are. I would like to have an accounting of where the $9,000 went

and to whom it went, that was budgeted last year and where you might expect it

to go this year.

MS KELLY: Actually, that is a set agreement

that we have in place with the federal government. I think, as a matter of fact,

I probably only signed off the letter in the last few days for the upcoming

year. This is for the administrative costs of the Internal Trade Agreement

Secretariat, and the Province is a signatory to this agreement with the federal

government. It is financed by the federal government and the provinces on a

50-50 basis. That is the amount this Province contributes as its share.

MR. RIDEOUT: So it is paid out as a grant

through your department to this particular agency. Is that what you are saying?

MS KELLY: To the Internal Trade Agreement

Secretariat, yes.

MR. RIDEOUT: So it is not a grant to an

individual business person around the Province.

MS KELLY: No.

MR. RIDEOUT: It is for this particular

agreement. Okay, thank you.

2.1.01.04, Business Analysis, page 147. There were

no Supplies budgeted for in the Estimates last year but the department ended up

spending $58,500 on supplies.

CHAIR: I think that is under Professional

Services.

MR. RIDEOUT: Excuse me. I am looking at the

wrong one. Professional Services, yes, 2.1.01.05.

MR. CROCKER: A major portion of that,

approximately $50,000, was paid to a chartered accountant to review the call

centre books after it was bankrupt.

MR. RIDEOUT: The call centre in St. John's that

went bankrupt last year?

MS KELLY: BPS Imaging.

MR. FRENCH: Did we conduct our own study into

this call centre? I may be wrong, but my impression was that we were going to

rely on the federal government one. Did we need a separate one?

MS KELLY: I'm trying to remember now. Minister

Foote was there then. At the first stage, wasn't there a part that the federal

government was doing and a part that the Province was doing, and this is the

part we did? I'm trying to remember, like you, back to that period last year,

and that is my memory of it. Is that correct?

WITNESS: That is correct.

MR. FRENCH: Who would have done this for us,

for $50,000?

MR. CROCKER: It is Price Waterhouse.

MR. RIDEOUT: Moving in the same head down to

2.1.01.10, Grants and Subsidies, we budgeted $700,000 in Grants and Subsides and

we only spent $439,000. Three questions, I guess. Who received those grants and

subsidies and what for? What were some of the amounts, as examples? Why would it

be that we only spent just a little bit more than half of what we budgeted in

providing grants for business analysis?

MS KELLY: I think that is through the EDGE

program there so it depends on the number of applications that you get in at any

point. That is the amount of business that was conducted through the EDGE

program last year.

MR. RIDEOUT: Okay. Now, some examples of who

were the recipients of the $439,000 last year?

MS KELLY: (Inaudible). Do you remember any -

MR. HOLLETT: NEWDOCK here in St. John's, for

example.

MR. RIDEOUT: Okay. How much?

MR. HOLLETT: They received, I believe,

approximately $180,000 last year. I can get the list for you if you want the

list, but it would be divided out amongst a number of other firms. These

amounts, essentially, relate to the $2,000 per job grant that was initially in

the EDGE program which is no longer part of the program. These grants here are

paid to EDGE approvals that date back at least two years.

MR. RIDEOUT: Okay, Mr. Hollett, can you add to

your list of undertakings to provide us with a breakout of this particular head

from last year, please, of the $439,000?

MR. HOLLETT: Sure.

MR. FRENCH: Just under Trade and Investment

(inaudible), 2.1.02.10.

MS KELLY: What page is that?

MR. FRENCH: It is on page 147. I just picked it

up there now. We budgeted $50,000 and we spent $150,000.

MS KELLY: That is the funding that covers the

Newfoundland and Labrador Irish Business Partnership, the one that Vince Withers

heads up for us. We have a full-time staff person there. It is one that worked

with the Board of Trade this year to do the recent trade mission to Ireland, and

to do the pre-work and also the follow through from the previous business. That

is the one that works with keeping the Irish partnership going.

MR. FRENCH: So, Mr. Withers, he is not paid, he

is a volunteer?

MS KELLY: No, he is the head of the board. He

is not paid in this position. I think the paid person is on a secondment from

our department, Kirk Tilley.

MR. FRENCH: He would just receive his expenses,

if he goes on one of these trips. I don't expect the fella to travel around for

nothing.

MS KELLY: No, there is no per diem or anything.

It is only actual expenses, I think, (inaudible).

MR. FRENCH: Okay, I have no problem with that.

Sorry, Tom.

MR. RIDEOUT: No, that's fine. Under Technology

Transfer Opportunities-Offshore Fund, 3.1.01.10, Grants and Subsidies, we

budgeted $720,800 last year and we spent $385,800. I know this is cost-shared,

but can the minister give us some idea of how this money was paid out, and for

what kind of activity?

MS KELLY: Let me see. I have a couple of

examples here under the program. Servco Environment Limited. Funding is approved

for training and development of an oil spill response program. The project was

scheduled to be completed by December 31, 1998. Due to unforeseen delays with

training partners overseas an extension was granted up to this year for June 30,

Then one of the others was Crosbie Salamis Limited.

Funding was approved to allow training for one engineering access design

solutions in both the offshore and the onshore industrial environments. That

project, too, was scheduled to be completed in 1998 but had delays and was

extended into 1999. That training, it notes here, has been completed with

savings identified at over $8,000. That money will be returned to the fund for

contribution to other projects.

MR. RIDEOUT: Good. In 3.1.02.10, Special

Initiatives-Offshore Fund, there is another

section that deals with Grants and

Subsidies. We budgeted spending $2,500,000 last year under that head and we

actually spent $1,196,000. Can the minister provide us again with some

indication of how that money was spent and for what purpose?

MS KELLY: I think C-CORE was a part of it. The

Centre for Cold Ocean Resources Engineering received approval for a grant that

was spent over five years for support of their long-term enhancement of advanced

technologies for development of offshore resources in Canada for the global

market. From my knowledge of C-CORE, a good portion of that would have been for

the contracts, for instance, that they have with the French -

WITNESS: The European space agency.

MS KELLY: Yes, the European space agency. That

is mostly done through France and that.

The other one is CCMC info-marine. That is the

Canadian Centre for Marine Communications. Actually, they were in Ireland with

us, I think, doing some business over there. Money was approved from the

Offshore Development Fund for an info-marine program. The total proposed budget

for that is $2,500,000. They will use the money from the ODF as seed funding to

lever investment from other sources. Most of this program you will find,

especially through C-CORE and through CCMC, that usually this money is used to

go to other parts of the world, or other parts to federal initiatives or to

other countries, to especially China, France and other countries like that, to

have the seed funding to get these countries to participate in the research.

MR. RIDEOUT: Okay. Thank you. 3.1.04.10, the

next head, Information Technology Initiatives, deals with Grants and Subsidies.

We budgeted $473,700 last year, we spent $390,000, and we are looking to spend

$473,700 again. Can you explain this particular head to us, how the money was

spent last year, and where you anticipate spending it this year?

MS KELLY: Most of this is core funding that is

provided for Operation ONLINE which has, I think, another two years under their

agreement - it was a five-year agreement and they are into their third year now

- and Network Newfoundland and Labrador. Actually, I don't remember how long

that agreement with Network Newfoundland and Labrador is. Is that similar to the

other ones, the five-year agreement or -

WITNESS: It is similar to the (inaudible)

pretty much year to year.

MS KELLY: Year to year, okay.

MR. RIDEOUT: Okay, those all the questions I

have. I don't know if any other committee member have questions.

CHAIR: Any other questions from any other

Committee member?

MS JONES: (Inaudible).

CHAIR: Ms Jones.

MS JONES: Minister, I guess I wanted to make a

comment. Any time there is a suggestion that we should reassess employment

between provinces or contracting between provinces it becomes a concern for me.

Because as you know, my district is on the Quebec border, and a great deal of

the business that we do in the district is with the Province of Quebec. I just

wanted to reiterate for people, who may not know, that there is a great deal of

trade and employment sharing between Labrador and Quebec on both ends, both in

Labrador West and in my district in particular.

It was just this weekend that I spoke to one

individual who lived in Forteau. He told me he moved there thirteen years ago.

For the last twelve years he has worked in Quebec and lived in Labrador. So it

is that kind of relationship that is there.

In terms of suggestions that there should be other

parameters put on that, I get a little bit, I guess, defensive. Because we had

lobbied quite a long time last year in order to be able to have Quebec change

their employment legislation or contracting legislation allowing our companies

to go in there and bid on those contracts and be able to work in their province

the same as they were doing in our Province. That was a significant achievement

for us.

The other thing I wanted to comment on is with

regard to information technology. I have to say that the development of the IT

sector is making a tremendous difference in rural areas of the Province. I'm

experiencing that firsthand in my own district. For example, a lot of the

programs we were trying to access in rural schools we are now able to because we

have the technology to do so, especially in areas like physics.

Last year I had students in my district who

completed distance education programs in physics, who scored among the highest

in the Province at the end of the year. I thought that was tremendous. I do,

however, have some concern and that is that a lot of the IT programs that were

implemented by your department and with Industry Canada have been fairly

successful, and I guess we have created quite a dependency on them in

communities. I am a bit concerned about the fact that Industry Canada is looking

at reneging on some of its operating costs for a lot of the cap sites around the

Province. I am just wondering if you or your department have been involved in

that process in terms of trying to find alternative sources of funding for

operations.

MS KELLY: Through Operation ONLINE we certainly

- the research on that would certainly be of concern. My understanding was that

Operation ONLINE - Keith, you probably could be more accurate than I could,

because I may be mixing it up with another program. Do we deal directly with

Industry Canada on these IT fundings or is a lot of it through Development and

Rural Renewal?

MR. HEALEY: Most of that is through Development

and Rural Renewal.

MS JONES: Okay.

MS KELLY: Our only involvement would be, I

guess, not in an administrative way but in a policy sort of way. The development

of the industry would be looked at through Operation ONLINE and we would receive

advice there, but the actual agreements themselves would be done through

Development and Rural Renewal.

MS JONES: Okay, thank you. I don't have any

other questions.

MR. RIDEOUT: I think this is where we proceed

to call the heads.

On motion, subheads 1.1.01 through 3.5.01, carried.

On motion, Department of Industry, Trade and

Technology, total heads, carried.

CHAIR: Before we adjourn, we have the minutes

from the Committee meeting last night with the Department of Forest Resources

and Agrifoods to adopt.

On motion, minutes adopted as circulated.

CHAIR: I would like to thank the minister and

her staff, as well as the Committee members, for coming today. Thank you.

Our meeting this evening is going to be at 5:00

p.m. instead of 7:00 p.m.

The Committee adjourned .