Resource Committee

2011-05-17

Newfoundland and Labrador — Committees

May 17, 2011

The Committee met at 6:00 p.m. in the House of Assembly.

CHAIR (Verge): Okay, we are on.

First of all, I would like to welcome you all here tonight where we will be

reviewing the Estimates for the Department of Business, but before we start I

have a couple of orders of business. The first one, I will ask the members on

the Resource Committee to my right if they would introduce themselves, please.

MR. BAKER: Jim Baker, MHA for the District of Labrador West.

MR. DAVIS: Paul Davis, MHA for the District of Topsail.

MR. HUNTER: Ray Hunter, MHA for the District of Grand Falls-Windsor-Green

Bay South.

MR. KELVIN PARSONS: Kelvin Parsons, MHA for the District of Burgeo & La

Poile.

CHAIR: We have Mr. Brazil in the back there.

MR. BRAZIL: David Brazil, MHA for the District of Conception Bay East &

Bell Island.

CHAIR: Would you like to introduce your officials with you, Mr. Parsons?

MR. KELVIN PARSONS: Simon Lono is with the research office in the

Official Opposition.

CHAIR: Thank you.

We have circulated the minutes for our last meeting of the Resource

Committee, which was the Department of Environment and Conservation. I would

entertain a motion that these minutes be adopted.

MR. DAVIS: So moved.

CHAIR: Moved by Mr. Davis, seconded by Mr. Brazil.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: All those against, nay'.

Carried.

On motion, minutes adopted as circulated.

CHAIR: In terms of speaking times, we usually start off by giving the

minister fifteen minutes to start, if you so choose, and then fifteen minutes to

the other side, but my experience is we usually relax the times and we will end

up going back and forth.

Minister, I will ask you to start as soon as the Clerk calls the first

subhead. With that, you can do your introductions and introduce your officials.

CLERK (Mr. MacKenzie): Clause 1.

CHAIR: Shall clause 1 carry?

The hon. the Minister of Business.

MR. DALLEY: Thank you, Mr. Chair.

It is certainly a pleasure to be here for my first Estimates Committee as

Minister of Business. I will take a couple of minutes to speak about some of the

accomplishments that we have had and some discussion on the plans of the year

ahead. Before I do, I would like to introduce the people who are with me this

evening. Starting to my left is Ray Dillon, Deputy Minister; Harman Khurana,

Director of Business Analysis. Next to Harman is Linda Vaughan, Departmental

Comptroller. Behind Linda we have Susan Clarke, Director of Brand Development.

Next to Susan is Carol Ann Carter, Director of Communications with the

Department of Business; and next to Carol Ann would be Darrell Hynes, Executive

Assistant.

Mr. Chair, the Department of Business has been active in the past year in the

areas of, particularly business attraction, aerospace and defence, and oil and

gas. Our government is committed to making strategic investments that will

enable the growth of our key industries, and the Department of Business has

valuable funds in place to see that we succeed.

We do recognize that things did slow down during the global recession of

2009. Our experience is that many of the national and international companies

had their expansion plans on hold and investment budgets were low; however, in

2010 we did see somewhat of an economic rebound. In my department we were able

to close nine deals, the most we have ever closed in a year. It is a very

positive trend and we look forward to that in 2011.

The Department of Business; right now we have dozens of prospects we are

looking at, at various stages of development and covering a whole range of

business opportunities. The projected funding is in the tens of millions of

dollars as currently requested through our department. As a result of the

positive trend, we are anticipating a successful year for our business

negotiating team.

The Department of Business has been allocated a budget this year of $41.4

million to fulfill our mandate, providing leadership for business developments

and growth in Newfoundland and Labrador. The vast majority of this budget is

allocated to supporting an attraction of new businesses to Newfoundland and

Labrador and the funding is assigned in a number of funds. We have the Business

Attraction Fund, which is created to enhance the Province's ability to compete

for and attract new national and international business investments. We have the

Oil and Gas Manufacturing Services Export Development Fund created to assist oil

and gas supply companies in the Province to expand their markets through the

export of products and services. We have the new Air Access Strategy, which is

aimed at enhancing air access to, from, and within the Province of Newfoundland

and Labrador. As well, we have the Aerospace and Defence Development Fund, which

is in place to help continue to advance this particular sector in our Province.

Outside of the funds, we continue to strengthen and build on the Province's

brand image as we market Newfoundland and Labrador as a preferred destination to

live, work and invest. Of course, the branding and marketing activities overall

support the business attraction mandate and its objectives and certainly go hand

in hand in terms of creating a very positive investment climate here in the

Province.

We continue to manage and make meaningful progress with the red tape

reduction process. It is relieving the regulatory burden from the public and

businesses in the Province and looking at improving client services for those

who have to deal with government and improving efficiencies. We continue on our

mission to provide leadership in building a very competitive economy to foster

growth and attract new business investments across Newfoundland and Labrador.

Mr. Speaker, I will refer to you as Mr. Speaker before the day is over, you

have been in the Speaker's Chair. Mr. Chair, I want to thank you for the

introductory opportunity, and certainly feel free to ask questions. I would be

happy to answer any questions, and if I cannot, I have my officials with me to

lend a helping hand.

CHAIR: Okay. Before we go to the other side for some questions, I would

remind your officials, Minister, when you speak, if you would watch for the red

light on the front, and for the purpose of Hansard, if you would identify

yourself before you speak.

Now I think we will go to Mr. Parsons, and you can ask as many questions as

you want, sir.

MR. KELVIN PARSONS: Thank you.

Usually what I like to do is go through the actual mathematical figures first

and see what changes happened from what was budgeted last year to the revised

and then get into what has been allotted for this year. Then I will go on to

some more substantive, general type questions.

First of all, on page 105, heading 1.2.01 and these are pretty specific,

usually just trying to find out what happened or did not happen here. Under that

heading 03, Transportation and Communications, you had allotted $178,000 and

actually spent $50,000, this year you have it at $78,000 budgeted. I am just

wondering what the reason might be that you did not spend last year what you had

anticipated?

MR. DALLEY: The allocated budget was $178,000. Within that executive

support team we had a number of vacant positions, and some turnovers as well.

Also, allocated in Transportation and Communications was an allocation for the

Director of the Air Access Strategy, which was not hired until the last quarter.

As a result of that, we did not spend the budget that was there.

MR. KELVIN PARSONS: Continuing down there to item 06. Purchased Services,

$239,000 allocated and $70,000 spent, and just $17,000 allocated this year. What

kind of purchased services would we be talking about there?

MR. DALLEY: Again, the primary allocation of that budget was for the

launch of the Air Access Strategy, as well as to attend and promote the strategy

in different trade shows. The primary bulk of that funding was for that purpose,

and because we did not hire until late in the year, again, we did not use the

allocated funds.

MR. KELVIN PARSONS: Can you provide us with a breakdown of where you

actually spent the $70,000?

MR. DALLEY: Sure, yes. What we will do, we will provide it to the Chair

and then through that route.

MR. KELVIN PARSONS: Yes. That is good, that is fine.

MR. DALLEY: Yes.

MR. KELVIN PARSONS: Thank you.

Page 106, Strategic Planning and Communications, in that case you had

budgeted $76,000 and spent somewhat more, $109,000. Is there any particular

reason why you overspent there?

MR. DALLEY: Yes, the extra funding there was primarily used for moving

expenses for employees.

MR. KELVIN PARSONS: Okay.

Under Professional Services, you budgeted almost $1.5 million, spent

$330,000. What kind of professional services would be included in that?

MR. DALLEY: That particular number as you see it, almost mirrors what has

taken place in the Purchased Services as well, the flip-flop of numbers. Two of

them kind of add up to what we had budgeted. As a matter of fact, we spent a

little less than what we had budgeted but there is the technical piece, the

professional and purchased services.

Let me ask Ray, if you could probably explain a little detail.

MR. DILLON: Sure. Generally speaking, a professional service would be a

service whereby you are using the brain power of a consultant or an agency that

would do that sort of work, versus purchased service would just be the gross

purchase of a product. In the case of this, most of this is related to

marketing, and it was advertising.

Had we used a marketing agency to do a piece of work for us and then go out

and buy the ad spaces in The Globe and Mail for instance, that would go

under Professional Services. If we had elected to just deal with The

Globe and Mail ourselves and buy the advertising based on creative that we

had done ourselves, it would have been Purchased Services. That is the reason

why. The two numbers, if you add them up, it is almost identical to what was

budgeted. It was just how we placed the orders for our advertising throughout

the year.

MR. KELVIN PARSONS: Okay. Can we get a breakdown of what you spent during

that year 2010-2011 on professional and purchased?

MR. DILLON: Sure thing.

MR. KELVIN PARSONS: Under Business Attraction, I see in Transportation

and Communications you were spot on, that is pretty unusual.

MR. DALLEY: Which

section is that?

MR. KELVIN PARSONS: Page 107.

MR. DALLEY: I do not have 107. Can you give me the section?

MR. KELVIN PARSONS: Page 107,

section 2.1.01.03. Transportation and

Communications.

MR. DALLEY: Okay.

MR. KELVIN PARSONS: I think in the whole budget that is probably the only

two numbers that were exact. I did not know if it was a typo even, it was so

exact.

Under the Purchased Services and professionals there, would you be able,

again, to provide us with a list of to whom the money was paid?

MR. DALLEY: Sure.

MR. KELVIN PARSONS: Under Special Initiatives, you had budgeted $7.750

million in Grants and Subsidies and actually spent $2.1 million. I believe we

have seen press releases throughout the year for the various companies that

receive that. I am just wondering if off the top of your head you could tell us

quickly who in 2010-2011 actually received that $2.162 million.

MR. DALLEY: The figure that is showing is the money that was actually

disbursed in 2010-2011. The actual number and the deals that we did in

2010-2011, what we actually committed was around $6.5 million. What was actually

put out the door as a result of contribution agreements and contractual

agreements with the companies, that is what we are able to disburse throughout

2010-2011.

MR. KELVIN PARSONS: Is that why the figure is higher this year,

2011-2012? Because you have gone up to $10.7 million, that is to follow through

on the disbursements that you have already announced?

MR. DALLEY: Some of the commitments, yes.

MR. KELVIN PARSONS: Again, maybe in a nutshell, if you could just give us

some idea of what projects were funded and to what amount.

MR. DALLEY: Ray, do you want to probably

MR. DILLON: It represents several. Maybe we could get you that detail in

writing because, at the risk of making a mistake, there was probably a dozen.

Because, again, some of these payouts would have been for prior years, deals

that we did two years ago that had disbursements over three-year periods.

MR. KELVIN PARSONS: Okay.

MR. DILLON: It is not just one or two that make up that amount.

MR. KELVIN PARSONS: Okay, sure.

Business Attraction Fund, $25 million, $1.075 million went out. What was

involved there?

MR. DALLEY: That would be the same scenario. Basically, companies we

would have had some deals with and the payout would have been made this year.

Again, in terms of the actual commitment, it would have been the $6.5 million.

The same scenario and we can certainly provide you with where that was disbursed

in 2010-2011.

MR. KELVIN PARSONS: So, $25 million was allotted, $1,075,000 was

disbursed, and you budgeted $25 million again this year. That $25 million

number, as a routine number, has been popping back now for a number of years.

That is not how you had it up in the other one, Special Initiatives.

In Special Initiatives you had $7.7 million, put out $2.1 million, but you

bumped up your budget this year, as you just explained, to show that you are

hoping to do $7.7 million, plus those extras that you are carrying over from

last year. How come the same mythology has not been used in business attraction?

MR. DALLEY: In the business attraction piece, the $25 million is a loan

and equity fund. It is a fund that we have in place and we believe it is

certainly an attractive fund that garners attention and a number of companies

have come to us looking for investments, looking for money from government. We

have this fund to be able to sit and negotiate with these companies, but we have

an expectation that they bring a significant investment as well. Through that

process, we are able to ensure that the right investments and the decisions we

make we are comfortable with. As well in terms of the $25 million being

available, it gives us the flexibility as a department to be able to position

ourselves out there in the global market that we have an attractive fund and we

can have something that we can sit at the table and have discussions with them.

MR. KELVIN PARSONS: Where did you spend the $1 million last year is the

bottom line?

MR. DALLEY: The money that was spent? Again, maybe I will refer to you,

Ray, if we want to get the list later.

MR. DILLON: We will include that in the list because, again, some of

these were from smaller amounts that would have been from prior deals down to

decimal point.

MR. KELVIN PARSONS: Was there any new monies advanced under the Business

Attraction Fund? We only spent a million dollars; it should be fairly easy to

give me some specifics.

MR. DILLON: Certainly, we would get you all of those details. Deals that

we would have announced this year, some of the money will flow in future years.

Some of the deals that we may have announced in the third quarter, we would not

have gotten in the receipts from the company until 2011-2012.

MR. KELVIN PARSONS: That is follow-through stuff. What new monies did you

spend in the fiscal year 2010-2011 out of the Business Attraction Fund? You only

spent $1 million out of $25 million. I am just wondering, rather than put

everything off to details, it is only a million bucks we are talking. I can see

on the other one you said there were twelve type transactions, but for a million

dollars you ought to be able to tell me where you spent the million dollars, if

it is flow-through, how much of it was flow-through, if it was new monies, how

much of it was new monies.

MR. DILLON: There is a company called Bit Trap Studios, which was

$126,314.

MR. KELVIN PARSONS: That is new, right?

MR. DILLON: Yes.

Eastern Star Group, $450,000; and a company, their name is 6574262 Canada Inc

- their trading name is ICUS, to be precise - $500,000.

MR. KELVIN PARSONS: That is all new monies?

MR. DILLON: That would be the Business Attraction Fund money for this

year.

MR. KELVIN PARSONS: 2010-2011?

MR. DILLON: Yes.

MR. KELVIN PARSONS: There was no flow-through money in that $1,075,000?

That is all the new money you just read?

MR. DILLON: That is correct, yes.

MR. KELVIN PARSONS: I am just trying to keep separate what is

flow-through and what is new.

The provincial revenue referenced there in that

section is $1,227,500. Could

you explain what that is from?

MR. DALLEY: That would be loan recoveries from previous deals. Companies'

part of the agreements is that we pay their loans and that is funds we received

in repayment.

MR. KELVIN PARSONS: Who were they from?

MR. DALLEY: Two companies: one was Kodiak and the other one was Progress

Software.

MR. KELVIN PARSONS: What was the breakout on each of them? Kodiak is the

(inaudible)

MR. DALLEY: Kodiak was $1 million and Progress Software was $227,500.

MR. KELVIN PARSONS: Just dealing with the Terra Nova one, you just

referenced that they have repaid $1 million. That originally was $8 million,

right? They were lent or granted $8 million in 2008?

MR. DALLEY: Yes.

MR. KELVIN PARSONS: Sixty staff were laid off. At the time when the

former minister was questioned, he indicated that your department was going to

pursue a revised business plan and pursue the repayment of the $8 million. How

much in total has been repaid by Kodiak, of the $8 million they were given?

MR. DALLEY: Of the $8 million, there has been $1 million repaid. Under

the new negotiated agreement with Kodiak, it was $1 million.

MR. KELVIN PARSONS: So are they still in operation?

MR. DALLEY: Yes, they are.

MR. KELVIN PARSONS: How many employees do they have now?

MR. DALLEY: The last number I had was 106.

MR. KELVIN PARSONS: What are the plans for any more repayments, or have

you bartered off that $1 million was okay?

MR. DALLEY: No, there are still $7 million in loan outstanding that is

owing and new clauses have been built in, in discussions with Kodiak.

MR. KELVIN PARSONS: Any specifics that you can tell us about? Are they

supposed to maintain certain employment levels in order to not have to repay?

MR. DALLEY: I will refer to Ray for some detail.

MR. DILLON: Yes, there are employment levels they need to maintain in

order to not cause us to have the ability to call in the loan.

MR. KELVIN PARSONS: The minister indicated 106 employees there now. What

are they supposed to maintain?

MR. DILLON: What they have contractually agreed to is a minimum of

eighty-five to 110 full-time positions.

MR. KELVIN PARSONS: How often do you monitor that? How is the monitoring

done on it?

MR. DILLON: In the case of that one, it is a quarterly report that they

give us.

MR. KELVIN PARSONS: How do you verify if they did or did not? They give

you the report -

MR. DILLON: They would give us payroll records that would be auditable by

us. So, certainly if we see something that we do not agree with or we have

questions, we have the right, as part of our contractual arrangement, to go in

and do an audit of their books.

MR. KELVIN PARSONS: Does the Business Advisory Board still exist?

MR. DILLON: No, it does not. It was, as an entity, wound down, I think,

two years ago.

MR. KELVIN PARSONS: Okay. It was never announced that it was wound down,

though?

MR. DILLON: I am not familiar if it was. I cannot recall if it was, I do

not believe.

MR. KELVIN PARSONS: Is there any particular reason why you closed it out?

Because at the time, of course, and for a number of years after Premier Williams

created the Department of Business, the Business Advisory Board and the persons

who sat on it deemed it to be crucial to being a success in terms of attracting

people, successful business persons in this Province. Is there any reason why

you would shut it down?

MR. DILLON: I believe the thinking was that the Business Advisory Board

was pretty important to us early on as the department went from, I guess in

essence, one employee to the full complement that it has now, so it was very

important to get the guidance and oversight of the experience that the folks had

on that board. As we ramped up and developed the programs and put in place our

staff, it was not required to have the formality in the board. Certainly, many

people on that board we still deal with on a regular basis and, as a department,

seek advice, guidance and understanding of the marketplace. While it does not

exist formally, we still take great advice from many members of the board.

MR. KELVIN PARSONS: Progress Software: They received, I believe, $325,000

in an interest-free loan from government and nineteen months later, in July of

last year, they shut down. Have you recovered any of that money?

MR. DALLEY: Yes, the money that we have recovered is $227,500. As a

result of an agreement, a contribution agreement that we had with Progress

Software and the process that we generally follow of not putting the money out

the door upfront, as a result of that process, the agreements that were there in

place with Progress were certainly tied to job creation and tied to the number

in the level of jobs that they were able to create. Initially, they had some

non-refundable funding out of the $325,000, because they had met certain job

targets, but beyond that they were unsuccessful and, as a result of that, they

fully repaid their loan.

MR. KELVIN PARSONS: The $500,000 received by ICUS - I guess that is the

numbered company you just referenced in Mount Pearl - to manufacture the

environmentally friendly bio-pesticides and bio-fertilizers, what is the status

right now on that group? How many jobs have they created or expected to create?

MR. KHURANA: Harman Khurana.

The company has just completed the building itself and has ordered the

equipment, so it is not yet operational. The understanding is that in the next

few weeks they are going to be formally launching the business and that is when

they will be hiring people.

MR. KELVIN PARSONS: Has there been any further advance to ICUS, other

than that $500,000 that was announced?

MR. KHURANA: No, $500,000 was the total amount of funding approved, and

that was to help with the start-up cost, the building and equipment, and that is

where it stands right now.

MR. KELVIN PARSONS: Have they requested any more?

MR. KHURANA: No.

MR. KELVIN PARSONS: Compusult: They received $1 million for aerospace and

defence sector development in July of last year, what is the status on that

project? Have they started?

MR. KHURANA: Yes, they have. I do not have the employment number in front

of me. They were approved this year; it was only for the six months. The new

people who they hired, those are the salaries that we are funding. It is

actually a two-year project, so they are supposed to create approximately, I

believe, about thirty positions. So they have hired six to seven that I know of,

based on the last report we received. Those are the salaries we are funding.

That is part of the subsidies account that you saw. One of the transactions

within the twelve that Ray referred to was Compusult, and there is still a

commitment left for future years on that file.

MR. KELVIN PARSONS: Okay.

Have they approached government for any further funding?

MR. KHURANA: Not yet, no.

MR. KELVIN PARSONS: Not yet. Do you expect them to, that sounds like you

MR. KHURANA: Well, the existing funding has not been exhausted yet, they

only drawn down about $200,000 of the $1 million that been approved, so there is

still a long ways to go before considering any other potential applications.

MR. KELVIN PARSONS: Okay.

Bit Trap, that is the game developer

MR. KHURANA: Bit Trap, yes.

MR. KELVIN PARSONS: got approval for $300,000 in July last year. What

is the status on them?

MR. KHURANA: Again, they hired six out of the eight people, which they

hope to hire over a three-year period. They have only taken $125,000 out of the

$300,000 yet, but they have invested the full $1.6 million of inward investment

as part of the project.

MR. KELVIN PARSONS: I was under the impression they were supposed to hire

eighteen over four years.

MR. KHURANA: Over four year? Well, eighteen is over the four years; I

mentioned the three-year target. It is eight people over the first three years

and then the game launches and they move up to eighteen people. So, the first

three years is the development of the game. In the fourth year, they move to

eighteen.

MR. KELVIN PARSONS: They were supposed to put $1.6 million in. How much

of that has gone in did you say?

MR. KHURANA: The full amount is

MR. KELVIN PARSONS: They have made their investment.

MR. KHURANA: - in the business, yes.

MR. KELVIN PARSONS: Where have they set up shop?

MR. KHURANA: It is in St. John's. I do not have the exact location off

the top of my head, but they are in St. John's.

MR. KELVIN PARSONS: Okay.

On the Cahill Group of Companies, they got some funding to expand their pipe

fabrication I do believe, a half a million dollar or so, in St. John's, last

August. What is the status on that particular project?

MR. KHURANA: Again, they have also completed the equipment purchase and

they are presently working on the building expansions. It was an expansion

project which included buying specialized equipment to get into chrome metal

fabrication, as well as expanding the business to accommodate a paint shop. They

are still in the process of completing this work and they are drawing down the

funds. Not all the funds have been disbursed yet. As the new operation is

expanded and business starts operating, they will start hiring new people.

it equity investment or a straight loan?

MR. KHURANA: It was under the Oil and Gas Export Development Fund which,

by its nature, is a grant-based fund, so it is a non-repayable contribution.

MR. KELVIN PARSONS: Okay, so it was a grant. How many people did you say

they were supposed to -

MR. KHURANA: I will have to get back to you on that. I do not have the

exact targets in from of me.

MR. KELVIN PARSONS: Okay.

Have they requested any further funding?

MR. KHURANA: No.

MR. KELVIN PARSONS: Minister, on the famous red tape reduction strategy,

what is the current status?

MR. DALLEY: The current status is it is an ongoing process, as I am sure

you know. We had targets of 25 per cent and we were able to exceed that goal

with a reduction of 27 per cent. As we head into 2011, we are committed, as a

government, for a zero per cent increase in regulatory reform. As we also go

forward, we will strive now to certainly zero in and focus on more quality of

the existing regulations and certainly some of the flow of the new regulations.

MR. KELVIN PARSONS: Has the red tape reduction strategy addressed

internal red tape as well? For example, all the forms that get traded back and

forth between departments, you want something for a piece of equipment, OCIO or

whatever, there seems to be a lot of paper.

MR. DALLEY: I will get Ray to answer some of the technical piece.

MR. DILLON: No, the mandate of the regulatory reform branch within our

department, or red tape reduction as it was known, does not include internal red

tape; but what we have found is that the learning and the practices of that

exercise we are starting to try to transfer that over into internal departments

to let them, as a result of our learning, apply that. It is not a mandate; it is

not a deliverable of our department.

MR. KELVIN PARSONS: It would be fair to say right now we do not know, and

government itself, what the extent of red tape is. You have set targets, for

example, otherwise, but if we are not doing red tape reduction internally, I

guess we do not have any idea if we need to go there, what the situation is,

what the targets ought to be.

MR. DILLON: Our measure of red tape deals with any private citizen or

business that would come into government to do business with us. That is what we

monitor and manage well. With respect to employees within government who might

want to expense things or do things within their job that are just internally,

no, we do not, ourselves, measure that. It has not been part of our mandate.

MR. KELVIN PARSONS: If we are going to truly deal with red tape, wouldn't

that be a good initiative? I mean from just being an MHA and filing my claims

weekly, the red tape you have to go through, surely, government is one of the

biggest creators, internally, of red tape. Has there been any thought given to

that?

MR. DILLON: We get tapped on a regular basis for advice by departments.

Again, we do our best to instill the knowledge and experience we have to let

them know how they might want to approach reducing some of the red tape within

their individual departments.

MR. KELVIN PARSONS: On the Air Access Strategy, Minister, the Taking

Flight piece, $5 million apparently was allocated.

MR. DALLEY: Yes.

MR. KELVIN PARSONS: How much of that has been spent? Has it all been

spent?

MR. DALLEY: No, there has been some commitment on the Air Access

Strategy. It is not announced yet, but there is certainly interest in the fund.

Again, it is relatively new, we have had the director in place for a short time,

but there is certainly some interest in the fund.

MR. KELVIN PARSONS: That money was allocated to someone, the $5 million,

or it was just allocated to the fund?

MR. DALLEY: No, it is to a fund and we have $1.7 million allocated for

this year.

MR. KELVIN PARSONS: Oh, okay.

I guess it is tough to measure any concrete benefits yet at this point, this

early in the game?

MR. DALLEY: Well, it is certainly early in the game. We have some

positive feedback and we have some interest. We are certainly pleased to be at

that stage this early for sure.

MR. KELVIN PARSONS: They were supposed to encourage the development of

some new routes I believe?

MR. DALLEY: The purpose of the fund, as the government - and no doubt,

you travel as well. There are a number of issues that come up around the

Province, both from the travelling public and tourists but certainly from a

business perspective as well and the tremendous opportunities that we have in

the Province. It is part of our mandate to look for inward investment and be out

there in the global marketplace. The air access piece comes up quite often, so

the purpose of this is to kind of take all of that information and to be able to

support the airlines and support the airport authorities primarily in their

promotion of new airlines for airport authorities to promote their industry and

their product as well.

MR. KELVIN PARSONS: For example, Stephenville airport, the government has

put a substantial amount of dollars into Stephenville Airport Corporation over

the past several years. They have been on hard times, both from routes and

airlines serving it, certainly passenger airlines. I do not think they have

either one there now, or one flight a day or something.

Would that be the type of strategy that would be considered under this air

access, that you might give money to Stephenville Airport Corporation, for

example, to help them develop themselves?

MR. DALLEY: Any airport authority or corporation that wants to take

advantage of the fund, it would be through their initiative to promote

themselves, to promote what they offer. It is not a capital fund, it is used for

promotion.

MR. KELVIN PARSONS: That is what I mean. If Stephenville Airport

Corporation, for example, are looking for a pot of money to help them market

themselves as a good route, whether it be for commercial service or passenger

service, is that a pot that they can access?

MR. DALLEY: Yes, that is a pot of money they could certainly make

application to and have consideration, sure.

MR. KELVIN PARSONS: I believe as part of the announcement, you said there

would be a private industry advisory committee to be struck? Has it been struck

yet?

MR. DALLEY: It is in the process. We are well along in the process but it

certainly has not been publicly announced yet. Again, we are well along in the

process.

MR. KELVIN PARSONS: What kind of individuals do you anticipate being part

of that committee? What skill sets would you be looking for?

MR. DALLEY: Again, it is an advisory board that will basically represent

the industry. The make up of the board will ensure that it is well represented

from geographical regions. Particularly, airport authorities will be well

represented. The airlines will have some representation there - not specifically

though, right? No. It is a make up of people from the industry and a make up to

ensure that we have all areas of the Province well represented.

MR. KELVIN PARSONS: In terms of applications to either of the funds that

you have for assisting business and attracting business, how many applications

would you have had in that fiscal year 2010-2011?

MR. DALLEY: I guess we could put in a number. We have dozens there now. I

would say in the range of close to forty. It is hard to gauge and give you an

exact number because there are different stages and different processes. We have

a number of calls and a number of leads we are pursuing. Then there are some

pre-application stages, I guess, where they want to float some ideas with us,

and then there are actual applications. Right now, the actual application piece

is somewhere around forty.

MR. KELVIN PARSONS: I always ask these questions of all departments: Was

any polling done by your department in the last year?

MR. DALLEY: Polling?

MR. KELVIN PARSONS: Polling of any kind.

MR. DALLEY: None that I am aware of.

MR. KELVIN PARSONS: Temporary contracts of thirteen weeks or less, was

any hiring in your department in that year?

MR. DALLEY: No.

MR. KELVIN PARSONS: Of the applications you do get, how many are from

people outside? My understanding was the Department of Business was supposed to

take money to attract businesses from outside to the Province. Are they all from

outside?

MR. DALLEY: The mandate of the department is to attract investment from

anywhere outside the Province. That would include anywhere else in Canada and

any international investment as well. The majority will come from outside, but

also included in that would be the ability for local companies to partner with

outside companies. If there is a partnership and there is inward investment that

expands or creates new opportunities in the Province, then they would qualify

under our programs.

MR. KELVIN PARSONS: Okay. Like the Cahill fund, for example, that is

completely inside, right? The fabrication

MR. DILLON: Yes. In the case of GJ Cahill, that was a local company but

the program that they qualified under was the Oil and Gas Export Development

Fund, and that fund includes indigenous or local companies because it is an

export-based fund as opposed to the Business Attraction Fund, which is to bring

in inward investment.

MR. KELVIN PARSONS: Okay. I did a calculation as to what the department

has achieved in eight years and we had the total amounts budgeted over the

eight-year period was $104 million. Of that, we put $17 million out the door,

some of which were successful, some of which were not. I realize that nobody

expects when you are attracting business that you are going to get 100 per cent

success.

Aside from the issue of whether they were successful or not, that is another

issue, we have had some cases of progress, for example, going under and

whatever. We have only managed, as a department, to put 16 per cent of what we

have had budgeted out the door in eight years. Not a stellar success rate,

wouldn't you agree? If I received 16 per cent in a course I was doing, I know a

lot of people would be very displeased.

MR. DALLEY: The success of the department is measurable in many ways.

Before I talk a little bit about the fund and what we have out the door, I want

to recognize that through our marketing and brand developments, through our

regulatory reform, through our Air Access Strategy, these are all initiatives

that are well received around the Province. They are very positive, they

contribute to a positive business climate and we believe contribute to the

strong economy that we have in our Province right now.

Specifically to your question of the amount of money that has been out there,

right now we have something like twenty deals that we have been able to

complete. That is approximately $25 million. It has created well over 350 jobs

during the past five years.

Added to all that, while we look at the past eight years and we are able to

see where we have made investments, we have a good return on those investments,

jobs are created, we also realize and particularly take note of last year where

we have seen nine deals. There seems to be more interest, more opportunity

coming out of the recession. We anticipate there are some growth and some

opportunity. We are starting to see as well that we are having success in

helping to diversify the economy, particularly in aerospace and the defence

area. As a result of all that, we see that we are able to make a positive

contribution and feel as we go forward and the economy stays strong and the

global recession continues to go in the right direction, when we come out of

that we anticipate that we will be able to use more funds down the road.

MR. KELVIN PARSONS: As you probably know, Minister, the Department of

Business, in my case anyway, I have never been an advocate of its standing alone

department for the business. You are new to the department. What is it the

Department of Business and its staff does, and I am not suggesting that you

people are not trying to spend your full $25 million a year and attract

business, I am sure you are, but the merits itself of having a stand-alone

business department, twenty-eight employees, that could not be done in

combination with some other department. Even the fact that we have

MR. DALLEY: It is certainly a debatable point, as you have referenced;

you have asked the question a number of times. When we look at the Department of

Business and the focus and the identity that we have in the Province, we know in

our interaction with the business community and the focus that it gives, they

are pleased. Added to that within our department, we have kind of a distinct

responsibility and a mandate that really focuses on regulatory reform, market

and branding, again, air access. These are the kinds of things that help focus

us in improving the business climate in the Province. Again, specific to us,

that we are able to focus on attracting foreign direct investment to help focus

on diversifying the economy, have a staff who are very skilled and specialized

in not only attracting new business but also in terms of negotiation and

research where we are dealing with a lot of national and international

companies.

While there is a debate as to what could be put in one department versus

another, we are in a very competitive climate, a global, international

competitive climate. Our ability to focus on that, our ability to promote the

strengths and have the skill set to do that enables us to focus on inward

investment, bring new businesses into the Province. It is a total different ball

game than if we are dealing with just indigenous companies, local companies that

already exist.

MR. KELVIN PARSONS: Minister, I take it you would agree that when we talk

about diversifying our economy, we have pretty well a split economy here in the

Province when it comes to the Northeast Avalon area versus rural Newfoundland. I

would think part of the focus would be to diversify not only in the nature of

the types of businesses we have but diversify in the sense of trying to spread

it around the Province. Would you agree that that would be part of it, or are

you talking diversification and if it happens in St. John's, that is fine?

MR. DALLEY: No, without question. As you know, I represent a rural

district. I have lived in rural Newfoundland and Labrador all my life,

thoroughly enjoy it, and certainly well aware of the challenges. We also

recognize on the Northeast Avalon, the economy on the Northeast Avalon is

strong, it is a heavily populated area and a lot of our technology and so on is

based out of St. John's. Through our department, we are very keenly focused, and

certainly I, as minister, am very keenly focused on any opportunity that comes

to rural Newfoundland and Labrador. We recognize the significance of creating

jobs and opportunities out there. A number of our programs, for example the

Aerospace and Defence Fund have some incentives built in for rural Newfoundland

and Labrador where we add 25 per cent of the contribution, so we will do 75 per

cent of the program versus 50 per cent on the Northeast Avalon. That is geared

particularly in that area because we certainly see strengths around our Province

in terms of 5 Wing Goose Bay and Gander, particularly with aerospace and

defence.

We are keenly interested in rural Newfoundland and Labrador; we evaluate

those applications as they come in. I can give you an example of where, early in

my ministry I guess, we were able to make an announcement in rural Newfoundland

and Labrador, it happened to be in Twillingate, about Eastern Star Group. It is

a very rural community where a business opportunity came to create eighteen to

twenty-five jobs in a rural area, where we are going to have value added to the

shrimp industry and new technology being introduced to the Province. Again, that

is an example there of where our funds are available to the people across

Newfoundland and Labrador, whether it is urban or rural.

MR. KELVIN PARSONS: I have no further questions.

CHAIR: Are there any further questions?

If not, I will ask the Clerk if he could call the subheads, please.

CLERK: Subhead 1.1.01 to 2.1.03 inclusive.

CHAIR: Shall 1.1.01 to 2.1.03 carry?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Contra-minded?'

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: Contra-minded?

Carried.

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

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

without amendment?

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Contra-minded?

Carried.

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

CHAIR: Just before we conclude, I would like to thank all members of the

Committee for their participation tonight. Thank you, Minister, and your

officials, Mr. Parsons, the researcher, and other members of the Committee.

I would like to remind members that the Resource Committee we will be meeting

tomorrow morning in the House of Assembly to review the Estimates of the

Department of Innovation, Trade and Rural Development, the Newfoundland and

Labrador Research and Development Corporation, the Rural Secretariat, the Status

of Women, and Francophone Affairs.

With that, I would entertain a motion to adjourn, please.

MR. DAVIS: So moved.

CHAIR: Moved by Mr. Davis; seconded by Mr. Hunter.

All those in favour, aye'.

SOME HON. MEMBERS: Aye.

CHAIR: Contra-minded?

Carried.

Thank you, ladies and gentlemen.

On motion, the Committee adjourned.

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2011-05-17
Type	committee
Volume / chapter	committees_standingcommittees_resource_ga46_2011-05-17-resource-business.htm
Language	en
Format	html
Source	PROVINCIAL
Identifier	e8168e4c3116435a4907eac399167570c6d7f6cd

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