Resource Committee — Department of Industry, Trade and Rural Development to present their Estimates. We will begin by introducing the members of the Committee who are present. MS M. HODDER: Mary Hodder, MHA for Burin-Placentia West. MR. McLEAN: Ernie McLean, MHA for Lake Melville. MR. BUTLER: Roland Butler, MHA for Port de Grave. MADAM — 4 March 2010

2010-03-04

Newfoundland and Labrador — Committees

April 10, 2003 RESOURCE COMMITTEE

Pursuant to Standing Order 68, Mr. Ernie McLean, MHA for Lake Melville

replacing Mr. Kevin Aylward, MHA for St. George's-Stephenville East, for part

of the meeting.

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

MADAM CHAIR: Good morning everyone.

My name is Sandra Kelly, for the record. I will be chairing this Committee

until the arrival of Mr. Aylward. This morning we are very pleased to have with

us the Department of Industry, Trade and Rural Development to present their

Estimates. We will begin by introducing the members of the Committee who are

present.

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

MR. McLEAN: Ernie McLean, MHA for Lake Melville.

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

MADAM CHAIR: Now we will turn things over to the minister to introduce

her officials and to make some opening remarks.

MS FOOTE: Thank you, Madam Chair.

I am Judy Foote, the Minister of Industry, Trade and Rural Development. It is

a pleasure to be here before the Committee this morning. Before I begin, allow

me to introduce the officials who are with me from the department. To my

immediate left is John Scott, the Deputy Minister; to John's left is Ken

Curtis, the Manager of Financial Operations of the Central Administration

Division; next to Ken we have Bill Stirling, the Executive Director of the

Regional Economic Development. Immediately behind me is Terry Johnstone,

Executive Director of Technology Development and Corporate Planning; next to

Terry we have Donna Kelland, Assistant Deputy Minister of Trade and Investment

for Jobs and Growth; next to Donna we have Ted Lomond, Executive Director for

Federal-Provincial Agreements; next to Ted we have Phil McCarthy, Assistant

Deputy Minister for Strategic Industries and Regional Development; back in the

back benches is Larry Guinchard, Assistant Deputy Minister of Regional

Operations. So, we have a good support team here this morning to answer any

questions that you may have.

Let me start by saying that job and creation and economic growth remains key

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

growing. It has become much more diversified. Real Gross Domestic Product grew

by 8.2 per cent in 2002, marking the third time in five years that the Province

led the country in economic growth. Employment is increasing and, in fact,

reached an all-time historic high in 2002 for the second straight year.

Out-migration is slowing. The trend line for most economic indicators is indeed

moving in the right direction.

These gains are being realized throughout the Province across a number of

sectors and are not just confined to St. John's. In fact, approximately 60 per

cent of the 26,900 new jobs created since 1996 have been created outside the St.

John's area. All regions of the Province are benefitting from economic

progress, although not all at the same level yet. I think that is an important

word there, Madam Chair, not all at the same level yet.

Government has an aggressive plan for economic growth in job creation. It is

called the Renewal Strategy for Jobs and Growth and was released as a companion

document to the 2001 Budget in March, 2001. It is an action oriented agenda with

over 130 specific priorities for action. Fully two-thirds of the priorities for

action focus on the challenges confronting rural Newfoundland and Labrador

making it a strong rural agenda as well. Continued support for the

implementation of the Renewal Strategy for Jobs and Growth is a major part of

the 2003 Budget, as it was for the last two years.

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

$43.7 million in 2004 to lead its implementation to build on the strong

foundation on economic momentum we have established in recent years: new

measures to support small business growth, industrial research and development,

the attraction of new businesses to the Province, and regional economic

development form major thrusts of the budget for the department in 2003-2004.

On the small business front, government is making new investments to

encourage the growth of small business. Government is reducing the payroll tax

for small businesses, easing corporate income taxes on small businesses, opening

up new resources of capital for the private sector through various venture

capital tax incentives and reducing regulatory red tape faced by the business

community. These initiatives build on a number of small business development

measures implemented in recent years through the Renewal Strategy for Jobs and

Growth.

Government is investing $5 million to establish an industrial research and

innovation fund to leverage significant new research and development investments

from federal institutions and the private sector. The fund will help ensure the

Province remains competitive in the global economy and captures new economic

opportunities available to Newfoundland and Labrador.

Government will be moving to establish a new business attraction agency to

entice new investment, new companies and new industries to the Province as

strategic growth sectors of the economy. Government will contribute $1.5 million

annually to this particular initiative. An additional $250,000 will be provided

by Aliant through Network Newfoundland and Labrador and an additional $250,000

will be provided by Aliant to the recently announced Near Shore IT development

initiative. This will provide the new agency with $2 million annually.

Government is also making significant investments in regional economic

development and has budgeted approximately $9 million to implement a number of

industry and community initiatives that have been approved under the

Canada-Newfoundland and Labrador Comprehensive Agreement, known as CEDA.

We have also budgeted an additional $5.5 million for new economic development

initiatives as its contribution toward a proposed $20 million extension of CEDA

as a transitional measure to a new model of federal-provincial cooperation

through the creation of a Canada-Newfoundland and Labrador Economic Development

Board. Should the federal government decide not to partner with the Province in

extension of CEDA or the proposed Canada-Newfoundland and Labrador Economic

Development Board, the Province will use the $5.5 million provided in the Budget

to ensure that key and strategic economic development initiatives, implemented

by provincial departments and agencies through CEDA, continue in the future.

This will include initiatives such as aquaculture programming, tourism

marketing, youth entrepreneurship programs, and trade and export development

activities.

The 2003 Budget also included $350,000 to host another rural expo event in

2003, and we are anticipating that will be in Gander. Over 500 people attended

Rural Expo 2001, including 105 youth delegates, 260 conference participants and

120 exhibitors. There were over eighty nominations for the community economic

development awards and an estimated 2,500 people toured through the business

exhibition hall. Rural Expo 2001 was a huge success in showcasing and promoting

the economic potential and entrepreneurial accomplishments of rural Newfoundland

and Labrador.

The significant resources being allocated to the Department of Industry,

Trade and Rural Development reflect this government's strong commitment to an

action oriented, economic development agenda.

Thank you, Madam Chair.

MADAM CHAIR: Thank you very much. It was very comprehensive.

We will start now going through the headings. Mr. Byrne, do you want to

start?

MR. E. BYRNE: Yes, thank you.

Sorry we were a bit late this morning but we were tied up in a meeting. I

know you missed us.

MADAM CHAIR: We just started, actually, a few minutes ago.

MR. E. BYRNE: Yes, I know.

Good morning everybody. I guess before we go into the details of the Budget,

there are some larger issues that are facing the department. One dealing with

the difficulty in negotiations that are ongoing, I assume, between your

department, as the lead economic department of the Province, and the federal

government as it relates to an economic renewal agreement. I have met with a

number of the, in my capacity as a critic, zonal boards in the Province who -

and I know they have expressed that to the department as well - are extremely

concerned about what their future and ability will be to implement regional

economic plans without such an agreement.

Can you give some general comment to that first before we get into - what has

transpired? Where is the holdup? What seems to have happened? I understand there

are some huge divisions and disagreement between the federal agencies and the

provincial agencies in terms of where this should go, and I will leave it at

that for the moment.

MS FOOTE: Let me start by saying that what has happened with the decision

taken by the federal government doesn't only impact on Newfoundland and

Labrador. In fact, it was a unilateral decision taken by the federal government

to get out of all cost-shared agreements throughout the country.

Having said that, when we made representation to the federal government to

see CEDA continue or, in fact, to go down a different path of the

Canada-Newfoundland and Labrador Economic Development Board, the response that

came back from Minister Byrne, his initial response, was that no, the federal

government is not interested in doing anything anymore on a cost-shared basis,

that, in fact, they had taken the decision that they were going to go down their

own path of funding economic development initiatives and not doing it on a

cooperative basis with any government.

Now, we have not heard back from Allan Rock, and, of course, it would have

been to Minister Rock that I would have written to ask him to consider this new

approach, in light of the fact that there were not going to be any further

cost-shared agreements. We have not heard back, to date, from him. I am hoping

to get a meeting with him. I had hoped to get one next week, but he is away, he

is out of the country, for a couple of weeks over Easter.

Having said that, where the Regional Economic Development Boards are today,

they are in a better position than most other groups, because we were able to

negotiate a three-year program with the federal government for them, an

extension to their funding, so they are okay. Now, we tried to do the same thing

with the federal government through ACOA for the industry associations, and they

wouldn't bite. They said: No, we want to do them on a one by one basis which,

of course, caused concern for the industry associations.

I am told that ACOA has been looking very favourably on groups that are

coming to them looking for funding, even though some of them have gone looking

to them for 100 per cent funding, bearing in mind our $5.5 million which will be

our 30 per cent of the $20 million that we have put in the budget will not cover

off 100 per cent of all of the initiatives that were traditionally covered. It

just cannot happen. It won't even come close.

I am pleased to report that, I guess, in the last little while the federal

government, ACOA, has seemed to be much more considerate of the fact that, look,

this means that a lot of initiatives won't get funded if, in fact, we don't

come to the table; maybe 100 per cent for some of them, and maybe higher than

the traditional 80-20 or the 70-30.

I have been told by Nati, for instance, that ACOA has approved, through the

SCIF program, some programs 100 per cent, so I am pleased about that. When you

bear in mind that, in fact, this Pan-Atlantic initiative now, that the feds have

in place, they have $700 million. They have more money now than they ever had to

fund these types of initiatives. The problem we have is that under their

guidelines ACOA cannot fund anything of a provincial nature, anything that would

come out of a provincial government department. For instance, tourism marketing

was funded on a joint basis but now we are going to have to fund that 100 per

cent. That is $1 million that is going to have to come from that $5.5 million.

The Fisheries Diversification Program, $500,000 will have to come out of that as

well. Those are initiatives that are considered to be provincial. So ACOA cannot

even look at those types of initiatives. Having said that, in our discussions

with them they recognize that. What they are doing now is looking at some of

those other initiatives and looking at funding them at much higher levels. We

are hoping that with the amount of money we have we will be able to come to the

table to help some, but not all, hoping that the feds will pick up the

additional costs.

MR. E. BYRNE: In terms of the new model, I guess is the best way to put

it, that the federal government has put in place with a pot of money - and you

have indicated that it is $700 million. What strategy does the department have

to access, or to aggressively access most of that? Does it require changing

certain models or structures within government so that we are not perceived as

funding that would be applied for, the feds would not be able to see it as

normally coming from a line department of government? In terms of where this is

a new initiative, obviously on the federal government, how have we responded, or

the department responded, to a lead Economic Development Agency in terms of a

strategy in which, not only the government, but stakeholders and groups,

associations, et cetera, have some assistance in trying to make their way

through those criteria to access that funding?

MS FOOTE: Well, that is part of the problem that we have. Now what is

going to happen is that you have the federal government with their pot of money

and we have our pot of money, which is what we have been saying to the federal

government. This is not in the best interest of the Province. We have done some

really good work over the past thirty years through cost-shared agreements by

sitting down together and determining what the provincial priorities are. The

problem we have now is that with the federal funding - and only the federal

government taking in the proposals and improving them in their entirety, then

they are determining what provincial priorities are. They may not necessarily be

the priorities for this government or some of the agencies out there.

MR. E. BYRNE: Right.

MS FOOTE: We are kind of in a bind in that respect, but we have been

sitting down with the officials of ACOA, whom I have to say have been very

cooperative, understanding that this does pose a problem for us.

I know I heard Minister Byrne say that in the past there have been some

issues with respect to disagreements at the levels between the federal and

provincial officials. To the best of my knowledge that happens at any time, but

they were always able to sort themselves out and get through the process and

fund the particular initiative. It is an issue for us, I will say that to you.

They have their own guidelines. They apply their own guidelines. Anything of a

provincial nature they will not look at. We cannot go to them with the $1

million we need, the additional $1 million for tourism, and say: You should fund

this; because they just cannot fund it under their guidelines. It is not the

same as a cost-shared agreement.

MR. E. BYRNE: You have indicated as well that this is just not a

Newfoundland and Labrador issue, that it is a nationwide issue. Have you had

discussions - I would assume you have - with your counterparts in all the other

provinces in terms of a national provincial strategy in trying to come to grips

with this? I can imagine that many other provinces are in like situations and

probably many debates around the country are occurring just like this one now in

many rooms and maybe even in legislatures. What sort of strategy has the

department, yourself as minister, either been part of or proposed on a

national-provincial level to the federal government to try to get them to move

in another direction?

MS FOOTE: Up to this point in time, when I came into the department the

advice I had received was that in fact this had been discussed ad nauseam with

counterparts across the country. So Minister Parsons has had discussions with

his counterparts when he was acting minister. The deputy minister has been

speaking with other deputy ministers. They have been speaking with the federal

government, with Industry Canada. They have been speaking with ACOA.

The Premier, in fact, along with the other Atlantic Premiers - because of

course the impact on Atlantic Canada is significant, more so than it would be on

other provinces. Particularly if you look at some of the western provinces or

Northern Ontario. Having said that, that all happened prior to March 31, which

is when the agreement finished. There was a lot of attempt made to try and get

the federal government to rethink their position on this. Clearly, they were not

prepared to do that. Discussions that I had with Gerry Byrne, since coming into

the department as well, clearly indicates that this is a Cabinet decision taken

by the federal government. They are not going to revisit it. So then we thought:

well, how do we get them to look at a different model? If they do not want to do

cost-shared agreements anymore, how can we look at a different model? This is

when we went forward with the Canada-Newfoundland and Labrador Economic

Development Board, thinking: Let's sit down; let's look at a different

approach. One of the issues we have all the time with groups and with

organizations -

MR. E. BYRNE: That has been proposed for some time. Former Premier Wells

proposed that, I believe in 1993-1994, if my memory serves me correctly.

MS FOOTE: Yes. At this time now, of course, it is more important because

now we do not have anything. I guess one of the basis on which we are suggesting

that we could do this is to try and get away from a lot of the duplication and

overlap that exists as well, when you have two economic development entities. So

that was part of the suggestion and part of the recommendation.

I have not heard back, as I said, from Minister Rock. So I don't even know

what his thoughts are on it. I will be pursuing it with him. I had hoped to meet

with him next week - not possible apparently, but it is something we will

pursue. Having said that, we are where we are today without any cost-shared

agreements, and with our $5.5 million, knowing that the feds have $700 million

that is pan-Atlantic to spend. I must say, the federal officials have been very

good. They have consulted. They do touch bases with us to find out where we are

with this.

Part of the problem we have, of course, is that groups will go to them and

they will approve a project. They will do the analysis based on their

perspective on what they think should happen. They will approve a project for 70

per cent and say: Go to the government and get the remaining money. We have had

no input. We have had no analysis. We do not know if that is relevant or if it

is important for that particular region. So that is where we are with it.

MR. E. BYRNE: What is some of the criteria? Is there new criteria, from

the federal government's point of view, to access this $700 million pot for

Atlantic Canada any different than what already exists?

MS FOOTE: No, it is the same criteria. It is a decision that was taken by

the federal government for whatever reason. I ventured to say - in the media

interview - that maybe it was because they felt they were not getting enough

credit for the money that they were putting into the system, but of course they

deny that.

MR. E. BYRNE: Is there any - maybe no official explanation on what has

occurred. I know you cannot - I am not trying to ask a speculative question or

hypothetical question. In just your own sense of it I guess, having been in the

department before, or a version of it, on why the federal government has moved

in this direction. Because it is a complete about-face, as everybody is aware,

in terms of federal-provincial relations across the country.

MS FOOTE: You are asking me a question that I do not have an answer to.

In fact, David Cochrane asked me the same question. I said: I have no idea. He

mentioned: Do you think it is because the federal government thought they were

not getting enough credit for the money that they were actually spending?

Because the reality is, they put more money into it than a province. (Inaudible)

would do when you consider it is 80-20 or 70-30 on any of those agreements. And

I said: I have no idea. It is odd. Why would they not go down the path of

continuing cost-shared agreements? Because everyone is a winner when you do

that. I even said: maybe it is because they were not getting enough credit; but

in this Province we never did anything without making sure they were at the

table. Contrary to what happens in Ontario, Alberta and B.C., where they do not

want to give the feds any credit for anything no matter who the stripe is, here

I am saying: I do care how much credit they give as long as you give me the

money.

MR. E. BYRNE: Exactly. Take it all if you want. It is very

narrowed-minded, from that point of view.

MS FOOTE: That's right.

MR. E. BYRNE: I guess on another issue, another topic altogether, in

terms of the Immigration Investment Fund. What role does the department play in

that fund?

MS FOOTE: The Provincial Nominee Program?

MR. E. BYRNE: The Immigration Investment Fund.

MS FOOTE: Is that the one that is handled through Finance?

MR. E. BYRNE: I know Works, Services and Transportation in the past, and

Finance has played a role. Obviously, as the lead economic department in

government there would have to be some involvement, whether in an advisory

capacity or committee capacity, in terms of trying to advance proposals maybe or

suggestions coming from people within the industry where they feel they could

take advantage of this program and leverage it to get investors into the

Province.

MS FOOTE: Yes, the Provincial Nominee Program?

MR. E. BYRNE: Yes.

MS FOOTE: We had 300 units in that program. In fact, when I was in the

department before that was one of the initiatives we worked on. We have used up

all 300 units. We are now at a point where we have another proposal that we want

to take to Minister Coderre. We think it is one they will be supportive of, but

of course we do not know that until we go. We are going to look for additional

units.

MR. E. BYRNE: This one dealing with agriculture?

MS FOOTE: Yes, that's right. I met with the dairy farmers'

association, and they make a very valid point. There is a great opportunity

there. So, we have a proposal. I am waiting to get a meeting with Denis Coderre,

just coming into the department obviously. But the proposal that we have now, we

have reworked. There were some issues with the initial proposal, but all 300

units have been taken up. So we are going to look for additional units.

Now PEI had 1,000 units in their agreement, so we are going to look for

another 700 units, bearing the time frame - I guess it is the end of March,

2004?

WITNESS: December, 2004.

MS FOOTE: December, 2004. That does not give you a lot of time to use up

700 units, but we are going to go for them anyway.

MR. E. BYRNE: Well, if you do not use them you lose them. You would be in

the same boat if you did not go for it, type of thing.

MS FOOTE: You are right in terms of the agricultural, there is a golden

opportunity there through this program if we can get the federal government to

agree with it. We think we have ironed out where the problems were in the past

with this new proposal.

MR. E. BYRNE: Whatever problems there were, were not necessarily just

exclusive to our Province, but other provinces as well.

MS FOOTE: That is right. Absolutely.

MR. E. BYRNE: In terms of - you talked about it, I guess, inadvertently

in agriculture. What role does the department play in terms of different sectors

of the economy - we will talk about agriculture for the moment - in terms of

long-term strategic planning, say in that industry? A huge industry, worth about

$550 million, and probably one of the industries that has the opportunity for

significant growth. What sort of involvement does the department have with the

department of forestry and agriculture in terms of a long-term strategic plan

for that industry in trying to advance its causes, assist, develop, market and

aggressively pursue the opportunities that that industry presents to us?

MS FOOTE: Just let me speak, and maybe John or someone else can speak to

it after. One of the things that I am doing, and I think it happened before I

went there too, of course, but it is to meet more regularly with industry

associations and with the dairy farmers out there to, again, find out what their

issues are and have an ongoing discussion with them in how best to address

those.

In terms of the relationship that has been built up and how we work with

forestry, I am not sure. John, did you want to - is that an ongoing -

MR. SCOTT: Perhaps I can speak to that for a couple of moments.

First of all, the Department of Forest Resources and Agrifoods has primary

responsibility for the primary end of the industry and has access to a number of

federal-provincial funding mechanisms outside of ACOA. In our Renewal Strategy

for Jobs and Growth, agrifoods is one of the ten sectors identified as having

priority for growth and there was some strategic long-term direction articulated

in that strategy.

The Department of Industry's role is from a business development point of

view and value-added point of view. So secondary processing opportunities in

looking at the business side of the business, either from a business financing

side or a marketing side. There is strong collaboration between ourselves, the

Department of Forestry and Agrifoods and the industry association, to identify

where those opportunities are. As well, we take a very keen role with the

Regional Economic Development Boards in terms of regional opportunities and

priorities for agrifoods, and where the boards have identified that in a

consultative manner through their own strategic planning process we partner with

them and facilitate the implementation of those priorities where all

stakeholders feel those are worthy of pursuit. We would engage ACOA, for

example, in a facilitative role, or the Farm Credit Corporation, or the Business

Development Bank of Canada if it is a business financing issue. If it is a

production issue, on a technological basis, we would engage agrifoods - a branch

in Forestry and Agrifoods. If it is something that our own programs lend support

to, then we would bring that to the table. In the past we have had the benefit

of our cost-shared agreements to leverage money as well, so we have played that

type of facilitative co-ordinating role. If the framework is jobs and growth,

the framework is the Department of Agrifoods primary processing policy and we

pursue it from there.

MR. E. BYRNE: Anything that may arise from time to time that fits within

that, or even outside of it, you need to have a look at it and do it due

diligence, I suppose, and pursue it from there.

MR. SCOTT: Absolutely.

MR. E. BYRNE: I don't mean to be taking up time. I can stop if anyone

else has any questions.

CHAIR (Aylward): The Chairman will allow you to carry on.

MR. E. BYRNE: Thank you.

CHAIR: The new Chair, who just got back here.

I am Kevin Aylward, the Chairman, by the way. I will just let you know who I

am.

MR. E. BYRNE: Thank you very much.

CHAIR: Mr. Byrne.

MR. E. BYRNE: It has been a long time since the days of (inaudible), Mr.

Chairman. I met you there one time before, many years ago, and Mr. Lomond as

well.

Again, generally if I could just pursue some of the larger concepts of the

department and deal with the IT sector and recently, I guess, some of the

challenges that the government has faced with respect to the agreement with

xwave. I wonder if you can just speak to that generally for a moment. I have

some specific questions dealing with that contract. I am fairly aware of the

details of the contract as it was released publicly by yourself. Where do you

see that agreement from that level first of all? There have been some, I guess,

questions raised to myself and others, I suppose, but I will speak for myself,

in terms of the strategy that was launched with xwave in buying out - letting

Aliant buy out xwave in 1994, renewing the agreement, that in some ways we have

lost our ability to really grow an IT industry and we have put all of our eggs

in one basket in combining with a private company to develop and grow the IT

industry in the Province. How do you answer that concern that is out there and,

specifically then, how is the contract with xwave? How do you see it going?

MS FOOTE: I am aware of the concern because obviously NATI expresses that

concern from time to time. The decision that was taken by the government to go

that route again ensured a major player in the IT industry in this Province and

made it possible for that particular company to be able to attract business to

Newfoundland and Labrador. Part of the agreement, of course, is that they must

support, they must make employment opportunities available to the local

industry.

One of the issues that came up with xwave, that we had to visit, as you would

know, was the whole issue around employment and that they had not met their

employment objectives. It was necessary for them to do that to be compliant with

the agreement. We met with xwave and with Aliant and had the discussion that it

was necessary for them to be compliant; otherwise, we would impose the penalties

that were there. I have to say that they were co-operative. They came to the

table and recognized that it is about growing the local industry.

You find a difference of opinion between xwave and Aliant verses some of the

other players in NATI. I keep telling Aliant that you are a member of NATI and I

keep telling NATI that Aliant is a member of NATI. You are a family; try to get

along. We all have disagreements, but -

MR. E. BYRNE: They are equivalent to a 1,000 pound gorilla in a twelve

foot aluminum boat when it comes to the industry, though.

MS FOOTE: Having said that, the agreement is in place and it is in place

for as long as Aliant owns xwave. The question is, of course, whether or not

they are going to sell it. If they are, then we will have to look at where we

are with respect to government work and whether or not we continue with that

agreement - the Benefits Agreement - and it depends on who buys it. Of course,

we will engage NATI in that consultation process to see -

MR. E. BYRNE: Have we gotten value for the privatization of xwave? It is

a service that government will require in perpetuity. I know in 1994, when

debates and discussions took place in the House here, people generally were in

support of it. There were a number of concerns, but you are only trying to read,

I guess, the tea leaves of the future as it relates to the IT industry at that

time because there was no experience; but, based upon the last nine years that

we have moved down that road has it, on balance, worked in your view? Have we

gotten value for our money, from government's point of view?

MS FOOTE: Well, if you look at the number of employees at xwave, I think

they have 450?

WITNESS: Five fifty.

MS FOOTE: Five hundred and fifty. Only 120 or so of those are actually

doing government work, so clearly, because they had a government contract and

were able to grow the industry, they were able to attract other business, so

very little of the business they do is actually government work.

Having said that, according to the note that I have here, xwave brought in

more than $48 million in new IT business to the Province since 1994. They have

contracted out more than $20 million in IT work to local IT companies, and they

have invested upwards of $6 million to bring the Atlantic data processing centre

to Newfoundland and Labrador.

MR. E. BYRNE: So, about $2 million a year they have given to local

companies?

MS FOOTE: Yes. There is another $2 million, too, from government that is

on the street, because when we renewed the agreement with xwave, the benefits

agreement, we agreed, based on NATI's recommendation as well, to put $2

million of government work on the street, so really they have $4 million worth

of (inaudible).

MR. E. BYRNE: In terms of the announcement that you had recently, there

were thirty-three jobs, I think - is that the number you used?

MS FOOTE: Yes.

MR. E. BYRNE: I have a reason for asking. I am not trying to, you know,

set traps or anything for you this morning. A couple of days after that, I

received an e-mail from a former xwave employee who was working in the IT sector

- I do not know if you have received this -

MS FOOTE: I have the same e-mail.

MR. E. BYRNE: - about thirty-three jobs. You know, I found it a pretty

cute story. Is there any merit to that? You received it. There were thirty-three

jobs. I will just give it to you in context.

The day after, or around the same time, within a day or so, give or take a

day, of the announcement that you had reached some arrangement and Aliant were

going to live up to the spirt and create an extra thirty-three jobs, et cetera,

apparently xwave laid off thirty-three employees, ten in the Province of Nova

Scotia and twenty-three in New Brunswick, the exact number they were going to

create here in the Province - this is what the e-mail alleged - and then offered

those same employees, all of those employees they had declared redundant in New

Brunswick and Nova Scotia, the opportunity to relocate to Newfoundland and

Labrador for jobs there. Thus the argument being: Were three really thirty-three

new jobs created? Probably not, but there were probably thirty-three new people

moving to the Province.

MS FOOTE: Here there were thirty-three new jobs created.

MR. E. BYRNE: Yes, there were thirty-three new positions coming to the

Province.

MS FOOTE: That is my only interest.

MR. E. BYRNE: And so it should be. It was just a question on a point of

interest. Certainly, I didn't want to pursue that. I mean, thirty-three jobs

are thirty-three jobs, as simple as that.

MS FOOTE: Absolutely. I can't worry about New Brunswick.

MR. E. BYRNE: It was an interesting e-mail.

MS FOOTE: I know. I got the same e-mail.

MR. E. BYRNE: Okay.

In terms of the future for the IT industry, some of the things that Ireland

has been able to do in terms of the government itself, they are in a much

stronger position in joining the European Union and the buckets of cash that

came with that.

MS FOOTE: And Brussels leaving the money there for them.

MR. E. BYRNE: Yes. Unreal!

Some of the things they did, in terms of wiring Ireland, basically,

themselves, and letting IT companies buy into that, the private sector wouldn't

have done it.

How do you see the future, given what we have to work with from our own

financial resources, from Broadband technology to, I guess, putting more and

better infrastructure in place? Where do you see our Province going with respect

to that?

MS FOOTE: Speaking on Broadband, because that is certainly something

that, as you know, we announced in the Budget, the $5 million for Broadband,

that came about as a result of an opportunity through the capital for the

infrastructure program, for us to access $5 million there, match that with $5

million from the Province and look to the private sector for an additional $5

million. It is going to cost a lot of money to do what needs to be done in this

Province. We don't have the money to do it and the private sector is not going

to come to the table unless we are able to come to the table with matching

funds.

I think we are making a good start with $15 million for Broadband. That, as

you know, we announced in the Budget. That is a start for us and that will be

through our Centre for Distance Learning Innovation. That centre is out of the

Department of Education, but of course works very closely with this department

because of the IT sector in the IT industry. So that will be done through a

centre, but it will not be just schools that will be able to access it.

Hopefully, it will be also - when it is up and available - available to business

and to outfitters. So it will benefit the tourism industry -

MR. E. BYRNE: Everybody.

MS FOOTE: Everybody.

MR. E. BYRNE: Yes. I am going to pursue that in a few minutes because I

just have to drop out to our caucus room for about ten minutes. I will just

(inaudible).

MS FOOTE: Can I go out with you?

MR. E. BYRNE: The coffee is not very good out there. Anyway, I will be

back in a few minutes. I will leave it to one of the other members.

CHAIR: Thank you, Mr. Byrne.

Are there other members interested in pursuing the minister?

Mr. Taylor.

MR. TAYLOR: Yes, I will ask a few questions.

Mr. Chairman, we hear lots of talk from Industry, Trade and Rural

Development, and from various departments I guess, about economic

diversification, economic development, rural economic development. Most of the

time I guess there is - or rarely, I guess, is probably the better way of

putting it. Rarely do I hear much in the way of acknowledgment with the

potential that we have in our, I will say, marine and fisheries related

industries and the potential there for - I do not mean fish. I hate to bring up

fish because whenever you bring up fisheries with the industry people they think

you are talking about processing fish.

As you are aware, I am sure, over the past couple of years the makers of

Netmind have made the first sale of a piece of acoustic technology from the

Province of Newfoundland and Labrador for fisheries equipment to Iceland. I

think it was a remarkable accomplishment on their part. I wonder how much, from

your department's perspective, you have evaluated and planned for movement in

that direction to help encourage that type of development here in the Province.

Every time we talk, as I said, about fish and marine related industries we talk

about pumping oil and filleting fish. There is a hole, in my view anyway - maybe

I could stand corrected - but I would think that there is probably a fair amount

of potential for growth in this service sector for that industry, especially

given the educational facilities that we have here which we could use as

resource material to help partner with the private sector or whatever, on those

fronts.

I do not know if you understand my question. The questions is: Has your

department looked at the opportunities there? Do you have anything in the way of

a strategic plan to help move us further down that road?

MS FOOTE: Excuse me if I start to cough. The joke, when we started, was

that I hope I do not have SARS. I am here with a headache, a cough and a

temperature. I should have given out masks before I started.

CHAIR: We did Health last night, Madam Minister, so that is okay.

MS FOOTE: Trevor, with respect to the fishing industry. We do have the

Fisheries Loan Board, as you know, which is in place for harvesters. That is one

component. There was a $10 million diversification fund through FRAM/ED -

through CEDA. No, through FRAM/ED, I am sorry. That was $10 million.

The fishing industry is treated, I guess, like we treat all sectors. If there

is an opportunity there for growth, if someone has a proposal, if someone is

developing a new product - and you are right, it is happening throughout the

Province. There are some wonderful initiatives happening. With our regional

offices around the Province and our development officers - and some of those are

sector oriented - it is their job to work with different sectors to help grow

those sectors, and the fishery would be one of them. There is a concentrated

effort on the fishery, as there are in other sectors as well. We have people who

are assigned to do just that, people who can work with different sectors to

bring them along. Then, of course, working through the regional offices - they

would work through the regional office into our office in St. John's to access

any type of funding that they might want. But, of course, they would have to go

through the same type of analysis that would be done for any sector.

MR. TAYLOR: Yes. In my view, I think in many cases people do not realize

the opportunity that is there. For example, last fall I ran out to the Baie

Verte Peninsula for a day with Paul Shelley for a little visit. While we were

there we ran down to La Scie and dropped into a place at the back of a hardware

store there, Cape John Industries Ltd. I do not know if you have been there or

not but a couple of young fellows, basically, started making crab pots for the

local fishing industry. This past year they have exported, I am not sure if it

10,000 or 20,000 crab pots to Greenland. It is just a little thing and I bring

it up in the context that I don't think people understand that we don't

necessarily have to be developing this technology. A crab pot is not a very

advanced piece of technology, but in the technology industry there is a world

out there that needs a lot of equipment and we have the ability, with our best

kept secret up there, the Marine Institute, to generate the people with the

skills to do that. Again, I believe it would be a wise investment on the part of

government to look at that sector of the economy and to develop a plan to move

ahead there in that respect.

I will just give you an example. I have brought it up a dozen times to

business people and to people in economic development on the Northern Peninsula.

We have roughly 100 shrimp trawlers based in that area, on the east side and the

west side, and every net at somewhere between $7,000 and $15,000 a pop comes

over Bonne Bay hills, for example, and a significant number of them actually

come from off the Island. Everything that is related to it comes from outside

the Province and probably 95 per cent of it comes from outside the country.

Now, I know you can't build a factory in Newfoundland or Labrador to make

shrimp twine, for example, for our little industry, but there are things that we

can do there. Again, I have said to those people in economic development offices

and in the local business community: Why don't you try and do some of it here?

You know, there is potential for five or six or eight or ten jobs constructing

this type of equipment for the local industry, the provincial industry, and

wherever, but I don't think they recognize that. Even though you tell them,

even though you show them, there are 100 nets with probably gross sales in

excess of a quarter of a million dollars, people still don't realize that

there is an opportunity there. I think maybe the department could help nurture

that knowledge, I suppose.

MS FOOTE: You certainly don't have to educate me with the fishery,

because I am from Grand Bank which is a historic fishing community. In my

district, I guess, if you look at the majority of employment, it is certainly in

the fishery.

You speak about the crab pots: Well, in Grand Bank there is a gentleman who

is making lobster pots and selling them to St. Pierre and Miquelon and to other

places, of course. He is recognizing an opportunity there. You are right, it is

not just about some IT product. Things like crab pots or lobster pots, even if

they just employ two people, it is a small business in rural Newfoundland and

Labrador. It doesn't have to be a big employer for it to be valuable.

You mentioned possibilities and whether or not people recognize them. There

is an opportunity there now for someone to be making bags for fishermen to ship

their shrimp or clams or whatever in. We had a little industry started up in

Grand Bank employing three or four people doing just that, but it went under.

Why did it go under? The market was there for the bags. In fact, we had someone

call down to my district office to find out if it was still in place because

this man wanted to buy bags and he couldn't get them anywhere in Newfoundland

and Labrador. He was wondering how they were made, if they had the sewing

machines and those types of things. Why do some things work and some don't? I

don't know.

In terms of a focus on the fishery through our Renewal Strategy for Jobs and

Growth, it became very evident from the consultation process that there was, in

fact, an understanding and appreciation for the opportunities in the fishing

industry as we went around the Province. In fact, if you look at the Renewal

Strategy for Jobs and Growth there is a very good focus there on the fishery. It

is not that it is not part of what we are thinking of as a department of

government. All of our regional offices - and you know we have them around the

Province - are in tune with that report, in recognizing that this is a strategy

that encompasses all sectors including the fishery. There is a recognition among

the officials within the department of the value of the fishery to the Province

of Newfoundland and Labrador. When you consider the $10 million that was there

for a diversification fund, then clearly there was emphasis put on the fishery.

MR. TAYLOR: I understand that, but again I wish I hadn't brought up the

fishery, I wish I had just stuck to marine industry because I see a greater

potential, and that is why I started off talking about Netmind and the export of

acoustic technology to Iceland. Unfortunately, whenever we get into - as we are

doing right now - the debate about opportunities related to the fishery, we go

back to some form of processing, or secondary processing, or something that will

serve an industry need here in the Province. It is hard enough to get people to

see that, as I just indicated and as you indicated and understand, I am sure.

There is a piece of GPS technology that you screw on the dash in a sixty-five

footer in Newfoundland, that is the same piece of technology that goes aboard

the Maersk Chancellor that is tied up on the waterfront there now. I do

not know that our IT industry, our graduates from the Marine Institute, our

graduates from Memorial University or, you know, our business community out

there, really recognize the export potential of this part of what we are about,

of our industry. I do not see where there is much that we can do, and I

understand the bag issue. When the shrimp fishery started up, we talked about

this, and I was a long ways from politics then. I was gone back aboard the boat

and I was tangled up with St. Anthony Basin Resources, and we looked for

opportunities. Somebody suggested that, well, maybe we could start up a little

factory making bags, so we did a little bit of investigation on it. We were

going to pay our people $10 and $12 an hour to make bags, and somebody in India,

or wherever it is, is paying them $10 and $12 a month or something. I mean, we

just cannot compete. What we can compete on, I think, what we would have maybe a

better chance at, I am asking you if your department has, as part of its

mandate, investigated the export potential for the IT sector of our marine

industry, I guess.

MS FOOTE: Well, certainly through our strategic business initiative we

are out there all the time looking at opportunities and identifying

opportunities and seeing what the need is, not just in the country but

internationally for different products, and looking at what is available or what

can be done in Newfoundland and Labrador.

Don't forget, we have the Canadian Centre for Fisheries and also the first

fisheries innovation, and we also have the Canadian Centre for Marine

Communications, so it is not that there is a shortage of places in which to

pursue and follow through on opportunities of the type that you are speaking.

There are lots of entities out there that, if someone has an idea, they could

certainly follow through on. As well, from our perspective, from the department's

perspective, we look at every opportunity, and certainly when we go out of the

Province looking at what is happening in other areas, not only of the country

but in other countries around the world, to find out what would be relevant for

Newfoundland and Labrador and what could be done here, you are right, it has to

be something that is applicable worldwide, or that is applicable outside of

Newfoundland and Labrador, for it to be profitable in some cases, if you are

talking the kinds of things that we are talking now.

MR. TAYLOR: Other than a person employed to install the equipment,

outside of that, I do not think we can ever have a business or an industry that

is sustainable based on 500 sixty-five footers. It has to be a bit more of a

North American or global view or whatever if we are going to develop that part

of it.

MS FOOTE: Absolutely.

It is like the light that was made for life jackets. If you were making that

just for Newfoundland and Labrador, it would not have been a success. The point

is, that is used everywhere now in the world. It is the same thing. When you are

talking technology, you have to able to talk about larger than just Newfoundland

and Labrador.

MR. TAYLOR: On Regional Economic Development, just a quick question. I

suppose it is probably able to be found there in the Departmental Salary

guidelines. How many people does the department have employed as Regional

Economic Development Officer type, whether it is directly employed or - I do not

know if you directly employ all of them out there, because I know there are a

lot of them. How many are employed directly by the department, if that is a fair

question?

MR. SCOTT: We have approximately 200 people in the department directly.

In the corporate office, which includes the Marystown branch, the Portfolio

Management Division, there are approximately just over 100 there. The balance of

our positions are what we would call field based, which would be in our regional

offices around the Province and our zonal offices. They reach from Postville

into St. John's itself. The department is split about 50-50, and the corporate

office serves those regional offices.

The Regional Economic Development Boards themselves are funded through the

federal and provincial governments still. They are in twenty economic zones. On

average they would have four or five staff funded through the federal-provincial

arrangements, on top of our own departmental staff.

MR. TAYLOR: That approximate 100 figure would be in addition to the 200?

MR. SCOTT: No, 200 all told for the department. It splits about 50-50

between corporate functions, which are primarily in St. John's but also partly

in Marystown. Then the balance would be through our regional and zonal offices.

MR. TAYLOR: Okay.

Any questions, Harvey?

MR. H. HODDER: (Inaudible).

MS FOOTE: You have rural blood in your veins, Harvey.

MR. H. HODDER: Pardon?

MS FOOTE: You have rural blood in your veins.

MR. TAYLOR: Yes, he had a farm in his district up until a little while

ago.

MR. H. HODDER: I did have one farm in my district.

MR. TAYLOR: Minister, an issue I guess that - I do not know how much your

department - again, it is an important issue I think in rural development. I

guess there is nothing you can do about it. It is not within your control, but I

want to bring it up here in the hopes that either you have raised it or your

department has raised it - just so that you recognize the potential that is

there for it, I guess, when you meet with your federal and provincial

counterparts that they become aware of the magnitude of the issue, if they are

not already. Those are these European Union tariff issues which have a very

negative impact on our - I am going back to the part of the fishing industry now

MS FOOTE: You are going back to shrimp.

MR. TAYLOR: Well, no, actually there are two. There is the shrimp one -

there are a whole host of them, certainly. It applies to all of it, but shrimp

and also to cod, to groundfish. As a matter of fact, the Arnold's Cove plant,

which barely gets mentioned, is seriously impacted by a 7.5 per cent tariff on

exports to the European Union. They are profitable, but they are marginally

profitable. I guess that is the reason why they decided to put the place up for

sale back some time ago. I think it is off the block now and there were not any

takers.

That is a very serious issue - and again, with the shrimp. In today's

environment, I look at shrimp, if we did not have the tariff that we do going

into the European Union we would be able to access the best market in the world

for cold water shrimp and we would be the low cost producer going into that

market. As it stands, we are one of the high cost sellers in that market because

of the tariff. The other thing that it would do, it would enable us to access

the industrial shrimp off the offshore factory-freezer trawlers for processing

through our own plants here, which would really make about 20 million pounds of

shrimp available to us, which effectively is enough to run the average shrimp

plant in Newfoundland for probably about forty weeks of the year.

Anyway, it is a big issue. It would certainly increase the viability of our

industry. I am just bringing it up here because I wonder if your department -

because it is a rural development issue and because you are involved in rural

development and trade - probably it is an Intergovernmental Affairs issue as

well, but I would ask if your department - I know you have not been there very

long now - were aware of it and made any representation to the federal

government on trade issues?

MS FOOTE: Absolutely. This has been an issue for some time. When I was in

the department before that, I was involved then in lobbying to get this changed.

In fact, it is interesting that you bring up the fishery and focusing on the

fishery. When we were in Iceland, back four or five years ago, Brookfield Ice

Cream met with us on a trade mission and of course they were running into the

same type of issue on ice cream as we were running into with fish. So it is a

matter that we continue to lobby on, working with not only this department but

IGA and with the Department of Fisheries of course when it pertains to fish.

MR. TAYLOR: I find sometimes people - I say again - do not realize the

magnitude of the situation. People think that because we are selling all our

shrimp and because we haven't used all the autonomous ATR, is it - whatever it

is called where we can access the European Union market under lower tariff, if

we make sure that our shrimp goes to a company where there is some repackaging

done on it or whatever - people think because we are not using all that and

because we are selling it all, everything is hunky-dory and it is not as big an

issue as we are making it out to be. It is a massive issue, it is the difference

between the viability of a shrimp industry on its own and a shrimp industry run

in this Province on the back of a crab industry. That is what we have and I don't

think everybody recognizes that either, but it is the fact of the matter.

I hear things coming out of Ottawa: Well, you know, you are selling all your

shrimp. The federal minister, our federal representative, has backed that up on

a couple of occasions and don't think it is as big an issue as it is. I hope

that the Province recognizes it is as big an issue as it is.

MS FOOTE: Absolutely.

CHAIR: Thank you, Mr. Taylor.

Harvey.

MR. H. HODDER: I want to make a couple of comments on some data here.

One of the things the minister alluded to - I grew up on the Burin Peninsula

and I grew up in a boat building family. In fact, I am the only generation of

five generations that never made their money building boats.

Have we lost something there? For example, I go around Newfoundland, I am out

in King's Point where I have family, my wife's family, and I see the boats

that are being constructed in there. Then I drive down to Bonavista North and I

see the kind of work that is being done down there. In terms of our ability to

be able to construct, there is no question, we have a long tradition, in your

District of Grand Bank and when I was growing up on the Burin Peninsula. Some of

the great boat builders of the Province, the Grandys and the Thornhills were all

MS FOOTE: The Grandy dory.

MR. H. HODDER: The Grandy dory and all the rest of it.

In terms of crafts, in terms of what Trevor was saying, we have to think

outside the fishing industry, think in terms of recreation. When I am in

Ontario, up around Orillia somewhere, and see all those crafts that are up

there, I think: You know, is it possible that we in Newfoundland could be

accessing some of that marketplace? I have always thought that, perhaps, there

is something in the transition here in the downsizing of the fishing industry,

that there might be something that we could be doing differently or could be

accessing the skills we already have. If we wait another generation, they will

be gone. Many of them are already gone, actually.

MS FOOTE: Harvey, just to give you some information on something that we

are pursuing, that is a boat building strategy with the industry.

MR. H. HODDER: Yes.

MS FOOTE: We are looking at doing that as part of our vision for that

particular sector; but, when you talk about boat building in Newfoundland and

Labrador, are you familiar with George Yates in Springdale?

MR. H. HODDER: Yes.

MS FOOTE: Well, George is having tremendous success selling his boats as

pleasure craft.

MR. H. HODDER: Yes.

MS FOOTE: In fact he has one now, I think, that he is going to be

shipping to Toronto, that will go from Toronto to the island there.

George tells me that, when he goes to boat shows, the people who come to him,

it is always repeat business or someone who is familiar with someone who has

bought a boat from him, and he has yet to have anyone find a problem with his

product.

One of the interesting stories he told me is that usually when they go to

these boat shows and they take orders for boats, most companies will ask you to

put a certain amount of money up front. Like, if you are going to build a boat

to a certain specifications, this boat is especially for you; so, rather than

build it and you not pay me for it, they have to either pay some up front and

pay the rest on delivery or pay all of it before it is delivered. What George

has been doing is, in fact, taking the order and building the boat with no money

up front and shipping the boat up to the owner. The owner will actually use it -

do a test trial of the boat - and then pay him. He has yet to have someone not

follow through on payment or say I do not want the boat. His business speaks for

itself. He is doing a tremendous job. He has boats in California. He has boats

in Cottage Country in Ontario. The market is there and there are people in the

Province who are, in fact, availing of the market. He is one of them.

MR. H. HODDER: I have always viewed that as one of the industries that we

could be expanding because we have a skill set and we have the background. This

is the - because I have an interest in that kind of thing, particularly when it

comes to smaller craft. I am not a boat owner but I grew up with them. When you

go out to King's Point and Springdale, you see there is tremendous potential

there. Likewise, for example, I have gone to Point Leamington where I lived for

awhile and see the glove factory there. What is happening there: just a simple

idea that someone had. The young fellow who came down - he was in Ontario making

them - who came home and said: I am going to start a little factory here. I can

do it.

MS FOOTE: Actually, he worked for the owner and the owner asked him about

the potential in Newfoundland, so he came back to Newfoundland and set up the

company there for the same owner. It has been a tremendous success, you are

right.

MR. H. HODDER: A tremendous success and employing now, I think, about

twenty -

MS FOOTE: I do not know. I have not been there since I was in the job

last, but -

WITNESS: (Inaudible).

MS FOOTE: Where are they in terms of numbers?

WITNESS: (Inaudible).

MR. H. HODDER: Yes, it is a fair number. I haven't visited that site

now for five or six years, but it has had a tremendous impact. It has been able

to let Point Leamington and Leading Tickles and a couple of communities there,

you know, be pretty well self-sustaining, and it is that kind of condition that

is very important.

The other thing I wanted to talk about was the issue that was in all the news

several years ago in the minister's office there, and that was the issue of

transferring the jobs to rural Newfoundland.

MR. E. BYRNE: I thought you were going to talk about the bison herd.

(Inaudible).

MR. H. HODDER: No, no, we still have the press release. We just wanted to

see if the bison - if there are any archeological digs on the Brunette Island,

but we understand that the -

MS FOOTE: Maybe that is where the furniture is.

MR. H. HODDER: Oh, that is where the furniture is.

MR. E. BYRNE: Get onto that.

MR. H. HODDER: Well, there we go. We shall have to send out a search

party.

MR. TAYLOR: (Inaudible).

MS FOOTE: What did you say, Trevor?

MR. TAYLOR: (Inaudible) shredder?

MS FOOTE: For furniture.

MR. TAYLOR: Ground (inaudible).

MS FOOTE: Let's hope the mikes aren't on.

CHAIR: Order, please!

We are getting a little off track here. If you could just get it back in

order here. We have coffee waiting.

MS FOOTE: Sorry. I apologize.

MR. H. HODDER: The transcripts will be quite interesting when we get

them.

On that issue, there was an investment by the Province of somewhere between

$15 million and $25 million and I wanted to give an update on that because

primarily that was over many departments but it was brought forward by

government as a way to stimulate employment and to bring long-term sustainable

jobs to rural Newfoundland. While we would disagree here with the methodology

that was used, we are certainly not opposed to trying to bring sustainable

long-term jobs to rural Newfoundland. Has there been a final assessment of that

completed and the final analysis - there was a lot of talk at the time about how

much it was going to cost and all that kind of thing. Has there been anything

done on that recently?

MS FOOTE: Treasury Board - now it is not within our department, other

than that one portfolio which we moved to Marystown. But, to the best of my

knowledge, the officials in Treasury Board are looking - I do not know what kind

of analysis they have done, where they are, and what the total cost was. I have

not been involved; don't know. I am pleased with the fifteen that are in

Marystown.

CHAIR: On that note, we will go to a coffee break and be back here at

10:45 a.m. How is that?

We have coffee in the caucus room.

MS FOOTE: Is that a cough break, did you say?

CHAIR: Coffee and coughing break.

Recess

CHAIR: We are now back in order. If we can continue the Estimates of

Industry, Trade and Rural Development.

Mr. Byrne, when you are ready.

MR. E. BYRNE: Yes, thank you.

MS FOOTE: If I could, just for a second?

CHAIR: Sorry, Madam Minister.

MS FOOTE: A couple of questions about different sectors and our strategy

on a go forward basis. I do not know, but just to bring your attention to the

Renewal Strategy for Jobs and Growth. That, in fact, looks at a number of

sectors, including the fishery sector, the aquaculture and the agriculture

sector in terms of framework.

MR. E. BYRNE: Yes. Also, it is a well-crafted document.

MS FOOTE: We just have to build on it, you're right.

I am going to have to apologize because it seems the more I talk the worse I

get.

MR. E. BYRNE: You are not the only one in the boat today like that.

MS FOOTE: I told John he is on.

CHAIR: Mr. Taylor.

MR. TAYLOR: If that is the case, John?

Minister, you raised the Fisheries Loan Board in earlier comments. Just a

couple of questions on that related to the recovery of old outstanding loans,

those that are in arrears and what have you. The first question is: Would you be

able to tell me how much the department has recovered - the loan board has

recovered - in these old loans, say over the last couple of years? Most of those

loans are probably in excess of ten or twelve years old. I know I get a lot of

calls on it, and I am sure some of you people do also. Pretty well every member,

I suspect, who has any kind of fishing constituency would get a number of calls

on it. Some of the calls are from people who have the ability to pay - for lack

of a better way of putting it - and some probably do not.

Anyway, the first question, I guess, is: What kind of recovery have you had

in recent years on those old outstanding arrears?

MS FOOTE: Trevor, if you do not mind, I will ask Larry Guinchard to speak

to this because he has that file.

MR. TAYLOR: Yes.

MR. GUINCHARD: Yes, Mr. Taylor. As you know, from correspondence you have

had with our department, each individual fish loan is treated on an individual

basis because, as you know, each individual has different circumstances. These

loans have been outstanding for a number of years. We have recovered in access

of $2 million roughly in the past year, and probably a little over that the year

before. We are budgeting, hopefully, this year another $1.5 million to collect

on the Fisheries Loan portfolio as well.

MR. TAYLOR: What was that you are budgeting for this year?

MR. GUINCHARD: About $1.5 million.

MR. TAYLOR: In recovery?

MR. GUINCHARD: Yes.

MS FOOTE: I tabled the Annual Report of the Fisheries Loan Board in the

House. I do not know if you were here or not, but a lot of that information is

in there.

MR. TAYLOR: Okay, so I will get a -

CHAIR: They will give the detail.

MR. TAYLOR: Yes. I will follow up by picking up a copy of that.

What is the cost of - before I go there - I guess I can get this also out of

it. How much in the way of loan guarantees, and what have you, is the government

putting out in the Fisheries Loan Board, as we call it, on a yearly basis today?

Do they go together?

MR. GUINCHARD: About $30 million last year. Right, Phil?

MR. McCARTHY: Under the Loan Guarantee Program in the last few years, we

have averaged somewhere between $10 million and $14 million in loan guarantees.

MR. TAYLOR: Ten million dollars to $14 million per year?

MR. McCARTHY: Yes, in 2001-2002 it was $14 million.

MS FOOTE: In the annual report, it says that the board approved $13.6

million in new fisheries loan guarantees in 2001-2002, through the chartered

banks, to twenty-six fish harvesting enterprises for the purchase of new fishing

vessels or the purchase of and/or renovation of used vessels. The board managed

a fisheries loan guarantee portfolio comprised of 135 accounts in 2001-2002,

having an outstanding value of $31.2 million.

MR. TAYLOR: How has that changed over the past five or six years? Has

there been much of an increase in the number and the total amount in aggregate -

the loan guarantees? Has it gone up? Has is gone down? Has it remained

relatively stable?

MR. McCARTHY: In the last three years it has been fairly stable. In

1999-2000, we did around $13 million for about thirty-seven. In 2000-2001, we

did around $10.5 million. In 2001-2002, we did close to $14 million.

MR. TAYLOR: Relatively constant.

MR. McCARTHY: Yes.

MR. TAYLOR: The recovery on that, have there been any instances of

failure to meet conditions, any foreclosure on any of those that you -

MR. McCARTHY: That is managed by the Department of Finance. The numbers

are very, very low.

MR. TAYLOR: Very low.

MR. SCOTT: The Fisheries Loan Guarantee Program, over time, since it was

introduced in the 1980s, has been very successful in that regard. The number of

defaults have been on probably one hand - maybe two hands at most in the last

several years - a very strong performance. I am not aware of any default in the

last four of five years, particularly when we have been looking at a much more

diversified vessel in terms of the new fishery, as I would call it. It has been

a very successful program administered through the chartered banks.

MR. TAYLOR: Okay.

I know you have budgeted, as you said, $1.5 million for recovery in these old

loans. How much is it costing the department, approximately, to recover this

$1.5 million to $2 million a year?

MS FOOTE: Larry?

MR. GUINCHARD: We have a staff in Marystown; we have a portfolio office

staff down there that manages all that fisheries loan portfolio, Mr. Taylor. I

guess staffing runs about $500,000. The budget overall this year is about

$750,000, I guess, if you put in all the purchased services and things like

that. They do all of the accounting for all of the portfolios as well, not just

the collections of the fisheries loan. They also do all the financial

statements, preparation for the Auditor General, and things like that. There are

three portfolios, really: the ENL loans, the Fisheries Loan Board and the Farm

Loan Board. The collection effort is concentrated on the fisheries loan part of

it in that area.

MR. SCOTT: (Inaudible) perspective, we have a portfolio, including the

guarantees, in the order of $140 million. The direct fisheries loan portfolio,

which was the under $50,000 one before, has an outstanding balance of about $20

million. So, if you look at the relative portion that staff spent on various

types of portfolios done in Marystown, that will give you some sense of how that

gets split up.

MR. TAYLOR: I know that, as Larry said, there is flexibility, I guess, I

will say, in how you handle the recovery of some of these outstanding loans. I

don't know how to ask the question. I have talked to your staff on a number of

occasions on behalf of individuals, and what have you, who have contacted me

from around the Province, and I know, as I said in my opening remarks, or sort

of alluded to it anyway, that some of these people, you make the contact, you

find out the situation, and you know, as plain as the nose on your face, that

some of these people have the ability to pay some, if not all.

The problem I see with some of it in the approach of the department - and I

do not fault the individuals because I know that they have a job to do and they

do it quite well, I think, to recover a couple of million dollars on loans that

are in excess of ten years old, I would say almost entirely. They are doing a

good job, in some cases, squeezing blood out of a turnip.

I find it very frustrating, I guess, when I find an individual - I will just

give an individual example of a fellow who is sixty-five or sixty-six years old,

he had a boat in 1988 and owed $4,000. I am talking about a specific case now. I

am not going to be exact in the numbers I am using but I know that his wife is

taking a fair amount of medication. When I talk to some of the case workers they

understand the situation and understand that this person has a very limited

ability to repay. You get the indication that: Well, if this fellow makes an

offer of $500 or something like that, well we will probably accept that. It is a

token type of thing, right?

I remember calling this individual back and advising him on what he should

do. He was contacted some time shortly thereafter, when it was in the process of

being brought to the board or had been brought to the board, whatever. He was

advised that the board wanted $1,000 out of him, basically. One thousand dollars

to myself and to most of us here, I guess, is not something that is extremely

hard to put your hands on, but I know this individual and it was difficult to

put his hands on it. He was just so intimidated by the call. Not that the person

was necessarily intentionally, intimidating, but he was intimidated by it. He

wanted to get this out of the way. It was hanging over his head. So he said:

Okay. He agreed to it. Yes, he paid it, but I think there needs to be some

direction from the department to be a little bit more compassionate towards the

older people, in particular, who are in these situations. It is a tragedy.

I know of another situation where somebody has tried to start over in another

business, and because that business is somewhat viable and generating a little

bit of a profit, that their business is being threatened because of an old loan

for a fifty-footer or something that they had back in - I remember when they got

it but I cannot remember what year it was. I do not know, but I guess the

question is: When are you going to bring closure to this? I know that with some

of these people you can probably never bring closure to it, and I understand

that a thirty-five year old individual like myself probably should have somebody

breathing down his or her neck on some of this stuff because they have not done

whatever. There needs to be a different approach, I think, on some of this,

especially in light of the circumstances that brought all of this to where it is

today.

MS FOOTE: I will speak to this, Mr. Chair.

Trevor, obviously, as a government, we are sensitive to those issues and to

the situation in which people find themselves. As Larry said, each loan is

looked at on a case-by-case basis. If there is an indication that you can, in

fact, pay, you should pay, because at the end of the day we have a

responsibility to recover taxpayers' dollars; but every case is looked at by

individual basis, and if there are hardships, they are supposed to be taken into

account. Any repayment schedules are supposed to be based on an individual's

ability to pay, taking into account where they find themselves today. In fact,

many loans have been written off because people cannot pay.

So, if you have knowledge of someone who has been hard done by or not treated

fairly than feel free to bring it forward because it certainly is not the

government's wish to put someone through a difficult time if their personal

circumstances are such that they really cannot respond in the way that we would

like for them to but they just cannot. It certainly is not government's

intention to treat anyone harshly. In fact, we make an attempt to try and treat

them all equitably and fair. As I say, loans have been written off. So it is not

a case of not recognizing. Obviously, we must have recognized, in those

instances, that there were hardships and people could not follow through and

could not meet their commitment.

MR. TAYLOR: Yes, I am aware of instances where loans have been written

off. Another example, I know of a situation where an individual contacted me - I

guess I will bring it up in the context: Has there been a change? I do not know

if that is a fair question, but it almost seems to me that in the last

year-and-a-half, I suppose, I get a sense that there has been a change and there

is more pressure on the people who are trying to recover these outstanding

loans. I get a sense that there is more pressure on them to recover the money.

I will give you an example. About two years ago, first when I got elected, an

individual called me and he owed - anyway, it does not matter what it was. It

was a significant amount of money. He could never pay it off. He will never live

long enough to pay it off. I know the individual and he has very few options

open to him. He is fishing on a small crab boat with a person who has a permit

now. I suspect he is bringing in, in earned income, probably about $10,000 a

year - and EI with that. I talked to the case officer at the time, I forget who

it was. Anyway, through the jigs and the reels, over the course of a couple of

months it worked out: Well, okay, we will leave it alone. It was not written off

because I do not think that you really do write them off. That is not the sense

I get anyway. But, it is there: We won't bother you but if you win the lottery

we are going to come looking for your $30,000 type of thing. That was left

alone. Everything was hunky-dory, and just about a year later he called me and

said: Boy, they are after me again. I cannot remember now what we worked out or

how we worked out but we did work out some kind of a repayment schedule. I know

he cannot afford it and it is causing hardship for that individual. Supposing it

is $100 a month - yes, maybe it is only $100 a month but $100 a month to

somebody who is bringing in $1,200 or $1,400 a month in EI and income throughout

the year, on average throughout the year, is not a very big pile of money.

MS FOOTE: I can tell you there has been no change in policy and no change

in direction in terms of whether they should increase the pressure or whether

they should go after more. There has been no direction given along those lines.

So nothing has changed from that perspective. If someone is doing it, they are

doing it on their own, but I would expect what they are doing is following

policy.

We have written off loans, yes. If the circumstances warrant it, loans are

written off. I guess at the end of the day we have to look at the circumstances

and determine whether or not they can, in fact, pay back some of the taxpayers'

dollars that were borrowed. Don't forget, there is someone called an Auditor

General too who looks at all of this very closely. We have to be seen to be

doing the job that needs to be done, but at the same time being sensitive, as we

are and we have been, to individual circumstances.

MR. SCOTT: I can add one small point. Our objective in the last several

years, recognizing the age of these accounts, is to bring closure to them in an

orderly businesslike manner, as soon as we can, being sensitive to the

circumstances of individuals. As a corporate priority we are trying to bring

this portfolio to closure in an orderly manner. As the minister said, there is

no new policy direction in terms of getting tougher. That is not the way to

bring closure to it. It is to bring closure to it on a responsible businesslike

basis.

MR. TAYLOR: I think Ed Byrne is going to ask a few questions now.

CHAIR: Thank you, Mr. Taylor.

Mr. Byrne.

MR. E. BYRNE: Thank you.

To the deputy minister: You mentioned earlier, when Mr. Taylor was asking

about the outstanding amounts within the Fisheries Loan Board, about $20 million

in loans outstanding of $140 million portfolio. Just for verification purposes:

That is the same portfolio, I guess, that was reported in the Auditor General's

report which said, the annual report of the Auditor General of the House of

Assembly for the year ending March 31, 1999, included a report on Enterprise

Newfoundland and Labrador's loan portfolio - is that the same one? - funded

through the former Department of Development and Rural Renewal's Strategic

Enterprise Development Fund. Is that the one?

MR. SCOTT: That would be part of it. When we talk about our portfolio we

include the former ENL loans and equity, the former Fisheries Loan Board, the

former Farm Development Loan Board and our Loan Guarantee Program.

MR. E. BYRNE: There is no money owing to you from the Farm Loan Board, or

very little?

MR. SCOTT: Very little.

MR. E. BYRNE: That is about a 98 or 99 per cent repayment rate on that

stuff.

MR. SCOTT: I believe in the Auditor General's report in 1999 she was

focused on ENL, not Fisheries, not Farm, and not the Fisheries Guarantee

Program. The Fisheries Guarantee Program is delivered legislatively through the

Department of Finance Loan and Guarantee Act, but we administer it from an

application point of view and an approval point of view. When we sum up our

portfolio, we include that, but in the public accounts it would show up in the

Department of Finance.

MR. E. BYRNE: Okay.

Is most of that information available through the Freedom of Information,

what the total outstanding portfolio is, $140 million, and where it would be

owed from?

MR. SCOTT: Yes. In fact, there are -

MR. E. BYRNE: At some point in the future would you be able to provide

that to us?

MR. SCOTT: In fact, the annual audited financial statements of each of

the portfolios are tabled as part of the public accounts.

MR. E. BYRNE: It would all be in there?

MR. SCOTT: It would all be in there in terms of the liability, the value

of the assets, and so forth and so on. We reported upon it when the minister

tabled the department's annual report and the annual reports for the external

boards and agencies in a capsulized form.

MR. E. BYRNE: A similar question to Trevor's, but on a different scale

in terms of the pursuit of trying to recover loans that the Province has made to

either groups, individuals, businesses, et cetera, and obviously we should

pursue that. To the person, or the case which he referenced just a moment ago,

the individual who owed $4,000 to the Fisheries Loan Board, it was pursued and

an agreement was made in $1,000. At the same time people in the Province see,

for example, in the Auditor General's report this year, where it said that one

company - I will just read it for the record, if I may, Mr. Chair. It says,

"In October 1992, Enterprise Newfoundland and Labrador (ENL) made its first

loan of $500,000 to the Company to purchase equipment.

Since the initial loan of $500,000 in 1992, ENL has advanced five additional

loans totaling $949,365. In addition to this $1,449,365 in loans, ENL also paid

professional fees of $29,343 on behalf of the Company. In addition, interest

charges of $976,849 have been added to these loans. As at 31 March 2002, ENL had

recovered only $233,300 of its investment resulting in a balance owing of $2.22

million comprised of $1.32 million in principal and $0.9 million in interest.

The Company has not made any payments since October 1998 and the entire

outstanding balance is considered by ENL to be doubtful of collection."

It goes to show, in detail, right up until 1998, what was paid out from the

department. I guess a couple of questions emanating from that. I don't know if

you can name the company. If you cannot, that is fair enough but I will ask the

question anyway. More to the point, while we are recovering monies from

individuals from the Fisheries Loan Board, given the fact of where the fishery

has gone and the circumstances surrounding the reality of the industry today,

people ask legitimate questions about: well, when it comes to certain companies,

we have not been able to recover substantial amounts and, in not recovering

them, we have continued to loan, on the one hand, more money. I guess I am

looking for a response to that sort of argument that has been publicly offered.

MR. SCOTT: That is, we understand, Sir, in the public concern. As the

minister noted earlier, we manage our investments on a case by case basis and

the fundamental objective is a developmental objective. While the recovery of

the taxpayers' investment is very important, the primary concern is ensuring

that investment works to create a strong business, a viable business, create

jobs and, where there are circumstances beyond the company's own control or

otherwise, to show flexibility and be a patient lender or investor, we do so.

The guiding principle in the department is to look at each individual

circumstance. I will say to you, as well, that all of our investments are dealt

with and managed, in terms of decision making, by an arms-length board as

opposed to internally within the department to ensure that there is objectivity,

and to ensure that there is independence in terms of the assessment of the

circumstances.

In the case of the Auditor General's report on this particular company, I

would be happy to share the name of the company with you privately but the

company is operating so these types of reports and Auditor General's

statements are usually masked somewhat in terms of the name of the company

because it could compromise their ability to raise capital or keep business.

MR. E. BYRNE: Oh, sure. I certainly do not want to go there, if that is

going to do that.

MR. SCOTT: It would be very familiar to you and, I think, to Mr. Taylor

as well, but in these circumstances the opportunity was there to grow a new

industry in a rural area of the Province that was in desperate need of stimulus

and, while there were a number of investments made over time, each were

considered on their own merit by an independent board to determine whether it

was in the public interest to carry on with that.

Ultimately, the intent still is to recover the loan but, in the meantime, the

business is operating. It is generating jobs. It is generating taxes for the

local economy and otherwise. Again, the fundamental principle is looking at case

by case.

In the case of the fishery, you are dealing with an entrepreneur, a

self-employed individual, and the enterprise is probably struggling, as opposed

to an investment that is referenced as company A in the Auditor General's

report, where the company is growing over time but taking longer than

anticipated.

MR. E. BYRNE: I do not want to be perceived as saying that we shouldn't

entertain that but, in terms of being accountable to the criticisms or the

concerns that are raised, they are legitimate, I suppose, and if they are raised

we must deal with them as legitimate.

MR. SCOTT: Absolutely, and in the Auditor General's report we try to

provide the perspective that we take in dealing with those issues, and in our

response to it we try to present (inaudible).

MR. E. BYRNE: In terms of the concerns raised in the Auditor General's

report, and outside the Auditor General's report, about monitoring of the

portfolio, and the department's involvement in monitoring and ensuring that

what was agreed to was followed up on. If there are changing circumstances - I

mean, that is the world we live in - that the department is aware of them,

whether it be ensuring that if we have the right to have members sit on boards

of directors, that they are there; whether it is financial statements that must

be coming to the department and they do not, and they continue not to come. How

does the department deal with those criticisms and challenges, because they are

here and elsewhere?

MR. SCOTT: Again, those issues are dealt with on a case-by-case basis,

looking at the particular circumstances confronted by the company. In the case

of audit financial statements, or financial statements generally, that is a

normal term and condition that we apply for monitoring. If a company is not in a

position to bring forward the financial statements, or do so in a timely manner,

that does present a challenge to us. We do require those to monitor the accounts

effectively, but, at times, companies are not in a position to bring them

forward. In those circumstances -

MR. E. BYRNE: You would think that any company worth their salt, on a

year-by-year basis, would produce financial statements. They may not be willing

to provide them to you or to a department of the government, but you would think

they would have them for their own self-analysis. Not everyone does it.

MR. SCOTT: Indeed, I could not agree with you more, and it is good

business practice.

MS FOOTE: I think the problem is, that it is the government, and

government is always the last one that is considered as someone that needs to

get paid back.

MR. SCOTT: That is part of it. If there are circumstances where the

formal documents are not before us the duty of our staff, in which they

discharge, is to visit the company, look at the records that they have, inspect

the facilities and the like to ensure that there is monitoring beyond the

formality of an audited statement - and not diminishing the importance of an

audited statement.

In a practical sense, at the end of the day if we are not getting audited

financial statements, or financial statements in accordance with the terms and

agreement, yes, we could call the loan in terms of default. But, if the company

is still there, producing jobs, generating wealth, then the decision is made: Do

you call it on a technical basis and cause the company to collapse because you

are calling the loan and its creditors are vulnerable and the like, or do you

continue to work with the company to manage through that circumstance? It is

difficult and it is a balancing act case by case.

MR. E. BYRNE: Oh, it has to be. It must be disturbing to you. For

example, when the Auditor General - I mean the departments have a heads up

because you have an opportunity to respond and your response is in every report.

But when you see, for example, in one particular loan $1,175,000 and the review

shows, for example, there was inadequate documentation to support how much the

company paid for the building. The loan was provided for the purchase of

building other assets acquired. In addition, a subsequent search with the

Registry of Deeds by a government solicitor did not identify any title transfer

of the building to the company.

Secondly, in addition to ENL Financing, shareholders were to contribute

$600,000. There was inadequate documentation to show that shareholders had made

the investment. Thirdly, as a condition of a $500,000 loan, the financing

agreement stated that the company should not pledge the shares or assets of the

company without written consent of ENL. After the company was provided its first

loan of $500,000 it is clear the company purchased the remaining 50 per cent of

the outstanding shares of the other shareholder. In exchange, the other

shareholder took a $250,000 mortgage on the company's assets. There was no

evidence on file that ENL gave consent, as required by the loan agreement,

before this transaction occurred.

That is a pretty damning indictment, in my view - I am not pointing to

anybody, I want to be clear on that - of the company; not necessarily of

government but of the company. I guess by extension then in the question of

monitoring our activities as a lender on a bonafide and legitimate basis to try

to develop an industry in a particular region and help a company grow. It has to

be frustrating when you have to deal with that as a deputy minister and as a

political head of the department and as executive and support staff. How do you

deal with that? What do you do? I am just trying to get a sense of how -

MS FOOTE: You are absolutely right, and it is difficult because you are

put in the position where - what happens if the company has x number of

employees and you go out, are you going to call the loan? Are you going to put

them in a position where they are going to go under? It is really difficult

because it could be a region where - one is, in fact, in Trevor's district -

where in fact that could have happened. If we had not said: Okay, we will let it

ride for the time being. But it is, it is a difficult call. What do you do? We

have a committee in place, an independent board that looks at all the

circumstances and then makes a decision and advises on the best way to go

forward. It is a hard call. It is fine for the Auditor General, and God love

whoever it is, you know, to sit there -

MR. E. BYRNE: Yes. I mean they have the same mandates, no matter who it

is.

MS FOOTE: Yes, that is right.

- and review this and make comments on: that this is not right or that is not

right. At the end of the day, we - I guess politically and whoever is here -

would have to make the decision whether or not you allow the company to continue

or see it go under. I think anybody would make the decision that, hey, if you

are employing fifty people, twenty people, ten people in an area where there is

very little employment, that you err on the side of the company.

MR. E. BYRNE: If there is a reasonable chance of continued success, I

suppose.

MS FOOTE: Absolutely.

MR. E. BYRNE: So, on the opposite side of the same question, I suppose:

How do you answer the criticism, for example, on Newfoundland Bonding &

Composites that the Auditor General put forward, that Cabinet made a decision

prior to any due diligence being done? It is not supposed to happen that way.

Newfoundland Bonding & Composites, for example, or any company for that

matter, they go through the process in seeking investment and it hopefully ends

up at the Cabinet Table - and government has every right to make that decision,

obviously, and providing direction to get this through the process because this

is the will of the Cabinet. We would like to see it done, and we believe it is

in the best interest of the Province and the region, et cetera. How do you

answer the criticism that that process was not followed, that a decision was

made and then the loans were done after the fact, or the process in which

officials were involved happened and occurred after the fact? Is that an

anomaly? Obviously, it seems to me it is.

MS FOOTE: I think if you look at the situation with that particular

company, the issue for us was, here was an opportunity at diversifying the

economy, at doing something different, which we are trying to do in all parts of

the Province.

MR. E. BYRNE: I am not questioning that.

MS FOOTE: What we were up against was the chance that it would go to

P.E.I. Whether it would or would not have, who knows? But do you take that

chance? What you make sure you do when you are going down that path is that the

owner of the company is at the table with you. I do know that since then they

have invested about what, $27 million?

WITNESS: (Inaudible).

MS FOOTE: Thirty-five million dollars. So I know what you are saying in

terms of process but -

MR. E. BYRNE: I am not speaking to the company -

MS FOOTE: No, I know what you are saying in terms of process, but that is

a call you make when you are looking -

MR. E. BYRNE: So the normal commitment, say, coming to the

Lieutenant-Governor in Council from the line department and the minister

(inaudible) department and the Premier to a company like that, where: Look,

there is a process you must go through. We are not going to unduly impede it,

but we are there with you and we are going to make it happen. What you are

saying is, that assurance was not good enough at the time for...?

MS FOOTE: Oh, no. There was analysis done. It probably did not go through

the regular route, but there was analysis done. Clearly, we did not go in this

and say: Yes, we want this, so here is $9 million. No, absolutely not. We had to

look at what it would have meant for the Province, and was it worth our while to

invest that kind of money at this point in time? Everything pointed to this

company getting some very good contracts. It was a political call, it was a

judgement call, but it was a good call.

MR. E. BYRNE: I do not dispute that. It is the process I am talking

about.

Speaking of that company, or any other company that government is involved

with, where you have the right, for example, to put people on the board of

directors, or have the right to send in your own officials just to determine how

things are going, has the money that we have provided, the large sums provided

from the Treasury, been spent where it is? If it hasn't, there are reasonable

explanations that can be provided for all of that as well, I suppose.

In this specific instance, why didn't government ensure that they had a

right to put people on a board of directors and they had a right to send their

own financial people in, whether from the Department of Finance or Treasury

Board? Why were decisions taken like that, not to pursue that in terms of an

ongoing monitoring process? It is not just with this company, but it has

happened with others as well. Is that done on a case by case basis, you just don't

have time? Is it that we are satisfied, from what we hear, from the evidence

that the company has provided?

I think you know were my question is. It is about the process and the

monitoring and accountability side of the equation, not the question of whether

we should help the company or not. That is a separate issue.

MR. SCOTT: Again, the approach taken is on a case by case basis. I will

say to you as well that over time, in respect of some of the examples that you

have cited, Mr. Byrne, the Auditor General has referenced that there is

inadequate documentation on file. We often have differences of view of what

constitutes adequate documentation. At times, I will acknowledge to you, that we

have followed up and monitored as the Departments of Development and Rural

Renewal, Industry, Trade and Rural Development, and Finance. Sometimes our

documentation efforts are lacking. It does not necessarily mean the monitoring

is not occurring.

As well, in respect of some agreements, we do have rights to sit on boards.

We exercise that on a case by case basis. Those are rights that we have as

opposed to, I would say, a duty to actually do in every circumstance. If we are

satisfied that we have a good enough understanding through other means of what

is happening with a company - through, for example, annual financial statements

that may not have been audited yet, site visits to the company and reports from

the company itself - we would use our judgement, as the Department of Finance

does, in respect to monitoring the CHC Composites file, because they are the

ones that are monitoring that, and determine what intervention we need at what

level.

We often reserve the right to sit on the board of a company. Sometimes we

elect to do so. Our general approach is that we do not do so unless we have to.

It is a measure of last resort rather than a measure of first resort. It really

depends upon the circumstances.

MR. E. BYRNE: The airline industry, nationally and internationally, is in

somewhat of a turmoil for a number of reasons: exploding oil and gas prices, a

huge, huge and steep decline in passenger travel, lost revenues. You look at the

type of restructuring that companies like Bombardier are going through and it is

pretty challenging times for that industry generally.

Newfoundland Bonding Composites are facing the same challenges, and the

airline industry is like that. If you look at the last twenty years, it is very

much, like my father used to say, like a dog's stomach. When it is up it is

up, and when it is down it is down. There does not seem to be any in-between

with it whatsoever. What challenges are they facing? I understand that there are

involvement with the company and, again, I am not questioning that. Could you

elaborate on that at all? Because it seems to be a pretty bright industry. It is

new and it is going through some challenges, like any private sector company

would, but it presents a whole set of new problems that probably were not

factored into the initial outlook of the company when first coming to

government.

MS FOOTE: We see this company as expanding, and every indication is that

it will. Strategically, their business is primarily military. So, if you look at

what is happening now, not that it is something we like to see, but every time a

helicopter goes down over in Iraq, it bodes well for Bonding Composites and any

other company, so it is looking good. Every indication we have, working with

company, is that - and the fact that they have invested $35 million themselves

into this is a good indication that their own work, their own analysis, their

own research, indicates that they have a bright future.

MR. E. BYRNE: Yes. I certainly do not want to be perceived as being

negative towards that action, and government's involvement, because I am not

at all. Are there discussions occurring? It has been suggested publicly, as

well, that the company -

MS FOOTE: They have come back to us looking for some more support but,

obviously, like any initiative, or any request, we certainly would have to do

due diligence and we are doing that.

MR. E. BYRNE: If we could move into another area, that would be okay?

CHAIR: Sure.

MR. E. BYRNE: In terms of government's venture capital strategy or, as

some would say, the lack of government's venture capital strategy, depending

on who you talk to - I did not say it.

MS FOOTE: Did you read the Budget?

MR. E. BYRNE: I read the Budget. Like I said, it was a well-crafted

document.

MS FOOTE: Like this one.

MR. E. BYRNE: Yes, exactly.

The Minister of Justice said to me the other day: You wanted annual reports,

Ed, you got them.

MS FOOTE: You got them, that is right.

MR. E. BYRNE: We are here today like that, and that is fine. That is

important. I am not trying to minimize that, because it is important to do that.

MS FOOTE: I know.

MR. E. BYRNE: We just have to get all of our Crown entities and agencies

doing it too.

Anyway, in terms of the venture capital strategy, some individuals have

discussed publicly and privately with me that they have participated in the

strategy; they do not see that the department is aggressive enough in pursuing

it. I guess I am looking for a general response to that sort of concern that may

have been raised - I am sure it has been raised to the department as well - and

your response to it.

MS FOOTE: Of course, what you see in the Budget is a reflection of

ongoing discussions that we have had with people who have been interested in

either investing or taking advantage of investment. A couple of the initiatives

in the Budget, for instance, the Venture Capital (Direct Equity) Tax Credit

Program, we have expanded that because clearly it was only available to

individuals. What we were finding from individuals who also own companies was

that they would like to be able to invest as a company, obviously, for the tax

benefits.

I guess the most interesting one that we have announced is the possibility of

a labour sponsored venture pool. That one, for us, I guess, we will go seeking

proposals within sixty days from Budget Day. We would like to think that, with

the availability of money there, we will get one that is labour sponsored,

bearing in mind that the feds have one that is labour sponsored, and 15 per cent

tax credit on that one and 15 per cent on this one would go very well.

MR. E. BYRNE: A big incentive.

MS FOOTE: Absolutely, but we are not sure. We are going to be flexible

enough that if we do not get one acceptable to us based on what we are looking

for, then we are going to be flexible enough to look at other venture capital

pools. We are hoping it is going to be a labour sponsored one - whether it will

or not.

We are hearing from a lot of small businesses that there is nowhere for them

to access capital these days. It is difficult.

MR. E. BYRNE: It isn't there -

MS FOOTE: No, the banks are out of it altogether.

MR. E. BYRNE: Decisions are made in Halifax. There are vice-presidents of

all the major branches here. They will probably challenge me on it, but I am

confident enough in what I say, that they have very little authority in terms of

dealing with the local business community in approving business loans.

MS FOOTE: Absolutely. Many are made in Toronto.

MR. E. BYRNE: Pardon?

MS FOOTE: Many decisions are made in Toronto.

MR. E. BYRNE: Yes. Business development banks, it is a nightmare; very

closed shop in terms of who has access, who does not. It is really scandalous.

MS FOOTE: They are out of the risk-taking business altogether.

MR. E. BYRNE: If everyone is out of it, who is in it?

MS FOOTE: That is right.

MR. E. BYRNE: On that front, do you have any regular discussions in your

ongoing activities in the department with the banks on this issue, trying to

squeeze and leverage?

MS FOOTE: Yes, all the time. It is ongoing, and it is like beating your

head against a brick wall. Even if you look at Newfoundland and Labrador and how

the banks perceive Newfoundland and Labrador, if you have assets here - not

worth a pinch.

MR. E. BYRNE: I was just going to give you an example, a true story.

MS FOOTE: Not worth a pinch.

MR. E. BYRNE: A friend of mine, who I have known for twenty-five years

but hadn't seen for about four or five years - I was at the Aquarena the other

day picking up my daughter from swimming - comes over to me and I say: How are

you doing all the time? Good. Still working away, doing well? He started to get

into a complaint about no investment, no chance to get access to capital. He

said: Ed, let me tell you, I am sitting on $850,000 worth of building assets

that I do not owe a penny on. They are mine, and I could not leverage $200,000

against it, not $100,000, and I own them outright. Some of the properties, I

have been leasing for the last fifteen years. I do not owe a nickel to anyone on

them. They are all income now. Everything is paid off. He said: You talk about

frustrating.

MS FOOTE: It is really tough.

MR. E. BYRNE: It is. How do we get around that? I do not know how to do

it. When all of the major lending institutions and the arms of the federal

government, who are not into it themselves, what do you do?

MS FOOTE: Of course, it is back to adventure capital, building on that

and promoting that.

MR. E. BYRNE: That is what we talked about in terms of, he said: There is

no pool of venture capital that I can access. That is one of the challenges that

he sees, not only for the Province but for Atlantic Canada as well.

MS FOOTE: Absolutely. For businesses, I do not know, but ACOA does still

lend money to businesses, so that is always a possibility for them.

MR. E. BYRNE: He did not want to do that. He says, I do not have time. He

is a real entrepreneur, and he has done extremely well for himself. He said: I

do not have time to deal with that. I do not want to deal with those. I have

enough around me that I should be able to do this myself, and it is not a

problem. He is bringing probably $150,000 of his own cash to it and couldn't

leverage $200,000 on $800,000 worth of building assets that he owned outright,

that he had long-term leases in 80 per cent of them. Incredible.

MS FOOTE: Well, I mentioned a boat builder earlier who told me last

Friday that he cannot get his hands on $250,000. This is a man who is selling

boats everywhere in North America. It does not make sense. We have a company in

rural Newfoundland that has an asset, a plant there, worth $18 million and what

do they value that at? A local real estate company went down to do an

evaluation, and what was it?

WITNESS: Two million or $3 million.

MS FOOTE: Two million or $3 million, an $18 million facility, and that is

in two years. It has been there. It is built. The bank, in that case an Italian

bank, put money into it.

MR. E. BYRNE: Is it an attitudinal problem? What is it?

MS FOOTE: Oh, absolutely. That is a part of it.

MR. E. BYRNE: That is a big part of it, that I see.

MS FOOTE: It is a big part of it, absolutely. They look at us as if, you

know, what do we have to offer, 530,000 people spread out around 10,000 miles of

coastline. It is mainland attitude, I am sure of it, when it comes to the banks;

and you are absolutely right, the people here have no authority.

MR. E. BYRNE: They do not.

MS FOOTE: None.

MR. E. BYRNE: If they want to get approval of a local mortgage outside of

the Newfoundland and Labrador Credit Union, for example, it goes to Halifax for

approval. That is a fact.

CHAIR: The Chairman -

MR. E. BYRNE: I mean, it is unbelievable.

Sorry.

CHAIR: No, no. The Chairman does not normally intervene but this topic

has been grating at me for a long time so I will give you a radical thought and

then I am going to leave it there. Then I am going to shut up.

Tax the banks on their profits in this Province for about 2 per cent to 5 per

cent - figure out the number - tax them and put it into the venture capital fund

and let them go after it. Then they will smarten up. It is the only thing that

is going to get them to smarten up. So, think about it, threaten them with it,

and maybe they will change their minds.

That is all I am saying. Thank you. Go ahead.

I am sorry, Mr. Byrne. I had to get it off my chest. I am sorry. My

apologies.

MS FOOTE: Mr. Chair, do you know how many branches they have closed down

in rural Newfoundland?

CHAIR: It does not matter, they are still making money.

MS FOOTE: They would probably close everyone if we did that.

CHAIR: They are making money. Remember, they are making money.

Now I am shutting up. My apologies, Minister. I had to get it off my chest.

Okay, I will write a letter on it.

MS FOOTE: We all share your frustrations, sir.

CHAIR: Yes, I don't know if we all have them.

MR. E. BYRNE: I have a couple of more but I need to go to the washroom -

lots of water. So if you can give me a quick break?

MR. TAYLOR: Okay, no problem.

CHAIR: Mr. Taylor, before that, I just want to check with any of the

members. Mr. Butler, do you have any thoughts or any questions on this?

MR. BUTLER: I had one there. It was in relation to - I think one of the

hon. gentlemen here mentioned about information being provided with regards to

accounts receivable, but I wanted to go back, and then when my hon. colleague

brought up the Auditor General's report it really prompted me to ask this

question.

In the Auditor General's report this year, I think there is a

section there

where there is $260 million or something that was written off over a period of

time back over the years. The question I am asking - I do not know if it is all

in relation to your department, minister, or from different departments, but my

question is: Is all the information in relation to that $260 million available?

For example, who the people were involved with those companies; why it could not

be collected; the dates and times this happened; the years it was, and so on. Is

that available?

MR. SCOTT: That level of detail would not be available through the public

accounts. Quite frankly, even if we were to receive a Freedom of Information

request, the level of detail that we reveal about an individual entrepreneur's

dealings would be limited.

The normal practice would be to advise anyone and inform anyone of where we

have invested money, with what company, for what purpose, but we would not

report upon the status of that account. If an account is written off, it is

summed up in the public accounts. Again, it is not a matter that we publish a

list annually or otherwise of specific transactional write-offs.

MR. BUTLER: Just for clarification, say the Fisheries Loan Board. I know

you said some of them may be written off, so I will just use a hypothetical

name. John Jones from the District of Port de Grave probably owed $60,000. That

would be available to the Auditor General,

whereas someone who had $17 million

written off, I cannot get that information. Is that correct?

MS FOOTE: If it is company versus an individual. The individual would

have been an entrepreneur as well, right? You could not get that information?

MR. SCOTT: No, it would not matter whether it was an individual. It is an

entity for making investment in a policy in terms of administratively applies.

Having said that, the Auditor General has access to all of these records and all

of these details. He or she has the right to report if he or she feels that

there is anything inappropriate or contrary to legislation or whatnot.

MR. BUTLER: That is why I was looking for it, because this is in the

Auditor General's report, and being on the Public Accounts Committee there are

different issues that we bring forward. Here is the Auditor General provided

with all of this information, about $260 million was written off, and if that is

the topic I want to bring up, I cannot get the information to ask questions

about it. That was the reason I asked that question.

CHAIR: Thank you, Mr. Butler.

I think on the Public Accounts Committee you probably could get the

information if you pursued it, I am assuming, with the PAC. We can check that

out.

Madam Kelly.

MS KELLY: Just from the perspective of our Economic Development

Agreements with the federal government that have run out, and they are not

expressing any interest in renewing them. Has there been any new agreements,

that you know of, struck with other provinces or has anything happened since our

Budget was brought down to see any signs at all that they are going to

cooperate? I know the money you outlined in your opening remarks, if we have to

use all of that to fund the initiatives just here in our Province, I think some

of the associations and stuff, there is going to be nothing left is there for

each of the zonal boards and other proposals that will come in from communities?

All our money will be used if the feds do not partner with us?

MS FOOTE: The same question was asked earlier by Mr. Byrne. I have not

heard back from Minister Rock, and that is who I wrote to about the

Canada-Newfoundland and Labrador Economic Development Board. I had hoped to meet

with him next week but he is away. He is out of the country for a couple weeks.

We have not had any indication at all that the federal government is willing to

reconsider. In fact, Minister Byrne came out very strong the day of the Budget

to say that this was not on. He did that without full knowledge of what we had

in mind. So I am hoping that on second sober thought he will reconsider and help

us in terms of trying to move that forward with the Minister of Industry for

Canada. This is not just between the federal government and Newfoundland and

Labrador, it is every province. They have gotten out of cost-shared agreements

right across the country.

I am supposed to be in Alberta this Monday and Tuesday to meet with rural

development ministers and I am putting this on the agenda hoping that we can -

because those are the minsters you really need to meet with when you talk about

CEDA and cost-shared agreements. I am hoping to be able to work with them to try

and bring some profile to this issue. Even if the feds are saying they are

getting out of cost-shared agreements, look at the type of proposal that we put

forward as a Province. That would give them a way out, face-saving measure too,

so that they are not back into cost-shared agreements, but it is a totally

different approach. So that is my thinking on that.

MS KELLY: Will Minister of State, Andy Mitchell, be at that meeting

because he is responsible for rural Canada? He could be a big ally there too.

MS FOOTE: Yes, he is chairing it actually.

MS KELLY: Excellent, good.

Thank you.

CHAIR: Thank you, Ms Kelly.

Ms Hodder?

MS M. HODDER: No questions, thank you.

CHAIR: Thank you very much.

Mr. Taylor, sorry.

MR. TAYLOR: No problem, Sir.

Just a couple of questions. I have to go back, if I could for a minute - just

a suggestion more than a question actually on the Fisheries Loan Board. I know

one of the - you still have $20 million in outstanding debt there and you are

budgeting for $1.5 million in recovery this year. I think it is fair to say that

this problem will haunt us for a little while yet, unfortunately.

In the interest of trying to resolve it and recover, I suppose, as much as

can be recovered and do it in a more palatable way I think - one of the biggest

frustrations I find, that comes to me from individuals who have to deal with

this process, is a lot of these people are - I hesitate, they are not old. They

are getting up towards retirement age. Some of them have retired. A lot of the

people who are - they get the most frustrated with this. One of things that

comes back, whenever they talk to the loan board or to these individuals, the

first thing that comes out is: You have to pay all of this. Say it is $50,000.

It could be $20,000 in principal and $30,000 in interest, in some of these

cases, right? That is not outlandish at all. In almost all cases, the interest

is up comparable to the principal, and in a lot of cases exceeds the principal.

They are told, you have to pay it all. Well, I cannot pay it all. You have to

pay it all. Send us a financial statement, a statement of your financial

affairs. Do that and make us an offer.

In a lot of the cases the people are not even sure what they can afford - it

is just a statement of fact - and do not know what the board is willing to

accept, and do not find out until some months down the road from when they

finally got around to saying: Okay, I am going to talk to these people.

In a lot of cases, as you said, Minister, the government, sometimes, in a lot

of cases, is the last to be paid. People look on it that way, and for a whole

variety of reasons that has been exacerbated in the fishery, the Fisheries Loan

Board in particular.

My suggestion on this, and I do not know if you have given any consideration

to it so I will ask if you have, wouldn't it be better if the people who are

dealing with these individuals were given the latitude to get a line of

communications going here? That is one of the biggest problems. The individuals

on the front line should, by now, after twelve years - I know a lot of these

individuals have not necessarily been in it twelve years, but the department has

been, for about twelve years now, in a fairly concerted way, trying to recover

this money. Somebody should know by now, with this case here, what is able to be

done with this case here, especially once you get the statement of financial

affairs. You should know what the board is able to accept.

I think it would serve the board better, it would serve the government

better, and it certainly would serve the individual better if the lines of

communication were open on a basis of a negotiation as opposed to: You make me

an offer I cannot refuse. Because that is effectively what you have been telling

them for the past number of years, in my experience anyway.

Really, what happens in some of those cases is that the individual contacts

me - whoever me might be - and I contact somebody in the department and say,

realistically now, where do you fellows see this one sitting? What kind of an

offer do you need?

I will go back to the individual and say, you are wasting your time, based on

my experience, and based on my conversations with the department, if you do not

offer them $10,000. They might make the $10,000 offer and the next thing the

board turns it down. I don't know. That is rare, I know. If they do not call

me, this thing continues on and on and on. If somebody does not feel like

telling them what they need to hear as opposed to what they want to hear, then

they still do not get it resolved. Usually, if I call Larry or somebody else

down there in Marystown and ask the point blank question, whatever the answer is

that I get, I will go back to them and say, you are not getting this written

off. If you do not make an offer of $5,000, it is pointless calling me and it is

pointless calling them. That is the way it goes. A lot of people do not get to

that, and when they do finally ask somebody the people do not tell them what

they need to know.

My advice to you, in the interest of - would you consider, in trying to

recover this $20 mil

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Citation	2010-03-04
Type	committee
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