MR. BRIAN BOUDREAU (Chairman): We are all set now so we are going to call the meeting to order. I want to welcome all the committee members here. Of course, this is the Economic Development Committee meeting. Our witnesses today include the Department of Economic Development and I believe they are here on our request. I will ask the committee members to introduce themselves, starting with Frank.
[The committee members introduced themselves.]
MR. CHAIRMAN: As I indicated, our witnesses are from the Department of Economic Development, a delegation led today by the deputy minister. I think we will allow some time for the deputy minister to put a presentation before the committee and then we will open it up for general discussion and any questions from any of the committee members. Mr. Deputy Minister, whenever you are prepared to start, we are ready for you.
MR. RON L'ESPERANCE: Thank you very much, Mr. Chairman. I appreciate the introduction and I appreciate the opportunity to come before the committee today. Starting out, I want to thank Darlene for her always expert help in getting prepared for coming to the House committee.
I would like to start by introducing my colleagues. On my right, Shirley Carras is the Executive Director of Program Operations and Management, and on my left is Chris Bryant who is the Executive Director of Rural Development and Strategic Services. Also with us is Mary Anna Jollymore who is our Director of Communications.
As I said, we are very pleased to be here today. We have made the proceedings in the Hansard record of the House Committee on Economic Development required reading in the department. We follow the work of the committee with considerable interest. I had an opportunity to go through the material from the last presentation, your meeting with Frank Anderson representing the regional development authorities throughout the province who are key partners for us in Economic Development. We are always interested in hearing the perspectives and insights and the opportunity for questions from the members of the Legislature.
We are holding this discussion today at a time when, I think in many ways, all eyes are on the economy. We were experiencing a little bit of turbulence in respect to the economic cycle prior to the events of September 11th and certainly the events of September 11th have served to catalyze, I think, a lot of attention on economic issues, on security issues going forward, on implications in terms of continental policy issues, whether you are looking at energy, whether you are looking at the shipment of goods and services and those kinds of issues. I think our opportunity to talk today comes at a time when there is a great deal to talk about. We have seen lots of challenges in the high-tech sector over the course of the last year. We are certainly, I think, given the events of the last month, going to see challenges going forward. So I think it is extremely important that there be a fulsome and good, public debate around economic development issues as we go forward.
I have a very short presentation today. I am mindful of the time, that members want an opportunity to ask questions and to examine our views on a variety of issues, so I am going to try to walk through those fairly quickly. Chris is going to move this along for me. Today we want to provide an overview of the department's plans and objectives. We took these objectives from the invitation letter that Darlene sent us in advance of the meeting. We are looking forward to the discussions. I think they are going to be wide-ranging. They come at a time when, within the department, we have gone through significant restructuring. There has been a lot of activity over the last couple of years and we are going to get into some of that. So it is an opportunity to tell our story to the House committee and to have you fully understand some of our objectives and some of the things that we have accomplished as well as some of the things that are challenging us. There is no question that there are lots of those.
Overall, the context for government support for economic growth and development is very clear. After considerable consultation last year, with communities - over 100 meetings across the province, with elected and non-elected officials, with stakeholders - convened by our partners, the regional development authorities, we were able to put together an economic blueprint, if you will, called Opportunities for Prosperity. It was released last fall. The implementation is currently well underway. I brought along one copy of the document. I don't know if people have had a chance recently to go through it.
One of the things that we, in the department, take some pride in, is the fact that this document, while economic strategies and blueprints are never perfect and there are always
opportunities for people to say well, you should have included that or you should have included something else, I think the kind of feedback we have gotten over the course of the last year has been pretty solid in terms of the durability of the policy directions that were set out in the economic growth strategy. There is considerable conformity to both efforts of the federal government in terms of setting policy for economic growth as well as other jurisdictions across the country. So we are pretty pleased with that.
Our department business plan, which is on our Web site, further is derived from the Opportunities for Prosperity document and it really puts together and cements the implementation schedule that we had put forward in the actual document.
One of the things, I guess there are three reference points in introducing this slide that I would want to set out. Opportunities for Prosperity attempted to set out the role of government in setting directions for the economy. It looked at how we leverage our strategic advantages as a province, given the fact that Nova Scotia has a fairly large geographical mass, but it is a small population; it is on the eastern coast of Canada; obviously we are competing with all other jurisdictions. So how do we take and leverage our unique advantages as a province to grow the economy?
The third, I guess, reference point for us in the strategy was positioning government as a facilitator and an enabler and really sort of getting out of the business of actually being responsible for the creation of jobs and being responsible for all of the things that often go with economic development, but rather to create the right kind of stimulus conditions under which the economy can grow on the strategic side, on the tax policy side, on our unique ability to attract foreign directed investment, on our ability to prosecute a trade agenda that makes sense in the context of the goods and services that we have to offer as a province. So those are three very clear reference points for us.
The strategic directions outlined in the strategy really do deal with seven key areas, making sure that we do the best we can to make Nova Scotia's business climate as attractive as it can be. Looking at the strategic infrastructure requirements that support our economy, we are not necessarily only talking about things like transportation and roads and that sort of thing but also, more importantly, building our regional airports, building our Halifax International Airport as a regional hub for the province and being attentive to the issues of the smaller airports throughout the province, and the whole issue of broadband and digital infrastructure that is required to drive e-business and to create the right kind of capacity for businesses throughout the province to be able to do on-line supply chain management. Big companies like Sobeys and Maritime Life and those companies are actually now doing their supply chain management on-line.
Looking at the whole innovation agenda, labour force, the importance of both the demand and supply side of the labour market, looking at investments, growing our export and helping to create regional capacity throughout the province. You would have heard from
Frank some of the challenges that the RDAs face in the more far-flung parts of the province in trying to keep economic growth moving forward in creating community capacity in relatively disparate parts of the province.
The Opportunities for Prosperity document outlined five key areas for growth opportunities and also clearly referenced support for our foundation industries. So foundation industries being really the things that in many cases drive our export potential for the province: ocean resources, land resources, agriculture, tourism, culture and the growth opportunities being broadly the digital economy; energy, and I don't need to say much about energy to this group, you're all attentive to the opportunities that are before the province in respect to this; advanced manufacturing, learning industries and life sciences.
When you think about learning industries, and going back to those reference points that I talked about earlier, about leveraging our strategic advantage, the metrics on our post-secondary educational achievement level in Nova Scotia are higher than the national average, something like 54 per cent of all Nova Scotians have some type of post-secondary training, as opposed to 51 per cent nationally. Our metrics actually compare in the top 5 per cent right across North America. So if you think about learning industries in that context and you think about the potential for these industries to grow over time, Nova Scotia is very well positioned with its health care infrastructure here, its teaching capacity, its medical school, its concentration of universities and community colleges to really be a leader in the area of learning industries.
Life sciences, as well, again, if you think about leveraging our competitive advantages there, we have some great opportunities. These are areas where, while they are small in Nova Scotia at the moment, we are working very hard to grow that potential, to create a cluster around some of these areas that have the ability to attract the highly educated talent that tends to coalesce around these industries and to really put Nova Scotia on the map for the knowledge economy.
Just leaving that, I think one of the other issues that we are looking to, and this is a bit of a change for the department, is to really sort of look at ourselves as a bit of an enabler across the panoply of both federal programs and also supporting our provincial colleagues, so that there is horizontal management with, for example, our Department of Agriculture and Fisheries, which, if you think about those industry sectors, they drive a very large part of the export opportunities for the province, if you think about DNR and the wood fibre industry and so forth. So creating the right kind of linkages with our sister departments and also with the federal government. It is particularly important with the federal government at a time when the federal government through ACOA and arising from the announcement of the Prime Minister here about a year ago on the Atlantic Investment Partnership Initiative, a time when the federal government is making some substantive changes in the way that it is delivering some of its programs and services. We want to be part of that, we want to make
sure that they are properly coordinated. At the end of the day there is one taxpayer and I think the more we can work together with both our provincial and federal colleagues, the better.
One of the things that Opportunities for Prosperity did was it spoke to the issue of what kind of structures we need to have in the province that will support the growth strategy, that will support excellence in economic development going forward. We have developed two separate organizations, a much smaller, a much more focused Department of Economic Development - of which I am currently the deputy - and it was designed to be, really, a centre of excellence for public policy and program management in economic development.
What does that mean in real terms? Well, it means creating capacity around some key areas that are crucial to the future of Nova Scotia. Some of the things that we are building into the department - we are not there yet, we don't have in every case all of the resources in place - include a much more focused approach on trade policy. If you think about the evolution of discussions around trade globally over the course of the last, say, decade, it has been a huge issue. You have the ongoing discussions around NAFTA, around the European Free Trade Agreement, the North American and, indeed, the FTAA - the Free Trade Agreement of the Americas - all of which are issues that we need to have capacity to analyze, to understand, to understand the implications for our economy, to be able to position our economy, to be maximally effective in a rapidly changing world. So we are building in some expertise and some capacity around trade policy.
If you think about the opportunities that arise from government procurement, whether you think about it provincially or nationally or internationally through some of our international financial institutions, there is tremendous opportunity to maximize and to optimize opportunities for businesses throughout the province associated with those activities. So one of the things we are building capacity into the department to deal with is the whole issue of industrial benefits and the procurement agenda, looking at that both in terms of our own - the Government of Nova Scotia's - procurement activity within the province, national opportunities as well as international opportunities.
For example, just to mention one sector, within the aerospace sector, there is currently upwards of $18 billion worth of projects in the pipeline associated with procurement of aerospace: ocean-going vessels, the Maritime helicopter program, the Aurora upgrade, the afloat logistical supply vessels, a whole variety of things; $18 billion worth of procurement that will flow out over the next 10 to 15 years. If you think about the opportunities to create additional capacity to aggregate what is already a very dynamic sector in Nova Scotia on the aerospace side here arising from some of that procurement activity, those are some of the kinds of things that we are building capacity to be able to more effectively drive on a go-forward basis.
Nova Scotia Business Inc., when you really think about it, is the business development arm of government. It is really attempting to bring to bear private sector acumen
and expertise in delivering key business development programs of the provincial government and involved in activities, the standard things that you think about when you think about the execution of a business assistance program, business attraction, the whole trade and investment file. We are adding in that area a brand new program, recognizing that upwards of 85 per cent of Nova Scotia companies are small and medium enterprises; we are adding in a new component there that emulates programs in a number of other jurisdictions called business retention and expansion.
One of the messages that we heard very clearly during the consultation on the strategy was that we fall all over ourselves for outside investors, but we don't do a very good job around supporting indigenous Nova Scotia businesses and so on. So, the business expansion and retention program is really designed to address that issue, to support indigenous businesses in Nova Scotia to grow and to improve their export prospects, to improve their ability to work in the e-economy and some of those kinds of things.
The mandate for the Department of Economic Development is really to manage government activities in support of economic development, again emphasizing the partnership with our government partners, with community agencies, our RDAs and affiliated agencies like the Nova Scotia Business Inc. and Innovacorp, the Film Development Centre and so forth. Chris, I am just going to get you to pop up the next slide and we will speak to a few of those.
The lines of business for the department include a new business climate branch. What we want to do there is to monitor the business climate in the province, to benchmark best practices in other jurisdictions, to offer thoughtful and compelling policy ideas on how we can improve the business climate in Nova Scotia. Clearly it is going to involve working closely with other partners, with our Department of Finance particularly, but also with, for example, the Petroleum Directorate and others, our Environment and Labour Department, where you have workers' compensation and occupational health and safety programs and so forth, so trying to make Nova Scotia the best province in which to invest and to grow the economy.
Labour market demands. We like to think of ourselves as a bit of a translator from the private sector to government, whether it is the Department of Education or indeed the community college, to be a place where the private sector can come and offer some suggestions and ideas around labour market demand issues and that we can then review those with key others so that we can start to get a real dialogue around the supply and demand side of the labour equation.
Clearly, prior to the events of September 11th, part of the attractiveness of Nova Scotia as an investment destination has really resided in our labour supply, in the quality of that labour supply, very well educated, universally recognized to be well educated and driven, in many ways, by scarcity or supply constraints south of the border. Obviously, post
September 11th, some of those circumstances are changing. Unemployment is creeping up in other jurisdictions and so forth but we really need to take seriously the labour force issues and make sure that is a competitive advantage that we have, as a province, and we have to maximize that and we have to, on a go-forward basis, make sure that we continue to nurture it and develop it properly.
Knowledge management is the whole area of basically - I mean, we live in an information age and the half-life of new information is something like three months these days. So you know one has to be really constantly, if you are going to have good, competitive intelligence, if you are going to know where your province sits on certain key indices and metrics, it is important that you have that capacity to look at that.
Managing strategic projects. I will give you an example of this. I talked a little bit early on about the opportunities that arise in the aerospace sector. We have a number of strategic projects in that area that we are attempting to develop and nurture and manage complicated projects that involve interlocution with both the private sector, with other departments and levels of government and so forth, so that is an area that the department would continue to work in.
Rural development and communities in transition. We really are positioning ourselves there to work with the RDAs to really support the work that the RDAs are doing in terms of rural development. We have a working committee established with the RDAs to help sort out roles and responsibilities arising from the restructuring of the department and as well arising from the evaluation that had been done on the regional development authorities about a year ago - Chris? - I think.
Government relations. The department would work with the Intergovernmental Affairs Ministry, with the federal government and with the municipal level of government in terms of dealing with issues impacting on the economy and indeed with international governments because many of our projects have international reach. So that is a key area of the new department.
Within Shirley's division, we have the potential to manage through a small cadre of staff who have expertise in managing programs: the Provincial Employment Program is perhaps one, the Economic Diversification Agreement is another and although that agreement is reaching its end, there is still probably about two more years of work there in terms of the wrap-up and completion and so forth.
So progress, the new department is up and running. We have a comprehensive body of work underway. A number of the deliverables that we are working on were outlined in the economic growth strategy and so forth. I think most of you recognize and understand that it takes a while for new organizations to find their sea legs. I think the management literature
suggests that it is somewhere between two to five years before a new organization becomes acculturated to a new way of doing business and so forth.
I want to be clear in saying to the committee that there is a lot of work to do here. We are building capacity, we are bringing some new people in to bring specific kinds of expertise to bear. It is not all done yet, it will continue to require a lot of effort and nurturing but it is well underway. Our team is quite excited about the opportunities.
I want to spend a moment on NSBI, and I want to underscore that NSBI is a separate organization. The CEO has been recruited; the CEO reports to the board of directors who are responsible to the Minister of Economic Development. I am on the board of directors of Nova Scotia Business Inc. but the NSBI does not report through the department. We are involved in setting strategic direction and strategic policy directions for NSBI in some key areas that align with government policy. But again, this organization has been and is being set up to be separate and distinct from the department, to allow it to focus on its mandate and line of business. The lines of business are investment attraction and trade expansion. We talked very briefly about the business retention and expansion program and the business financing elements of the organization.
Current status. The board is in place. We got quite good feedback from a variety of sources on the quality of the board appointees, they seemed to be corporate leaders in Nova Scotia. We got a good review by the Metro Chamber of Commerce and other boards of trade throughout the province. Our CEO has been hired, Stephen Lund, he has been on deck for a couple of months now and Stephen's background is in the area of venture capital, business and business finance, so he brings a strong orientation to the job of being a leader in the business community.
Management positions - you would have seen many of those advertised in the newspapers - are currently being filled. A strategic plan is being finalized and we are working through all of the early elements, again, of getting any new organization up and running.
The strategy talked about some of the deliverables that we would be having over the next year to year and a half. We felt this was really important because for the strategy to have credibility and to have longevity, our strategy is really looking at 10 years, it is not like next year or the next year. We thought it was important that there be touch points and an opportunity to update that strategy, to mark progress and so some of the things we have been working on are an investment attraction framework and lending regulations.
We have had a private sector company help us with reviewing our lending practices and our lending program and establishing excellence in that area on a go-forward basis. We have worked with the federal government, our partners, Enterprise Cape Breton and the new
corporation that has been established to operate the Cape Breton Economic Growth Fund. They have that up and running and have had some success with that. There are a number of committees that have been struck under the economic growth fund to look at strategic opportunities in Cape Breton in key areas like cultural industries, film, environmental industries, the IT sector, and a variety of others, so there is quite a bit of cross-fertilization between other levels of government, between local players, the local business community.
We have been very pleased with the quality of directors of the Cape Breton Economic Growth Fund, senior business leaders who have - although they may not necessarily reside at the moment in Cape Breton, they certainly have an attachment to Cape Breton - brought a degree of expertise and vision to the effort. There has been a local advisory committee struck to bring local people to the table to offer advice and ongoing guidance, so we are pleased with the progress, really, that we have been able to make.
As a department we work quite closely with Rick Beaton and his staff in Cape Breton. We had an opportunity to sit down and do a six month review between our senior teams in June past. Arising from that there was quite a bit of work and we are following that up. We talked about the energy strategy and again, while we are not managing that process as a department, members will know that that is moving forward and coming to a conclusion, an extremely important policy document and blueprint for the future, given the importance of the energy industry to Nova Scotia and to our future.
The red tape task force was set up by government in the early days of its mandate to try to deal with some of the issues around permitting, approvals and regulatory fairness and equity for business folks. Chris has led with the RDAs an effort to develop a new policy, to underpin CED, and while it has not been released yet, it is well along the way.
The Business Climate Index. We are working on that particular document at the moment with Finance. Ourselves and Finance commissioned a bit of a review last winter to look at some of the key issues around the business climate in Nova Scotia and we want a report out on that and really use that business climate index as a kind of benchmark to measure progress over time, to see how things are proceeding in that area.
There is work underway on the concept of Brand Nova Scotia, linked to some efforts of the federal government, with a couple of international branding pilots that they have underway. As part of that, we have a new Web site called targetnovascotia.com and if folks have not had a chance to look at that, I would invite you to go into the department's Web site or to NSBI's Web site. It is a wonderful tool, a geographically referenced database that allows an investor or site selector to look at the various key indices within the province, the distance from rail lines, what type of power generating capacity is there, what kind of educational institutional infrastructure is there, the nearest hospital, retail, a whole variety of things, so an excellent tool. We are working with the federal government to develop an integrated Nova Scotia trade plan that makes sense in the context of what market should we
be working in, and why, based on competitive intelligence and in some cases, in-market support. Business retention expansion we talked about, and the rest are fairly self-evident.
We are negotiating with the federal government a provincial nominee program to facilitate immigration into the province. An important element of attracting new talent to our shores and increasing opportunities for business growth. We are going to do a kind of first report card over the next two or three months on exactly what we have been able to do over the course of last year. We are trying to hold ourselves accountable for what we said we were going to do and what we have actually done. There is no question, we have not been able to do everything we perhaps wanted to do, but nonetheless, I think we have made some promising progress.
Just a quick note on some of the investment opportunities that we have had over the course of the last year. A total looking out - now you understand that some of these will flow out over time, these are not jobs in one year - so with some of the payroll rebate investments, a total of 3,539 new jobs and quite high-quality jobs, relatively speaking and the maintenance or creation of 1,354 jobs as a result of loans and loan guarantees. Folks, this is an imprecise science.
When Secunda Marine modifies a vessel over there and you start to look at the direct and indirect benefits that accrue from that, we may be able to count clearly the direct benefits. When you start to look at the indirect benefits and, you know, the supply chain for that company and so forth, it becomes - the precision of it. So what I am giving you are benchmarks here.
We are strengthening our relationship with the RDAs and redefining in some ways that relationship and leveraging other economic development opportunities, working with the Halifax Port Authority, the Strait area, and indeed Sydney, around some aspects of port development, funding support by way of loan guarantees for offshore supply vessels. There are a number of key industrial development initiatives that we are working on that are really confidential at this point. Some of them are in the aerospace sector, some of them are in the advanced manufacturing sector. There are things that we hope will come to fruition.
I haven't covered our aligned agencies: the Film Development Corporation, which is a real powerhouse for the province and a source of great pride for us; Innovacorp, the province's innovation corporation which really has done a great job and has given yeoman leadership in the area of incubation and commercialization of new technology and provided a lot of support for life science industry development, some of which is now being levered into the work under the Life Science Development Association, LSDA; the Trade Centre, which is again a phenomenal success story; working on really fitting up and making the Atlantic Exhibition Park a kind of showplace, showpiece facility for the province - have I left any out - and the Waterfront Development Corporation, which we are quite proud of,
recently received an international award for the design of the waterfront strategy for metro on a go-forward basis.
That is our opening review. Darlene was insistent in saying she needed 15 copies and we have those to leave and we would take any questions or comments.
MR. CHAIRMAN: Thank you, Mr. Deputy Minister, your presentation was interesting as always, very professional, you presented it very well, very informative. I think you have experience before a committee and you know what the process is and we will open it up for questioning now. I would just like to indicate that perhaps we may be able to hear some background noise here today, but that is because our windows are required to be open because of air conditioning problems.
So the first questioner is Mr. Downe.
MR. DONALD DOWNE: Mr. Chairman, to Deputy Ron and staff, an excellent presentation. I have known Ron for a long time and if you ask him a question, it could take about an hour to get the answer. So in fairness today - I have the same problem - in light of the fact we only have a short period of time asking questions and invariably we would run out of time, I would ask if he could shorten them as much as possible.
Last week we had the RDA and clearly the development of the RDA back in 1996 was a great success for Nova Scotia and the work that Chris Bryant has done has been very good and well appreciated throughout rural Nova Scotia, from one end of it to the other and I want to congratulate him and his staff for that and, Shirley, with the issue of the Executive Director of Program Management, what a job to do right now.
We have been saying all along that balancing the budget and getting our fiscal house in order is important and critical but growing the economy is equally important. I was impressed with the number of jobs that you were talking about with different plans. The GDP in 1999 was 5.2 per cent, in 2000 it was around 3 per cent and this year, gosh knows what it is going to be, but prior to and post-September 11th, they are certainly below those numbers that we were hoping for. So the economy, the GDP side, is slowing down and that's a concern. Continually trying to grow the economy is a critical component of meeting the balanced budget situation.
One of the areas that you talked about was taxation. Part of your strategic plan was on taxation. The corporate tax was just announced recently that we are going to extend it another year. What impact is that going to have, do you think, between a $45 million and $60 million impact on business at a time when the economy is freezing up a little bit and slowing down, what further impact do you think that will have, major or minor?
MR. L'ESPERANCE: I take your point, Don. It is not just a Nova Scotia issue, these are global problems that as I noted that we have both, we were experiencing a slowdown prior to September 11th and certainly the events of September 11th have not helped that overall. There certainly are areas where in the new world that is coming forward, there may be some areas where it will actually create some growth for the province, Nova Scotia may become a more attractive destination for tourism. There may be more opportunities for some of the federal procurement initiatives and they may move forward more quickly. So I don't think it is all bad news.
On the specific question of the large corporation taxes, I think there is an understanding within the business community of the fundamental importance of Nova Scotia getting its fiscal house in order as being consistently - when we went out through the economic growth strategy consultations, the one single recurrent guaranteed theme that came forward whether you were in Glace Bay, whether you were in downtown Halifax with some of the senior business leadership of the larger corporations in Nova Scotia or on the South Shore in your area, Don, the one thing that people said the overarching imperative is to get our fiscal house in order. I think if you look across the country, those provinces that have been able to get in a positive cash position relative to others that are not, had a great deal more flexibility within their economy, have been able to provide tax cuts and to prime the pump in other ways. So, I think there is a clear understanding.
No one is ever happy when taxes continue or the rules of engagement become less clear, but certainly given the events of the past month, other provinces, like the big, dynamic, rich Province of Alberta came forward pretty quickly with some fairly tough medicine in respect to keeping its economy on an even keel. So clearly I think there is probably an appreciation within the business community of the importance of that single, paramount imperative of balancing the budget.
MR. DOWNE: Ron, on the issue of taxation, the chambers of commerce weren't happy about it but they do understand both sides and I appreciate where you are coming from. But, provincially, we probably have the highest percentage of personal income tax, of the federal tax, I think, in Atlantic Canada, and corporate taxes are certainly up there. We talk about the other taxes and yet we are trying to create an environment for economic development. So clearly I think the challenge is internal with the department and Finance and I am sure you will struggle through that. I just want to bring that to the forefront.
I do have a question with regard to film tax credits. The music industry has also talked about a tax credit. Multimedia, it is all going to Quebec and other jurisdictions. Can your department indicate their continued pressure on trying to bring forward those tax initiatives, is that still ongoing? They are important to the industry.
MR. L'ESPERANCE: No, I take your point on that, Don, and I know of your interest in the film industry and without question it has been a great story for Nova Scotia and it is
not only film, because I think everybody recognizes the convergence in that industry. Don is quite right in his observations that we are really talking about so many other opportunities, new media and a variety of other things like the music industry, the cultural industries that arise from that. We certainly are in continuing dialogue with the Department of Finance around those issues. The Film Development Corporation and its board of directors have been very effective advocates around a lot of those issues. We have taken the opportunity to meet with a number of the stakeholders associated with new media and the production opportunities that arise from that. This is very much a national issue as well, in that there are national discussions underway. The answer is yes, we are quite vigorous on that file.
MR. DOWNE: It is an important one. It was mentioned here many times. You mentioned that the economy was slipping before September 11th. We talked about how tourism might rebound, might be a benefit, yet our tourism numbers were down prior to September 11th and we don't know what is going to happen after that. We heard that P.E.I. tourism numbers are up. It's a hard one to read, but that is a big issue with the province. We have pockets that are doing well and others that are doing extremely bad. Maybe the focus, you are telling me, is that you are going to work with the Department of Tourism and Culture in developing a strategy with regard to tourism.
The issue on airports is a key one. We lost Icelandair. We fought very hard, and you will recall how we worked so hard to get Icelandair to Nova Scotia. The Washington track is going, the Boston track is going, Newark is going, everything seems to be going to Ontario. I know the Premier put a press release out about each the next day, saying you were going to do something, which is good. I support that initiative. I just think we need to make sure that we put as much pressure on Ottawa as well as those airlines to make sure that Nova Scotia doesn't lose out on that economic opportunity, because it is a huge benefit from an employment point of view and growth area. I would ask you to pressure with your minister a very strong effort on that front.
In growth, we talk about energy. Without question, no matter who you talk to in the energy sector, they will say, we need a minister or a department or somebody who is going to champion the cause in economic development in energy. Whether they add more to the department or they add another department or they reshuffle the deck, however they want to do it, the bottom line is industry is saying they are not being dealt with the way they want to be dealt with, right, wrong or indifferent. They need more help, somebody to champion the cause, to bring them through the maze of complications of dealing with government. That strategy is coming forward, the Premier hinted about it.
I would hope that we would be seeing, in that strategy, some focus in regard to how these industries are going to feel we are open for business. Not that we need to change our regulatory management, we just need to make sure that we can show them that we care and that we want to make jobs in Nova Scotia. We can have the highest standards in the world, I am not against that. My gosh, it just seems like everybody's frustrated, and that is wrong.
That is a wrong signal. I think you would concur that that message has been pretty clear in the province at this point. I hope we can correct that problem that is there.
On the issue of trade, as I have suggested before, the music industry is one that is a big industry here. We have trade missions happening throughout the world. As I have suggested before, have you ever thought of doing a trade mission specifically on music? It is very hard for people to enter into different areas. We do it with lumber, we do it with IT, we do it with virtually everything but the issue of music. We discussed it here at a committee meeting one time. I would suggest that if you would take it back and take a look at it, meet with the music industry, they seem to be in favour of it, but a made-in-Nova Scotia mission on developing opportunities for our musicians to be able to access other markets, it is a huge problem for us. We can't get them down there, they can try to get a gig but it is hard to get in the door. I think there should be a focus on that. It is an industry that we should be building on because we have a lot happening.
I am scared I am going to run out of time here. There are so many other questions. (Interruptions) Red tape commissioner, who is it?
MR. L'ESPERANCE: The fellow who heads up the red tape task force is David Grace.
MR. CHAIRMAN: That's it, Mr. Downe. Mr. Epstein.
MR. HOWARD EPSTEIN: Mr. L'Esperance, thank you, very interesting, wildly optimistic I would think but quite interesting nonetheless. I want to ask, if I could, about the immigration action plan that is noted at your site and that was on one of your sheets. Can you tell me a bit about that and in particular what I want to know is this, can you explain the underlying rationale? I wonder, as well, whether, in the figure that you are talking about over the next 10 years of net in-migration to the province, are you talking about people from the rest of Canada or if you are talking about people from outside of Canada, in the traditional sense of immigration, immigrants to the country? If that is the case, what I would particularly like to know is what the plans are to assist and support those people. I note, for example, that Quebec has a whole government department that is dedicated to supporting immigration.
I wonder what kind of arrangements you are talking about, back and forth, with the federal government. I'm wondering whether the government here would be hoping that supports would come from non-governmental organizations, or whether you see some role for the Department of Economic Development or some other agencies. I wonder if you could talk about those things.
MR. L'ESPERANCE: Sure. As you know this has been a burning issue with business leaders and with community leaders for some time, and we have been working with all the partners, MISA, the immigration settlement folks. We had a summit meeting with them,
probably about six or eight months ago, involving ourselves, HRDC, the Canada Immigration Commission and CCRA, because, as you know, the intersecting jurisdictions on some of these issues are quite complicated and far-flung. Part of that engagement was to sort of help all the government partners to, if you will, develop a rational plan around immigration generally. It involved our Education Department, Education is the lead department on immigration matters, and it is the Minister of Education who is the lead on general immigration matters within the province.
To address some of your questions directly, the first step of this process is to get the provincial nominee agreement negotiated and signed with the federal government. At the same time, there are ongoing opportunities through regular channels to support people who are immigrating to the province, either business immigrants or otherwise. We continue to do that.
MR. EPSTEIN: There is some program in place?
MR. L'ESPERANCE: The immigrant entrepreneur program. Another focus that we have on the immigration file is around the whole area of rounding out some of the issues for business immigration and business visitors to the province. We have been working with the Halifax International Airport Authority and CCRA and Canada Customs and Immigration in HRDC, particularly around facilitating access to specialized expertise that is required in the province when new highly-technical developments are taking place in industry. I won't name specific industries, but you can probably guess where you are using proprietary technology and you have to bring in somebody who has the specific skills for that area. So we are working to facilitate some of those areas, because we have experienced some challenges in the past in that area.
Finally, in terms of educational marketing, we have had a very vigorous educational marketing unit in our department. A woman by the name of Ava Czapalay heads that up, and she does just a terrific job. She works with universities around the province to attract students to Nova Scotia. Part of the focus of that work, as well, is to look at opportunities, when students are here, for family members and so forth, to broaden out the immigration equation a little bit and to market the province as a destination.
As you would know, Howard, one of the challenges, in terms of immigration in Nova Scotia, is that sometimes people tend to gravitate to the larger centres because there are larger ethnic communities there or they have family there and those kinds of things. In part, I think on the social side and the support side, we need to work closely with the agencies and organizations that have been set up to support immigrants and to create that kind of nurturing place, so when people come to the province we have a spot for them.
I had an opportunity yesterday, coincidentally there was an event down at Pier 21 for immigration, celebrating some success in the province around immigration. It was put on by CIC and CCRA. They honoured a small community church in Stewiacke that had set up, as a kind of community project, a sponsorship for immigrants. They were honoured yesterday. I am sure there is something in the press today. I think it is an issue where there is a lot of work to be done on the file. I think we are making good progress on it. It is complicated because people do tend to gravitate to the larger population centres, and there is not a whole lot we can do about that. We have to kind of put our best foot forward and make sure that we create an attractive, nurturing and supportive environment when people come. The reality is, if you are in a new country and you have family and friends in Toronto or Vancouver, the likelihood is you are going to want to gravitate there, so it is a challenge.
MR. EPSTEIN: I want to be clear. I think this is a very good thing, I was just hoping that the department would be able to move along with this and be in a position to announce some of what its plans are more definitely rather than just seeing it as a bullet point among many others. I think there are a lot of resources in the community, people who would be prepared to weigh in and help along the lines you have indicated. I will yield to another member.
MR. CHAIRMAN: Mr. Chipman.
MR. FRANK CHIPMAN: Ron, I would like to thank you for your presentation today, and your group. There is a lot of anxiety in the news. You read about it every day in the paper. We are a large producer of seafood in this province. We have the longest undefended border in the world. I like to accentuate the positive a little bit here instead of dwelling on the negative, but how has our economy shielded our province from some of the negative effects, economic disruptions, from the September 11th attack in the U.S.?
MR. L'ESPERANCE: I think that is a very good question. When you look at the Nova Scotia economy, relative to let's say other Atlantic Provinces, we tend to be a bit more diversified, we tend to be able to, I think, withstand some of the shocks with a little bit greater ease than perhaps some of the other provinces. Halifax and the Halifax area, when I think about the Halifax area, I think about the greater Halifax area because it has really become a kind of growth engine, 100 kilometres out. We have some real strength and some real diversity in that particular economy.
I think the business community, it is interesting because after September 11th, one of the first things that I did personally was I called up Dick Smythe at the Canadian Manufacturers Association because we started to get this kind of steady stream of concerns around transporter shipping and a whole variety of things. When you think about it, the Country of Canada does $1 billion worth of business with the U.S. on a daily basis. When
you look at some of the manufacturing models, Lean Manufacturing, Just in Time Production and so many of those things, the supply chain is really very much dependent on good transportation and quick transportation and all of that kind of infrastructure being in place.
What we have been attempting to do is to work with business and industry. You mentioned the fish products issue and the transport of perishable goods and a variety of things like that, we have tried to work with our private sector partners and public sector partners to see if we can't support and influence normalization of things back to a pre-September 11th era. I know the Canadian Manufacturers Association, which Dick heads up, and their national association which Perrin Beattie heads up, are working vigorously on this whole issue.
Those are just a few ramblings around your question. I think, in large measure, the economy in Nova Scotia has successively been diversified to the extent that we are in quite good shape. Obviously - I am looking at the honourable member for Eastern Shore, and I know he is going to bludgeon me with this before too long - there are some parts of the province where there certainly are challenges. I think, on balance, the economy is quite diversified. With some of the things that are in the works, the energy opportunities will serve to insulate to some extent, will serve to create greater volumes of investment than might otherwise be the case. I think it is not, as you rightly point out, all bad news.
MR. CHIPMAN: In other words, we are survivors here.
MR. L'ESPERANCE: That's right.
MR. CHIPMAN: Just another question. There has been a lot of comment and publicity about the payroll tax rebates that have been given to companies in the province. I think there is a misconception out there that cash is actually changing hands, we are giving cash, but that is not the way it works, is it?
MR. L'ESPERANCE: No.
MR. CHIPMAN: Could you clarify that a little for us?
MR. L'ESPERANCE: Absolutely. I appreciate you bringing that up, Mr. Chipman, because I think, despite our best efforts to educate folks, there is some misapprehension about what the payroll rebate program is about. It is really a performance-based incentive, and it actually is an incentive whereby the department, the government through the department, rebates a portion of the payroll taxes back to the company based on the company reaching certain agreed upon benchmarks. Those are audited, in terms of the number of jobs created.
The bottom line is there is always a value proposition for the province, it is never a complete rebate of the payroll taxes for the jobs created, there is always an incremental gain.
Obviously, in the earlier stages, that incremental gain is less than if all of the payroll taxes were coming to the Treasury, but over time, as those jobs are maintained and retained, with the indirect benefits, it is certainly good for the Treasury, and, I think, a responsible way, in a very competitive environment where many other jurisdictions are preferring much richer and much more robust incentives.
What we have tried to do is position our assistance to business programs so that you are not leading with the chequebook but rather selling the value proposition of the province, selling the competitive advantages of the province, everything from the human resource capacity that we have here with our workers - excellent workers, great reputation, well educated - our broadband infrastructure, our ports, our highways, our proximity to other markets, rail access; a whole variety of provisions.
MR. CHIPMAN: It must be fairly hard to compete because other provinces are offering similar programs. I guess it is not necessarily who offers the most attractive package, but where these companies really want to locate. Would that be part of what you call creating a capacity for economic expansion through programs like that? Let's use an example, let's say $10 million in payroll tax rebates over a certain period of time, or whatever figure you want to use, how long does it take? That is not a cash giveaway, it is money that you don't actually receive as your rebate back. What term of time would you have to wait until that period was up, say 5, 10 years, and then it all comes back to the province in the form of revenue?
MR. L'ESPERANCE: Absolutely. It is usually not the 10 year mark. I think the longest payroll rebate I have seen is five or six years. On average, they would be a three or a four year prospect. They are usually not that long, Frank. Again, I think you are putting your finger on a very important point. Take the recently announced opening of the Register.com facility down in southwestern Nova Scotia. Here you have a company that has a tremendous book of business as domain and URL growth take place in terms of Internet registration and domain registration, a potential real growth opportunity in their business. That is a company that came from downtown Manhattan.
A great story, a great Nova Scotia story around investment because, as Mr. Hurlburt would know, there was strong effort by the municipal levels of government, and not just one municipality, this was a situation where a number of the municipalities in southwestern Nova Scotia got together, really put some assistance together in terms of a building and vigorously marketed their community to the company. The result is a great story, creating some opportunities for local employment. When you start to look at the multiplier effect in the local economy for supply, the smaller businesses that supply that company, the other providers, the utilities, it is a great story.
MR. CHIPMAN: A fine example of groups working together.
MR. L'ESPERANCE: Absolutely.
MR. CHAIRMAN: Ms. McGrath.
MS. MARY ANN MCGRATH: Hi, Ron, nice presentation. I wanted to go back to something you spoke about very briefly, which was the shipbuilding policy, or the lack thereof, and the loan guarantees that we got into for offshore supply. In the absence of a shipbuilding policy, I know that is where we went, if and when the federal shipbuilding policy does come into effect, do you have any idea what effect that policy may or may not have on the existing loan guarantees that we have out there now?
MR. L'ESPERANCE: It is a good question. Of course the whole debate around the shipbuilding industry and capacity in Canada has been a very interesting one, an extremely interesting one from a policy perspective. It really does speak to the issue of globalization, because in many ways the Canadian shipbuilding industry cannot compete with the Far East, given the level of subsidies and some of those kinds of issues. It really speaks to the issue of us needing to know our competitive advantages and having our trade policy and understanding the impact of global regulatory structures and so forth.
To get to your point directly, I think the shipbuilding policy, I commend the federal government in leading the national effort on this because I think in some ways it has been a sleeper. Successive Premiers have put this issue - Atlantic Canadian Premiers of all political stripes - before the federal government over the course of the last four or five years. Our current Premier has been very vigorous on this file as well. It was difficult to get it on the radar screen of the federal government.
There was one occasion where a visiting federal minister was actually taken up to the Halifax Shipyard and shown through the Atlantic Hawk, which at the time was the second offshore supply vessel that the Irving yard had built. What a terrific vessel it is. When you look at those vessels, they are absolutely world-class and recognized as such. That vessel, I think, in its history actually went into the North Sea spot market, because there wasn't a solid contract for charter hire for it here at the time, and got rave reviews in a European context, just a great vessel.
I would expect, Ms. McGrath, that the current loan guarantees that we have in place will stay in effect in the presence of a shipbuilding policy, the final stages of which - I am not sure if there has been a final, public announcement on those; I think they are close but not quite to the goalpost yet. Depending on what the final resolve is, what kind of financing arrangements are put in place for vessels, whether there is an opportunity for depreciation on a more rapid basis, whether there is a lengthening of the term of financing and amortization of the financing of vessels, all of those factors, and whether, in fact, the shipowner or the shipbuilder is going to be the beneficiary as one or the other or both, those are all nuances to that policy that will impact on how they apply, really, to Nova Scotia yards.
One of the key elements of the discussion around the shipbuilding policy was to try to get the federal government to look at strategic procurement. For example, these afloat logistic supply vessels that are under discussion, there has been no, in my understanding, firm decision on whether to move on those or not. If, in looking at its procurement requirements, the federal government could schedule things so that there is some continuity of work over time or that you at least start to be able to build an industry around niche markets associated with particular parts of a shipbuilding contract.
If you think about the frigate program, Saint John Shipbuilding, I don't know what their investment was, probably $100 million, and when you think of the complexity of those new builds and all the different areas of expertise, the systems integrators for the emission systems and integrating all of the various weapon systems and all of that stuff, there are huge opportunities for knowledge-intensive business and industry to create clusters of excellence. Yet, it is a boom-and-bust cycle. Saint John Shipbuilding, in my understanding, it may be closed but it certainly has no work. The Davie shipyard in Quebec, I think, is in real financial difficulty.
We have to find a way, strategically. We can't compete with Korea and with China, in terms of shipbuilding, new builds, you have the Jones Act next door, which is a complicating factor in terms of the North American markets, so it is an issue that I think if we can work with our federal partners and some of the kinds of initiatives that were discussed quite vigorously during the shipbuilding discussion can be brought to fruition, I think it would help the industry without question.
MS. MCGRATH: I guess the short answer is that until we know more details about what the federal policy may look like we have no idea. It may wipe out the loan guarantees altogether, it may not. I understand your points about some continuity in the market, because I know that Irving went through an awful lot of upgrading, both in Saint John and Halifax, to do the military contracts, and then more upgrading in Halifax to do the offshore contracts. There is capacity in the industry itself currently for 18 to 20 of those offshore supply vessels, but no idea whether or not we will have the climate we can afford to build them in. At the same time, they have to build the expertise within the marketplace and the workforce to carry that forward, and then hope they can hang onto it or it goes somewhere else.
MR. CHAIRMAN: Mr. MacDonell.
MR. JOHN MACDONELL: Mr. L'Esperance, thank you for your presentation. Mr. Downe wasn't far off the mark when he spoke about your ability to give an answer, and he also made the point that he was in that same ballpark as well, the only difference is you do give an answer. (Laughter)
MR. DOWNE: I don't think I said that. (Laughter)
MR. MACDONELL: I am not usually a member of this committee, so I am finding this interesting. I have concerns about the economy of the province, certainly when it comes to rural development issues. I find it really interesting that the federal government will look at a program around shipbuilding to make the industry more competitive here compared with other jurisdictions where they are getting help; also, the air service, the airlines, to look at helping them. It sure seems to be difficult to get the federal government or governments anywhere to look at agriculture or those issues. WTO and other related treaties really seem to hammer agriculture and that sector far more than some of these other sectors.
I want to ask, and I don't know if you can be specific or not but I will use an example as a concern and if I am off-base you can tell me. Recently within the last year a mill that produced hardwood flooring - I think in the Tatamagouche area, Northern Lumber - went into receivership. The problem they had was they couldn't get hardwood to produce the product. This is the kind of thing that the province talks a lot about, value added, trying to attract industries that are concerned about producing value-added product, create more jobs, get more value. The owners of that mill had to compete with a large mill in the New Glasgow area, Savoie/Dickson, and it seemed that most of the hardwood was going to Savoie/Dickson which was milling it there and then sending the hardwood lumber to their mills in New Brunswick to produce hardwood flooring.
I am curious as to whether that mill here in the province, Savoie/Dickson, would have gotten Nova Scotia taxpayers' dollars to essentially put Nova Scotia mills out of business? If that is possible, I think that is something I would like to see the government look at. If those dollars are going to be made available to businesses that come in from other provinces, at the detriment of Nova Scotia businesses, there has to be some component in the plan that ensures they make some supplies available to Nova Scotia business. You may not be able to speak specifically about that but if you can, I would appreciate it and whatever you could say.
MR. L'ESPERANCE: I can't speak specifically about the particular company you are talking about but conceptually, one of the clear guidelines associated with any type of business finance is to look at the business plan and the business case. Clearly, it would favour something associated with value adding. We would generally not be in favour of simply supporting a business or industry that isn't doing the value add here. We would want that on the basis of reaching some agreement with a particular company to make sure that that happens. I have seen that happen and they are often tough negotiations and they are tough discussions. I have seen it happen recently in the Cape Breton area around a segment of the fishing industry where we had a very good result at the end of some very tough negotiations with the requirement that some value-added capacity and processing capacity would be put in locally.
The other thing your question raises is the whole issue of displacement. Generally, another one of the criterion associated with business finance is to make sure you are not, by
virtue of helping one business, putting an unnecessary burden on another business as a result of that.
Finally, on the wood fibre issue, there are a couple of files that we work on where key companies in Nova Scotia are having problems sourcing particular varieties of wood and wood fibre. In some cases they are having to bring wood in to supplant lack of availability here. In those kinds of situations we work with the Department of Natural Resources and try to find a way through the leasing arrangements with, in some cases, the pulp and paper companies and in some cases the Crown lands assets and those sorts of things, to try to find a way to get fibre to people in a way that allows a number of interests and competing interests to co-exist so if there is a plantation of hardwood in the middle of lands leased to a pulp company, we can often negotiate a way to get that fibre to - as long as it can be efficiently accessed and dealt with - the competing interests.
There is quite a bit of work done in that area and we could certainly do some research off-line on the particular company that you mentioned and we will do that and let you know privately, whether or not there was any provincial government assistance associated with it.
MR. MACDONELL: I would appreciate it and I like your point about working with Natural Resources. I know you had mentioned earlier in your presentation about working with your sister departments, so some days it certainly feels as though departments work on their own. If companies have access to Crown lands and then we have to go back to bargain with them to get access to wood that actually belongs to the province, there is something wrong with the way we write those deals. I certainly don't want to see the companies in a situation where they think something is being offered to them and they plan on that and then have it pulled out from under them, I am not talking in those terms. Stewardship is one thing and looking out for the interests of everybody else is another.
If I have the chance for another question, I would like to come back.
MR. CHAIRMAN: Mr. Dooks.
MR. WILLIAM DOOKS: Ron, I thank you and your colleagues for coming in today. I certainly enjoyed your presentation and I share with you your enthusiasm for the future of the economy of Nova Scotia. Ron, you are well aware of, and we have spent many hours talking about, the economy of the Eastern Shore. I don't think it is news to any of my colleagues sitting around this committee that indeed, we are in trouble there. The economy is at a stalemate, it doesn't seem to get any worse but on the other hand it doesn't seem to get any better. I am not going to say anything negative here today, I know your department and the resources you have are focusing on the Eastern Shore but as I said, I guess we have to judge that by results and I am sure some positive things are going to come down the line.
What do we do with the very rural areas that are having problems developing? First you have to look at it and ask, why are we having problems developing, is it our attachment or partnership with greater Halifax? Is it that we are too close but not far enough? Why would someone open a plant in Sheet Harbour when it would be more lucrative and easier on supplies and demands in the Burnside area? Is it our infrastructure? Is it the position of the federal government? What has the federal government been doing to help out the economy on the Eastern Shore? These are some of the questions I ponder and some of the questions I ask. I am constantly lobbying for a better way of life for the people I represent.
My area is very diverse, you know the whole story. We have Musquodoboit West that doesn't seem to be experiencing any of the difficulties of Musquodoboit East. Unemployment is very high and would be equal to some parts of Cape Breton, Glace Bay, New Waterford. Our population is aging, it is declining and what support are we getting from the federal level of government?
Usually I never, ever go outside our own level of government, but it seems to me the new approach, although the rest of Nova Scotia may share and grow in that direction, I think we may have to take a step back and accept and look for some of the old approaches to developing the Eastern Shore. I think it is necessary for all levels of government - municipal because we are part of HRM, provincial, and federal - to sit down together and ask what is the problem, how can we solve it and how can we fix the employment problem on the Eastern Shore, the economically oppressed economy?
I think it is important that the governments actually - I wouldn't want to say buy, but - encourage with incentives, with new programs, to lobby for industry to locate on the Eastern Shore. We have the workforce, we have the numbers, people are willing and want to go to work but it is pretty hard for someone to travel each day from Ecum Secum or Moser River to Halifax and return.
As a matter of fact, a couple of weeks ago I was visiting the area with the Minister of Finance and a situation came up and I had to actually hitchhike back from Ecum Secum to my home in Jeddore - through no fault of the Minister of Finance. While hitchhiking, a fine young gentleman picked me up and in conversation with him on the way to my home in Jeddore I asked him where he was travelling to. First of all he said, you are welcome to have a ride but it is going to be a fast one because I have to get to the shipyards, I'm working tonight. He was travelling from Ecum Secum. As a matter of fact, the gentleman was Jerry Pye's nephew and he was travelling from East Ecum Secum, which is even further than my riding, to the shipyards and back each day. His family lived there. Back and forth, can you imagine what that would be like?
Many other young people in the area are not as fortunate to have a vehicle or no way to get a vehicle or probably never had the training or the opportunity to have the training or the finances to do that. What we are encountering is the spirit is dying within the area. I speak very highly of the people I represent, but as a representative I think it is very important for me to speak and to talk and to take every opportunity to share with all levels of government the situation which I am facing there.
I think, Ron, it is very important for us to work with the federal government, the municipal government and our own government to try to get - and I respectfully say - some of the attention which the folks in Cape Breton get. We know that Cape Breton is coming along better. As a matter of fact, I traveled there not too long ago, things looked great there, prosperous, Buy Cape Breton First, the incentives, the programs, they have very strong boards of trade or chambers of commerce, the Strait area is booming, and on and on and on. We have to start adopting some of their principles on the Eastern Shore so that we also can bring prosperity to the Eastern Shore.
I just would like to say once again that I thank your department for what you are doing there. I hope some of the initiatives will prove out to be positive, but I have to now go out and call on the federal government to come and to work in partnership with the provincial government and the municipal government and say, okay, the Eastern Shore has a problem, we have to go and look at how we can attract new industry there. We have to put new incentives in place, more than just the norm that is being shared throughout the rest of mainland Nova Scotia. The payroll program, I don't think that is quite enough. Training, I don't think that is quite enough.
What is it? I don't know - well, I do know but I am not ready to share that yet. The point is as the rest of Nova Scotia grows and prospers so should the people on the Eastern Shore, so should the youth on the Eastern Shore have the same opportunity as any other person in Nova Scotia. One person out of work is a Nova Scotian out of work. Ron, you have heard me go on and on to the point where I am sure you are getting frustrated with me, with the meetings, talking to the minister and people in your department. Don't take this as negative, take this as a person who is going to continue to lobby until all levels of government sit down and fix the problem with the Eastern Shore.
MR. CHAIRMAN: Mr. Hurlburt.
MR. RICHARD HURLBURT: Ron, to you and your colleagues, welcome and thank you for the presentation. One thing that I keyed into - or two things - in your presentation, was it seems to me that on the two senior levels of government there is always favouritism to some parts of Nova Scotia over other parts. I will take you back to my home community and what has happened in the past 10 to 15 years. We had our tin mine closed, 340 direct
jobs, but not only those direct jobs, approximately 240 indirect jobs. Machine shops closed down, courier services left town, trucking companies left our community, construction down, and the list goes on. We had Domtex, 540 people at the peak, gone, out the window.
Let me ask you, what did any department of the provincial or the federal government do for southwestern Nova Scotia in the downturn of those two industries and the downturn of the fishing community? I will tell you what happened, the community worked together, all councils, all levels, chambers of commerce, the RDAs and what have you all worked together to make sure that our community thrived. We did it on our own, but we see other parts of this province - excuse me, I might be thrown out of here when I say - favouritism is shown to them, especially by the federal government. Then in your charts today there was a fund for one end of this province again.
I don't think that is fair to other parts of Nova Scotia. You heard Mr. Dooks, he has been complaining about the Eastern Shore since he has been elected, and I don't blame him for complaining about it. What I say is that it should be fair to all parts of Nova Scotia.
When I was the warden for our county, in the 11 years that I sat there, I saw the provincial government rape, from our community, jobs and transplant them to Bridgewater or Kentville. I don't think that is fair. You are competing communities with communities. We all have to be on a level playing field. The federal government has dumped the airport in our local community. Now it's saying, you bail yourselves out. What is it doing? It is doing the same thing to the ports in our community. Those two ferries, two years ago, brought 360,000 tourists to our shores. To get onto the highway - we do not even have a highway in Yarmouth yet they are zinging along at 100 kilometres an hour and then all of a sudden they are down to 60 kilometres an hour.
I just don't think it is fair that parts of Nova Scotia seem to get it and other parts don't, but they get it if they are vocal. Our community has been sort of laid-back and we have been taking whatever was dished out.
I remember six years ago, the white knight came riding into Yarmouth, had his big chequebook, he said, oh, I have a chequebook but it is not signed, I have $3.6 million for you to fix up the Domtex property in Yarmouth, which was going to be a parking lot, which to this day, right now, I think - don't quote me on the numbers - approximately 400 people will be employed in that complex as we speak. The community has done that with little help. I say little help. I think we have acquired some money from the provincial government, but not to the tune of what the man who came into the community and said here is what we are going to do. Then we had to fight five years later to live up to what the man said he would do in the community, and it is still not to the degree of what he said, but the community has done it.
I appreciate your comments on Register.com. That is a community effort that made that happen in our community. The tax rebate is a great incentive, but the community is what
made that, put it over the hump. The three councils partnering to put the facility there is what did that. Maybe some of the other communities across this great province could learn by that.
Ron, in your presentation I was very pleased to see that you are going to work closer with the RDAs, because the RDA, I will tell you, in southwestern Nova Scotia has been a very excellent tool for all of our communities. It has taken the barriers down between Shelburne and Yarmouth. We work now as one, and what is good for one is good for the other. I will tell you it is one of the best tools that we have down there, and we need to work with those RDAs to make sure that they stay in place, because there have been concerns from the local governments on the mandate of the RDAs. Are they going to extend the life of the RDAs, and for how long? You can't go year to year, there has to be a long term for the RDAs. I appreciate your comments on the RDAs, and I just wanted to share with you what is happening in our community; I am sure you heard me speak on it before.
MR. CHAIRMAN: Mr. Downe. Just before you start, I would just indicate we are going on to the second round now, and I do expect shorter questions and shorter answers for the next few minutes.
MR. DOWNE: Mr. Deputy Minister, who brought in the program for the job strategy, the income tax reduction. (Interruption) Yes, annual rebate. Mr. Hurlburt got me a little off-track here. Who brought that in?
MR. L'ESPERANCE: Well, when I joined the department, which was almost three years ago, the program was still in discussion at that point in time, so I don't know precisely. It had a couple of names. I saw an earlier iteration of it that called it the growth dividend fund and subsequently it has been called the payroll rebate initiative. What we have tried to do in the language of it was to signal to people what it is, that it is not a handout of money and, to Mr. Chipman's earlier observation, trying to actually communicate to the public that this isn't corporate welfare but rather a tool to attract jobs and investments.
MR. DOWNE: I think it was the previous administration that brought in the program; it is a good program and I am happy to hear the benefits of it, as is the RDA. The business retention and expansion strategy, this ties in to rural Nova Scotia as well as Halifax, the two economies. Can you tell me, the strategy, is it ready to be announced specifically, and do resource industries fit into that area?
MR. L'ESPERANCE: It will be an NSBI program. Fred Morley is the manager of that program. In the run-up to looking at this program - and again I am speaking now not as NSBI because I don't speak as NSBI, I am just telling you what we attempted to do in setting up the program - Fred had an opportunity to look at a number of different jurisdictions that offer these programs. They are a standard kind of fare program. It is primarily going to focus on the rural areas. There is a real opportunity with this program. It could have easily been a CED program, but we wanted to keep it on the business side. There is a real opportunity to
engage local people and expertise. It is primarily a business visitation program working with visiting local companies or responding to the overtures of local companies.
MR. DOWNE: It is going to be implemented, it hasn't been implemented yet, and it will be implemented and run under NSBI?
MR. L'ESPERANCE: Yes.
MR. DOWNE: And it will be specifically for rural areas and it will be encompassing rural development?
MR. L'ESPERANCE: Yes.
MR. CHRIS BRYANT: Just a couple of comments to add on that. Half of the former Economic Development field staff has gone to Nova Scotia Business Inc. to do the business retention and expansion program. It has actually been tried in Kings County; Kings Community Economic Development Agency has done a kind of pilot of something very similar. Rather than wait for a crisis, you identify the key businesses in your area and you go out and talk to them and say, okay, what's happening, what problems do you have, what is it that government should be paying attention to?
I happened to be in Kings last week and had a chat with Robin Marshall from the RDA there. He is really excited to see this thing rolled out across the province, because their experience to date has been quite positive. Even businesses that don't have anything to raise are delighted to be talked to, to be appreciated, and then they come up with issues, which sitting in an office in Halifax may not seem like a big deal but if you are selling apples, or whatever it might be down in theValley, to have somebody say, okay, what about this? Sometimes there's an answer, sometimes there's no answer, but at least it is engaged.
The program is not so much about handing out money and so on, it is about identifying problems locally, people who have dealt with those problems locally, and then bringing the issues to the attention of whether it's municipal, provincial or federal government for a solution. The model has been used in Ontario. We have had a pretty close working relationship. They borrowed some of our RDA stuff, we are going to borrow the business retention and expansion from them. It seems to work really well. It is built around business taking control, not just government telling them what to do.
MR. CHAIRMAN: Mr. Carey.
MR. JON CAREY: A few quick ones. Tourism and Economic Development are closely related in Nova Scotia, of course, Ron, and I just wonder, the new organization, what relationships are in place or are being developed to work closer together or to have the benefits of sharing resources and that type of thing?
MR. L'ESPERANCE: In order to support the strategy we have a structure called the deputy minister's reference group for Economic Development. The Deputy Minister of Tourism and Culture sits on that group, so there is a lot of interaction, back and forth, between the department and the Department of Tourism. Similarly, NSBI will work with Tourism around specific initiatives, files, possibly marketing and trade-related kinds of activities associated with both; on the one hand promoting tourism and on the other hand attracting investors. There are a lot of opportunities for mixing business and tourism and a variety of those things. There are quite good, well-established linkages around those.
MR. CAREY: Did I understand you correctly when you were talking about some of the programs that were going on, that the Aurora, some of the update on that had been worked through Economic Development?
MR. L'ESPERANCE: We are certainly working with the aerospace sector on the whole variety of procurement opportunities that the federal government is looking at. One of the procurement opportunities is - and it is live at the moment; in fact, I think the bids for that program close on Friday, if I am not mistaken, on October 19th - for the Aurora upgrade. I think nationally it is about $1.2 billion - it is a big project - to upgrade all the Auroras. Their emission systems are avionics, systems integration piece and so forth, so we are very hopeful, given there are a lot of those aircraft on the East Coast.
MR. CAREY: Some of these, I know, have been done already and I was just wondering, what part did your department play in securing or helping with that?
MR. L'ESPERANCE: We have been primarily working with the Aerospace and Defence Industries Association of Nova Scotia, in terms of trying to grow that sector, a lot of SMEs - small and medium enterprises - that get certified for contract work. There is a great story out of Lunenburg. Composites Atlantic is a company that makes nose cones for planes and a whole variety of other things out of advanced materials, so it is really a growing company. What we have been doing is a lot of intergovernmental work associated with that, working with colleagues from ACOA, working with colleagues from DND, working with the industry association and with industry here so the IMPs of the world, Hermes, you know, the other potential contractors could serve to benefit from those opportunities here.
MR. CAREY: Thank you.
MR. CHAIRMAN: Mr. Epstein.
MR. EPSTEIN: I think we probably have a profoundly different view of the utility of tax expenditures in order to attract industry. I have to say I am very skeptical about this and I worry about it. If I may, since we have been talking about it, I want to take the example of Register.com because it is one of the most recent ones.
Everyone is very happy that Register.com is establishing itself in Yarmouth, an area that has had some hits recently - well over the last decade - in terms of lost jobs and there are new jobs coming in there. But no matter how you slice it, whether you call it a tax subsidy or you say that you're not actually giving away dollars, whether you call it a tax expenditure or anything else, it is still a subsidy that is coming out of the public purse. What I worry about is, in essence, you are taking a company that is demonstrating how good a corporate citizen it is in Manhattan, by attracting it here. You have to wonder how good a corporate citizen it is going to be here and whether it will last as others beyond the time of the subsidy, or whether it won't be attracted away to somewhere else.
I tend to think that we would be a lot better off if we were giving this money, or any subsidies at all, in smaller amounts so the risk is not so great and second, to individuals and companies that are already rooted in Nova Scotia, that aren't internationally mobile and have a history, make a habit - or more likely - of moving around from place to place. Surely we would be better off doing that. So I worry about this aspect of it.
It seems to me that, at first I am puzzled as to why it is - I'm not so puzzled because if it is the game that is being played, then it is not too surprising that Nova Scotia will sometimes get involved with it, but the part that is puzzling is - we often hear these things called, in your term, a great story. It seems to me surely if your minister was wanting to comment on it they could say, we are sorry we have to do this but we feel we have no choice because we are so desperate for jobs and therefore we have to get involved in this kind of competition. Maybe that the jobs are a good story, but this is surely not a desirable thing in terms of a long-range strategy.
We can't do it for every job. Clearly, we don't have deep enough pockets in order to do it for every job and when you are doing it, you begin to choose one amongst the other. I worry about this as a strategy, I worry about the extent to which we are exposed by these kinds of investments in companies that will have no reason, necessarily, to be here; if they can be attracted by these kinds of subsidies to come here, they can be attracted to go somewhere else when the term of the agreement is over.
MR. HURLBURT: On a point of order, Mr. Chairman. I would like to clarify a statement that he just made. The key reason Register.com is in Nova Scotia today is because 20 per cent to 30 per cent of their workforce every morning did not show up in Manhattan to work. In Yarmouth it showed 2 per cent to 3 per cent. That is one of the key elements that attracted them and they were not only looking at Yarmouth, they were looking everywhere to locate.
MR. EPSTEIN: Right, which means there is a financial competition to get the location for their business.
MR. HURLBURT: Get your head out of the sand.
MR. CHAIRMAN: Do you have a question for Mr. L'Esperance?
MR. EPSTEIN: I sure do have a question and the question is, when you look at the list of measurements for progress that you have at your Web site, an increase in provincial employment levels by 20,000, investment per person above the national average, export expansion and so on, provincial GDP growth above the national average, these were put up, I think, last year. I don't know how recently you monitored these. I am wondering do you still stand by these as realistic projections?
MR. L'ESPERANCE: Certainly, if I could, Mr. Chairman, offer a couple of comments on the earlier statement first. A lot of these companies coming to Nova Scotia are not necessarily closing out something somewhere else and coming here, it is because they have a new contract or a new line of business and are looking to invest in another area. Naturally, the Canadian dollar, from the point of view of U.S. inward investment, makes it an attractive proposition, but I don't think at the end of the day that is the final thing. I think in the case of something like Register.com - and since we are on that it is useful to explore and probe it a wee bit - they were looking for a bilingual workforce and that was there in spades - Université Sainte-Anne - and a really top-notch, professional workforce.
As I understand their book of business, it is a new book of business, it is associated with expanded domain name registry, associated with different professional designations and so forth. On the issue of will they leave or will any of these companies leave, I think we have seen a really rapid change in business models over the course of the last decade, we are going to continue to see those changes, as new technologies are brought to bear. Many companies are out-sourcing corporate functions and focusing on core business and there are trends and changes in business models and the way in which they are approaching a lot of their things, so . . .
MR. EPSTEIN: But no matter how attractive we are, would they have come without the subsidy? Presumably not or we wouldn't be giving the money away.
MR. L'ESPERANCE: On that particular point, I think the subsidy is part of a value package that gets presented by the province. I think a stronger part of it are the other things that we have to offer.
MR. EPSTEIN: The challenge is to keep them after the end of the subsidy.
MR. L'ESPERANCE: There are always challenges associated with it. It is not an easy job, as we are in competition with many other jurisdictions. I agree, it is a challenge.
MR. EPSTEIN: The original question was would you stand by the . . .
MR. CHAIRMAN: Mr. Epstein, pardon me, but we do have two other members who wish to speak and I am trying to be fair and allow as much equal time as possible.
MR. CHIPMAN: I would just like to say, Ron, thank God we live in a democracy because I would hate to see this province without the jobs from Michelin, from Sobeys - if you want to say - Register.com, I would hate to see those jobs go. I guess Mr. Epstein and I have a difference of opinion.
Anyway, I share my concerns and concur with what my colleagues from Yarmouth and the Eastern Shore have said here, there is a problem in rural Nova Scotia. A fine example of that, and some of my colleagues from the HRM might disagree, but it is my understanding that 75 per cent of the employees in this province reside within HRM, and that 75 per cent of the purchases made within the province are purchased within HRM. I know the member for Eastern Shore is part of the HRM.
I think a fine example of what this government has tried to do, and we all know the results of that, was the equalization formula proposed with the municipalities. That hasn't come to a conclusion yet (Interruptions) Yes, well, I was learning some new habits from my friends across the floor here. Anyway, Ron, could you get into a little detail on the Jones Act, you mentioned that before? Is that protectionism by the U.S. shipping industry?
MR. L'ESPERANCE: I am by no means an expert on the Jones Act, but my rudimentary understanding is it's a piece of legislation that goes back to roughly 1920. It really is a piece of legislation that requires that any vessels travelling between ports in the U.S. have their bottoms made in the U.S. It has the tendency on the international side to create an advantage for U.S. vessels. I believe it was one of the exclusions under the NAFTA agreement, so it is kind of grandparented into the current arrangements.
MR. CHAIRMAN: Mr. MacDonell, last question.
MR. MACDONELL: I will try to be everything I can be. (Interruptions) Mr. L'Esperance, you have only been there two years or less, but you probably have enough information about the department. I am curious, as the province was getting the Sable Project onstream and there were questions about the gas distribution, did the department have any plan of their own on how they would like to see gas distributed around the province? My thought would be that one of the first places that would get it should be Cape Breton, as a source to attract business. When it comes to these issues, I am curious as to the direction that the province needs to be going in with this and even some talk of a possibility of gas going directly to the U.S. and maybe not even touching or barely touching the shore of Nova Scotia. How much of a role does Economic Development have, or how much of a plan does the department have around where they see the best use of Nova Scotia's gas resource?
MR. L'ESPERANCE: We have been working very closely with the Petroleum Directorate and DNR on the energy strategy initiative. We have had two or three meetings between our respective senior staffs and the energy team. We have participated in a number of the discussions around power deregulation and some of the issues associated with that. We have participated in some of the discussions around emissions and environmental issues and so forth. Our focus, as a department, is around the industrial development and the economic opportunities that arise from the presence of offshore gas.
The actual regulatory issues around distribution and tariffs and taxation and those kinds of issues, while they do broadly coalesce around issues associated with business climate and so forth, our primary focus - and we are working with a number of proponents around industrial development opportunities associated with the offshore gas and working with PD and DNR on the broader strategy elements, but on gas distribution, specifically, we have not been working on that file.
MR. MACDONELL: You don't really have an overall plan for what you would like to see, even if other departments don't share your view of what you think the potential of the offshore could be for the province? Your department doesn't . . .
MR. L'ESPERANCE: Again, we are very much focused on key industrial development opportunities. This is a very young industry. In many ways the energy strategy is an opportunity to really set some strategic planning mechanisms in place and to start to drill into a lot of the broader issues associated with the industry and optimizing benefits for Nova Scotians, for business, for citizens and so forth. Do we have a specific plan at this stage? We are working with the Petroleum Directorate and DNR around the strategy. We've put down a marker in the economic growth strategy as indicating the energy strategy, and the industrial development and the potential benefits of offshore gas here are obviously going to be huge.
Again, like we were talking about in terms of the analogue to procurement, what we want to do with the energy industry here is to create an industry as opposed to a boom-and-bust cycle as energy comes and goes. There are tremendous opportunities if you think that all the IT infrastructure for seismic, for data creation and interpretation for the energy industry generally, tends to be coalesced in particular parts of the country.
Is there an opportunity - I don't know the answer to this question - to create that and then to export that expertise to other jurisdictions across the world? We are looking at the broad array of economic benefits associated with the offshore.
MR. CHAIRMAN: Mr. Deputy Minister, that basically eats up all our time today. As the Vice-Chairman of the committee I want to express our appreciation, the committee's
appreciation, for coming here today. We did request your presence here, and we do appreciate you coming here very well informed, with all the information, all the questions were answered, and I would suggest the committee members are quite happy with your presentation. Your staff, of course, as well as yourself certainly do have a good reputation throughout the Province of Nova Scotia. Certainly in Cape Breton, particularly your staff down there and the staff here in Halifax, their abilities and their capabilities are second to none, I believe, in Nova Scotia. I want to congratulate you because that is a reflection on you, sir, being the deputy minister. (Applause) We do appreciate you taking the time today.
According to my time here, I am going to refer to the agenda, please; I have about four minutes. We have some discussion on future witnesses that the committee has to partake in. It surrounds, basically, Aliant Inc. They are scheduled for our next meeting, November 6th, from 9:00 a.m. until 11:00 p.m. - 11:00 a.m. Pardon me, I thought I was on Ron Russell's time there for a minute. (Laughter) In any event, are we comfortable with the November 6th meeting and the agenda for that particular meeting?
MRS. DARLENE HENRY (Legislative Committee Clerk): They had mentioned to me - if I could interject here for a minute - that it will be just Mr. Howard, the government relations person, and some of the regulatory body. If the committee wants to meet with their executive officers, they can't meet on November 6th, they will have to change the date. They are willing to meet with the committee to discuss Aliant's economic contributions and value to Nova Scotia, and they are willing to ensure that they will answer some of the committee's questions, which I suspect are on the rural rates but anything more than that we may have to, with the executive officers, change that date. Is November 6th okay with the committee, for Aliant to come in to speak on that topic?
MR. CHAIRMAN: Do we understand what Darlene is indicating to the committee? Actually there is a media person coming in. Are we comfortable with the fact that they only have one individual coming in?
MR. DOWNE: I would rather have had more but if they are there and if we are not happy with the answers, we can always ask for the rest to come later.
I would like to make one comment, if I could, before the meeting is over. Now that our guests are gone, I find it very disturbing when we start pitting one part of the province against the other, and the biases about one part of the province against the other. The member is coming back in the room, I just find it very frustrating that we as a committee - all areas of the province have some problems - should be working to try to find solutions. I find it very distasteful to have comments, almost like we are trying to pit one end of the province against the other. I don't think that is in the best interests of Nova Scotia or Nova Scotians. I think what we should be doing is working together to try to find benefits for all of Nova Scotia, jobs and benefits for all of Nova Scotia.
I did take a little exception to the member for Yarmouth's comments. I felt they were somewhat biased. I don't think that is the way we should be . . .
MR. HURLBURT: Well, I take exception to your statements.
MR. DOWNE: Okay. I am just saying that I felt there were some comments made there about picking one end of the province versus another. I think we have problems throughout Nova Scotia, and we need to continually work toward benefiting all of Nova Scotia. I just wanted to make that comment after the guests are gone, I didn't want to get into an argument with you at that point. (Interruptions)
MR. HURLBURT: I'll argue with you any time you want, on that point.
MR. DOWNE: We, as Nova Scotians . . .
MR. HURLBURT: . . . southwestern Nova Scotia. When you were there you forgot southwestern Nova Scotia.
MR. DOWNE: We, as MLAs of Nova Scotia, are for all of Nova Scotia.
MR. CHAIRMAN: Order. Order. We are dealing with the agenda here. Let's deal with the agenda, please. We do have about 40 seconds before we are out of time. I would appreciate it if we could refer to the agenda, please. Is November 6th fine with the individual Mrs. Henry has indicated is coming in?
MRS. HENRY: Just one other thing. November 20th, Sable is unable to get their senior management together to meet with us. By the looks of things, I doubt if they are going to come in. Is there anybody else that the committee wants to inject at that time? I put a little witness list there in front of everybody, it is probably buried in your papers. We have the Strait Area Chamber of Commerce; the Christmas Tree Growers Association and Council, those people are presently going to be before the Standing Committee on Resources on October 30th, but that doesn't mean they can't come before us as well; we have the Scotia Rainbow; and the Grow Cape Breton Fund that was presented and left over from the previous witness list. Is there anybody from this list that you want injected on November 20th.
MR. CHAIRMAN: Mr. Chipman.
MR. CHIPMAN: Yes, Darlene, I think I suggested the Nova Scotia Christmas Tree Growers Association quite some time ago. I think my colleague, the member for Lunenburg West, would agree that Christmas trees are the resource-based sector, there is no doubt about that but they certainly contribute to the economic prosperity of this province. They have been going through some very difficult times in the last year, would you not agree, Don?
MR. DOWNE: Absolutely. The balsam fir Christmas tree capital of the world is Lunenburg County. I would love to have them come in.
MR. CHIPMAN: I would like to see them come to Economic Development.
MR. CHAIRMAN: Are the other committee members comfortable with the Nova Scotia Christmas Tree Growers? (Interruptions)
MR. EPSTEIN: Are they also appearing in front of Resources?
MRS. HENRY: Yes, the Resources Committee on October 30th, but that does not mean that they can't come before this committee as well.
MR. DOWNE: They are going to be pretty busy. (Interruptions)
MR. EPSTEIN: I would think it is a bit of a strain for them.
MR. CHIPMAN: It was originally proposed, suggested for Economic Development and they have been shifted to Resources.
MRS. HENRY: Yes. I don't know how or why they were shifted to Resources, I just know that they are coming, so I thought I would mention that to you at this point.
MR. EPSTEIN: Can I ask if we could have a backup? If they say, look, we only want to go to one committee and aren't available, whichever committee it is, can we pick a backup?
MR. CHAIRMAN: Certainly. Do you have a suggestion?
MR. EPSTEIN: Yes, I would like the Cape Breton Growth Fund. I see we have the Strait Area Chamber of Commerce, Scotia Rainbow, Grow Cape Breton Fund. I would have thought the Grow Cape Breton Fund was the more general item. (Interruptions)
MR. CHAIRMAN: And what aspect do we want to discuss with the Cape Breton Growth Fund, so that Darlene is aware? What issue is it that you want to discuss?
MR. EPSTEIN: I think we want to know what they do, their structure, how they are going, what their successes and failures have been, what their lessons are, whether they have anything they can teach the rest of the province. (Interruptions)
MR. CHAIRMAN: Is the committee comfortable in that direction? (Interruptions) Great. I will entertain a motion to adjourn please. (Interruptions)
We are adjourned.
[The committee adjourned at 3:09 p.m.]