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16 novembre 2005
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HANSARD

NOVA SCOTIA HOUSE OF ASSEMBLY

COMMITTEE

ON

PUBLIC ACCOUNTS

Wednesday, November 16, 2005

LEGISLATIVE CHAMBER

Office of Economic Development

Industrial Expansion Fund

Printed and Published by Nova Scotia Hansard Reporting Services

PUBLIC ACCOUNTS COMMITTEE

Ms. Maureen MacDonald (Chair)

Mr. James DeWolfe (Vice-Chairman)

Mr. Mark Parent

Mr. Gary Hines

Mr. Graham Steele

Mr. David Wilson (Sackville-Cobequid)

Mr. Keith Colwell

Mr. David Wilson (Glace Bay)

Mr. Michel Samson

In Attendance:

Ms. Mora Stevens

Legislative Committee Clerk

Mr. Roy Salmon

Auditor General

WITNESSES

Office of Economic Development

Mr. Paul Taylor

Chief Executive Officer

Mr. Chris Bryant

Director - Decision Support

Mr. Andrew Hare

Director - Lending and Special Projects

Mr. Marvyn Robar

Director - Development Initiatives

[Page 1]

HALIFAX, WEDNESDAY, NOVEMBER 16, 2005

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIR

Ms. Maureen MacDonald

VICE-CHAIRMAN

Mr. James DeWolfe

MADAM CHAIR: Good morning, I want to call the committee to order. We'll start by doing introductions, which essentially is a sound check for Hansard.

[The committee members introduced themselves.]

MADAM CHAIR: We'll start with our witness introductions.

MR. ANDREW HARE: Andrew Hare, Economic Development.

MR. MARVYN ROBAR: Marvyn Robar, Office of Economic Development.

MR. PAUL TAYLOR: Paul Taylor, Office of Economic Development.

MR. CHRIS BRYANT: Chris Bryant, Office of Economic Development.

MADAM CHAIR: Thank you. It is our procedure to begin the proceedings with a short statement from the department, so I will turn it over to whoever will be making that statement.

MR. PAUL TAYLOR: Madam Chair, I understand I have up to two hours to do this opening statement. (Laughter)

1

[Page 2]

Thank you very much for the invitation to appear here today. I do have a quick opening statement and we went through our introductions, so I would like to take a few minutes at this point in time to have a quick chat about the Nova Scotia economy, its strengths and weaknesses and the role that the Industrial Expansion Fund plays in improving the economic fortunes of Nova Scotians.

We believe there are a number of positive trends currently in the Nova Scotia economy. Our economy is experiencing growth, it's experiencing increases in business confidence and more businesses are indeed opening their doors.

I think these strengths are reflected in our employment numbers. The latest numbers from Stats Canada show the unemployment rate in Halifax to be about 5 per cent, among the lowest in the country. Province-wide that number is 8.5 per cent. Last month more than 4,000 jobs were created. The employment situation is also improving in all regions of the province. We are recording some of the highest employment levels in Nova Scotia history, at least since Stats Canada began charting these numbers 30 years ago. While things are improving, we certainly understand that we can always do better and we always want to do better.

I know some would criticize the new jobs in our economy as being in the low-wage category. Others might say too many are focused in Halifax and others might even classify these as dead-end jobs. I think it is important that we remember that these jobs cover a wide range, some are entry level, some are computer programmers, some are service sector jobs, and others are white collar engineering jobs.

Regardless of the level of wage, we must remember that every new position is a new opportunity for an individual and our economy. When someone lands a new position they learn new skills, they create a work history for themselves and they build a resume. There is no such thing as a dead-end job. Every job opens up new opportunities and every job makes someone a useful contributor to our society.

We, in the Department of Economic Development, are proud of every single job that is created as a direct or indirect result of what we do. Each single employment opportunity is part of the process of building a labour force, creating capacity and generating wealth. We do want to continually raise the value of employment in this province and raise the standard of living for our fellow Nova Scotians. One of the important ways of doing that is increasing our exports and by supporting successful organizations in doing so. The Industrial Expansion Fund (IEF) is one of the tools we use to do that.

Just let me give you some quick background on the IEF. It's constituted under the Industrial Development Act. The general purpose of this Act is to help establish, assist, develop or expand industries in this province. The fund has flexibility in the amount and type of funding it can provide, therefore it is used to assist in the development initiatives of other agencies, or in those circumstances where an initiative falls outside the financing vehicles

[Page 3]

of other departments or agencies. The fund also serves as a corporate funding mechanism for broader government initiatives.

I can list a number of examples of recent use of this fund: Frito Lay, Great Valley Juices, Apple Valley Foods, Oxford Frozen Foods, the Boatbuilders Association, and Composites Atlantic, to name a few. These are successful organizations and we are providing them with the support they need to grow and expand.

Take Apple Valley Foods, it's expected to create 35 new positions and allow this company to increase its exports to the U.S. Others, like the $1.5 million loan to the Boatbuilders Association allows local firms to take their homegrown skills and translate them into higher-value products. Consider the Credit Union Loan Program. This initiative is backstopped by a $25 million guarantee from the fund, it will create jobs right across this province, building capacity in our small business community, particularly in rural Nova Scotia.

Another thing about the loan program, of which we are particularly proud, is it represents a true partnership, a partnership between the province, the credit unions and the co-op council. We often used that word "partnership", partnerships among provincial economic development agencies, municipalities and the federal government. The reason we go back to that message is that partnerships do work.

The province has a number of economic development agencies under its direct control. Departments such as: Natural Resources; Tourism, Culture and Heritage; Energy; Agriculture and Fisheries; and Crown Corporations like InNOVAcorp; NSBI; the Film Development Corporation, each has their own focus and their own capabilities. These organizations partner with the federal government through agencies such as ACOA, the Port Authority, the Halifax International Airport Authority, as well as municipalities through groups such as the RDAs and the Greater Halifax Partnership.

Often it takes participation from several organizations to secure any given opportunity. Together we can find the right fit, like the one with Crossley Carpet Mills Limited. A major North American carpet company chose to move a major part of its operations from the U.S. to Truro. This happened because three organizations, NSBI, OED and ACOA participated.

Ocean Nutrition is another example. Here is a Nova Scotia company on the verge of a major expansion. Their jobs are based in rural and urban Nova Scotia. They can help us to anchor a life sciences industry in this province, and other jurisdictions wanted them to do the same thing. We put together a package that worked, it brought together NSBI, InNOVAcorp and OED. Now we have a local company trading roughly 500 high-paying jobs in Nova Scotia and we have the benefit of a new anchor tenant for the Knowledge Park in Dartmouth.

[Page 4]

We believe we have been successful and perhaps fortunate that our investments in this fund have worked as well as they have. In 2004-05 we really only had one investment go bad and that cost taxpayers $180,000. This is a pretty good record for a fund that advanced $26.4 million in 2004-05 alone.

I mention these numbers for two reasons. One is to reinforce that there is risk associated with each and every one of these decisions. It requires a lot of thought and analysis and we are lucky that we have skilled and talented staff, like the people you have appearing on either side of me this morning, reviewing these decisions on behalf of the taxpayers of Nova Scotia. The second is to remind everyone that not all businesses are going to last in this province. Companies will continue to be created and some businesses, whose business plans have run their course, will no longer exist.

Some businesses who seek financial support of the government are not going to receive it. Some companies represent a level of risk which is not acceptable to taxpayers. After all, in each of these investments there has to be a reasonable sharing of risk in what is a very competitive market.

In conclusion, let me say there will be ups and downs in the economy, some years are going to be better than others for this fund, but I believe the investments from the IEF and our partnerships with agencies in Nova Scotia and elsewhere will continue to help to build a better future for Nova Scotians. Thank you.

MADAM CHAIR: Thank you very much. The opening round of questions will go to the NDP caucus.

The honourable member for Halifax Fairview.

MR. GRAHAM STEELE: I do have a number of questions for you but in order for them to make sense I'm going to have to take a few minutes to provide some context.

The same group was here last year at about the same time. Last year's theme was your relationship with Nova Scotia Business Incorporated because the members of the Legislature were having trouble understanding why we had two different agencies apparently doing the same thing. NSBI was set up ostensibly to get politics out of Economic Development and your office seemed to be putting it right back in.

This year's theme for your being here is the Industrial Expansion Fund. Both meetings, last year's meeting and this year's meeting, are getting at the same thing, which is that we on this committee, or maybe I should speak only for myself, this committee is concerned primarily with transparency and accountability. We don't understand, I don't understand how the Industrial Expansion Fund can seem to operate with no rules, or at least, to be more precise, no rules that have ever been publicly explained.

[Page 5]

The specific reason you're here is because of what the Auditor General wrote in his June 2005 report, Page 25. I'll just read you the key sentence from that report:

"The IEF's annual audited financial statements are tabled in the House along with statements of other crown entities in Volume II of the Public Accounts. However, the annual business planning, budgeting and accountability reporting information tabled in the House by government or available from OED on the government's website includes very limited reference to the fund, its plans, activities or performance."

So, in other words, we, as members of the Legislature, get virtually no information about the fund, its plans, activities or performance. Every year the fund is spending tens of millions of dollars, and we get virtually no information about it. When it comes to the IEF, it seems like anything goes. For example, in the last provincial forecast update, which used to be the quarterly report, issued on August 31st, expenditures for the Office of Economic Development were already $14.3 million over budget to cover spending on ". . . Ocean Nutrition, the purchase of the Lunenburg waterfront lands, and additional business incentives provided under the Industrial Expansion Fund."

That's not bad considering that OED's total budget for grants and contributions was $30.6 million, and five months into the fiscal year you're already 47 per cent over budget. In the previous fiscal year, OED's budget for grants and contributions was $29.9 million, and it actually spent $45.7 million, for a budget overrun of 53 per cent. So when we see budget numbers for OED and the Industrial Expansion Fund, it seems like it's a made-up number, it seems like it has no relation to reality. The government will spend what the government will spend, so the number at the end of the year ends up being very different from what's in front of us in the budget documents.

In this year's Public Accounts - because when you were here last year, Mr. Taylor, you said, well, we supply detailed financial statements in the Public Accounts - I went back and looked at them, and discovered that the auditor's note - first of all, financial statements don't tell us very much, they tell us the financial position but they don't tell us what you're doing with the money and whether it's a good use of taxpayers' money. I also discovered that the Auditor General says that even your financial statements, that little bit of information we do get, are not in compliance with Generally Accepted Accounting Principles.

My first question will be for Mr. Salmon, could you just explain what the significance is of what you found when you were auditing the Industrial Expansion Fund's financial statements? What is the significance for this committee, of the fact that those financial statements are not in compliance with Generally Accepted Accounting Principles?

[Page 6]

MR. ROY SALMON: The qualification in my opinion relates to the treatment of administrative expenses and similar items that are not funded by the fund, they're funded by the department. That's all explained in Note 2 to those financial statements.

In terms of your issue around the activities of the fund, and its budget and its plans and its funding of organizations or corporations, I would not consider that to be a significant qualification.

[9:15 a.m.]

MR. STEELE: In sum, the Industrial Expansion Fund seems like the last bastion of financial impenetrability. We don't get enough information about what it's doing. Maybe you guys are doing a great job, maybe every penny you spend is sort of a golden opportunity for taxpayers, maybe it is and maybe it isn't. I guess my fundamental point today is that we have no idea, because you don't tell us.

As members of the Legislature, we do not get enough information about what it is that you do and, therefore, you leave the field wide open for these accusations of political impropriety and political interference, because when you were here last year, Mr. Taylor, you said that if a company comes to you, the first thing you'll do is you'll tell them to go to Nova Scotia Business Inc. Then, if Nova Scotia Business Inc. finds the business case hasn't been made out, then they come back to OED and, you more or less said, explicitly, that the decisions you make aren't always based on the business case, there are other criteria that you apply. But those have never been laid out for us. That's why it seems like anything goes, because when there's no publicly stated criteria, then almost anything goes.

We, in the Opposition, don't see the criteria that's being used. We have to dig to find out what the fund is being used for. We receive no evaluation or accounting of whether the spending has produced the kind of result that one would expect from this kind of fund.

Now, in the Auditor General's Report, there is a brief reply from the Office of Economic Development to the concerns raised by the Auditor General. It says, essentially, the OED will try to do better. So, I guess my first real question for you is, when are we going to see better information about the Industrial Expansion Fund?

MR. PAUL TAYLOR: Well, let me start with there are two primary areas where we will be responding. One is with reference to a better laying out of plans and objectives, and the use of the Industrial Expansion Fund as part of the Office of Economic Development business plan for the next fiscal year. More importantly, to deal with the issue raised by the Auditor General in his report, with respect to reporting on the fund, we have prepared - as we agreed to in response to the Auditor General's comments - an annual report on the Industrial Expansion Fund, which will talk about the fund in its totality, what it's used for. It will talk about how it has been used to date, the investments in the fiscal year being

[Page 7]

reported on, where those investments were, individually what results were achieved, where those investments were made, why they were made, and a summary accounting of the results achieved in the investments in the fund.

That report has gone through - well, we're probably up to draft seven now. I can take full responsibility for the fact that it's not a public document yet, because it's sitting on my desk. The reason it's not a public document as yet is my minister has not seen it. When the minister gives me the authority to release the document, in compliance with our promise to the Auditor General, that will be a public document.

MR. STEELE: You can see the difficulty, I'm sure, that when there's no publicly stated criteria - okay, let me back up for a second. Last year when you were here, you said that the Office of Economic Development will use this fund for reasons other than a strictly business case, because if there's a business case then Nova Scotia Business Inc. will provide the funding. But if there isn't a business case, if there is some other consideration, for example, a regional consideration or an industry consideration or, dare I say, a political consideration about what the government finds acceptable or not acceptable, then the Office of Economic Development kicks in and they use the Industrial Expansion Fund. It seems like the budget figures don't matter, you'll just find the money if it's needed. That has been very clear, both this year and in the last fiscal year.

When are we going to see a statement of the criteria that the Office of Economic Development uses? When are we, as members of the Legislature, going to see what it is that helps you decide when you're going to be spending money from this fund and when you won't?

MR. PAUL TAYLOR: The assessment criteria for the use of the fund, I do believe we provided them to the committee in response to the same concern. That was a follow-up request of the committee when we last appeared in front of the committee, to submit a detailed list of those criteria and the process we use, to the committee, which we did. I'm happy to provide those criteria again, but they have been submitted. There's a very long detailed list of the criteria we use in determining whether to make or recommend an investment to the Cabinet of this province.

MR. STEELE: But they're quite vague. Essentially, they are vague enough that they would justify saying yes to any investment or no to any investment. I guess what we're zeroing in on in particular is the political element, that is, where there's no real business case to be made out and the government, for its own reasons, wishes to spend the money but wishes to not admit that it's doing so for reasons of political benefit, broadly defined.

[Page 8]

How are we going to be assured that the politics have been removed from Economic Development spending? Tell us what it is you're going to do that will provide that assurance.

MR. PAUL TAYLOR: I can only really address that question from a staff position. I can tell you our role in the process. The political end of the decision is something you'll have to address with the minister and the government on the floor of the Legislature. Our role - let me explain that the use of the Industrial Expansion Fund is not something we go out and market. We do not go out and beat the bushes looking for investment opportunities for the Industrial Expansion Fund. We have a number of business agencies.

That's one of the things that really does distinguish us from the Film Development Corporation or from InNOVAcorp or from NSBI or from Energy, and on and on. Those organizations are constantly looking for investment opportunities in their sectors. Some of the opportunities that appear to us come from politicians of all stripes in this Legislature, they come from the local RDAs, they come from the chambers of commerce, and they come from companies themselves. Those opportunities appear to us. We then take those opportunities and we apply the criteria I just referred to in my last answer as to whether the opportunity in front of us meets those conditions from a staff opinion point of view.

That opinion is brought to me. I then make a decision on the basis of that advice, whether this opportunity will be brought forward to Cabinet for a recommendation on whether the government of the day wishes to proceed with the opportunity. In that process, if you want to explore how ministers take that information provided to them and ultimately make their decision, then I do believe that's a question for someone other than me.

MR. STEELE: Okay. You're absolutely right. Of course it is a question for the minister, but I'll tell you what our problem is, the minister never tells us and we have no way of finding out when it's the minister's decision that has been the deciding factor. That's our problem. If the minister would stand up in the House and say, yes, this was my decision, I did it, staff recommended the other way, but I decided that this is what we're going to do, that would be fine. Then we would be able to deal with it on the political level, about whether the minister made a good decision or not. But the thing is so wrapped in mystery, I would suggest partly on purpose, that we have no idea when what's coming forward is a staff recommendation or when it's a political decision. We just don't know.

I guess what I'm looking for is somebody to tell us. So let me ask you this, within the last year, how many occasions have there been where staff recommended one thing and the decision that came back from the minister or Cabinet was the opposite?

MR. PAUL TAYLOR: Your question is, how many of our recommendations to Cabinet were accepted?

[Page 9]

MR. STEELE: No. My question is, how many times in the last year did staff say yes and Cabinet said no, or did staff say no and Cabinet said yes?

MR. PAUL TAYLOR: The way the process works, given the criteria that we have put in place for assessing these opportunities, if the recommendations from staff are we should not proceed, this investment does not warrant the attention of government, then that investment decision doesn't get to Cabinet. I can say, of the ones that we have forwarded to Cabinet, I do believe, last year, in every case where we recommended, or the advice was to proceed with a specific investment, Cabinet agreed with that investment.

MR. STEELE: In the past year, there is not one single case where staff said no, we recommend against this investment, but the minister or Cabinet said, no, we're going to make it anyway. That never happened, not once?

MR. PAUL TAYLOR: What I'm saying is the opportunities that appeared before us at the staff level that we disagreed with as meeting the criteria that we have agreed to use, we at the staff level did not bring them forward.

MADAM CHAIR: Mr. Steele, you have three minutes remaining.

MR. STEELE: I'm asking a pretty straightforward question. I think the fact that you're kind of dancing around it gives me all the answer I need.

I want to turn to a specific company. There are three companies that I worry about, among the ones that you fund. One came up last year, and it was actually raised by the then-member for Halifax Citadel, and that's CanJam Trading Ltd., which is a saltwater fish processor, trading largely although not exclusively into Jamaica, hence the name. Fish processing is a competitive industry in Nova Scotia, and CanJam's competitors aren't thrilled with the fact that the company gets a large amount of money from the province every year.

Since the last time that you were questioned about that in this forum, CanJam has received two more large sums from the province; early in the year, $1.85 million and later in the year, another $1.85 million; Orders in Council 2005-1 and 2005-367. It is the only company - I just want to wait until Mr. Taylor is listening - for which your office issued no news releases. Now I'm thinking, why is it that a company would get $3.7 million and the government issues no news release, because your office always issues a news release, no matter how much money is involved. The smallest amount was $250,000, and here's a company getting $3.7 million - and it's not the first time they've gotten a large amount of money from the province - and yet there's no news release that I could find. I did find one for every other bit of financial assistance out of the Industrial Expansion Fund.

[Page 10]

So what's going on with CanJam? Should we be worried? Why is it being treated differently from its competitors? Why is the government making no public announcements? Why is this relatively small company getting so much public money?

MR. PAUL TAYLOR: I'm just flipping through my notes here for the press release that was issued. The last two times we have dealt with CanJam - the first one a press release was indeed issued, the second time that you referred to us dealing with CanJam, no press release was issued because there was no new money involved in the transaction. It was simply an extension of the deadline under which the existing finance was to be repaid. There was no new money. There was no net creation of employment. There was really nothing to announce.

MR. STEELE: Should we be worried about this company? How much money is at risk here? How much money has gone into CanJam Trading from your office?

MR. PAUL TAYLOR: I'm going to hand this off to Marvyn.

MADAM CHAIR: Mr. Robar.

MR. MARVYN ROBAR: In respect to CanJam, there is an $850,000 term loan and a $500,000 guarantee outstanding at the present time.

MADAM CHAIR: The time has expired for the NDP caucus. I'm turning to the Liberal caucus. Mr. Colwell, you have 20 minutes, until 9:50 a.m.

MR. KEITH COLWELL: I may be sharing my time with my colleagues. I just have a couple of questions. Back on CanJam, you say there is $500,000 outstanding and $800,000. Could you explain that in more detail? Is it outstanding? Is it not payable? Is there risk involved in getting that repaid? What is the situation?

MADAM CHAIR: Mr. Robar.

MR. ROBAR: There's an $850,000 term loan, and a $500,000 guarantee. On both vehicles of financial assistance, payments are being made, as specified, and the accounts are in good standing.

MR. COLWELL: I just want to ask you a couple of questions about the Credit Union Loan Guarantee Program. How many loans have been approved under that program?

MR. ROBAR: I would think it's probably about 100 to date.

MR. COLWELL: What's the average size of the loans?

[Page 11]

MR. ROBAR: The average size is between $60,000 and $80,000.

[9:30 a.m.]

MR. COLWELL: Are they competitive, interest-wise? I've had some companies in my area that have gone to the credit union and looked at them. The credit union basically told them, come to us, we'll give you the money anyway and forget this because it's a lot cheaper to do it that way.

MR. ROBAR: I believe the loans are commercially competitive under the terms of the program. The credit union is allowed to charge up to six percentage points above their cost of borrowing. Again, that is determined on how the credit union sees the risk of any individual transaction.

MR. COLWELL: I have some other questions, too. You talked earlier about the loan criteria when you were being questioned about maybe some political interference and I say maybe because that's not proven, of course. Who sets this loan criteria for the large loans? Who actually establishes that criteria?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: That's a question, unfortunately, that is going to predate me because these criteria have been in existence for a long period of time. They are primarily financial criteria as to how they were originally approved and the authority, who signed off on them, that predates me. I don't know whether you can add anything on that one, Marvyn?

MADAM CHAIR: Mr. Robar.

MR. ROBAR: The criteria are just simply general business criteria that anybody involved in a financial analysis would look at: management, markets, risks, security, viability - just the general type of financial analysis that one would undertake.

MR. COLWELL: Has there ever been any interference from the minister or any members of government when it comes to loans, suggestions that maybe you should consider this loan a little bit more than another one, or is there any inference from, say, the minister, or other ministers of government, or anyone else in government who says this one should be looked at more favourably than others, or reconsider this one that you may have turned down? Has that ever happened?

MR. ROBAR: In my experience, no.

MR. COLWELL: I will pass it off to my colleague.

[Page 12]

MADAM CHAIR: Mr. Samson.

MR. MICHEL SAMSON: I'm curious about the recent announcement regarding Ocean Nutrition's new facility that is going to be constructed in Dartmouth. This company has a significantly large workforce in Mulgrave, which is probably about as rural as you are going to get here in Nova Scotia, and I think it is a tremendous success. The question that I have is whether there was any sort of representation made by your office or by government to try to keep this expansion in rural Nova Scotia, rather than the current site in Dartmouth that is being proposed?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: Certainly our discussions with the company very much so focused not only on the production in Dartmouth of the Omega-3 powder, but the production of the fish oil in Mulgrave was very much a part of those discussions. The company, as far as we understand, continues to look for a way to put together the package necessary to expand that plant. In terms of where they stand specifically on the expansion of that plant, that's a question you would have to ask them. Very much so we were focused on the strengthening of Ocean Nutrition's business plan by opening up a revenue stream from the Omega-3 powder and how that related to the opportunity in Mulgrave to continue and expand that facility.

MR. MICHEL SAMSON: The fact is, this new facility is proposing to create up to 520 jobs which would have been an incredible boost to the Strait area or to any other rural area of the province. Yet, while we are certainly pleased the jobs are staying here in Nova Scotia, I think the unemployment rate in metro is not anywhere near what we see in other rural communities. I guess my question more specifically is, was there specific representation made by your department to Ocean Nutrition to try to keep these jobs in rural Nova Scotia?

MR. PAUL TAYLOR: The answer to that question is a definite yes. Our discussions with the company, as this agreement with the company unfolds over the next five- to seven-year period, up to a third of those 520 jobs that we have been dealing with could, indeed, be in Mulgrave.

MR. MICHEL SAMSON: One of the other subjects I want to talk about is community economic development. As you'll be aware, I have the privilege of representing an area that has Development Isle Madame, which has been recognized as one of the leaders in community economic development. I'm curious, could you tell me exactly what monies are made available by your department to support initiatives under community economic development in the province?

MADAM CHAIR: Mr. Bryant.

[Page 13]

MR. CHRIS BRYANT: We've had a couple of main sources of funding. Remember in the old days we had the Community Opportunities Fund, the Waterfront Development Fund, programs like that. Those ended in 1999. Since then we have made money available through the RDAs, they have been able to fund some of those projects, and we have also - without having a particular program - worked with a number of agencies, ACOA and others, to try to get funds to some of those community groups.

We are in the process now, we have a conference actually tomorrow and the day after at the Old Orchard Inn on celebrating innovative communities. At that conference we will be talking a little bit about the implementation of the new community development policy and there will be submissions to Cabinet this year to try to get some budget to do more direct work with community groups like Development Isle Madame and some of their counterparts.

Right now there isn't specific money allocated in those areas, but it has clearly come up as a need. At recent meetings I was at in Canso, as Canso revives itself they have some interesting ideas, how can we make a bit of money available to a community group there that is trying, in a sense, to replicate the Isle Madame experience. So not much available now, hopefully more in the coming years.

MR. MICHEL SAMSON: With all due respect I would submit that the need for that money has not come up recently, the need for that money has come up since 1999 when the government cut what was available to these communities. When I think of the Waterfront Development Fund and I look at what it did for communities along the South Shore, what it did for communities in Pictou - I'm sure the member for Pictou East would speak quite fondly of the investments made in that community and the significant impact it has had on tourism and strengthening the economy in that community. The fact is that's all gone and it now has been six years that we're telling rural communities, we want you to make decisions on your own and make investment choices on your own, don't wait for us in Halifax to tell you what you need for your community, which is a great approach. Before there was actually money to back it up.

I recognize your comment that you're spending your time trying to encourage ACOA, the federal government to invest in these initiatives for the community. I must say I find it extremely sad that our provincial Department of Economic Development is going to see the feds to see if the feds will give money to communities to make necessary investments because the fact is the province has no money to give. I'm wondering if you can just confirm that for me again, that right now, as we speak, community groups that are coming to ask the provincial government to support them in infrastructure initiatives that would benefit the economic development of their communities, there actually is no money in the Department of Economic Development to support those initiatives with actual cash to go towards those projects?

[Page 14]

MR. BRYANT: There is some money. Even back to 1999 we had some $400,000 that we held on to then. We've worked to increase that. I think if you look closely probably in excess of $1 million, $1.5 million has gone out to community groups, usually in response to specific requests from those groups. We haven't had the programs restored but we have worked hard to make funds available. I don't deal directly with the Community Economic Development Program as I used to, but I know my colleague, Neil Conrad, has worked extremely hard, where there are opportunities. Typically what happens is some community money would be generated, they'll find some money at ACOA, people come to us looking for funding to support that and we generally go in on a one-third, one-third, one-third basis.

At the current time I don't know precisely how much we have spent this year but I can certainly get those numbers for you. There is money in the budget, it has just been done differently and it has been a question of each year since 1999, negotiating for a little bit more and trying to build a case.

MR. MICHEL SAMSON: Can you at least tell me what the name of this fund is?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: Just looking through the details of our budget, underneath our development programs budget, we do have an identified source of funds for exactly what you're talking about called Community Development Funding and it is resourced in the current fiscal year at $1,105,000.

MADAM CHAIR: Mr. Bryant.

MR. BRYANT: It goes along with a series of other funds that we have made available.

MR. MICHEL SAMSON: Do you have a policy statement or something you can share with us as to how these funds are being disbursed? Basically, what I'm hearing today is the department is doing everything it can to give out money because the government cut the existing programs that were there but you're still trying to find money. Is there a policy statement around this Community Development Funding? I must say in the last six years this is the first I have ever heard of this funding being made available? I would certainly like to know whether Development Isle Madame has any idea that this fund exists or any other group in Nova Scotia has any idea this fund exists. I can tell you, it's news to me and I come from an area that is quite active in the role of community economic development. Can you table the policy statement around how this funding is given out and second, a list of the projects that have received this funding?

[Page 15]

MR. PAUL TAYLOR: We can certainly forward to the committee the criteria that are used to determine how that money is spent and provide the committee with a list of the money that has been spent in the current fiscal year, that's no problem.

MR. MICHEL SAMSON: That funding has gone toward specific projects, it has been a cash funding, not in kind, or not considering employee wages of the department for working on projects, but it's actual cheques that have been sent out to groups?

MR. PAUL TAYLOR: That money goes directly to the community projects.

MR. MICHEL SAMSON: But right now, today, can you give me one example of a community project you are aware of that would have received this funding?

MR. PAUL TAYLOR: That money would be used for such things as, if a community was interested in doing a planner on how to revitalize its downtown core. That community would go looking for funding to assist doing that work and they would generally find that money in the Office of Economic Development, they would find some of that money in ACOA, they might find some of that assistance through the RDA, but that's the type of project that the money is used for.

MR. MICHEL SAMSON: Do you have any press releases or anything that may have gone out indicating any of this funding that has been given? Let me get to the point, are you telling me that community economic development groups throughout this province, from Yarmouth to Sydney, are aware that this funding does exist and regularly make application to it?

MR. PAUL TAYLOR: Given the breadth of the request for funding from that pot of money, yes, I would say community groups from one end of this province to the other are quite well aware that the Office of Economic Development is in the business of supporting community development.

MR. MICHEL SAMSON: As far as the former Waterfront Development Corporation Fund and the Community Opportunities Fund, could you indicate to us how much each of those funds were prior to 1999?

MR. PAUL TAYLOR: That, unfortunately, will pre-date me. I don't know if any of my colleagues can help you out with that question or not.

MADAM CHAIR: Mr. Bryant.

MR. BRYANT: The funds went up and down. At the end, the Community Opportunities Fund was around $1 million a year and the Waterfront Development Fund was a similar size, roughly about $2 million was being spent at that time.

[Page 16]

MR. MICHEL SAMSON: If a community comes forward today with a request for a waterfront development project, what monies are available through the Office of Economic Development for those projects?

MR. BRYANT: Those projects would have to line up for the money that Mr. Taylor mentioned.

MR. MICHEL SAMSON: And that is the $1.15 million?

MR. BRYANT: Roughly, yes.

MR. MICHEL SAMSON: That $1.15 million in this year's budget, is that approximately what it has been since 1999?

MR. BRYANT: More or less. I remember distinctly because I was handling the file, there was $400,000 in 1999 and we patiently worked to build it back up.

MR. MICHEL SAMSON: Has the Office of Economic Development kept track of how much money ACOA, through its various agencies, and HRDC, has invested in community economic development in this province?

[9:45 a.m.]

MR. BRYANT: We have some pretty solid numbers on federal spending in the last year. Some years it's less precise than others.

MR. MICHEL SAMSON: Could you tell us what numbers you have, approximately, right now that you could share with this committee as far as investments by the federal government in regard to . . .

MR. BRYANT: I don't have those numbers at my fingertips. I certainly can get them for you.

MADAM CHAIR: Mr. Samson, you have approximately four minutes.

MR. MICHEL SAMSON: Could you give me a ballpark figure? Are we talking $1 million, $2 million, $10 million? Where is that number?

MR. BRYANT: If you follow federal announcements, they're even more opaque, sometimes, than provincial and municipal ones. Money gets announced many times. The AIF fund certainly has a Strategic Community Investment Fund that's announced on a regional basis. I would have to dig in to find out how much actually came to Nova Scotia. Those decisions, in the old days, used to be made right here in Halifax as part of the joint

[Page 17]

federal/provincial economic diversification agreement - those decisions are made somewhere else. I don't have a number. It's certainly larger than the provincial amount.

MADAM CHAIR: Mr. Samson.

MR. MICHEL SAMSON: I would say that's an understatement, to say the least. I would ask if you could table those numbers with this committee.

MR. BRYANT: We can get that information.

MR. MICHEL SAMSON: I have no doubt that there's quite a disparity between the two. Just before my time finishes, I'm wondering if you could . . .

MADAM CHAIR: Mr. Taylor, I think you have something to add to that last point.

MR. PAUL TAYLOR: I just want to clarify that we'll do our best to get you the information on ACOA spending that's publicly available to the extent we can get it from them. If it's not possible for us to get it from them, then that's probably a question that has to be asked directly of them.

MR. MICHEL SAMSON: The reason I raise that - and I'm sure you probably share the same frustration I share - is that when Nova Scotian communities are looking to move themselves forward, to make investments in their communities, to take the lead and to restore economic development in their communities, the Province of Nova Scotia is not at the table. Or, if it's at the table, it's there with empty pockets. We have to go to HRDC, to ECBC, to ACOA, and to other federal agencies.

I have to tell you, I don't know how many times I've written, on behalf of organizations, asking for money, and each time, from the provincial Office of Economic Development, the answer is there are no funds. I've gotten tired of writing. I don't even bother doing it anymore, and I tell the groups it's a waste of a stamp because there is no money from the province. We have to rely completely on the federal government. That's why I asked you if you could show us those numbers, because I think those numbers are an embarrassment to our province. We've abandoned these communities, and in fact we have allowed the federal government to take almost the complete burden of allowing these communities, whether it's on waterfront development, whether it's strategic infrastructure for these communities, they're almost strictly having to rely upon the federal government.

I think that's extremely unfortunate, because it flies in the face of this government's statement that they want communities to be able to take control of their future, to be able to indicate what their priorities are, rather than waiting for bureaucrats in Halifax to dictate what's to be done. It's a commendable statement, but it's pretty hollow when there's either no money there or there's maybe $1.15 million for an entire province. I have no doubt that

[Page 18]

we'll see that millions and millions are being invested by the federal government, especially through the programs of HRDC and ECBC. Is that it for my time?

MADAM CHAIR: Unless you have a question to put.

MR. MICHEL SAMSON: That's fine. I'll pass.

MADAM CHAIR: The time for the Liberal caucus has expired for this round. We will now turn to the PC caucus.

Mr. DeWolfe.

MR. JAMES DEWOLFE: Good morning, gentlemen. When I heard a member of the Opposition talking earlier about political impropriety, political interference, and makes this remark, we in Opposition, when everyone knows the member is a freewheeler and doesn't even support his own caucus - but he misleads the Public Accounts Committee by saying there are no news releases. I have a real problem with that because every bit of funding - I read these news releases - that comes out of Economic Development is announced in great detail, and sometimes more than once because good news deserves that. How can that member say, no news releases? Mr. Taylor, perhaps you could answer that.

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: I would agree with you. Any time the use of the Industrial Expansion Fund commits the province to a financial obligation, a news release or a public announcement is made. In some rare cases it's not made by the province, it's made by the company itself, but there is always a release that identifies the commitment of the province, the objective the province is trying to achieve, and the results it expects to achieve.

As I referred to the member's previous question, there are occasions when there is an administrative issue that has to, by law, go through Order-in-Council that does not trigger a press release because, on the advice from our communications people, there's really nothing more to announce that the actual public issuance of the OIC doesn't accomplish. We are certainly trying to make sure that every time we commit public funds to a public purpose that there is an announcement made.

MR. DEWOLFE: Even at the local level, sometimes a local office of Economic Development makes a localized announcement. Lynn Coffin, for instance, in my area. Going back to CanJam, I do recall a press release regarding that when they received a loan extension, not a grant but a loan extension, there was a release that came out on that. That kind of flies in the face of the comments that were made. Absolutely no credibility comes to mind.

[Page 19]

An honourable member, Mr. Steele, suggested that you, Mr. Taylor, were dancing around questions of Cabinet approval. I guess I'm wondering, did Cabinet ever approve a file that you said no to, in your memory?

MR. PAUL TAYLOR: In my answers to the previous questions, what I was trying to get across is that when we at the staff level say no, we haven't made it a practice of going to Cabinet to say no.

MR. DEWOLFE: No, anything that you . . .

MR. PAUL TAYLOR: We say no to an awful lot of things in an awful lot of our programs.

MR. DEWOLFE: And I know that. I'm experienced, Mr. Taylor.

MR. PAUL TAYLOR: We try not to occupy Cabinet time by going and saying, here's an opportunity we shouldn't do.

MR. DEWOLFE: A previous member seemed to cover a lot of territory in negativity, talking about investments that have gone south. I believe you suggested that $180,000 was the figure that came to mind, and that's out of multi-million dollar investments. Having said that, I think that answers the question, that you're doing a good job at Economic Development when you consider the dollars involved. I expect that you learn from those experiences, too, when this happens. When you see signs like that, that the taxpayers' dollars are expended unnecessarily, it's all a learning experience, too. So it cautions you on future dealings, I would think. In my mind, I think it's incredible that we're talking in terms of only $180,000, and maybe you would like to expand on that.

MR. PAUL TAYLOR: What I think I'd like to do is use the opportunity to say to the members of the Legislature, from all Parties, the gentlemen sitting on either side of me - I don't want to comment on their ages, obviously - represent close to 75 years of experience in this area. These people are dedicated civil servants who really are trying to see economic opportunities created in this province. When an opportunity in this province, for example, turns out to produce 100 new jobs, these people take a lot of pride in the fact that there are now 100 families with a source of income, or an increased source of income, mostly in rural areas. They spend a lot of time and a lot of due diligence on putting their best efforts into assessing what makes sense for the province's taxpayers.

These aren't people who are here to try to give the public's money away. They are here trying to grow the economy. Nothing gives them a better sense of accomplishment than when all of the loans, all of the incentives that are put out under that fund are performing. That's the sense that you're doing your job well, and they have - certainly since I've been in the position I'm in - a record that they can truly be proud of.

[Page 20]

MR. DEWOLFE: And I totally agree with you, from my experience. I'm going to leave the real questions to my colleague, the member for Kings North.

MADAM CHAIR: Mr. Parent.

MR. MARK PARENT: I just want to pick up where my colleague, the member for Pictou East, left off. It's clear that the job of the Opposition is to oppose, and we've heard contradictory Opposition claims in a certain sense: first, that things are being operated for political reasons and, secondly, that there's not enough money coming out and there's not enough being done.

I guess ultimately the proof is in the pudding. I want to go back to your opening statement, because we have had the best job stats, the lowest unemployment stats in the history that we can remember. Can you elaborate on that? Have you tracked the unemployment stats? Are these the best that we've seen in recent memory?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: From a total employment level in the province, the statistics show - and the most common source of these statistics, obviously, is Statistics Canada - since Statistics Canada began reporting numbers for Nova Scotia, and I think it was close to 30 years ago, we are at a record level of employment in this province. My memory is going to fail me as to the unemployment side, the statistical number, but certainly, without a doubt, in the metro area, where a third of the population lives, if we're not at historical lows, we are very close to them.

MR. PARENT: In fact, in metro, the unemployment is lower than most of the major urban centres in Canada.

MR. PAUL TAYLOR: I think the numbers will show that the Halifax metro area has the lowest urban unemployment rate east of Winnipeg, in the country.

MR. PARENT: I don't want those to get lost, because the proof is in the pudding. In some sense how you get there is not as important as the fact that we get there. Record employment, the highest employment levels in 30 years, since Statistics Canada has been tracking employment. In Halifax and in other areas, record unemployment levels. I know we need to do better, but that needs to be stated, that needs to be stated well, and I want to thank you gentlemen for the work that you do.

Someone mentioned the community innovation awards banquet, a program that's going on in Wolfville at the Old O starting tomorrow and going to Friday. I want to commend you for that, as well, and just lead up to a question. I really think that - and this fits in with Tory philosophy, so it's a good fit - the emphasis on healthy communities, both in

[Page 21]

terms of physical health and in terms of economic health, the community is important, the individual doesn't exist apart from the community, and when the community is healthy, individuals will be healthy. I just want to ask you, maybe you could do a little promo on this

program that's coming up on Thursday and Friday, for just a few minutes.

[10:00 a.m.]

MR. PAUL TAYLOR: Well, I can start, but then I'll hand it over to Mr. Bryant, who is, certainly, directly responsible for this activity. From a community development point of view, it's a conscious drop of the word "economic" out of the term that used to be community economic development. From a provincial government point of view, we're trying to take a more inclusive approach, if you will, in exactly what you said, that the health of a community is more than its economic health. Obviously people have to have a way to support their families and they have to have a way to purchase the essentials of life. So an income and a healthy economy are part of it.

But the health of a community and the stability of a community is woven into a lot more, the transportation system, the education system, the health system, all these elements, particularly the environmental health of a community, add up to a centre where people want to live and where people want to create value, they want to stay, they want to raise families there, they want to enjoy the balance that comes from that community. So the way we approach economic development and the way we've laid it out in the community development policy is the economic activities of an organization like ours and our partners in the Crown Corporations and the other economic development agencies in the various levels of government have to be interwoven with the social and the environmental, even the regulatory side of things to make the community a whole.

If any one of those components of a community begins to break down, it puts pressure on the rest of them, and eventually that puts pressure on - we've run into companies, when we've been consulting around our economic strategy for the province, they're quite direct in attracting people to rural Nova Scotia, into small communities, they may very well have an attractive business model to go there, but they have concerns that they come to us around the health of the health system, what the schools are like, what the roads are like, what the environment around that community is like, because they're going to have to attract people to work in those businesses. So it is one piece of a bigger puzzle. Economic development has to be interwoven into a lot more than just a plant or a new retail operation.

MADAM CHAIR: Mr. Bryant.

MR. BRYANT: There's not much to add, except to say that the conference tomorrow and Friday is an attempt to make a little more public a community development policy that we put together over the last several months. It was approved by Cabinet in December, and got a bit of money in the 2005-06 budget to move things forward. We're combining with

[Page 22]

ACOA on this one. I'm sorry Mr. Samson isn't here, because in fact it is a fairly productive relationship with ACOA. They have money, and we're glad that they have it. We're happy to work with them on joint projects.

The real purpose of the conference the next couple of days is to look at this broader conception of community development, look at the social, environmental, cultural and economic aspects of it and to highlight the kind of creative things that are happening right across the province. We hear a lot of negative stories about how bad things are in some parts of rural Nova Scotia. There's no question there are communities under considerable stress, but that's not the only thing that's happening.

The conference over the next couple of days is an attempt to bring together examples of communities that have taken innovative approaches, that have done things differently, that have taken the first principle of our policy, which is that community plays the leadership role, to heart and demonstrated it. We're hoping the result of the conference will be lots of sharing of ideas among communities, both rural and urban, that have found new ways to do things at a time when there's no question money is tight. We don't have buckets of cash to throw at problems anymore, we have to use our own money carefully, and tap into federal sources where it's available, and also tap into the resources that are available in communities. I think many communities have found there's more there than they thought. So we're looking forward to the conference.

MADAM CHAIR: You have four minutes.

MR. PARENT: I really want to commend you on it. I think it's a wonderful stress. Your comment about how we don't have buckets of money, so we need to share our ideas reminds me of a comment that Ernest Rutherford said, "We don't have the money, so we have to think." We've got lots of ideas, and I think it's a great conference.

Very quickly, I want to talk on agriculture. Thank you for some of the programs, Hostess, the Great Valley Juice, things that have been important in supporting agriculture. I want to emphasize, again, the importance of agriculture. It now competes on a global marketplace, as you know, and has global pressures that it was shielded from before, so the support is desperately needed, because it is a primary industry that is incredibly important in large parts of Nova Scotia, and certainly in the area I come from.

One of the things that was raised to me by one of my - they're not farmers anymore, they're global business people - was that a lot of the Sobeys, the Superstores are demanding single-sourcing of a certain commodity, for example, blueberries. For him to single-source blueberries, he has to be able - not blueberries, it's another product, it's a vegetable product, but for him to single-source that he has to be able to grow that outside of Canada as well, because the harvest season, the growing season in Canada will only supply the one harvest, so he has to have another place. He cannot access money to help create employment over

[Page 23]

there, because we're all geared to employment here, but if he doesn't create employment over there, he won't be able to single-source to Sobeys. They'll go elsewhere, they'll go to Ontario, they'll go down to California, they'll go somewhere else.

It's not a question, but it's an issue that we need to begin to get our heads around, that we are in a global marketplace, and we have to be able to tailor our policies in ways that will help. This is just one instance, and I throw it out. I know my colleague is chomping at the bit to get some questions in, so maybe there's a very quick response to that, Mr. Taylor.

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: That is a conundrum, that is a challenge that has to be worked on as we go forward, particularly with our federal colleagues in International Trade Canada. We recognize that we want to grow local companies into world players, and I think we can all recognize just about every world player we see has operations in more than one country, that's what makes them a world player. Those foreign operations are integral to the home base, or to the operations in Nova Scotia. It is a very difficult sell to find ways to financially incent the creation of opportunities in another country, even if they are vital to the operations here in Nova Scotia. There are lots of opportunities here in Nova Scotia that can compete for that money. So it is a challenge, without question.

MR. PARENT: But you recognize the importance of it, increasingly, as the economy of the world gets integrated.

MR. PAUL TAYLOR: Exactly. That is one of the consequences of the planet shrinking, and operations and the supply chain into these big organizations indeed becoming global.

MR. PARENT: How much time do I have left, Madam Chair?

MADAM CHAIR: Your time has expired.

MR. PARENT: Thank you. I'll have to give it over to my colleague for the next round.

MADAM CHAIR: We'll start the second round with the NDP caucus. We'll do 15 minutes, so you have until 10:24 a.m.

Mr. Steele.

MR. STEELE: I actually have a great deal of respect and trust for Nova Scotia Business Inc., and if Stephen Lund is listening today, he'll probably fall off his chair when he hears that, because I think he feels he gets a pretty rough ride in here, and he does. They

[Page 24]

have a good accountability framework and good reporting; whereas, in contrast, the Office of Economic Development, as the Auditor General said, in the information we get there's very limited reference to the fund, its plans, activities or performance. So, in other words, we don't know very much about what you've done, what you're doing, or what you plan to do. Other than that, we know a lot. Do you see what I mean?

When I say that I don't have a great deal of trust in the Office of Economic Development, that's not a pejorative thing, it's not a reflection on you, all of whom I know to be fine people, experienced, hard-working civil servants. The point is you don't give us the information we need to make the judgment for ourselves.

None of us in the Legislature should be put in the position of just taking your word for it, or just taking the minister's word for it. I would have thought that from a purely defensive point of view, if you want to get rid of all of these allegations or suggestions or possibilities of political interference in the work you do that you would want to provide us with the information that we're looking for. The reason that all these things get suggested is because of the vacuum of information. When you have a vacuum of information, that's when all the theories and speculation and allegations rush in.

In that context, let me go back to CanJam. When you were here last year, Mr. Taylor, you said that the reason why the Office of Economic Development was dealing with CanJam rather than Nova Scotia Business Inc. was precisely because the president of CanJam sat on the board of Nova Scotia Business Inc. I was looking at their annual reports, and she is not listed as being on the board for at least the last two years. So I assume she's off the board. She was on it once, we all know that, but she appears to be off it now and has been for at least a couple of years. The last annual report that lists her as one of the board is 2002-03.

I guess my first question to you is, given the fact that I understand and accept Nova Scotia Business Inc.'s accountability framework but I don't accept yours, why is it that more than two years after Grace White has left the board of NSBI that your office is still dealing with this file?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: My understanding is like yours, that Grace White had left the board shortly before the Office of Economic Development assumed the file for CanJam. However, having once assumed the file, what you've really seen in terms of activity on that file is a continuation of the original arrangement made between the Office of Economic Development and the company. So it has been quite logical that the Office of Economic Development, once having put that file in place, would continue to oversee that file until such time as CanJam is no longer accessing government money on that file.

[Page 25]

MR. STEELE: Do you think that there might be a good argument that the file should go back to Nova Scotia Business Inc., given its stronger accountability framework?

MR. PAUL TAYLOR: No. Given the history of our staff with the file and the people involved with that file, I think it makes much more sense for it to stay where it is now, where it's being properly managed at this time.

MR. STEELE: Let me talk now about one of the other companies that I worry about, and that's MedMira. Maybe I should start by asking you, how much public money is in MedMira and how much public money is at risk in MedMira, just the dollar amount?

MADAM CHAIR: Mr. Robar.

MR. ROBAR: There's a $2 million loan guarantee outstanding to MedMira.

MR. STEELE: And that's the only commitment that the province has?

MR. ROBAR: There was a previous loan, a forgivable loan, made in 1998-99 of $600,000.

MR. STEELE: I'm going to suggest to you, Mr. Robar, you might want to sit a little closer to the microphone.

MR. ROBAR: There is a previous forgivable loan of $600,000 made in 1998-99.

MR. STEELE: Of course MedMira is a publicly traded company, and so there's a great deal of information available about it, much more, say, than the average company that the Office of Economic Development is dealing with. When you look at MedMira's situation - let me just tell you a few things that cause me to worry about the safety of the public's money. Last year they had sales of $2.7 million, but a loss on sales of $2.7 million of $5.9 million. I believe I'm right in saying the company has never made money. We have the owner selling a large number of shares, we have an influx of venture capital, because the company is burning through cash when it's in this development stage, we have people being paid in shares rather than with money, and it goes on and on.

The last time I saw a company that was doing this kind of thing, where the principal job of management seems to be raising money, including from the public, the last time I saw this we were talking about Dan Potter and Knowledge House. Dan Potter appeared before this committee and everything was fine and the province said everything was fine and then, of course, we all know what happened to Knowledge House. These signs that I have just listed here, they're worrying. It doesn't mean the company is about to go under or anything like that but it's not the kind of thing you want to see in a company for which the public - you and I and the people who everybody on this committee represents - might be on the hook for

[Page 26]

$2 million. Do we have anything to worry about with MedMira? What's your assessment of how much of the public's money is at risk here and whether we should all be worried?

[10:15 a.m.]

MR. ROBAR: One of the basis for the investment in MedMira, one of its stated objectives is to grow the life science industry and the biotech industry. I think, as most people are aware, this is an emerging industry and it's an industry that generally produces intellectual property, property that is outside the realm of traditional security, land and buildings, so there's always a higher degree of risk when you're investing in this type of sector. The province is also trying to grow the biotech sector through investments in companies like MedMira, Ocean Nutrition, that are Nova Scotia-based and create Nova Scotia jobs.

When you look at MedMira, you look at the positive attributes, the fact that it has patented products approved by Health Canada, the FDA in the United States, by the Chinese equivalent to the FDA. It has successfully raised $20 million, $30 million through private sources before any government funding. It continues to be able to raise private capital in the marketplace, all of which are positive signs that others have faith in the company too and its futures. So when you put all of these components together, in this sort of field it is quite an attractive investment, I would think, for the public, if we're trying to grow this type of sector.

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: I just want to add quickly that you have hit on one of the issues that as a government of this province we have to consider and that is, from an economic opportunity point of view, it is highly unlikely that if we want to play in the biotechnology sector, if we want to play - in some respect - in pieces of the information technology sector, it's highly unlikely we're going to pick somebody else's company up and move it to Nova Scotia. Most of the opportunities, we believe - and certainly our partners in other provincial agencies believe - are going to come from either expanding businesses that are here now, or growing new ones from scratch and supporting their growth by entrepreneurs who like to be here and have grown up here.

By their nature, those sectors are risky and they have extremely challenging financial market conditions to face in terms of raising risk capital to support them through those periods where when they have a great idea, they have a patent, they're just starting into the marketplace, there seems to be some take-up, but there is not a commercial institution that's willing to take a risk on them. So if we want those sectors to grow, somebody is going to have to share that risk with them. If it's the government, we have to recognize that it is risk and you're absolutely correct, MedMira has risk, all of these investments have risk. It's whether the Government of Nova Scotia should be taking that risk to support the growth of that sector.

[Page 27]

MADAM CHAIR: Mr. Steele, five minutes.

MR. STEELE: You know that's an excellent answer and it underlines the point that I've come to the committee with today and that is simply that what you just said, which makes perfect sense and it's perfectly defensible, is not written down anywhere. It is not in any document provided to the members of the Legislature to explain why you do what you do. I have a number of other examples here in the same vein but they all go to illustrate the same point, which is the lack of information we have to evaluate what you're doing, which is why what you're doing seems like such a mystery. There are perfectly logical, defensible reasons why you do what you do, you just don't tell us about it unless you're sitting in front of us in this committee and we ask you about it. We need better information than that.

Let me move on to a different topic, as I said, I have a couple of other companies here that I could go through but it essentially makes the same point. In the Public Accounts, 2004-05, there's a reference to a guarantee being paid out of $566,000, which company was that for?

MADAM CHAIR: Mr. Robar.

MR. ROBAR: The account was a payout of a guarantee for Rosedale Farms, which was a former mink operation in the Digby area.

MR. STEELE: And in the previous year the payout on loan guarantees was $900,000, though there is no reference as to whether that was one or more loan guarantees. Can you tell us which company or companies the province paid out $900,000 for?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: Just to be clear, which fiscal year are you referring to with the $900,000?

MR. STEELE: That figure comes from the 2004-05 Public Accounts, which gives the previous year's figure as a comparison to this year's figure. This year's figure is $566,000 and the previous year it's listed as $900,000.

MR. PAUL TAYLOR: I have to be honest, I'm drawing a blank on that one. That is information I will have to find for you and forward.

MR. STEELE: Earlier in the session today you said that there was only a $180,000 loss, I think you said, in the past year. What company was that for?

[Page 28]

MR. PAUL TAYLOR: That's for the current fiscal year and those are - I just don't know what ground I'm standing on here - the tabling of the write-offs haven't been brought to the House of Assembly yet. That's in our current fiscal year, the write-offs for the 2004-05 period that haven't been brought to the House yet and I don't know whether I'm on proper ground to divulge them in this setting, or whether they have to go to the House of Assembly first, I just don't know.

MR. STEELE: But the write-offs are very different from the kind of loss. I wonder if we're talking about two very different kinds of things. You're talking about the current fiscal year that's currently underway and we're about six, seven months into the fiscal year and you're saying there's a write-off. But you bring write-offs forward every year but that's a different thing from actual losses.

MR. PAUL TAYLOR: Just to clarify, I might have confused you, the $180,000 figure is in reference to the performance of the fund in the 2004-05 fiscal year. As I understand it, the write-offs for the Office of Economic Development, including those under the Industrial Expansion Fund, have not yet been tabled in the House of Assembly for that fiscal year.

MADAM CHAIR: Mr. Steele, you have one minute.

MR. STEELE: One other quick question. Another company that receives money from the Industrial Expansion Fund, or from your office, is Composites Atlantic, a company that is well known and the president is well known, Maurice Guitton. He also sits on the board of Nova Scotia Business Inc. Is the fact that he's on the NSBI board the reason why his company's file is being handled by the Office of Economic Development?

MR. PAUL TAYLOR: That is one of the reasons, yes.

MR. STEELE: And Ocean Nutrition Canada is a wholly-owned subsidiary of Clearwater Fine Foods, one of the principals of which is John Risley, who is no longer on the board of NSBI but was at one time. Is that the reason that file is being handled by the Office of Economic Development rather than Nova Scotia Business Inc.?

MR. PAUL TAYLOR: That file is coordinated by us but it has the involvement of NSBI in their participation financially in the Ocean Nutrition operations, as is InNOVAcorp and OED, so it's all of us together on that one. That's a classic partnership example.

MADAM CHAIR: The time has expired for the NDP caucus. We will now go to the Liberal caucus.

The honourable member for Richmond.

[Page 29]

MR. MICHEL SAMSON: The fund we were speaking of earlier that you mentioned had $1.15 million in it, am I correct to say that fund is called the Nova Scotia Community Economic Development Fund?

MR. PAUL TAYLOR: That may be the formal title. In my notes it's referred to as the Community Development Fund.

MR. MICHEL SAMSON: Could you tell me what community development bonds are?

MR. BRYANT: Community development bonds was a program we looked at and thought about instituting, they're very common in the U.S. We looked at it around the time that we started the Community Economic Development Investment Fund. We chose to go with the Community Economic Development Investment Fund because that was a more appropriate tool for Nova Scotia. Community development bonds, as I understand, would involve municipal governments or certainly in the U.S. involves municipal governments and our structures here are much more complicated and harder to do.

I believe that there may still be people in Service Nova Scotia and Municipal Relations and some of our own people still looking at the option, but it hasn't been one that we have pursued.

MR. MICHEL SAMSON: I'm just looking through the blue book here and noticed that is one of the initiatives that we're going to be undertaking for economic development but it's clear that route has not been pursued.

MR. BRYANT: I remember the blue book promise and we certainly looked at it but it just didn't seem to be a workable process for Nova Scotia. In fact, I don't think they're done anywhere in Canada as far as I know.

MR. MICHEL SAMSON: I wonder if you could tell me how many community investment funds we have active in the Province of Nova Scotia right now?

MR. BRYANT: I'm sorry, I don't know that number. We can get it for you easily enough.

MR. MICHEL SAMSON: Can you give me an approximate figure of how many there are?

MR. BRYANT: I want to say 16 but I'm not sure - 13 or 16 are the numbers stuck in my head. I know the past year was the largest year yet. The program seems to be continuing to grow. I had an informal bet with a colleague of mine and a promise that when he hit the $10 million mark I'd take him out to dinner and I've never had to collect on the

[Page 30]

dinner, so I don't think we're up that high, but I know it has grown. Was it $3 million last year, Marvyn?

MR. ROBAR: I'm not certain.

MR. BRYANT: We can get those numbers, we just don't have them. I figured we were talking about the Industrial Expansion Fund today so I didn't bring all that data with me.

MR. MICHEL SAMSON: Who is responsible for Community Investment Funds in the Office of Economic Development?

MR. BRYANT: Chris Payne.

MR. MICHEL SAMSON: What activities are being undertaken by the Office of Economic Development to encourage the use of Community Investment Funds?

MR. BRYANT: I know that Chris is on the road fairly regularly, kind of talking up the structure of the funds. I know our field staff are all fairly well informed about how the funds work. Because there have been a number of funds out there, there's pretty good knowledge in the interested public community - accountants, bankers - and people who are thinking about the existence of the fund. So they're fairly commonly known now.

MR. MICHEL SAMSON: Who is responsible for the administration of the funds? In other words, does the Office of Economic Development provide any sort of staff resources toward the operation of the fund, the establishment of it, and the continuation of those investment funds?

MR. BRYANT: No.

MR. MICHEL SAMSON: Why not?

MR. BRYANT: We publicize the funds, we work with the proponents to make sure that their proposals are acceptable to the Department of Finance and the Securities Commission, but the funds are self-managed.

MR. MICHEL SAMSON: Why is no one working with these funds?

MR. BRYANT: Working in what respect? In fact, within communities - I think in your own case - there was one done through the credit union and so on. The capacity is there in the community to do the work around the fund. We make the opportunity known and community groups build them up. I know the Black Business Initiative, for example, had a

[Page 31]

couple of funds there and within the board of the BBI and the Black community, they have the accountants and lawyers and people who can do the work on the fund.

MR. MICHEL SAMSON: That's right but as far as smaller communities, these funds are quite an undertaking to manage. When you're relying upon volunteers in community economic development groups to be able to manage these funds, the experience, unfortunately in our area, has been that they are too burdensome, it's too much work to do, there has been some loss of some of the investments, and unfortunately it has left a sour taste in the mouths of many of the investors. I don't understand, being that we're not where we want to be as a province, why is the Office of Economic Development not putting more resources toward working with these groups to assist them not only in the promotion and the establishment of it, but in the continuation once it is going?

MR. BRYANT: I think the general philosophy has been that these are Community Economic Development Investment Funds, they're not government funds and therefore we encourage the communities to work the funds. I know there have been examples of difficulties. I know in discussions I have had with Chris Payne, they're looking at some sort of modifications to the funds to make them more effective, but right from the beginning this has not been a government program that we would manage. This is a program we would use our tax system and those kinds of things to encourage the kinds of approaches we wanted to see in communities.

[10:30 a.m.]

MR. MICHEL SAMSON: Let me put this question to you. Do you believe the community investment funds are at the success level in this province that they should be?

MR. BRYANT: I think they've done more or less what we expected when it started. There is no question that we can make modifications to make them more successful.

MR. MICHEL SAMSON: Does your department keep track of how much money Nova Scotians invest in RRSPs or other retirement investments?

MR. BRYANT: The Department of Finance keeps a very close eye on that.

MR. MICHEL SAMSON: Could you give us a ballpark figure of what that total is?

MR. BRYANT: The last number I saw was around $600 million was leaving the province.

MR. MICHEL SAMSON: So $600 million is leaving the province, less than $10 million is being used in community investment funds, and it's your position that it's having the success rate that the department hoped it was going to have?

[Page 32]

MR. BRYANT: I think we're moving up the ladder. I look around at everybody in the room here, those of us who have money invested for our retirement and so on probably don't have it all in Nova Scotia, we have it in all kinds of different places. I would like to see a higher percentage, we've always publicized that amount of money that left the province to try to make sure people think about putting a portion of it in, but I think it will always be a portion.

MR. MICHEL SAMSON: Let me say on a personal note, I'd love to be able to put money into those investment funds myself but I would fear some of my colleagues from the NDP would suddenly accuse me of all sorts of misdeeds and wrongdoings, so unfortunately we're prevented from even participating in those types of funds.

Let me put this to you, Mr. Bryant, no, we're not going to see $600 million of Nova Scotians' money staying here in the province but if we want communities such as Isle Madame, Canso, communities throughout the whole South Shore, and the Cumberland area to survive, we need to find ways of keeping money in those communities. Right now, with all due respect, it's not coming from your department, you only have $1.15 million. While the member for Kings North sees that as opposing, it's not, it's a plea for the government to put more money into those programs to help rural communities. I know you would all love to see more money available to you to assist rural communities, so if the member for Kings North is opposed to that or is against that, let him say so.

I can tell you that I will continue to push the government to invest more money into rural communities, especially in community economic development initiatives, infrastructure and in strategic investments to allow communities to move forward. If the member for Kings North is opposed to that, then that's his own choice. We need more initiatives put into promoting community investment funds.

To just set them up and tell the community groups, now you're responsible for it, is not working. Those who have tried it are telling other groups, stay away from those investment funds unless you have lawyers, accountants and ready access to professionals to assist you, because if you're a layperson, or you don't have a finance background, these are extremely difficult funds to manage. That is why I believe you have to undertake a review of what is being done and if it's a requirement of putting more resources, I'm not suggesting that the government manage these, but I'm suggesting the government should make available to these organizations the proper resources not only in the set-up but in the management of these funds.

Let me put the question to the deputy minister, are you prepared to undertake a review of what is taking place with the community investment funds and whether it requires more staff in your department or even making staff available within the Civil Service, who may work in other departments, to assist community groups where they know they can pick

[Page 33]

up the phone and get ready access to an accountant, to legal advice, rather than leaving these groups on their own?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: I would say the issue of access to capital in rural communities is one we are constantly focused on, we're constantly looking for new solutions in that area or are looking for ways to enhance the solutions we have. I guess my short answer to your question is, we're constantly reviewing our programs, like CEDIFs, like the small business loan program, like our approach to venture capital to find out if it's working and if it's not do we have to change it, do we have to find something else?

It is a long, high hill to climb. We are moving up that hill. We would all like to get there faster. It's a function of the resources necessary to balance all of these things at the same time.

MR. MICHEL SAMSON: Have you looked at what other provinces are doing in the area of community investment funds and what sort of success they might be having in other jurisdictions?

MADAM CHAIR: Mr. Bryant.

MR. BRYANT: When we set up our program we did fairly extensive consultation with other provinces. One of the shining stars at the time was a fund in Manitoba which has recently been under some press scrutiny for people walking off with money. We chose to take a slightly different tack and I think it's still a good tack to go on.

I would agree with your point that we should probably be doing a bit more and certainly, we can work towards that. I haven't seen an example in other provinces that we think is more effective. There may well be examples out there. We have had a lot of people from other provinces come and look at our model and ask questions about it.

MADAM CHAIR: Mr. Samson, you have three minutes.

MR. MICHEL SAMSON: What sort of advertising are you doing in regard to community investment funds? I guess the question is if I were to stop the odd person from different communities throughout the province and question them, do you believe they would actually be able to have knowledge of what the community investment fund is, what benefits it has? Do you believe Nova Scotians are properly aware of what's available through these community investment funds?

[Page 34]

MR. BRYANT: I certainly think if you walked out on the street here and stopped the first passerby, the chances of them being able to tell you about CEDIFs would be pretty low. However, if you look at the people who see opportunities, people who work at ACOA, people who work in our field offices, people in credit unions, people in banks, accountants, and lawyers who are looking at these kinds of opportunities, I think there would be a reasonable knowledge, some mixed views. Certainly the investment dealers' community hasn't been 100 per cent supportive on some of these things but I think among the people who might see the opportunities, there's not a bad level of knowledge. It's better than it was some years ago.

I know our staff, Chris Payne and certainly the field staff, have done a job trying to get out and talk to people about what the tool is and what it might be used for. It's not the proper tool for all projects. It is, like any investment, a risk and you're right, it does impose some burdens on the community. It is easier than an initial public offering, that's what we set it out to be. Could we make it easier still? Perhaps. At what point is it too easy and people start to do projects that maybe they shouldn't do? I'm not sure. I think it's legitimate to have a bit of a hurdle in the way of these projects so that people think them through very carefully and make sure that they're not just kind of going into this thing without a pretty clear understanding that there is risk involved, that not all of these projects will be successful, and there is a certain burden of paperwork that comes along with making sure that investors are as protected as they can be.

MADAM CHAIR: You have 45 seconds.

MR. MICHEL SAMSON: Let me just end by saying I think there is a tremendous opportunity through these investment funds to keep money in communities and it doesn't require individual investors to put up a lot of money. If you can get $1,000 or $2,000 from 20 investors, that's not a lot of exposure for each individual but it's a lot of money made available to a business or made available to a group that wants to set up a business. We have tremendous opportunity there, more work needs to be done. It means more resources, more staff, more advertising and more knowledge to Nova Scotians that keeping a little bit of their money here in Nova Scotia can pay off big dividends and there is quite a bit of protection made available there for investors that you don't see in your typical RRSP investment, so I encourage you to put more effort into that.

MADAM CHAIR: Thank you, Mr. Samson, your time has expired.

The honourable member for Waverley-Fall River-Beaver Bank.

MR. GARY HINES: My question starting out was going to be very direct which was how much money is in the fund, but I'm not going to ask that question because information from the conversation today has indicated to me that there's flexibility there, so I want to talk about the flexibility.

[Page 35]

In the Industrial Development Act there are some statements that would indicate to me that there's flexibility. I will just read from Section 4(2), "The Governor in Council may from time to time transfer any unappropriated money in the Industrial Loan Fund to the Industrial Expansion Fund and may from time to time re-transfer all or any part of the money so transferred to the Industrial Loan Fund." Section 4(3) is, "The Governor in Council may from time to time transfer to the Industrial Expansion Fund and charge to Capital Accounts such sum or sums . . .", and it goes on.

There were suggestions earlier that perhaps the fact that budgets get used up early in a fiscal year suggests that maybe there was some mismanagement, politics at play, or some improprieties. My suggestion would be - and I'm going to ask you to verify that and then talk about the flexibility of funds - that you get the iron when it's hot. In other words if you have a client that you have to make major investment in early in that fiscal year, then would it not be prudent to that, as opposed to looking at it and saying, well, I can't do that because I need this money further in the year. Can you tell me a little bit about the flexibility that the Act allows in funding your programs?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: You are correct, there is a wide degree of latitude in terms of the use of the fund to advance industries in this province. I would re-emphasize that the Industrial Expansion Fund - and I reflect back to some of the questions earlier, about the plans for the fund and laying out what we expect to accomplish with the fund - when it was originally established, and I think it holds true today, it was set up to have a pretty wide range of applicability to be able to fill in the gaps, if you will, between other funding mechanisms the government may have elsewhere in its system, to take advantage of opportunities as they come.

It very much is an opportunity-driven fund, in that it, as I said in an answer to a previous question, we do not go out, as OED and administrators of the Industrial Expansion Fund, and beat the bushes looking for ways to advance monies out of this fund. These opportunities inevitably come to us. As I said, we make an assessment of whether we think these are valid investment opportunities that should be considered by Cabinet. I think the Nova Scotia economy is gaining more of a positive reputation from a foreign investment point of view in that people are beginning to express more confidence in the business climate in this province. They're beginning to express more confidence in the opportunities they have with partners here in this province, partners in the private sector in particular. We are seeing more opportunities to make use of not only the Industrial Expansion Fund but opportunities elsewhere in the NSBI, InNOVAcorp, Energy world.

The fact that the fund is consumed or expenditures take place early in the year versus later in the year, the rate to which those expenditures are accumulated inside the budget of the Office of Economic Development, is a function of the opportunities that show up and

[Page 36]

when they show up, we, as bureaucrats, leave the decision to the political level of government as to whether they want to advance those monies for the purpose recommended. We bring the opportunities forward which we think will advance the economic interests of the province, based on the criteria we use, both from a risk of the capital that would be put out and the benefits achieved from putting that capital out. The Executive Council makes the decision as to whether they want to do that or not.

The rate at which those opportunities come to us, the rate at which we then assess them and the rate at which Cabinet then decides whether they're going to accept the recommendation or not, that depends on how fast those monies get expended against our budget. I remember, in answer to a question a little earlier, the reference was made that the local credit unions are saying, don't go use the credit union loan program, just come to us and we'll advance the money to you without having to go through the credit union loan program. That's great. If we could ensure that the private sector would step up and provide the risk capital, particularly in rural Nova Scotia, to small businesses to fund their operations to allow them to grow, we'd step back out of the process completely. We'd step the Industrial Expansion Fund back out completely, if the opportunities that people want to pursue in this province can be met by private sector sources of financing.

That is, by far, our first preference to see how those things get funded, but that is not possible in all cases, given the risk that's involved in some of these opportunities, that risk capital is not there. They come to us for various reasons. The rate at which we get those opportunities approved determines how fast the money is allocated against that fund.

[10:45 a.m.]

MR. HINES: In fairness to clients, I'm sure there's nobody who comes to you who doesn't believe they have a good opportunity. In making decisions, some are disappointed. Those are the ones we read about in the newspaper, because they make good print and they make good fodder for the Opposition. In saying that, does client confidentiality tie your hands considerably in terms of telling the public exactly what happened or the reason you had to turn down programs?

MR. PAUL TAYLOR: It's always a consideration, because we have to keep our eye on the next client who's thinking of coming through our door with an opportunity. If we're quick to try to defend our activities through putting personal or protected financial information on the street, in doing so there is a strong likelihood that the person who's considering an opportunity here in Nova Scotia is just as likely to take that opportunity somewhere else where they have more confidence in the protection of that information.

It's absolutely true that if, as staff to the government, we are to be held accountable for the track record of the use of this fund, in terms of how many of their recommended investments we brought forward actually turned out to be what we thought they would be,

[Page 37]

if we're going to be held accountable on those terms then, absolutely, we are going to have due diligence and scrutiny of the opportunities, and some of those opportunities are going to fail that test, that they do not warrant an investment by the Province of Nova Scotia. That could end up in either a company leaving this province to go elsewhere, where they can get better terms, or it could end up in a company going out of business and going through the receivership process.

As sure as I'm sitting here, that's going to happen again. Companies are going to get that answer. That's just the function of the spectrum of opportunities that come forward. You're absolutely correct that everyone who comes through our door thinks they have an ironclad business case. The fact that they're knocking on our door would indicate that the commercial financial institutions, right away, don't think they have that ironclad business case, so there's a set of risks there that somebody else isn't willing to step up and take. So we know from the start there's something we should be paying attention to in that business case, and some of them will not meet the test no matter how well they think they should meet that test.

MR. HINES: Would it be true to state that changing socio-economic conditions and changing demographics would make it more opportunistic for maybe another area to take a project that you've turned down? Would that sometimes be the case?

MR. PAUL TAYLOR: You're touching on a much bigger subject area, and that is the competitiveness of this business. As we watch the globalization of the economy, whether that's a good thing or a bad thing, that's not relevant to us, it is happening. The world shrinks, the supply chains move globally, particularly in manufacturing, with even a stronger reference to rural manufacturing opportunities. The competition is fierce. It was fierce before we saw the rise of the so-called Asian Tigers. That competition is going to remain fierce for a long time to come. If China manages to price itself out of the market by growing so quickly, there is a whole series of Indonesias, Vietnams, all sitting there waiting to take their place with 25-cent labour.

That competition, particularly for the people who use hands or machines to assemble things, is fierce. You'll find in every jurisdiction in North America right now that has an economic strategy in the public, that economic strategy will have an emphasis on knowledge economy. It will have an emphasis on IT, it will have an emphasis on biotechnology, because that's where the western economy still has an advantage, in that intellectual property area.

The competition to take that intellectual property and then assemble it into a product is fierce, and there is always someone somewhere else who wants to pick up that opportunity and move it out of this province or take it away and never see it here in the first place. You can't overestimate how many jurisdictions are in this business.

[Page 38]

MR. HINES: You just answered my last question which was about forward thinking, so I'm going to pass back to Mr. Parent for another question he had.

MADAM CHAIR: The honourable member for Kings North.

MR. PARENT: I want to correct the honourable member who wondered what I was criticizing. What I was criticizing was the negativity certainly not the need for investment in rural areas, that's important. What I want to ask a question about is research and development. I've been told that one of the areas where we have problems, in terms of research and development is that too much of R&D is centred in universities, there's not enough research and development taking place outside of that context. Is that a fair analysis and if so, what are we doing about it?

MADAM CHAIR: Mr. Taylor.

MR. PAUL TAYLOR: I wouldn't say we have too much research being done in our universities, we'd like to see as much research done in our universities and the public labs. There is a challenge certainly on the private sector, the so-called applied research side of things.

If you look at the economy of Nova Scotia and how it has been created, we have a lot of resource industries that supply the upgrading industries of the Storas, Bowaters and people like that who take raw resources and upgrade them into products. Those companies in general tend to be branch plants of somebody else's intellectual property created elsewhere, Michelin is included. They don't tend to do a lot of their research here into their products. We recognize that as an area, particularly if we want to focus on the knowledge side of the economy, we recognize that we do have to pay more attention to the R&D being done in the private sector.

I know the Premier's Advisory Council on Innovation has brought forward a recommendation to the Premier that we look at the level of the R&D tax credit, obviously aimed at the private sector. We're doing an assessment with the Department of Finance now on that recommendation as to whether that is the best vehicle and if so, how it should be changed. We talk to companies much more so now, when a company comes through our door looking to do the branch plant thing, as good as that is, and particularly if it's in rural Nova Scotia, great, but we're talking more to them now. Great, we'd love to do business with you but we also want to talk to you about the research that's feeding that product and how you can recognize the advantages of the research being done in our universities here and the research being done in the federal labs here in Nova Scotia. That can be a springboard for you to do more research in support of your products here in Nova Scotia.

[Page 39]

There is certainly a general recognition, particularly in the HRM, because of the existence of so many of the universities here - obviously they are scattered in other places in the province - that we do have the high knowledge level in our workers and we do have a large university system that is well-suited to step in and support such private sector research.

MR. PARENT: Thank you for the clarification of my comment because it's not that there's too much going on, I mean we can use all we can and more in the universities, but in comparison, we need more in the private sector. One area that . . .

MADAM CHAIR: Your time has expired.

MR. PARENT: I'll just close with this comment since I have run out of time but one area that the Premier's Advisory Council on Innovation focused on which I think is very important was making this province the most environmentally-friendly province in Canada by the year 2025, and coupling that because many people see that as a cost. The opportunity for doing R&D and for producing environmental technologies, I personally think that that is one of the future hot spots that people are going to be demanding, that type of technology and that the opportunities are there. I just want to encourage you in that recommendation number one, I believe it was, from the Premier's council. Thank you very much, Madam Chair, sorry for taking too much time.

MADAM CHAIR: Thank you. The time has now expired for questions. At the end we allow a bit of time for a wrap-up statement, but before we do that I have one quick question. Do you have any women or members of visible minorities, persons with disabilities in a senior management position in the office, at a director's level?

MR. PAUL TAYLOR: We have women in those positions. I do not believe, at this point, we have any from the persons with disabilities or visible minorities groups. The Office of Economic Development is a very flat organization. In our management ranks we have six people.

MADAM CHAIR: But you do have more diverse representation than we see here this morning, for example?

MR. PAUL TAYLOR: Yes.

MADAM CHAIR: Thank you. I'll now entertain a closing statement from the office.

MR. PAUL TAYLOR: Thank you for the opportunity to once again appear before the committee. Point well taken, that we do have a task in front of us to better explain our approach to the use of the investment funds. We see lots of good things going on in this economy, we see lots of opportunities in this economy, and we see lots of ways for the

[Page 40]

province to participate in that economy, but it bears repeating that we do have to take advantage of the opportunities we have to better explain what it is we do, why we do it and the results we're achieving, because there are excellent results being achieved in this province that the public of this province not only should be aware of but they should be proud of. We'll certainly take that message away. We just look forward to a continuing strong growth of this economy, and we're happy to be part of it.

MADAM CHAIR: Thank you for being here this morning. I will now entertain a motion for adjournment.

AN HON. MEMBER: So moved.

MADAM CHAIR: We are adjourned.

[The committee adjourned at 10:57 a.m.]