HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Michel Samson (Chairman)

Mr. Brooke Taylor

Mr. William Dooks

Mr. Mark Parent

Mr. Howard Epstein

Mr. Charles Parker

Ms. Marilyn More

Mr. Wayne Gaudet

Mr. Harold Theriault

[Mr. William Dooks was replaced by Mr. Ronald Chisholm.]

[Mr. Charles Parker was replaced by Mr. Gordon Gosse.]

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

WITNESSES

Nova Scotia Business Inc.

Mr. Stephen Lund - President and CEO

Mr. Pat Ryan - Vice President, Financial Services

Mr. Martin Walker - Director, Small Business Growth

Mr. Peter MacAskill - Director, Corporate Services

Office of Economic Development

Mr. Paul Taylor - CEO

Mr. Chris Bryant - Director, Decision Support

Mr. Marvyn Robar - Director, Development Initiatives

Mr. Neal Conrad - Director, Community and Rural Development

HALIFAX, TUESDAY, MAY 17, 2005

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Michel Samson

MR. BROOKE TAYLOR (Chairman): In the absence of the chairman, we will commence the meeting. I would like to welcome our guests this morning from the Office of Economic Development, Nova Scotia Business Inc. Perhaps we could begin by asking our guests to identify themselves for recording purposes and then we will go around the horn, so to speak, and have MLAs introduce themselves, as well.

[The committee witnesses introduced themselves.]

MR. CHAIRMAN: Good morning, gentlemen, and welcome.

[The committee members introduced themselves.]

MR. CHAIRMAN: Thank you, everybody. I know Wayne Gaudet is here representing Clare and the Liberal caucus. I think he is checking with the chairman just to see what his schedule might be.

I guess, Stephen, you understand the process here so I will turn the floor over to you and you can begin.

MR. STEPHEN LUND: Thank you, Mr. Chairman. I'm going to say a few opening remarks and Paul Taylor will follow me.

Mr. Chairman, ladies and gentlemen, thank you for the invitation to speak this morning. If I may, Mr. Chairman, and members of the committee - I was going to say please let me introduce my colleague, Pat Ryan, but we have already done that - we have been invited today to speak about Nova Scotia Business Inc., about the agency's work and about our involvement in the collective effort to grow Nova Scotia's economy. The province's growth during the past few years has been steady and solid. Year over year, Nova Scotia created 5,400 jobs. That means we are up 1.2 per cent over 2004 and we have outperformed several other provinces across Canada in sheer job numbers, but there is always more work to be done to continue to build Nova Scotia's economy even further.

Let me start by saying that Nova Scotia Business Inc. is part of a cast of many who are all working toward a more prosperous Nova Scotia. Mr. Taylor and the Office of Economic Development are in this cast of many. So, too, are the agencies and community development groups from Cheticamp to Yarmouth and Springhill to Halifax. (Interruptions)

MR. CHAIRMAN: Excuse me, Stephen, I will yield the floor to our chairman. Good morning, Michel.

[9:03 a.m. Mr. Michel Samson took the Chair.]

MR. BROOKE TAYLOR: We did the introductions and turned the floor over to Mr. Lund.

MR. CHAIRMAN: Mr. Lund, good morning.

MR. LUND: Good morning, Mr. Chairman.

MR. CHAIRMAN: Please continue.

MR. LUND: Professionals at NSBI's offices throughout the province are also working side by side in the effort. Here's what our part has added up to so far. Since NSBI's inception less than four years ago, our work with companies has secured deals that will result in the creation of about 7,500 jobs and the maintenance of another 3,500. That is more than 11,000 jobs. The distribution of the jobs is roughly shared equally between rural and urban locations. The total payroll impact is estimated to be $315 million since NSBI's inception - the past three years, the province's net return is $40 million.

Let me say that NSBI is more than a lending institution. We are a business development organization. Lending is one aspect of what we offer. NSBI has staff dedicated to growing business through four services. NSBI's business advisory team members in six regions throughout Nova Scotia held more than 700 meetings with Nova Scotia companies last year. The advisory team made referrals to NSBI's export and financial services groups and to other partner organizations. Our export team helped companies generate more than

$30 million and increased export sales during 2004-05. Using our export programs emissions to markets in Washington, Boston, Los Angeles, South Carolina, Trinidad and Tobago, the Netherlands, and Belfast, 171 companies had more than 500 business-to-business sales meetings. Last year the financial services team arranged 13 financings with growth-oriented Nova Scotia companies. NSBI's business development team attracted 12 companies that had relocated all or part of their business to Nova Scotia during 2004-05. Our business attraction results are as good as any province in Canada - but for NSBI, companies like Anadarko would not be here today.

As I have said, we are not alone in the job of furthering Nova Scotia's prosperity. NSBI staff is focused on finding solutions for business, including NSBI payroll rebates, export and advisory services, loans and other financial solutions, or our staff may link a client to our partners - partners like the Office of Economic Development have different tools with which to help Nova Scotia's economy.

NSBI's mandate and regulations do not allow us to be all things to all businesses. We must help grow businesses in Nova Scotia and we must generate a return on investment for our shareholders - the citizens of Nova Scotia. This means we work with growth-oriented Nova Scotia companies and we also attract new business to the province. NSBI staff works diligently to find solutions and with every potential client we may work with; NSBI assesses the company's business case and applies rigorous due diligence.

Snair's Golden Grain Bakery is an example. Last Summer NSBI staff worked closely with Snair's for more than four months. Other partners had also been involved. I must say that I am obligated to uphold the commercial confidentiality of company dealings with NSBI. Business entrusts NSBI with sensitive information - this is an important principle for the success of business. I can tell you that the due diligence of the business case ruled out a favourable recommendation despite everyone's dedicated efforts to reach some solution for Snair's. The outcome is disappointing. We all want Nova Scotia's businesses to succeed. Although work needs to be done, we are proud of our successes to date and we are proud of the impact that we have made in Nova Scotia's communities. Thank you, Mr. Chairman, and members of the committee.

MR. CHAIRMAN: Thank you, Mr. Lund. Are there any more presentations?

MR. PAUL TAYLOR: I have a short one on behalf of Economic Development.

MR. CHAIRMAN: Please proceed.

MR. PAUL TAYLOR: I would also like to thank the committee for the opportunity to appear this morning. It's no secret that small business is an important element of the economy of Nova Scotia. I would like to just cite a few statistics in that regard: 92 per cent of our employer businesses in Nova Scotia are classified as small business; they contribute

about half of the province's GDP; and they create 40 per cent of the net new jobs in Nova Scotia. Given this impact, it's no wonder that the Office of Economic Development puts significant resources into small business development.

I just want to mention a few of our programs aimed at small business. It's not a complete list, but I think it captures our work in this field. The Credit Union Loan Guarantee Program is a partnership among the credit unions, the Nova Scotia Co-operative Council, and the provincial government. Introduced just a few years ago, this partnership has resulted in $8 million in loans given to 115 small businesses, and the creation and maintenance of more than 700 jobs, mostly in rural Nova Scotia. We are looking to expand this program in the near future.

Nova Scotia's Community Economic Development Investment Funds, or CEDIFs, began about five years ago. Since then 26 of these funds have been created with more than $13 million in capital raised, again invested in small enterprises. This year was a record for investment with more than $3.2 million raised. We expect to see even more investments in community enterprises next year.

Last year government announced a five-year extension to the $1.5 million prototype boat credit facility for members of the Nova Scotia Boatbuilders Association. This program gives their members the opportunity to develop new products for export, as well as for the fishery and recreational markets. Over the past five years, Nova Scotia's boat building industry has introduced 30 prototype products into the marketplace.

Our supplier development program at OED is working to have more Nova Scotia companies involved in the procurement process in Nova Scotia. Nova Scotia firms already capture approximately 80 per cent of the $1 billion a year in procurement put out by the province and the MASH sector. However, we think that figure should increase, so we are engaged with a number of initiatives. For example, reverse trade shows, a new procurement directory, an electronic notification system for bidders, all under the supply or development banner and all in an effort to simplify the process for Nova Scotia firms to get access to Nova Scotia business.

I would also like to mention the legislation to eliminate the business occupancy tax, the completion of the red tape reduction initiative, and the increase in the small business tax threshold, as well as new export and trade initiatives. While these don't fall under OED, they are all helping to improve the climate and prospects for small businesses in this province.

There are many initiatives and programs available for small business. There are many efforts underway by government to support and enhance the work of these small businesses. We can and are always looking for new ways to support this important sector of our economy. We believe there have been some real successes, our economy is performing well

in most regions of the province, and I believe we should be confident in Nova Scotia's economic future. Thank you.

MR. CHAIRMAN: Thank you, Mr. Taylor. Committee members may have some questions. Mr. Parent.

MR. MARK PARENT: Mr. Chairman, I've already warned Mr. Lund that I'm going to ask the same question, but I guess I want to push this a bit further. Since the inception of NSBI, there hasn't been a single board member from Kings County. I looked at the press release about strengthening the board: five from Halifax, two from Lunenburg, one from Port Hawkesbury, one from Stellarton, one from Windsor, one from Sydney, one from Truro; again, none from Kings County.

Kings County is the third most populace and most economically active county in the province. Kings County does not feel that it's getting the attention it deserves in terms of economic development. Although the board member is one aspect of it, it's an important symbolic aspect, that there be someone on the board from that area. Anyway, I push that again, I pushed it before, and I'll continue to push it until someone gets on from that area.

How many projects has NSBI done in the Kings County area? Do you have those statistics with you and the dollar value of them?

MR. LUND: I don't have it. I can get that number for you.

MR. PARENT: Could you give me that information? That would be helpful. I do appreciate that Mr. Whitty is on site, and I'm looking for good things from him. I know he needs a bit of time to get out there, and I think he's doing a good job, I appreciate that. I continue to voice my frustration on the board level.

MR. LUND: If I could just make a quick comment on that. I do appreciate your comments. The board is one aspect of what we do. The board was set up taking into account a number of factors, including geography, skill sets, and a number of other things. In terms of the policy of the board, when terms come up, we look at trying to get some consistency but also some renewal each time. We try to address what we think might be shortages on the board, whether it's gender, whether it's a specific type of business, or whether it's a certain geography. One of the newer additions was Larry Evans in Port Hawkesbury.

I do take your point and I will bring that back to the board. As we look at new positions that come up, we will try to address any gaps that we see. As you will remember last time, I think, when you were here, you did express concern about the area and we did hire somebody, Jamie Whitty. If we had a full team of him - he's going gangbusters. I was with him last week at a meeting with people from Minas Basin Pulp and he has been meeting

with a lot of companies and doing a lot of great things. We know it's an important area and we've taken some steps to make sure that we're a part of what's going on there.

MR. PARENT: In terms of small businesses, I'm glad that you mentioned small businesses because they're so important to the area. One of the reasons why I fought so hard against the introduction of Sunday shopping was to help small businesses, because the small business owners in my area were saying we are overburdened, we need this time off, we need this break.

My colleague across the table, when I spoke about what our government did for small businesses, was very quick to point out that I was fabricating an image of the government being supportive of small business when really we weren't. So can you elaborate further on what we're doing for small businesses and what more might be in the pipe for small businesses? I know they're not the biggest employer, but they are an important economic generator across Nova Scotia.

[9:15 a.m.]

MR. LUND: Sure. Small business is an important generator - and we know that - right across the province. Of 33,000 businesses, 92 per cent are small business, and although they are not the main employer they are certainly a major component of the economy. We do many things in NSBI and also in OED to address and look at what some of the issues are with small businesses.

We spend probably 70 per cent of our efforts working with small businesses across the province. We've met with close to 700 companies last year across the province dealing with many issues, and many issues are beyond our control. With Martin's team placed around the province, we're focusing on trying to find solutions that work for companies - it might be financing, it might be referring them to somebody else, it might help with a business plan here or there. Mark, do you want to make a comment on that? Because it's really Martin's team.

MR. MARTIN WALKER: Thank you, yes. We have our team spread around the province.

To Stephen's point, the thrust of our initiative is really recognize and refer. We had over 700 company meetings last year, and out of that we try to dispose of that or at least ensure that that meeting, that encounter comes to some outcome. Recognize and refer was the core of it last year - we referred over 180 opportunities through partners in the field and another 140-some-odd referrals came within NSBI itself, within our export services group or financial services.

We're part of the fabric - there are many partners and our job is really to be aware and on top of every offering that's out there and to make sure that we can identify a need, and then from there find the right tool to fit that need. Our focus is small business.

MR. PAUL TAYLOR: I would just add there are a number of provincial programs, a few of which I mentioned in my opening remarks that also are aimed at small businesses and rural communities. For example, the broadband extension into rural Nova Scotia, there are very telling statistics on job creation and new business creation, particularly small business creation in rural communities that have access to broadband service.

MR. PARENT: Speaking about that, here's an interesting - it's more a philosophical question. Alvin Toffler, who I think shouldn't be allowed to write any more books because back some time ago he wrote a widely acclaimed book called The Third Wave. In The Third Wave he was talking about how the second wave was centralization, urbanization as the big cities grew and that in the third wave with new technology - broadband technology, et cetera - we would be able to live in rural areas and the urban centres would depopulate in favour of people who had a better lifestyle. That has not happened. What we're seeing is that the urbanization and the jobs - in Nova Scotia right now, basically an hour's drive outside of Halifax is where the population is growing, where the jobs are growing, and where the unemployment statistics are somewhat acceptable. Do you have any idea how we can change that or do we just give into it?

I know John Ibbitson from The Globe and Mail was in town yesterday saying don't bother with the rural areas, you have to concentrate on the metro area and that's it, just give up on the rural areas. I hope he's wrong, but certainly we've seen a lot of attention to these major cities, in spite of the fact that with broadband, with the technology we have, it is entirely feasible to be living in Yarmouth and working out of Halifax, for example. Do you have any idea what is going on here? It is confounding the futurologists, I know.

MR. PAUL TAYLOR: We've seen some changes in the trends of migration of people away from rural communities in Nova Scotia. It is still pretty telling that most of the communities in rural Nova Scotia, the municipalities, are still experiencing population decline or, at best, stable populations. As you would know, there are a number of factors involved in that kind of demographic change.

Certainly in OED, we've started to look, through our community development policy, as a whole as opposed to strictly trying to trade economic opportunity in a community. In order for people to want to live in a community, there has to be a system in place that allows for the transportation of the people. That allows for the health care and the education, but they also have to have economic opportunity, a way to earn a living in that community that allows them to have roots in that community.

So we do put a lot of focus into growing the economic opportunities in rural Nova Scotia. In fact, in OED we spend probably most of our time looking at rural opportunities. NSBI does work in that area, but also opportunities in the metro area. Some of the changes we've seen with people, particularly young people, is they are still continuing to leave rural Nova Scotia, whereas before the vast majority of those people would end up in Toronto and Calgary and points west. We now see a change in that more and more of those people are stopping, at least they're stopping in metro, staying in Nova Scotia. It still doesn't solve the problem of keeping young people in rural Nova Scotia.

One of the big opportunities we see as our economy continues to expand, there's confidence in our economy as it continues to expand. As the reputation in that economy expands, which we hope to deliver further through the Brand Nova Scotia Program, we have an incredible resource of expatriate Nova Scotians, who have gone down the road in the past, in part, because of a lack of economic opportunities to keep them here.

We see and hear from people on a weekly basis in our department. People are looking back here and saying, I've lived in Toronto for 15 years, but Nova Scotia is home. I want to come back. Is the economic opportunity going to be there this time? So if I do uproot myself and come back, that those economic conditions aren't going to chase me away again. There is a growing confidence level we see, again, on a weekly basis, or hear of people who have been hired into good positions in the Nova Scotia economy, who are, when you look at their resumés they're from Toronto, they're from Ottawa, they're from Calgary. But you go a little further back on that resumé and they're from Sydney, they're from Parrsboro, they're from the South Shore.

Those expatriates are coming back, and they're trained, they're experienced and they want to work here. It's a tremendous resource that we see, in addition to the immigration initiatives, as a way of bringing people back to this province and back into those rural communities, if the economic opportunity is there for them.

MR. LUND: If I can make a comment on that, the rural-urban issue is not just in Nova Scotia, it's all over. You can look at the booming success of Ireland, it's mostly in Dublin. They're trying to deal with issues outside of Dublin. And this is right across Canada. I think Paul really hit the nail on the head in terms of what the potential is. Sixty-two per cent of the jobs that we created last year were outside of Halifax.

We don't force companies anywhere, but we make it a point to try to encourage companies to do something outside of the main areas. Because when somebody is sitting in Boston and they think of Nova Scotia, if they know where Nova Scotia is, they think, well, I want to go to Halifax. Well, they may decide to do that, but we also try to encourage them to take a look elsewhere. If you look at some of the areas around the province where there has been significant impact made, companies like Lightbridge out of Boston, in Liverpool, that tried to hire 100 people and now we're hitting 300. Convergys in Cornwallis - go to the

Strait area now and see how that's booming. We're making an announcement today in Yarmouth, around Register adding people.

There are lots of opportunities, and I think the opportunity to bring people home is a good one. We're now in a situation, I believe, where we do have a lot of opportunities that we're looking at from a job perspective. So when we talk to people about coming home, we actually can talk to them about potential opportunities.

MR. CHAIRMAN: Ms. More.

MS. MARILYN MORE: Thank you. I have two areas of particular interest, one is the voluntary sector and the other is community and rural development. I'm wondering - I wanted to think a little bit outside the box - are any of your services or programs suitable or accessible to the voluntary sector? I'm thinking they are a considerable employer in this province and many of them actually have business operations that help fund their non-profit side. I'm just wondering, is there any possibility for non-profits to benefit from any of your services?

MR. NEAL CONRAD: Maybe I could just address that one. Certainly in the area of community and rural development one of the areas that we clearly recognize is the whole question of capacity within communities around the province. For example, with our regional development authorities around the province, we actually fund those in partnership with the Department of Community Services. They are, in fact, volunteer boards.

We also have worked with women's groups and women's shelters around the province, as well recognizing the potential impact they can play in the rural economy. We went through a demonstration program with the women's centres two years ago, it was a two-year program, and we anticipate that we will, in fact, renew that this year. It's specifically directed at women being prepared to re-enter the workforce. We're not doing it, we're working in partnership with the women's centres throughout the province.

Although we do not have a broad initiative in that area generally, there are some key specific areas in the province that we have identified that we wish to work with, particularly in the areas of economic development and performance. A key to that will always be the sustainability of the organizations themselves. One of the first things we would do with them, of course, is to have them understand the business case, and that they can, in fact, work towards a sustainable business model or a sustainable model for their organization. So, yes, we do work with some, not with all of them, and we have limited ability to do that, but we certainly do partner, principally, with HRSDC and the Department of Community Services in these areas where it's appropriate for us to do so.

MS. MORE: That's encouraging. I'm just wondering, is that opportunity known to the voluntary sector? For example, is that possibility mentioned on your Web site or in any of your marketing?

MR. CONRAD: No, it isn't, but it is widely known through our network of regional development authorities throughout the province, which really are front lines in the communities on matters of economic development. The 14 RDAs that exist around the province would carry that message for us.

MS. MORE: I would like to just suggest that perhaps that invitation should be a little more formalized with some of your other publicity and marketing.

MR. CONRAD: Point well taken, thank you.

MS. MORE: When you were talking about community and rural development, I actually come from a community of rural social development in Nova Scotia, so this is something I'm most interested in. I fully understand all the challenges about migration. I understand there have been some very good models of trying to turn that tide around in northern Ontario and the western provinces. A lot of research and best practices have come out of those initiatives. I am wondering, have you been able to tap into any of that experience in other provinces in Canada?

MR. CHRIS BRYANT: I'll take a crack at answering that. I've been sitting for the last couple of years on a federal/provincial/territorial working group on rural development. I currently co-chair the Nova Scotia Rural Team. In fact, we both learn from other provinces but increasingly find that we have models here that are actually working really well. There's been an increasing amount of sharing. Hard to point to specifics because we're still in the early stages of it, but you're absolutely right, there are good things happening, other places we can learn from.

Increasingly, I go to these meetings and we start talking about the work we do in the Black Business Initiative, the work we're doing with the Le Conseil de développement économique de la Nouvelle-Écosse and so on. We have models here that are exportable. I'm hoping when the new deal for cities and communities goes beyond the sort of gas tax phase, there'll be some opportunity to kind of expand that.

Certainly the federal Rural Secretariat and the City Secretariat seem to be keen to do that, and I think in Nova Scotia we're well positioned to try to grab onto some of that. It's a good point you make.

[9:30 a.m.]

MS. MORE: Actually, Mr. Bryant, if you don't mind staying. You and I were just starting to discuss an issue at Public Accounts last Fall I believe it was.

MR. BRYANT: I put that completely out of my mind.

MS. MORE: I was concerned because there seemed to be a decrease in the amount of money available for community and rural development. I was just wondering how is that maintained? Is that increased or just what sort of financial priority has there been within this current budget, in the upcoming budget?

MR. BRYANT: In fact there is more money and, Neal, maybe you can detail some of that. We have a little more money, you always want more, but we do have more money in this budget for community and rural development. That's money directly to implement the community development policy but also some programming money.

MR. CONRAD: Yes, on the programming side. In community and rural development, our programming normally falls into a couple of different areas. One is planning for economic development - that's at the regional level, a lot of that happens with the regional development authorities but in some cases it goes beyond that, particularly looking at an issue that may be specific to a region. Let's say an agricultural problem in the Annapolis Valley that spans the geographies of multiple regional development authorities it would come under that category.

There's local economic development planning as well, there's also a budget for opportunity identification which is an early phase assessment, sort of pre-commercial. Those would be, specifically, commercial enterprises, we'd be looking at the potential of those, and we would assist in developing the business case before it would go to our colleagues at Nova Scotia Business Inc. for example. There is a small bit of funds for project implementation and those budgets have increased in the last two years and we will be maintaining those budgets in the current cycle. We had an increase a year ago and we'll be maintaining those budgets this year. (Interruptions) The funding for the regional development authorities themselves have increased this year by some $350,000.

MR. GORDON GOSSE: I thank the members for being here today and doing a presentation in the Standing Committee on Economic Development. I represent an area of Cape Breton with probably the highest unemployment at 16.9 per cent. I noticed in the speech you gave that most regions of Nova Scotia have economic growth, but I think the region I represent hasn't had any economic growth in a very long time. With the removal of Sydney Steel and coal mining and everything, the economy has taken the bit of it.

I see most people who work in Economic Development say more jobs have been created and it's very difficult for me to understand that more jobs have been created if the unemployment rate's at 16.9 per cent in Cape Breton. In the presentation you said that the small business program loans administered by the credit union was $8 million and 115 small businesses helped. I'm just wondering how many of those loans have gone to small businesses in the CBRM and how much money would that entail?

MR. PAUL TAYLOR: I don't have it broken down by region in the province, we can certainly get those figures for you. I understand it has been right across the province but I don't know how much was in Cape Breton.

MR. GOSSE: Okay, so you can get those numbers for the committee? I'm just wondering in another issue there how many new jobs have been created in the CBRM by NSBI over the last year?

MR. LUND: If I think back to two years ago when we were at this very committee, we were criticized for our lack of efforts in Cape Breton although we had been working quite diligently in the area. If I look back over the past year, probably two years, we've done more work in Cape Breton than any other area of the province. If I look at some of the success we've had, if I start with the Strait area and I'll go to CBRM. The Anadarko LNG opportunity that's coming here that we've spent the last three and a half years working on. EDS expansion in Port Hawkesbury, we've been part of. The Federal Gypsum plant, we spent 18 months putting that deal together in the Strait area. We've worked with companies like Techlink to provide financing, DynaGen to provide financing, PharmEng to provide financing, Cape Breton Casting to provide financing, MacLeod Resources to provide financing.

We've worked with a lot of companies that we haven't provided financing to, but we've been able to work with, whether it's the chocolate company in Isle Madame, where we spent four months working with them to try to help them out. So in terms of the numbers of jobs (Interruptions) We can get the number but we've had a lot of success in Cape Breton in the last year, including CBRM. It's 869, maintained and new jobs in CBRM in the last year.

MR. GOSSE: I'm just wondering, of the total budget of NSBI, how much of it has been invested in new businesses in CBRM?

MR. LUND: I looked at our client list the other day, in terms of where it's spread out, and I'm thinking Cape Breton itself was 20 per cent to 22 per cent. Our transactions and our client base roughly reflect the population break. Again, 62 per cent of our jobs created last year were outside of Halifax. It's roughly equivalent to the population. We've been pretty bang-on the last couple of years.

MR. GOSSE: Interesting. I heard a story on the CBC Radio when I was driving up on Saturday. Cumberland County, CBC Radio, Sunday night driving up to Halifax, it said that the outward migration of rural Nova Scotia - there would be nobody left in the population of Cumberland County in the next 30 years because of the outward migration. And it's the same in Cape Breton. Cape Breton will be under 100,000 in CBRM very shortly. I'm just wondering, does NSBI or Economic Development have any plans or projects in the future to help curb the outward migration in rural Nova Scotia and in CBRM?

MR. LUND: That's a big issue. In terms of the role that we play, we work with companies. That's our job, we've had a good track record of working with companies. So we always look for opportunities. We have people on the ground, in Sydney and Port Hawkesbury, working with companies day in and day out. We've had some great successes, and we believe there are lots more opportunities for us. But again, we work company to company, that's what we do.

MR. PAUL TAYLOR: We have also been active in the Cape Breton area over the last year and a half, certainly since I've been there, for companies that we've dealt with. As well, put a lot of effort, a lot of time and money in Stora. I know it's not in CBRM, but we've put a lot of effort into the Stora expansion, and we're continuing to work with the company on continuing opportunities in that area. We provided assistance to Laurentian Energy, we provided assistance to a company called Forever Sports, we partnered with NSBI on Federal Gypsum.

As well, we have been active in the area. We also run a number of province-wide programs that are designed, they're not focused on Cape Breton but they're certainly applicable to Cape Breton, right across the board. Again I refer back to the broadband extension. It's our intention to completely cover this province from one end of the province to the other. I think, at the end of this year, we will be at 82 per cent of the population and businesses in the province now have access to high-speed Internet. We think that's certainly as important a highway as any actual road in this province, and we intend to work to try to expand that number until we cover the entire province.

The CAP program is another example of us trying to push opportunities out into rural areas of the economy, and expand that program throughout Cape Breton. Again, the CDIFs, the small business loan programs, the industrial expansion fund, our work with the RDAs, our work with the chambers of commerce, the senior chamber and junior chamber, in the Sydney area, all focused on trying to - when I gave an answer to a member's earlier question - create those economic opportunities that allow people to come back to this province and come back to Cape Breton, because there are probably more expatriate Cape Bretoners out there than any other area of the province and it's a resource we want back.

MR. GOSSE: Well, thank you, that is good to hear. Cape Bretoners are a migratory species at the best of times. I hope I didn't criticize NSBI, I'm not here to criticize anybody. I'm here to get answers on important questions on economic development in Cape Breton so I thank you for your answers. You will get that information? Thank you.

MR. CHAIRMAN: If I could ask a few questions on behalf of our caucus. One of the main reasons we asked you here today was to try to get a better understanding from you. As you can well appreciate, we're certainly aware of some of the successes that we've had, but any time you hear of a business leaving Nova Scotia that has had a long history here, especially in rural Nova Scotia leaving our province to go to a neighbouring province, it's troubling to say the least. I'm wondering, as briefly as possible, if you could indicate to us what we should be saying when constituents and Nova Scotians are telling us how did we possibly lose Snair's Bakery from our province?

MR. LUND: Sure, I mean, nobody likes to see that happen, it's disappointing, a 60-year-old business in Nova Scotia. There are 33,000 businesses in Nova Scotia and not every one of them is going to be successful. The facts alone dictate that, the statistics. We spent four and a half months working with this company. We had some very dedicated people on the file. There were many other groups involved in looking at this. At the end of the day, none of the groups stood up and said that they could provide financing to assist the company. At the end of the day, you know, the interest of the taxpayers of Nova Scotia take precedence over any single individual company and although there wasn't a financing alternative available, a lot of work, a lot of hours went into trying to help this company and, at the end of the day, it didn't work out. When we look at any transaction it has to make business sense. That's really the principle that we're guided by.

MR. CHAIRMAN: How much money were they looking for?

MR. MARK PARENT: On a point of order, I hope I'm not being picky, but my own personal perspective is that when a chairman wants to have questions, which should be allowed, that they would then switch with the vice-chairman who would take over and keep the track in time and keep order. I think it's difficult to wear two hats at once. In every other committee I'm on, the Public Accounts Committee, Community Services, that's the practice.

MR. WAYNE GAUDET: I don't see a problem with that.

MR. CHAIRMAN: No. If the member wants me to switch seats for 10 minutes, then I can do that if he thinks that's necessary.

MR. PARENT: I think it's a good policy that we should adhere to and I think that that's the way committees work.

MR. CHAIRMAN: Well, I've seen in the Public Accounts Committee before, in fact, Mr. Epstein, I believe when you were chairman, you certainly used your opportunity as chairman to ask questions and did not leave the Chair, and no one ever asked you to leave the Chair, and I think you governed yourself accordingly.

MR. HOWARD EPSTEIN: I think it is a subject of some comment, but I've also seen it go both ways. I know Mr. Steele, the current Chairman of the Public Accounts Committee, sometimes asks questions from the Chair, sometimes steps down. I think the practice here has been that the person in the Chair often will ask from the Chair. It's relatively relaxed, but if the point is raised, if it's problematic, it's easy enough to step aside or treat it either way. I certainly don't have strong feelings about it when it's not highly contentious, I wouldn't have thought it was.

MR. PARENT: No, and that's why I raised it because it's not highly contentious right now because when it does become contentious, that's not the time to raise it. Anyway, I put my point out, Mr. Chairman, and you're the chairman, you can rule on it.

MR. CHAIRMAN: I'm certainly more than happy in the future to arrange with the vice-chairman to switch. I invite Mr. Parent to watch the clock and any time he thinks I've been unfair with time, to certainly raise his points of order at that time.

Back to my question, how much money was Snair's looking for?

[9:45 a.m.]

MR. LUND: I'm sorry, I can't get into some of the specifics.

MR. CHAIRMAN: Well, they are no longer a Nova Scotia company so I'm not sure where there would be some privacy rules. They're leaving the province. Could you explain to me why there would be some privacy aspect to that if you had an agreement with them?

MR. LUND: Well, we still have to treat the information in a confidential manner.

MR. CHAIRMAN: On what grounds?

MR. LUND: Any information we receive from a client, you know there's certain information that would be deemed to be confidential. It's really part of business confidentiality.

MR. CHAIRMAN: The deal they got from the P.E.I. Government, is it your position that was a bad deal for the P.E.I. taxpayers?

MR. LUND: Well, time will tell. P.E.I. has to make up their own mind on what they want to do.

MR. CHAIRMAN: What sense of confidence should Nova Scotians have when we see that a smaller province than us was able to lure a 60-year-old business away from Nova Scotia? It's my understanding that, while I know you don't want to get into too many specifics, but I don't believe the money in question was even in the millions, it appears it was more in the hundreds of thousands and on the lower end of that. How do we have a sense of comfort when - we're used to losing out to Ontario, Quebec, Alberta, we're not used to losing out to P.E.I.

MR. LUND: Well, first of all, let me say that we don't lose many business deals at Nova Scotia Business Inc. In terms of what P.E.I. did, they make their own decision. I don't know what kind of due diligence they did, you'd have to ask them. They have faced their own pressures in the last year in terms of some of the deals and transactions they've done.

Whether the amount is a couple of hundred thousand or a couple of million, it's still taxpayer money, and we take our job pretty seriously. We would have loved to have helped out Snair's Bakery, and we did everything we could for four and a half months on the transaction. At the end of the day, the business case didn't justify putting taxpayer money into the company.

MR. CHAIRMAN: One of the other businesses that did raise some concern was, it was my understanding we were in the running for a brewery that ended up setting up in New Brunswick, so it appears there was competition for that one and we lost out to New Brunswick. I'm wondering if you could again maybe explain to us what happened in that case?

MR. LUND: Sure. It depends on how you qualify lost out. This is a very competitive world. We compete with jurisdictions every day. Every jurisdiction offers incentives to companies. As a jurisdiction in Nova Scotia, you have to decide on how much you're willing to offer in terms of incentives. Our track record in terms of investment attraction, as far as we can tell, is the best in the country. Not every transaction where a company goes somewhere else is necessarily the worst thing. Let's not forget, there weren't a lot of jobs involved with this. There was a lot of money involved being offered by another jurisdiction.

We've had terrific success on creating high paying jobs. A lot of it focused on the IT world. In fact, the average salary of the jobs we created last year was $53,000. I don't believe there's another jurisdiction that can even come close to that in the country.

MR. CHAIRMAN: I know you've made mention that you believe that our success rate is the best. I'm always concerned when people give those appraisals when they're not able to give an outside source. I know the minister, the Deputy Premier is always big at

giving those kinds of appraisals and each time he's asked has anyone else ever given him that sort of indication when looking at the rest of the country, the answer is always no. Self-praise is always important but, at the end of the day, we need to see what the whole picture is. Have there been any sort of studies that you could provide us with that would give us some sort of indication of where we do stand on the retention and attraction of businesses compared to other jurisdictions?

MR. LUND: There aren't any studies, it's really hard to get information. You'll find that we are the most open and transparent organization in the country for what we do. If you look at our annual report and try to get the same information from any other jurisdiction, you're not likely to get it.

We work with a number of the other investment attraction organizations across the country. We meet on an annual basis and we share information back and forth. That is the source of some of our information. The recognized world leader in terms of investment attraction is Ireland. They went from the last worst-performing country in Europe to the best in a 10-year period and they did it by bringing in U.S. companies to create jobs. For hundreds of years they have exported their people and they now bring in 40,000 to 60,000 people a year. So if I compare our results with who's considered the world leader - they did 33 investment transaction deals last year creating 7,000 new jobs, we did 12 deals last year creating about 3,000 jobs - on a per capita basis, we can hold our own with the best in the world.

We have 70 people and an operating budget of $8 million, they have 1,200 people and an operating total budget of $750 million. So in terms of the results, we're pretty comfortable in the terms of where we stand.

MR. CHAIRMAN: Mr. Lund, one of the main concerns with NSBI, especially from rural Nova Scotia, is the belief that you're for big business. While I hear you talking about small business, there are very few small businesses in my area that feel that NSBI is there to work with them. I think it's important to know exactly what your definition is of a small business, as to where NSBI would be willing to work with a company. What is the cap you have established, whether by employee or by revenues?

MR. LUND: We work with companies of any size and shape - there's a difference between whether it's a financing question or whether it's just working with the company. I think if you use the term, which the Department of Finance uses in terms of big business, small business, it's usually 50 people over or under 50 people. We've been accused of being a Halifax-based organization even though 60 per cent of our jobs were created outside Halifax last year, and I was accused in another part of the province recently of being a Cape Breton-focused company. One of the challenges is when we work with a big business and we bring in lots of jobs, that's what makes the paper. What doesn't make the paper is the 700

companies that we've worked with across the province, or the many companies we work with that we don't provide any financing to, but we help out.

Many of our efforts are focused on working with small businesses around the province. Our investment attraction team is a small team in comparison to the rest of our organization. That tends to be the one that gets all the press, but Martin's group, day in and day out, works with companies in every part of the province.

MR. CHAIRMAN: Well I'm wondering if rather than relying upon the papers with this type of committee, can you provide us actually with a list of these 700 companies that would indicate how many employees they have, not having to give the details of what you've done for them, but that would reiterate what you've just said, so that we can see that the companies with two, three, five employees are actually working with NSBI and are seeing some form of results. I think here's a golden opportunity for you to provide committee members with the assurance that small businesses in our areas are actually getting some assistance. So if you could provide this committee with that information we'd certainly look forward to it.

MR. BROOKE TAYLOR: I was concerned about the distinction between small business and big business and you've kind of answered that, Mr. Lund, but I guess more specific when we're talking about funding, where did the various thresholds begin and end? I know on different occasions we've had entrepreneurs and small businesses communicate with NSBI and then subsequently the funding, or as far as the funding concerned went, they were pointed in another direction, but nonetheless they certainly received some counsel and guidance. But I think for the audience here we should clearly point out where - is it a quarter of a million dollars where you begin and where do you stop, or where do you start and where do you stop?

MR. LUND: I'll turn this over to Pat.

MR. PAT RYAN: There isn't a hard floor or ceiling, but let me give you a description of the general approach we take and why. One, we don't exist to compete with private providers of capital, so very often we'll recognize and refer an opportunity where there's a more appropriate service provider. In terms of transaction size, generally we become engaged at about $125,000 and up and that's largely predicated on the fact that there are many institutions in the province that are well equipped to fund small business with appropriate products and at the speed of small business.

I was a commercial banker for a long time, and if I had a small business customer that had a problem, they needed it fixed today or tomorrow. Whether it was working capital or equipment breakdown or something of that nature, there are plenty of institutions that are geared to deal with volume like that because of the way in which we're structured and the

way in which we're governed, it takes some time to conclude a transaction, regardless of size.

The Community Business Development Corporations have the capacity to lend up to $125,000. They're in the communities, they have a very broad reach in terms of the kind of financing that they're able to do. Generally, when we establish what I would call a soft floor, we establish it based on the fact that those community-based lending organizations would be able to address themselves to that niche that's going unaddressed by the private sector.

We recently engaged in discussions with a number of the CBDCs from across the province looking for ways that we could become engaged in transactions jointly so that we can get to know the customer at an earlier stage and we could help them expand their reach. If they have a client that needs a quarter of a million dollars or needs $200,000 or something of that nature, so that we combine forces to provide them with the financing tools they need.

They've also identified some opportunities that exist in the market that are under-serviced at the present, and we're trying to work through some of those situations to develop some products. We've done loans as small as $45,000 during the time I've been employed with the corporation, and as large as $4.5 million. We have the capacity to lend up to $15 million, but generally we haven't approached that yet. So $125,000 and up would be the short answer.

MR. PAUL TAYLOR: I should add at this point, the credit union loan program, which the province designed and gave it to the credit unions to deliver, has a threshold of $150,000 and lower. There is no minimum in that program and I'm told the average size of loan going out under that program is $39,000.

MR. BROOKE TAYLOR: I just wondered if there was a hard, fast - if you will - starting point. I'm not sure, with respect, to what the lending factor is, I guess it's generally $125,000.

MR. RYAN: Generally speaking. I've had the question from frustrated prospects or customers who will ask, what if I don't need $125,000? I mean, if we aren't able to identify an appropriate source, so when our folks in the field are in front of a customer that has a financing issue, the first thing they're going to do is get the clearest understanding of the client's situation that they can. They're well connected to a range of service providers in their communities - chartered banks, the Business Development Bank, credit unions, the CBDCs and so on. They want to find the best fit for the customer. If that fit doesn't exist for a smaller loan, then we'll go there and do that loan.

MR. BROOKE TAYLOR: I think some small businesses feel that even though there are a number of private providers, even for larger loans, there are certainly quite a number

of private providers, but I think there is a gap there for the small business. I suppose, on an infrequent basis, we hear from some small businesses that feel they don't want to somehow fabricate their application to make it $125,000 to perhaps be deemed eligible or work it up, negotiate it to that point. Going back to the private provider, even the Credit Union sometimes it just doesn't seem to fit. Maybe it doesn't fit because of the assessment and careful evaluations that have been carried out. I'm not suggesting that in certain cases these loans shouldn't be turned down.

Recently we had an announcement in this province regarding Clarke Transport. I think it's a good news announcement, establishing a national headquarters here. I think NSBI has agreed to put $1.9 million into a payroll scheme. Obviously you won't get into the specifics, but who actually, on behalf of NSBI, monitors that type of program and continues to keep the process very much relevant and maybe a little bit transparent?

[10:00 a.m.]

MR. LUND: The payroll rebate is really the main tool that we use when we talk to companies. There are probably anywhere from - I'm sure there are 30 to 40 different types of incentive tools that jurisdictions would use. It's the one that's worked for us, it works more so in labour-intensive industries, particularly in the call centre industry. A few years ago it was very successful.

Once we put it in place, then we have systems in place to monitor it on an annual basis. We get auditors' opinions, we verify it. There's really not a financial risk involved, because we would only reimburse some of the payroll after the fact, after the company has created jobs. So we monitor that on an annual basis. The Auditor General just conducted a review of our payroll rebate program and found it to be in good shape.

MR. BROOKE TAYLOR: Can you give a little more detail on the payroll scheme? I think it's generally the same policy, I would think, that would apply.

MR. LUND: In terms of how it works?

MR. BROOKE TAYLOR: Yes.

MR. LUND: When a company would come in - first of all, when companies look at where they're going to maybe set up an office or relocate part of their business, this is an incredibly competitive world. There are 2,000 groups out there in economic development in the U.S., and many of them are very aggressive and many of them with far more money and tools at their disposal. It is a competitive world. Companies look for some type of incentive whenever they locate, or relocate. For us, it's really a defensive mechanism, and we don't win business on incentives, but you can easily lose business if you're not in the game.

So the tool that we've used is really a risk-free tool. It doesn't always work, but it's the one that's available to us. So if a company comes in and creates jobs, we would rebate part of their payroll back to them at the end of each year, usually for up to five years. It has been an effective tool in Nova Scotia. But again, it's one of many tools offered out there. When you look at some of the transactions that go on in the States, we're talking $200 million, $300 million, $400 million in different types of incentive packages. We just don't compete on those deals.

MR. BROOKE TAYLOR: So you're basically saying that it is risk free, the payroll rebate?

MR. LUND: Yes.

MR. BROOKE TAYLOR: From a taxpayer . . .

MR. LUND: From a tax point of view. We obviously look at every company that we're involved in, we want to make sure that it's a sound company and that we've done our due diligence but, at the end of the day, the payroll rebate is a risk-free tool for the province, and it's one that we use. Many other jurisdictions tend to provide money up front to companies, and they could provide, in the U.S., tax-exempt bonds to free property, to outright grants to other types of incentives, to adjusting the tax rates for specific companies, from a state level and a provincial level.

MR. CHAIRMAN: Mr. Epstein.

MR. EPSTEIN: Mr. Lund and Mr. Taylor, it's a pleasure to have you and your staff here today. I think I'm going to take most of my time in talking to you a bit about how it is I think we might better do the job of economic development in Nova Scotia. Because my portfolio as Critic is Economic Development, I think from time to time I've found myself as a critic of the department and NSBI. You shouldn't think that I don't wish you well, because I certainly do, I wish you great success, I wish the province great success. I just have, perhaps, a slightly different idea of how it is that we might go about doing this.

Mr. Lund, there were two examples that you gave in your presentation that really struck me as instructive. They're instructive about what seems to be the thinking inside the department. One is the Anadarko example and the other is the Ireland example. You said, for example, that in Anadarko you had spent four years working on this and that it's great to have this company here but, do you know what? A year ago Anadarko, which is a U.S.-based company, bought out Access Northeast which is a Calgary-based Canadian company.

Many of us have views on whether this is such a good idea, that is views as to whether foreign ownership of particularly the resource sector in Canada, but not alone that sector, is such a wonderful thing and to find that featured as one of the big successes strikes

me as odd. I will tell you something else about that proposal. Even before it became Anadarko, it went through the approvals process in Nova Scotia lickety-split and I'll tell you that a lot of us are not very impressed with how it is that an LNG plant, however potentially beneficial, went through with such a minimum of environmental impact scrutiny when we find that LNG plants, all of them down the United States coasts, east and west, are being turned down by community after community. So what that suggests to us is we were chosen as an outpost with a low level of scrutiny for the business as a place to locate.

Now, I've got to say that the combination of a Canadian company getting quick approval through a low level of scrutiny for something that's not desirable and then quickly selling it off to the United States is not exactly the model of economic development that many of us have in mind. I'll tell you something else about Ireland. I think you might want to compare Ireland with Iceland. Ireland is a success, you said, on the basis that it managed to attract a lot of investment from the United States, again that problem of foreign investment from another country, and the reason Ireland was in the position to be able to attract that kind of investment is because it received hundreds of millions of euros from the EU in order to jump-start its economy and it is still in a very divided, difficult position.

I think if you looked at a place like Iceland which hasn't received subsidies from anybody, which has a very high level of self-reliance, a very high level of economic development and a very egalitarian society, you might find a different model. So the next time you're going abroad, I suggest you might want to have a look at another model of economic development that is close to our shores and, in fact, would be a lot better for us.

Now, it seems to me that these kinds of examples can only commend themselves to you if there isn't a fundamental appreciation of what it is that drives both the Nova Scotia and the Canadian economy and I want to tell you what in my view these factors are. What I'm about to say is true - the Canadian economy as a whole and of the Nova Scotia economy as a subset of that. The fundamental features, and this is true regardless of whether you call them problems or you think of them as virtues, and I think most of them are problems, but these are the fundamental facts, one is that we have a small population. That's true of Nova Scotia, it's true of Canada. That means there's a small domestic market. The second is that it is a resource-based economy. It's not an advanced industrial state to the extent that it should be. The third is that it's foreign-owned. The fourth is that there's a huge amount of corporate concentration and the fifth is that we are excessively reliant on one trading partner.

Now, those are the fundamental starting blocks and facts that you have to understand about the Canadian and the Nova Scotia economy and if you want examples of stuff like that in Nova Scotia, for example, on corporate concentration, you just have to say to yourself - you remember certain family names, you think of the Joudreys, the Sobeys, the Braggs, the Irvings and Mr. Rowe and Mr. Risley and the idea of corporate concentration in Nova Scotia, as a fact of life, becomes immediately obvious.

Now I think all of those are problems and I think that if you bear in mind that we can do something about those kinds of things and that dealing with those kinds of things should activate our economic thinking, then you might end up with a different model.

I want to take one of these things on that list and illustrate it. It's the fact that we have one trading partner. The reason that I'm focusing on that one is that I know you don't have responsibility for say, immigration, which might tend to expand both our domestic population in Nova Scotia and in Canada, but the government has turned its mind to that, albeit in a quiet sort of way.

You don't have direct responsibility for the Department of Education, which is probably the best way forward in terms of economic stimulus. You do have responsibility for trying to find investors and trying to develop our businesses here. When I'm telling you that we're excessively reliant on one trading partner, of course that's the United States, and it's understandable, given Canada's history, that we have such extensive trade with the United States. The last time I asked, I don't think you had anyone in your department who spoke Spanish. For all that, the important thing is not just to speak Spanish, but French, Italian, and Chinese, because if we don't expand throughout the world our trading partners and who we deal with, we're really going to miss out. We're going to miss out first because, in principle, it's unsafe to be so accessibly reliant on one trading partner when you don't have a big domestic population of your own.

The other is, given what's going on in the United States economy we would have reason to be worried, because if there are problems with the United States economy and we're so heavily dependent upon it, then we are extremely vulnerable. We do know, given examples like how the U.S. has behaved over softwood lumber, that they are quite prepared to invoke their domestic laws in order to close down the borders. This is highly problematic for us in Canada, and for me to hear you list off all the American cities that you go travelling to, I find this highly problematic. We're missing out and what I'm suggesting to you is that unless we think through a different kind of strategy, we're not likely to get very far.

Now I've talked with you before about bringing in big investors from somewhere else. This only works as a short-term strategy. It's a big shot in the arm for all those small communities in Nova Scotia that get call centres, and those jobs are needed, but if there's not a strategy to hold onto those jobs and keep them beyond the times of the subsidies, then they're in fact very likely to move. Those are highly mobile jobs; they can pick up and be anywhere in the world at all, and this is problematic for us.

What I'd like to see is some kind of indication that we're going to begin to move in a different direction. This has been completely absent despite the fact that you've had good success in terms of numbers of jobs that have come. I see those jobs as highly vulnerable. I see us as highly vulnerable in this community. So I'm wondering if there's anything in what I'm saying that resonates for any of you, whether any of this makes any sense to you, whether

it's the kind of perspective on the world that you have or whether you think that we're going to be able to continue to attract investors just from the United States and be able to continue along with that as our main economic hope for the future. If that's your vision, I have to say I think we're going to be in big trouble.

MR. LUND: I'm not sure where to begin, but let me start by saying that I do share some of your concerns, I don't agree with all your points. I'll start with sort of the last point you made about call centres.

The call centre industry has been very successful in Nova Scotia, employing about 16,000 people. We have not focused on call centres in the last couple of years, we've focused more on things like high-end IT jobs. What is actually happening is we have more interest now for companies coming to Nova Scotia in call centres or IT than we've ever had before. The trend that moved into places like India and China is now starting to come back because of issues in India around some of the labour issues and some of the costs of doing business. We have not seen any movement of companies outside of Nova Scotia, and we don't anticipate that, we are in regular contact with all our companies.

[10:15 a.m.]

I was in Convergys last week, they are very excited - and that's the biggest call centre in the world - about expanding in Nova Scotia. In terms of the U.S., 77 per cent of our exports go to the U.S. We do a lot of work in the U.S., but I believe we need to also broaden our horizons and look at other parts of the world, and that is part of what we we're doing at NSBI.

I don't agree with your concept about the impact of U.S. companies in Nova Scotia, we've had a great, successful track record. We're very familiar with Iceland. There aren't many examples of countries around the world that have been able to be successful by just working and by just generating from within. The pure example of that is a country like North Korea. The most successful countries in the world today, the economies, are India, China, Vietnam is a major one, Ireland is a major one, and the Eastern bloc countries are starting to come along. What they've done is they have worked on educating their people and they have attracted foreign direct investments. They have opened up their economies to foreign direct investment, that is the critical success. They introduced capitalism, entrepreneurship and they focused on education - all those countries have done that and they have been very successful in doing that.

We have had great success with companies right across the province, whether it's Michelin, Stora, or Convergys, these companies have been model citizens and employ a lot of Nova Scotians. I believe it's a combination in terms of supporting our local companies, but also to work with companies that are a right fit for our province. Having Lightbridge in Liverpool, creating 300 jobs, is a great news story.

Anadarko - I don't agree with your concept about Anadarko rushing through the process. They've gone through every single regulatory process, they've met every regulatory process, they are on track. This is a company, one of the biggest, independent oil and gas companies in the world. We are trying to encourage our energy sector here with the slow-down in the offshore, and this is a great opportunity for us to build, to use the pipeline capacity. Anadarko is a great citizen and they've done a great job in the community. They had a community session in terms of suppliers recently and they had over 500 local companies come to the session - they have committed to working with local companies, to create work for local companies and local jobs.

What we also see from this is great opportunities for spinoff businesses that can utilize some of the coal coming out of Anadarko. We have been in discussions, with several other businesses, that we hope will come to fruition in terms of competing to build that opportunity in Nova Scotia.

In terms of our economy we've done well in Nova Scotia, but there are many things that we need to continue to work on. If you look at some of the work from Ross McCurdy, and some of the work done in other areas in terms of prosperity, although we've done well in Nova Scotia we continue to rank behind other similar-sized jurisdictions around North America.

There are some key things that we need to focus on: education is certainly a priority, it has to be a priority in this province; innovation has to be a priority in this province; increasing our exports, increasing the number of people who export has to be a priority in this province; and making sure that we have a vibrant business climate has to be a priority in this province. If you look at comparing some of the successful areas, one of the concerns that I have in the province is that we have one of the most highly educated workforces in the province, but 30 per cent of our people do not finish high school; of those 30 per cent, 62 per cent of those people have left the workforce. To me, this is a real concern that we have to address, and we have to look at our tax structure again, we don't do a great job in commercialization. We have to address those.

A lot of great work is going on in Nova Scotia. There are a lot of great local companies that we will continue to support in Nova Scotia and that will be a priority, I think, for NSBI, as well as Paul's group and other parts of the government. We have had great success, I believe, as a province, but I do believe there is more work to be done. I believe that

you do raise a lot of good points, and I do share some of your issues around diversifying our economy and also making sure that we don't rely on one trading partner.

I believe the biggest opportunity for Nova Scotia is utilizing our workforce to match what's going on in the world today. The biggest driver right now in the world today is around the use of IT and this IT outsourcing. What we're seeing now is Nova Scotia is positioned to be a world player in doing IT outsourcing. That's right across the province. That's why the

broadband is so important for us. These other economies that we track have gone through phenomenal success, but we believe, in some respects, they've also created opportunities for Nova Scotia.

MR. EPSTEIN: Can you tell us anything about the Premier's Advisory Council on Innovation and what it's doing these days?

MR. PAUL TAYLOR: The Premier's Council has been and continues to be quite active. The main task it has worked on over the last several months is giving the Premier and the department advice on how we can best invest the resources the province puts towards research and development in the province. We have, as in many areas of our provincial budget, limited resources to put into the research and development agenda.

One of the main areas we put money into is to cost-share programs such as the Canadian Foundation for Innovation, where the provinces are obligated to cost-share projects - obligated is too strong a term, the province has the opportunity to cost-share projects that are supported by CFI. We do not have enough resources to cost-share as well as pick up the operating costs in many cases for the facilities that are doing that research. So we have to find a better way to prioritize what type of research the province is prepared to cost-share. That research has to be linked to the type of companies that Stephen's company is trying to attract, the type of companies that InNOVAcorp is working with, the type of companies that ACOA is working with in this province.

So we have to link the economic growth strategy of the province, the business attraction and retention and expansion efforts of its companies with the research agenda in the province. The council on innovation has been doing some work for the Premier and the minister on how to better make that link. What sectors, what areas of the economy or what areas of research link to the economy should we be prepared to support?

MR. CHAIRMAN: Excuse me, Mr. Epstein, I'll have to cut you off at that point.

Mr. Gaudet.

MR. WAYNE GAUDET: Mr. Lund, you indicated earlier that Nova Scotia Business Inc. has created thousands of new jobs in Nova Scotia and thousands of jobs maintained or secured. Do you have a breakdown on these numbers of where these jobs were created and maintained?

MR. LUND: We do.

MR. GAUDET: Could you provide the list?

MR. LUND: Yes. I don't have it on me, but I can.

MR. GAUDET: My next question is in terms of Digby County. How many jobs were created or maintained in Digby County? At the same time, how many companies have contacted NSBI, and how many companies have received help? Are those numbers available?

MR. LUND: We can certainly talk about the companies that we provided financial assistance to. In terms of companies that have contacted us, I don't know - we keep records in terms of companies that we meet with. So we would have all that. In terms of Digby County, I might turn it over to my Digby County resident.

MR. RYAN: I've just been thinking about where the county line is. The Convergys Call Centre is across the county line, but it has a substantial impact on Digby County. A.F. Theriault & Sons is a client of ours where we recently did financing. I'm going to demonstrate my geographic ignorance, because I'm not quite sure which side of the line it's on.

So those are two examples of material transactions that we've completed in the last period of time. We have some prospects in the region, but we have not done a great deal of direct financing in the region during the time that I've been with the corporation. Proportionately, across our portfolio, I think the dollars that have been placed over time are

relatively consistent with population by region. But we're not doing as much in my hometown as I'd like to see us doing.

MR. GAUDET: Let's hope that's going to change.

MR. RYAN: That makes two of us.

MR. GAUDET: Mr. Lund, you've indicated that 62 per cent of the jobs that were created last year were created outside Halifax. Does NSBI offer any encouragement or incentive to companies to set up shop outside metro?

MR. LUND: We do.

MR. GAUDET: What type?

MR. LUND: I'll give you some specifics. First of all, when we talk to companies, they make the final decision on what works best for them. It's a company decision, but we certainly try to encourage them to look at other parts of the province - many of them might have an idea of Halifax being the only place in the province.

When CGI announced they were creating some jobs in Halifax after Maritime Life and Manulife, we worked with them for a number of months and we actually put in place a payroll rebate for the jobs in Halifax, and we also talked to them about opening up in Sydney

- we said some other area of the province, but we really were talking to them about Sydney. We did put an additional incentive in that and we are, in fact, working with them to try to establish something in Sydney.

Most of our transactions in terms of payroll rebate have a higher percentage payment when it's outside HRM. So we try, but it doesn't always work. Some companies have just said that they want to be in Halifax, but other companies have been quite successful, like Lightbridge - first of all I don't think they knew where Nova Scotia was and, secondly, didn't know where Liverpool was. According to their numbers, they didn't believe they could get more than 100 people, and it turns out that the matrix that many of these companies use doesn't apply to Nova Scotia.

Our workforce tends to have less turnover and to be more dedicated than in many other places. When they opened in Liverpool they quickly had 300 people; Convergys is the same way. Most of the initial numbers that we look at for companies are exceeded just because they get in and they're very happy. I drove by Liverpool yesterday and they're hiring more people. We do try in every case.

MR. GAUDET: On the payroll rebates - are they only being offered to companies that are moving to Nova Scotia? I guess my question is are they being offered to companies that are looking at expanding?

MR. LUND: We do offer them to companies that are expanding. Generally, we have sort of a rough guideline on 50 new employees.

MR. GAUDET: Is that the bare minimum?

MR. LUND: It's a guideline minimum. We've gone lower than that.

MR. GAUDET: How low?

MR. LUND: We've done sort of, initial first year of five, we've had five employees. Canso would be a good example of that one, where we put a call centre in Canso, but it's available to any company whether it's in Nova Scotia or looking to come to Nova Scotia.

MR. GAUDET: That are looking at expanding?

MR. LUND: Yes.

MR. GAUDET: So you would certainly entertain the possibility of creating five new jobs?

MR. LUND: We would certainly look at it. To handle all the administration and all that, five jobs might be difficult and that's why we have a number at 50. Again, it's a case by case. We say 50, we've done a lot less than that, depending on the situation.

MR. GAUDET: Mr. Taylor, looking at the credit union loan program, there are over 33,000 businesses in Nova Scotia, yet only 115 businesses were helped by the credit union loan program. I guess I'm trying to find out why so few businesses have been helped. At the same time, how many have applied and, specifically, are there problems with this credit union loan program?

[10:30 a.m.]

MR. PAUL TAYLOR: I don't have the number on how many have applied. I can say the program is just now entering its third year and it was an initial prototype program, it was designed to just test the waters as to whether there was demand for this service in the marketplace. It was initially set up to put $2 million a year available for small businesses over a three-year period. We had to change that time frame to a program of $1 million, $2 million and $3 million, we had to advance money to allow for the increased demand coming at us in the third year. We just had a report done in concert with the credit unions on what has worked and what can be done to improve the program or what the likely demand for the program is. That report has been completed and it recommends that we significantly expand this program throughout the province, which should certainly increase the opportunity for more businesses to come forward.

I have the figure of 115 who have been successful. I am afraid I don't know what proportion of that represents the number of who have applied. The credit unions are sitting in judgement of who warrants to receive the loans. They've been doing very good work on the due diligence for those loans and, to date, I think since the program started, we've had one official default in that program for some $50,000. There are a few on watch but, in general, the loans that have gone out under that program have been very stable and have performed well. It gives us the confidence, and certainly the feedback from the credit union partners has been positive enough to consider expanding it.

MR. GAUDET: The reason I was raising that, I'm aware of two companies at home that have applied and were turned down. I don't know exactly the reasons. I was trying to find out if this program has identified any particular problems with working with businesses in general?

MR. PAUL TAYLOR: One familiar problem that comes up in dealing with small businesses and in dealing with mid-size businesses in this province, we hear it quite often and it has led to a number of conversations with the folks at the Department of Education around the skills agenda and the community college agenda, what these small companies lack in many cases is good, solid, general management business experience. Someone who knows how to meet a payroll, someone who knows how to manage the working capital, someone who knows how to keep this business on a growth pattern to move from small to medium to a mature company. That, in many cases, complicates the application that comes forward to the credit union when someone is doing an assessment of whether this company

is worth investing in, that lack of good, solid general management experience stands in the way of a lot of companies. You would think companies would need crucial expertise here and there, and specific well-trained people, but we see the issue arise with NSBI's clients, we see it arise with InNOVAcorp's clients, and we see it arise in that program in general business experience.

MR. GAUDET: Thank you, kindly, for your answers.

MR. PARENT: A question and then just a comment. I wasn't sure, I was listening carefully to the points my colleague elaborated on in terms of what our problems are or the unique situations in which Canadians and Nova Scotians find themselves in terms of economic development. One of the issues which you've raised that I think is bang on, but I didn't hear any response to, is an over-dependence on resources for economic activity. I know that in agriculture, for example, we're trying to do more value added stuff but the comment has been made based upon really the Hebrew scripture in Joshua that Canadians are "hewers of wood and drawers of water" and that nothing has really changed in that regard, that we're overly dependent on resources. I know my colleague, the member for Halifax Chebucto, made that comment but I didn't hear any response to that. Is there any response that you have to that and what we're doing to try to move up the food chain as it were?

MR. PAUL TAYLOR: I'm sorry, I have to apologize I thought you were asking Stephen that question.

MR. LUND: Our dependence on resources, it's really that we're opportunity driven. If we want to increase the level of prosperity in the province we have to look at a number of things and recognizing where we do have opportunities in our resource sector then we have to capitalize on those. Our trade last year of $5.9 billion, $1.1 billion was in gas and just under $1 million was in fish products and then we have tires and wood products. It's really matching opportunities with what we have.

There are other elements of the economy that we have opportunities in as well, opportunities in the marine-based life sciences for example, opportunities around aerospace and some of the work being done by companies like Composites Atlantic, work in the IT field and some of the international work that we're now bringing to Halifax with companies like Keane. There are opportunities and again it's really matching what our strengths are with what the opportunities are.

MR. PAUL TAYLOR: We're just starting down the road with taking another look at the province's economic growth strategy. It was produced five years ago, Opportunities for Prosperity, and it broke the province's economy into two groups of sectors: the so-called foundation industries, the reason the province was founded, primarily the resource industries plus the tourism sector, and then it identified those sectors of the economy that held the most

opportunity to go on in the future, like advanced manufacturing, education, IT, biotechnology, those sorts of things.

It has been five years, we want to go back and take a look at what has changed since that document was issued, what in that strategy is still relevant today and what we have to do to amend the strategy based on five years of learning. Without pre-judging the outcome of that effort, one of the areas we want to continue to pursue, because I think it holds a lot of promise for this province, is to take the technologies that are embedded in those new high-technology sectors of the economy, the IT and the biotech sectors in particular, the advance manufacturing, and apply those technologies to our traditional resource industries, into the forestry industry, into the mining industry and into the fish processing industry to find out how we can profitably use those technologies to increase the value of the resource that's being harvested to create even more value added to those products before they leave the province and to create higher margins for the people who are developing those resources.

We think Ocean Nutrition is a classic example of the pattern we'd like to see followed, research being done in Nova Scotia institutions, small businesses being started in the province that marry a raw material like fish resources to the pharmaceutical or supplement industry. It translates eventually into manufacturing opportunities like we see at Mulgrave so you get the entire spectrum: the educational aspect of it, you have the raw resource, the harvesting aspect, the manufacturing and companies like that. As Mr. Epstein pointed out, we have a small market and those companies are designed to access the export market, essentially to import somebody else's wealth to the province.

MR. LUND: Another point on that is I think it's also important that we address the productivity challenges and make sure that we are increasing the level of productivity that we have in the province. A couple of ways to do that with some of our existing companies is to increase investment in plant and equipment, in things like IT, things like training, all those things, and creating more critical mass is also important. I think that's where this IT wave and all these new technologies can be applied to many of our traditional industries. I think we need to continue with that.

MR. CHAIRMAN: Mr. Parent, I'll have to cut you off there. Mr. Epstein.

MR. EPSTEIN: Just following up then, on my colleague, the member for Kings North, his point, and this is exactly what I was talking about when I was asking about the Premier's Council on Innovation, and when I made the point about resource-based. There's nothing wrong with having a resource-based economy in a way. In the end, you can't just have super structure, you just can't have a service sector, you have to have a goods-producing sector as well, but the point is to in fact build on it. As you said, value added is one term. When I think about it, it seems quite right. What do we do with our natural resources?

So I look at the Premier's Council on Innovation, clearly it seems to me that this is modelled on what David Peterson, the Ontario Premier did 15 years ago, but they published a whole series of studies on their economy and where the opportunities were and what the direction was. Now, I haven't seen anything come out of the Premier's Council on Innovation in Nova Scotia, kind of identifying those things. It seems to me we've been really slow on this.

I'll give you an example, as I understand it, the leading locus for research right now on blueberries and what their possibilities are in terms of applications is on P.E.I., at the University of P.E.I. and maybe Holland College. But the point is, they're doing the research over there on something that we grow here, and where I think we have the largest resource in North America, in terms of that. So how did that happen? How did it happen that the commercialization of blueberries, of which we have an abundance, kind of took place in a neighbouring province? It seems to me that we're missing out on these kinds of opportunities, and that would have been an ideal one for Nova Scotia to, in fact, build upon something that we have a tradition of doing here, that is producing this resource. Surely there's something that we can do along those lines.

Again, going back to the Premier's Council on Innovation, is there something happening there? Have I missed it? Are there publications? Is there a direction? Is there some kind of strategic thought about this? I know that at least one of the sectors that you've identified in the past as being a sector that you wanted to see additional investment in and growth in is biotechnology, and I thought it was kind of related to light science stuff and would hook into our universities. Are we making any progress on this?

MR. PAUL TAYLOR: Dr. Ogilvie's committee is going to file its interim report with the Premier by the end of June. They've been working on, in addition to the R and D priorities, a series of issues that are going to be contained in that report, all around the innovation file. This is not a comprehensive look at the economy of Nova Scotia as it relates to innovation, they have taken, given the makeup of that council, specific areas where they have recognized expertise, and they are going to bring back a report to talk about those issues.

The five issues on this list are innovation at the community level; the expanded opportunities for the use of information and communication technology; corporate taxation as an issue in Nova Scotia as to how the business climate in Nova Scotia supports or does not support innovation; youth and entrepreneurships in innovation industries; and in particular they want to continue to try to develop the idea of - well, twofold, from an environmental point of view, to deal directly with the traditional view of the environment and the economy as being trade-offs to one another, that if you want to grow the economy, you have to hurt the environment.

They want to continue to pursue the opportunity to position this province as twofold. One is to develop an economy in this province that's recognized as sustainable and will attract companies that are recognized as sustainable in the marketplace, the Storas for example. There's a very interesting story around Stora trying to get into a new marketplace. The first thing that happened when they tried to enter that marketplace is the customers of the company showed up at the plant and audited their environmental practices for three days before they would even consider accepting a bid from Stora to serve that marketplace because the customers of the product wanted to make sure that their supply chain is environmentally responsible. So when they go to the marketplace with that product in another form, that they can be responsible in saying that the supply chain that got them to that point was environmentally responsible.

[10:45 a.m.]

The technologies and the opportunities to support industries in Nova Scotia that are in that frame of mind, i.e. we want to recognize environmental responsibility as an asset to which we can market as part of the brand of the company. The technologies that feed that type of thinking, the council also has a firm belief rooted with Dr. Ogilvie that it is also an economic opportunity for the province to support the growth of those. It would be the environmental equivalent of OTANS where you would have a support sector supporting companies like Stora in environmentally responsible practices and supporting the growth in that direction. The report will cover those areas.

MR. CHAIRMAN: I'll stop you there. Mr. Chisholm.

MR. RONALD CHISHOLM: Thank you for being here. I'm just sort of a last minute replacement to be on this committee this morning, I'm replacing Bill Dooks who had another engagement, so I got the notice at about eight o'clock last night that they needed a fill-in so I didn't get a lot of chance to prepare for this.

MR. LUND: Would you like me to give you a question to ask? (Laughter)

MR. CHISHOLM: We talked a lot about the Strait area and the call centre in Port Hawkesbury, Ocean Nutrition and I'm hearing some good things about those companies, that there's the possibility of an expansion. The Canso call centre is another one and I know that members of the Department of Economic Development and NSBI worked very diligently with everyone in the community to make that one happen and it's my understanding that there are some thoughts of expansion in that facility.

One of the problems they were having was getting qualified people to work in that centre and Community Services now has a program in place right in Canso for training some of the people who might be able to work in that facility. Is that expansion going to become a reality? The talk in the community said it is.

MR. WALKER: The company is evaluating their expansion plans, I think they have been challenged within the community to identify numbers of appropriate people in the quantities that they need. The owner of the company is very mindful of growing to a point where turnover issues become a concern in a relatively small community. I think that there will be a modest growth plan and they would like to see the company probably grow by another 10 to 15 people over the coming time.

MR. CHISHOLM: There's a lot of challenges in Canso right now as everyone knows and anything that can be done down there that can help them would be greatly appreciated. The other issue, I'm not sure if my colleague, the member for Halifax Chebucto is going to agree with everything I say here but Keltic Petrochemicals is a company that's been around for the past four, five or six years looking at a petrochemical plant as well as the LNG facility, CoGen facility in Goldboro. Is that an open file that NSBI has ongoing?

MR. LUND: No.

MR. CHISHOLM: They haven't approached.

MR. LUND: We don't have any dealings with them, we talked to them a few years ago initially but we didn't have any dealings with them.

MR. CHISHOLM: But if they do make application, they will be given the same consideration as other companies?

MR. LUND: We encourage any business in Nova Scotia and the one condition is that it has to go through a due diligence process that we have at NSBI. It has to make good business sense to the province.

MR. CHISHOLM: In meetings I've had with them, their plan is that there will be probably 3,500 construction jobs in the construction phase of it, there will probably be 450 jobs when it's up and running in four and a half years' time, something to that effect.

MR. LUND: Let's just hope the business case is solid.

MR. EPSTEIN: Don't hold your breath.

MR. CHISHOLM: My friend, the member for Halifax Chebucto, says don't hold my breath but if it does become a reality and I can tell you that there has been a lot of work over the last five years done on that file and it's one, I think, the whole province will benefit from, if it can become a reality, not only in Guysborough County. It is crucial for Guysborough County that it happens, if at all possible. Having said that, there was $350,000 more in the budget this year for RDAs. Is that going to be divided equally among the RDAs provincially?

MR. PAUL TAYLOR: Yes, it is. I think it's $25,000 in addition to each one of the RDAs.

MR. CHISHOLM: That will bring them up to how much provincial funding per year?

MR. CONRAD: It's $150,000 per RDA.

MR. CHISHOLM: Thank you, Mr. Chairman.

MR. CHAIRMAN: Just a few quick questions to wrap up. You indicated that there are 26 funds that were created under the community economic development funds. Those are the total funds that have been started here in the province, is that correct?

MR. PAUL TAYLOR: Yes.

MR. CHAIRMAN: How many of those funds are still active?

MR. PAUL TAYLOR: I do believe they all are. (Interruptions) Twenty-five, I guess, is the answer.

MR. CHAIRMAN: So there has only been one that has ceased to operate. I've notice that come RSP time, the Government of Newfoundland and Labrador had quite a significant amount of ads - and I'm trying to remember what the name of the company was but the Newfoundland and Labrador logo was at the bottom. The ads ran on TV for quite a significant amount of ads, come RSP time. It was encouraging investment in what seemed to be some sort of CED-type fund that Newfoundland and Labrador was sponsoring. I don't know, Atlantic GrowthWorks might have been the name of it, something along those lines. There certainly seemed to be quite a push by the government there to publicize them. I think that it's something that we should be looking at here in the province.

One of the other items you mentioned was value added in the fishery sector. I can't emphasize enough that there's nothing more disappointing than to continually see shrimp being landed in Nova Scotia and trucked immediately to New Brunswick. There is still way too much of our crab being landed here and being processed either in New Brunswick or Quebec. We finally dealt with the Newfoundland and Labrador situation, how ironic that we actually have Newfoundland and Labrador boats landing in Richmond County right now. A bit of a twist of irony for the government out there with their protection plans. I would certainly encourage you to look at how much is still leaving this province. I don't think we want to get into a situation, again, of building too many fish plants. We certainly have to ask how much product does it take before we start to at least encourage possibly additional facilities, or the expansion of current facilities, rather than having just one shift, the possibility of moving to two shifts, based on the amount of product that is leaving.

One of the final matters I wanted to raise was support to small businesses. One of the sectors of small business that is currently suffering quite a bit now is our gas retailers, our small gas stations - especially in rural areas - that are disappearing by the week and month. I'm wondering what sort of work either has been done, or that you are proposing to do with gas retailers, to be able to stem the flow of closures that are currently taking place?

MR. PAUL TAYLOR: Let's see if I can take those in order. The ad I do believe you saw from Newfoundland and Labrador would have been by a Venture Capital firm, GrowthWorks. They are actually a company that was attracted to the region through the work of the Province of Nova Scotia and ACOA to establish a pan-Atlantic Venture Capital Fund. So the same company raised capital here in Nova Scotia, the Nova Scotia fundraising, I think, exceeded the totals in both New Brunswick and Newfoundland and Labrador. I don't think they managed to raise anything in P.E.I., or a very small total. It's a Venture Capital fund that is operating here in Nova Scotia under the changes that were made last Spring to our Venture Capital legislation.

MR. CHAIRMAN: The ads in question were clearly advertised for the Government of Newfoundland and Labrador, not for . . .

MR. LUND: Mr. Chairman, I think Newfoundland and Labrador did create a couple of different provincial funds, if I'm not mistaken.

MR. PAUL TAYLOR: They wouldn't have used GrowthWorks.

MR. LUND: No, it would be two different things. GrowthWorks is an Atlantic Canadian Venture Capital Fund, but there might be another fund that Newfoundland and Labrador has created separately that has a similar name, we can check on that.

MR. PAUL TAYLOR: The issue around crab exports. Certainly, both organizations that you have before you this morning are in close contact with our Agriculture and Fisheries

Department. We don't maintain resident expertise on the fish harvesting or processing sectors inside our organizations. When we are given the opportunity to deal directly with them, the first place we go is to the Agriculture and Fisheries Department. I know there's a lot of changing going on in the crab sector now, we've been told there's a lot of overcapacity at the processing level in Nova Scotia for snow crab in particular. As you would know, it's continuing to evolve as a situation so we rely heavily on Agriculture and Fisheries to advise us as to whether we should be putting our toe in that water at all.

Gas retailers. It's a very competitive market as far as I understand, it's handled mostly by the people in Service Nova Scotia and Municipal Relations. The question as to whether or how much government should be involved in trying to control, regulate, establish or otherwise deal with retail margins at the gas retail level. Retail margins are down into the 5- or 6-cent range and that is squeezing the economic opportunities of particularly low volume

stations where they're just not generating enough revenue off the retail margin to cover their operating costs. A very competitive business in rural Nova Scotia.

MR. CHAIRMAN: So is it safe to conclude that you're not working with gas retailers about diversifying, growing their business, you haven't looked at that sector at all?

MR. PAUL TAYLOR: No, they haven't. I won't speak for NSBI but to my knowledge they haven't approached us either through their association or individually, coming to Economic Development looking for a solution from us.

MR. CHAIRMAN: Just for clarification, you said overcapacity, is it your position that we have too many processing facilities for crab and not enough crab, or that there's too much crab and not enough facilities? I wasn't clear in what your answer was.

MR. PAUL TAYLOR: The advice I've been given from the Agriculture and Fisheries Department is that we have an overcapacity in the processing sector and an under capacity of product moving into those plants.

MR. CHAIRMAN: Then why is product still going to New Brunswick and Quebec?

MR. PAUL TAYLOR: That's a question beyond my level of expertise on the subject. It's something you would have to take up with Agriculture and Fisheries. That's the advice I was given on a specific issue a month or so ago.

MR. CHAIRMAN: We have a few minutes if you have some closing comments. I certainly encourage you to do so now.

MR. LUND: I just want to thank the committee for the opportunity to come in here today and discuss some of the initiatives. I've made some notes on some of the points and I don't always agree, but I do appreciate the comments and we do have some follow-up work to do. We feel the economy is doing pretty well although we continue to have some work, and we're always looking for ideas in terms of things that we can do and other areas of the world that we need to look at as models. Again, I just wanted to thank the committee.

MR. PAUL TAYLOR: As well, we've had some success over perhaps the last decade in trying to grow the economy of the Province of Nova Scotia. It's interesting, I spent a couple of days last week in the Amherst area talking to the local economic development associations and the issue they are wrestling with is, where are we going to find enough people to continue to grow this sector of our economy? So it's nice to see issues like that starting to come to the fore. Our challenge in the economic development agencies is to continue to find ways to bring higher value employment to the economy of Nova Scotia. I think we're making progress in the employment numbers, our efforts now have to continue to focus on higher value employment opportunities.

MR. CHAIRMAN: I want to thank you both and all of your staff for joining us here today. I think as Mr. Epstein pointed out, that it's in all of our interests that you succeed and we're here to certainly do our best to give you the necessary tools to be able to achieve that success. The more success you have, the easier it makes life for all Nova Scotians, especially the hard-working members of the Legislative Assembly. So I thank you for the presentations and to my understanding you've made commitments to provide a number of documents and

information to committee members. I would encourage you to do that. With that, I want to thank you.

[11:00 a.m.]

Committee members, we have the issue of upcoming witnesses. Do you wish to deal with that now? What is the wish of the committee? Mr. Epstein, do you have any recommendations?

MR. EPSTEIN: Is there any information from the clerk about the availability of any witnesses on these lists? If we're looking to pick a hierarchy, we can address that. Do we know about anyone being available from any of these organizations? (Interruptions) We have to set a hierarchy on this, do we?

MRS. DARLENE HENRY (Legislative Committee Clerk): Yes, we do.

MR. EPSTEIN: In that case, I'd like to suggest we think about the Whitney Pier, the retail gasoline, the Department of Tourism, Culture and Heritage, and HRM, which would kind of give us a geographic and an industry range. Whitney Pier, retail gasoline, Department of Tourism, Culture and Heritage, and HRM business parks. I have no preference amongst the four, but if we try to work on those then I think we'd get a geographic range and a topic range.

MR. CHAIRMAN: If I could make a suggestion, I think the retail gasoline dealers, it might be a good time to ask them if they wish to come and make a presentation in light of some of the concerns being raised.

MR. EPSTEIN: Absolutely.

MR. CHAIRMAN: If they are available. The only other one I would have added to your list, HRM business parks - I'm certainly interested in getting the Department of Transportation and Public Works in on the issue of not only twinning Highway No. 101, but the twinning of the other highways here in the province. For example, the famous blue route/red route in Antigonish has become a no route. That's one of the issues that I think we should get the department in, certainly the importance of economic development that those would create. I would certainly add that one to the list. If we can get retail gasoline in first,

it would be my recommendation; the others, I would say, would be based on their availability which the clerk can determine.

MR. PARENT: Excuse me, I have a question. What order are you wanting to do things in?

MR. CHAIRMAN: What has been suggested is, following the retail gasoline dealers, the Whitney Pier and area association, Department of Tourism, Culture and Heritage, HRM business parks, and the Department of Transportation and Public Works on highway twinning.

MR. PARENT: In that order?

MR. CHAIRMAN: What I have suggested is retail gasoline be approached first and then the others based on their availability.

MR. PARENT: On the retail gasoline, if I can just speak for two seconds on it because my riding has been in the news lately, I'm hoping if you do bring in retail gasoline maybe we could get at this issue as well. It's a slightly different issue for my riding - Bill Estabrooks misunderstands it. It's not a question of wanting regulation, this particular fellow can make a business if he's allowed to sell gas. So it's a question of the company saying you can buy the station, but you're not allowed to sell gas out of it for five years, so that's a different issue than the regulation issue. So somehow, hopefully, we can get at that issue as well. It's affecting . . .

MR. EPSTEIN: That's why the committee recommended retail divorcement last Summer. Is this person prepared to talk? Is this in Canning?

MR. PARENT: Yes, this is Canning. I think we should bring Mr. Cruickshank in because originally a year ago Petro-Canada went to him and said we're probably not going to renew the contract - there's a whole bunch of different reasons why they want to centre on their major source. They said, we'll let you sell gas, you can buy the station. Then all of a sudden this year, we'll sell the station to you, but you can't pump gas. Then it becomes economically unviable. I think that is the same thing that Scotiabank - remember when Scotiabank closed a lot of small, rural banks? We put pressure on them and they co-operated, at least in my community and hopefully in others as well, with working with the credit union so that it made it easy for the credit union to move in. I think we need to do the same thing with Petro-Canada.

I'm not sure if my fellow's a unique situation or whether there are others like him - it's not the regulation issue so much as the fact that it's unfair competition basically.

MR. EPSTEIN: Well, the retail gasoline dealers, of course, have an association and they'll have their reps, but maybe we should make sure that Mr. Cruickshank is prepared to come and talk to . . .

MR. PARENT: I'd be very happy to put his name forward because I would like more focus on it because I think Petro-Canada has not been fair at all in this process.

MR. CHAIRMAN: Is it agreed?

It is agreed.

The meeting is adjourned.

[The committee adjourned at 11:05 a.m.]