HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Keith Colwell (Chairman)

Hon. Ronald Chisholm

Mr. Keith Bain

Mr. Chuck Porter

Mr. Clarrie MacKinnon

Ms. Vicki Conrad

Mr. Leonard Preyra

Ms. Diana Whalen

Mr. Harold Theriault

[Ms. Diana Whalen was replaced by Mr. Manning MacDonald.]

[Mr. Harold Theriault was replaced by Mr. Wayne Gaudet.]

In Attendance:

Ms. Jana Hodgson

Legislative Committee Clerk

Mr. Gordon Hebb

Legislative Counsel

Also in Attendance:

Ms. Maureen MacDonald

MLA, Halifax Needham

WITNESSES

InNOVAcorp

Mr. Dan MacDonald

President & CEO

Mr. Charles Baxter, CA

Director of Finance and Information Technology

HALIFAX, TUESDAY, MARCH 10, 2009

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Keith Colwell

MR. CHAIRMAN: Good morning everyone, I'll call the meeting to order. I'll start introductions by going around the table.

[The committee members introduced themselves.]

MR. CHAIRMAN: I'd like to welcome our guests this morning and I'd ask you to introduce yourselves. After that, if you have a presentation, make the presentation and then we'll go to questioning. Welcome.

MR. DAN MACDONALD: Good morning, ladies and gentlemen. My name is Dan MacDonald, I'm the President and CEO of InNOVAcorp. With me today is Charles Baxter. Charley is the Director of Finance and IT and also the Secretary to our Board of Directors.

There is a presentation being passed out to you now. I do have a relatively brief PowerPoint deck here, just to set a framework for our discussion this morning, so I'll proceed, Mr. Chairman.

MR. CHAIRMAN: Yes, please do.

MR. DAN MACDONALD: The best way to talk about InNOVAcorp and our mission and activities is to talk about some of our clients. I just wanted to touch on a couple of these for you. This slide shows several logos of companies that are knowledge-based companies, based in Nova Scotia. They also happen to be InNOVAcorp clients.

These companies are companies that have a lot in common. These companies are competing globally, they are headquartered in Nova Scotia. They have based their products and services on a deep level of knowledge in the industry that they are working in. For example, Marcato Digital is a company based out of Sydney, Nova Scotia. This company was founded by a young man who was a manager of bands and various troops like that. Just only a week and a half ago he was awarded the ECMA Manager of the Year. This gentleman created a piece of software that he is bringing to the global market now to manage bands and various festivals. He has built this software around the Celtic Colours project in Sydney, Nova Scotia. He would have plans to bring that product to the world.

Prescribed Solutions, on your right-hand side, based in Truro, a company that has been built by two ex-pharmaceutical sales representatives, now dealing with the likes of Sobeys, Irving, Aliant, the Province of Nova Scotia, helping companies understand their health care costs around drugs and pharmaceutical things like that.

DementiaGuide. DementiaGuide is a company built by a practising physician and an expert in the area of Alzheimer's, now delivering products and services to pharmaceutical companies around the world, to help them run FDA trials.

MorSwift, down on the lower left, based in Digby, Nova Scotia, building innovative packaging machines and bringing those now to the global market. BioNovations, based in Antigonish, built by an ex-fisherman and a person who has been responsible for trucking live fish and so on to global markets, building now a transportation system that is improving dramatically the state of the product when it hits the end market. HeartString, based in Pubnico, is a company that is delivering products and services to the maternity marketplace; CleanCount, based in Chester, is delivering products and services around the pharmaceutical industry also. These companies are samples of the kinds of knowledge-based companies that are growing in Nova Scotia and who are InNOVAcorp clients.

The next slide. Knowledge-based companies are really important to the prosperity of Nova Scotia. These companies are headquartered here in Nova Scotia, they impact positively the gross domestic product of Nova Scotia, they're export-oriented for the most part, 98-plus per cent, they attract capital to our region, they make local corporate purchasing decisions, they create local wealth. They are, by their very nature, clean and green companies. They have a high average per-person payroll. These companies typically employ people at the $50,000 to $55,000 per year payroll. They have a diversity of jobs. The jobs in these companies range from R&D, to engineering, to shipping and receiving, to marketing and sales across the board.

If these companies are to fail, which they do from time to time, the people within these companies move back into the industry and are highly employable. As I mentioned those companies, on purpose I mentioned ones that would be based in Halifax or Sydney but also in rural parts of Nova Scotia. The very interesting thing about knowledge-based

companies is they typically set up where they want to set up. Typically the founders of these companies build their company where they want to live, be it Chester or downtown Halifax. These companies spin out even more knowledge-based companies.

Next slide. When we look at the life cycle of a knowledge-based company it usually starts with an idea by somebody who has a deep expertise in a particular industry and then moves through the sort of textbook five stages of growth. In the first three stages of growth is where these companies are particularly fragile and they are looking to commercialize their products and technologies.

Another way to look at this is that these companies in these early days - Stages 1, 2 and 3 - are burning cash, they're pre-cash-flow breakeven. They're trying to bring their products and services to market, they're trying to validate markets, they're trying to formulate partnerships, protect their intellectual property and so on. This is the space that InNOVAcorp plays.

InNOVAcorp is a Crown Corporation of the Province of Nova Scotia and works in Stages 1, 2 and 3 to help these companies make it to market. InNOVAcorp is an organization whose primary customer is early-stage Nova Scotia entrepreneurs or companies. We have secondary customers: regional investors, other economic development partners, and also post-secondary education institutions, universities and colleges. Our mission is to help these companies make it to market and be globally successful.

The way we measure ourselves is by the export revenue created by our companies, the companies that have come through our business model, which now measures in hundreds of millions of dollars; the total capital raised by our clients, which this year will surpass $100 million; and then the direct employment that is created by our clients, which last year surpassed 1,500 direct jobs. We also watch ourselves through a third-party objective survey through our clients from a client satisfaction point of view.

Our core business is something we call High Performance Incubation. High Performance Incubation is built up of three core services: incubation, mentoring and investment. If I break down these full core services now for you, incubation is specialized infrastructure, for example, for a life sciences company that requires specialized services, things you may never have heard of before: reverse osmosis water, pyrex piping, oxygen, fume hoods, those kinds of things. You could not achieve or access these kinds of services in a commercial environment. InNOVAcorp has infrastructure that allows these companies to come in and build their companies.

Mentoring is a professional services arm of our organization that provides people hands-on support and services to help them build their companies and make it through Stages 1, 2 and 3. We also, on behalf of the Province of Nova Scotia, manage a venture capital fund called the Nova Scotia First Fund and for the highest potential clients of ours we, from time

to time, take an equity position in those companies with the purpose of attracting other capital from other private-sector players in Canada and beyond.

High Performance Incubation is not a "one size fits all" system or program. When we identify a client and work with that client, we pull up alongside them, if you will, and we look to identify the things that they're struggling with, short, medium and longer term, and we look to support them on those things. Be they intellectual property, pricing and packaging, hiring talent, putting a compensation framework together, whatever that is around that wheel, we help them with either directly or through our partnerships.

The way we identify clients is through a proactive outreach where we reach across the province to identify these young companies. The most powerful way that we receive client inquiries is through word of mouth. We work with our colleges and universities, there is somebody from InNOVAcorp on a university campus probably every day of the week across the province. We work with our economic development partners. We run various kinds of competitions around the province either on our own or in collaboration with our university partners. We're tied very closely to the industry associations in the knowledge economy. I'm a board member on BioNova, one of my team members is a board member on ITANS, for example. We network with banks, accounting firms, venture capital firms and then the business community themselves.

The I3 competition we have run twice so far and we will run again in the next fiscal year. The last time we ran the I3 Technology Start-up Competition, we received 121 formal submissions from across the Province of Nova Scotia. I'm showing you this map to show you that innovation is alive and well in Nova Scotia, it's not just about Halifax or Dartmouth or Sydney. We received compelling submissions from literally across the province. Of those 121 submissions, InNOVAcorp reached back and worked with every one of them to move their projects along. There have been companies created out of that competition and some of the companies on the front slide that I showed you literally came out of that competition less than a year ago.

I'll finish up my remarks on this slide. The knowledge-based companies are extremely important to the future prosperity of Nova Scotia. These companies hire our young people, they're headquartered here and rooted here, they help our GDP and generally are excellent for the future of Nova Scotia.

So, Mr. Chairman, I'll pass it back to you and I'm happy to take any questions about InNOVAcorp and its operations.

MR. CHAIRMAN: Thank you very much. Mr. Preyra.

MR. LEONARD PREYRA: Thank you very much, Mr. MacDonald, a great presentation. It sounds like a wonderful initiative that has been relatively successful and I congratulate you on that. Certainly, in terms of your central argument that knowledge-based companies are important for the future prosperity of Nova Scotia, we can't disagree with that. I'm a university professor myself and the post-secondary critic and we see a lot of that on our campuses, both the universities and the colleges.

I have a question for you about your selection criteria. It sounds to me like you have a pretty rigorous process for searching for and screening and selecting companies.

MR. DAN MACDONALD: The selection criteria to become a client at InNOVAcorp is published on our Web site and in our documentation. To summarize it, basically it's about people, market, barrier to entry and fundability.

Starting with people, the people who come toward us with the idea, we always look at the level of expertise that they have in the discipline their idea is centered in: do they have industry experience, do they have business experience and so on. So we do an analysis of their experience.

The next one is market, how big the market is that they're looking to address. If they were looking to address only the local market, that's really not our mandate. Our mandate is to work with companies that are looking to address a large national or even international market.

The third one is barrier to entry. It's important for us to understand what the barrier of entry for competition is: do they have trade secrets, do they have intellectual property and so on.

The fourth one is fundability. When we look at this company and we look at what it's going to take to get them successfully to the marketplace, what kind of capital would need to be infused there?

So that's the way we look at it from criteria at the highest level. Nobody gets four out of four, there's some level of readiness in those four categories and depending on the readiness, we would welcome them into our system and help them move those four things across.

[9:15 a.m.]

MR. PREYRA: What kind of success rate do you have with the numbers of people applying who are rejected and also the numbers of people who are successful and go on to do well?

MR. DAN MACDONALD: Good question. When it comes to our pipeline, as we call it, the widest part of our funnel, we would see on average about 100 companies per year that we would engage at that high level. We don't necessarily reject people. If somebody just doesn't measure up to those four even at the basic level, typically we would either refer them to another organization of some kind or help them move one of those elements along, without actually taking them into the full system. Out of 100, we would probably take into our system between 15 and 25 of those companies per year.

MR. PREYRA: So you would have a waiting list of perhaps 70 to 75 people who have either been sent back for revision or improvement of some kind?

MR. DAN MACDONALD: I'm not sure if I'd call it a waiting list but that pipeline, in that widest part of the funnel, literally somebody could stay there for some number of months before they know whether they're coming in or not because they're still working on some of those elements.

MR. PREYRA: Given the situation that we're in at the moment, where clearly the government and society in general are looking for projects to support, where does InNOVAcorp fit in? I really mean it in the positive sense, where there's money being put into the Industrial Expansion Fund and other government programs. Why is it that InNOVAcorp, a success story, is not really in the forefront of those shovel-ready projects? It doesn't appear that there's any increase on the horizon on the budget or that there's any statement in infrastructure funding that we're going to help this really successful incubating venture that we've brought together.

MR. DAN MACDONALD: I appreciate your comments. In only the last six months, the Province of Nova Scotia announced a $32 million commitment to InNOVAcorp and its infrastructure through the development of the new BioScience Enterprise Centre on the Dalhousie campus. As far as the support that we've asked for and needed from the province, they have always been there for us. I don't believe in asking for something that you don't necessarily need, so we don't feel hard done by at all when it comes to the support we receive from the province.

MR. PREYRA: I'm looking at a list of companies that received support from the Industrial Expansion Fund, for example, and I see one here that is successful and deserves support, so it's not criticism of the company itself. LED Roadway Lighting, for example, is looking to test some of its technology, it has been very successful in the local market, it's looking for international partners. Why would a company like this not come through InNOVAcorp, which seems to be better positioned to provide support than through the Industrial Expansion Fund? I guess what I'm trying to understand is, what's the screening process for the Industrial Expansion Fund when you're looking at technology companies? Where do you draw the line between companies that go one route and the other?

MR. DAN MACDONALD: Right. My expertise is InNOVAcorp, not the Industrial Expansion Fund, so I really can't speak in any detail about that because really, I don't have the level of familiarity that you're looking for. If I talk in generalities, a company that is further along in Stage 4 or 5, which I believe the company you're referencing is, they have a new product line that they're looking to bring to the market, they are beyond the scope of InNOVAcorp. We're dealing with early-stage Nova Scotia companies. The company that is bringing that project to the fore is a later stage company, a company that has significant revenues and have literally - I'm not sure how many employees they have, but they're well beyond our mandate.

MR. PREYRA: But the government doesn't come to you and say, we've got this $220 million, you've got 75 to 100, potentially more waiting in the wings. You're the guardian angel here, we have the money - is there no system here where they consult with you and say, given this situation, what would you recommend to us in terms of projects to support or not support?

MR. DAN MACDONALD: Again, I can only speak to InNOVAcorp. As we do what we do and we identify those high-potential companies, we scale our operations in both direct employees and networking, with the support of the province. We're not lacking any support, I guess is the message I'm trying to give you. Is there somebody out there waiting that we can't get to because of lack of support from the province? I'm saying the answer is no.

MR. PREYRA: The question is whether or not those companies will fit that more rigorous selection criteria that you have prior to getting money from the government, whether or not the techniques that you've developed for identifying and recommending companies have been tested, have been relatively successful, as opposed to a process that really has no selection criteria.

MR. DAN MACDONALD: Again, sir, I can't speak to the Industrial Expansion criteria, I'm not familiar with that criteria. I'm familiar with my own and the way that we do business.

MR. PREYRA: In terms of your future priorities, where do you see yourself going? Given the situation we're in, what would you recommend to the government in terms of InNOVAcorp?

MR. DAN MACDONALD: We are in extraordinary times right now, that's for sure. In our portfolio of clients, some of them are growing through this but many of them are struggling also. So we've been working extra hard to help these companies survive and seize, in some cases, counterintuitive opportunities in this marketplace. I'm a big advocate of the knowledge-based economy and I think we agree on that. I believe the government does focus on the knowledge-based economy and I would love them to focus even more, to build the knowledge-based economy with roots here in Nova Scotia.

MR. PREYRA: Yesterday the federal minister was in to talk about support for universities and colleges. Part of the issue there for Nova Scotia is partnerships - what would you expect to see happen? I'm assuming InNOVAcorp would be one of the competitors, certainly one of the parties at the table in terms of applications for grants. What is our big challenge with that program that was announced yesterday?

MR. DAN MACDONALD: The program that was announced yesterday, again, I don't have a deep level of expertise there, but it was an infrastructure program where the universities within our province can apply to a stimulus package to help them build infrastructure or repair infrastructure. It sounds like a very positive thing to me. Universities in Nova Scotia have a deficit when it comes to deferred maintenance.

When it comes to universities, InNOVAcorp's primary role is that we work at the president, VP, dean, professor, student, researcher levels. We're working at all levels of universities trying to identify the most compelling, commercializable projects that are building inside the province. We run something called the Early Stage Commercialization Fund - it's part of our VC fund - and we have identified only in the last two years approximately 50 projects across our universities and colleges that we feel are very compelling and have a high probability of actually making it to market and creating a company. That is our primary role within the universities.

Our secondary role is we're influencing curriculum; we're always invited, on a regular basis, to speak at universities. We are holding various forums at the student level, the researcher level. We're very, very actively engaged with universities and colleges in Nova Scotia.

MR. CHAIRMAN: Order, please. Mr. Manning MacDonald.

MR. MANNING MACDONALD: Thank you very much, Mr. Chairman. Just a few comments and then some specific questions that you might want to address. First of all, by way of comment, your corporation is one that I think has been working under the radar for the past number of years. I think what you do in this province, you probably do well. Could you do more? I think that with the support of government, you probably could - with increased support of government. I want to get into that in a second.

A specific question. The rate of success of all the companies that have gone through your doors and the various stages of your program, what is the rate of success versus the number of people who have entered the program?

MR. DAN MACDONALD: The way I'd like to address that is - and hopefully this is going to hit the sweet spot of your question - without our business model, the typical success metrics out of 10 companies, five would fail, three would make it and survive, and one or two of them would be what you would term successful, highly successful.

Our services, when applied to those same 10 companies, we feel that we can double those metrics. What we do is through our services, we can de-risk those initiatives. On the journey to success we can cut out a year or two of a company's success, so rather than one or two being successful, we can turn that into two to four. Rather than two or three being mildly successful, we can double that and we can decrease the five failures down into one or two failures. That's our mode of operation and that's what we, through our metrics, have been able to track and do.

MR. MANNING MACDONALD: Again, when I look at InNOVAcorp, and I'm talking from some experience here - I used to be minister of that department back a century ago, the department at that time was fairly new. It was fairly innovative and since - well, that's what its mandate was - I was in that department, as part of a number of ministries I had at the same time, I tried to keep an eye on McCurdy and company and what they were doing there, and it seemed very exciting at the time.

Today, 10, 11 years later, if you went down Hollis Street today and asked 10 people who InNOVAcorp was, I would bet you that maybe one out of 10 might have some vague idea as to what InNOVAcorp does in this province, and that's certainly not an indictment because most successful businesses or most successful divisions of government, if you will, operate very quietly, below the radar and, to some extent, very successfully.

I think something like InNOVAcorp, in order to grow and do what its mandate suggests it should do, needs a lot of help from government. I want to go through a few remarks now that I have prepared here. One of them was the fact that in 2003 John Hamm announced, I don't know if you recall the Premier's Advisory Council on Innovation - well, you would recall it because you were on it. It was established to provide the government with strategic recommendations on how to move Nova Scotia's economy forward and to globalize the whole area of innovation coming from Nova Scotia, coming from within.

Like so many things over the past few years, the recommendations of the advisory council were largely ignored by government over the past few years. I think, and I might say to you that I believe that's one of the reasons that Nova Scotia has experienced the lowest real GDP growth in Canada since 2003; no indictment of your department, but an indictment of the direction I think government has gone over the past number of years.

The recommendation specifically stated that by 2025 Nova Scotia will have a GDP per capital equal to or above the Canadian average. In addition to the 2025 goal, there were goals, incrementally, of five years from then that would see 5 percentage points increase in each of those five-year periods.

Do you know if the government has set similar goals to what the advisory council suggested, or do you feel that these goals are achievable today? If so, is this supported by government?

MR. DAN MACDONALD: As you said, I was on the Innovation Council when I just came into the job, about three years and 10 months ago, one of my first things to do was to join that council.

When I look back at that council's report, in the area of environmental technology industries, we are now, as InNOVAcorp, and other parts of the government, really moving into what we now call clean technology. InNOVAcorp has a clean technology practice, we have the Environment Trust out of the Department of Labour. We are working very hard to build environmental-related or clean technology industries in Nova Scotia.

In that report we spoke a lot about broadband connectivity across all of Nova Scotia. That's an initiative that I co-led about a year and a half ago and is now rolling out across the province. I'm not suggesting to you that everything in that report was done, but I am suggesting to you that several things within that report and within that guidance from those folks are actually being implemented by us and others within the government; maybe to your point, with not the appropriate level of fanfare but we are implementing those things.

Typically the fanfare, if you will, on InNOVAcorp comes through our clients. When our clients are successful, that is the press that you hear, not necessarily about us. Frankly, I think that's the way it should be.

MR. MANNING MACDONALD: Another comment on that. I think perhaps you do what you do effectively and without fanfare, I don't think there's any question about that. I haven't heard the Cabinet or the Premier bragging about the efforts of InNOVAcorp over the past few years. They're coming out with different strategies as time moves on or as the economy dictates or as the political climate may dictate.

[9:30 a.m.]

I'm just wondering why an organization like yours, that is stable, that works with businesses throughout the province, knowledge-based businesses, including the ones you mentioned in my area which are doing very well - you didn't mention Protocase, which is another one that is . . .

MR. DAN MACDONALD: Yes, it was on my slide.

MR. MANNING MACDONALD: I noticed that. Those are good companies and are doing their bit but Cabinet hasn't seen fit to put you guys up for bragging rights and I wonder about that, I wonder why.

Is the leadership - I don't expect you to tell me yes or no, if the leadership is coming from Cabinet or the Premier, or the lack of leadership, I can look after that, but I would say that perhaps the whole business that my colleague mentioned about the direction that your

corporation is going that perhaps would be enhanced and strengthened if the government would show some public acknowledgment of what you're doing, on a regular basis, and, as a result of that, give you more resources to work with.

Those are comments, I don't expect you to react to that because that's putting you in a very difficult position.

MR. DAN MACDONALD: I will react to that. Again, I appreciate your comments. Perception is reality. On October 28^th the Premier and various ministers announced the new BioScience centre investment in Dalhousie University. It was a full bragging day for InNOVAcorp and what we're going to do in the future.

The Premier and many of his ministers have been to our facility several times. I have met with our clients. We feel we have a pretty strong level of support there but again, you're welcome your comments.

MR. MANNING MACDONALD: Thank you.

MR. CHAIRMAN: Mr. Chisholm.

HON. RONALD CHISHOLM: I don't have anything right now, Mr. Chairman.

MR. CHAIRMAN: Okay, Mr. MacKinnon.

MR. CLARRIE MACKINNON: Thank you very much. It's excellent to have you folks here today. I believe, too, that you are, in fact, doing a good job. You mentioned that 98 per cent of the companies that you are involved with are export oriented. There must be a great role involved in relationship to steering them toward the air, land and sea folks who are involved in looking after the exports and there must be some real problems there. Is that part of your role; are you actively engaged there?

MR. DAN MACDONALD: When it comes to exports, I'll reiterate that most all of our clients, I'd say basically 100 per cent of our clients, are export-oriented companies. When I talk about exports I would say, don't necessarily think container ships. This might be software that's literally exported across the Internet, it could be relatively small packages that are shipped overnight through FedEx, and those kinds of things.

Exporting products and services is a big challenge based from here in Nova Scotia; not so much logistically, but competitively. The companies that are growing here in the province, they're competing globally. They're competing against companies in California; Boston; London, England; and so on. Our expertise is to help these folks find those export markets, validate them, ensure that they understand realistically and objectively the

competitive environment. That is where the heavy lifting is when it comes to exports, helping them navigate their way through that.

MR. MACKINNON: Just going back to the interactions that you have with the various agencies - Nova Scotia Business Inc., ACOA, Enterprise Cape Breton and so on - have any of your companies been able to cash in on the increasing amount of cash that is being made available through the Industrial Expansion Fund? Surely, with so much money going in there and the fact that there's more money there than with Nova Scotia Business Inc. and the increasing role of Cabinet involved in these kinds of finance decisions, surely some of your companies have been able to cash in on the cash that's available there.

MR. DAN MACDONALD: One of the expertises we have, when companies are navigating their journey through Stages 1, 2 and 3, is to be able to tap into and maximize things like NRC-IRAP and ACOA, and NSBI when they get much further on. So it is an expertise of ours to help them navigate those different, various programs - things like SR&ED credits, and so on, from a tax regime point of view. I do know of a couple of companies that have approached the IEF and they are working through that process with our support.

MR. MACKINNON: But you're not aware of any that have actually gotten money through the Cabinet process yet?

MR. DAN MACDONALD: Yes, I am. Halifax Biomedical is a company based in Mabou, Cape Breton, that received support from the IEF probably about a year and a half or two years ago. Ocean Nutrition Canada, with operations in Dartmouth and Mulgrave, would have received IEF funding in the last two or three years.

MR. MACKINNON: Thank you. Looking at the urban/rural relevancy and impact, the competition submissions, I noticed that - and certainly the submissions are based on the companies following through, the new entities trying to get off the ground and so on - I see that Zone 1 has the fewest submissions. I'm wondering if you have statistics in relation to the actual companies that you have been involved with, zone by zone. I look at northern Nova Scotia and I see an area that has a lot of companies and has a strong industrial base, or at least had a strong industrial base - it's not as strong as it used to be with Trenton gone and other problems that are up there. Can you give us some statistical information zone by zone?

MR. DAN MACDONALD: I don't know if I can give you those specifics today. The I3 map that I shared with you is a snapshot in time, that was a snapshot taken in February 2008. In Zone 1, I believe there were 14 or so submissions. When I3 ran, with the publicity we received and the reputation that we built and strengthened across the province, we've had additional submissions outside the competition from Zone 1, and all of the zones frankly. Do we keep those metrics? Yes, we do. I do not have those metrics with me today.

But in Zone 1, you're right, there are lots of companies that are emerging there. Some of them are reaching out to us to understand what we do and we're proactively engaging them and working with them the best we can.

MR. MACKINNON: You talked about the $32 million commitment that was made by the province, and you used the terms that the province has always been there for InNOVAcorp and we're not lacking any support. I have to agree with the statement that has already been said - there has been very little promotion, I feel, out around the province in relation to the good job that you folks are doing; you seem to be very happy with that $32 million. However, there is a situation where people on the street, a lot of them, as was indicated, most people are not aware of the role that is there. I'm surprised that you make such a strong statement in relation to the support that you get from the province when in reality, I don't think a good job has been done of selling the role that you, in fact, are involved in.

MR. DAN MACDONALD: Again, I appreciate your comment. An organization like ours does various kinds of things to get on the radar screen of our target audience, which is those entrepreneurs. We work through universities, we work through banking institutions, legal firms, accounting firms, we are very networked with the RDAs, the regional development authority associations around Nova Scotia. Could we do better? I'm sure we could do better.

When it comes to our target audience, which is the entrepreneurs in Nova Scotia, I believe we're doing a pretty good job reaching those folks. When those folks go to their mentor - whether it's their banker, their lawyer, their accountant or business community leader - we get most of our referrals through that effort. So, again, I'm not arguing with you that we could do better, we could always do better. Reaching out to those entrepreneurs using various techniques like the Web, networking and tech socials - a tech social is something, I think, that's important for you folks to hear about.

We run a tech social in Sydney, in Lawrencetown and in Yarmouth the first Thursday of every month, and we will now build that out further across the province. What those are - those are get-togethers where there is a speaker about technology or knowledge-based industries and those events, in Cape Breton for example, pull in between 30 and 65 people every time. It is a word-of-mouth network that's growing pretty fast, but I would agree with you that we can do better.

MR. MACKINNON: In relation to knowledge-based companies, it seems that big knowledge-based companies are in great difficulty, some of them, with the downturn in the economy. How are we faring with these very bad economic times in Nova Scotia with those knowledge-based companies? How are they doing in the province?

MR. DAN MACDONALD: It's a great question. As I said, some of them are actually growing through this economy, believe it or not. Those would be people in aerospace and defence, those would be people who are spread horizontally across multiple sectors - those people targeting health care, education - those companies are growing. What we've been doing is working very hard to help companies understand that they must position themselves in the "must have" category. If you're trying to market a nice-to-have product today with a poor ROI - return on investment - you're definitely going to struggle in this marketplace.

So how are companies doing? I would say that about 50 per cent of them have not been affected, but probably another 30 per cent of them have been affected; 20 per cent are growing. The 30 per cent that have been affected, they have been affected, especially those companies that are selling and marketing products into what we call the business-to-business marketplace. If they're positioning products that are not in that "must have" category with a very rapid return on investment, they are struggling.

MR. CHAIRMAN: Order. Mr. Gaudet.

MR. WAYNE GAUDET: Thank you, Mr. Chairman. I wanted to pursue Clarrie's comments. Dan, first of all, thanks for your excellent presentation. I guess I'm trying to get a better understanding of the industry, especially with these challenging times. Are knowledge-based companies starting up, are we growing, are we stable, are we losing? I'm just trying to get a sense of how we're making out, as we speak?

MR. DAN MACDONALD: I'm going to try my best to answer your question, if I'm on the wrong track then just stop me. The pipeline of new opportunities we see is not decreasing, it's steady or even increasing in some areas. Nova Scotia's ability to create knowledge-based companies is pretty robust, I would put it up against any province in Canada. As far as how we're doing, are our's living and growing at the pace of those in other provinces, I would say that they are.

The model that we've created at InNOVAcorp and the way that we assist companies is looked at across Canada and beyond as a best-in-class model. I think Nova Scotia is punching above its weight, but still there's a lot of room to grow across the whole spectrum.

MR. GAUDET: In your opening comments, you made reference that we have roughly 1,500 direct jobs. In the last few years, has that number been basically stable, are we losing, or how do we . . .

MR. DAN MACDONALD: No, that has grown.

MR. GAUDET: By how much? What is the percentage?

MR. DAN MACDONALD: The metrics, I'm just going to refer to something I believe was in the package that you would have. When we tracked the companies that have come through our business model, in the 2005-06 fiscal year, we base-lined it at 860 - 860 direct jobs through the companies that have come through our business model. That grew to 1,183 and then to 1,500, so we have seen growth.

This year - the 2008-09 fiscal year which we're just finishing up now in the month of March - we're doing our scan across all of our companies to see where we are. Those final figures are not available yet because many companies we will measure right at the tail end of March. What we're seeing is that companies in that nice-to-have, poor ROI angle, they have dropped their workforces by onesies and twosies and threesies. Companies in aerospace and defence, the ones that are targeting health care, biotech, they're growing.

[9:45 a.m.]

Mil-Aero is a company in Dartmouth that has grown from probably four people two years ago, now to 22 people, for example. Medusa, based in Halifax, has grown from 10 or 11 a couple of years ago, now to 37. So we are seeing growth depending on the sector you're in. But to answer your question, over the last three years we have certainly grown, almost doubled.

MR. GAUDET: With the out-migration problem I'm just curious, do knowledge-based companies in Nova Scotia have difficulty in recruiting employees?

MR. DAN MACDONALD: I think the answer is generally yes, especially when it comes to recruiting specific talent. These knowledge-based companies, typically they start with a deep level of technical expertise - engineering, scientific expertise, if you will. As they get closer to market they need another kind of expertise which we call, just as a catch-all, go-to-market expertise: business development, marketing and sales. Those are the people that our companies are struggling to find the right people to fill those roles to help them move into market and we've been very active to help them. We've networked with all of the recruiting firms in Nova Scotia, we've made it known to them the kinds of skill sets that these companies are lacking, we help do matching, but that is the one area where our companies are struggling to find the right level of expertise: marketing, business development and sales.

MR. GAUDET: In terms of looking at the skill sets required, are we working with our universities to try to provide the skills needed in order to allow our companies here to grow?

MR. DAN MACDONALD: I would say yes, but we could always do more. As I mentioned before, we're trying to influence curriculum within our universities and colleges, more around business building, business development and marketing. We have developed

a case study, for example, that has an Atlantic Canadian context. In many of our universities and colleges across the world for that matter, they're looking at the classic Harvard business case. What we have done is created an Atlantic Canada business case which has the same format, the same style, but it talks about the reality of building a company in Atlantic Canada. That case study has been presented and offered in our colleges and universities. My team goes in and presents the case, the students work on it and report out. So those are the kinds of things that we're doing.

MR. GAUDET: In terms of how we're doing across the country, you've made comments in your opening statement that a lot of these companies are people from Pubnico, from Digby. Do we have people from outside coming in, or that basically doesn't exist?

MR. DAN MACDONALD: When you look at the charter of InNOVAcorp versus NSBI now, Nova Scotia Business Inc. is extremely good at attracting companies to Nova Scotia - like the likes of Research in Motion - InNOVAcorp is building companies within Nova Scotia.

Now our companies are attracting talent from around the world. ImmunoVaccine Technologies is a biotech company that has recruited some of the best and brightest, literally from around the world, to come and locate here and to work for that company.

Once in a while we have an expatriot Nova Scotian or Atlantic Canadian who has built a start-up company somewhere else and is now looking to move that to Nova Scotia. We're all over that, we're extremely aggressive to try to help them make good on that dream they have to move that company back here.

MR. GAUDET: My last question, Mr. Chairman. So do we know who they are? Are we going after them? How proactive are we?

MR. DAN MACDONALD: Well, our primary focus is to help companies in Nova Scotia but when we're doing our networking and marketing, we're definitely on the lookout for expatriots. I would say we are probably contacted, in the run of a month, maybe four or five times, by people looking to understand the landscape, looking to understand the programs and services they might be able to take advantage of.

Now in the run of a year, there's probably one or two cases where somebody literally picks up and moves that early-stage company to Nova Scotia. An example of that would be Innovascreen. Innovascreen is a small biotech company where the founder has roots in Nova Scotia, was working in San Diego, California and, like many Atlantic Canadians, there's that homing signal back home. When he expressed an interest and a potential of moving back, we surrounded him with as much encouragement and so on as possible. Here he is now, based in our BioScience centre on the waterfront. He has, I believe, six employees working on state-of-the-art drug development technology.

MR. GAUDET: Thank you.

MR. CHAIRMAN: Mr. Bain.

MR. KEITH BAIN: Thank you, Mr. Chairman. You mentioned earlier that about 860 jobs have been created . . .

MR. DAN MACDONALD: In 2005-06.

MR. BAIN: . . . and I'm looking, they are high average per person payroll. What is the average pay for those individuals?

MR. DAN MACDONALD: Just to reiterate, in 2005-06, the direct employment from the companies that have come through our system was 860; last year it was 1,500. To answer your question, the average payroll is $55,000 per year, last year. This year we think it's probably flatter up, maybe 2 per cent or so. That payroll last year was a $62 million payroll that it brought to Nova Scotia.

MR. BAIN: I guess when you look at the tax revenues that will come as a result of that, along with the operation of some businesses . . .

MR. DAN MACDONALD: When you look at the export revenue, the capital equipment these companies purchase, the payroll, these companies are directly affecting our GDP.

MR. BAIN: I guess another question. We know that the employees in these companies are knowledge-based and I guess they're sort of unique, would be the right word to use. I'm just wondering about marketability of these individuals who are in these companies, is there a turnover?

MR. DAN MACDONALD: Is there turnover? Well yes, there's a level of turnover but I would say it's relatively low. I think, if I understand your question or your comment, when you work in a start-up environment, if you're the engineer person or team or the marketing team or the accounting team, you're doing a bit of everything. In a start-up there aren't any big walls between one part of the organization and another and you become extremely innovative, you know how to stretch a dollar, you know how to become a very hard-working, fast-paced employee.

These folks who work in these environments are highly employable. As I said before, once in a while these companies fail. When they do fail, the people who worked within those companies are highly sought-after employees and meld into our community and work on and take their skills somewhere else - very, very marketable skills.

MR. BAIN: I wonder if you can explain the pipeline to me. You mentioned there would be about 100 in the pipeline and then you mentioned the number of companies. I guess what I'm trying to do is tie it into InNOVAcorp marketing themselves, as was mentioned before, and if there's potential for expansion. When you talk about those 100, how many are actually in the list, in the funding part of it?

MR. DAN MACDONALD: Fair enough, it's a good question. So our pipeline system, we are seeing about 100 unique opportunities in a year. Those opportunities are at different levels of readiness. It could be the person who had an idea last Thursday and wants to talk about it. Well, probably there's not enough meat on the bones to take them into our system.

Of those 100, we would bring approximately 25 per cent of those into our criteria analysis level. We would have multiple meetings and conversations with those companies and we would bring, on average, about two to four companies into our system per quarter. So there's a lot at the widest part of the funnel and that's good, but there are a lot of them that are not really ready to come in. We would give them guidance on how to make themselves much more ready and to come back in on another day.

If you look at today, I believe we have approximately 47 active clients in our system right now. Those clients come through our system, they benefit from our programs and services and then they exit our system. So there is a turnover there on an annual basis.

So we're looking at new, we're considering new. Some don't need our services anymore and drop out at the bottom, so that's the kind of flow that we have.

MR. BAIN: So is there a capacity, like an overall capacity that you would have to serve?

MR. DAN MACDONALD: That's a fair point. There is a level of capacity and we've chosen not to grow in a linear fashion. In other words, as a business, we have to make sure that we're using taxpayer dollars the best we possibly can.

The way we scale, the way we expand ourselves and our capabilities is by using our network of mentors, people who are outside of our company. I think we do that very effectively. In any one given day - today, for example - working with our clients, there's probably 20-some people, individuals, local or international, if that's required, working with our companies on our behalf, to help us scale and expand as those peaks and valleys happen.

MR. BAIN: So if the capacity was higher, the service you're providing to those companies could possibly not be as good as the service you are providing now? The bigger you get, the service could decline - I'm saying could. Would that be . . .

MR. DAN MACDONALD: Fair enough. One of the challenges, those of you who have taken a look at our business plan or accountability report, one thing that I watch very carefully, as the leader of the organization, is the quality level that we're providing our folks.

MR. BAIN: That's where I was going.

MR. DAN MACDONALD: So the more clients you're dealing with, there's a danger that your quality could go down. So we work very hard to provide a quality service to our clients. The only way we can do that, as the pipeline grows, is to expand our employee base and/or expand using our network of mentors.

MR. BAIN: You mentioned, or it was mentioned before, that you're funded by Economic and Rural Development . . .

MR. DAN MACDONALD: Yes.

MR. BAIN: . . . and you might have mentioned it earlier but I didn't get it, what are the other sources of revenue?

MR. DAN MACDONALD: When you look at our annual budget, the annual budget is around $7.5 million. Approximately 65 per cent to 70 per cent of that comes from the Province of Nova Scotia. The other revenues are incubation infrastructure revenues, also various kinds of professional services revenues. So we make up about 30 per cent of our own revenues from our services.

MR. BAIN: Thanks, that's it for me, Mr. Chairman.

MR. CHAIRMAN: Mr. Preyra.

MR. PREYRA: Thank you very much, Mr. Chairman. I just wanted to follow up on one question I was asking at the end. The federal government has announced a number of large-scale projects, many of which touch on technology and innovation. Some of the complaints we've seen about the programs that have been set up is the challenge of partnerships. Many of these projects require 50-50 partnerships and certainly the kinds of projects you're talking about are the higher level, not necessarily of risk but they're unproven, they're promising projects. How do you deal with this issue of the lack of - I think the term is "angels" - in the industry in our province? You are one of the guardian angels, if you can call it that, but people who are trying to start a business say that there aren't enough angels around and so it makes it difficult for them to compete for these big projects out there. What is the strategy for dealing with that challenge?

MR. DAN MACDONALD: Yes. Some people would call that access to capital, access to capital to grow the companies. Access to capital has been a long talked-about issue in Atlantic Canada and it certainly is an issue. Some people think it's a supply issue of quality companies, other people think it is a demand issue, and around and around it goes.

Our strategy and the strategy of the province has been to focus on what it's going to take to turn that capital market situation around. You mentioned angels; one of the things that we've done, I think very effectively and continue to work hard on that, is to provide our support and encouragement to what is called formal angel networks. So an angel investor, for those of you who are not familiar with it, is typically a high net-worth individual who is willing to invest in a high-risk, early-stage company.

Approximately five or six years ago angel networks started to form around the world. In Atlantic Canada we're very fortunate to have an angel network called the First Angel Network. There are approximately 105 members of that angel network, many of them based in Nova Scotia. InNOVAcorp has pulled up alongside that angel network. We share a pipeline, we co-invest in companies, trying to leverage our dollar investments with two or more of their dollars. So angel investors and angel networks are extremely important to the future of this knowledge-based economy. So is venture capital, there are very few privately run venture capital firms based in Atlantic Canada.

[10:00 a.m.]

What InNOVAcorp, or the province through InNOVAcorp has done, is we have reached out to venture capital firms in Toronto, New York, California, Montreal, and we are positioning our highest potential companies to those venture capital firms and looking to convince them to invest in Nova Scotia. We've been pretty successful with that.

The Province of Nova Scotia in 2003-04 topped up our Nova Scotia First fund with an $8 million capital investment in our fund. We've taken that $8 million and we've turned it into $32 million; $13 million of that $32 million investment has come from outside the region. So we can always improve, that's for sure, but we've done a pretty good job in attracting capital to the province. So those venture capitalists based in Toronto and elsewhere, they don't see beyond Montreal a lot of times, just from a perception point of view. So we have to work very hard to get on their radar screen and convince them that Nova Scotia companies, the highest potential Nova Scotia companies, can compete toe to toe with companies from anywhere, and convince them to invest their money here.

MR. PREYRA: Then to get back to an earlier question, just doing rough math, you get approximately $5-plus million from the province . . .

MR. DAN MACDONALD: Yes.

MR. PREYRA: . . . perhaps $8 million from the Nova Scotia First fund, why is it that those numbers are so low when you've got $220 million in the Industrial Expansion Fund, which, regardless of how you feel about the projects being funded, has been seen as kind of old-fashioned, pork-barrel politics with uncertain criteria, very poor success rate? How do you understand $5 million for something that provides incubation money, start-up money that encourages innovation and technology and $220 million that just disappears into the political ether just prior to campaigns?

MR. DAN MACDONALD: Again, I appreciate your comments but I can't comment on the Industrial Expansion Fund. It's not my area of responsibility, nor do I have a deep knowledge in that.

MR. PREYRA: But it does seem . . .

MR. MANNING MACDONALD: You must know there's going to be a campaign. Do you know something I don't know?

MR. PREYRA: I've heard rumours about it. Certainly the expansion of the fund suggests that there's something at work.

I want to ask you a somewhat unrelated question about the academic role in this, and having spent most of my life at university, I know that there's a great deal of innovation and research going on at universities. It seems to me that most scholars and researchers are not really prepared for the world that you live in. You had mentioned mentoring. It seems beyond your mandate to do that kind of mentoring prior to application, but do you do anything at the universities and colleges to train young academics and Ph.D candidates about your research?

MR. DAN MACDONALD: It is actually part of our mandate to engage post-secondary institutions, colleges, universities, to try our best to commercialize the technologies that are being researched in there.

Now to your point, not every researcher wants to be an entrepreneur - in fact, I would argue that many of them don't. What we have tried to do is, we have proactively mapped the research projects happening across our universities. We have also mapped the commercialization potential of them and also tried to take or analyze the commercialization savvy or interest of the researcher themselves. The ones that reach the highest part of that list, we have proactively gone into the universities and met with those folks. We have done an entrepreneur analysis, if you will, we have done a marketability analysis, an intellectual property analysis, and tried to help them understand how they might take their research forward - would they license it or would they literally start a company?

That's what the Early Stage Commercialization Fund that I mentioned a few moments ago is all about. This fund, relatively modest in size - these are $20,000, $30,000, $50,000 grants, but they're totally intended to help that researcher understand more clearly the marketability and the size of market, et cetera, of the thing that they're working on.

So are we working with universities? Absolutely. Do we see that as part of our mandate? Absolutely. We now have around 50 projects that are running in universities across Nova Scotia in that ilk that I just described.

MR. PREYRA: We had talked earlier about the challenge of 50-50 funding of federal projects coming down. The government has said that it's unlikely it's going to be able to match those funds, certainly at the universities and colleges, and has suggested that perhaps the alumni can raise money for matching funds. Has there been any discussion of InNOVAcorp being one of the possible 50-50 partners in the competition for federal funds? Is there a possibility of expanding InNOVAcorp's pool of venture capital to meet those requirements?

MR. DAN MACDONALD: Those federal programs that are stimulus-oriented, relatively short term, measured in the next two years on infrastructure and buildings and those kinds of things, we don't see a role for ourselves there. Those matching dollars would come from either the province or other donators, but we really don't have a role to play there.

When it comes to other things, like CFI - the Canadian Foundation for Innovation - grants or those kinds of things, or AIF - the Atlantic Innovation Fund - we're relatively active there. We're helping these researchers and teams within the universities find who might be those partners that they could partner with in the private sector and helping them engage those partners, helping them write those proposals.

MR. CHAIRMAN: Order. Mr. MacDonald.

MR. MANNING MACDONALD: Thank you very much, Mr. Chairman. Just very briefly, one of my favourite subjects is tax credits, or the lack of them in Nova Scotia's case, in some areas of the economy. The advisory council that I spoke of earlier, the report dealt with the research and development tax credit system. The council advised the government at the time that they should increase the tax credit from 15 per cent to 40 per cent of allowable expenditures, in order to enhance the operation. The council also noted that the government may not choose an increase to 40 per cent but that the increase should be sufficient enough to differentiate our province from other jurisdictions.

I'll give you an example of missed opportunities, and most people have heard me say this time and time again. Back in the late 1990s, a tax regime was set up in Nova Scotia to provide a leg up in different areas of the province to promote the movie industry, to promote the stage and screen industry, if you will, musical productions, that type of thing. The

government of the day enhanced the tax credit system outside of metro Halifax, which spurred some activity in Cape Breton - and I speak specifically of Cape Breton but it did so later on in Shelburne as well.

In Cape Breton, the movie industry took off down there as a result of that increased tax credit system, with the CBC getting involved down there with Andy Cochran and Pit Pony, which was produced in Point Edward just outside of Sydney, and also some movie productions like The Bay Boy, New Waterford Girl, Squanto, and on and on - as a matter of fact, it was a beehive of activity. They didn't come down there because they wanted to come down there, they came down there because they took advantage of the tax regime that was in place - in other words, it was profitable for them to come there. As a result of that, many people were trained in the film/music industry, sound stages were set up in Point Edward and also in Shelburne, and the movie industry was sort of taking off. Many, many people were trained and that's a very labour-intensive business, as you know, it virtually provides something economically for everybody.

Along came the current government, immediately backed up on the tax credit system to, in their minds, level the playing field which meant, why would you go to Sydney if there was no advantage to go to Sydney, you'd stay here in Halifax. But now what has happened is that Halifax is suffering in the film industry because they're not keeping pace with the rest of the country in terms of tax incentives, so it's all going back to the CBC productions you see now. I'm sure if Andy Cochran were here he'd agree with me that the productions now are being based back again in Toronto and in the United States.

First of all, why do you believe that the government did not substantially increase the tax credit system for your operations, for R & D? Also, do you still think an increase in the tax credit system in Nova Scotia would help your business grow and not only your business, but maybe businesses like the film industry that may come back and be once again vibrant in Nova Scotia, which is very dormant right now?

MR. DAN MACDONALD: I think you're referring to the Scientific Research and Experimental Development - or SR&ED as it's called - tax system or tax regime, where the province and the federal government both provide tax credits or tax breaks to knowledge-based companies who are doing R & D. SR&ED is extremely important to our clients and to all knowledge-based sectors in Nova Scotia. Nova Scotia and Quebec are the two jurisdictions in Canada which are pretty well neck and neck in how rich those SR&ED credits are.

When the Innovation Council proposed an even richer SR&ED credit regime and said that the Nova Scotia Government could take a lead on that, there was a lot of work done on that and I was personally part of it. What we realized very quickly is that if the Nova Scotia Government increased its share of the SR&ED credit, that would grind down the federal participation so if we increased it, we would actually leave money on the table from the

federal side. Since then we've been working with the federal government to try to understand how they too could simultaneously raise theirs. So with all due respect, the SR&ED credit is extremely important. The Government of Nova Scotia, with the help of myself and others, looked at increasing it. If we were to increase it, it would actually grind down the federal dollars and actually leave money on the table and it would actually be counterproductive.

MR. MANNING MACDONALD: Unless there were additional negotiations.

MR. DAN MACDONALD: Unless there were additional negotiations and we were to convince the Government of Canada. There has been some activity around that of late to try to find an innovative way around that, but that was the main reason why they stalled on that initiative.

MR. MANNING MACDONALD: Just a final comment, Mr. Chairman. Again I relate this whole discussion to the film industry in Cape Breton which was literally destroyed because of the backup of the incentive on tax credits, and it will probably never come back again unless the government actively gets involved in increasing the tax credits to the point where people will leave another location and go to a particular location because of that. Nobody goes to places because they like going there, they go there for economic reasons and if the workforce is available.

The tax system in Nova Scotia has not given rise to much increased activity outside of Halifax metro. I've always said that Halifax metro is the catalyst that makes Nova Scotia go, and we don't disagree with that, but Halifax metro is able to sustain itself much easier than some rural parts of Nova Scotia. So I just throw that out to you that perhaps if we had an additional tax regime in areas that need the support, then perhaps we may be able to spur more activity there. So that's just by way of comment.

MR. DAN MACDONALD: I appreciate your comment.

MR. CHAIRMAN: Mr. Chisholm.

HON. RONALD CHISHOLM: Thank you, Mr. Chairman, and thank you very much for your presentation, it was great. I guess what I want to talk about is Ocean Nutrition and I think it's BioNovations, that's in Antigonish?

MR. DAN MACDONALD: Yes.

MR. CHISHOLM: That's the company building the tanks. I guess it's good, as far as my portfolio goes, in the fishery. They're building containers that will ship live fish products right around the world. How far along is that company? Would you know that?

MR. DAN MACDONALD: BioNovations, based outside of Antigonish, has an existing business where they are shipping live seafood, lobster, for example, to mostly the U.S. markets. Through BioNovations, I came to learn - and I don't think I ever appreciated this before - when you pick up a load of lobster in Nova Scotia and you ship it across the border, you could be stuck at the border for hours and hours, maybe even a day. As you move your way down through the United States to market, whether it's in Los Angeles or Miami, the temperature and humidity swings are all over the place and the mortality rate of the live lobster is very high.

BioNovations, Joe Boudreau, the founder, recognized that and he has been working on different systems to prevent that mortality rate. So BioNovations now have a prototype tractor-trailer that they have re-engineered basically with an electronic and computerized control system, to monitor the humidity, temperature, et cetera, and to make the inside of the trailer a consistent temperature. Now they've taken the mortality rate from the 15 per cent range down into the 1 per cent range.

So how far along is he? He now has prototype trailers and is working with his first customers, including some companies inside of Nova Scotia and he would plan to take that to the local market first, but also the European market. His technology can work on wheels, but it can also work in a container on a ship. So the future of BioNovations, we believe, is bright.

[10:15 a.m.]

It's a great story because this gentleman is not only a fisherman, he's an inventor, he's a transportation expert and now he has taken all of that deep level of expertise to build this new transportation system.

MR. CHISHOLM: I know on a recent trip, just before Christmas, on a promotion that we did on lobster in western Canada, one of the major concerns for companies out there and the restaurant and hotel associations, anybody who was dealing with and buying live lobster from Nova Scotia, was the mortality rate and the length of time that it takes to get lobster there. There were times, I was told, that containers could be sitting on the tarmac in Toronto waiting and may be there for a day. I'm told the mortality rate for lobster is about 15 per cent to 18 per cent.

MR. DAN MACDONALD: The interesting thing about BioNovations is they identified several problems: mortality rate, quality, the cost of fuel, and the payload. What they've done with their system is they've increased the payload of lobster, rather than other water and other systems, to actually keep the lobster alive. They have affected all of those things; the mortality rate has gone down, the payload has gone up, the fuel consumption has gone down, a very nice story. The return on investment for a product like that now is exactly

what I was talking about before, it's in that "must have" category where the return on investment is very fast and he would have a welcoming audience now in the industry.

MR. CHISHOLM: I've been meaning to drop in to see him because there were some contacts that I made in western Canada that may be able to help him, so I plan on doing that very shortly. The other one is Ocean Nutrition, they're another success story.

MR. DAN MACDONALD: Ocean Nutrition started as part of the Clearwater infrastructure, but early on in the life cycle of that company when they had two scientists, they set up shop in the InNOVAcorp BioScience centre down on the waterfront. InNOVAcorp's role with Ocean Nutrition has been multi-faceted over the years, helping them with everything from accessing partners, accessing infrastructure, to building their new micro-encapsulation factory in Dartmouth. It is a huge success story for Nova Scotia, they deserve the credit. We feel that we played a pretty important role along the way.

It started with two people in our BioScience centre, it now employs near 400 people not only in Dartmouth, but in Mulgrave and then other offices around the world. Their export revenues are significant and that's a company now that is the true example of a knowledge-based company, hiring people across the spectrum from scientists, master's, to bachelor of science grads, to marketing, sales, shipping, receiving, the whole gamut. That has been a real pleasure to watch that one grow, that's our biggest success story. There are others coming up now, ImmunoVaccine Technologies, Medusa - these are the companies that you may not have heard a lot about yet, but those are the up-and-comers, the next Ocean Nutritions.

MR. CHISHOLM: I realized back in 1999, that's around when they started, 1998-99 . . .

MR. DAN MACDONALD: Ocean Nutrition?

MR. CHISHOLM: Ocean Nutrition did and I think there were about nine people in 1999 and there are 160 or 170 there now, maybe even more, so it has been a real success story. The last time I toured that place what got to me the most was the number of young people working at that facility, they tend to be all young graduates, so it's a real good success story. Thank you very much, it was a good presentation.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: You indicated that you don't see a real role in relation to a stimulus package for the companies that you're involved with on a large scale. You are, in fact, around the province and dealing with companies and so on, you have an expertise that is very great and very knowledge-based in more than just the knowledge-based industries. If you had input into a stimulus package, could you give us a little insight on where you

might go with a stimulus package? We've been waiting for one in this province for a long time.

MR. DAN MACDONALD: When I look at the biggest challenges of our knowledge-based industry in Nova Scotia, they fall into two categories: access to capital and access to specific highly-qualified skills. On the access to capital side, we are working with the Government of Nova Scotia and other partners - the federal government also - to improve that area, to make more capital available to knowledge-based industry companies. On the access to talent side, there are various programs for access to Ph.D.s and scientific talent and that's important. There aren't the same programs in place for the business development, marketing and sales talent that I was speaking of before. So I would answer your question that way - if there were two areas that I would push hard and am pushing hard for is access to capital and access to specific talent on the business-building side.

MR. MACKINNON: How do we or how do you or how collectively do we promote InNOVAcorp so that more people are aware of what you're doing and the good potential that you have there? Furthermore, even more important is, how do we get information out there that there is such a thing as the First Angel Network or the angel network and so on - you mentioned 105 entities that are out there showing interest in helping out in that regard. I think most people in Nova Scotia if you said to them, what is the angel network, they'd sort of think of some kind of spiritual TV channel or something or other, right? There just isn't the knowledge out there in relation to that body and a hell of a lot of people don't know what InNOVAcorp is too.

MR. DAN MACDONALD: Again, I appreciate the feedback on the lack of awareness there. There is more to be done. I think the I3 competition, which we would plan to run in fiscal 2009-10, will do a great deal of awareness building yet again to raise the visibility of what we're up to and so on.

With regard to the First Angel Network, while we're partnered with them, that's not part of us, they have their own outreach. They have various kinds of networking events across the province on a regular basis. I think the most effective thing we can do is to continue or rev up, if you will, these pipeline sources that I shared with you here a moment ago, to make sure that every bank manager in Nova Scotia knows about InNOVAcorp and our services and knows how we can help their clients. That's an initiative that we're taking to the next level in this coming year, to continue to do these tech socials, not in only three areas but maybe five and six areas, through 2009-10. So always more can be done; maybe a venue like this can help us raise our awareness.

I think one other comment would be that sometimes in life, you have organizations or companies that are almost ahead of themselves - they are claiming to do all kinds of great things when maybe they can't. So while we're underneath the radar screen, I think it's a

perfect time for us now to come out and start to be a lot more aggressive on communicating what we do because we have been able to do good work, we do have a track record.

MR. MACKINNON: One of the things that I've run into in my constituency is some very small businesses that have a very difficult time dealing with the banks and even the credit union, in relationship to getting small amounts of money. Do you see a greater role - because there isn't much out there for microcredit. A lot of countries are getting into microcredit and I'm wondering what your thoughts are on that.

MR. DAN MACDONALD: A couple of comments. The companies that have come in through our funnel, one of the key things we help them with early on is to get their financial house in order. When I say financial house, to get their financial reporting stabilized. When these entrepreneurs - they're often very technical. They're just moving so fast and working so hard that they forget about the fundamentals, like having a proper cash flow statement and balance sheet and so on. So one of the first things we do in our model is we apply expertise to help them get their financials straightened out, to really know where they are. With that information they're in a much better position to go and approach a bank or the credit union.

We have a great partnership with the co-operative movement across Nova Scotia. They place a lot of loans, some secured, often character loans as it's called. So I think they're doing an excellent job across Nova Scotia.

With regard to microcredit, I believe I understand the concept. I've seen and read about how it works in less fortunate parts of the world; I think it could probably work here too. I think it depends on your definition of micro, with all due respect. If micro, in a very, very poor country, is measured in $500, I'm not sure how far $500 could bring us here, but if microcredit could be measured in tens of thousands, then that might give people the cash they need to validate where they're going and to take that next step.

MR. MACKINNON: You have mentioned that just two of your companies, or companies that have come under your umbrella, have gotten Cabinet-based money through the Industrial Expansion Fund. I'm wondering, you know these companies very well - one of them, of course, is in Mabou, in the Premier's constituency and so on - I'm wondering if, in fact, based on the knowledge that you have of those two companies, if they had business plans that would have gotten them the same dollars through Nova Scotia Business Inc.

MR. DAN MACDONALD: Again, I'm not an expert in either Nova Scotia Business Inc. or the Industrial Expansion Fund. When you referred to Halifax Biomedical, Halifax Biomedical was one of our early clients. They won the first I3 competition, so in the Cape Breton area they were up against some stiff competition, and through a private-sector judging panel they were awarded the top prize in our first I3 competition.

The reason I'm bringing that up is that should give you an idea of the level of credibility of that young man and their business plan. We continued to work with Halifax Biomedical and when they went to the IEF board, if you will, or IEF system, we supported them. So when the IEF reached out to us and said, what do you know of these folks and are they credible and so on? The answer was a big yes from us because we had known so much about them along the way.

I mentioned a couple of companies. Protocase would be another company - based in Mr. MacDonald's area, I believe - that have also received funding from the IEF, I believe. That's another very strong company that we have watched and worked with now for probably four years.

MR. MACKINNON: I'm certainly not taking any issue at all with Halifax Biomedical. I think my concern and the concern of many people in this province is that we actually have something shaping up in the province that is Nova Scotia Business Inc. almost versus the Industrial Expansion Fund, and I think it's fundamentally wrong. So that's all I'm saying.

Manufacturing tax credits. We've had some comment in relationship to the film tax credit, but I see a role in these difficult times for a manufacturing tax credit. I'm wondering about your views on that, as a stimulus in this province.

MR. DAN MACDONALD: I must admit that I'm not that up on a manufacturing tax credit, tax regime. It's a little outside our general space here so I apologize, I really can't answer that.

MR. MACKINNON: Okay, thank you.

MR. CHAIRMAN: Order, please. With the committee's permission, I'd like to ask a few questions - no problem with that?

A couple of things. You already touched on it, and my honourable colleague just asked about the fact that you get an entrepreneur and typically an entrepreneur is all involved in the idea of the great picture of how they can develop their product and move forward, but oftentimes they don't have the expertise to run the business part and that is as important as the product, and you touched on that. Could you elaborate a little bit more on exactly what you do, because oftentimes you're dealing with somebody who has this wonderful idea, doesn't have any business experience whatsoever, doesn't have a clue as to how to run a business, and that's as big a problem doing that part of the operation as it is doing the technology part.

[10:30 a.m.]

MR. DAN MACDONALD: Just to paint most with one brush, if you just let me do that for a minute, most folks who come into our system are very technically oriented, the root of their expertise is on the technical or the engineering side of the idea. I wouldn't agree that they don't have a clue but I would agree that they lack a lot of those business-building fundamentals, and that is our key role here.

When we see somebody come with a great idea and we've validated it through our criteria, we would start to immediately apply the surround sound, if you will, to that person. We'd help them get their financials in order, we'd help them validate the market objectively. We would help bring expertise in to map out the most appropriate paths to market, and all the while the entrepreneur is learning through those processes. If the entrepreneur decides at a point, with our guidance or not, that they would like to hire a marketing professional, for example, we would help them really understand clearly what kind of marketing professional they might hire. So our role is to surround those entrepreneurs with the areas of expertise that they lack.

We really can't help them on the science, if you will, or the engineering. We help them with all of the other business elements: pricing, packaging, distribution, hiring, human resources. That is our role, to surround them with those things. They don't have to listen to us, but many of them do.

We act as a sparring partner, a very constructive sparring partner. So rather than going to a venture capital firm in Toronto and getting slammed, if you will, not being prepared, we would help them prepare themselves over some number of months, then go and have that meeting. We would help them walk into a bank with a proper financial statement and a proper business plan. In our opinion, that makes a world of difference between an idea rooted in technology and a real business opportunity.

MR. CHAIRMAN: I couldn't agree more. I think that's one of the things that this province hasn't done well for many, many years and I'm pleased to hear that's the approach you're taking. I believe a lot of really innovative ideas come out of Nova Scotia. We don't get much credit for that here and oftentimes the people are just so wrapped up in the idea that they don't get to the business part. Even though they're very capable of doing that, if they don't have the help to get that in place, it's a real problem.

The other thing I see, too, is very successful businesses sometimes don't understand what their costs are and they get in trouble over time. Do you do anything like that with businesses that you've worked with?

MR. DAN MACDONALD: On the cost side, when I talk about getting the financial house in order, when we start helping companies map things like pricing and business models and distribution and so on, we're usually the reality check for them on how profitable they are going to be, if at all. We help companies understand the most profitable way to go to market, on what kind of relationships and contracts they should have with a distributor. Should they go exclusive, non-exclusive, should they go global, when should they go to different countries? So that again is directly in our wheelhouse, that kind of information sharing and sparring with these companies, to make sure they think that through.

MR. CHAIRMAN: That's really good because that's one element that I think we didn't have for years and it's really good to see that's in place.

The other thing is, if you had more money from the provincial government, could you do more work and support and grow more companies? I know you partly answered that before and you don't want to go - you want to do it in increments and I agree with that. But if you really had some access to more funds to maybe help with more incubation, more mentoring, would that help? What kind of resource would you need to really grow it?

With the economic situations in the world today, any time we can grow a company in Nova Scotia, we're going to win, win, win - you just don't lose. Any idea what would really help InNOVAcorp to really grow this knowledge-based industry that you're working so hard with?

MR. DAN MACDONALD: I think again the access to capital and this access to talent, those two threads are the most important things. If the government was to ante up, if you will, more, those would be the two areas I would make the request for.

MR. CHAIRMAN: When you talk about capital, what kind of numbers are you looking at?

MR. DAN MACDONALD: On the access to capital side, when you look at the venture capital landscape in Atlantic Canada, and Nova Scotia specifically, you would be talking - measured in millions of dollars per year, probably single-digit millions of dollars per year -$3 million to $5 million. If we had access to that capital and we had the ability to place that capital alongside private-sector capital, then that would help us grow - us, meaning the Nova Scotia knowledge industry.

MR. CHAIRMAN: Yes, and that's not a lot of money in the grand picture of things. With the successes you've had - and as you go through the high-tech businesses there are a lot of failures, too . . .

MR. DAN MACDONALD: Yes, there are.

MR. CHAIRMAN: . . . that goes without saying - that's not a lot of money to grow the economy and a solid economy, with good paying jobs. You're not very long getting your money back in income tax and all of the other taxes that the province and the federal government would have.

When you talk about staff for these companies - I know that's a major issue over time - do you do any headhunting outside the province for people or do you just strictly rely on universities to turn out the type of people they have? From personal experience, universities do a great job, and I've never knocked them because they do excellent work. But really, to get someone out of a university that you can take into a business and really be productive, that takes a long time, just until they get the expertise and work with that, and oftentimes mentors aren't there to help them do that. We've got to maintain these very bright young people in the province to help our economy grow. Any comments on that?

MR. DAN MACDONALD: Yes, I do. I think this area of accessing talent - okay, so there's lots of talent in Nova Scotia, of course. There's lots of talent that we call ex-patriots, people who have left Nova Scotia - I'm one of them - who have gone out and worked in Canada or around the world, who now have a very specialized level of expertise, especially in this go-to-market, marketing and sales, business development. We are always on the lookout for those people.

How do we do that? We have helped build and are heavy supporters of things like East Coast Connected - I'm not sure if you're familiar with that, but that's an initiative that actually started out of Toronto. That is a huge network, now about 1,700 professionals who are ex-patriot Nova Scotians, Prince Edward Island, New Brunswick, who are working around the world, who have self-qualified themselves as wanting to be connected with the business community back here. That network we tap into a lot, to identify specific skills. So we're not a headhunter but we're working with headhunters all the time, looking for specific skill sets and specific business categories and so on.

I think a home run for us is to repatriate one or more ex-Nova Scotians back to Nova Scotia, where they move their family, their young family, they take their skills back to the province and apply those skills to these knowledge-based companies. That's a home run and it can happen a lot more, that's for sure, but that is something that we do all the time.

MR. CHAIRMAN: What about the university sector? How do you take someone who is out of university, fresh, and then turn them into one of these experts in a reasonable length of time? Typically companies cannot afford that learning curve, so how do you address that?

MR. DAN MACDONALD: Well, we're certainly not the answer for all ills here but one of the most important outputs of the university system is qualified people. We're big believers in the co-op programs that started at engineering but now are almost across most all disciplines, where these students have an opportunity to work for two and four months inside of companies. We've worked really hard to position our companies as receptors for those people.

It's cool for a company or for a person, a co-op student, to go work in a bank or to go work in a large company but we've been trying to help students realize the benefits of coming to work for an early-stage company, where they get a lot more experience, they get a lot more well-roundedness and so on; that's something that we're driving.

Dalhousie University has a brand new MBA program and I'm an adviser on that program. InNOVAcorp has stepped up to the plate and made a commitment to take a number of those MBA co-op students into our own organization and to our clients so that we can get those people exposed to knowledge-based companies and get them up the ramp of skill sets faster than they otherwise would be.

MR. CHAIRMAN: That's fantastic. My time has expired now. Does anyone else have any questions, a couple of quick questions?

Okay, I'd like you to wrap up and I want to thank you for coming today. It was very informative and I know my colleagues share this view, that please encourage the industries to come and work in Nova Scotia, and keep up your good work. It's unfortunate that the government hasn't funded you more. We see money that's going into some questionable activities over time but when you talk about the success rate you're having and training people in business, how to run business and also to bring their ideas forward, I think it's exceptionally good.

I do agree with my colleagues, too, that you have to get out there and promote this more, but that'll probably bring a flood of quite interesting people to your door. I've been witness to some of those individuals myself. Just keep up the good work and I personally can't commend your organization enough, and I know my colleagues share that as well. If you could just wrap up, please.

MR. DAN MACDONALD: I appreciate the committee's feedback today. Thanks for giving us the opportunity. I heard you loud and clear on awareness, getting our name out there and continuing our good work. I appreciate that feedback very much, thank you.

MR. CHAIRMAN: Thank you. We have a few things - business of the committee, so if we could start. You don't have to stay for this, if you don't want.

Okay, the first thing on our agenda here is a letter from the Deputy Minister of Finance. It has been circulated to everybody. It appears that the deputy minister is not prepared to come to our committee - they're going to come now? (Interruptions)

Anyway, they decided that they don't really want to come here. So what's the wish of the committee, to drop the invitation or to push it further? Mr. Preyra.

MR. PREYRA: Mr. Chairman, I do want to reiterate some of the points that we were making at the last meeting. The government has announced since then a number of programs and an injection of additional funds, around $220 million, into the Industrial Expansion Fund. There have been several billion-dollar programs announced from the federal government that the province is going to partner in. There have been daily announcements of paving contracts, multi-million dollar paving contracts. So there have been these series of announcements from both levels of government.

It seems to me that these expenditures and these initiatives are really vital to the province and to the work that we do as the Economic Development Committee. We are the Economic Development Committee, we are the eyes and ears of the Legislature and, by extension, we're the eyes and ears of the people of Nova Scotia. People want to know whether or not there's a connection between these projects and how these monies are being spent, whether or not there's a strategy behind it. So to me, for the department to say that they're not going to come and provide this background information or this analysis is, in effect, a kind of contempt for the Legislature and a contempt for the committee.

We have had any number of departments that have come before us on a similar request. We've had the Department of Health come here and talk to us about its analysis of the situation, about the challenges it faces in dealing with a variety of crises. We've had the Department of Immigration speak to another committee on similar matters; the Department of Energy will be coming here next week. So there is no suggestion that a department is immune or somehow allowed to avoid meeting this committee, just because it happens to at one level be involved in giving advice to Cabinet. Every department gives advice to Cabinet and we're not asking for what advice the Department of Finance is giving to the Cabinet, we're not asking for discussions that are taking place at the Cabinet Table. All we're saying is that we want to know more about these expenditures, where the revenues are coming from, is there an overall strategy behind them.

It seems to me that if the department is saying that the Premier is going to make an announcement to some group next week, or the week following, about infrastructure, that's no substitute for speaking to the Legislature itself or to one of its committees. It's in the Legislature, it's in the committee that members have the opportunity to ask the government about its programs or to ask the bureaucrats administering the program about that program. The fact that there may be an announcement at an event or there may be a legislative sitting where the government will announce it is not an explanation or rationale for saying that this

committee doesn't have the right or the obligation to talk to members of a particular department, to ask about how a particular program or set of expenditures is being administered.

MR. CHAIRMAN: Mr. MacKinnon.

[10:45 a.m.]

MR. MACKINNON: I'm very disappointed with the response that we have gotten here and even more important than this response is the fact that we've had such a head-in-the-sand approach to the economic conditions in this province for several months now and we should have been in the Legislature, as legislators throughout the world have addressed the situations that have developed in their jurisdictions. This is just an add-on to the insult that we have gotten repeatedly in not having the House in session. I think this is fundamentally wrong.

If we, as legislators, cannot get an update on the economic conditions in this province at this time, we are in a very backward jurisdiction in relation to finance. I just look at Obama and he's on the job for hours and he's implementing economic reform and so on and we've just had such a lacklustre approach, it's fundamentally wrong.

MR. CHAIRMAN: Mr. Chisholm.

MR. CHISHOLM: The letter is quite self-explanatory. The NDP seems to be trying to make some political hay out of this issue. They know we will be going into the House very shortly or sometime in the very near future. There will be a budget. They have every opportunity to question the budget. We'll go into Supply, the estimates, and they'll question the estimates there. So, Mr. Chairman, I think the letter is quite self-explanatory and it just tells me how unprepared, I believe, that the NDP is to even think about trying to govern this province with some of the issues that they're bringing forward. There is a stimulus package that will be released some time soon.

MR. CHAIRMAN: Mr. Preyra.

MR. PREYRA: Mr. Chairman, at our last discussion we talked about this issue and as I recall the vote at that time was unanimous, that everyone agreed that we needed to get some kind of indication from the department as to how these plans hung together. We're not talking about the future, which is something that we will get in the budget . . .

MR. CHISHOLM: Why aren't we? You're talking about . . .

MR. CHAIRMAN: Order, please. One speaker at a time.

MR. PREYRA: . . . we're talking about something that is happening now and has happened already.

The issue at the time was that Nova Scotians are worried about their future, they're worried about their jobs, they're worried about pensions, they're worried about the government's strategy for dealing with it. We, as a committee, looked at it the last time and said these are legitimate concerns and we need to find a way to bring those concerns to the fore. As I recall, the members on the government side agreed with us at the time and went on to say, yes, that's a legitimate point, we need to find a way to reassure Nova Scotians that there is a strategy in place and that the government is dealing with it in a logical way.

We're not interested in looking at Cabinet discussions. The minister is at the table and he says that there will be a discussion shortly, but we do not know that, we have not had any indication that the government is going to do anything more than make a series of announcements at a variety of events, and I think this committee has an obligation to look at these issues in an organized way.

MR. CHAIRMAN: Mr. Chisholm.

MR. CHISHOLM: Mr. Chairman, I guess we did agree last month that we would bring some of these people in, but when you read the letter, if you look at it, it's self-explanatory. We will be going back in the House at our usual time probably, whatever we do every Spring, with a budget and we will present a budget. They'll ask questions, they'll have their opportunity for probably a month to go through every line item in the budget. Nova Scotians will know at that time what the province is doing.

I listened to them here this morning trying to get into the Industrial Expansion Fund and their criticism of that. What are they saying? They're saying that maybe we shouldn't be giving Nova Scotian Crystal any help to grow their business and all of the other businesses in the province. That's basically what they told us this morning, they have no indication of what it takes to run a business in this province and what the government has to do to manage business in the province. Mr. Chairman, I agree with the letter, it's self-explanatory like I said.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: Mr. Chairman, we were not trying to make political hay. We were trying to ask very legitimate questions, and those questions were very legitimate. To come up with a comment like because we're asking questions that we're not ready to govern, I could go one step further and say . . .

MR. CHISHOLM: Mr. Chairman, on a point of order. The member is trying to say something that I didn't say. I didn't say they didn't have the right to ask questions, they can ask all the questions they want. They were asking them here all morning. They were into the Industrial Expansion Fund . . .

MR. CHAIRMAN: We have to stay on the topic about the Department of Finance.

MR. CHISHOLM: All I'm saying is that the letter is self-explanatory.

MR. CHAIRMAN: Mr. MacKinnon.

MR. MACKINNON: I was just taking exception to that comment, the not-ready-to govern comment. We need a government in Nova Scotia, not a government in hiding in Nova Scotia.

MR. BAIN: Mr. Chairman, on a point of order.

MR. CHAIRMAN: Just one second.

MR. BAIN: That is straying from the topic.

MR. CHAIRMAN: Yes, it is straying from the topic. We're here to discuss what action we should take, if any, to bring the Deputy Minister of Finance in and I think to resolve this discussion a little bit, number one, we'll ask our legal counsel, Mr. Hebb, what alternatives we have and after we talk about the alternatives, if there's a motion put on the floor we'll entertain a motion, have a discussion on that and move from there. Mr. Hebb.

MR. GORDON HEBB: Your alternatives are one, to invite someone and if they decline to appear you have the choice of issuing a subpoena, it's that simple.

MR. CHAIRMAN: Okay. Mr. Preyra.

MR. PREYRA: Mr. Chairman, I do want to respond to that comment about the Industrial Expansion Fund because it touches on this question. Our questions about the Industrial Expansion Fund really relate to the fact . . .

MR. CHISHOLM: It's off the topic.

MR. CHAIRMAN: It is off topic.

MR. PREYRA: . . . that they're spending $220 million and . . .

MR. CHAIRMAN: Order, order. The issue is whether we bring the Department of Finance in here or not. If you want to put a motion to that effect, I'll entertain the motion; if not, I don't want any more discussion on the last meeting we had, because we have to keep on topic here.

MR. PREYRA: Mr. Chairman, at our last meeting we did agree unanimously that the committee wanted Department of Finance officials to explain to us exactly what the government's strategy is, to link the series of announcements that have been made to a variety of projects, to reassure Nova Scotians that the department and the government do have a strategy and there's nothing that has changed since the last meeting. The only thing that has changed is the government's position on whether or not they're going to appear before this committee. I would say if the Economic Development Committee does not have the right or the authority to ask a government department about how it is spending money, or how it can justify the spending of money, then what else are we about?

I say that we should subpoena the department . . .

MR. CHAIRMAN: Motion.

MR. PREYRA: I move that we invite the department again to come before this committee and if they don't that we may have to compel them to come.

MR. CHAIRMAN: Mr. Hebb.

MR. HEBB: I'll just say if there is to be a motion to subpoena, there's a requirement under the rules that a member would have to present a certificate to the committee indicating that the evidence to be obtained from such witness is, in the member's opinion, material and important. I just wanted to point out, that would have to be presented to the committee before the committee could actually vote to issue a subpoena.

MR. BAIN: You're saying a notice . . .

MR. HEBB: It's a certificate filed by a member of the committee. I'll quote from the rule, ". . . stating that the evidence to be obtained from such witness is, in his opinion . . .", the member's opinion, ". . . material and important . . ." That is a prerequisite to a motion to issue a subpoena.

MR. CHAIRMAN: Mr. Gaudet.

MR. GAUDET: Mr. Chairman, I'm just looking for clarification on the certificate. Is that a legal document? Is it something that we obtain from the Speaker's Office?

MR. HEBB: You could recess for five minutes and I could prepare it for you, it's a fairly simple document.

MR. CHISHOLM: Can we get a second opinion on that?

MR. CHAIRMAN: Now just before we get carried away here, we have, I believe, a motion on the floor that says we should again invite the Department of Finance - am I reading that properly? - to invite, we're not talking subpoenas at this point because that was the motion that you made. Am I clear on that?

MR. PREYRA: I think invite them and say that we will subpoena them if they don't. If the committee is suggesting that we move directly to subpoenaing them then I believe we would support that.

MR. CHAIRMAN: Well, I need clarification on this, Mr. Preyra. My understanding of what you said, and tell me if I'm wrong because I want to really clearly understand it because it's quite a discussion here, are we going to simply invite the deputy minister and staff back based on our original invitation that was unanimously passed by our committee here? Is that what you're proposing?

MR. PREYRA: Yes, I would change the motion to say that we will subpoena . . .

MR. CHAIRMAN: You will have to withdraw the initial motion to do that again.

MR. PREYRA: All right, I will withdraw the initial motion and then subject to the advice we've just received that we should provide a certificate and a subpoena as soon as possible.

MR. CHAIRMAN: Do you so move?

MR. PREYRA: I will move that.

MR. CHAIRMAN: Do we have a seconder on that?

MR. GAUDET: Sure, I will.

MR. CHAIRMAN: Seconded by Mr. Gaudet. Now, with that in mind and with what the solicitor said, I believe we have to have a certificate first before we can discuss the motion, so if we have a short recess until the member can make that up in conjunction with the legal counsel, we will do that. I would say we will be back here - is five minutes long enough?

MR. CHISHOLM: Could you explain that again, now what are you doing?

MR. CHAIRMAN: In order to really discuss this whole issue we have to have a certificate from the member that indicates that, indeed, it is a worthwhile venture to do this.

MR. CHISHOLM: For a subpoena?

MR. CHAIRMAN: Yes, for a subpoena, that's what the rules . . .

MR. CHISHOLM: So you're talking subpoena now.

MR. CHAIRMAN: That's what the motion was. Once we get that then we can discuss the documentation that's brought forward and decide whether or not this is something we should pursue at that point. So I would say - is five minutes long enough to prepare that? So we'll have a five-minute recess, until 11:00 a.m., and we'll reconvene at 11:00 a.m. and discuss it further.

[10:57 a.m. The committee recessed.]

[11:05 a.m. The committee reconvened.]

MR. CHAIRMAN: Are the members ready? Let it be noted that two members of the caucus, Mr. Chisholm and Mr. Bain, have decided to leave the meeting.

Unfortunately, we don't have a quorum at the present time, that causes some grief. So until we get a quorum, we can't continue the meeting. Do we have another member? (Interruptions) We could request another member to come. We could wait maybe - what would be a reasonable amount of time to wait for another member to come, either from government or one of the caucuses?

MR. GAUDET: Well, let's recess for half an hour.

MR. CHAIRMAN: Okay, we'll recess for half an hour and reconvene here at 11:35 a.m.

[11:06 a.m. The committee recessed.]

[11:37 a.m. The committee reconvened.]

MR. CHAIRMAN: Thank you very much. I see everyone is back again. I do have a certificate here from Mr. Preyra and it reads as follows:

"I, Leonard Preyra, hereby certify that, in my opinion, the evidence of Vicki Harnish, Deputy Minister of Finance, is material and important."

So based on that, we have a motion on the floor to subpoena the Deputy Minister of Finance and I'm open for discussion on that.

MR. BAIN: Mr. Chairman, on a point of order, just over what has transpired in the past while. First of all, our meetings are scheduled from 9:00 a.m. to 11:00 a.m. There was no motion made to extend the hours of the meeting, for one thing, and you, as chairman, said there wasn't a quorum, so therefore the meeting couldn't be held.

I guess another question is, the authority to postpone for half an hour so that a meeting can be stacked, so there are two or three points of order that I'd like to bring up. Lack of quorum means that the meeting is over.

MR. CHAIRMAN: I would ask Mr. Hebb to address that.

MR. HEBB: It is my view that a committee of the House, unlike the House, which loses quorum, is entitled to continue. For example, if a committee is hearing witnesses and loses quorum, they can continue to hear the witnesses. The committee cannot make any decisions without a quorum but a committee can continue.

Now, at the point on the hours, a committee is free to continue beyond the eleven o'clock hour and this committee did . . .

MR. BAIN: In agreement with the committee, though, the committee has to agree to extend the hours.

MR. HEBB: Yes, and this committee did, with a quorum present, adjourn the meeting to eleven o'clock, which would be beyond that hour, so I don't think there's any issue there.

The committee subsequently - although it was recognized there wasn't a quorum, the committee recessed, not adjourned, because there was no quorum, but it recessed, which I think the committee was entitled to do, and when it returns - which is now - if there is a quorum, then the committee is able to deal with motions. That would be my advice to the committee. It's up to the chairman to rule on your point of order.

MR. CHAIRMAN: Yes, I believe your point of order is out of order, based on the opinion of the solicitor. So let's move forward with the issue. Any discussion on the certificate? Mr. MacDonald.

MR. MANNING MACDONALD: Just to be sure of what's happening here, we're basically asking - and I'm not a member of this committee, I'm sitting in for somebody else, so I haven't been privy to what went on before here, but is this just a case of the committee requesting Vicki Harnish to come before the committee?

MR. CHAIRMAN: Yes.

MR. MANNING MACDONALD: And she's refusing to come before the committee, is that interpreted?

MR. CHAIRMAN: Yes.

MR. MANNING MACDONALD: So that's all the motion is, now subpoenaing her to come to the committee?

MR. CHAIRMAN: Yes.

MR. MANNING MACDONALD: Okay. Does anybody know why she refused?

MR. CHAIRMAN: There was a letter that was circulated, that you might not have had a chance to see. Mr. MacKinnon.

MR. MACKINNON: Mr. Chairman, what I find hard to fathom here is that we unanimously requested her to appear before this committee and I don't see why there has been such an uproar about the issue of making this request to subpoena. We still should be in agreement that she should appear before this committee, so I have no understanding of why we would be against her coming to the committee now, when we weren't at the last meeting.

MR. CHAIRMAN: Mr. MacDonald.

MR. MANNING MACDONALD: Am I to believe that when we asked her, it was unanimous?

MR. CHAIRMAN: Yes, it was.

MR. MANNING MACDONALD: I'd call for the question, then.

MR. CHISHOLM: What is the motion?

MR. MANNING MACDONALD: The motion is that she be subpoenaed to come before the committee.

MR. CHISHOLM: Could we have the motion read back?

MR. CHAIRMAN: Yes, Mr. Bain first.

MR. BAIN: Just one comment, Mr. Chairman. We did unanimously agree to ask the department to appear before the committee. We did receive a response and the second paragraph states, ". . . I do not believe that department officials are in a position to provide the information you are looking for."

The rest of the letter, as my honourable colleague said before, is self-explanatory and, as a result of that, I'll be voting against the motion to subpoena.

MR. CHAIRMAN: Mr. Chisholm.

MR. CHISHOLM: That's it.

MR. CHAIRMAN: Okay, maybe read the motion again. Mr. MacDonald.

MR. MANNING MACDONALD: My reaction to the second paragraph was that if they feel that way and if Vicki Harnish feels that way, she should just come to the committee and tell us that, that's all. This is a legitimate request and it was unanimous. I don't think she should be allowed to duck this.

MR. CHAIRMAN: Ms. MacDonald.

MS. MAUREEN MACDONALD: I want to support the motion. I also want to say that as somebody who also chairs the Public Accounts Committee, I'm really quite concerned about the precedent this would set if we were to accept that a deputy minister is able to assert that they are not going to appear in front of a standing committee of the House, when the members have unanimously passed a resolution asking that that be the case.

This is the system we have of accountability and the senior public officials are accountable to the Legislature through standing committees for their department. This would set a terrible precedent, I think, if we were to accept that a deputy could simply say that the questions you are seeking are not relevant to what I'm prepared to provide.

MR. CHAIRMAN: Any more discussion. Mr. Preyra? The motion, as I understand it - clerk, do you have the motion there? - was to subpoena the Deputy Minister of Finance and . . .

MR. HEBB: You also have to specify a date as to when you want her to appear.

MR. CHAIRMAN: And we have to specify a date too. Is there someone who would like to amend the motion to a date? Mr. Preyra.

MR. PREYRA: As I understand it, we have proposed a date and I don't know if there's any reason to change that date. I believe the date was March 24^th.

MR. CHAIRMAN: March 24, 2009, and you do make that amendment to the motion?

MR. PREYRA: Yes, I would.

MR. CHAIRMAN: On the amendment. Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

On the original motion. Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

[11:45 a.m.]

The next item we have on the agenda is a letter from Rob Bennett of Nova Scotia Power. You have all received that information. I responded back to Mr. Bennett that the May 12^th time he said he could come was satisfactory to the committee. Is there any problem with that from anyone? If I don't hear any objections to that, that is what we will schedule.

The last thing that's not on the agenda, but something we've been working on for a while, we requested information from the Port Authority - do you have the exact request there? - regarding the tonnage over the last number of years that has gone through the port. With two separate letters we have not received a response even from them. Here's what was requested.

We requested on February 25^th, as a result of the January 13, 2009 meeting of the committee, we were looking for overhead cost supports and what they are in administration; the decrease in TEUs in 2008, how it compares to TEUs over the last three to five years; property value estimate; and a wish list of projects for potential infrastructure funding that may come from the federal government. That was sent on February 25^th and we did send the original letter, which went out on January 28^th, and they've ignored both letters. What is the wish of the committee?

MR. MANNING MACDONALD: Who did the letter go to?

MR. CHAIRMAN: It went to Karen Oldfield, President and CEO, both letters. Mr. MacKinnon.

MR. MACKINNON: I think this information is so basic, to get the TEUs for the last five years and do a comparison, it's really appalling that we get two responses without the information. It just is beyond imagination that you can't get that supplied to this committee. Here, again, if we are going to operate as a committee and we can't get the most fundamental information, it certainly makes us somewhat Mickey Mouse in our approach.

MR. CHAIRMAN: Mr. MacDonald.

MR. MANNING MACDONALD: Clarrie, I think what has happened here is we didn't even get a response.

MR. CHAIRMAN: No, we didn't even get a response.

MR. MANNING MACDONALD: You said two responses without the information. We didn't even get a response . . .

MR. MACKINNON: Sorry, two letters without . . .

MR. MANNING MACDONALD: . . and I think that something as basic as that, I believe that - I think the government members should take the message back to the political ministers involved in these various departments that they had better start talking to their senior civil servants about the power of these committees.

These committees have the right to ask for that information and for bureaucrats to ignore the kind of letters that go out from these committees, I think is contempt of these committees - not by the government ministers but by the bureaucrats. I think that somebody should have a talk with those bureaucrats.

MR. CHAIRMAN: Would you like to make a motion?

MR. MANNING MACDONALD: That they have a talk with those bureaucrats? (Laughter)

MR. CHAIRMAN: That wouldn't work, I don't think.

MR. MANNING MACDONALD: I don't think that would go too far. Sure, I'd move the motion that - well, you're asking that they respond to . . .

MR. CHAIRMAN: Well, we sent them twice and they never responded.

MR. MANNING MACDONALD: I don't know what motion to make here, you're asking me to make a motion.

MR. CHAIRMAN: We can do one of two things. We can write them again and see if they do respond, or we can issue a subpoena to them to provide the information.

MR. MANNING MACDONALD: Well, I think in fairness, we should give the Port Authority a chance to respond by asking - and my motion would be - that they immediately respond to the request by the committee . . .

MR. CHAIRMAN: With a deadline.

MR. MANNING MACDONALD: . . . with a deadline on it. Then this committee can decide on what further action to take if that deadline is not met. Is that . . .

MR. CHAIRMAN: Mr. Preyra.

MR. PREYRA: I would agree if there was to be a motion, but I would also give them the benefit of the doubt. I was at a meeting a couple of weeks ago with the Port Authority and it seemed to me that information is there, it's readily available and it's publicly available.

We are meeting with the Port Authority this afternoon, some of us are meeting with the Port Authority, and we can certainly reinforce that motion, if need be, that we would like to see it. I do find it difficult to understand why they haven't responded because it isn't really information that we can't get.

MR. MANNING MACDONALD: It's innocuous information.

MR. PREYRA: Yes, so I would agree with the motion.

MR. CHAIRMAN: Okay, we have a motion on the floor. Any more discussion on the motion?

Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried unanimously.

The last thing we have to talk about, we're going to tour the facility this afternoon at 1:30 p.m. Where would everyone like to meet? On the site.

No other business? A motion to adjourn would be in order.

MR. MACKINNON: I so move.

MR. CHAIRMAN: We stand adjourned.

[The committee adjourned at 11:50 a.m.]