Yes, Mr. Chairman.

Does the committee agree?

Sergeant-at-Arms, could you escort the witnesses in please? Mr. Minister, for the record, could you please introduce your witnesses?

Mr. Chairman, on my left is Mr. Bob McLeod, deputy minister of Resources, Wildlife and Economic Development. On my right is Mr. Jim Kennedy, director of corporate services for RWED. Thank you.

Thank you, Mr. Minister. Welcome, witnesses. General comments. Mr. Miltenberger.

Thank you, Mr. Chairman. I will make this as brief as I can. It is good to see the reference to a broad energy strategy, that the Minister mentioned in his comments, and hydro potential. I am also interested at some point in the budget as we get to talk about secondary diamond development, hopefully outside Yellowknife. I am interested to see the progress on the consolidating of the lending agencies and support agencies for business and the work that is going on and, of course, the business incentive program.

At the appropriate time in the budget, I would like to discuss with the Minister what I think is a very carefully crafted letter about the regional funding transfers that lays out the money that was transferred from regions to headquarters to deal with the critical expenditures that were identified.

Mr. Chairman, as the Minister indicated, this is a very important department. The area of tourism in the constituency of Thebacha is one of growing interest and one that I would like to, regardless of the eventual fate of the hotel tax, work with the Minister and his department to try to move along.

I do not have a lot of big issues in this department. A lot of them are positive issues. I would just like clarification and some discussion. I think they have a lot of work before them, as the Minister said, and an ambitious agenda. Thank you.

Mr. Minister.

Mr. Chairman, I can either respond to each comment or else listen, make my notes and respond to everyone at the end of general comments. Whatever is the Members' wish.

What is the wish of the committee?

General comments. Mr. Bell.

Thank you, Mr. Chairman. I do have some general comments on programs that may not have a corresponding line item in detail. The first initiative I would like to comment on is the review of BIP. I think this incentive policy is certainly something that we need to work on. As I said before, I think we have a real chance here. The Minister has agreed to look at this. I am glad he has, because I think it needs retooling. I think we need to come up with a program that works for northern business.

I think to get back to the philosophy of what we are trying to do here is to level the playing field for real northern businesses. We want to level the playing field for them with southern businesses so they are able to take advantage of the economy as it heats up in the North.

I think it has had its failings. The department admits this. We have had people who have been able to side-step the intent of the BIP for whatever reason. There have been various ways it has been done. In effect, southern businesses with little more than a token operation in the North have been able to get status under the BIP and qualify for the incentives. We know that was never the intent. I am glad the Minister is looking at it.

I think there are several things in the paper that his department has put out that are very interesting. When favourable tax rates are analyzed versus tax credits, I tend to favour overall tax rates because this broad approach will look across all sectors at all sectors. I think the minute we try to get into trying to administer specific tax credits, I think we are talking about an administrative undertaking.

The other thing that might happen is when we look at small business, I think the small business threshold can be looked at, but certainly we need small business tax rates that are competitive with our southern neighbours. We have seen Ontario move to lower their small business tax rates. Alberta is proposing to do so. I believe BC's is 4.5 percent. There was a time when we seemed to be leading the parade in this area, but it is slipping away from us and we are no longer at a competitive advantage in this area. So I think we can move quickly.

The paper looks at the possibility of moving to, I believe it is currently six or five percent, but moving to zero percent for small business as a tax rate. I think it would only cost this government an estimated $1.6 million. I think it gets back to this idea that we have very little capacity to raise our own revenues, especially in the area of small business taxation. So I would like to see us consider this as a worthwhile initiative.

Whatever we do, we have to move to make sure the BIP can provide an advantage for northern companies on more than just Government of the Northwest Territories contracting. We have acknowledged that the Government of the Northwest Territories' direct spending is now only seven percent of GDP if we take wages out. More and more, we see much of the work that is being done and money being spent is being spent by a lot of these big companies, the BHPs, the Diaviks. I think we have to make sure that northern businesses are competitive and can take advantage of these opportunities.

One of the ways we might look to do this is by providing subsidies for businesses that are northern in the form of employment. The Minister in discussing this previously has indicated that it is difficult for us to tell the private sector who to use when contracting. I would agree. I think we do not want to get into protectionist schemes. Those always seem to run us into trouble, but incentives certainly might be the way to go.

I think there is a real opportunity as well to link this very closely with maximizing northern employment, the strategy that Mr. Ootes is spearheading. I think part of the BIP should be about employing Northerners. The initial intent was to encourage entrepreneurship. I still agree with that as the thrust, but when we look at what we are trying to do, we are trying to stimulate the economy and make sure that Northerners can be hired so that we have people paying taxes in the North, living here, contributing to the economy. If there are ways that we can do this, it certainly makes a lot of sense for us to try to address that. If BIP is the mechanism for that, then that is great. I would like to see us go down that road.

I will have more comments about the BIP as we look further at the development and as the Minister gets ready to consult and eventually unveil his new program. I think it is critical that we have a manufacturing directive in this initiative. Manufacturing is a sector that we really have a lot of room to stimulate. I think I have spoken before about the need to diversify our economy. We all have. We simply cannot put our hopes strictly in the non-renewable resource sector. We simply do not know what will happen to world commodity prices. I think it would be irresponsible for us to be too reliant in this area.

I would also like to speak to the committee that is reviewing the various lending arms and economic development agents of this government; the BDF, the BCC and Community Futures. I think this is another worthwhile initiative. I think we have to take a look at what we are doing and make sure that all of these lending agents are linked.

The Auditor General has indicated over the past few years, time and time again where we see situations where one arm of our government is not aware of what another is doing in terms of lending money to people. We cannot have situations where a business accesses BDF funding and gets a grant, turns around and uses that grant as the equity portion to leverage a loan for BCC. We cannot have 100 percent borrowing. There simply has to be some ownership. There has to be some investment from the businessperson or else there is not the level of commitment.

When all of the money is leveraged, there is also a tendency to overcapitalize, to turn around and say, "All right, if I can get this amount of money, I must need all new equipment, I must need all new capital." I also believe that what happens in these scenarios is if you do not have an ownership in this capital, you tend not to take very good care of it. I think this is something that we have to address.

I certainly think there needs to be clear linkages so we know. We cannot have situations where the BCC is lending money to someone and not understanding that the equity portion they have come up with was in fact BDF funding. I am not saying that this happens often, but I know in the past it has happened on occasion.

I am glad we are taking a look at these programs. I think we also have to take a look at what some of the charter banks are doing. The BCC requires and has quite tight restrictions for security on loans, and I think it is good that we are cautious. I think we have a pretty favourable rate of collecting on our loans, but we have to realize that we are not a charter bank. We are a lender of last resort. It is important that we get into economic development in the communities, especially in smaller communities where charter banks refuse to be in the business of lending money.

Part of the BCC's portfolio is going to entail high-risk loans. I think that is the nature of the BCC. I think we have to get away from the numbers game and be more interested in taking a good look at business proposals, making decisions on the basis of sound business proposals and working with entrepreneurs who are interested in getting into business.

We certainly have some room for improvement here. I think we cannot continue to choke business by requiring security that is unreasonable. We ask people to put up homes and vehicles and all kinds of things to secure loans, when in fact if you look at the history and the record that this government has, very rarely ever do we foreclose on someone and go after someone, very rarely do we go and take homes, cars and these kinds of things. Why do we ask people to put them up in the first place? I think these are some of the questions we have to ask when we look at the mandate of the BCC and the mandate of all of our lending agents.

I will have more detailed questions, but these are a couple of the programs that did not have corresponding details, so I felt compelled to comment on them here, Mr. Chairman. Thank you very much and I look forward to detail.

Mr. Minister.

Mr. Chairman, if there are no further general comments, I would be pleased to respond to the two. Did we want to continue with general comments first, and I will respond after?

I am just wondering if you are going to remember all of this. It is getting pretty lengthy, so I am just wondering if it might be more...

-- Interjection

I do have a few people on the list, and it will be probably pretty lengthy, so I am just wondering at what point will you respond. Mr. Minister.

No. Go ahead.

I have Mr. Delorey.

Thank you, Mr. Chairman. I will keep my comments short. I just wanted to touch on a few things. I was kind of surprised to see, with all the activities that are going on in the North and all the big plans that we have for development, that tourism was the top priority out of the five priorities for this department for next year. I know it was a priority for the department, but I was surprised to see it at the top of the list.

I have the same problem with the tourism industry that I have with a lot of our other initiatives that we are taking to develop our North and open it up. If we have to fund it on the backs of our businesses and our residents, it gives me reason for concern. I think that we have to start raising money or getting more money from Ottawa to be able to spend large amounts of money in these areas. I think there is only so much that we will be able to do if we have to do it through taxes and raising money on the backs of our residents.

One of the big areas that the department is looking at is in the energy field. I see at the top of the list that the department will be examining options to develop an energy strategy, so we are still in the strategy business. I am hoping that we see some positive results coming out of that.

I have to mention my favourite that is in here -- the Arctic Energy Alliance to reduce costs and the environmental impact, energy and utility services.

-- Applause

One of the problems I have in this whole area is that we study greenhouse gases and one of the members of Arctic Energy Alliance, I think, is the Department of Public Works, as we talk about reducing greenhouse gases and cleaner sources of energy.

In Hay River, there is money being spent right now to convert buildings that are on propane, all hooked up for natural gas. They are piping and spending money on putting them back on diesel fuel. I just do not think that goes anywhere towards looking after greenhouse gases and getting us ready for the future and cleaner energy systems. Why that is, I am not really sure. I do not know if the Arctic Energy Alliance has anything to do with that.

With regard to the oil and gas sector, I see in the comments that the department has established three regional oil and gas positions to assist communities maximizing involvement in development. I am not sure where those positions are, but I would be interested in reconfirming where those three positions are in the oil and gas sector.

I would also like to get some information on one of the department's initiatives. They sponsored a series of human resource development programs and associated support services, contracts to aboriginal corporations to deliver forest inventory, several cultural activities. I know that the forest industry is kind of tied up. I do not know exactly what this means. I would like to get a bit more information on whether this is a whole new management body to look after the forest industry or NWT forests.

I do not have a problem if we do not want to do anything with the forest industry and just tie the whole thing up and wait until we are ready to do something with it. I do have a problem with the department when they help set up a business that needs forest products to succeed and lend the business money to get started up, and then shut them down by not giving them licences to cut trees and actually they go broke. I do not think that is a very good way for the department to operate. I know that in Hay River there are a couple of businesses that are going through some very hard times.

With regard to the NWT Business Development, the $1 million fund, I would be interested in finding out where that money is going to be administered from, if it is going to be administered at headquarters or if it is going out to regions. Those are just some of the areas I have some questions in out of the Minister's opening remarks. I will have more questions as we go through the department. Thank you, Mr. Chairman.

Mr. Minister, do you want to respond to those now or do you want to continue on?

Mr. Chairman, it is really up to the Members. If they want me to respond as we go through, I will do that. If they want me to wait, I will wait until the end. I am taking notes. I am at your pleasure. Mr. Bell had indicated before he did not need a response right now.

It is up to the Minister if he wants to reply, but you do get a lot more than ten minutes. I will allow you that. Next on the list is Mr. McLeod.

Thank you, Mr. Chairman. I just wanted to make a few quick comments. Some of the issues I want to raise are not in detail, so I thought I would bring them up in general comments.

First of all, I wanted to say that it really concerns me when I see overall that his department over the last couple of years has shifted focus from what used to be community-focused to more industry specific and more so to diamonds. A lot of things have changed. It looked like a bright future in the communities where the Development Corporation and the private companies are now looking pretty grim. The opportunities are very limited.

However, we are at the threshold of development in the Deh Cho. There is an agreement that has been signed and we probably will see the formal signing in the spring of this year. Yet we are seeing cutbacks, a number of cutbacks.

The biggest one is to the Business Development Fund. This is a fund that our communities depend on. It has taken a major cut in the last few years. From my estimation, it is about an $800,000 reduction. This means that a lot of companies in the smaller communities are going to have a harder time to access funds when there are less funds. I have been told that the funds for the Business Development Fund, in the South Slave region anyway, only last until early June or July. It is going to get even tougher to access the dollars. That is a real concern.

The second thing is a lot of communities in my riding are depending on the interim resource management agreement that has been there for a number of years to assist them to deal with different resource pressures and participate in land discussions. That has been cut completely now. I am hoping that there is going to be some indication from the federal government that we will see this returned at some point.

One of the biggest issues that I wanted to raise tonight is the situation that is happening with the Kakisa commercial fishermen. I was happy to see the Resources, Wildlife and Economic Development Minister was down in that community and discussed this issue with them. It might be premature to expect a response from him, but we experienced a real downturn in the number of available fish in the fish catch over the last couple of years. What used to be a daily catch of three or four or five tubs is now something they are catching on a biweekly basis, I believe. There have been some studies done by Fisheries and Oceans. However, I think there is going to be a real need for some type of assistance for the commercial fishermen there.

I am not sure what the results are of the study. I have not seen it yet. However, I am sure it is going to mean that we are going to have to request that some of these fishermen quit fishing maybe for a year or so or however long it takes. It may be because the quotas were set too high, but I cannot say for sure yet. They are going to need some assistance because that is their livelihood. It is something they depend on and have depended on all their lives. Commercial fishing has been in existence since the 1950s in Kakisa. That is something we are going to have to be very aware of and monitor very closely over the next while.

There are other issues that I wanted to raise, but they are in detail. I will just mention them quickly. I am very concerned that the Wildlife Advisory Group has no representation from the Deh Cho. I do not know why that is. Maybe we could get an explanation at some point. In his statements, he mentioned that there are three oil and gas positions. I am not aware of any that have been located in the Deh Cho. The focus seems to be all in the Inuvik area and there is little attention being paid in this area that I represent.