[ Page 2595 ]

CONTENTS

Routine Proceedings

International Financial Business Act (Bill 50). Hon. Mr. Couvelier

Introduction and first reading –– 2595

International Financial Business (Tax Refund) Act (Bill 49). Hon. Mr. Couvelier

Introduction and first reading –– 2595

Insurance Amendment Act, 1987 (Bill 48). Hon. Mr. Couvelier

Introduction and first reading –– 2596

Tabling Documents –– 2596

Miscellaneous Statutes Amendment Act (No. 3), 1987 (Bill 55). Report –– 2596

Third reading

British Columbia Enterprise Corporation Financial Restructuring Act (Bill 53).

Committee stage. (Hon. Mr. Couvelier) –– 2596

Mr. Stupich

Mr. Williams

Mr. Harcourt

Hon. Mrs. McCarthy

Third reading

Committee of Supply: Ministry of Economic Development estimates.

(Hon. Mrs. McCarthy)

On vote 17: minister's office –– 2602

Hon. Mrs. McCarthy

Mr. Harcourt

The House met at 10:08 a.m.

Prayers.

HON. MRS. McCARTHY: Mr. Speaker, I would like to welcome all the people in the gallery. I understand there is a son of one of my friends in the gallery and, specifically, I would like to welcome alderman Helen Boyce from the city of Vancouver. We are very pleased to have her in the gallery today, and I'd like to ask all the House to welcome her.

Introduction of Bills

INTERNATIONAL FINANCIAL BUSINESS ACT

Hon. Mr. Couvelier presented a message from His Honour the Lieutenant-Governor: a bill intituled International Financial Business Act.

HON. MR. COUVELIER: Mr. Speaker, Bill 50, the International Financial Business Act, is the second part of the package of two pieces of legislation designed to provide an environment that encourages the conduct of international financial activity in Vancouver. As with Bill 49, this bill is being introduced at this time for discussion only, and it will be reintroduced in revised form when the effectiveness of these combined efforts has been demonstrated.

Taxation has been identified by both the federal and the Quebec governments as the major factor in the creation of an international financial centre. I agree that it is a factor; however, I suspect that the costs imposed by taxation are substantially outweighed by the much less direct cost of regulation.

Bill 50 is designed to create a competitive regulatory environment. Although difficult to measure, government regulation imposes real costs on financial institutions. These companies devote time, energy and money to complying with the regulations, and in many cases are precluded from pursuing profitable opportunities. For domestic institutions, these costs of regulation are, of course, more than offset by the benefits of public protection. International financial centres, however, deal with non-residents who are highly sophisticated and competent. The consumer protection afforded by a strict regulatory environment is not needed as long as the unsophisticated cannot be involved. It is of vital importance that the regulation of international financial activity in Vancouver be competitive with that imposed by other jurisdictions. A less onerous regulatory regime, in these circumstances, is not only defensible but essential.

Bill 50 introduces a mechanism to dramatically reduce the regulatory cost that is imposed on newly incorporated subsidiaries of financial institutions that conduct international financial transactions exclusively with non-residents. The regulatory regime is designed to isolate these subsidiaries from domestic markets, but in all other respects the free market will prevail.

The international financial businesses formed under Bill 50 will be eligible, along with other financial institutions, for the tax incentives provided in Bill 49. As with Bill 49, it is not clear that Bill 50 can do its job unless complemented or validated by the federal government. Once again, I urge the business and financial community to examine this legislation closely, and on the basis of that examination suggest to both this government and the federal government how this legislation or other government measures could be effectively used to the benefit of British Columbia and Canada.

These two pieces of legislation represent an important provincial contribution to the joint efforts of the federal and British Columbia governments to develop an international financial centre in Vancouver. If the private sector can demonstrate that, with the help of this or other legislation, our objective can be achieved. I will be pleased to introduce revised bills. For the present, the legislation is being introduced for discussion and I am looking forward with great interest to any and all comments on this initiative.

Mr. Speaker I move first reading of Bill 50, the International Financial Business Act.

Bill 50 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

INTERNATIONAL FINANCIAL BUSINESS
(TAX REFUND) ACT

Hon. Mr. Couvelier presented a message from His Honour the Lieutenant-Governor: a bill intituled International Financial Business Tax Refund Act.

HON. MR. COUVELIER: Bill 49, the International Financial Business (Tax Refund) Act is one of the two pieces of legislation which, when taken together, represent tangible evidence of this government's ongoing commitment to the objective of developing Vancouver as an international financial centre. It is the government's intent that this legislation not be debated and passed by the Legislature at this time, but that it will be available for public discussion and consultation. It will be reintroduced and passed at some future time, after an opportunity has been provided for public discussion.

As a result of an announcement in the 1986 federal budget that measures would be introduced to facilitate the development of Vancouver and Montreal as international financial centres, a provincial initiative that was already underway was diverted for almost a year in favour of efforts to develop a federal-provincial measure.

With the tabling of a federal ways and means motion in January of 1987, followed by legislation in June, it became apparent that what had been achieved was only a commendable first step. As a result, the comprehensive provincial measures that I have now tabled were developed.

Bill 49 goes as far as a provincial government can to create the type of tax regime which, I believe, is required for Vancouver to be competitive with other international financial centres. Bill 49 also provides some personal tax incentives which are designed to help make Vancouver attractive enough to generate a critical mass of participants. By and large, these tax measures will not expose the provincial government to significant costs. Simply put, most of the business that will enjoy the tax benefits would not, in their absence, occur in Canada. The government would not be collecting the tax revenues it is prepared to give up.

Bill 49 works by providing a refund of provincial income tax paid on profits generated by financial institutions located within the Greater Vancouver Regional District from a wide

[ Page 2596 ]

range of international financial activity. As noted, these activities are limited, with a few exceptions, to dealing with non-residents, so the refunds or tax exemptions will have little, if any, cost in terms of forgone tax revenue.

[10:15]

Unhappily, I remain unconvinced that a provincial taxation measure alone can be sufficiently attractive to be effective. Additional federal tax incentives involving federal corporate income tax and withholding tax are also required. On this point I am in complete agreement with the spirit of recommendations in the report of the Blenkarn committee. In spite of media reports that the Blenkam committee opposed such tax matters, their report clearly indicated that to be effective, the federal tax measures should be extended to additional financial activities, just as I am proposing in Bill 49.

With the introduction of this legislation, I am challenging the business and financial communities in British Columbia and in Canada to become more actively involved — in fact, to take the lead role in this initiative. With Bill 49, I believe that the provincial government has gone as far as it can go in terms of taxation. I hope that when the support and leadership of the private sector has been demonstrated, the federal government can be convinced to implement tax measures which follow this example. We must remember that the real competitive niche to be filled is unique to Vancouver, an opportunity afforded by its location on the west coast of North America. Either we can be Canada's and North America's financial gateway to the Pacific Rim, or we can allow Los Angeles, San Francisco or Seattle to take the initiative.

Mr. Speaker, I move first reading of Bill 49, the International Financial Business (Tax Refund) Act.

Bill 49 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

INSURANCE AMENDMENT ACT, 1987

Hon. Mr. Couvelier presented a message from His Honour the Lieutenant-Governor: a bill intituled Insurance Amendment Act, 1987.

HON. MR. COUVELIER: Mr. Speaker, this bill sets in place an administrative incorporation procedure for provincial insurance companies. The present Insurance Act does not provide for the incorporation of insurance companies. If an insurer wished to incorporate in British Columbia, it had to do so through a special act of the Legislature. That procedure has been an impediment to the establishment of insurance companies in the province.

Bill 48 is tangible evidence that the government is meeting its commitment to promote growth in the financial sector of the province by encouraging the development of insurance companies in British Columbia.

Mr. Speaker, this bill is not intended to be debated further at this session. It is, as with the other two bills, intended to alert the financial community of our desire to make some changes in this respect, and we invite their comments and participation, as we do all British Columbians who have an interest in the subject. I therefore move that this bill be read a first time.

Bill 48 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

HON. S. HAGEN: Mr. Speaker, I ask leave to make an introduction.

Leave granted.

HON. S. HAGEN: Mr. Speaker, in the precincts today we have with us a gentleman who has worked very hard to ensure that the University of British Columbia remains the premier university in this country. We have with us today the chairman of the board of governors at UBC, Mr. Bill Sauder. I'd ask you to please make him welcome.

Hon. Mr. Strachan tabled a report titled: "Annual Report to the Governments of the United States and Canada from the Columbia River Treaty Permanent Engineering Board."

Orders of the Day

HON. MR. STRACHAN: At the outset, Mr. Speaker, I'd ask leave to call report on Bill 55.

Leave granted.

MISCELLANEOUS STATUTES
AMENDMENT ACT (No. 3), 1987

Bill 55 read a third time and passed.

HON. MR. STRACHAN: Mr. Speaker, I call committee on Bill 53.

BRITISH COLUMBIA ENTERPRISE CORPORATION
FINANCIAL RESTRUCTURING ACT

The House in committee on Bill 53; Mr. Pelton in the chair.

section 1 approved.

On section 2.

MR. STUPICH: Dealing first with section 2(a), I raised these questions in second reading, and both the minister and I agreed that it would be better to deal with them in committee.

In 2(a) all of the property and assets of the Development Corporation and all rights are to be vested in the new company. My question was: at what value? I know I can't talk about section 4 right now, but section 4 says the value will be established by cabinet. I'm wondering whether we know in section 2(a), or do we have to wait until we get to section 4 to discuss the figure at which the assets will be transferred?

While I'm asking that question, may I just point out that the total liabilities of the corporation will exceed the total assets, I guess — because I've got nothing else to go on other than a guess — by something like $100 million. There is a deficit there, a shortfall.

HON. MR. COUVELIER: Mr. Chairman, the revised balance sheet that follows the folding-in to the B.C. Enterprise Corporation of BCDC and B.C. Place will show assets

[ Page 2597 ]

of $518.8 million and liabilities of $220.4 million and equity of $298.4 million, for a balancing total of $518.8 million.

MR. CHAIRMAN: Just before we proceed, if it will facilitate the debate on this bill, the Chair has no objections to the sections being dealt with simultaneously.

MR. STUPICH: The minister, I think, has an advantage over the opposition in that he is giving us figures now that presumably are based on something more up to date than March 31, 1986. We have figures for BCBC, but we don't have anything for BCDC after March 31, 1986.

To get a figure of almost $300 million equity when the best information that we have is that there is currently a deficit of something over $110 million — and that's a guess, I admit — means that somewhere or other some debt of over $400 million has been written off. In other words, the Crown is suffering a loss of something like $400 million as a result of this transaction. I'm not complaining about that; I just want to know if that's really the way it is.

HON. MR. COUVELIER: I'm not quite sure I follow the question. You're right, these figures are as at March 31, 1987 — not 1986. The equity of BCDC prior to the folding-in is at a deficit or a loss position of $102.6 million, if that helps the hon. member.

MR. STUPICH: A loss position of $102.6 million — as I recall, B.C. Place has something like close to $9 million, so that would mean, then, that we are talking about a combined deficit of $112 million. The minister said that the pro forma balance sheet, if I can use that term, shows a net equity of $298 million. We are talking about a difference of $415 million, roughly, that has disappeared somewhere.

I think the short answer is that the Crown has accepted that loss and is taking it into its own accounts, and the deficit for the year 1987-88 will be $400 million plus whatever the operating deficit is for this year. The minister predicted in his budget speech that it would be $825 million, I think. So that means that now we're looking at a deficit for this year — so far; this may not be the end of it — of in excess of $1.2 billion.

I'm talking about figures to give the minister a chance to consult and catch up — because there isn't supposed to be a silence. I'm sorry, does the minister understand my question now? We have deficits in two corporations, we add them together, we produce a now corporation with a net equity. There is a shortfall of $400 million.

HON. MR. COUVELIER: The member is right; I'm having some difficulty listening to four speakers simultaneously.

The B.C. Place equity prior to the fold-in is at $162 million — positive. The net effect to arrive at the equity of $298.4 million arises from the consequence of the restructuring of the $396 million that was spoken of yesterday, and breaking that up into equity and write-off.

MR. STUPICH: Mr. Chairman, now I have the answer to my question. We have a net equity because the Crown is taking some $205 million worth of capital in BCDC — that's where it sits, or B.C. Place, and it's been transferred to the Crown — and we're saying that that investment in B.C. Place originally is worth $205 million. That's an investment that has produced a loss in every year since the company has operated. We're still saying that in spite of this history of losses, B.C. Place is still worth $205 million to the Crown. We're not going to write down that figure. In all honesty we should write it off in total and take the loss of $205 million, but apparently from what the minister is telling me, we're not going to allow for any depreciation in that figure at all. We're saying that B.C. Place is still worth $205 million to us, even though it has an unbroken history of operating losses.

HON. MR. COUVELIER: the hon. member will remember that yesterday I mentioned we were incorporating in B.C. Pavilion the public facilities — the stadium and the convention centre. So that will result in a cleaning up of the accounts and a separation so operations can be judged more accurately in the future.

The net effect of this, of course, is to put the assets into B.C. Enterprise Corporation, using proper accounting practices and procedures, as described yesterday, at valuations which in our judgment will allow them to be developed and/or sold so that there is no loss incurred. As was expressed yesterday, it is true that we are taking out of the system some sums of money to make sure that this fiscal period, for which this government feels exclusively responsible, starts on a clear, understandable basis, so that the past occurrences brought about by economic difficulties of that time and decisions by players at that time can be isolated from the current operations. I submit that what we are doing here — and I hope with this questioning that you might come to the same conclusion — is cleaning up these records, so that for once and for all there can be a proper understanding of where we start the new look of this new government with its new, first-time budget.

MR. STUPICH: Mr. Chairman, I think that when I asked this question I said to the minister that I wasn't complaining about what was happening at all; I just wanted to understand it. It would appear that the minister is ready to agree with me right now that what we're admitting is that these experiments, these games we've been playing, have cost us in excess of $400 million, and we're saying let's recognize it now, start out with a clean slate and write off that $405 million this year.

[10:30]

I think the minister is not prepared to write off the $205 million of shares in B.C. Place. I would recommend that before the end of the year he do consider that and write that off as well, because certainly they're never going to be worth anything to the Crown.

It's not a case of complaining. I just want to understand it. We have taken a bath, as the first member for Vancouver East (Mr. Williams) just said, in excess of $400 million. We're recognizing it now and accepting it and starting the new corporation with a clean slate.

HON. MR. COUVELIER: One final comment, Mr. Chairman, just to make absolutely certain that there's no confusion here. The effect of these adjustments we've described will be reflected in the 1986-87 operating year. I trust that that's understood.

MR. STUPICH: I think my first question was whether, in placing a value on these assets that are being transferred I will leave that to section 4, and ask him how he's going to value them.

[ Page 2598 ]

MR. WILLIAMS: So all of this laundering is taking place in the 1986-87 operating year. Right? Because it's retroactive. So this is the final action in the laundry in terms of dealing with this mountain of debt.

HON. MR. COUVELIER: I take offence at the word "laundering." What we're doing here, as I said earlier, is merely making sure that from now on all interested people will be able to understand the dealings of the government. I suspect the hon. members would agree that by this reorganization it will be possible that we won't have to go through this kind of confusing exchange next year.

MR. WILLIAMS: This is the most expensive laundromat in British Columbia's history that we've got before us right now. There is simply no doubt about it. This is laundering all the debt of those profligate years of Social Credit. It's not Monday; it's not washday. But it's the biggest bath we've ever seen.

I guess what you're telling us is that you just don't want to deposit that annual report of these outfits. You want the laundry to work so you don't ever have to deposit the real annual reports for B.C. Place or the B.C. Development Corporation. The laundry is here. The numbers will change; the offloading of the debt will take place.

MR. G. HANSON: Arctic Power.

MR. WILLIAMS: Yes, we'll get Mr. Clean out of this.

Really, all the gobbledegook.... It's really tough. We somehow don't seem to train our citizens in these names and arcane words about equity and debt and so on. It's pretty simple what's been going on. The eyes glaze when we get into the millions and close to the billions, Madam Minister of Economic Development. It's a tremendous advantage for an incompetent government; it really is.

They can understand the expensive meals, and that offends them. That was only a million. They understand that, and it offends them. But when we get into these hundreds of millions, the eyes glaze over, and it's beyond the ken of the average citizen. Lucky for you that it is, because there has indeed been profligate, wasteful spending on an incredible scale. What you're really saying here is: "We don't want you to see the real books. We're going to make it retroactive because we don't want you to see the details." I have to commend the minister for some of the information he's provided us, and that has been helpful. Nevertheless, one really wonders.

Will the minister deposit with the House what would have been the annual report of BCDC and what would have been the annual report of B.C. Place prior to this action in this statute?

HON. MR. COUVELIER: That was a rambling comment made by the hon. member. The last comment was: would we introduce annual reports, as if these changes had not occurred? I suppose the answer is no, we would not do that. What would be the purpose? We would wind up thoroughly confusing everybody. Admittedly, some who are less mentally agile and less competent might have glazed eyes in dealing with this subject, but those of us who are alert and managing the public's business are on the balls of our feet and able to deal with these problems in a way that is not confusing and is quite straightforward.

MR. HARCOURT: I have followed this debate with some amusement because we have this tortuous process to pay for a stadium erected on some of the most valuable land in the world, and here the minister is sheepishly putting forward this convoluted, awkward, indefensible piece of financial — I won't use the word chicanery because it's not really that; it's just the most bizarre, obtuse, difficult way to carry out the public's business.

I hate to give you your lines, Mr. Minister, because that's not my function or duty — you've got staff people to do that — but you could have said that we've just bought for $60 million some of the most valuable land in the world, which is what I congratulated the Premier for in 1980-81 when we purchased the land on the north side of False Creek. For $60 million the land was purchased. It was a good purchase. It ranked up there with Manhattan Island — $9 a square foot. Here we have all this land which is very, very valuable, and we build a stadium where it should have been built for $126 million.

You could have then covered the stadium, as we did, financially the same way. The stadium was built on time, under budget — with union labour, by the way; a very skilful union-labour contractor. You could have said this is a wonderful accomplishment. There was $25 million put aside for the stadium, another $25 million promised on top of that, $10 million worth of land, and then you could use it as a public facility, $25 million a year, and had it paid for as an asset for British Columbia. And everybody would be proud.

Then you'd have on top of that 165 acres of land that could be redeveloped over a 15- or 20-year period, at a cost of $9 per square foot that the people of British Columbia had paid. As a matter of fact, the federal government threw in five pieces of land, or two of the five pieces of land. You could then have said: now look, we've got land that we can sell on the open market, or lease, for $300 to $400 a square foot for the expensive commercial buildings, or for $30 to $100 a square foot for housing. It was a good deal.

To take that sound investment by the people of British Columbia — some people disagreed but I didn't; I thought it was a good deal for British Columbia — and to turn it into this lump of awkward, sheepish, convoluted accounting is astounding. That the Social Credit government, over the last six or seven years, could turn it from a triumph into an embarrassment....

MR. WILLIAMS: Funny-money boys.

MR. HARCOURT: Mr. Minister, it may have been your predecessors; they're all Social Credit. Most of the people who are in the cabinet now were in that cabinet that took this potential triumph and turned it into this embarrassment here. I find it really quite unusual, as somebody who comes from a business background and has run a large organization, to see the process we've gone through here over the last few days — to take what should have been a political triumph for you and turn it into an embarrassment. Look at how many of your members are away because they don't want to sit through this.

MR. WILLIAMS: They're ashamed.

MR. HARCOURT: They are ashamed, and they should be. You took some good ideas and turned them into a political embarrassment. That takes a lot of ineptitude to do.

[ Page 2599 ]

HON. MR. COUVELIER: I'm very pleased to have the hon. Leader of the Opposition make one of his rare attendances in the House for a debate. He seems to be concentrating on the question of the stadium, and I'm very pleased that he acknowledges that the construction of that stadium was a Social Credit initiative that was highly successful and has very desirable social consequences.

However, he totally misses the point, and had he attended the discussions earlier he would understand that the stadium has been isolated into a separate corporation. We are proud of the stadium and we intend to continue it under a corporate structure called B.C. Pavilion Corp. The issue here regarding the write-offs and having to do with the write-downs relates more to the operations of BCDC, and basically is attributable to industrial land holdings which, on a falling real estate market, have to be recognized, using conservative accounting principles, which of course this government is always pleased to do.

HON. MRS. McCARTHY: I really didn't want the remarks of the Leader of the Opposition to go by because, as my colleague the Minister of Finance has said, he has completely missed the point. In this last dissertation — one of the few from the Leader of the Opposition — we seem to have missed the point that in the two corporations being discussed and in the financial restructuring which this bill addresses, there was something other than the stadium in the whole process in this last four years.

In this last four years, in the very city which both the Leader of the Opposition and I represent, there were thousands of jobs created. There were some 14,000 jobs created on the B.C. Place lands and over 48,000 jobs created in the presentation of Expo 86 on those lands. He seems to think the construction and the jobs were all wasted.

The assets left for the city of Vancouver — of which the Leader of the Opposition was the mayor — were not just a credit to this government. They were also a credit to the largest city in British Columbia. There were other assets also. Let's get away from the city of Vancouver.

We have turned the Whistler lands into an international resort, an internationally renowned ski resort; yet another asset for British Columbia. B.C. Development Corporation, which everyone can get very excited about now and the hon. first member for Vancouver East (Mr. Williams) can get all upset about the losses.... I've got to tell you, Mr. Chairman, if it hadn't been for that corporation over those very difficult world recession days...

MR. WILLIAMS: Are you peddling that line again? Come on!

HON. MRS. McCARTHY: ...many hundreds of people would not have retained their jobs, and their families wouldn't have had a paycheque. When we talk about financial restructuring here, let's talk about some of the assets that have been of great asset to the city of Vancouver such as great job creation; those assets are still left.

What we see in the restructuring is addressing the difficulties of a past administration and a past financing structure which met a time in our economic life that it was necessary to meet — unquestionably.

In taking over that responsibility, I wanted to be sure that it was restructured so that we start off without all the encumbrances, and we are able to take that land asset we have and ask the private sector to do what they do best: to come to the table and develop that land to the advantage of the taxpayers of this province and not have the taxpayers continually out of pocket by using taxpayers' funds for development purposes which, in this transaction alone and in the redevelopment and reorganization of these two corporations, in this year alone will save about $150 million.

When we talk about restructuring the financial situation, let's put the past in perspective — in job creation and in the assets that are left to have further job creation, but that job creation being done by the private sector in conjunction with the city of Vancouver, the Coquitlam community, the Victoria community and putting the private sector dollars up for development.

[10:45]

MR. HARCOURT: I want to take the words out of my mouth that the minister placed there. I didn't say that these were wasted assets at all. I have said from the beginning that they are valuable assets for the people of British Columbia. I'm just saying: why don't you treat them that way? Say what you just said throughout all this debate, instead of this basically shovelling back onto Bill Bennett all the evils of the last ten years of Social Credit government. That's what you're doing. Most of you were there; you were part of those decisions.

Instead of trying to be so embarrassed in the way you're going about this, you should have just financed it as an asset. That's what I said earlier. It's a $126 million asset that had to be built. Empire Stadium was falling apart, and we needed a stadium in British Columbia. Say that. Finance it. There was $50 million to cover most of the $126 million cost. Then invest another $25 million for three years — paid for — as an ongoing asset for the people of British Columbia. Then you would free up the rest of the land from all those charges. The plan all the way along has been to recycle the land after Expo, for the private sector to come in and do what you just talked about, Madam Minister. There's no disagreement on that. It's just that the way you're going about it is one of the most bizarre and unusual processes I've ever seen — that's all I'm saying.

I'm glad to see there's a continuation of what the New Democrat government started with the opening up of Whistler in the 1970s to become a major asset for the people of British Columbia. As somebody who has left many broken skis on that slope up there, I agree with you: it is a very fine asset, and it is now becoming difficult for us domestic skiers to get on the lifts, because it is very popular. I'm saying why don't you just treat it that way — they are assets for the people of British Columbia that are paying dividends — instead of going through all this gobbledegook?

The private sector is going to be utilizing the lands that the hon. member for Vancouver East and I helped put together when we were on the Dunhill board of directors. Again, we should just say that. Those lands were acquired to help the development efforts of the lower mainland, Victoria and other areas. The private sector was always expected to come in and do that. That's what you could have said here, instead of going through this tortuous process to dump all the bad debts and mistakes on the past Social Credit administration — to freshen up the very stale fresh start that's underway right now.

[ Page 2600 ]

MR. WILLIAMS: The Minister of Economic Development says: "Well, you know, it was the difficulties of the past administration. It wasn't me; I'm part of the great, new fresh start." Gee, she has been here since she left parks board many decades ago. It doesn't wash. We're doing the laundry, but that one doesn't wash. "It's the difficult past times. It was all that terrible international recession. It had nothing to do with me; it had nothing to do with Bill Bennett and nothing to do with my colleagues. It's that terrible international recession. The international recession is the reason that BCDC was mismanaged; it's the reason that B.C. Place was mismanaged." Come on, it doesn't wash at all.

The Minister of Finance tells us he isn't going to give us the real annual reports for BCDC and B.C. Place, because he has this retroactive statute that's going to launder all those numbers. Well, maybe you can give it to us verbally, then, Mr. Minister of Finance. What were the losses for BCDC in the last fiscal year to the end of March, prior to bringing in this legislation? The losses for the year ending March '86 were some $87.4 million. The year before, they were around $60 million in losses. So it's very clear that there has been an accelerating, terrible loss situation in BCDC. The question is: how much were the losses in this last fiscal year that we're handling here? It has clearly been very substantial through the years. Given the asset base of the corporation, they are extraordinary losses. No other lending institution, even in the public sector, has those kinds of losses that I'm aware of. It's an extraordinary level of mismanagement. It's an extraordinary level of bad judgment in terms of those lending activities.

There are other things on those books — or responsibilities — for BCDC, like the Louisiana-Pacific Corp. and lending some $25 million to that American giant for a small chipboard plant in Dawson Creek. It was to be interest-free money — $25 million for three years — which would be another new $10 million loss or liability. I guess that's not on the books of the corporation. That's something the government is going to have to directly funnel to the corporation. But maybe we have the loss picture for the year ending the end of March.

HON. MR. COUVELIER: Mr. Chairman, the unaudited calculation — and bear in mind that this has got to be approximate — is about $80 million for last year.

MR. WILLIAMS: I thank the minister for the figures, but this is extraordinary: $87 million in losses for the previous fiscal year, $60 million in losses the year before that, and then $80 million....

Interjection.

MR. WILLIAMS: I'm sorry — that was a cumulative loss. But this is a new $80 million.

MR. HEWITT: Why don't you read the financial statements for '85 and '86?

MR. WILLIAMS: Lord, this is a new $80 million.

Interjection.

MR. WILLIAMS: No, it's a new $80 million loss.

AN HON. MEMBER: Bad research.

MR. WILLIAMS: The minister brought the facts just now — an $80 million loss under the Minister of Economic Development, the member from Shaughnessy.

Interjection.

MR. WILLIAMS: Only seven months. Okay, it was $80 million in the year, so the minister wants to correct this now, and that's reasonable. I accept the minister's point. She was only responsible for seven-twelfths of that loss.

Interjection.

MR. WILLIAMS: No, this is up to March of this year. The Minister of Finance just gave us the figures up to March. This was the Minister of Economic Development in March.

Interjection.

MR. WILLIAMS: You were the minister in March, you were the minister in April, you were the minister in February, you were the minister in January, you were the minister in December. You were the minister responsible for most of these recent losses in this corporation. It's part of the overall inheritance, certainly, but this is more losses being dealt with here. Those are extraordinary losses.

The minister was kind enough to provide the opposition with statements regarding the loans of BCDC, or sort of the basket of loans, and notes that there was provision for losses on loans over $1 million of $41 million plus, and for losses on loans under $1 million of $13 million plus, for a total of $53 million in this corporation. Then there's an estimated net value of the loan portfolio of $129 million. Those are significant provisions for losses, and I guess the question that must be asked is: is the minister satisfied, and are his auditors satisfied, about the provisions for losses with respect to those loans in BCDC? That is, has there been an intensive review with respect to the security of those loans, as would be normal in a thorough auditing process of a lending institution? Are they satisfied that there are no likely surprises beyond those numbers?

MR. CHAIRMAN: The Chair would appreciate if the comments could be made through the Chair, and now recognizes the Minister of Finance.

HON. MR. COUVELIER: Mr. Chairman, the answer is yes.

MR. STUPICH: Mr. Chairman, we have the accumulated deficit of BCDC — subject to auditing, I appreciate — of $167.4 million at March '87. What was the accumulated deficit of B.C. Place at that time? The latest figures I have are something in the neighbourhood of $8 million.

HON. MR. COUVELIER: Approximately $85.3 million, although by virtue of surplus contributions, there still was a positive equity balance.

MR. STUPICH: I think that's the figure I was trying to arrive at earlier. The deficit is larger for BCDC than I had anticipated. So we've got accumulative deficits of roughly $253 million, and we end up with a corporation with a net equity of $298 million. This means that between capital

[ Page 2601 ]

which the province has purchased and other things that have happened, there is some $550 million of government money in this new corporation. To take two corporations that have accumulated deficits of $252.7 million and end up with one with a net equity of $298 million: that's a total of $551 million that the Crown is contributing to this new corporation. I said earlier that it was $420 million; now we're up to $551 million. That's not a question. It's just adding up the figures. We realize now that the Crown has taken a bath at $551 million rather than $420 million.

My question is on section 2(l)(b). I'm a little puzzled by the wording: "all of the obligations and liabilities of the development corporation in relation to the property, assets and rights transferred under paragraph (a)...." Does the corporation have obligations and liabilities that are not related to the assets being transferred? I can't imagine what they would be. I just wonder why it's worded that way.

HON. MR. COUVELIER: There are two points there that I would like to come back to. First, the hon. member does not recognize in his recap — his totalling of some $500 million — the fact that there was a contributed surplus on the books. So the numbers do not reach those magnitudes. In other words, you're mixing apples and oranges there, I think.

Secondly, dealing with the wording, to the best of our knowledge, those words don't have any significance other than for the members of the legal fraternity who like to cover off all eventualities. We don't attach any numbers to them.

[11:00]

MR. STUPICH: As I said, I can't imagine what they would be, other than the ones that are related.

I think I'm not mixing apples with oranges when I get out to $551 million. I did say the debt, and also the share capital owned by the government in this new corporation. While we have an account receivable, we also have capital invested, and I submit that the total of $551 million includes the capital investment. So we're not mixing things up; it's just that we're talking about different things. The Crown is still investing $551 million in this new corporation, by capital or by loan.

MR. WILLIAMS: There's another area around BCDC: guarantees on other loans. That's $1.6 billion in guarantees of this corporation. Has there similarly been audits with respect to those guarantees? Do the figures you provided us in terms of provision for losses on loans deal with that as well?

HON. MR. COUVELIER: The question of the guarantees is intended as a balance sheet footnote item only. It is not believed to have any significance in numerical terms. But as I say, the auditors, in an abundance of caution, and following conservative accounting principles, require these kind of comments to be made. This section merely recognizes the feeling of the private sector auditors of the corporation that those sorts of assurances should be made — as a footnote.

MR. WILLIAMS: Pretty big foot, pretty big note: $1.6 billion. And we're the guarantors. If any average citizen was a guarantor on a loan, they would consider it as a pretty significant potential liability.

HON. MR. COUVELIER: A point of clarification, Mr. Chairman. The hon. member may be assuming that three zeroes are missing there. The sum is $1.6 million, not $1.6 billion.

MR. WILLIAMS: The Louisiana-Pacific exercise: is that a liability of the corporation or has that been assumed directly by government?

HON. MR. COUVELIER: It is shown, and it is on that listing that we provided the member with yesterday.

MR. WILLIAMS: Yes, I appreciate that, Mr. Chairman. The understanding had been that the cost of that interest-free loan was to be met by government funding directly to the corporation. That's simply being accommodated then in this whole exercise?

[Mrs. Gran in the chair.]

HON. MR. COUVELIER: That's correct, Madam Chairman.

Sections 1 and 2 approved.

On section 3.

MR. STUPICH: Section 3 transfers all the indebtedness of the Buildings Corporation, including any indebtedness incurred between now and the end of this calendar year?

HON. MR. COUVELIER: No, Madam Chairman, it only transfers the $205 million investment in B.C. Place.

MR. WILLIAMS: To clarify, Madam Chairman, the potential is there, though, if the Crown were to assume that. If there were to be a process of privatization, for example, that opportunity is there. Is that correct?

HON. MR. COUVELIER: Yes.

MR. WILLIAMS: So it's quite possible after this exercise by the Minister of Intergovernmental Relations (Hon. Mr. Rogers) that this could be one of the agencies of government — and this is a new Social Credit Crown corporation, not one in history or from 1972-75 — that could potentially be privatized without any of the complications of their current debt level?

HON. MR. COUVELIER: Madam Chairman, the bill does contain a sunset clause. The member might like to recognize that.

Section 3 approved.

On section 4.

MR. STUPICH: Section 4(a) gives the Lieutenant-Governor-in-Council the right to establish the value of property, assets and rights for the purpose of transferring these to B.C. Enterprise Corporation. What guidelines is the cabinet going to use in establishing the value of property assets and rights? There's nothing here. It's wide open; it would seem they can do anything they want.

[ Page 2602 ]

HON. MR. COUVELIER: The answer, Madam Chairman, would be the audited values using appropriate accounting principles as described in yesterday's discussions.

MR. STUPICH: Madam Chair, appropriate accounting values or practices don't plan the circumstance, because we're, in effect, selling assets from one company to another. At that time, it's an excellent opportunity for the Crown to revalue the assets, perhaps on the basis of appraisals, or whatever basis; I don't know. If it's the intention of the minister to transfer them at book value — and I think that's what he meant — why doesn't the bill say so, instead of saying that the cabinet has the authority to do whatever it wants?

I know it's difficult; he's trying to listen to his adviser and listen to me at the same time, and he keeps looking from one to the other.

My problem is that when we're setting up, we aren't transferring the corporation as an entity. If we were, it would be appropriate accounting practices to retain the same values. We're selling the assets and we're selling the liabilities to a new corporation. We can sell them at what they're worth, either by appraisal or by the history of revenues — which are not revenues; they're all losses; the assets are worth very little on that basis. If it's to be done at book value or lower book value or market, then why don't we say so, instead of saying it's up to the cabinet to do whatever they want?

HON. MR. COUVELIER: I suppose the hon. member might like to take issue with the legislation draftsmen, but the fact of the matter is and I'm saying now that the principles being followed here in the restructuring are that land and projects are recorded at the lesser of the current market value or cost. Loans are recorded at principal outstanding less provision for losses. Those losses have been vetted by a private sector accounting firm to verify their authenticity and relativity. Public facilities are recorded at cost. As I say, I don't think there's any suggestion here that there's any manipulation of the dollars involved. There rather is an honest attempt to bring forward defensible figures based on sound accounting principles.

MR. STUPICH: I accept what the minister has said, and it's now down in Hansard and related to this section, and we can look at it again some other day if need arises.

Section 4(b): "specify indebtedness of the buildings corporation for the purpose of section 3(l)...." The minister said earlier that the amount of the debt was going to be $205 million. I think he left the door open to the possibility of including further debts that could be allocated to this up to December 31, 1987 — I'm not sure. How is the minister or how is cabinet going to do this?

Madam Chair, I asked a question actually which was related to two separate subsections, and the section that I'm dealing with, 4(b), specifying indebtedness of the corporation for the purposes of section 3(l), is where the minister used the figure of $205 million. I just wanted to ask whether all 4(b) means is $205 million. Is that the answer?

HON. MR. COUVELIER: Yes, the figures previously dealt with are: for section 3(l), $62 million; for 3(2), $143 million. The cumulative total is $205 million.

MR. STUPICH: We are just left with 4(c): "specify other indebtedness of the buildings corporation for the purpose of 3(2)." That figure may not be known yet, and if that's the case, so be it. If the minister just tells me how he or cabinet is going to arrive at that figure for 4(c).... That may be the $62 million you mentioned.

HON. MR. COUVELIER: The figure applicable to that subsection would be $143 million, which is the amount which is not assignable.

Sections 4 to 7 inclusive approved.

Title approved.

HON. MR. COUVELIER: Madam Chairman, I move that the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Pelton in the chair.

Bill 53, British Columbia Enterprise Corporation Financial Restructuring Act, reported complete without amendments, read a third time and passed.

HON. MR. STRACHAN: Committee of Supply, Mr. Speaker.

The House in Committee of Supply; Mrs. Gran in the chair.

[11:15]

ESTIMATES: MINISTRY OF
ECONOMIC DEVELOPMENT

On vote 17: minister's office, $269,370.

HON. MRS. McCARTHY: First of all, I would like to say what a privilege it is for me to be presenting the estimates for the Ministry of Economic Development. I have with me my deputy minister, Mr. Stan Dubas, and also Brian Dolsen from our ministry, and I can tell you that in the short time that I've had the ministry responsibility I've had very good cooperation and excellent teamwork from this ministry. I know that that will continue.

As I will detail, my ministry is at the forefront of some of our government's newest and most exciting projects, programs that reiterate our new government's positive and successful attitude. The development and expansion of our economic base in British Columbia is the number one priority of this government.

May I remind members that the advocacy of the free enterprise system was the main plank of our election platform last fall and that British Columbians endorsed that point of view. The majority of British Columbia voters supported the outlook that the best route to job creation, prosperity and long-term economic strength is through government support of a viable and enterprising private business sector, rather than a dependency on government agencies to do absolutely everything.

Much of the thrust of our policies and programs is directed towards freeing the entrepreneurial spirit in our

[ Page 2603 ]

province, encouraging new business, assisting new investment and diversifying our industries into production of new products and export goods for world markets, and these are the building blocks for the future and of our new economy.

One of those building blocks is the Industrial Relations Reform Act, which my colleague the hon. Minister of Labour and Consumer Services (Hon. L. Hanson) introduced this spring. I mention this topic only to make the point that a stable and predictable climate of labour relations is an essential ingredient to creating a favourable environment for foreign investment.

British Columbia as a trading province needs the confidence of its offshore customers and investors. The reform of our labour legislation will, in the long run, improve the chances of foreign investment here. The new law will ensure that protracted disputes do not cause irreparable harm to the economy.

By doing so, it promotes the public good in this province — the greatest good for the greatest number. Sound management, employee relations and a stable labour climate attract foreign business interests, and then all of British Columbia benefits, including those who condemn the measure we have taken.

My ministry's role in this strategy is to be a partner, to be a catalyst. We do this by helping create a business climate that encourages growth and fosters new and innovative ideas and technology, and in essence, freeing enterprise. We're making it possible for innovative British Columbians to put their ideas to work and to follow the example that was given in 1986 when we invited the world, the world came and British Columbians understood that there was a new attitude and a new way in which to do business in British Columbia, and that was with a positive attitude, not the negativism that is emanating from the giggling member for Vancouver East. We believe that economic growth flows naturally from allowing the private sector to do what it is best equipped to do: harness venture capital and ideas, and let the market determine success.

I see my job as Minister of Economic Development as marketing and promoting around the world the goods and services that British Columbia produces. It is the private sector's job to build and to produce, so that the resulting demand will be satisfied. Madam Chairman, that way we all will win; that way we are market-driven, with our success based on our ability to compete with world producers and exporters. Those of us on this side of the House do not underestimate the ability of British Columbia firms to take on the world and win.

Today I have the opportunity to discuss a number of initiatives we have taken to achieve these goals, and to tell you about the exciting developments that await us in the future. Speaking of the years ahead, let me just preface my remarks with one thought, which underlines just how important the next few years are going to be. This fall when our British Columbia children enter kindergarten, their parents will look forward to their graduation from high school in the year 2000. That is how close we are to the twenty-first century: just 13 very short years. That's how little time we have to diversify our economy, to create thousands of new jobs for our children and grandchildren, and to attract investment to British Columbia which will go elsewhere unless we can convince the international marketplace that there is a British Columbia alternative.

I think it's important to interject a couple of statistics here. Madam Chairman, as all members know, we have been talking about a diversified economy for many years, and for the most part people still think of us — and to a degree British Columbians think of themselves — as loggers, miners or fishermen. Today let me give you some idea of where our economy is headed and where we will be by the time that British Columbia child graduates 13 years from now, in the year 2000.

The fastest-growing sectors of our economy are not wood, paper or even mining. These will continue to be the backbone of our economy, but in terms of growth they are surpassed by many of the service, manufacturing and knowledge industries: aquaculture, growing by 59 percent; subsea industries and marine technology, growing by 50 percent; apparel, 35 percent; electronics and computer software, 26 percent; plastics, 19 percent.

Just to give you some idea of scale, I recently joined the mayor of Toronto in opening the third annual Canadian Festival of Fashion in Toronto. We had several British Columbia companies there, all of them as talented, if not more so, than any of Canada's leading firms. That one industry, the B.C. apparel industry, accounts for 4,000 jobs and $250 million in goods and services, and is indicative of the various nontraditional sectors of our economy that are growing by much more than mere leaps and bounds.

Most British Columbians don't even know we have an apparel industry or a growing electronics and software sector, or that when it comes to subsea technology, we are the world leaders. I look forward to changing that perception. I look forward to letting British Columbians know just how far we've come, and also how much further we have to go in order to say with all confidence that we truly are a diversified economy.

I have some recent evidence that this government, through our ministry and its industrial development agreements with the federal government, is succeeding in diversifying British Columbia's economy. I'll give you an example, Madam Chairman. In Grand Forks, in the Boundary-Similkameen riding, a project has been started with our help which meets all of our prime objectives in one stroke. It creates jobs — 100 permanent new long-term jobs — and it protects nearly 40 more. It introduces long-term investment into British Columbia from a major Australian resource company. It achieves technology transfer into British Columbia of a manufacturing process which is new to the province. It injects $11 million into the local economy for construction and fabrication of new facilities, and it results in production of a new line of commercial building construction products, which are to be exported to the United States from the border town of Grand Forks.

The project is the Bradford Enercon expansion from commercial and industrial construction into the manufacture of insulation products. The project is a result of a joint venture between CSR of Sydney, Australia, and Pacific Enercon, which operates an existing plant at Grand Forks. The project was recently awarded a $6.5 million loan under the Canada-British Columbia industrial development subsidiary agreement, and at a recent press conference, the Australians acknowledged that, without our support, they may well have made their investment elsewhere. The Bradford insulation division of CSR Ltd. holds half the Australian insulation market and has been manufacturing and distributing these products for more than 50 years.

[ Page 2604 ]

Using the latest technology developed in Australia and Europe, the expanded Grand Forks plant will use copper slag residue to produce high-value insulation products for Canadian and international markets. The bottom line is new jobs for British Columbia in a area which has lately felt the effects of changes in demand for forest products. The project gives added life to that region and assists us in becoming more diversified as a trading province.

While government helps to build a favourable climate in which to do business, we do rely on the private sector to apply its unique abilities to plan and implement for the future. Our goal as government is to develop British Columbia as Canada's front door to the important Asia-Pacific region. Our strategy is designed to build on our natural advantages, our location on the Pacific Rim, our proximity to the United States with its 260 million consumers, the Canada-United States free-trade agreement — which we hope will be completed by the year's end — and the fact that we are midway between the world's two other major markets: Europe and Asia.

We're going to continue to build on this crossroads concept, as well as the mature and efficient transportation network that goes with it. The advantage of our location on the world's trade routes is being realized by those who seek a good place to invest in the vast North American market of more than 250 million customers. For instance, a director of Toyota Motor Co. of Japan, Mr. Tadashi Onishi, was in Vancouver recently to preside over the announcement of Toyota's expansion of its automobile-wheel manufacturing plant in Delta. He remarked that one of the considerations in deciding to expand in British Columbia was the fact that our province is located on the Pacific Rim and yet is so close to the United States market, where all the increased production of the expanded plant will go.

Madam Chairman, the $26 million Toyota expansion project means about 65 additional permanent jobs at the plant, up from the 70 jobs they now provide. The plant has already generated export revenues to Canada of more than $16 million, and now its expansion will add to this success story.

Our involvement, interest and support made this possible with a $3 million loan from British Columbia and another $3 million loan from Canada, under the industrial development subsidiary agreement. These are loans, Madam Chairman.

Projects such as this — and there are more — also build on our skilled and educated workforce.

We also have the potential to develop new industrial sectors, such as electronics and communications, aviation and aerospace, plastics and value-added wood products. In the electronics sector, one of our strongest growth areas, we also recently awarded — with the federal administration — assistance to a Richmond company to make possible the manufacture of a component that will be a new product for British Columbia. Solar systems Industries Ltd. will diversify its existing solar energy operation by adding electrode deposited copper foil to its product line. The foil is used in printed circuit boards by the electronics industry, mainly in the United States. Thirty new jobs are being created in two years. More exports from British Columbia will take place, and construction and expansion activity, costing more than $5 million, will benefit the local economy. It's another example, Madam Chairman, of achievement of growth by innovation.

In the fields of tourism and visitor facilities, we're building on the natural beauty of our province and the exposure afforded us by Expo 86. Along with my colleague on the Cabinet Committee on Economic Development, the Minister of Tourism, we have a major project: the new Vancouver Trade and Convention Centre, which we opened two weeks ago tomorrow with 200 of the world's most influential convention buyers. To date, the Vancouver Trade and Convention Centre has booked some 118 events worth more than $150 million through to 1995.

Just to reinforce how quickly time passes, the Vancouver Trade and Convention Centre is working on a convention for the year 2000. Two weeks ago, because of the official opening of the centre, we tied down the pension benefit plans convention of some 14,000 people to come to British Columbia and to the trade and convention centre.

In this past week, one of our volunteer people, Mr. Paul Wong of the Lions International Club, was in Taiwan. We have a very good chance of getting 40,000 Lions International Club members into the trade and convention centre, in their convention which will be held a short five years from now. It will take almost five years just to prepare for that convention and 40,000 people, leaving dollars over at least five days and in extended post- and pre-convention trips for many more days, in British Columbia and British Columbia communities.

Each of these areas I have referred to are intended to provide a positive business environment, one that lets the private sector get on with the work for which it is not only well suited, but also well financed. Since almost every area of activity involves both federal and provincial jurisdiction, we're working in partnership with Ottawa to build on the new economy.

[11:30]

One such area is to develop British Columbia and particularly the lower mainland as Canada's gateway to the Asia Pacific region and the exciting growing market it represents. Let me just highlight some of the specific objectives of the Pacific Centre for Trade, Commerce and Travel agreement, which I cosigned late last year with my federal colleague the Hon. Pat Carney.

First let me say that Transport Minister John Crosbie's recent announcement that the federal government has decided to follow through on defederalization of airports is one British Columbia supports with enthusiasm. The creation of a new British Columbia airport authority will take a fresh approach to the Vancouver International Airport as Canada's Pacific gateway. This is not to trade one government ownership for another — not at all — but to make our international airport a regional economic generator with benefits for tourism, international business and value-added manufacturing, much like Schiphol Airport in Amsterdam, a major gateway to all of Europe. In addition, our airport authority will work to develop regional airport initiatives across this province to stimulate tourism and economic development.

At ground and water levels, the Fraser River ports, the Vancouver Harbour, the Roberts Banks Superport and its surrounding lands, the Tsawwassen ferry terminal, the Vancouver International Airport on Lulu Island, and of course our port in Prince Rupert, all form a major transportation complex under various jurisdictions serving many different functions.

[ Page 2605 ]

Our provincial government is planning to capitalize on this mature transportation system and to find developers and entrepreneurs to work with government to create new products, new industries and new jobs. The establishment of a manufacturing service and light industrial complex adjacent to the lower mainland ports is very important. We look around the world and see a tremendous growth in the development of manufacturing plants alongside major transportation centres. We not only have the land for such developments; we also have a growing list of small- and medium sized firms with expanding export potential. Through the provision of suitable industrial sites, the establishment of small industrial container sites and the future development of deep-sea container facilities, we can and will open new doors to new markets.

The third objective of the Pacific Centre agreement is the creation of an international financial centre. I was very pleased to see that my colleague the Minister of Finance (Hon. Mr. Couvelier), in giving his presentation of his bill earlier today, is giving time for the community to come forward with their ideas on the exposure bill that was tabled in the House today.

As you know, the provincial government and B.C.'s business community have been active for a long time in seeking ways to accelerate growth in the international financial sector and to build on the natural advantages of Vancouver as a commercial centre for western Canada and the Pacific Rim. When the regulatory and legislative conditions are in place, it is expected that there will be a significant growth in international financial transactions and other related activities, such as the International Commercial Arbitration Centre, the stock exchange reciprocity with overseas exchanges and specialization in admiralty and Asian law. These new international commercial services form an important structural component of the new economic strategy. In all of these areas, by honing our marketing and promotional skills, we'll be market-driven rather than facility-driven.

This thinking also extends to my ministry's presence at the community level throughout the province. In cities and towns throughout British Columbia we are partners in enterprise through our business development programs. The provincial budget presented by our Minister of Finance placed great emphasis on the government's presence within communities and economic development at the grassroots level.

Our challenges here are to deliver programs in a costeffective way, to encourage decentralization and privatization and to help small businesses lead the way. Self-reliance, creativity and the entrepreneurial spirit, at both the individual level and community level in partnership with local governments, are making our programs a success. Among these activities are advocacy on land use and zoning, where we help cut red tape and work with local government on behalf of business. My colleague the Minister of Municipal Affairs (Hon. Mrs. Johnston) assists in that very much. I should explain to the House, particularly to the members of the opposition, that it is a team effort. The Cabinet Committee on Economic Development and the newer deputies' committee on economic development work together to make sure that these plans are delivered to the people of our province in an administratively effective way.

Community projects such as Venture Inland, Initiatives Northwest and Better Buy Victoria are all regional promotional projects that are co-sponsored with the private sector.

Then there's the working with our economic development organizations, chambers of commerce and business associations to implement programs at the local level. We help promote educational seminars and conferences, and manuals to identify business opportunities, and have them implemented locally. The theme is educational, advocating self-help. We work with municipalities to help them prepare their promotional and marketing efforts. If a municipality attracts a big development, as Whistler did with plans to build a Canadian Pacific hotel, our ministry can take some credit for helping, along with the Minister of Tourism (Hon. Mr. Reid). With federal-provincial cooperation and marketing advice, we help to bring that about by providing that advice.

Another grassroots program we have is Community Organizations for Economic Development, or COED, in which the Ministry of Economic Development has signed partnerships with 133 of the province's 144 municipalities. Our primary objectives, of course, are job creation, investment and healthy local communities. Municipalities have traditionally relied on the provincial government to create local development, but we now find that the message from those municipalities is that municipalities themselves are better able to influence their own future, and we agree with that. They need to be proactive rather than reactive. They know that local regulations that impede the establishment or expansion of private sector firms have to be removed. We talked about that for a long time, and we are finally getting results in that regard.

More than 90 percent of British Columbia's economic growth occurs within municipal boundaries, and COED is an able vehicle for direct and aggressive economic action on the part of local government. Communities facing economic restructuring, particularly those outside the lower mainland, see COED and the advice received from my ministry's personnel as one of the most positive initiatives available to them.

In addition, Madam Chairman, contributions from my ministry for full-time economic development staff and special projects work to promote a proactive attitude in municipal governments. By providing specific funding to municipalities, we joint-venture with them to add local dollars and local manpower for local economic development. Even the federal government has recognized that community-based economic development initiatives are at the leading edge of economic recovery, and has, among other activities, introduced its communities futures program.

Without COED, this area of economic development would become the exclusive preserve of the federal government, and we feel that our program enhances theirs and theirs enhances ours. However, because of COED's simplicity and cost-effectiveness, other jurisdictions are studying it. The state of Washington has already copied it. It reinforces our government's commitment to local economic development, and it helps British Columbians and municipalities truly understand how their economy operates or how to cope with regions who need to rethink their local economic mix. Through education counselling and modest financial support, the COED program is costing only $1.5 million this financial year. Government is having a measurable impact at the community level in spite of the small investment.

Another way in which we are making an impact is through the application of our government's purchasing policies. Introduced in 1985, the purchasing policy uses the buying power of the province's public sector as a lever for

[ Page 2606 ]

economic growth. In addition to determining the price and quality of purchases, the policy focuses on the overall value given to B.C. Because of its provincewide impact and its effect on a broad spectrum of firms in the manufacturing and service sectors, the purchasing policy is a most effective tool for economic development throughout our province. The policy is being implemented at the community and the regional level, and it's being accomplished by enlisting the support of local governments, elected and appointed officials of municipalities and regional districts, of hospital boards and their staff, of school boards and college boards and their administrative people to help in carrying out the objective of the policy.

In the same way, with a view to British Columbia's economic development, the federal government is cooperating in identifying greater opportunities for British Columbia firms in the field of federal procurement. Not only are we vigorously seeking with our federal counterparts greater opportunities for British Columbia businesses to obtain contracts to supply federal government needs; we're also seeking through federal agencies more and larger contracts for British Columbia firms on the international level. An important part of the purchasing policy's overall strategy is to seek opportunities for substitution of British Columbia goods for ones now imported for use in our public sector. However, our purchasing policy does not seek to encourage this import substitution through the provision of subsidies or grants. British Columbia firms are expected to be competitive in price and quality with out-of-province and offshore firms in order to gain public sector business opportunities.

It is our view that no British Columbia firm should rely 100 percent on government contracts, and we encourage companies to pursue private markets for any items they supply to British Columbia's public sector. This goal of import substitution is being actively pursued by Purchasing Commission staff through an ongoing liaison process with government ministries, Crown corporations and other government bodies throughout the province and, indeed, with other agencies and organizations in B.C. which spend public money. We provide data to local businesses on imported products now in use in the public sector, and by this process succeed in greatly increasing awareness of the opportunities for using B.C. products. And we've been working directly with B.C. companies to achieve uniform standards in cost criteria for use when bidding for public sector business.

Madam Chairman, I suggest that it is time to reinforce this impact by increasing our presence with local service organizations and by taking an even greater informational role. To that extent we have already embarked on the business information role through the new British Columbia Enterprise Centre at the B.C. Pavilion complex in Vancouver. We opened the enterprise showcase on June 19, and it will serve as a centre for promotion of British Columbia products, investment and trade opportunities. It will provide a focus, along with the Plaza of Nations, for both business and entertainment events and programs.

My ministry has moved its Vancouver offices from Robson Square to the B.C. Pavilion, where it will be taking a more aggressive marketing position in our promotion of international trade and investment. The most innovative feature of the Enterprise Centre is the International Opportunities Network, the one-stop shopping centre for business information and the store-front for all business in all British Columbia.

I know, Madam Chairman, that my time is up for the introduction. There is so much more to talk about in economic development; however, I will look forward to presenting my other initiatives in economic development during the debate on my estimates. Many thanks.

[11:45]

MR. HARCOURT: The minister's example of Pacific Enercon in Grand Forks is indeed an example of where cooperation has worked. I was through that particular plant in my visits around the province over the last few months, and it is an example of how the slag sitting behind Grand Forks is being utilized as a product that deals with a lot of the safety concerns people have about asbestos. It has gone through some serious problems over the last little while. I think the cooperation of the municipality in terms of the residual royalties from the slag and the new capital that has come in, plus the management there who have struggled through the tough times, is an example of taking an unusable substance and making it create jobs.

I also went to the Pope and Talbot mill while I was in Grand Forks, and you could see why our forest industry is so competitive with the United States. It's one of the most advanced, technically sophisticated lumber mills anywhere in the world. That's an example of where we as British Columbians are using our ingenuity, using cooperation. I think that's a good place to start. But as the Virginia Slims ad goes, you've got a long way to go yet. A good example of that is in Penticton, where the Canwood plant cannot get wood. They could add another shift, but because of the awful way we run our forests, they cannot get the supply of wood that they require to be able to hire more people. That's an example of where we have done some things right in this province, but we still have a long way to go.

We're going to talk about two areas in our discussions of the Economic Development ministry. One is the lack of an economic strategy for this province. Lots of buzzwords, lots of beginning efforts, but there's still the distinct lack of an economic strategy that is truly community-based and cooperative and involves all sectors in our province, not just business barons who are flown in from Tokyo or New York or Toronto for a gab session with the Premier; small and medium-sized as well as the multinational corporate leaders. Trade union leaders aren't there. Native leaders aren't involved; municipal leaders aren't involved in the economic advisory council; people from the leaming institutes are not involved. It is not a genuine, broadly based, regional economic strategy. We're still lacking that.

I think it's sad that in this area.... The New Democratic Party caucus extended an olive branch for a fresh start at the beginning of this legislative session. Two weeks before we came here, we said that economic development and job creation should be our focus: how can we work to bring about a prosperous and stable British Columbia? We said that we were prepared to once again, in this very serious time for this province, the most serious economic depression we've had since the thirties.... How can we work in a bipartisan way, where possible, to get this province going again? To show our good faith, we said well ahead of time that we were going to put a motion forward on the throne speech to set up a task force — not a study group — of members of this Legislature to go and work with British Columbians, as we did in the 1940s, when the Legislature put together an all-party committee of Liberals, Conservatives and CCFers to put together

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the blueprint for this province that was used in the 1950s and the 1960s by W.A.C. Bennett, who was a member of that committee and helped modernize this province.

That was an all-party committee. We said let's do that again in this time of trouble for British Columbia. That cooperative approach was rejected by this negative, negative government, this government that can only say no to positive suggestions from the opposition caucus. We were disappointed when that happened, Madam Chairman. We took the Premier at his suggestion that maybe we should use the existing committees. So we suggested two committees of the House, and that was rejected — again a negative, doubting Social Credit Party over there, rejecting these positive suggestions from the New Democrat caucus. Then in the budget speech we put forward a whole range of positive suggestions to help bring about a stable and prosperous British Columbia.

Interjections.

MR. HARCOURT: Madam Chairman, it would be very useful if some of the hungry members who are looking for cabinet posts over here, hungrily, would go out and have their peanut-butter sandwiches. I hear the grumble of their stomachs from here. That's about all the sense they're making: just stomachs grumbling, coming out of their mouths now, grumbling mouths.

Interjections.

MADAM CHAIRMAN: Order, hon. members.

MR. HARCOURT: We will miss the first member for Vancouver South (Mr. R. Fraser) — who pines for a cabinet post again — but go and have your peanut-butter sandwich.

We put forward our own proposals. If we weren't going to be able to sit down and work on this in a bipartisan and cooperative way, we said, okay, in the budget speech and the various estimates we would put forward what it would take to bring about a prosperous and stable British Columbia.

We said, about forestry, that some of that windfall profit that came back to this province should be reinvested in our forests, reinvested in reforestation, in silviculture, in making sure the Canwood plants have their supply of lumber so that they can get involved in the remanufacturing business, so that we can get more value added to the logs that we have in this province. We suggested that that be reinvested in research and development, doing value-added activities, import substitution — all the buzzwords that have been used by the hon. minister — and that was turned down again by this very negative government. We felt that that reinvestment in the forest industry could create 25,000 to 30,000 new jobs throughout British Columbia, in the communities where the highest unemployment took place — and that was turned down by this government.

We suggested that in terms of tourism, which is the second major industry, if we were to involve all areas of this province in regionally developed economic strategies and truly build on the marketing skills that Mike Horsey, the deputy minister, brought to this government, to finally start to do some sensible marketing with economic development — to the point where I was prepared, as mayor of Vancouver, because we were finally getting some decent tourism strategies out of this government, to increase the investment of our city from $200,000 to three-quarters of a million dollars in tourism.... Finally there were some decent business strategies coming out of this government in tourism. We suggested a whole bunch of ways that we could encourage, for example, the trade union leaders to help encourage trade union conventions to come here, and suggested that we could have the Pacific Institute of Industrial Policy inviting people here to come and meet in our convention facilities, to talk about ways of improving our economy, of increasing trade, of involving working people in this province. We suggested a whole bunch of ways that we could increase tourism in a cooperative way — and then you brought in Bill 19.

Bill 19 is one of the great tragedies of this government — an anchor on our economy. You have rejected not only the good will and the good faith of our caucus, in working cooperatively, but you threw away the opportunity of the working people in this province to work cooperatively with Bill 19. You threw away the Pacific Institute of Industrial Policy. You threw away the enthusiastic use of union pension funds in building and investing in British Columbia. You threw away the involvement of trade union leaders in marketing their projects in the Pacific Rim, into the United States, into Europe. You threw that away with Bill 19 — again a negative, negative, nasty government.

In terms of medium-high tech, we put forward a number of recommendations through the hon. members for Point Grey and Nanaimo outlining ways in which we could, through the use of our post-secondary institutions, our service sector and the private sector, expand that area, realizing that we're not going to be Silicon Valley North or Don Mills West. We don't have that in the cards but we do have some splendid high-tech, medium-tech industries here building on our natural resource skills, building on our communication and transportation capabilities, world-class companies — MDA, MacDonald Dettwiler, Glenayre — a whole range of industries that are out there in the marketplace. They're spinning off new products, new ideas, new jobs. Then there is the major development out at UBC, the expansion of the TRIUMF facilities.

Those are ones, Mr. Minister, where we have been positive. Again we've been working in a bipartisan way. We encourage expansion of skilled jobs, but we think we're missing opportunities. We're missing opportunities again. As the Virginia Slims ad says, we've got a long way to go. We're not pushing our capabilities in education as an export market; we're making it more difficult to bring students here. We are not expanding our tremendous capabilities in medical services, where we are one of the top five centres in North America, to bring people from the Asia-Pacific area here to pay the cost plus 15 percent. We have tremendous possibilities there that we're not exploring.

We have also the fact that we're the leaders in the world in urban skills. A number of the members here are from local councils. We're all proud of the fact that we do cities better than anybody else in the world. We have a range of planners and financial people and engineers, city managers, all over Canada and through this province, who could sell these services in a combination of aid-trade programs to developing countries. There will be more people by that year you mentioned, Madam Minister — the year 2000 — living in cities for the first time in human history rather than in the countryside.

I've worked with other mayors in this country to put together a $20 million program with CIDA to sell those services, We should take advantage of that here in British

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Columbia. We do cities the best of the best in this province. We have a program through CIDA with 14 coastal cities in China to make those urban skills available. We have a program in Africa with Project 2000 to make those services available. There are opportunities in Mexico City; there are opportunities in Rio de Janeiro; there are opportunities in Lima, Peru. These countries with cities are crying out for our expertise.

So again, I'm not being negative; I'm not being critical. I'm saying that these are opportunities. I'm prepared, as the Leader of the Opposition for another 898 days, to share, and we as a caucus are more than....

Interjections.

MR. HARCOURT: Oh, I see some of them are back from their peanut-butter sandwiches. That's good; they're back. The hon. member for Esquimalt is going to make a magnificent Attorney-General.

So we have those opportunities in high tech.

Small business. We put forward a number of suggestions to increase jobs in the small business sector, because we understand that 80 percent of the new jobs are being created through small business. The ideas of entrepreneurial centres, T and M resource facilities and incubator centres, and ways of increasing the entrepreneurial skills of British Columbians.... It's where the jobs are going to be created throughout British Columbia. We're supportive of those programs, and we are prepared to put those forward in a cooperative way, as we were in this task force that we suggested to get B.C. going again, which was rejected.

We think government can play a strong and positive role. That's why we put forward the suggestions that we upgrade the municipal infrastructure program; that we upgrade highways, and that they not be black holes that take business away from Penticton and Kamloops; and that we integrate those in regionally based economic strategies.

So in wrapping up, there are a number of areas that we have suggested: improving education, opportunities for women, justice for native people, and improving labour/management relations. Those are the kinds of things we'd like to see happen here, as the most positive part of this Legislature, to get B.C. stable and prosperous once again.

HON. MR. STRACHAN: I move the committee rise and report progress, and ask leave to sit again.

The House resumed; Mr. Pelton in the chair.

The committee, having reported progress, was granted leave to sit again.

Hon. Mr. Strachan moved adjournment of the House.

Motion approved.

The House adjourned at 12:01 p.m.