Premier Beaton Tulk 
Speaking Notes

St. John�s Board of Trade
November 8, 2000

Good day ladies and gentlemen.

• I am delighted to be here today to speak to you, recognizing the important role the St. John�s Board of Trade plays in the economic and social growth of the province.

What are the reasons for my being here?

• First, it is important to give an overview of the economic growth and wealth creation in the province.

• Secondly, it is important to briefly describe our fiscal position as it, more than anything else, will set the environment for sound economic growth and wealth creation.

• Third, I wish to describe what Government has done and will do to create the right environment for continued growth.

• And fourth, I will take the liberty of discussing the recent "political" actions of Government, and how they are intended to lead to further economic and social growth for Newfoundland and Labrador.

• Let me deal with the first matter of economic growth and wealth creation.

• By any standards, after the calamity of the groundfish moratorium, Newfoundland and Labrador has experienced unprecedented economic growth in recent years.

• There are many economic indicators. I�d like to review just a few, starting with GDP growth. Growth is projected to be 4.7 per cent this year, the third straight year of strong growth following 6 per cent in 1998 and 1999. Private sector forecasts indicate that economic growth will continue next year with real GDP growth in the 4 to 5.3 per cent range. This will place the province among the leaders in the country for the fourth straight year.

• Employment, after improving substantially in the previous three years, is relatively stable this year and is at one of its highest levels in a decade.

• The value of exports is expected to grow to a record $7.5 billion in 2000, accounting for the bulk of the province�s overall economic growth this year.

• The value of manufacturing shipments will exceed $2 billion for the first time ever. Capital investment will top $3 billion for the second straight year.

• Retail sales in the province have increased substantially since 1997 when this province introduced the Harmonized Sales Tax, reducing sales tax by five per cent. This contributed to a consumer confidence that continues to grow.

• During the first seven months of 2000 sales reached $2.5 billion, up 6.6 per cent over the same period in 1999.

• The indicators are all pointing in the right direction � up. Our challenge is to maintain and expand this growth so that all Newfoundlanders and Labradorians may benefit.

• There are some key sectors of our economy that are leading the way.

Oil and Gas Sector

• Hibernia production is projected to increase by 37 per cent to around 50 million barrels this year. Offshore oil production will grow by about 48 per cent in the near future as Hibernia increases production and Terra Nova comes on stream.

• A Development Plan application for an onshore oil development at Port au Port was received in June and a plan for the White Rose field is expected once cost figures associated with the floating production vessel are firm.

Fisheries Sector

• Overall fisheries landings are expected to be on par this year with 1999 at about 274,000 tonnes as lower crab and cod quotas were offset by higher shrimp landings.

• Fisheries landed value is expected to exceed last year�s record level of $518 million due mainly to increased prices. The production value of fish products is expected to exceed $1 billion again this year.

Mining Sector

• The value of mineral shipments will approach $1 billion this year. Growth will stem mainly from iron ore production which is expected to increase by 18 per cent as the industry recovers from a downturn in key markets in 1999.

Forestry Sector

• Newsprint is expected to have a banner year driven by strong world markets and a stable labour environment. In the first three quarters of this year, shipments are up by almost 14 per cent. The value of shipments this year is expected to top $600 million.

Tourism Sector

• Tourism is continuing to set new records. Last year, total non-resident tourism visitation reached 400,000 for the first time, an increase of 31 per cent since 1996. That number is expected to be up by between two and three per cent this year. Increased awareness achieved through special events like the Vikings! 1000 Years and continued improvements in service such as capacity enhancements on the Gulf ferry crossing are key reasons for this continued success period.

• Tourism should record another good year in 2001 as the Marconi Centennial celebrations get under way.

Information Technology Sector

• Information industries are continuing to grow. Industry surveys indicate IT employment grew by about 25 per cent for the third consecutive year with most growth coming off the Avalon Peninsula.

• It is no surprise that the St. John�s Metro region is at the centre of the province�s economic activity and outpacing the rest of the province.

• The province�s offshore oil and gas industry has been an important factor in the economic performance of the capital region in recent years, fueling optimism for the future.

• Tourism, residential real estate, construction and an expanding service sector are also important growth factors for St. John�s.

• This strong rate of growth is translating into jobs. The unemployment rate in St. John�s decreased by 0.6 percentage points in the first eight months of this year, going from 10.3 per cent to 9.7 per cent. This is the lowest unemployment rate for the area since 1975.

• We are seeing tremendous economic growth in St. John�s, but economic growth is not evenly distributed through the province. Areas of rural Newfoundland and Labrador still need assistance in the form of economic and social initiatives that specifically address regional challenges.

• Initiatives such as the venture capital tax credit programs that I will outline shortly target rural parts of the province in particular.

• Let me deal with the second reason and briefly describe our fiscal position.

• In the 1980s and early 1990s this province had deficits which often exceeded $200 million. When this Government was first elected in 1996, we embarked on a course of fiscal prudence and responsible expenditure management to tackle this significant deficit.

• We were able to get our fiscal house in order and, I believe, stop the excessive use of the province�s credit card, a pattern which could have only lead this and future generations to impoverishment and bankruptcy.

• Since then, we have consistently budgeted for prudent deficits � setting and meeting realistic and reasonable targets that balance the need to maintain our fiscal health with the need to maintain our growing economy.

• The measure of our success can be found in our current credit rating which Standard and Poor�s upgraded a year ago to A minus from triple B plus. This is the second time in 25 years that we have received a credit rating upgrade, and both upgrades have occurred during this Government�s time in office. The other came from Dominion Bond Rating Service in 1998, which upgraded us from triple B (low) to triple B.

• Newfoundlanders and Labradorians are now starting to share in the results of the Government�s stance on fiscal management.

• Finance Minister Lloyd Matthews will be delivering his mid-year financial statement in the coming weeks, but let me just say that the financial position of the province for 2000-01 remains on target with the Budget forecast.

• It is because of Government�s sound financial management that we are able to pass along substantial tax savings to the residents of the province.

• Through our program of affordable and responsible personal income tax reductions, taxpayers in Newfoundland and Labrador will have more money in their pockets. In this, the first year of the three-year plan, taxpayers in the province are receiving $42 million in provincial tax savings.

• When combined with federal tax reductions, Newfoundlanders and Labradorians will save approximately $400 million over three years, $187 million of which is the result of provincial tax cuts.

• Third, let me now deal as briefly as possible with Government�s efforts to create the right environment for the private and social sectors to create wealth and growth.

• I believe Newfoundland and Labrador is in the midst of an economic recovery. We are turning the tide and meeting the challenges forced upon us by the collapse of the groundfishery, a pivotal moment in this province�s history.

• In these last few years I have had the privilege of traveling to many communities in the province. I and my colleagues have been meeting and talking with ordinary Newfoundland and Labrador residents and entrepreneurs about how to make things better for themselves, their children and their children�s children.

• What we have heard and what we have experienced is a new attitude, a growing expectation that we can develop a reasonably diversified economy that will support centres of excellence and allow our people to work and live right here, if they so choose. And, choice is important.

• A "key" contributor to our continued economic success is small business. Small businesses have created more than 80 per cent of all new jobs in Newfoundland and Labrador since the 1980s and account for one-third of all employment in the province today.

• During the jobs and growth consultation last year, Government was repeatedly told that it must create the right environment to attract new investment and keep business competitive. We listened to what business people like yourselves recommended and we acted.

• This year�s budget contained a series of initiatives to stimulate the growth of small businesses and new jobs in expanding areas of the economy throughout the province.

These initiatives include:

• The release of a small scale manufacturing strategy, a sector which holds tremendous opportunity;

• Keeping the manufacturers� tax at five per cent; rather than raise it as suggested by the ACET report to 14 per cent;

• The elimination of the payroll tax for small businesses with payrolls of $400,000 or less; Previously it was $150,000. Hopefully, as our fiscal position improves further, it will be eliminated;

• The creation of two new programs in the Department of Development and Rural Renewal � a $2 million Small Business Seed Capital Equity Program, and a $500,000 Small Business Market Development Program.

• A key message throughout all of our public consultations last year was the requirement for investment capital.

• The Budget Speech also promised the introduction of a new venture capital tax program and just two weeks ago Government delivered not one, but two venture capital tax credit programs.

• The Direct Equity Tax Credit and the Labour-Sponsored Venture Capital Tax Credit are designed to stimulate the growth of small business and new jobs in expanding areas of the economy, with a particular focus on the needs of rural Newfoundland and Labrador.

• These programs are complementary and respond to the demand of capital requirements for businesses at various stages in their development. And, they do so by using the tax systems of both the federal and provincial governments.

• But the most important point for today is that individuals and groups with ideas for new businesses and those trying to expand current businesses will now be able to access private sector support like never before.

• Government will in the next little while be making the details of these two funds better known to the province through discussions and an information campaign.

• The rapid changes occurring in our economy are bringing with them a growing demand for skilled and knowledgeable employees.

• Government was urged to find ways to ensure people were prepared to take advantage of existing and future employment opportunities.

• We heard about the importance of education and the necessity to coordinate the needs of business and educational skills. Education was seen as the all important factor. However, there was also a need to coordinate between Industry, Government, Labour and educational institutions. That is why the Labour Market Development Council has been created.

• The LMDC includes representatives from Government, business, labour, education and social sectors. They have been asked to recommend ways that public and post-secondary institutions can equip people with the skills needed to succeed as we participate in the global economy.

• The Council will provide policy advice, act as a forum for the exchange of information, identify key issues and challenges, and serve as an advisory board in the formation of a labour market development strategy for the province.

• This province has the highest average workers compensation premiums in the country. This impacts on the competitiveness of existing local businesses and is a disincentive in attracting new businesses to the province.

• Just a few weeks ago we announced a complete review of our workers� compensation system to ensure that it is both sustainable and competitive over the long-term.

• In the coming weeks, with the release of the final report of the Committee on Jobs and Growth, Government looks forward to unveiling additional measures to stimulate economic growth in Newfoundland and Labrador.

A. We will explore, with business, labour and communities, new models of strategic collaboration and cooperation.

B. Work on a stronger investment prospecting strategy to ensure the needs and opportunities of all regions of the province, both urban and rural are addressed.

C. Continue to attempt to enhance our tax regime to ensure we continue to remain competitive with the rest of Canada.

D. Find ways to eliminate "red tape" when dealing with Government, while ensuring proper regulations remain in place � particularly as they apply to the environmental ecosystems of which we are a part.

E. Examine ways that we can give greater attention to trade and export development.

F. Explore how we can better address the needs of youth in our province.

G. Establish a Centre for Distance Learning. This was a key recommendation coming out of the Ministerial Panel on Education and is a priority for this Government, given the needs of rural Newfoundland and Labrador in this area.

H. Enhance our cultural and environmental industries.

I. And, help in the research and development of both the "old" and "new" economy.

• It is important that Government continue to build on its jobs and growth agenda to ensure that all communities in Newfoundland and Labrador have the opportunity to achieve their full potential.

• And it is this statement that, "we have the opportunity to achieve our full potential", which brings me to the fourth reason for welcoming this opportunity to speak to you � the recent "political" actions of Government.

• We have taken significant steps forward in recent years and we must be careful to make choices and take actions that will maintain our momentum.

• Over the past number of years and months we have, as part of our jobs and growth agenda, and as part of the economic and social initiatives of Government and other business organizations, been looking at the economic development models of other countries.

• We have looked at Iceland, Denmark, the Netherlands and other North Atlantic island jurisdictions such as the Isle of Man as well as the Irish Model.

• There has been a great deal of concentration on the Irish Model because of their great economic success and the many relationships and similarities with Newfoundland and Labrador.

There are some key lessons in that model.

A. The need for universal access to education so that our young people and young entrepreneurs can take advantage of emerging opportunities.

B. The need for research and development investment funding to enhance the opportunities available to us, both in the "old" and "new" economy.

C. And, the need for competitive, strategic investment tools.

• It has also become painfully obvious that the huge gap between the success of the Irish Model and our future success is the fiscal capacity of our province to give the private and social sectors of our economy the necessary stimulants and incentives to compete in a global economy.

• In my humble opinion, the only way forward at the rate we need to go is to convince the federation of which we are a part � and I am Canadian � that this province has

A. A "can-do" attitude;

B. And, we need a "hand-up" not a "hand-out."

• The "hand-up" all of us, including your organization and the Canadian Chamber of Commerce, have been referring to for the past while is to be found in the formula for equalization.

• The equalization program is intended to ensure that provinces have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

• As a province�s capacity to raise revenue on its own increases relative to other provinces, equalization payments are reduced by varying degrees, depending on the particular revenue source. The reduction of equalization depends on the particular revenue source being clawed back, but can reach up to 100 per cent in certain instances.

• Let�s look at Hibernia as an example. Even though we were able to reach agreement with the Hibernia owners on an accelerated royalty structure to coincide with increased production, under the current equalization formula we still lose 70 cents for every dollar of revenue from the project to the federal government.

• Imagine the benefit to Newfoundland and Labrador if we are successful in adjusting the equalization formula, even the slightest bit. Imagine the impact stemming from mega-projects like Voisey�s Bay and Churchill Falls. Any adjustment in the formula that would allow the province to retain a greater share of revenues would be welcome.

• Without any disrespect to any person, I believe that can only be done by working within the federal system; not fighting it from a distance.

• There are, I am sure, many examples of my concept of working within the system, but the most recent historical one that I can find is our neighbouring province of Quebec. Does anybody doubt that the journey of the so-called "three wise men" from Quebec � Marchand, Pelletier and Trudeau � has helped the province of Quebec within Canada?

• That is why I, along with other members of Caucus and Cabinet, encouraged the former premier of taking the somewhat "risky" political step that has recently been taken.

• Let me conclude by assuring you on behalf of the Cabinet and Caucus that, contrary to some media reports, we are carrying on the business of Government; and will continue to push the agenda for economic and social growth.

• The word "acting" for ministers is a misnomer and the term "acting or interim" premier does not occur in the Parliamentary lexicon or authorities, nor in my own.

Thank you and God Bless.

2000 11 08