Newfoundland and Labrador: Open to responsible business and investment

Recent reports in the national media, including The Globe and Mail, The National Post and Canadian Business, have commented on the evolving Fishery Products International-Clearwater Fine Foods situation and have questioned whether or not Newfoundland and Labrador is open for business. As Premier of Newfoundland and Labrador, I wish to set the record straight and put this issue in its proper perspective.

First, it must be understood that, while FPI is a publicly traded company, it was created as a special-purpose corporation in 1983 by the federal and provincial governments out of the ruins of ten failed seafood companies in the province. The seafood industry was, and continues to be, a major part of the economy of Newfoundland and Labrador, especially for many rural communities. FPI is now the dominant player in the industry. When the decision was made in 1987 to return FPI to the private sector through a public share offering, the Government of Newfoundland and Labrador enacted specific legislation governing the corporate affairs of FPI to protect the general public interest, given the special role it plays in our economy. This included restriction of ownership to a maximum of 15 per cent, to ensure that ownership in FPI would be broadly held and that no individual or company could take control of FPI for its own purposes.

This restriction is not unusual in Canadian corporate history where a particular public interest is at stake. Similar ownership restrictions are embodied in the federal Bank Act, limiting individual ownership of Canadian chartered banks to 10 per cent. And when the federal government privatized many Crown corporations in the 1980s, such as Petro-Canada, Canadian National and Air Canada, ownership and other restrictions were put in place on these companies through special purpose legislation, similar to that done under the FPI Act. Other provinces have acted in a similar manner over time as well. It is neither accurate nor fair, therefore, to characterize the corporate limitations set on FPI as unique, unprecedented or unwarranted in the broader Canadian context.

FPI has enjoyed considerable success since it was privatized under the FPI Act and has emerged as one of the most diversified and respected international seafood companies in the world today. Nothing would please the Government of Newfoundland and Labrador more than to see FPI continue to grow and strengthen, within the spirit and intent of the legislation that gave rise to its initial creation.

In May 2001, the shareholders of FPI put in place a new Board of Directors that included Mr. John Risley, the owner of one of Nova Scotia�s major seafood companies, Clearwater Fine Foods. The new Board explicitly acknowledged that FPI was a creation of the provincial legislature and "in this regard, FPI has special responsibilities which we as a Board are obligated and committed to fulfill." The companies indicated that their goal was to strengthen and position FPI as the pre-eminent seafood company in the world. At the same time, a public commitment was made that there would be no employee layoffs or closures of any seafood processing facilities in Newfoundland and Labrador. The company�s business objectives were to be achieved through expansion and diversification, not by contraction, and the company undertook to work closely with the Government of Newfoundland and Labrador as well as other key stakeholders, including community and union leaders, in the pursuit of its growth agenda. Subsequently, FPI and Clearwater announced their intent to merge under the FPI banner.

On January 9, 2002, FPI broke this commitment and the public trust that accompanied it, by announcing a plan to reduce its workforce by nearly one-half (almost 600 people) in three rural communities as part of a modernization program, without offering any transition plan for the affected workers. Public confidence in the company within Newfoundland and Labrador evaporated. Concerns over the long-term motives and implications associated with the FPI-Clearwater merger were also heightened by the company�s abrupt reversal of its earlier undertakings.

Accordingly, an all-party committee was established to review the evolving situation surrounding FPI and to solicit public views on whether the FPI Act, in its present form, is adequate to protect the general public interest as originally conceived. Its purpose was to facilitate a focused and informed debate among all stakeholders on this important public policy issue. A similar debate was initiated by the federal government several years ago when some of the country�s major chartered banks proposed several mergers of their own.

The all-party committee is in the process of concluding its work and will be reporting in the near future on whether any legislative changes should be considered to preserve the spirit and intent of the FPI Act. No decisions have yet been taken on this matter, and no action will be taken by the Government of Newfoundland and Labrador that would harm or otherwise compromise FPI�s continued success in the context of the special role it plays in our province.

In the meantime, FPI has indicated publicly that it intends to rethink its overall approach to the modernization of its facilities in the three communities concerned and, further, that the FPI-Clearwater merger is no longer being pursued. These decisions were taken by the company and the company alone � presumably based on what is in the best long-term interest of its shareholders.

The Government of Newfoundland and Labrador�s approach to dealing with the evolving FPI issue has been a responsible one and is in keeping with long-standing Canadian practices applied in other provinces and by the federal government in similar situations. Newfoundland and Labrador remains open for business, and any suggestion that the Government is sending a message to the contrary, by its handling of the FPI issue, is totally false and unfair.

Some time ago, the Government of Newfoundland and Labrador adopted an "open for business" economic policy and has taken many progressive measures to create and maintain a highly attractive environment for new investment and business growth. This is a central theme of our Renewal Strategy for Jobs and Growth that was released in 2001, and we remain fully committed to that objective.

Corporate and business taxes have been reduced significantly in our province and are now among the most competitive in the country. Our principal business investment attraction tool � the EDGE program � provides added tax incentives for new investments made in Newfoundland and Labrador by qualifying businesses. In fact, the EDGE program won an international business award in 2000 for its innovation and the results achieved from it. We recently enhanced the EDGE program to make Newfoundland and Labrador even more attractive to companies interested in expanding or making new business investments in our province. These are just a few examples of the many concrete actions taken to improve our overall business and investment climate.

In a recently released study by KPMG, an independent and internationally recognized business management consulting firm, our capital city of St. John�s was ranked among the top tiered cities in all of Canada and among nine different countries for doing business. This sends a clear message that we are competitive and that we are open for business.

Recent economic and business indicators confirm this fact. Newfoundland and Labrador has led or has been among the leading provinces in Canada in economic growth and new employment creation for the past four years. Independent economic forecasters, including most of Canada�s major banks, project this trend will continue in the years ahead. The province recorded an all-time high in actual employment in 2001, fueled by new private sector investment and business growth in an economy that is becoming increasingly diversified and globally competitive. Capital investment flowing into Newfoundland and Labrador has also been trending up � investment in 1999 was up by over 20% � five times the national average � and has been sustained since then. Exports have almost tripled since 1992, again propelled by private sector growth, with manufacturing shipments having reached historic highs in recent years. In addition, Newfoundland and Labrador is on target to produce over one-third of Canada�s light crude oil by 2005.

The Government of Newfoundland and Labrador welcomes with open arms new business investment, provided the companies act with integrity, respect our laws, and provide sustainable long-term benefits for our people. I encourage any open-minded individual to visit and experience first hand the new Newfoundland and Labrador and discover why increasing numbers of national and international companies are viewing Newfoundland and Labrador as the "right place for business."

                                                                                    Roger Grimes
                                                                                    Premier of Newfoundland and Labrador

2002 02 21                        10:45 a.m.