Foreign Affairs Committee on Feb. 13th, 2012

[Dr. John Sullivan]

You do it differently in every single country. If there's one message I can leave, it's that there's no model out there that's going to fit every different environment. You have to design it according to what's going on in the particular country.

In some countries, for example, Pakistan, there is a growing social responsibility movement in the private sector. It's in its early days. We actually helped develop a handbook for responsible business.

There is also the UN Global Compact. They have organized compacts in various countries. You can see which companies tend to sign up and engage in the UN Global Compact. I'm a member of one of the working groups, and I think Georg Kell has done a terrific job of pulling the compact together and bringing that model around the world. But it's principles-based, like the OECD principles of corporate governance or the principles for multinational enterprises. It's not a specific model for a particular situation. So you have to look at the principles and ask how they match up to the local environment.

It also makes a great deal of difference what kind of foreign direct investment you're talking about. I take your point that you're talking about the foreign direct invested companies.

One of the messages that Secretary of State Clinton delivered at Busan, which I think had a pretty profound effect on the audience, was to beware of companies that show up more interested in extracting minerals than developing the country.

Guess who she had in mind?

[The Chair, Conservative, Dean Allison]

Thank you.

Mr. Williamson, you have five minutes.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you.

Thanks for coming.

I think you'll agree that institutions are important because they demonstrate that the culture and geography aren't barriers to growth or poverty reduction. Ms. Sims talked about looking for solutions to reduce poverty, which is certainly an admirable goal and the whole point of development. Yet at the same time it seems to dismiss the importance of institutions, which I think are everything when it comes to development, because without them it is very difficult to develop, and perhaps impossible.

I want you to take a step back, get out of the nitty gritty and what's happening on the ground today, and talk about Africa versus Asia. Go back 50 or 60 years and show the development of institutions in these areas. At that time GDP per capita in some Asian countries was lower than in Africa. Through the building of institutions they grew over time to where we see them today. We see parts of Asia that have living standards on par with western countries. Africa is falling further and further behind, not developing, and not growing.

I think this is important, because when we face scarce resources and budgetary pressures and have to put aid dollars in certain countries, it is best to focus on incentives to get countries to develop institutions that will allow them to realize growth so they are less dependent on aid dollars and are pulled out of poverty.

[Dr. John Sullivan]

Were you directing that at Mr. Eaton?

[John Williamson, Conservative, New Brunswick Southwest, NB]

At either one of you, if you want to take 90 seconds each. I'll have no other questions, so you have the rest of the time.

[Chris Eaton]

Well, I think there has been an under-investment in institutions, I think both generally and certainly on behalf of Canada in terms of the way in which it thinks about poverty in many countries. I would also say that our understanding of how to actually build institutions has not been very good and has not been very strong, particularly when we've taken a cookie-cutter approach to building institutions, as opposed to a more detailed diagnosis of what's needed and what works within particular countries.

I would also, though, caution us not to be too pessimistic about Africa. Those 17 countries are supposedly the next 17 emerging countries. We work in Botswana: it's a middle-income country. Ghana is soon to be a middle-income country. In Rwanda, you can register a business in one day. Those guys are serious about the development they are doing, in part because the ambition is at a national level, but also because of the institutions they have formed.

[Dr. John Sullivan]

I would agree with all those points.

The other thing that I think is really important to keep in mind is that in Asia they started with the import substitution model of development, which so many countries adopted based on Raúl Prebisch's work, which was a tragic flaw.... But what the successful Asian tigers did was to quickly switch to an export incentive-driven model of development and remove a lot of the support in subsidies for their national champions.

Africa unfortunately didn't do that for a long time, and they also got trapped in the Fabian socialism that they imported, that Kwame Nkrumah and others imported into Africa. It was a whole generation before they abandoned that model of development—

[John Williamson, Conservative, New Brunswick Southwest, NB]

But that is a failure of institutions.

[Dr. John Sullivan]

Yes—

[John Williamson, Conservative, New Brunswick Southwest, NB]

That's putting in place the wrong institutions and getting it completely backwards and trying to develop in a way that is counter to.... I agree that there are no best practices. I made a terrible mistake by referring to Africa as a single entity. There are certainly examples of success, but there are examples of absolute failure as well, as there are in Asia, I suppose. But when you see some of the broad growth models tied to institutions, it shows that this really is key, above just directing aid at countries.

[Dr. John Sullivan]

Oh, that's absolutely right. There are countries in Africa that could go either way. Right now, Senegal, unfortunately, is one of those. There could be a role for Canada, in its participation in the community of democracies, or for Canada with the U.S. and other countries, to try to convince Mr. Wade not to do this, not to run again, and to actually take the Mo Ibrahim Prize, do the right thing, and stick with the constitution—let the institution work.

[Chris Eaton]

The other thing Asia did that Africa has not done sufficiently was an initial huge investment in agriculture, in thinking about agriculture as that initial engine for growth. That just hasn't occurred to the extent that it still needs to in Africa, where industry is often very nascent, and where if you don't get the agricultural sector actually working, performing much better, and being much more productive and much more innovative with the private and public investments that are needed for that, you're not going to have strong and sustained growth.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you.

We're going to start our fourth round.

Ms. Sims, five minutes, please.

[Jinny Sims, NDP, Newton—North Delta, BC]

Thank you very much.

I think we can agree on one thing: we do need to focus on institution development. Even when we're looking at Haiti, we realize that in order to make a move, you need to address the land issue, and you need to address the safety issue and establish some kind of rule of law so people can have that security side—and also look at people living in some of those camps.

At the same time as we're developing these institutions, I think what keeps coming back to me is this: what kinds of institutions are we going to help build? Are they going to be the kinds of institutions that meet the needs of the industry—I don't mean to pick on mining, but it's just that you're here today—or are they to meet the needs of the community for long-term sustainability? There's a big difference between the two. For me, advocacy and addressing human rights issues, such as the right to safety, security, and food, and also the right not to be raped—all of those issues become very important. Whenever we talk about institutions, I just see these clinical kinds just supporting industry, whereas for me the institutions have to support the humanitarian side as well, and the human rights issues.

What work has your organization done in that particular area?

[Dr. John Sullivan]

In the area of institutions for local development, to my mind, when you look at the informal sector and you realize that these are largely people trapped in poverty, and that 80% of the work in many countries is done by women, there really isn't much you can do without addressing that issue of livelihood. All the rest of it is going to depend on that, so we've concentrated a lot in that area. We've also spent a fair amount of time working on women's entrepreneurship, generally speaking, not just in the informal sector.

On top of that, one of the key issues—and this is where the UN Global Compact has done a lot as well—is trying to give real meaning and substance to the work of John Ruggie, who has led the way to creating a bridge. It has to be a win-win solution. It can't be a win for this side or a win for that side, if you're going to have sustainability. Everybody's going to have to lock in to it, if you want it to continue.

What I think John Ruggie has done in working with the UN and creating the business principles for human rights—the responsibility to protect, etc.—is that he has really created a framework that the international business sector has bought into. We've helped promote those. As I said, I produced a book in Pakistan—produced actually by Pakistanis in Lahore, who were holding seminars around the country to work on it.

There is one thing I would recommend, and again, perhaps Canada's government can help here. Hernando de Soto has already drafted the law on what can be done to create titling, property rights, and most importantly, when you realize Haitians don't have identity.... It's not just that they don't have land, but they don't have identity cards. How do you get insurance? How do you get into school? How do you get in and out of the country, except by smuggling, without an identity card? You have to create these identities.

[Jinny Sims, NDP, Newton—North Delta, BC]

I'm really pleased to see your focus on women and the returns we get from investing in developing women.

I'm going to hand it over to Mr. Larose, if I have a minute or two left.

[Jean-François Larose, NDP, Repentigny, QC]

Thank you for your presentation. My question is for Mr. Sullivan.

I simply want to mention that I greatly appreciate your point of view on the complexity of each place, country, province and municipality. Each one has its own identity and characteristics. I worked in the area of information and I have also worked in Mexico. I used to tell the people I taught there that I was there to teach them things, but that they also had a great deal to teach me. I also told them that I hoped that one day, Mexico would have the opportunity of teaching things to Canada.

Things always have to go both ways. As for all the information you gathered, I was wondering if some approach had been developed that would lead to our enrichment. We have so much to learn. We should not look down on other countries, but rather do the opposite and seek to find the information that would also allow us to grow as a society.

[Dr. John Sullivan]

Yes. We actually have developed something called our knowledge management program, because we found, as I said and as you agreed, every situation is unique, but nevertheless there are general principles that you can learn from one situation to another.

Working in Haiti for a couple of years, Hernando de Soto learned a lot, himself, but he also brought an awful lot. He was working with CLED, which is a private sector think tank that we were also working with. We had a tremendous number of success stories. We provided technical assistance and we provided financing, but a lot of the genius behind these stories came from local ownership and local innovation.

So we have a knowledge management program, and we've also developed something called the Development Institute, where we've captured some of this on film and tried to create a college course, which we're now using in one or two countries to pass along these messages.

That's a key part of what has to happen. You have to keep recycling this. It also has to be built on very strict and sound evaluation, so that you have data to show what these folks have been able to do.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We'll move back over to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

In northern Ghana, they have an incredible potential for agriculture, for one thing. Yet you see these huge tracts of land that are unproductive, and there is nothing happening. I understand that these are tribally held lands.

There were many things as a visitor that you get frustrated seeing. One is education. When I visited a school, I thought I got there during recess. After half an hour, you realize that they're not in recess.

There was a Dutch company, and you may be familiar with them. They've started to enable farmers to take larger tracts of land. They give them equipment, seed, and fertilizer, and then they hold the seed. How do we convince those who hold the land to let it go? I think that's the biggest problem in northern Ghana in agriculture.

Before we went to Tamale, we visited with the MPs, and they just about pleaded with us to help them build roads and railroads. The Chinese are doing it, and they were basically asking us to do it before they do. They don't want them to do it, to have that happen to them. It was kind of pathetic. Do we, as governments, focus on those things? You'll have criticisms that you're helping the mining companies and all those others. Yet to these people, that was the most important thing: roads and railroads.

It's on those two things, the agriculture and the issue with the Chinese.

[Dr. John Sullivan]

I think that's what the Millennium Challenge Corporation compact for Ghana is trying to focus on. The thing that is really nice about the compact is that it's based on the premise that help will be given once they've already gotten to a certain level. Of course, there are areas in which it could be improved. For example, it doesn't reach the least developed countries.

Anyway, that's an incentive in the Millennium Challenge compact. The other thing that is nice about it is that they've built it much like the Marshall Plan in Europe. How slow some of these compacts operated was a subject of congressional criticism. Of course, they didn't have the same human capital that we did in Europe after World War II, but the idea was that the compacts would be built by the people of the country, not simply designed in an aid mission or in a foreign capital.

This has made a huge difference, and I think that's one of the things the Ghanaian compact is focused on.

[Chris Eaton]

I think you focused on a couple of key bottlenecks that are present in many countries. One is land title. Who has access to land and how do they use it? That one is really tricky, particularly in the Ghanaian context, where local leaders have a lot of rights over land that they are reluctant to give up, even though they are not fully using the land themselves. Unlocking that puzzle, for which I have to admit I have no clear solutions, is an important task for the government and local community leaders to work on.

Another problem is basic infrastructure. Basic infrastructure is something that, in many respects, has become a bit of a dirty term in the development we invest in here in Canada. Yet it's critical. It's critical for agricultural development in particular. Think about market access. It provides access to improved seeds, fertilizers, and technology that allows for agricultural innovation and productivity growth.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Would you agree that we have to identify different areas of the world? If we talk about the Asian revolution, isn't there a difference in the way people are raised in a Confucian-type lifestyle, as opposed to an African system? Do you identify those and then recognize that because there is a difference you need to have a different approach? That's the point I was trying to get out earlier on.

[Dr. John Sullivan]

Yes, we do. We don't do this in Washington, by trying to figure out what the dominant cultural pattern might be in a country. Instead, we first identify partners in countries. This is why we're slower to get going in some countries than others.

We rarely start organizations—although we've had to in Iraq, Afghanistan, and a few other places, simply because they didn't exist. They were not allowed to develop. Normally, we try to find the organization. Sometimes it's a chamber of commerce; often it is not. In much of the developing world, the chambers of commerce are simply an arm of the government. You have to know what the difference is. The first thing is being able to recognize the right organizations, and the second is to be able to build the capacity of these local organizations and let them help set the agenda. They don't set it completely, but they're a big part of the agenda-setting. Discussions on these issues you're talking about is vitally important.