Evidence of meeting #37 for Foreign Affairs and International Development in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was development.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Fraser Reilly-King  Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation
  • Toby A.A. Heaps  Chief Executive Officer and Co-Founder, Corporate Knights Inc.
  • Paul Romer  Professor, Stern School of Business, New York University, As an Individual

4:15 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

Last week was our AGM, so I wasn't able to read as much as I wanted to on the G-8 initiative. If some of these initiatives are core to the business operations of the company involved, they're willing to bring their expertise and some money, and they're of benefit to countries, then I think they can only be helpful. That said, I want to emphasize that they need to be core to their interests, to their business model, because that's going to ensure good development practice, but they also need to respond to a gap or a need that's been identified.

One of the biggest gaps in food security is addressing the needs of smallholder farmers. I think in Africa around 60% to 70% of the population are farmers. Despite Canada's admirable contributions to the L'Aquila initiative—it was one of the first to complete all of its commitments there—this is still a key problem. Smallholder farmers still haven't been addressed. There's still a huge number whose needs aren't being met. This was one of the things that came out in the Africa Progress Panel.

It's good that these initiatives are moving the agenda forward, but it would be even better if they responded to genuine needs and demands.

4:15 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

So if there were private sector companies that could lend their expertise in helping smallholder farmers connect with markets, lower their costs of production, and increase their productivity, presumably that's something you would support.

4:15 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

I think it's a good direction, as long as it's sustainable.

4:15 p.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

You mentioned in your opening comments that the development of local private sectors in these countries is key. We know that companies from different countries often work in different ways when they're developing, say, resource industries in those countries. I understand that many Chinese companies, for example, rather than training people locally will often bring in lots of temporary workers from China and other places to work in those resource industries. Canadian companies, for example, are much more likely to train local populations in the skills they need to work in those companies.

CIDA has a number of initiatives where they use the expertise of Canadian companies to help develop local private companies as suppliers to those Canadian companies that are active in developing the resource industries in those countries. For example, CIDA is in partnership with World Vision and Barrick Gold in Peru, which is providing 134,000 residents with educational services, water, and sanitation. I wonder if you can comment on that project and what Barrick Gold is doing there, compared to what you know about Chinese resource companies and what they might be doing in those countries.

On another example, in Burkina Faso there's a project between Plan Canada and IAMGOLD that is providing 10,000 youth with skills training. I wonder if you can comment on that. Are these initiatives, where the Canadian government is partnering with private companies, producing results that wouldn't otherwise be produced if it were left to a resource company from another country—or with no support at all?

4:15 p.m.

Conservative

The Chair Dean Allison

Can you do that all in under 30 seconds, Mr. Reilly-King?

4:15 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

The local private sector is key. China has a very bad track record in Africa, and I don't think we can really compare the actions of Canadian companies to Chinese companies. We would probably all expect Canadian companies to be the best in practice.

I'm less familiar with World Vision and Plan Canada. I looked at the intervention made by WUSC, and one of the things I think is positive about that project, which I think they've done in collaboration with IAMGOLD.... IAMGOLD isn't even operating in the country anymore. There are still resources committed to this. The operations are taking place 200 miles away from where the mine is.

WUSC is beyond education, health initiatives, and training initiatives. It's working with local government to try to ensure that the real benefits from that project come to the local community. So it's trying to take the royalties that the country gets and bring them down to the local level. So I'd say that the practice there is guided less by corporate interests than by development interests.

4:20 p.m.

Conservative

The Chair Dean Allison

Thank you.

That's all the time we have.

Sorry, Mr. Dechert. We may catch you in the last round after Mr. Saganash.

4:20 p.m.

NDP

Romeo Saganash Abitibi—Baie-James—Nunavik—Eeyou, QC

Thank you, Mr. Chair.

I'd like to come back to Mr. Reilly-King and his recently completed analysis of the budget cuts.

You state from that analysis that it is extremely difficult to assess what exactly the criteria were for making this decision.

The analysis also mentions that Colombia, Peru, Indonesia, and Bangladesh have become important trading partners for Canada in recent years. To that list we can add Ukraine and Honduras, which recently concluded FTA negotiations in August 2011.

Some might see it as mere coincidence that more and more of our aid and development dollars are going to countries where we have increased economic interests. What are your thoughts on this change in direction? Is it the right direction we are taking in all of this?

4:20 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

It's difficult to say whether it's the right direction. It's the direction that the current government has taken.

But just to go back—you raised this issue before—it's fine if the government decides that it wants to pursue trading initiatives with different countries, but ultimately when it comes to development and aid money—and especially in the context of the ODA Accountability Act—I hope that the government, through CIDA, will prioritize the countries that have the greatest needs. In this context that would be low-income countries. They are the ones that need the most money. There are still populations within middle-income countries that need it, but I hope the government will continue to prioritize those that need the resources most.

May 28th, 2012 / 4:20 p.m.

NDP

Ève Péclet La Pointe-de-l'Île, QC

Thank you very much.

Mr. Reilly-King, you raised a good point: local development. Developing countries are often almost controlled through humanitarian aid. Countries that provide humanitarian aid tell themselves that developing countries don't have the resources for local development and that they will work on that for them. Based on how we currently view international aid, I fear that there will be even more patronage if that aid is provided by private companies. Developing countries are told that, since they are lacking the necessary resources, we will give money to our companies so they can work on local development in those countries' stead.

In international development, we should instead try to fund local companies, and not give money to a company that may not be familiar with all the needs of the population and the public institutions. This is a matter of public institutions and good governance. These issues are not at all part of those institutions' policies.

This has to do with the direction humanitarian aid is taking. Is this the right direction to take in terms of humanitarian aid? Should we not, as Mr. Reilly-King said, invest in private local development instead of using major private companies for large-scale development?

4:20 p.m.

Policy Analyst, Aid & International Co-operation, Canadian Council for International Co-operation

Fraser Reilly-King

Earlier I referenced CIDA's private sector development strategy from 2003, and it puts the development of the local private sector at the heart of its strategy. I think if you haven't already you should read that part of the private sector strategy, and I think it's something that Canada should continue to do.

Ultimately to be sustainable.... A number of individuals will comment about how aid hasn't been effective. We need to put in context that aid is a very small resource. A huge amount of direct foreign investment or capital is fleeing countries, tax isn't accrued in countries. So aid can only achieve so much. We would hope that the small amount of resources it's used for would prioritize the needs of low-income countries to help develop the local private sector.

That doesn't mean that large companies shouldn't engage in philanthropy. It's great if companies want to invest large amounts of money in pursuing interests that advance development in countries, or there's also the possibility.... I think there are some good public-private partnerships out there, as long as they start with the needs of local individuals. When they are top down, when they're supply driven, they're not going to work. But first and foremost, as I said, especially given declining aid resources, prioritizing the local private sector is key.

4:25 p.m.

Conservative

The Chair Dean Allison

Thank you. That's all the time we have.

Ms. Grewal, you're going to start but probably for three or four minutes, and we'll cut you off. Thanks.

4:25 p.m.

Conservative

Nina Grewal Fleetwood—Port Kells, BC

Thank you, Chair.

Mr. Heaps, I understand that during your December 2009 committee appearance, you told members that no company can succeed in a society that fails. You stated that you have faith that there is a strong self-interest for companies to engage in commerce in a way that strengthens social and critical stability. You also stated your support for Canadian companies in the aspect that companies must be at the heart of big solutions, or there will be no big solutions.

Can you describe why private sector investment is so critical to the development of less developed nations and how the private sector can contribute to the alleviation of the overall problems of health, education, and poverty?

4:25 p.m.

Chief Executive Officer and Co-Founder, Corporate Knights Inc.

Toby A.A. Heaps

Sure. Thank you for your question.

When you look at the scale of investment that we need to help these economies emerge and be able to feed their citizens and keep them healthy and give them jobs and give them electricity so they can read at night, the scale is many orders of magnitude beyond what direct aid could ever do.

Direct aid, as Fraser says, plays a valuable role in places where people are starving and in some disease eradication, but as far as helping countries rise and achieve sustainable development, the private sector is where the capital flows are. In context, the $95 trillion for global bond markets is many times more than any aid budget, and the bond issues are growing every year.

Our financial system is plugged up in many ways and in need of plumbing. It tends to finance what it's financed before with some exceptions like mortgage-backed securities in the U.S. So it looks at track records for this type of new investment, for this country, and it has a bias toward financing what it's financed before and with whom it's financed before.

If we want to achieve sustainable development in relevant timeframes, we're going to have to scale up private sector finance, redirect the trillions of dollars that are already flowing, and start tilting them toward more sustainable development investments. That's where we can make the biggest contribution, and that's what's so exciting about being Canadian. We have penetration in more countries. We have more countries with penetration in us, and we have more stable financing than almost any country in the world. So if we can marry all those things.... EDC is a great institution to work through, it is superbly well positioned to lead this new vanguard of sustainable development, but it will need a nudge to ramp it up.

4:25 p.m.

Conservative

The Chair Dean Allison

Thank you.

That's all the time we have.

I want to thank Mr. Heaps and Mr. Reilly-King very much for their discussion today.

With that we are going to suspend so we can let these witnesses go and bring our other witnesses for our next hour. Thank you very much, gentlemen.