Canada-China Relations Committee on Dec. 11th, 2023

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you.

I want to talk about the AIIB's financing projects.

A couple of years ago, a senior member of the AIIB, as reported in the Financial Times—a reputable publication—said the bank was open to funding projects under Myanmar's military junta, which is not something the Government of Canada supports.

How is the government reconciling its position of having membership in a development bank whose senior members openly muse about funding projects in jurisdictions like Myanmar?

[Julie Trépanier, Director General, International Finance and Development Division, Department of Finance]

Thank you for the question.

We're not aware of the AIIB being open to doing projects with the junta in Myanmar.

We would have certainly, if it were the case, or if any such project is brought to the board, we would certainly—

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I appreciate that answer.

Let me give you some other examples that have happened.

In 2020, a number of non-governmental organizations accused the AIIB of violating human rights and environmental standards in India when 103 families were forcibly moved to make way for a metro rail project funded by the AIIB.

In the same year, similar allegations about a lack of environmental standards were made with respect to an AIIB project funded in Bangladesh. This was the Bhola power plant, where a flood occurred and a number of workers died.

A year later, the Office of the High Commissioner for Human Rights stated that human rights had been violated in Indonesia's Mandalika tourism project, which was also funded by the AIIB, particularly with the forced displacement of people and forced resettlement.

More recently, civil society organizations have alleged that there are predatory and abusive collection practices with regard to a microfinancing project in Cambodia that the AIIB funded.

With all these projects, there seems to be a pattern emerging about a different style of governance compared with that of multilateral organizations and development banks such as the World Bank.

In all these cases, how can that kind of funding of those kinds of projects be consistent with the government's stated foreign policy priorities?

[Steven Kuhn]

The AIIB has invested in 178 projects. That is the project count I have before we paused our work. Of course, over the last six months, we haven't been engaged in reviewing projects or participating in project approvals. I can't speak to the specifics of those projects, including whether or not they were considered at the AIIB before or after the pause that we've engaged in.

What I can say is that, as presented in the testimony of Mr. Pickard, the AIIB is a young institution—it's about seven years old—so one of the ways it has been engaging in project investment decisions is by doing it alongside other, more mature organizations like the World Bank or the Asian Development Bank. In fact, more than half of the projects it invests in are done alongside other institutions that have longer track records with respect to these issues.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

I just enumerated four projects—four out of 178. That's over 2%. That's not insignificant. These seem to fit into a model that the Obama administration predicted, which was that this was going to be a sort of strategy by the People's Republic of China to export its authoritarian model of governance throughout the Indo-Pacific region. As we are seeing projects like this getting funded through a very different lens of human rights, protection of the environment and a very different lens of due process and procedural fairness for those communities affected, it seems to me that those predictions have come true.

Is the review that—

[The Chair, Liberal, Ken Hardie]

I'm sorry, Mr. Chong, but unfortunately your time has expired.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay. Thank you.

[The Chair, Liberal, Ken Hardie]

We'll go to Mr. Fragiskatos for five minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you to both of you for being here today.

My question will be very general, but, for those watching, I think it's instructive: Why does Canada participate in initiatives such as this? What was the underlying purpose of the movement towards engaging with the AIIB?

[Steven Kuhn]

Thank you.

There are three general reasons why Canada and other members engage in multilateral development banks, including the AIIB.

The first is, as I have said and as was set out in the news release when Canada joined this institution, that it's out of a desire to help foster inclusive economic growth in that region—in that particular case, the Asian region—and this is consistent with the Indo-Pacific strategy and other foreign-policy priorities of the government.

The second key reason why Canada would engage in multilateral development banks, including this one, is to ensure that discussions that happen at those board tables take into account Canadian priorities and Canadian values. Those include issues of forced labour, as we've been talking about. They include issues of environmental protection. They include issues of gender equality, and I could name a couple of others.

The important issue is not that we are able to veto every project with which we don't agree but that we're able to make sure there are conversations about Canadian priorities and values in those projects as they're considered by the institution.

The third reason, of course, as we discussed, is for commercial opportunities that benefit Canadians as a result of our engagement in the institution.

[Peter Fragiskatos, Liberal, London North Centre, ON]

However, our eyes are wide open with this particular iteration of Chinese leadership. This is not the China of even 10 years ago. Things have changed dramatically, and that is something this committee has understood time and again.

I do see you agreeing, so in recognition of that, what would you say Canada is doing to plant itself or position itself in response to changing dynamics in China as far as its particular approach to international engagement goes?

[Steven Kuhn]

I think there are a number of instances of conversations or debates that Canada has had at the board table of the AIIB, through which we have been successful in building coalitions around that table and moving the institution in ways that are not aligned with what China might have wanted, notwithstanding the fact that they are the largest shareholder.

I think about the policy, for example, a couple of years ago, when the AIIB announced that it would not invest in coal projects or related coal infrastructure as part of a climate policy. That happened because Canada had been at the table and had pushed on that important issue.

The AIIB's treatment of Russia, in the context of Russia's aggression towards Ukraine, is another example that has occurred only as a result of Canada's leadership there. For example, in 2022 the annual meetings were supposed to happen in Russia, in Moscow, and we were able to build a coalition around the institution to make sure that did not happen. The activities of the institution in respect of Russia are also on hold indefinitely.

Those are things that happen because we are at the table, because we're having conversations, difficult conversations. No, we don't win every conversation we have—that's the nature of working in a multilateral setting—but we do have those conversations, and that's an important first step.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I have 40 seconds left, Mr. Kuhn. The point on building coalitions, I think, is a very important one. We are working with like-minded countries in that context of the AIIB to, if not to push back, if that's not the right phrase, certainly present an approach that is in line with liberal democratic values.

[Steven Kuhn]

Yes. That is a key reason that we engage in an institution like this.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you very much.

We now have Mr. Bergeron for two and a half minutes.

[Stéphane Bergeron, Bloc, Montarville, QC]

I want to pick up on my previous question.

Mr. Kuhn, regarding the discussions you have had with your counterparts from Australia, Germany, Sweden and the United Kingdom, you said that you cannot speculate.

I am not asking you to speculate. I am simply asking wether, based on the discussions you or our representatives — not necessarily you personally — had with counterparts in Australia, Germany, Sweden and the United Kingdom, there were shared concerns about what we are discussing right now.

[Steven Kuhn]

Thank you for the question.

I think perhaps the easiest way to understand the engagement of other countries is also to start by recognizing the internal review, which we heard testimony about previously, that the AIIB is conducting in respect of some of the issues that have been identified. Those partners who continue to be engaged at the board of directors of the institution while Canada steps away from that board are looking at that review and are trying to hold the institution to account on issues of governance and culture and the complaints mechanism and HR issues. Those matters are the focus of that review and some of the issues those countries are engaged in.

For us, for our review, those 19 recommendations that have been put forward and are being looked at and examined by the board are important, but they're not sufficient. They do not fully satisfy the extent and the seriousness of the allegations that have been put forward. We need to layer on top of that some additional areas of review and some additional elements that we would like to undertake as part of the continuation of our own review.

Those four partners and others we've been speaking with do share commonalities across some elements of the review, but I wouldn't want to speculate on whether or not they share all the elements of the review we have under way.

[Stéphane Bergeron, Bloc, Montarville, QC]

Have other countries taken a step back in light of what is happening at the AIIB?

[Steven Kuhn]

I'm not aware of any other country that has taken the type of measure that we have taken at this point in time.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Bergeron.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Kuhn.

[The Chair, Liberal, Ken Hardie]

We will now go to Ms. Ashton for two minutes and 30 seconds.

[Niki Ashton, NDP, Churchill—Keewatinook Aski, MB]

Thank you very much.

In review you're conducting, are you also speaking with Canadian companies or contractors who work with the AIIB or who work on projects approved by the AIIB?

[Steven Kuhn]

The review is under way. Of the 40 interviews we've conducted to date, we have not yet reached out to particular Canadian companies who are benefiting from the institution. The review is continuing. We still have work to do.