Finance Committee on Nov. 6th, 2017

[Pierre Poilievre, Conservative, Carleton, ON]

Explain what that means.

[Neil Saravanamuttoo]

It's an investment for which we don't necessarily expect to get a full return on our capital the way we would with a non-concessionary investment.

[Pierre Poilievre, Conservative, Carleton, ON]

In other words, you don't expect that we'll get the money back—or at least the accounting is set up so that we don't have to get it back.

[Neil Saravanamuttoo]

The accounting is set up that way. That's right.

[Pierre Poilievre, Conservative, Carleton, ON]

Finally, you mentioned that if there are retained earnings, there would be a formula to determine what share of those retained earnings belonged to Canada. If there were no retained earnings but there were in fact net losses, then I suspect the reverse would be true as well.

[Neil Saravanamuttoo]

That's the assumption we would work on, yes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

I have Mr. Albas and Mr. Boulerice.

On this last question on accounting, which was along the lines of money, I take it what you said in your testimony is that this is more than just an investment in a bank. I think you said that the purpose is global development. Can you expand on that?

Yes, the Government of Canada is possibly going to invest $256 million. What are the other things beyond the money that the Government of Canada is hoping to get in terms of global development because this is not just about money or we wouldn't be doing it?

[Nicole Giles]

There are several pieces in response to that question. We know that a lack of infrastructure is one of the biggest brakes on economic development in any region. We know in particular that in Asia the infrastructure financing gap is approximately $1.7 trillion per year. In the absence of addressing that gap, economic development will be slowed in that region. That means on a slightly more inward-focused commercial perspective there are fewer opportunities for Canadian companies and less ability for Canadian companies to be able to move products to market and then move products back the other way into Canada.

From a purely international development perspective we also know that in the absence of economic growth, countries aren't able to sustain reliably strong and good governance: strong in good public health care systems, education systems, the justice sector. An example of that is that if there's not strong economic growth, there's not a strong and reliable tax base. That can translate into, for example, police officers not being paid a living wage, which makes them more susceptible to corruption, which in turn creates a negative investment climate in that country, and then the cycle continues.

We know that economic development is the foundation for growing strong countries, and we need stable, strong countries to be allies and to help ensure a stable international order, which Canada quite frankly depends upon to be able to function internationally.

[The Chair, Liberal, Wayne Easter]

Thank you for that. Those are all good objectives.

I want to come back to Mr. Kmiec's earlier point on the pipeline issue. I'm one who certainly feels great sadness over the loss of the energy east pipeline. How do you make the point to a Canadian industry that is trying to get pipelines across this country to create jobs on both ends, and use our own resources to create economic activity when this bank could be—and I say could be—financing a situation that would be in competition with our resources? How do you answer that?

[Nicole Giles]

I think when it comes to the sensitive issue of pipelines, this is where our ability to assess projects on a project-by-project basis as they're brought to the bank is incredibly important. Canada would be at the AIIB table, and would have a seat, would have a voice, and the ability as well to work with other shareholders.

One of the things that we find very effective about our engagement with multilateral development banks broadly is that we work very closely with our G7 and our G20 allies on individual projects in our joint assessments, in determining whether those projects will meet Canadian national interests or our international development objectives. If we are not members of the bank we don't have a voice and we don't have the opportunity to contribute to the decision-making on particular projects. It's difficult to predict projects that may be in specific competition but this is where we would need Canada's ability and the officials' ability to provide that analysis on a project-by-project basis, and to be able to influence decision-making at the table.

[The Chair, Liberal, Wayne Easter]

Thank you.

We'll go to Mr. Albas, then Mr. Boulerice, and then back to Mr. Poilievre.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Chair.

In regard to currency shifts and whatnot, ultimately we're authorized I believe in American dollars—is it?—through this act for a total amount, but obviously the shares themselves, I'm sure, are being bought in a different currency. Or are they using the American dollar as the standard?

[Anchela Nadarajah]

Our commitment is in U.S. dollars and the shares will be in U.S. dollars.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

When we purchase from the AIIB, we will be getting an exact share value. There will not be any arbitrage between the use of a different currency besides the United States dollar.

[Anchela Nadarajah]

No. It will be in U.S. dollars.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

If the bank is a complete failure.... Let's just say the governance isn't very good and a future Canadian government looks at this and says, “You know what? This isn't working out, so we want to sell our shares.” What happens if everyone else is trying to sell their shares and no one is purchasing them?

Book value is not a proper estimation of what something is worth; the market is. If other countries are unhappy with the program, the price of those shares will go down or we won't be able to sell them. Can you give us some sort of assurance that we won't end up in this kind of situation?

[Nicole Giles]

When we look historically at the performance of multilateral development banks and international financial institutions, we haven't seen that kind of concern brought forward. We haven't seen a run on shares. When you look historically at our engagement with similar institutions since the 1940s, we haven't seen that pattern of behaviour. Obviously we would never be in a position to guarantee the performance of every bank, but I think there's a quite solid historical record.

I think as well that given the broad membership of the bank, including many of our like-minded partners, if there were such a large concern with the governance of the bank that everybody was looking to potentially pull out, that would also voice common concerns that presumably would be raised at the bank, where the governance would be able to be dealt with, if there is a majority of shareholders with those concerns. Presumably we would be able to work with our like-minded and other shareholders to be able to address those concerns in a meaningful way at the bank.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay. Could you please define “like-minded” partners in terms of which countries you would identify that with?

[Nicole Giles]

That would of course be our G7 counterparts. We have of course France, Germany, and the U.K. Many of the G20 we would also identify as our like-minded partners, including Australia. We can give you a full list of the membership.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I don't need a full list. Right now, I'm asking you to give some assurance to my constituents as to who you would identify as “like-minded” partners. We have France, Germany.... Could you start reading out some of the ones that my constituents would identify as being like-minded?

[Nicole Giles]

I'll identify partners that in my capacity I would identify as like-minded, but I think that given that this is a public record we may want to review the statement after that as well, because there could be potential foreign policy implications for the assessments that I'm about to provide, Mr. Chair, if that's acceptable.

[The Chair, Liberal, Wayne Easter]

That's okay.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Perhaps, Mr. Chair, we should let them come back with that official assessment.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I'm sorry. For the purposes of my questioning, I need to have this right now, please.