Evidence of meeting #123 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.
A video is available from Parliament.
5:55 p.m.
Conservative
5:55 p.m.
Q.C., As an Individual
No, they tend to raise money broadly and then apply the funds to both loans to and investments in particular projects. Those projects tend to be P3. I must disagree with Mr. Cross when he says that the governments are taking all the risks. The private sector is taking the risks in a properly designed P3 that the international investment banks sponsor. The best example of that is the International Finance Corporation, which is the World Bank's twin, which deals only with the private sector. They make sure that the private sector is running significant risks and takes the main burden of the risk. It's the whole point of not just handing money out at the World Bank level to governments to do with it what they sometimes do very badly.
5:55 p.m.
Liberal
5:55 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
I would like to thank the witnesses for being here today.
First, I would like to talk about the Asian Infrastructure Investment Bank. If Bill C-63 was adopted, $500 million from Canadian taxpayers could be paid into this bank, which involves risks, of course.
Mr. Robinson and Mr. Cross, I would like to hear your comments on the fact that this money comes from international development budgets. In your opinion, is this the right way to invest $500 million in international development? Does investing in such a bank meet our international development goals?
You could answer first, Mr. Robinson.
5:55 p.m.
Q.C., As an Individual
According to the charter of the AIIB, which is in fact articles of agreement—they don't use a formal charter—the investments will be made with the focus on Asia. The board of directors includes 12 members from Asia and only three from the rest of the investing group. The one thing you have to bear in mind is that Canada's investment is going to be as a minority shareholder in terms of the investments by all of the more than 60 countries that have now joined with China to join the AIIB.
The control and governance provisions in the articles of agreement are Byzantine. When you examine them, it's pretty clear that the dominant shareholder is going to be China, which is why I had my concern about making sure that the bank had proper controls on corruption when it's starting out with not only Canada's $0.5 billion but the other $100 billion that is it's basic capital.
5:55 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Since it is money earmarked for international development that would be used, the department responsible for international development would be the one to fund this bank with $500 million from taxpayers.
Do you have any comments on that, Mr. Cross?
5:55 p.m.
Fellow, Macdonald-Laurier Institute
I just go back to the comment that Mr. Robinson made, that if this were.... It makes it sound as if this is just operating like a normal bank, like a private bank. If money were just going through, and risk were just being passed on, I'd raise the question why we need the AIIB. There's government involvement along the way for a reason.
6 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I 'm not sure that the question was understood properly. Anyway, I would like to talk about the answer we got yesterday at the technical briefing. We were told that this investment was meant to enhance Canada's image in the Asia-Pacific region.
Do you think this $500 million investment will really improve Canada's image in the Asia-Pacific region? Will it really give Canadians business opportunities? That's the argument we heard yesterday, that this $500 million will ultimately benefit Canada in some way.
Do you think that's a good way to help Canadians? Will this really help to improve Canada's image?
6 p.m.
Fellow, Macdonald-Laurier Institute
I agree with you that it's hard to believe. Are people in Asia even aware that Canada is making this token contribution? I noted that the United Kingdom, Germany, and some of the other nations that joined later seem to be doing so more because they want to be involved in the allocation of contracts than because they wanted to have good public relations.
6 p.m.
Q.C., As an Individual
I would have to agree with that. As a practitioner and not an economist, I'm a bit cynical. If you looked at it from the perspective of all of these minority shareholders jumping in, 60 of them that are not going to have any power unless they vote en bloc against the dominant shareholder, China, the main reason they're doing it is that the nationals of the minority shareholders are terrified that if the country isn't in, they're not going to get an opportunity to win bids to do those projects. I'm thinking of engineers and construction companies. I'm thinking of international construction companies like Aecon, which was just bought by a Chinese entity, supposedly private but actually a state-controlled entity. I'm thinking of SNC-Lavalin, a world-class engineering firm that has run into its own problems with corruption. Those are the reasons, I think. There were negative inducements, such that if you weren't in, your nationals weren't going to get the business.
6 p.m.
Fellow, Macdonald-Laurier Institute
I have one little thought to add to the end of that. Even if we do get some very small public relations benefit in Asia, I would then question whether it's worth the cost to the U.S. The U.S., and particularly the Obama administration, lobbied hard for none of the other G20 countries to join this bank. By doing this, we antagonize our biggest trading partner and closest ally. Is that worth whatever small benefits we're going to get in Asia?
6 p.m.
Liberal
6 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I just have a comment to make. I think there are more effective ways to spend $500 million to stimulate the Canadian economy than to invest in that bank.
6 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much, Mr. Chair.
Thank you, everyone.
I would have liked to have asked Ms. Thompson, Mr. Bradley and Ms. Cooper questions. Unfortunately, I will have to limit myself to the Asian Infrastructure Investment Bank.
I would be very interested, Mr. Cross, to see your book being co-authored by Mr. Robinson. It would be a fascinating editorial process to watch.
Mr. Robinson, I think you've made it quite clear that there's more to Canada's participation than just occupying a 1% share of the AIIB. Can you talk a little bit further about some of the benefits that can accrue not only to the Government of Canada as a participant but also to the Canadian economic ecosystem as a whole?
6 p.m.
Q.C., As an Individual
I don't see many. I'll reiterate that I think that the interest of the minority shareholders was to protect their nationals based on the theory—which may not be a valid theory at all—that preference would be given to the nationals who are bidding for these contracts, assuming they are going to continue to be P3s. I don't think there's any doubt about that. The private sector will be involved.
If that was the main driver, I don't see any wonderful return to a development bank's minority shareholders. I could be sympathetic to the argument that the $500 million should have gone into the Canada infrastructure bank to encourage more private participation in that and build more infrastructure in Canada. However, I'm not an economist. I'm just a lawyer.
6:05 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
At yesterday's meeting, we heard from officials from the Department of Finance indicating that the investment wasn't going to be at $500 million. I think currently we're in for a share at $150 million, and that would increase to a maximum of around $350 million.
6:05 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
I'm sorry, $346 million.
For the record, I just want to make sure we're talking about the same thing.
A large number of minority shareholders are not dominant shareholders like China, which holds 30% of the bank's share capital and thus voting power.
6:05 p.m.
Q.C., As an Individual
Well, I have a hard time seeing it, unless it's just to be part of the world's big six international development financing institutions. We are certainly a major member and contributor to the World Bank. We're part of the Inter-American Development Bank, and the other four.
It tends to be an obligation that countries are supposed to assume, to buttress their general approach to international development to participate in the international development banks. I'm not sure that's going to get the citizens out giving us cheers in the main squares of Asian countries. However, it does show that we're meeting our assumed obligations and so-called punching above our weight by being in with the rest of the world, and it virtually is the rest of the world. It's 60, and apparently there are 22 applicants waiting in the wings to join to become minority shareholders.
6:05 p.m.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Mr. Cross, what would be your sense as to the theoretical interest of minority shareholders participating in this development bank?
6:05 p.m.
Fellow, Macdonald-Laurier Institute
I'm sorry, could you repeat the first part of that? I didn't hear you.
