Foreign Affairs Committee on Dec. 8th, 2011

[The Chair, Conservative, Dean Allison]

Welcome everybody. Pursuant to Standing Order 108(2), we're studying the role of the private sector in achieving Canada's international development interests.

I see a hand that's been raised.

Madame Laverdière.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Yes. Thank you very much, Mr. Chair. Having given notice, I would like to make a point of order and read to the committee the following motion.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Chair, on a point of order, you have committee business on this agenda. So doesn't that give--.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

No, but I would like to present the motion now, having given notice. The motion reads, “That the committee devote at least one public session”--

[Mike Wallace, Conservative, Burlington, ON]

On a point of order, Mr. Chair, is she entitled to do that?

[The Chair, Conservative, Dean Allison]

Hold on one second. I'll let you read the motion, but we'll deal with this in committee business, right?

[Mike Wallace, Conservative, Burlington, ON]

Is this committee business?

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

I want to present the motion.

[Mike Wallace, Conservative, Burlington, ON]

I don't care if you want to; the rules are that you can't.

The agenda says, Mr. Chair, there's committee business. If she wants to present the motion, I'll move that we go in camera. All committee business is done in camera.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

I'm sorry, Mr. Chair. I can agree to discuss it under committee business, but my understanding, especially after having given notice, is that I'm fully entitled to read the motion now for the record.

[The Chair, Conservative, Dean Allison]

I'm going to let you read the motion into the record, and then we'll have to defer it to committee business. Go ahead, read the motion.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Okay. It reads:

That the Committee devote at least one public session to study Canada's position at the United Nations Arms Control Treaty negotiations scheduled for February 2012; that such a meeting or meetings take place before the winter adjournment in order that it precede these negotiations; that witnesses to be invited to appear at this meeting include representatives from the organization Control Arms Coalition as well as the Department of Foreign Affairs; and that the Committee's findings be reported to the House of Commons before the winter adjournment.

I have the French translation here.

[The Chair, Conservative, Dean Allison]

Okay. So we'll set that aside until we deal with committee business later on.

Thank you very much.

Going back to our projected order of business here, I want to welcome Cameron Brohman, president and co-founder of the Bandaid Project.

Sorry?

[Cameron Brohman, President and Co-Founder, Brandaid Project]

Brandaid.

[The Chair, Conservative, Dean Allison]

Brandaid. Did I say Bandaid? Sorry about that. It's the Brandaid Project.

Thank you very much for being here this morning, and we'll just hear from you in a second.

From Results Canada—no stranger to our committee—I welcome back Jean-François Tardif. Congratulations on your new role. I guess you're appearing before us for the first time as the executive director. Congratulations on that. And Katy Wright is also here. So thank you very much.

I'm going to start over here on this side. My bad for calling you Bandaid Project.

Welcome, sir. Let's hear all about your project. You've got 10 minutes. Then we'll hear from Results, and then we'll go to questions.

Thank you.

[Cameron Brohman]

I'd just like to give you a little of my background and how Brandaid Project came into existence.

I have spent the past 25 years working in the developing world, mostly in Haiti, on a number of mostly not-for-profit NGO sector projects. During that time, I noticed that poverty wasn't improving with the usual models of philanthropy and aid. In 2009, I founded a company called Brandaid Project. The other co-founder is the president of JWT Canada, a branch of the largest advertising agency in the world.

The Brandaid Project came into being from my observations that poverty needed marketing. It needs a lot of things, but it certainly needs marketing. Brandaid Project is a company that brings the high-powered marketing assets of Madison Avenue—big business advertising and marketing—to bear on the production export problems that producers have in the developing world.

We modelled the company in Haiti on a Haitian matrix, but it has replication in many other countries. We belong to the UNESCO's Global Alliance project, sharing best practice in the creative Industries, and intend to take the model that we created in Haiti to the 60 least-developed countries.

I will give you a brief history of what the Brandaid Project has accomplished in its brief time. We launched the company publicly in 2009 with two major events in the United States, sponsored by Vanity Fair magazine and Dior. This is very much in keeping with what the Brandaid Project does. We bring large corporate sponsorship interests and expertise in marketing into partnership with small and medium enterprise producers in the developing world. In this case, it's Haiti.

One of these two events was launched during Oscar week in Los Angeles, and the other during fashion week with Diane von Furstenberg in New York. We created collections of home decor products, and we showed those products in these two venues, with corporate celebrity and business guests in attendance. The model is intended to create marketing opportunities for small, otherwise anonymous, producers in developing countries. This went very well.

Then, the earthquake happened. Brandaid Project was about to become a UNESCO vehicle for this model to work in the 60 least developed countries. When the earthquake happened in Haiti, we decided, for company and personal reasons, to focus our attention in 2010 on Haiti. That's what we did.

What we did exactly was to look for purchase orders for the producers we had been working with. The purchase orders we found were with Macy's department store chain in the United States. Macy's is a 900-store chain. We brought Macy's buyers and designers to Haiti. They intervened with Haitian artisan producers in the home decor line, and produced 18,000 units of product in about six to seven weeks, three months after the earthquake, and during hurricane season. These products were finished and exported to the Macy's warehouse in New York, and events were convened by Macy's in 25 flagship stores.

This led to a purchase order in excess of $200,000. While we didn't do a baseline study on this particular project, we could see that this money and the portions of it that went directly back to these producers improved their lives substantially. It also created a brand called Heart of Haiti, which continues to be sold in Macy's stores, and is, in fact, expanding into more of their stores.

The Macy's order taught us many things. One is that there is a certain price point at which small producers in emerging economies can make money, and there is a certain price point beyond which it becomes a question of diminishing returns. Due to that Macy's order, Brandaid Project and Macy's received a good deal of media coverage in the United States as well as Canada. In fact, the story made it onto the front page of The Globe and Mail, where Minister Bev Oda saw what Brandaid was doing and noticed that it was a Canadian company—but mostly activated in the United States. We were contacted. We already had a proposal in with CIDA to launch several brands from Haiti. We felt that it was time to scale our model up, and that we could do a lot more with more resources.

The proposal that we had in with CIDA was subsequently approved, and for the last six months we have now been operating on a TFO CIDA grant project to launch 10 brands into the global market from Haiti. Four of these brands are community artisan brands. The other six are small to medium enterprises. That is to say, they are small to medium sized factories. The product line is home decor and home furnishings.

I'll bring you right up to date, and then I think that will be the 10 minutes.

This has led us to make some direct sales calls in Canada. We have subsequently acquired The Bay—The Hudson's Bay Company—as a customer. They're going to launch an integrated program based on the Brandaid project model sometime in 2012—I think in spring 2012. I just returned from London, England, the night before yesterday, where we had meetings with Selfridges, one of the biggest department stores in Great Britain. They have also agreed to an integrated program, which they're going to launch during design week next September in London. We also have secured a contract with Cirque du Soleil for product from Haiti, and for deeper collaboration with Haitian artisan communities.

That's our activity to date. I think things are going well with this CIDA contract. It runs through to 2013, and the commitment is that Brandaid Project will create a dollar number of export value for products from Haiti for these 10 brands. I won't give you the figure, because it hasn't been ultimately decided. So we're working hard to make that come true.

I think that's enough background. I'm happy to relinquish the floor, take questions, and whatever.

[The Chair, Conservative, Dean Allison]

Thank you very much.

I'm sure there'll be lots of questions for you during the round. We're going to move over to Results Canada.

Mr. Tardif, the floor is yours.

[Jean-François Tardif, Executive Director, Results Canada]

Thank you very much.

Mr. Chairman, I thank you for giving us the opportunity to present our organization's point of view this morning on the important topic of the role of the private sector in international development.

I have the honour to represent Results Canada. Our organization is devoted to fostering the political will needed to eliminate abject poverty on our planet. We are part of an international network of like-minded organizations that are all independent, but have the same general objective.

Our organization is non-partisan and has no religious or ideological ties. Somewhat like the private sector, our organization seeks to identify and promote the most cost effective solutions to poverty. We are interested in solutions that save lives and give families the opportunity to create a small source of stable income.

So if we look at the private sector, the first thing that must be said is that the private sector's mission is profit, and it's a legal duty of the board of directors to actually uphold that mission of profit. So there's no room for purely altruistic missions. However, investment in social issues can be useful for branding purposes. That's important, of course, from a private sector perspective to attract customers, to perhaps get better conditions from certain suppliers, to attract employees who are looking for more meaningful work or workplaces, to attract investors--especially socially conscious investors--or perhaps to get more cooperation from local government.

So there is a place where the realities of both the public interest and the private interest can actually meet. But economic theory teaches us that the public sector is better equipped to create public goods, especially things like good health on a planet that is free of infectious disease, or good education levels that all benefit from. In those areas of public goods, the private sector really plays a complementary role.

The same economic theory shows us that the private sector is probably better equipped to do the actual process of wealth creation, whereas government plays more of a supporting role, establishing the necessary operating and background regulatory framework.

With your permission I'm going to look at those two areas, social development and wealth creation, and specifically at two subsets of those. One is micro-enterprise development, where the private sector has the lead; and the other one is infectious diseases, where the private sector has a complementary role and the public sector has the lead.

Let me start with micro-enterprise development. In the developing world, most of the population is not employed by formal businesses or by government. There are just no jobs to go around, so the population has to offer its labour for casual work or has to be self-employed. In this context, of course, the development of microfinance has had a tremendous impact on the very poor over the past 30 years, given the demand for that self-employment opportunity by those populations.

When we talk about microfinance, what do we mean?

Essentially, we are talking about very small loans granted to very poor people who want to start up a business. These loans are generally granted at business interest rates. Moreover, experience has shown that the rate of reimbursement is often above 90%.

The microcredit movement was founded by Professor Yunus. This won him the Nobel Peace Prize a few years ago. What are the results of that movement?

Today, 138 million very poor women have access to credit, whereas only 8 million people had access to microcredit when Results Canada launched the Microcredit Summit in 1997. So we have seen phenomenal growth.

Does this mean there are no challenges? No, there are challenges and they are of some magnitude. First of all, we have to reach the poorest of the poor. Too often, those who are not as poor are at the head of the line to obtain a loan, whereas the poorest people, those who are marginalized, are excluded from the microcredit expansion efforts. And yet, it is by reaching the poorest ones that we further development.

The second challenge is that we have to ensure that the poorest people do indeed get out of poverty. It is not enough to see if the loans are reimbursed. We also must ensure that the microbusiness generates profits on a regular basis.

The study of the social impact of microcredit is fundamental, and that is precisely one of the things that public agencies like CIDA should fund.

Now, what is the role of the private sector in micro-enterprise development?

First of all, microfinance in and of itself is almost exclusively a private sector led endeavour. Very few government-owned entities do microfinance. It can be private sector for profit, or not for profit. Both systems exist, but what is important is that profit not trump the social mission of the microcredit provider.

This is a difficult line of demarcation to trace. There's been a big debate, for instance, in the case of Compartamous Banco, a microfinance provider in Mexico, which was and still is offering loans carrying an interest rate of over 90% per year. Of course that is high, but at the same time this microfinance provider is present in virtually every impoverished community of Mexico, and serves mainly women, with very small loans, and their rate of penetration is unparalleled. So it's difficult to give a hasty judgment on that. It's a subject of controversy and probably further discussion.

When you go about operating a microfinance institution, of course you are in the private sector, but the private sector can also assist microcredit providers in various manners. First of all, they can provide the capital that is required for onlending. Actually, this is an area that public authorities are not good at; they don't have instruments. CIDA does not have instruments for providing capital for onlending. It's good at providing technical assistance, but for the actual capital loaned to micro-enterprises or micro-entrepreneurs, that's a good place to go.

One of the areas that capital can come from is from Canadians. Canadians, as very few people know, have an opportunity to invest in micro-enterprise in the developing world through RRSP-eligible organizations like the Canadian Worker Co-operative Federation, through Oikocredit, which is one of the big microfinance providers in the world.

Another example of a private sector contribution is technical assistance for microfinance. An illustration is Développement international Desjardins. They provide support and capacity-building for le Réseau des coopératives des caisses populaires in Burkina Faso, which in turn collects savings from those who are not so poor in Burkina Faso. With those savings, it lends to very poor peasants through a network called Caisses Villageoises. So it's very much a win-win, a big success story.

Beyond this general technical assistance, the private sector can also provide very specific assistance of a specialized nature, for instance, accounting software apps for smart phones for people who actually go into the villages and collect savings or offer credit and things like that.

It is really important to understand the complementary role that the financial sector can play here, in addition to all of this. The formal financial sector can assist graduating clients from the microfinance world to actually move into the formal finance world. For instance, Scotiabank in Central and South America has various programs, with average business loan sizes of $2,000 to $3,000, which are actually ideal for clients who have successfully grown their micro-enterprises from nothing to almost market size with loans of $200, $300, $800. Then they can graduate to the formal sector.

Beyond microfinance itself is the world of micro-insurance, which I want to speak about perhaps a bit later.

Before I finish, I want to make sure I speak about two important alliances that show the role that the private sector can now play in a complementary fashion with public efforts in the world of public health. The Global Alliance for Vaccines and Immunization, called the GAVI Alliance, is a perfect example of that partnership between public and private interests. The alliance brings together a wide range of partners: its donors, developing countries, governments, and also pharmaceutical companies, civil society organizations, and private foundations. All these people have a common goal of providing cheap immunization to the developing world.

What the alliance does is this. It really reinforces and strengthens existing systems on all levels. Here it is also worth underlining a very specific private sector initiative of the Government of Canada, the advanced market commitment for pneumococcal vaccines that made vaccines affordable to millions of children worldwide. What the Government of Canada did was this. It actually provided a guarantee to those pharmaceutical companies that were willing to provide vaccines at a cheap cost around the world. That drove the cost of the pneumococcal vaccine to 5% of its original U.S. market price.

Let me just finish by talking about the global fund, which, since its inception a decade ago, has basically brought together private sector businesses, corporations, business federations, etc., with the public sector and civil society in a huge alliance to fight the pandemics of tuberculosis, malaria, and AIDS. The private sector contributed, for instance, $182 million to that partnership in 2008. The most famous examples are consumer marketing initiatives like RED, which, through co-branding with partners like American Express, Nike, Apple, Starbucks, etc., have raised more than $150 million U.S. to fight AIDS in Rwanda, Ghana, Lesotho, and Swaziland.

I could also speak later about initiatives in the banking sector, where Canada has some strength, and also the mining sector.

In summary, for Results Canada, it is clear that the private sector can play a paramount role in economic development, in particular in the microfinance sector.

Moreover, the private sector can also play an important accessory role with regard to health, in particular as concerns immunization and prevention, in the context of the fight against widespread pandemics.

There only remains to thank you for this opportunity to present our viewpoint. Thank you.

Thank you very much, Mr. President.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to start with our first round over here, with Ms. Sims, for seven minutes, please.

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

Thank you very much.

First of all, I want to thank you for coming before us today and making your presentations. They are very informative. I've learned a lot about Brandaid today, and I didn't know too much about the work you did, so I want to thank you for that.

I also want to acknowledge the work your organization does. I had the pleasure of attending your conference with your volunteers along with my colleague Dean a few weeks ago. I was so impressed by the commitment of your volunteers who came from right across this huge country and were willing to give up their weekend to do the important work your organization does. Not only that, but I also have to commend you for doing what must have been an amazing job with them, because their lobbying sessions with the MPs that followed your conference were really very focused and very good.

We're here today to talk about microfinance, our foreign aid, and the role of the private sector, but I also want to talk a little bit about the fact that a lot of your campaigns are centred on the Global Fund to Fight AIDS, Tuberculosis and Malaria. I met with your groups that came around and really appreciated the fact you did it zonally, because the people who came around to meet with me were from Vancouver Island and the Vancouver area. So I could actually relate to the work back there, and we could have a connection that way.

The work you're doing in the area of AIDS, malaria, and tuberculosis is absolutely amazing. Since being on the Hill, I've learned a lot more about tuberculosis and its connections and impact than I knew before. The global fund saves millions of lives. We know that. But it is going through a very difficult time right now. I've been looking through the newspapers, seeing some of the headlines saying that the global fund for world health is halting new programs and beginning to scale back even on some of the programs it does.

I have to commend the Canadian government for its very generous pledge to the fund. We know that in your own communications recently, you actually said:

Tell Canada's Government that you support a bold pledge for the global fund that will support cost-effective programs that save lives from these deadly infectious diseases.

You've acknowledged that in your communications.

However, when I start digging into this, I'm getting a little bit concerned about the programs that are being cut and the programs that are not being started. Really, from the information I've been able to gather, even though we have pledged what I would say is a good amount of money, I'm not sure how much of it has actually been given to global fund. The last time I looked at the website, I saw that we hadn't transferred any money over yet. My fear is that we're putting lives at risk, if the global fund is in that kind of a critical condition.

So what is your sense—

[Lois Brown, Conservative, Newmarket—Aurora, ON]

On a point of order, Mr. Chair, just so that it's on the record, Canada has transferred all of its committed money to date. Our next payment is not due until into the new year, so our commitment to the global fund is up to date at this point in time, and we will continue to make good on the commitments we've made. I just want that on the record.

[The Chair, Conservative, Dean Allison]

I'm not sure that's a point of order, but anyway, we'll go back to Ms. Sims.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Absolutely, it is.

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

Thank you very much for that clarification. The website maybe hasn't caught up yet. It isn't up there, so that's why I was going down that road. I am pleased that the money has gone and that the next amount of money is coming in the new year.

Have you had conversations with CIDA about this, and what has been your information?

[Jean-François Tardif]

I'm happy to see that we share the same enthusiasm about the effectiveness of the global fund against AIDS, TB, and malaria, and perhaps share the same concerns around the table about the fact that the global fund could receive more funding and do more really extraordinary miracles in saving lives and protecting against those infections.

The concern is that there will be no further new programs at the current level of funding. That's why the head of UNAIDS has recently declared that there's a need for an emergency funding session for the global fund. But of course we have to salute the fact that an increase was pledged by the Government of Canada. The issue of the cashflow is critical. Pledging is important, but actual money in the bank is what matters at the end of the day.

When we met with the CIDA director general responsible for the payment, he assured us that it would happen before December 31 of the current year. I have not received any further information on whether it has happened or not The website of the global fund is updated only once a month. So we are assured that it should have happened or will be happening in the next few days. We have been following up and have not received confirmation yet. That's where we are.