Evidence of meeting #16 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 haiti.
A recording is available from Parliament.
NDP
Jinny Sims NDP Newton—North Delta, BC
Thank you.
The good news for us today is that my colleague across the way has shared with us that the transfer of funds has taken place, and there's just a lag in the reporting. The funds are there.
I thought you did an excellent job of presenting the roles of the public and private sectors and how they can be complementary. Though we realize the critical role the private sector can play, do you still see a major role for the public sector as we do our international development work?
Executive Director, Results Canada
Payments are really important, and if further payments can be front-loaded, that would make a huge difference.
The public sector is fundamental, and we in Canada know this. We like our public health and education institutions, and I think they would be the things to export to the rest of the world.
Conservative
The Chair Conservative Dean Allison
That was very well done--right on time.
We'll start with Ms. Brown and then move to Ms. Grewal.
Conservative
Lois Brown Conservative Newmarket—Aurora, ON
Thank you, Mr. Chair.
Just for the record again, I really want to clear up the issue of the global fund. Canada increased its commitment to the global fund recently. We have been up-to-date on all of our commitments. The call needs to go out to other global fund donors to ensure that they participate in the same way Canada has.
On the issue of payment, I hesitate to say this, but the reality is that we had debate in the House on the estimates. The estimates were held up in Finance by considerable argument, shall we say. We were anxious to see them go through, but the government cannot spend money until the estimates have been passed by Parliament. We were beholden to the opposition members to participate in getting those estimates passed so we could continue to spend the money Canada has committed.
As far as front-loading, it has to be recognized that the government needs to have its own revenue stream. Our commitments to the global fund, along with any other commitments we have made, are part of the estimates we have to pass in the House of Commons. So when those quarterly estimates come up, it is important that our opposition members understand they are part of the process of getting that money into the hands of those to whom we have made those commitments. I think it's important that the public understand that part of this puzzle.
I am turning this back to my colleague now. I needed to put that on the record.
Conservative
Nina Grewal Conservative Fleetwood—Port Kells, BC
Thank you very much, Mr. Chair, and thank you very much to our witnesses for their time and presentations.
Mr. Brohman, what kinds of challenges does Brandaid face in developing countries with regard to the regulatory, governance, and security environment and available infrastructure?
President and Co-Founder, Brandaid Project
First, could I make one point that I think is relevant? Here's a book called Brand Aid: Shopping Well to Save the World. It's not about my company; it's about brand aid. It's highly critical of Product Red and the global fund. I'd highly recommend it to everybody who's interested in this debate and this issue.
I can answer your questions now. The kind of problems we face in developing nations, especially Haiti, with regard to infrastructure are very complex and don't seem to be improving. With infrastructure that helps producers, especially small producers, get their products to market, you face several obstacles, from no road for getting get your product into the capital and to the airport, to regulatory practices that simply make it so complicated to export product that an artisan or a small producer in a country like this wouldn't even attempt it on their own.
Brandaid Project sees a business opportunity here to partner with small producers in developing countries and to give them the kinds of resources and know-how and savvy of the global market that they simply don't have. That partnership works very well.
One assumption we made that I think we have to revisit is that, after a year or two of this, of course they'll know how to do this themselves. The great example of fantasy thinking was that when the Internet came along and e-commerce, this would automatically transform the global economy of small producers. They would all become their own marketers; they would all have access to global markets. Nothing like this happened.
The IDRC, the International Development Research Centre, did a landmark study a number of years ago on e-commerce and its effect on small producers. It concluded that less than 5% of market potential for small producers had been reached in the e-commerce revolution. It's an intricate subject but it speaks to the need for professional branding and marketing.
Last year, $500 billion was spent on advertising globally—just on advertising, not including marketing. To give you an idea of how big that is, in a good year, maybe $35 billion is spent on making movies, and we know how big an industry that is. Advertising creates a kind of soup that we don't even understand. It's like explaining water to fish. We're in it so much that we can't even acknowledge its presence. The vast majority of small producers in developing nations are completely excluded from this necessity, if they want to sell into the global market.
Brandaid Project came into existence based on two very solid beliefs. One is that global poverty is a business opportunity. For some people it can be a moral obligation to display their charitable nature, but it's really a business opportunity. Properly approached it can make money for business, including small, medium, large, and multinational businesses. The other very strong belief of Brandaid is that to solve infrastructure problems—all of these problems—takes business. Business is invented to create prosperity where poverty used to be, and only business can do this.
I don't know if that helps.
Conservative
Nina Grewal Conservative Fleetwood—Port Kells, BC
Yes, that helps a lot.
My other question goes to each one of you. Please tell us, does the private sector need to be playing a bigger role in development efforts and why?
Executive Director, Results Canada
We're all in favour of the private sector. Indeed, we hope there'll be private sector participation in the global fund that we mentioned just a minute ago, because it's important. Right now we only have money for the standstill. We'll need further contributions from donors and also the private sector, if you want to scale up the fight against those pandemics. Of course, the delivery on the ground is also important. So yes, indeed, we need more private sector participation.
Conservative
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
Thank you, Mr. Chairman.
Thank you to the witnesses for coming this morning and for making your presentations, which I think all of us find very interesting and worthwhile.
I had three specific questions, and one, to Mr. Brohman,
and two for Mr. Tardif.
I find the concept of Brandaid very interesting. I certainly share a lot of what you said on the importance of taking things that, to us, might seem basic private sector advertising and marketing principles and opening the door for developing economies and local artisans to a path they wouldn't have dreamed of being able to touch. Done properly, it can have great effects for them.
You talked about some obstacles. Haiti, perhaps, is an example of a place where you're very active. I'm curious to see what other projects, complementary to Haiti, you might look at. You talked about infrastructure and other obstacles. My experience in some of these developing countries is that the government bureaucracies can be riddled with corruption. For someone trying to get a container full of home furnishings to Macy's from the port in Port-au-Prince, it's not as simple as arriving with a truck and loading it onto a boat. There must be endless bureaucratic obstacles, some of which open an opportunity for corruption.
I wonder whether that is the case and what you can offer as help to those artisans who would be victimized by local bureaucracies, police, and other businesses. The whole chain of getting product to market leaves them very vulnerable, I would think, to predators along the way. I'd be curious to hear about that.
Mr. Tardif, I'm going to ask all of my questions one after the other, and perhaps I will have time then to hear your answers.
You said two things that really got my interest, specifically that Canada has certain assets as well as a certain leadership in the financial and mining sectors. You ran out of time to give us more details on that. I would like to hear more.
The other interesting thing you said when you were talking about micro-credit is that profit must not trump the social objectives. You began by saying that one of the important elements of business—and this was Mr. Brohman's take on it—was profit, and that we had to recognize that.
I'm wondering how you propose to balance those two. I'm not disagreeing with you, but I'd like you to expand on that, because this may be the crux. Hearing of a 90% interest rate, we all reacted. It seems appalling. Mom Boucher and the Hell's Angels might operate that way; you don't think of it as some social objective. But you came close to saying that there may be a social objective to that kind of loansharking. I'm curious to hear you expand on that.
Thank you.
President and Co-Founder, Brandaid Project
Infrastructure is a problem everywhere. As to your reference to corruption, we regard that as being a different system. We don't call it corruption; it's simply a different system, a different way of doing business. It has to be understood that way and it has to be approached that way.
In terms of getting product out of countries like Haiti, it's not so difficult. Getting containers into the country is where money is made, on import duties and customs duties. That is usually where things are held up to ransom.
December 8th, 2011 / 9:30 a.m.
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
So in your experience, some local artisan who may be achieving some economic success because of the work of Brandaid and your partners hasn't yet been vulnerable to predators on the road from his micro-factory or artisan workshop to the port and onto the boat?
President and Co-Founder, Brandaid Project
Not so much. It's mostly with imports coming into the country that extortion takes place. As I said, it has to be approached as a different system. You just have to understand it differently and deal with it appropriately.
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
So instead of an excise duty or something, what you're saying is that it's a different way that some people may pay what we would otherwise regard as charges.
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
These are informal taxes that don't often end up in a consolidated revenue fund.
President and Co-Founder, Brandaid Project
That's right. But it does redistribute wealth.
Liberal
Dominic LeBlanc Liberal Beauséjour, NB
It also concentrates it in the hands of people we would view as criminals.
I'm teasing you.
Thank you very much.
Mr. Tardif?
Executive Director, Results Canada
Let's talk about the financial and mining sectors. These are sectors in which Canada has a comparative advantage. Indeed, banks are more important, and the mining sector is very present both in Canada and elsewhere in the world.
I would like to give you two examples. These are not Canadian examples, but Canada could easily emulate them. First of all, in Ghana, in Africa, the AngloGold Ashanti company submitted a proposal to the Global Fund to Fight Aids, Tuberculosis and Malaria, and received funds to launch a project. This project was very successful. The company itself provided over $1.7 million in equipment, expertise and infrastructure over the five years of the program. So that is one example where the private sector really played a leadership role.
Then, in the banking sector, the Standard Bank of South Africa concluded an agreement to provide free financial training to those who received money from the Global Fund to Fight AIDS, Tuberculosis and Malaria, so that they would know how to manage the funds, etc. The bank provided this financial and accounting training. It's a very simple thing, but one that has a very practical and useful impact in the field. So those are the two examples I wanted to bring to your attention.
There are two things to underscore with regard to the 90% rate. We are in favour of profit, but not excessive profit. The 90% rate is very high. However, two weeks ago, I spoke to Mexican representatives of the non-profit sector who were present at the fifth Global Microcredit Summit in Spain. I asked them how much interest they charge, and they replied that they too asked for 90%. The private sector and the non-profit sector were asking for the same amount.
I should also mention that we accept profit essentially to ensure the continued survival of the undertaking, its financial viability, and not to enrich the investors, as Muhammad Yunus has pointed out himself. This allows the business to meet its costs. We have a very clear example of that outside the field of microcredit, in the association between the Grameen Bank and the Danone Yogurt company in Bangladesh. This association has allowed them to provide very low-cost yogurt everywhere in Bangladesh. This yogurt contains nutritional supplements, micronutrients aimed at raising the level of nutrition in Bangladesh. This was done so as to cover all of the costs of expansion throughout Bangladesh without repaying the investors. This is what is known as social enterprise. I think it is an important model if the private sector is to contribute to international development.
Conservative
The Chair Conservative Dean Allison
Thank you very much.
We'll move to the second round now, for five minutes of questions and answers.
Ms. Brown.
Conservative
Lois Brown Conservative Newmarket—Aurora, ON
Thank you very much, Mr. Chair.
And thank you very much to the witnesses.
Mr. Brohman, you made the comment recently that global poverty is a business opportunity, and to solve problems you need business. Personally I would concur with that. I think there are great opportunities there for the taking.
I've had the opportunity to do some travelling in emerging economies. I was actually in Bangladesh with Results Canada when Katy Wright was leading that delegation, and I learned a great deal.
I had the opportunity to spend an hour with Muhammad Yunus. And I would encourage members of this committee to read his book, Banker to the Poor. It's not altruistic. Grameen Bank and BRAC Bank are competitors in that society, in the same way that Royal Bank and Bank of Montreal compete here. They are quite upfront with the fact they charge a 20% flat rate for interest, so it is a profit making organization. It's a bank that offers banking services, insurance, cell phones—everything is with the bank.
My question is what role do you see microfinance having? Is there an opportunity there that is going to generate employment and create profits for the business to encourage those businesses to stay sustainable?
I'd also like to ask, with regard to these jobs that have been created through Brandaid, what the employment rate is. What are the lifestyle results from the employment? Is it making changes for families who now have profit to perhaps spend on education or better living conditions or health care?
Can you give us some observations there?