Foreign Affairs Committee on Dec. 13th, 2011

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Chair.

You have quite a grasp of development of all different sectors, especially Africa. I told the previous witness that The Economist has this whole thing about Africa rising, and it's exciting. If we look at some of the countries, it's going to be hard, but what's going on is exciting for the majority of countries.

What happened in Tunisia was that this vegetable seller was one of those 40% of Africans who just wanted to get into business and encountered red tape and too much arm-twisting. There are a lot of young people and they just want to go. How does Canada play a role? You have some really good ideas here, especially dealing with the diaspora and this development finance system. And how can we build from that?

They reality is, still in that article, that the average person is getting $2 a day. We can show leadership. I remember doing projects in Central America, and I was paying $5 a day but everybody else was paying $3 a day. People were getting mad at me for paying $5 a day, but the next thing you knew, everybody was getting paid $5 a day. Sometimes, as Canadian companies, we have to say let's not be the bottom payer here when we're having all this investment. That should be a role we're playing as Canadians: let's be the highest payers in these places, because it will bring up the whole scale.

I'll go back to the development finance systems, where you're saying we're lacking at CIDA. I think sometimes governments are kind of nervous, because all of a sudden there's one project that didn't work and all the media and the opposition are all screaming bloody murder. That's the way it works. Sometimes we as governments are scared and say let's not go there because somebody might fail or something might happen. What do you think about that development finance system dealing with the diaspora, where there are pools of money, where the government plays a role and it plays a role? You said that pool of money is floating around there, so can you explain a little bit more how that mechanism would be set up?

[Daniel Runde]

I think you've put your finger on something that is a common problem, whether it's the World Bank or the UN. You've put your finger on a number of different things. Let me just comment on a couple of them, and I'll come back to your question if I have time.

I agree that Africa is a different story from 10 or 15 years ago, and I think Canada has an incredible role to play. I go back to this issue of managing the extractive industries. This is something in which CIDA has a role to play as part of its policy dialogue investment, making use of provincial governors and experience of provincial governments, especially because you have francophone experience here in francophone Africa, places like Congo, which you referenced earlier in your question to the other gentleman. In my mind, this is going to be an important part of the future of Africa. There are any number of different countries that are witnessing an extractive industry bonanza, and how they manage that money is going to be very important. Canada has a significant role to play.

On food security and agriculture, Canada has a major role to play there on food security issues. I would start with those two things.

Third, on this issue of policy dialogue within the sustainable economic growth sphere, it's around building this rule of law work I was referring to. I think that's going to be very important, because many of the 53 sub-Saharan African countries, as you said, are going to have an opportunity to take off. It's not so much about ODA—that will be helpful in terms of bringing the expertise—but it's about getting the rule of law right. We see this in Ghana, for example, among other countries.

In terms of Canadian businesses, yes, in general I think Canada brings labour and environment standards, including in its mining sector. You guys bring world-class standards to all sorts of global challenges. So yes, I do think standards of conduct of business are an important part of what Canada brings. I completely agree.

In terms of this issue of development finance in the diaspora, I do think there have been a number of experiments using savings and money sent from diasporas and how to catalyze that to use it for bonds or financing. What I would say about that is as follows in terms of the mechanics of it: government could provide some sort of a risk guarantee in terms of how that money is used. Oftentimes what will happen is you'll have to work through a bank or financial institution on the ground in a developing country, so they'll want someone to share risk with. So I think CIDA could have, at the very minimum, the authorities through Parliament to use grant moneys to share risk or create new instruments that are a form of loan guarantee that could be established for the private sector. That would be a way in which the government could play a role.

[The Chair, Conservative, Dean Allison]

You have a minute and a half, Mark.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

We see the Bill Gates and the Rockefeller foundations and how they're going. A whole lot of people are putting money into that, and they know they're going to get failures and successes. They have to have a goal, the millennium villages and things like that. I think it's a problem with a lot of governments. They're scared of failure, right? I don't know if the British or the Norwegians or the Dutch do it differently, but I find we're getting a little hesitant sometimes. I like the idea of mixing it up with the private and guaranteeing it. I think everybody's feeling they're part of the big solution.

[Daniel Runde]

I think this issue on sharing and taking risks is very hard for civil servants. They get burned once or twice, it hurts their career or it's embarrassing, and it's hard. So you have all these disincentives.

I think it requires leadership from the top, from ministers, but also from the civil service leadership to say they're going to provide the cover to take some calculated risks, and if we fail, we need to be able to.... To the extent they're able to say here are ten good things that happened, and obviously you're right, it's not the way of the world, but even in philanthropy this is hard. Private philanthropy has a hard time with failure too.

A number of organizations, like the Hewlett Foundation, try to talk about their failures in a more open way, but it's hard. It's culturally very difficult. You've put your finger on something very important. But I do think that the leadership of ministries, whether the president of CIDA or the minister, to the extent that both of them give some bureaucratic cover to some very capable civil servants, I think that's one way to deal with it.

[The Chair, Conservative, Dean Allison]

Thank you. We're almost out of time.

Mr. Dechert, you probably have time for a quick question.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

I'll be very quick. I'm going to follow up on Mr. Eyking's questions.

Thank you very much for your presentation.

You've mentioned diaspora communities. Canada is the largest new immigrant intake country on a per capita basis in the world, and we have significant diaspora communities from all these countries and there are many very successful Canadians from those diaspora communities.

In addition to the loan guarantee suggestion you just made, how else can we leverage those communities—their language skills, their knowledge of local business cultures and markets—to encourage them to make investments, employ people from those countries in their businesses in those countries?

[Daniel Runde]

This is a great question.

I would start with CIDA's 20 countries of focus, and I would crosswalk it to the diasporas. I would start by mapping that.

I think you could engage with diasporas in a number of ways. One question is can CIDA use its ODA money here? Why do I ask that? Because DFID, for example, several years ago used ODA money to publicize the cost of sending money from Western Union versus other money senders just to make it transparent and make it easier in immigrant communities. One of the issues we talked about is how we reduce the cost of remittances.

DFID said they were going to let the market work; they were just going to make it more transparent. They used a small amount of ODA money. You could see it in the immigrant communities, they had little cards that said this week this is what you can get from Western Union, and you saw prices starting to go down for some reason. I don't know what that was, but the point.... Well, there's that.

Coming back to this issue of the collective work of development, I also think they should be working with Canadian NGOs to encourage them. You could even create an RFP to say you're going to create a diaspora volunteer corps that does short term.... It doesn't have to be a peace corps; those are big-ticket, expensive programs. But there's often a very sophisticated private sector with diaspora linkages here in Canada, and it seems to me that as Canadians you could put out an RFP, and with a little glue money from CIDA you could build some sort of capacity.

They could also partner directly. Some diasporas are more organized than others, so it can work with some of the more organized groups.

Going back to can we use CIDA money in very limited amounts to build the capacity of diaspora communities to organize themselves better so they can do these sorts of things, I'm not saying huge amounts of money, but small capacity-building grants to do that.

I think there are some opportunities to partner with the NGO sector, to partner with diasporas, to leverage volunteerism. I also think in a number of these countries that Canada has made as a focus there is often a conflict component to it, so I think it's increasingly important to leverage these diasporas in terms of their language or contact skills. So how you're hiring, who you're hiring, and how you're engaging them could be on a short-term consulting basis in places like Haiti or Pakistan or Afghanistan, where Canada has significant investments and is going to be there for a long period of time.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Runde. Thank you very much.

Once again, if there are any materials you think would be beneficial to the committee, you could send them through and we'll make sure they get to the members. Even some of the links you mentioned would be great.

Thank you very much for taking the time to come up here. It's been very informative. We appreciate your time.

[Daniel Runde]

Thank you. It's been an honour and a privilege. Thank you very much.

[The Chair, Conservative, Dean Allison]

We'll suspend for a minute to bring our next witness in, and then we'll go from there.

[The Chair, Conservative, Dean Allison]

Could we have all the members come back to the table so we could get started with our last witness?

Once again I want to thank Dr. Robert Schulz, who is a professor at the University of Calgary, for being here today.

Dr. Schulz, we'll turn the floor over to you. You have ten minutes for your opening comments. Then we'll go back and forth, as you witnessed with the last two witnesses, to try to get some questions in.

Thank you very much for being here. I'm going to turn the floor over to you, sir.

[Dr. Robert Schulz, Professor, Haskayne School of Business, University of Calgary, As an Individual]

Thank you very much.

First of all, it's good to be here.

To summarize my comments, what I'm talking about is that smarter money from the Canadian government and collaborative networks can produce sustainability and long-term results for people who need help. I don't really have any silver bullet, but I hope to be able to provide some silver thread to sew together some existing parts that exist in Canada today.

Going back in international development, my first experience with that on a very intensive basis was with a student whom I mentored in the late 1970s. He wrote his master's thesis in African history, and I helped him focus on business. He discovered that the NGOs were 13 times more successful than government-to-government money in Africa.

He took that master's thesis and is now a very senior manager at CIDA. His name is David Foxall. I hope that through our government, I'll be able to find him, because they moved him around quite a bit and he's difficult to find.

Currently I'm a director for the Fig Tree Foundation in Calgary. It's a non-profit organization that networks 45 NGOs, including CAWST, the Centre for Affordable Water and Sanitation Technology, which involves water and sanitation throughout the world; Light Up The World, which involves solar-powered lights; Opportunity International; and many other organizations. One of the things we found is that most NGOs spend a lot of money on infrastructure and don't necessarily collaborate, so we have a round table of 45 NGOs talking with each other and sharing best practices.

In addition to that, one of my former students, Avik Dey, was the chief financial officer for Remora. He was in the Llanos Basin in Colombia looking for oil and gas. Unfortunately, the company was sold, and now he's available again. The key aspect he presented—he and I had the same idea—was to network the receiving organizations.

In South America, most companies have to spend 1% of their capital expenditures and revenues in social enterprise. They do that only on their own. They don't collaborate. The concept that we have is to form a network in Canada of NGOs that should be working together with companies that are in the receiving areas, which are putting money in for oil and gas or extractive industries. Get them to network together, and then we can source what's actually needed after doing a needs analysis on the local scene.

There are also some new technologies, which would be available to developing countries, in coal, energy, and water. I'm a director of a very small skunk-works company in Calgary, which has major breakthroughs in coal with a very low CO2, irrespective of where Canada is in the Kyoto accord. In addition to that, the intellectual property is not necessarily in the university, and this inventor has had major successes in many areas for coal, hydrocarbons, and water purification.

In Africa, part of the network again is John Waibochi of VirtualCity in Kenya. He won the $1-million Nokia prize for the best IT application in Africa and the world, where he takes smart cards that the farmers have and he's able to drive corruption out of the supply chain. I asked him why he's not dead already, and he said because they make the pie bigger for everyone.

What I'm trying to say here is that there are many puzzle pieces that I know of, and other puzzle pieces that people know of in Canada. It would be very helpful if this committee could help sew these pieces together.

Another foundation was mentioned by the previous speaker—the Aga Khan Foundation, which is based in Ottawa. And CAUSE and CARE are already involved in international development. Indeed, in Calgary there's a very large Ismaili Muslim community. I've done the academic awards for that community for 15 years. Elizabeth Florescu is the research director for the millennium development goals. She lives in Calgary. So there are lots of opportunities for networking.

The key aspect that I want to encourage again, and I'll stop here, is that smarter money and collaborative networks produce sustainability and long-term results. One of my faculty colleagues, Loren Falkenberg, is a co-author of a paper called “The Role of Collaboration in Achieving Corporate Social Responsibility Objectives”, where again they talk about collaborating networks.

The key aspect here is whether the government in Canada and the private sector can co-lead—work together—to help more people and spend less money doing it.

Thank you very much.

[The Chair, Conservative, Dean Allison]

Thank you, Dr. Schulz.

Why don't we get started with questions. We're going to start over here on my left with Madam Sims.

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

Thank you very much.

Thank you for your brief comments.

One of the things I think you pointed out is the need for collaboration and for people to be working together. I think all of us in this room will agree that when you have five, ten, or fifteen different groups working in an area it really does make sense for collaboration to occur. Otherwise, you could all be working at odds with each other.

The other point I think you made is that there is a role for the public sector, government, to play in our international work.

One of the things that is pushing, I would say.... And you must have heard the previous speaker, as well, who mentioned the growing role of the private sector and why there seems to be an imbalance in some ways that we are worried--from our side anyway--could increase the role of the private sector, but decrease the role of the public sector. And this thing is the freezing of our CIDA funding to do our international work.

At the same time, we do recognize that the private sector does play and can play a very effective complementary role to the work done by CIDA and through CIDA.

How do you see CIDA supporting some of the initiatives you have talked about or some of the work that you see us doing abroad? Do you see it as a critical part of our international work?

[Dr. Robert Schulz]

I think CIDA can play a major role and already does.

It would be helpful for CIDA to document its successes in the field, because there's not enough documentation of why things work in the field and why they don't, which could then be made available to the private companies that are in the same geographic territory. In addition to that, CIDA could provide the meeting and the co-lead, if you will.

I'm a co-author on a book called Corporate Integrity: A Toolkit for Managing Beyond Compliance. The first author is Donna Kennedy-Glans, former vice-president international for Nexen. She went all over the world. The key aspect we found is that corporations have different levels of what they would call ethics or corporate responsibility. Some manage only with the compliance level, just the rules, and that's level five. We actually go to ten levels. So one of the things that CIDA could do is to try to get the corporations to move to a higher level of understanding of what corporate responsibility is all about.

It's not just about following the rules, but at the end of the day we want corporations to spend their money wisely so that there's sustainable development, and it's not just the money and product that's coming out of a country, but what's left behind. The key aspect for that would be for CIDA to try to find someone like Bill Gates or Warren Buffet in Canada to also be a co-lead in this, because they are at level ten in their levels of integrity.

So there's a lot of work there for CIDA to do, and it's all possible, in my opinion.

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

Thank you.

Over to Jean-François.

[Jean-François Larose, NDP, Repentigny, QC]

Dr. Schulz, thank you for being here. Your presence is greatly appreciated.

The private sector’s record in developing countries is somewhat of a problem to my mind. If one is very familiar with history and the different eras, one knows that everything began with an army that marched from country to country with private interests in mind. In time, governments intervened, with broader intentions, and I am thinking here of the United Nations. We have now moved on to another stage, and yet there are more and more errors being made. It always seems that we come up with formulas that involve calculated risks, but that is something else altogether. There is an oversimplification that I would call the sanitization of the idea. It consists in going to a neighbour's while having in mind an idea of what is required for each of the countries. And when things get complicated, it seems no one is able to understand.

The private sector is more problematic for me because we always come back to the fact that even here at home, in our own backyard, in our own country, we have difficulty agreeing on the right approach. Oftentimes, the public sector has had to bail out the private sector. During the last economic crisis, it was public money that was used to pull the United States out of the crisis.

Good intentions are always welcome. However, the problem is that the private sector is constantly at the mercy of fluctuations owing to the international economy. The good intentions remain, but the course of a corporation is excessively influenced by this market.

My question is a simple one. Regarding the percentage of influence of the public sector versus the private sector, you talked of cooperation. I am in full agreement with you. The problem is that the cooperation being considered at present is very simplistic, relying greatly on finance and leaving a little too much room for the private sector.

In Africa, I find that this looks a little bit like the Far West, because there is very little regulation. Here, at home, there is a lot of lobbying under way to deregulate anything that comes under government control; however, these very same companies want to venture out into these countries with the belief that they are providing some benefit.

Does Canadian leadership not lie precisely in this cooperation, the purpose of which would be to regulate and to ensure a better balance? I do not know if you get my question.

[The Chair, Conservative, Dean Allison]

Dr. Schulz, you've got about a minute and a half to answer.

[Dr. Robert Schulz]

It seems to me that the issue always is whether the glass is half empty or half full. I think most corporations say they're doing more than they've done before, and many people would say they could be doing more.

My view is, there's more that could be done and there's a role for the public sector to help corporations do more and to manage the compliance as well. The key aspect is getting the chief executive officers of the large mining companies and the large oil and gas companies that are involved in international business in the room together with the government and no media and say, "Let's talk about how to really be serious about helping people and spending our money wisely." If that's a simple solution, let's do it, because it hasn't been done yet.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Mr. Dechert, seven minutes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Thank you, Dr. Schulz, for being here today.

On the answer you gave to a previous question, I've got two questions. What role can the Canadian government play in policy development to utilize core competencies of the Canadian extractive industries in international development? Secondly, in your opinion, are there a number of things holding private companies back from playing a larger role in international development? If there are, maybe you could describe those to us and what maybe the government can do to try to alleviate some of those issues.

[Dr. Robert Schulz]

On the government lead, I've already described the government calling for a summit of five or six of the senior people in extractive industries, getting them in the room together with the government and saying let's see if we can work better on this. If the lead comes at the CEO level for the companies who say they're interested in corporate responsibility, the government says okay, let's do it.

The second aspect is what's holding companies back. Part of it is that the companies themselves want to promote their own initiative for some companies, rather than a collaboration. Companies would say that if they put money into a collective pot then they may not be able to get the concessions they want or the ability to go into foreign countries. So there's the rub. Yet many corporations are already working in health and safety, they're already working in policy in terms of representatives, as you said, of government. I don't see any reason why companies can't work together to spend their money wisely, along with the government's money. If there's a matching of NGO money by the government along with the corporations, that's working together. They're saying, "We’re going to go put our power system into Africa. We’ll build a network off the satellite. We'll take all the schools in the neighbourhood and give them all access to the Internet. There are computers there. We are already running power batteries. We'll go charge the batteries for the schools in the neighbourhoods." That's working together.

The pieces are all there, in my opinion. The networking isn't there. The Government of Canada can take the lead.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

From your experience, can you give us some examples of Canadian companies that are doing good international development work, and perhaps some places where more can be done and how the government can support that?

[Dr. Robert Schulz]

In terms of international development work, the extractive industries are ready with technology in terms of the work they're doing in zinc, for example, which you've already heard about.

The key aspect here is that each company is doing its own individual part, but we need to do a little better in terms of leveraging the collective that's there.