Foreign Affairs Committee on Feb. 27th, 2012

[Dominic LeBlanc, Liberal, Beauséjour, NB]

Particularly if the EU is also moving in that direction, if you have major countries or regions of the world where your mining companies or colleague mining companies are located, it sort of levels the playing field.

[Pierre Gratton]

That's right. We want a consistent set of rules and a consistent set of reporting requirements in the EU, the United States, and Canada, for example, so we don't have to take the numbers and report them in three or more different ways. That's no good for civil society either. They then have to try to parse through that and figure out what it means. So we want a common set of rules.

On the other issue in terms of Canada's mining industry, we represent the large companies in this country that are dual-listed. There are many other companies listed on the Toronto Stock Exchange, and some are very small exploration companies. They could have four to five employees. So these rules could be more of a burden for them. It will depend on how one goes about defining them for smaller companies, and what they will have to report and how.

Over the last few months we have been talking to Revenue Watch and Publish What You Pay about working together--if I can disclose this--to see what we can come up with on a collaborative basis to move this forward within Canada--something that makes sense.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. LeBlanc.

We're now going to start our second round of five minutes with Mr. Williamson.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you.

Mr. Georgetti, I see you're aware that the committee is investigating how we can involve the private sector in international development to achieve this country's development objectives. The government feels that the private sector is essential to the reduction of poverty in developing nations. This committee has heard from institutions, joint private projects, professors, as well as think tanks on this matter. From my point of view, the narrative is encouraging, and it seems to reinforce the fact that the private sector is essential--or at the very least does play, or can play, and should play a role in the reduction of poverty in developing nations.

We've even heard support from the opposition regarding the various projects that Canada's respected businesses and NGOs have presented. In fact, our NDP critic for international cooperation, the honourable member for Newton—Delta North, said on December 13:

...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.

But you do not share this member's opinion that there is a role for the private sector to play, working with CIDA--is that correct?

[Kenneth V. Georgetti]

No, it's not. We don't disagree with that, to an extent. But what is the analysis, and what are the checks and balances around that? It's not the only aspect; it's part of it, but you still need regulatory oversight and citizen oversight and participation in that. That's where we think it gets lost.

We want to caution everybody that we don't disagree with the way corporations run, we just understand them, and their motivation is to maximize the return for their shareholders. When they're in a conflicting position, they have to go to their mandate to maximize those profits and the returns for their shareholders, sometimes at the expense of other considerations. That's where we think we're offside. That's only where we're offside.

[John Williamson, Conservative, New Brunswick Southwest, NB]

So it's really a question of off by degrees, as opposed to being a question of throwing out the policy?

[Kenneth V. Georgetti]

We think it has to be collaborative with other participants, other NGOs that do the work on the ground, as we said, with the workers and with the citizens, to give them the empowerment to understand their rights and obligations at work and in the community. We don't think the corporations can do that as well as do their work.

[John Williamson, Conservative, New Brunswick Southwest, NB]

However, the issue wasn't addressed in your statement, but it is part of your brief, that some $5 billion a year is spent on overseas development, of which $530 million per year was spent on these 700 projects in 143 countries. You complained that this spending exceeded expenditures in any other of CIDA's other categories, with the exception of health. But you break down those numbers and you're talking 10% of the budget. That's hardly dwarfing all the other work that CIDA is doing.

Would you not concede that there is a complementary aspect, that some of the money—10% of the budget—is going to some of these projects, but the 90% needs to be in traditional foreign aid?

[Kenneth V. Georgetti]

I'll have to give it to my expert.

[Lucien Royer]

Well, the fact is we don't know because CIDA has not reported it. In 2008 CIDA reported the figure that you mentioned, in terms of investments. Last year to Parliament that figure was reduced, but the actual amount invested in private initiatives was actually cut out of it. In 2011 there was no report at all.

That is the whole problem here. There are contentions and assumptions that are made without evidence. Ken has asked where the analysis is. Where is the analysis, and where are the data? There is no evidence. We haven't seen it because CIDA has not reported it to Parliament.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Am I correct in concluding, based on reading your brief, that you seem to take a dim view of things like micro-credits, the development of credit unions, and things like that? My understanding is that there really is no debate about these projects among the development agencies. The UN itself is an institution that I often think is wrong most of the time. On the focus of credit unions, there seems to be an almost across-the-board agreement that it is one important way to help countries develop, yet your brief seems to suggest that you're kind of suggesting that's not the case.

And you asked about evidence. There's a Nobel laureate who in fact won the prize because of his work on micro-credit and the positive impact it has on development and pulling people out of poverty.

[Lucien Royer]

The point is that what is missing here is the total picture. What we see here is $535 million that was invested in 2008. That kind of establishes a ground level of investment. Then, in addition, now there's a new program to fund CSR, which is on top of that. Therefore, you see a trend here that is increasing. No matter how small it was in 2008-09 and in 2011, which we don't know about, there is a trend. The new trend actually funds projects that multinationals should be investing in themselves.

In the $535 million that you mentioned, there are CIDA-funded projects that are not in partnership with companies. This is a different story. There again, you have a tendency that is not being analyzed. You have a total picture that is not properly understood, mostly because you've articulated the benefits and advantages without really looking at the costs and the losses over time. When I talk about over time, it's also in excess of the closure of the project, and beyond.

[The Chair, Conservative, Dean Allison]

That's all the time we have. We'll catch that conversation in a later round.

We're going to move over to the NDP and Madame Laverdière for five minutes, please.

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

Thank you, Mr. Chairman. I would like to thank all our witnesses for their interesting presentations. I thought that several aspects overlapped.

I was surprised to hear Ms. Lissakers speak of institutional weaknesses. It is true that the resources in some resource-rich countries have been known to hinder development. At times, they have led not only to corruption, but also to conflicts causing unbelievable numbers of death. All of this is very often caused by institutional weaknesses within the country. This is a recurring theme, as you may have noticed. In fact, it may be the case with respect to the sharing of land if the institutions that define land ownership, or define what a residence is, and so on, are not strong enough. A country's institutional structure is a determining factor in its development. I will come back to Ms. Lissakers a little later.

People say that education is extremely important, but people are realizing, if I understand you correctly, that CIDA funding for education projects is diminishing.

For a country to have strong institutional structures, it of course needs workers who are trained to work in a specific industry, but it also needs civil servants, school teachers, lawyers and so on. It requires an educated population. However, at the same time, CIDA is investing less and less in education.

You don't know me, but my colleagues know that is quite rare for me to speak at such length. From what I understand, educational funding is being reduced because concrete results have not been seen. But educational projects cannot produce concrete effects. However, at the same time, it seems to me that there is plenty of research and data that tell us that education is a key factor in development.

I would like Mr. Royer or Mr. Georgetti to share their comments on this topic.

[Lucien Royer]

It's very clear: the historical documentation will show that the more you educate people, the more you develop their capacity to actually participate in decision-making, not only in their workplaces, at home, and in their community, but at the national level and abroad. Anything that diminishes education actually diminishes the quality and nature of development in that country.

To address your first concern more directly, which is asking for evidence for the impact of this particular investment in development, there is evidence, and we have outlined it in our brief. It's reflected in documentation that you will find at footnote number seven. That basically analyzes this type of development and concludes that this very often dramatically and deliberately reduces the capacity of the state to govern.

This is related to contentions that this type of development improves the taxation base of local communities, when in fact the evidence goes to the contrary. Reducing the capacity of the state to govern is far more serious than eliminating or reducing the possibility of instituting educational mechanisms, or equally as serious.

Those two factors in concert should really pose questions, raise flags that there is a negative impact here that is not being discussed. And again, where is the analysis?

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move back over to Mr. Van Kesteren, for five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you all for coming here.

Very quickly, Mr. Royer, I don't want to get into this with you, but I think you're trying to have it both ways. In your introduction and background, you say the CLC does not agree with the government's contention that partnering with private companies to fund foreign aid projects is the best way to improve the lives of the world's poor. I haven't got enough time to let you respond, and maybe I will if we come right back to it, but I think it's a basic conflict of world views. Adam Smith said it's not for the benefit of the butcher that the baker gets up at five o'clock in the morning. I think this study is trying then to advance the cause of commerce and the spin-off. I think you believe that as well, but when you make a statement like that.... It's hard to have it both ways.

You may get a chance to come back with that; I just want to go to the mining group first.

CIDA has recently piloted three projects with NGOs: World Vision, Plan Canada, and WUSC—we had them here a few weeks ago—and the Canadian extracting business. The object was to develop capacity and experience. The government feels then that the private sector has much to offer in technical assistance and perspective.

I have three questions for you. Number one, what in your opinion can your association and the broader extractive sector as a whole offer to help reduce poverty in developing nations? Number two, what, if anything, is holding private companies back from playing a larger role in international development? Number three, how can developing natural resources in a sustainable manner contribute to poverty alleviation?

If you get those done, maybe we'll give Mr. Royer a chance to retort.

[Pierre Gratton]

I'd like to go to the middle question: what is holding us back?

We have seen examples of significant resource investment in extraction. We've seen places where the results of this investment have not been shared across the population base, where there are examples of corruption, and where we haven't seen the development we thought this investment would bring. Canada, for example, and many other countries have benefited enormously from mineral wealth.

Over the last number of years, largely through ICMM, the International Council on Mining and Metals, we have been looking closely at this issue, the so-called “resource curse”. We have tried to identify ways in which we can ensure that this does not happen. It's by no means certain that the resource curse is going to happen. It's not certain that investing in Africa in a mining project is going to make the country worse off. It can make it better off. You gave the example of Botswana. There are other examples in Africa too.

The question then becomes: how do you do development right? How do you do it in a way that ensures the likelihood of lasting economic benefits? That's where I see these CIDA partnerships as pointing a way forward. Companies work with others who know international development and the benefits of aid better than the mining industry does. By partnering with them, you enable more creative approaches to ensuring that the value and jobs associated with the extractive industries flow more broadly to the communities in and around the mine and beyond.

I think that the issue of transparency of payments is part of that. It's part of the answer when citizens have a better understanding of where the money flows. A lack of knowledge of how to do this right has held us back in the past. We've been doing a lot of work around the world to learn where mining investments have generated the kind of lasting development we'd like to see. We have looked at what we can take from that. I think that's part of the answer.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You talked about transparency. Is there any action demanded on the part of foreign companies from China, for example, to have that same transparency?

[Pierre Gratton]

China's an interesting question.

[The Chair, Conservative, Dean Allison]

That's all the time we have, but I'll let him answer the question.

You're out of time, Mr. Van Kesteren.

[Pierre Gratton]

China is changing the playing field quite a bit. These are typically state-owned companies that go in with a lot of resources and do a lot of development work in some cases. The Chinese state bringing a lot of their resources to bear is creating some challenging circumstances for the private sector in parts of Africa.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Mrs. Grewal.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you, Mr. Chair.

Thank you all for your time and presentations.

It has been established by many experts that a large part of the economic growth in developing countries will come from the agricultural sector and extractive industries. It has also been observed that the youth population in those countries is growing and will one day represent the majority of the world's population. In developing countries, the majority of the youth is unemployed. This is attracting them to illegal activities, and in some countries to militant groups.

How important is it to provide training and education to prepare the youth to learn demand-driven skills? How important do you believe it is to give them the skills and training for the future? Do you feel that the government should be engaging the extractive sector in delivering this kind of aid? Please answer all these questions if you would.

[Pierre Gratton]

I'll back up again and refer to these three projects by way of examples.

They are pilots. This is new for Canada, although, as I mentioned in my statement, many other countries have been doing this kind of work for years.

The debate that's taken place here in recent weeks around this has given these three projects more notoriety than they deserve, in the sense that these projects very much developed bottom-up. This was not a question of companies going to CIDA and lobbying for money and then finding a partner. These were projects that were identified by the NGOs in question on the ground in these countries. They were looking for partners. The companies identified themselves as potential partners. The NGOs did a lot of their due diligence on the companies. I think it probably worked both ways.

Once they developed a project, CIDA expressed an interest in it. It saw them as worthwhile projects, because they showed the potential of leading to lasting outcomes, such as providing technical skills and skills training for workers. The one in Burkina Faso is a really good example. They're training electricians. They're training plumbers. There's a whole range of skills that are going to lead to jobs within the industry or outside the industry. There are many different types of skills.

As we all know, employment supports families. When they come from an educated family, kids want to be educated. From then on, it generates a lot of longer-term social benefits.

Another important point is that these have been characterized as subsidies, but it's important to point out that.... In the case of Rio Tinto Alcan in Ghana, it doesn't operate there. It did at one time, but this is a project it's doing with WUSC several years after it stopped operating in the country. I don't know how one could characterize that as a subsidy.

In the case of Burkina Faso and IAMGOLD, a lot of the beneficiaries of this investment are hundreds of kilometres away, and they may or may not work in the mines. Most of them probably won't. They're going to work elsewhere. I see this not as CIDA subsidizing mining. I see it as mining subsidizing CIDA and helping extend CIDA's reach and the reach of these NGOs to do development assistance in these countries.