Foreign Affairs Committee on April 30th, 2012

[S/Sgt Gisèle Rivest]

Getting back to what I was saying earlier, we do a presentation and we try to outreach all the time.

I think it was last summer that we hired a student to identify companies at risk and send a letter to all the companies to advise them of the law and ask them whether they were interested in having a presentation.

[Gary Schellenberger, Conservative, Perth—Wellington, ON]

How do Canada's efforts to combat bribery and corruption compare with those of other countries, such as the United States and the United Kingdom?

[Supt Stephen Foster]

I'm somewhat familiar with what's done in the U.S. and which agency has responsibility there and the amount of work they're doing. I would say, given the size of the United States, that what we're doing is comparable.

The U.K. recently amended its legislation, and at the most recent OECD—their most recent update for their phase 3 review—they were asked to again amend their legislation, although it wasn't clear to me that it would have.... They did one amendment, and then they were amending soon thereafter. It didn't seem to me that this would have been entirely demonstrated as being needed at that point in time.

The U.K. and their current regime has been praised internationally for what they have. From our perspective, in Canada we have dedicated resources, unlike many of the other OECD or developed countries.

[The Chair, Conservative, Dean Allison]

Thank you.

That's all the time we have.

Madame Péclet, you have five minutes.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Good afternoon. My thanks to our witnesses for joining us today.

Under the current act, for a company to be found guilty, the crown has to establish a link between Canada and an offence committed in a country other than Canada. Sometimes, the legislation is very specific. Human trafficking, for example, or sex tourism when Canadians go to other countries. The offence is then considered to have been committed in Canada. So these things have to be specifically written into the act. At the moment, it is not mentioned in the CFPOA. In most cases, there has to be a link of that kind.

Can you tell us about the way in which the RCMP can establish such a link? Take, for example, the case of a mining company with activities in other countries that commits an offence, never mind whether it is SNC-Lavalin or anyone else. A link with Canada has to established in order for the company to be found guilty, correct?

[S/Sgt Gisèle Rivest]

I think we answered that question when we talked about the type of jurisdiction. There have to be more links than just the fact that a Canadian is involved. Maybe money changed hands where the offence was committed, whether in Canada or elsewhere. It depends on the case. It depends on a lot of things.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

It was mentioned earlier that you currently have 24 cases. Is it a problem for the RCMP and the crown to prosecute companies? Are there obstacles to having businesses found guilty?

[S/Sgt Gisèle Rivest]

I would not say obstacles. However, proving corruption is not easy. It takes a huge amount of time. That is probably why no more cases have gone to court. They take a lot of time to prove.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

The OECD report that my colleague referred to earlier recommends that Canada “clarify that police and prosecutors may not consider factors such as the national economic interest and relations with a foreign State when deciding whether to investigate or prosecute allegations of foreign bribery”.

So we have to clarify the act and indicate that political relations should have no influence on the court cases, and so on. Can you comment on that conclusion in the OECD report?

[S/Sgt Gisèle Rivest]

Not really. But following on from what we have done with OECD and DFAIT, we have asked companies and NGOs what they think of the OECD suggestions. Improvements need to be made, certainly, and we are working on that at the moment.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

The report says that the act must be amended to make it clear that it applies to all international business, not just business for profit.

Is that also included in your consultations?

[S/Sgt Gisèle Rivest]

Yes. We are studying the matter right now.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

You mentioned NGOs, but have you consulted the general public? Don't you find it a little strange to consult companies about something that…

prosecute the companies?

[S/Sgt Gisèle Rivest]

The consultations are quite extensive. We have brought experts in the area to the table and asked them for their opinion.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Okay. Thank you.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Mr. Schellenberger, you have one quick question?

[Gary Schellenberger, Conservative, Perth—Wellington, ON]

I do.

If you expected bribery and corruption in a country that you wanted to do business in, would it not be prudent to make the request to the RCMP instead of to the corrupt government where you wanted to do business? And if so, what could the RCMP do to that foreign government?

[Supt Stephen Foster]

At what stage of your business transaction would that be?

[Gary Schellenberger, Conservative, Perth—Wellington, ON]

I'm a businessman and I want to do business in country A, a developing country, and I suspect bribery and corruption is happening. If I were to go to the local government, the people there would probably be the corrupt ones. If I came to you, what could you do other than advise me not to do any business there? Is there anything the RCMP could do in that particular case, because it is a foreign country?

[Supt Stephen Foster]

I think what you're describing is perhaps outside the area of activity where we would be involved. That sounds like it's in advance of the business transaction. That's perhaps the domain of some other government department, perhaps DFAIT and the trade commissioners or Export Development Canada or CIDA, but it would not necessarily be the RCMP at the start of a business transaction.

[Gary Schellenberger, Conservative, Perth—Wellington, ON]

Okay.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you.

To our witnesses, thank you very much for being here today.

We're going to suspend for a few minutes to set up our video conference for our next meeting.

Thank you very much.

[The Chair, Conservative, Dean Allison]

Could we have all the members back to the desk?

I want to welcome Freedom from Hunger's Christopher Dunford, senior research fellow, who is video conferencing all the way from Sacramento, California.

Welcome, sir. We're glad to have you here today.

We'll ask you to make your opening presentation, and then we'll take some time to go around the room and have the members ask questions to follow up.

I will turn it over to you, sir. You have 10 minutes. We look forward to hearing your presentation.

[Christopher Dunford, Senior Research Fellow, Freedom from Hunger]

It's an honour to be called to appear before this committee, especially as an American with only tangential connections to Canada.

My name is Chris Dunford. I've been the president of Freedom from Hunger, based in Davis, California, just outside Sacramento, for the past 20 years.

Just recently, I moved into a new role as senior research fellow. In that role, I'm charged with gathering what we and similar organizations have learned about supporting the self-help efforts of people who are so poor that they are chronically hungry. That's important to keep in mind, as that frames the rest of my remarks.

So that's about 1 billion people, mostly in developing countries, particularly South Asia and Africa. This number is far greater than the number suffering from catastrophic famine due to natural or man-made disasters. The primary cause of their chronic hunger is deep chronic poverty. These billion people correspond roughly to the number living on less than the World Bank's $1.25 U.S. a day, which is the World Bank's cut-off point for deep poverty.

Now, it's important to understand that these are not passive victims. They have the resilience and resourcefulness of the human spirit, and they have each other for mutual aid and solidarity. So the most appropriate development intervention, therefore—rather than replacing these considerable self-help assets—is support to enable chronically hungry people to help themselves and their families.

Freedom from Hunger has been working in this arena for more than 65 years. We've learned that the most cost-effective, sustainable way to support the self-help efforts of very poor families is a combination of microfinance, education, and health services delivered to groups of women living in very poor communities.

We've developed this combination as an integrated service delivery package and have provided training and technical assistance to a wide variety of organizations: credit unions, rural banks, microfinance institutions, and non-financial NGOs. We've helped them adopt and then adapt this delivery model to the particular circumstances of the local populations they serve. In effect, we're a wholesaler of innovation to the retailers of services to the poor.

As of the end of 2011, our worldwide staff of only 50 have been training and providing technical assistance to about 150 local organizations in 19 countries, with emphasis on francophone West Africa, where we have had long-term productive partnerships with several credit union federations started and still supported by the Mouvement Desjardins, and also on the Andean countries of South America, as well as India, the Philippines, and Mexico.

These partners—our partners—are delivering this combination of microfinance, education and health to well over 4 million women these days. When we count the number of their family members, that comes to almost to 30 million men, women, and children. Now, this is of course a drop in the bucket, compared to the 1 billion chronically hungry poor, but our purpose is to create a powerful demonstration of what can work for these people.

I'm going to make three points, but for background to those points, I should point out that Freedom from Hunger is a classic charity in its ownership, governance, and funding structure, even though we operate much like a consulting firm—but with a very clear social purpose.

About half our funding comes from individual Americans. The other half comes from private grant-making institutions, including the Toronto-based MasterCard Foundation, with the appropriate blessing of Revenue Canada, I hasten to add. We have never received funding from CIDA or other parts of the Canadian government, and don't expect to, so you may say that we don't have a dog in that fight; however, some of our developing country partners have received and do receive CIDA support in some way.

My first point is that the problem of chronic hunger and support for self-help of the poor is fundamentally a social service problem that in more developed economies is the purview of public sector efforts. However, there are some social services, such as financial services to the poor, that are much more effective and sustainable for the long term when they are delivered by the private sector—in which I include the private cooperative sector—albeit with appropriate government oversight and regulation, especially when saving services are provided. Of course, we all know that the past few decades are littered with failures of government efforts to provide retail financial services to the poor.

My second point is that the poorer the clientele of a microfinance service provider, the more these clients face severe problems that are not being addressed by the usual specialized services, such as education, health, agricultural extension, business development services, and so on, especially in rural areas and marginal peri-urban neighbourhoods. A microfinance provider may be the only social service in town.

There's often a strong business case for the microfinancier to push the boundaries of their standard business model and skill set to provide non-financial services as well as financial services, especially education and training and facilitation of access to whatever services are provided by whatever other organizations are in the local area, including government.

For example, it's clear that a healthy client is more likely to be profitable than a sick client, or a client with sick children. Our market research in Burkina Faso and Benin found that one-third of the annual income of very poor households is spent on dealing with just one disease—malaria. That's an enormous financial impact that a microfinancier cannot ignore.

We've shown such microfinanciers how they can provide their clients—and their staff, for that matter—with effective education for prevention and treatment of malaria, as well as access to insecticide-treated mosquito nets and even clinical services for malaria and other disease treatment when they're locally available. This can be done for only a small, marginal cost that reduces their annual profit by only a couple of percentage points, say from 24% to 22% per annum, to cite an average for five microfinance providers in five countries on four continents that are providing these kinds of health protection options.

My third and last point is that not all microfinanciers are the same in their business motives. Many are strictly commercial and profit oriented, especially in more developed regions like eastern Europe and central Asia, but equal or more numbers, especially in Africa or south Asia, are motivated primarily by social objectives.

Even as they operate as commercial entities with the same imperative to cover all their true costs and generate a profit—call it a surplus if they have a cooperative or non-profit structure—they and their lenders and investors, or members, are willing to sacrifice a few percentage points of profit in order to achieve measurable social objectives, such as improvement in family food security and health status.

In thinking about microfinance as a private sector social service delivery infrastructure, it's very important to discern the difference between primarily commercial and primarily socially motivated microfinance providers. Regardless of their driving motives, almost all microfinance providers claim to be socially motivated, but only those that are truly so motivated in their daily business practices are likely to literally go the extra mile and make the extra effort to deliver an effective combination of both financial and non-financial services that are required to truly support the self-help efforts of the chronically hungry poor.

Those are my opening remarks, and I'd be very pleased to hear your questions and concerns and try to answer some of them.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. Dunford.

We're going to start with the opposition.

Mr. Saganash, welcome.