Foreign Affairs Committee on May 7th, 2012

[Dr. Stephen Brown]

I'm sorry, able to demonstrate what?

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

The care you just referenced. If we were to show that extreme care you're talking about, you would sign on to the policy?

[Dr. Stephen Brown]

The care, but also that this was a more effective way of using development funds, that they were being used in places that needed it the most, that were based on recipients' needs and not the needs of, for instance, Canadian mining companies to obtain and retain the consent of people negatively affected by the mining companies' operations—

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

I think that's fair enough. We do have decades of what I would call failed poverty reduction strategies, where, as you just pointed out, money was spent and more money was seen as perhaps producing better results. It didn't do that. Now we're trying to tap into markets, which is a change.

I suppose another question for you...I'm kind of curious—

[The Chair, Conservative, Dean Allison]

Actually, that's all the time you have.

I'm going to turn to Ms. Brown for five minutes.

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

Thank you very much, Mr. Chair.

I'm pleased that universities are centres of conflicting thought so that people can explore lots of different ideas.

We had Carlo Dade here, senior fellow, School of International Development and Global Studies, from the same institution as you. Mr. Dade told us, in his comments, that Canada is way far behind in this whole initiative, that actually USAID and the U.K. have been doing this for quite some time and that Canada is very late to the table on this initiative. So it's interesting to have the diversity of discussion.

Mr. Shariff, I'm very interested in your comments about the maximizing of multiplier effects. We often talk about trickle-down effects, and I think that's what you're looking at with some of the initiatives your organization has taken. You talked about economies being interdependent, that one initiative can create a multitude of other impacts. You talked about the mobile phone company and you talked about Roshan.

I'd really like to know more about the agribusiness and the tourism that you talked about in your new business models. How are those creating those ripple effects in the economy that are allowing other people to start their own businesses, for instance? Can you talk about those?

[Khalil Shariff]

Mr. Chairman, thank you.

I do think that one of the impacts of intelligent and thoughtful private sector activity in the developing world is that it has ripple effects.

I would like to say, though, that I don't think it is an automatic outcome. I think they have to be designed this way. They have to be designed with a development mindset. If designed with a development mindset, there are huge possibilities.

If I take the tourism example, tourism is the sector that employs among the most people in the world. It's a very important sector for the developing world. It also earns hard currency. But you can have a tourism sector that attracts low value-added tourists or you can have one that attracts high value-added tourists.

The Serena hotel chain has tried very hard to establish benchmark-creating investments, to demonstrate that in the developing world, with development world talent, you can create global standard facilities and then attract global standard tourists, business people, and attract a conference market, etc. But if you are to do that, you have to do it in a way that also creates a strong local constituency. You do a lot of work in training, you do a lot of work in backward linkages to all the supply chains that would help a hotel do its business, whether it's food or all the services a hotel needs. All of that, if intelligently designed, can be sourced from local markets.

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

May I just interrupt for one moment?

[Khalil Shariff]

Yes.

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

Do you have a hotel in Nairobi, Kenya?

[Khalil Shariff]

Yes, the Nairobi Serena Hotel.

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

I was there. It's an absolutely wonderful hotel.

[Khalil Shariff]

The other, in Afghanistan, the Kabul Serena Hotel, was an early investment, partly also to try to spur a whole series of other private sector investors in the country at a fragile time.

I think the other requirement is that you have to have long timeframes. I don't think you can run this kind of private enterprise with simply a quarterly earnings mindset. You have to believe you're investing in the long term, and what you're creating is effectively permanent capacity in the country. You also recognize that these are fragile environments, so there's going to be a certain level of volatility.

The right combination of patience and persistence can pay off, I think, if you have the long-term thinking and if you've got the right score card. Profits are essential. You can't do sustainable economic work if you're not able to cover your costs and more. But you also need to be deliberate about identifying other outcomes you're seeking to achieve and measure them. They have to be measurable. I think where we've had enterprises able to do both, we've seen that kind of impact.

The Serena hotel chain now, of course, floats on the public exchanges in east Africa. It's a public company in Kenya. So it's another multiplier effect, because now the actual equity ownership of a firm like that is democratized.

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

So the food you're serving in your restaurants, you're buying from local farmers. I understand from my stay there that the Serena Hotel accessed coffee and mangos—my favourite—from local farmers. That's generating an income for those farmers that is, again, making them independent, self-reliant businesses in the area.

Can you talk about agribusiness a little bit and how that's being impacted by what you're doing?

[The Chair, Conservative, Dean Allison]

That's all the time you have, but go ahead and I'll let you finish.

[Khalil Shariff]

Obviously, agribusiness is a big area. Again, I don't think it necessarily means large, corporatized farms. I think what we're talking about here is how you can help small-holder farmers aggregate their input in an intelligent way and get value out of it. We're seeing a lot of experiments, and French beans is an example. I've talked about honey, and we're seeing this in cotton in West Africa, in Côte d'Ivoire. We see it in rice and we see it in sesame seed. What it requires is a willing entrepreneur who's able to bring global expertise, which goes back to the issue of knowledge transfer.

I think part of what we require in the developing world is the best knowledge in the world. One of the severest forms of marginalization is marginalization from the global knowledge society, where your knowledge horizon is simply what you've inherited, not what is known in the world. So what does it take for us to be able to bring the best knowledge in management techniques in agribusiness to the developing world? That's the challenge I think we have to confront. If we're not willing to bring global standards of excellence to these issues in the developing world, that is simply to say it's “good enough for Africa” or “good enough for Asia”, and we don't think that's tenable.

We think that where Canada has gold standard practices that can be brought to bear, they should be, with a development mindset involved.

[The Chair, Conservative, Dean Allison]

That's what we heard from our guest from Sudan, who said that one issue they have is farmers being able to produce more because of the technology we understand in the west versus what they have. You just reinforced that point.

We're going to move over to Madame Péclet for five minutes.

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

Thank you, Mr. Chair.

I would like some clarifications. Mr. Shariff, everything you are advocating—helping farms, small farmers and small businesses—is not really the main topic of discussion. We have nothing against microcredit and we encourage it. It develops expertise and that creates wealth, as you said. The point here is about giving out money that belongs to the Canadian taxpayer. Each and every Canadian is giving money to large companies that are already well set up in some countries and are probably already making millions of dollars in profits. That is what we are talking about. We have to make a distinction between giving money to a company that is already well established and already has employees, and giving it to a non-profit organization.

My question is about the redistribution of wealth; both witnesses can answer. If we give international assistance money to a company that is already very profitable, that already hires workers, and that is developing a country's natural resources, do you really think that that will allow wealth to be redistributed? Redistributing profits would be a good way to create wealth around a company.

Does a company extracting natural resources benefit the people? Let us be honest and talk about things as they really are. Does it really benefit the local population, or the company? I am talking here about companies that are set up to make profits, not about your very well respected non-profit organization. So we have to distinguish between a mining company and a non-profit organization.

[Khalil Shariff]

Mr. Chairman, let me begin by clarifying the premise of the question, which I appreciate.

My understanding is that the committee is looking at the broad question of the role of the private sector in achieving international development objectives. I think Professor Brown and I have taken different approaches to answering that question. Our answer to that question is based on our experience on the role of private sector in development. We have simply taken the approach to share what we have distilled in half a century of work in this area.

To the very specific question you've asked, it seems to us the important issue is how you can help create an economic dynamic even among the most marginalized populations in the developing world. Without creating some kind of economic dynamic for marginalized communities, they will never have the resources they need to be able to invest in their own futures. I don't think we can ignore that question. I don't think it's the only question we have to look at, but it is a central question that we must address.

There are many different ways we're going to have to look at that. There'll be some very micro kinds of ways we'll look at that. There'll be financial services institutions that we'll look at. We'll look at some major enterprises. All of them, if they have the right developmental mindset, can have an impact among marginalized populations.

The bulk of the committee's discussion today I think has been focused on a very specific issue around natural resources management and mining. I have to say that my own perspective is that it is inescapable that mineral wealth in the developing world is going to be a major driver of the future of these countries. That is not the end of the question; that is the beginning of the question. The issue now is, what supports are we ready to provide the developing world in order to help them manage their natural resources well in a way that will be a force and an engine for national development? That's the question, and I don't think we've got clear answers.

There's a very specific experiment that CIDA is—

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

I would just like to point out that one of the most important parts of international aid is the creation of political stability in a country that's usually in a crisis. Do you really think that any private sector company would be able to create a political democracy or political stability in a country that's in crisis? Do you really think that a company, such as a hotel or a mining company, would be able to give that stability to people in a country that is in crisis, that is not a democracy and does not have a judicial system?

We Canadians give funds to our government for international aid to invest in a country to give it stability. Do you really think that would be achieved by the private sector companies that wish to make profits? That's my question.

[The Chair, Conservative, Dean Allison]

That's all the time, but once again, I'll let you finish the question.

[Dr. Stephen Brown]

Can I have a crack at it?

[Khalil Shariff]

Mr. Chairman, I think our supports to countries are different depending on the situation they're in. I think you're right that in a time of a humanitarian crisis, there are certain things you have to prioritize. At other points in a country's development, you begin to include other kinds of supports.

I think it's our perspective that you need strong governments, but you also need a strong landscape of institutions outside of government, all the private sector, frankly. In our system, we call both the commercial private sector and civil society the private sector. They're outside of government.

We think that a healthy society, one that is resilient against crisis, is one that has robust institutions across all parts of society. That's been our experience, and it's what we experience in Canada.

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

Can we get a little bit of—

[The Chair, Conservative, Dean Allison]

Mr. Brown, do you have a quick response to that?