Foreign Affairs Committee on June 4th, 2012

[The Chair, Conservative, Dean Allison]

Pursuant to Standing Order 108(2), our study of the role of the private sector in achieving Canada's international development interests will begin.

I want to thank Mr. John Guarino for coming today from Coca-Cola. Thank you very much. We're looking forward to hearing your testimony.

I also want to thank James Haga, who's with Engineers Without Borders. James, it's good to see you here, and thanks for your time.

We apologize for getting started a little late, but now that we're here and we're ready to roll, Mr. Guarino, we're going to start with your remarks. You've got ten minutes and then we'll hear from Mr. Haga.

Mr. Guarino has to catch a plane at 4:30, so I would ask individuals to address their questions to him for the first round at least. James can stick around a bit longer.

So let's get started.

Mr. Guarino, thank you again for taking the time to be here, for making the trip up just to talk to our committee. We're looking forward to your testimony. We're going to start with you. For ten minutes the floor is yours.

[John Guarino, President, Coca-Cola Refreshments Canada]

Thank you.

Good afternoon, Mr. Chair and members of the committee, and thank you very much for the invitation.

I'm John Guarino, president of Coca-Cola Refreshments Canada. Joining me today is Sandra Banks, vice-president, public affairs and communications.

I've had the privilege of living and working internationally for the last 25 years and serving markets in Europe, the Middle East, Africa, parts of Asia, and now, very proudly I might add, Canada. I've seen first-hand how the Coca-Cola company and its bottlers strive to make a positive difference in the communities around the world, and particularly in Africa. I have been travelling to Africa for the last 20 years and have visited 25 countries on the continent. I have personally witnessed both the promise and the challenges of this great continent. I love Africa for what it is and what it can be, and I am pleased to be here to share our story.

At the Coca-Cola company we know our business can only be as strong, sustainable, and healthy as the communities we serve. We believe that no company can have a significant impact in sustainability by working or thinking alone. Instead, we must rely on partnerships that connect business, government, and NGOs.

In Canada we collaborate with government, NGOs, other businesses, and local communities across the country to develop better solutions in the areas of active living and the environment. Through our partnership with the Breakfast Clubs of Canada, we have provided Minute Maid juices to school breakfast programs for over ten years. We work with ParticipAction to get kids off the couch and get them active, and with the WWF we are working to protect the Arctic habitat of the polar bear. Those are just a few of the ways we are partnering with others to make a positive difference. I should add that in Canada Coca-Cola operates in all ten provinces and employs directly 6,300 people in more than 50 facilities, including seven production plants.

Coca-Cola has been on the African continent since 1928, when the first bottling plant was established in Johannesburg, South Africa. Today Coca-Cola operates in all 56 countries and territories in Africa. We are one of the continent's largest private sector employers, with approximately 65,000 employees. In addition, it is estimated that for every person employed by Coca-Cola, more than ten people are employed in related industries.

Our corporate social investment programs in Africa are coordinated and implemented by the Coca-Cola Africa Foundation. Established in 2001 in response to the growth and impact of the HIV pandemic, today the Coca-Cola Africa Foundation supports many other community initiatives. In being here with you today, I will focus on four important areas of our investments in Africa. These are health, including undernutrition and disease; women economic entrepreneurship; water; and sustainable agriculture. Given the scale and complexity of today's health issues, it's challenging for one business or even one industry to make a material difference on its own.

As you may know, malnutrition accounts for 11% of the global burden of disease, and it is the number one risk to health worldwide. We are using our beverage expertise to help with undernutrition, and Coca-Cola is working to bridge the protein gap in impoverished nations with protein-rich beverages. Coca-Cola is developing and distributing a global fortified juice product to give school children much-needed vitamins and minerals. We are partnering with government, nutrition experts, and organizations like the World Food Programme and the Howard G. Buffett Foundation to get this beverage into school lunch programs, together with nutrition and physical activity education. Our global partners on this include Cutrale Citrus Juices; DSM, a global science-based company active in health and nutrition; Tetra Pak; and the Global Alliance for Improved Nutrition, an NGO related to the Bill and Melinda Gates Foundation.

Last year we launched pilots in Colombia, Malaysia, and Ghana. So far in Ghana we've reached 2,500 students, and we expect to reach 4,000 students by the end of next month.

Our concern for health and well-being extends beyond undernourishment. Since 2006 the Coca-Cola company has been involved in NetsforLife, a partnership battling malaria in sub-Saharan Africa. To date, NetsforLife has distributed 8.5 million nets, saved the lives of more than 100,000 children, and trained nearly 74,000 malaria control agents.

AIDS, of course, is one of the great health issues of our time. Through the Coca-Cola Africa Foundation, we have formed partnerships with local grassroots and international NGOs to deliver HIV/AIDS education and prevention.

Our partnership with the Africa Network for Children Orphaned and at Risk, or ANCHOR, helps to support over 146,000 HIV/AIDS orphans and vulnerable children across eight African countries.

Building on an existing partnership with the Global Fund to Fight AIDS, we joined with RED late last year to raise money and awareness in the fight against AIDS with our music platforms and other resources.

The world is now close to achieving the first AIDS-free generation of our time by virtually eliminating mother-to-child HIV transmission by 2015.

Coca-Cola is also working with the Global Fund, the Bill and Melinda Gates Foundation, and the Yale health leadership institute to increase access to vital medicines in Tanzania. Using our supply chain expertise, we've joined with Tanzania's Medical Stores Department to develop a new distribution strategy, redesign core processes, and train medical store staffers. We're now working with our partners to replicate this initiative in Ghana, which has an acute need for vaccine distribution.

Around the world, we've seen first-hand the positive impact women's economic empowerment has on the health and well-being of families. In fact, we're striving to enable the empowerment of five million women entrepreneurs worldwide across our value chain by 2020. This effort, called “5 BY 20”, was launched in 2010. We expect to reach a total of 300,000 women by the end of this year.

In Africa, our micro distribution centre model has provided business ownership opportunities for women in Kenya, Tanzania, Uganda, Ethiopia, and Mozambique. In Nigeria and Ghana, over 70% of the micro distributors are owned by women.

Water is a very important focus for us, and one closely related to health and women's empowerment. By 2020 we're committed to giving back 100% of the water used in bottling our beverages.

Already we've conducted 386 community water projects in 94 countries since 2005. These projects not only have a direct health impact but they also empower women, given the time many women must spend carrying water, particularly in Africa.

To date, 42 water projects in 27 countries have been supported, in partnership with and co-funded by the United States Agency for International Development, USAID, under the Water and Development Alliance, or WADA, and other partners.

In Senegal we undertook a Water and Development Alliance project to enhance access to water and sanitation for approximately 22,500 people in poor, rural, and remote communities. Our WADA project in Tanzania is providing water, sanitation, and hygiene services to almost 17,000 people living in ecologically sensitive areas.

The Coca-Cola Africa Foundation also has a Replenish Africa Initiative, known by its acronym “RAIN”. Our goal is to provide over two million people with access to safe drinking water by 2015. In the Amhara region of northwestern Ethiopia, RAIN has given access to water and sanitation to over 45,000 rural residents. RAIN will launch over 100 water access programs across Africa, including sanitation and hygiene education programs.

Finally, encouraging more sustainable agriculture practices is another focus for us. Agricultural products are ingredients in almost all of our beverages, so the health of our business depends on a healthy agricultural supply chain.

Our juice business is growing significantly. To make sure we can source enough juice to meet the demand, and to help improve the livelihoods of fruit farmers, we formed Project Nurture. This is an innovative four-year, $11.5-million partnership with the Gates Foundation and TechnoServe, a not-for-profit business organization.

With Project Nurture, we are helping more than 50,000 farmers in Kenya and Uganda to grow mangoes and passion fruit for locally sold fruit juices, building Coca-Cola's business while creating sustainable livelihoods at the farm level. A third of the participating farmers are women.

So far, more than 18,000 metric tonnes of fresh fruit from this project have been harvested and sold. Minute Maid juice drinks using locally grown mangoes from this project will be launched in eight countries beginning next month.

I know I've covered a lot of territory, and I appreciate your attention. I cannot promise to know all the details behind our many global initiatives, but I will do my best to address any questions you may have.

Thank you very much.

[The Chair, Conservative, Dean Allison]

Thank you.

We're now going to turn it over to Mr. Haga. You have ten minutes, sir.

[James Haga, Director of Advocacy, Engineers Without Borders Canada]

Good afternoon, everybody. It's my pleasure to be here today. Thank you very much for fitting me into your busy schedules.

My name is James Haga. I have the privilege of working as a senior director with a Canadian organization called Engineers Without Borders. I've been working with this organization for four years, starting in west Africa and Ghana. I've also had the chance to work in east Africa, in Kenya and Tanzania, and I've been in our office in Toronto for the last three years.

I'll start by telling you a bit about our organization. We have over 55,000 members of EWB, as it's known across the country. We are an engineering-based organization, as is evidenced by our name. We attempt to work in a systemic way, a way you would expect engineers would try to contribute to society, focusing not on symptoms, but on the underlying root causes of why poverty persists.

We have a staff of over 60 people, in five countries in Africa. We focus primarily on three areas of development: first, water and sanitation, particularly via support and maintenance systems, ensuring that the longevity of water resources continues to be accessible; secondly, through agricultural development; thirdly, through rural infrastructure development.

With respect to the subject matter the committee is focusing on right now, I'd like to focus my comments on an innovative new financing mechanism for development aid, one that we believe creates an opportunity for effective engagement between both public and private sector players.

As a leader in international development, the Government of Canada is not only dedicated to improving the lives of people living in poverty, but it is also committed to pushing boundaries in search of better and more effective ways to do such work.

We welcome and support recent commitments by Canada, for instance, untying all of Canada's aid and signing on to the International Aid Transparency Initiative, and being a leader in supporting initiatives such as the G-20's small and medium-sized enterprise finance challenge.

In 2012 Canada also ranked first among all G-8 countries on fulfilling commitments made at international summits, which is a great testament to our country.

The truth is that much of foreign aid does work, and things have been getting significantly better in recent years. Hundreds of millions of people around the world are better off because wealthy countries like ours paid to vaccinate children, dig wells, build roads, and buy school books.

That being said, some foreign aid is misspent. Critics argue that much of it is ineffective and can at times hinder development. Too often money is spent on inputs that fail to achieve the desired outcomes. While many aid programs are successful, others fail for a number of reasons. The primary flaw in the current way of delivering foreign aid is that it tends to strengthen the accountability from recipient countries to donors rather than their own citizens.

Canada allocates close to $5 billion a year in aid, yet even with our good achievements there is still more we can do to maximize the results of our dollars. In the context of the world's current fiscal reality, more than ever it is important to be creative in maximizing the value of those dollars.

With this in mind, I'm here today to talk to you about an idea for Canada to invest in, which is the new cost-effective approach to foreign aid called cash-on-delivery aid.

Critical to the subject matter of the committee's study, the cash-on-delivery approach provides an opportunity for innovative collaboration between public and private sector players. With this approach, the focus is firmly placed on delivering results in the most effective and efficient manner. Notably, this proposal is not focused on the amount of aid that Canada gives, but instead on making our approach to that aid more effective.

Cash-on-delivery aid is inherently a results-based funding approach. This means that Canada only provides funding once progress towards an agreed upon result has been demonstrated. In short, if results are not achieved, Canada doesn't pay.

Paying for results is nothing new in the world of business, but it's not necessarily the way traditional foreign aid has worked. By starting with the focus on results, cash-on-delivery aid can make some forms of foreign aid more effective, less corrupt, and better able to respond to what people truly need. In doing so, cash-on-delivery has the potential to capture more public support for aid programs that often save the lives of millions of people.

Let me provide a quick example of how cash-on-delivery aid could work.

Canada and the Government of Ghana could enter into a five-year contract that specifies a set of payments and what Ghana must do in order to receive those payments. These would be made public. The contract would set a baseline--for instance, the number of children expected to graduate from high school. The year after that and for five years running Ghana would receive $20 for every child who graduates up to that baseline number. As an incentive to do even better, additional money could be provided for every child who exceeded that baseline. The results would have to be accurately measured by Ghana. Since school records are often spotty, Ghana would administer a standardized test and count the number of students who took it and make those results public. Once the contract is signed—and the contract itself is a key element of how this would work—Canada would leave it up to the Government of Ghana to choose how it wants to deliver the agreed-upon result and who should do it. This means that the Government of Ghana, hypothetically, would be responsible for the end-product result, although they could choose the most effective and efficient way to deliver that result. It could be through their own public service, contracting a private company, engaging local or international NGOs, or any combination of the three.

Ghana could do whatever it thought was necessary to solve the problem. If it squandered resources or had money carved off through corruption and there were fewer graduates as a result, it would get less money. By definition, donors would not be wasting taxpayers' dollars.

You might be wondering if this approach is working or being piloted anywhere. In fact, it is currently being attempted through a partnership between the U.K.'s Department for International Development and the Government of Ethiopia. They've stepped into a contract. The idea is that the Department for International Development will make grant payments to the education ministry of Ethiopia for the increase in the number of students above a baseline that sit for or pass the national grade 10 exam. Education is just one example of a sector or an issue this model of aid could work through. Currently it is the only area in which this idea is being piloted.

Piloting cash-on-delivery aid would bolster Canada's reputation as a global leader in delivering effective, efficient, and innovative aid. It aligns very well with Canada's and CIDA's commitment to results and to greater accountability. This approach ensures a higher level of accountability for partner-country citizens and Canadians alike. By working through local governments to establish jointly desired outcomes and then gather precise, reliable information about those outcomes, cash-on-delivery strengthens public institutions and motivates political leaders in developing countries to care about measuring their country's progress towards clear goals.

This alone enhances accountability between partner governments and their citizens, which in the long term is absolutely essential for sustainable development. It would also alleviate the sense that a country's problems were being fixed by outsiders, and local officials and citizens would be able to claim ownership over their own progress. Further, because the cash-on-delivery model means that Canada transfers funds only once results have been demonstrated, Canadian citizens themselves can trust that their taxpayer dollars are being used effectively.

To wrap up and review, I believe there are a number of critical benefits to this approach to delivering foreign aid, things that could leverage both private and public sector players, with the defining element being that it puts an emphasis on the result and on whoever is best equipped to deliver that result in view of the partner country government with whom Canada would enter into a contract. This approach would maximize the value of Canada's aid by delivering funds only once measurable progress has been demonstrated. It would provide better and more evidence as to how Canada's aid efforts are making a difference in people's lives. It would increase the efficiency and sustainability of Canada's aid efforts by decreasing administrative burdens on both Canada and our partner countries and increasing partners' freedom and responsibility to manage and deliver on their own development commitments.

This approach would contribute to enhanced global security and the national interests of Canadians by facilitating the strengthening and stabilization of local leadership, political institutions, and civil society in developing nations. It would continue Canada's leadership in improving aid transparency and accountability, an area in which our country has quite recently become a global leader.

I believe that investing in cash-on-delivery aid would be another step in the right direction for Canada's aid policy. While it is certainly not a silver bullet approach, we believe there is considerable potential for this innovative financing model presenting Canada with a unique opportunity to maximize the value for money of our development efforts and lead the world in piloting an efficient results-based aid model.

Thank you very much. I will certainly do whatever I can to address any questions you might have.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Haga.

I forgot to introduce Ms. Banks, but Mr. Guarino introduced her. Ms. Banks, thank you for being here as vice-president of public affairs and communications with Coca-Cola.

As I mentioned before, Mr. Guarino needs to leave around 4:30. You can address your questions to whoever you want, but keep in mind that you'll only have him for half an hour. It is suggested that you ask those questions first, but we'll go from there.

Mr. Dewar, you have the first round, for seven minutes, please.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, and thank you to our guests.

I will start with Mr. Guarino. You mentioned a lot of work you have been doing internationally in the very comprehensive overview in your presentation today. I want to pull the lens back a bit. Do you or your company have a position on the millennium development goals?

[John Guarino]

On the....

[Paul Dewar, NDP, Ottawa Centre, ON]

Do you subscribe to the millennium development goals, which are looking at increasing aid effectiveness, looking at targets for governments to invest in development and aid. The target is 0.7% of gross national income. For example, Sweden has reached it. The U.K. is looking at bringing in legislation so that as a government they would reach the goal for international aid of 0.7% of their gross national income.

Are you aware of those goals, and do you, or maybe Ms. Banks, have an opinion on it from a policy perspective?

[John Guarino]

I've heard of the goals, but our company's view is we tend to not be looking at various goals like that on a day-to-day basis. I can get a detailed statement on anything we may have said on that.

Our approach is generally to work on issues in our local area of operations in terms of how we work with our partnerships, whether it's private sector, NGOs, governments, without looking necessarily in terms of funding goals or anything else. It would be more about agreeing on the objectives we're trying to do on an initiative basis, and who are the right people to bring together in that initiative, and how much we each have to put down, whether it's a company or our Africa foundation, and how we're going to fund that. That's how we would look at each initiative we were doing.

[Paul Dewar, NDP, Ottawa Centre, ON]

I mention it because you mentioned working with the Gates Foundation, for instance. I believe you also mentioned the Global Fund. These are organizations that have worked with government. I was simply wondering where you were from a corporate perspective in terms of what many have held up as the standard for international development, and that is achieving these goals.

Maybe I could come at it another way. What do you see as the role of government when it comes to international development?

[John Guarino]

I think particularly as it's related to many of the initiatives we do, depending on the country, whether in Africa or around the world, we can't do without government support, whether it's federal government, and very often it's local government, local communities. In Africa we may need tribal support to get some of these community initiatives done. It wouldn't be one size fits all in terms of how we work with government. It would be done on a country-by-country basis, depending on what their expertise was.

What we seek are the right experts to address where we think we can make a difference in how the communities operate. That's where we go for the expertise, and then it's working with whoever, whether it's the private sector or public sector, to get it done most effectively.

[Paul Dewar, NDP, Ottawa Centre, ON]

I'm curious. Do you have estimates about how much of your business—I believe it's grown significantly in the last number of years—is in the water business? In other words, with respect to your market in Canada—and if you have global it would be terrific—how much of the revenue comes from selling water in the beverage industry?

[John Guarino]

I don't know the exact number. We could probably get it. It would be well under 10%, probably below 5%.

[Paul Dewar, NDP, Ottawa Centre, ON]

Would you say it's a growing market?

[John Guarino]

Depending on the country. It's not growing everywhere.

[Paul Dewar, NDP, Ottawa Centre, ON]

Here in Canada.

[John Guarino]

Here in Canada we are not growing our normal water business.

[Paul Dewar, NDP, Ottawa Centre, ON]

No? It's not growing. Okay. If you have those numbers, that would be terrific.

I'm impressed with the recent program you're launching and will have growing in the next month, Project Nurture. I ask you that because some might say, with all due respect to Coke, you're in the business of selling beverages, and if we need to have people who are going to be supporting people to be more self-sustaining in their development of agriculture, or for that matter trying to get access to water, is Coca-Cola the best way to go? You can understand why someone might have that point of view. My argument is not to suggest that it's not good to have people doing good things, it's just a matter of who does that work.

Allow me to just ask you this question in terms of the project you're focusing on right now. You're doing two things, and you admit it in your presentation. On the one hand you're trying to get more people involved at a local level. On the other hand, you quite rightly are saying that for the purposes of your company you're trying to sell beverages, and that your goal is also to be able to sell the beverage locally. Is that correct?

[John Guarino]

Yes, we are trying to sell our beverages locally.

I think on water, in the grand scheme of things, we're actually a very small user of total water. We are working, as I said, with USAID, the WWF, and others in programs on water usage. As I said, we are committed to giving back as much water as we use in the bottling of our beverages by 2020, in other words, getting toward a water neutral state so that we're giving back exactly what we use in the bottling of our beverages.

We continue to make good progress against that goal. We report on that goal every year, on where we stand on it. We're doing that through a variety of efficiencies in terms of how we actually run our bottling operations and how we can save water there. The other is looking at other ways we can give back in terms of rainwater harvesting, supporting various initiatives such as watersheds and what not.

It's a little bit of both. It's about our being more efficient, but also our partnering with people to reduce. We have committed to getting to a level by 2020 of giving back exactly the amount we use in bottling our beverages. We think you can do both.

[Paul Dewar, NDP, Ottawa Centre, ON]

May I ask a policy question that's related to what you just said? You have concerns about the effects, particularly in Africa, around climate change, then. Are you concerned about water? I'm assuming that you're concerned about—

[John Guarino]

No. Water is a natural resource, and in some areas there are water scarcity issues, in parts of Africa as well. We've done many studies on that, working with independent firms on water scarcity and how we fit into that. It is certainly part of our planning, where we go in and put in plants to source the water in water-stressed areas. It is all part of everything we look at. We don't rely on our figures; we rely on—

[Paul Dewar, NDP, Ottawa Centre, ON]

No, I was simply making the point that it's a concern, that access to water is one of the threats of climate change. I was just seeing if you'd concur with that.

[John Guarino]

Certainly I don't want to get into.... We are concerned about having access to enough water and that we are able to replenish what we use. There are very different areas where there are water problems.

[The Chair, Conservative, Dean Allison]

Thanks, Mr. Dewar.

We're going to move over to the government side. Ms. Brown, seven minutes, please.

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

Thank you very much, Mr. Chair.

Thank you very much to our guests for being here.

Mr. Guarino, I'm going to address my comments to you because we have you for such a short time. First of all, I want to say that in achieving the millennium development goals, Canada is the only country in the world that has paid up on its financial commitments to the various global funds. Regardless of the percentage that people talk about, it's the actual money in hand that really makes the difference.

Contrary to what my opposition may think, I have run a business, and I know there is nothing wrong with self-interest in business. You need to have a return on your investments in order to grow your business and to continue investing in some of these other good funds you are putting money into.

I'm very interested in this part of your presentation where you talked about the fact that you are enabling the empowerment of five million women entrepreneurs worldwide across our value chain. I wonder if you could expand on that.

You know that our whole discussion here has been about the involvement of the private sector in helping us to achieve our development goals. There are those of us who see private sector involvement and growth in emerging economies as the key to seeing these countries become enabled economies.

I wonder if you could expand on exactly what's happening with women. How are they growing these micro-businesses? What impact is that having on the general economy?