Foreign Affairs Committee on June 20th, 2012

[The Acting Chair, Conservative, Nina Grewal]

I would like to bring this meeting to order.

I would also like to welcome the witnesses. Jim, thank you so much for your time, and, Mr. Ruszkowski, thank you so much.

We'll start with the agenda. I would like to ask Mr. Ruszkowski to start with his presentation, please.

[Jean-Paul Ruszkowski, President and CEO of the Parliamentary Centre, Parliamentary Centre]

Thank you very much, Madam Chair. Thank you for giving us the opportunity to talk about the role of parliamentarians in the extractive industries.

I am the president and CEO of the Parliamentary Centre, which is a Canadian organization that has existed for 40 years. We have worked in 45 legislatures around the world and have conducted more than 85 projects to support parliamentary strengthening around the world.

A lot of discussion has taken place in Canada on how Canadians should contribute to global prosperity in the long term through the extractive industries. That discussion is even deeper in other countries that are resource rich. It is my understanding that the need of emerging economies is mainly to acquire the tools to help governments, parliaments, and stakeholders reach a common understanding of the opportunities offered by the extractive industries and to mitigate the risks associated with them.

An important way to achieve a balance between the different views on this is to enhance the capacity and the knowledge of parliamentarians so that they can contribute to good governance in the industry sector. This is the reason the Parliamentary Centre has undertaken a job in Ghana to support the Ghanaian Parliament in managing the discovery of oil resources.

There are three core functions of Parliament—I'm not teaching you anything new—which are to represent the interests of the constituents, to legislate, and to oversee what the executive branch does.

In the value chain of extractive industries there is a role for parliamentarians at every step. The extractive industries value chain demonstrates that we have the ability to transform this into an opportunity and a source of development and prosperity for the people.

The chain is only as strong as its weakest link. It is up to us to seize the opportunity or squander it.

I'll deal now with some of these phases of the chain. The first is how to decide whether you extract resources. We have to think about the society as a whole. And it is important to assess realistically and accurately the potential of these resources. I also suggest that a cost-benefit analysis be done at this stage so that we know whether it's valuable and in the interest of the nation to exploit that resource.

The second phase is what we would call negotiating the best deal. The issue, primarily, for parliamentarians at this stage is to answer three main questions: who can explore and exploit the resources; how can such rights be allocated; and under what conditions will it be done?

We think a competitive bid process provides the host nation with a better opportunity to evaluate the prospective companies that intend to invest, which bring with them diverse experiences and capabilities, and for the nation to choose what is of the most benefit to them. Parliamentarians, particularly the members of the relevant committees, such as natural resources, should have a very good understanding of what such contracts entail. It is at this stage that we also must examine the potential negative impacts that could occur from such investments.

An efficient, effective award policy will exhibit certain characteristics. It has to be transparent. It has to be a competitive. There have to be non-discretionary procedures for the award of exploration, development, or production rights. There has to be a clear regulatory and contractual framework and well-defined roles for the institutions of the state.

In the third phase, which is actually the developing of the resource properly, parliamentarians have a key role to play in ensuring that the proper policies and regulatory frameworks are in place to enable efficient, effective, and sustainable management and oversight of the extractive sector. Parliament plays a role in overseeing the government agencies and in looking into how they allocate and account for the revenues.

The fourth aspect or phase is the collection and optimization of revenues. Extractive industries are subject to a great variety of fiscal instruments. These include various taxes, royalties, surface fees, bonuses, and production-sharing agreements.

Corporate tax structures and laws governing employment, the environment, and occupational health and safety also have implications for how the extractive industries will be managed. The key steps in transparent and sound revenue management are as follows.

First, we must have a macroeconomic policy and fiscal framework in place.

Second, we must also allocate public expenditures judiciously based on a medium-term expenditure framework that is also aligned with the country's priorities.

Third, we must ensure adequate scrutiny and appraisal of public investment choices to provide for sound revenue-sharing policies.

Fourth, we must encourage a public dialogue on the management of national extractive industries that stimulates and improves the transparency and the oversight by governments. Empowering Parliament and civil society to carry out their respective roles is essential to ensure the proper oversight and accountability of the government’s macroeconomic policy decisions.

Fifth, audits are also very critical to having sound industry management and can provide legislators and the general public with useful information on problem areas and recommendations that may reform it.

Last but not least, we must ensure long-lasting prosperity. Extractive resources are finite. Therefore, it is even more important that revenues from extractive industries are used to ensure future benefits for citizens, both for today and for tomorrow.

In conclusion, Madam Chair, I would like to say that the more that governments respect democratic freedoms, uphold standards of transparency and accountability, and demonstrate a commitment to building administrative capacity, the more likely it is that oil and mineral wealth will be used for the development purposes that improve the lives of citizens.

Thank you very much, Madam Chair.

[The Acting Chair, Conservative, Nina Grewal]

Thank you.

Now I would like to ask Mr. Abbott to start his presentation, please.

[Jim Abbott, As an Individual]

Thank you, Madam Chair. I would like to acknowledge the hard work of the clerk of the committee in getting this set up for us so that we could do this today.

My name is Jim Abbott. I had the privilege of serving as a member of Parliament for Kootenay—Columbia through six elections, from 1993 to 2011. I served on the Standing Committee on Foreign Affairs and the special committee on Afghanistan in my sixth term and was the parliamentary secretary to the Minister of International Cooperation.

My presentation today will explain my continuing involvement with the personal initiative I began two years ago before my retirement. Then, as now, I derived no income from this project. As a matter of fact, my wife calls it my “expensive obsession”. Here are my proposals.

One, there is an increased demand for delivering capacity-building services in many countries that are envisaging new wealth in developing their non-renewable resources.

Two, we need to look at the next step, to increase our capacity to involve more parliamentarians in several priority countries in passing appropriate legislation. In many cases, legislators in those countries are functioning in a parliamentary system that lacks capacity to create and enact suitable legislation.

Three, every nation requires treasure to deliver services to its citizens. With good business practices, built on corporate social responsibility, extractive industries have the potential to create wealth and improve delivery of resources to citizens in developing nations.

Fourth, and finally, extractive industries need predictability.

In May 2009 I was approached by the president of the Canadian Public Service Commission, Ms. Maria Barrados. She is a noted international expert on building and maintaining public service capacity. The government and public service of Mongolia had approached Ms. Barrados about restructuring their public service because of the rapid expansion of extractive industries in Mongolia.

My part in Ms. Barrados' initiative evolved over time, primarily on the interface between politicians and bureaucrats.

In September 2009 the Canadian and Mongolian prime ministers witnessed the signing of an MOU in Ottawa that created the momentum to build civil service capacity to address Mongolia’s competence to govern in the best interests of Mongolia's citizens.

In January 2010 I travelled on my own time—and my own dime, I might say—to Ulan Bator to work with Ms. Barrados. I met with Mongolian officials, high-level bureaucrats, and politicians. It was evident to me that the Barrados initiative needed stronger parliamentary awareness and ownership in Mongolia, so I brought the issue to this committee, and in December 2010 you tabled a unanimous report. All parties were on the same page in the Canadian Parliament—a strong sign to citizens and governments in both nations.

You’re currently examining, and let me quote, “how private sector entities—notably increasingly global Canadian firms—can be catalysts in generating long-term economic growth and alleviating poverty in developing countries”.

I believe that thoughtful Canadians want to support the world of developing nations. But we're pummelled by irresponsible froth about the mythical, so-called, resource curse. Are there nations with conflict, corruption, lack of diversity, and enclave effects? You bet.

Do some governments have insufficient investment in human resources? Are there some who lack democracy and human rights, leading to low growth and worsened level of poverty? Well, regrettably, the answer to the list is yes. But it needn’t be so. The issue is good governance. The dividends of good extractive governance are a peaceful society, investor confidence, a diversified economy with forward and backward linkages to the extractive sector, economic growth, improved social infrastructure, shared prosperity, and a positive corporate social response. That's a list that any of us would want to be associated with.

We recognize that the responsibility of any civil service in any country is to create and apply regulations that accurately reflect the meaning and intent of legislation passed by democratically elected parliamentarians. Responsible corporations desire a strong civil service because extractive industries need predictability.

Canada has a proud history of investing time and treasure, assisting nations in the conduct of democratic elections. Canada’s objective has been to give citizens a voice, building a framework for peace, order, and good government.

My presentation is about giving them the parliamentary tools with which they can create that framework. This responds, by the way, to an increasing demand to deliver capacity-building services in many countries as they develop new wealth and their non-renewable resources.

In Canada—we've had the presentation here today—the Parliamentary Centre has been offering services to strengthen legislatures for the past 20 years, and has acquired extensive experience in helping Ghana negotiate a win-win deal with extractive industries in their country. I strongly recommend that you really deeply study this.

I also suggest that acknowledgement, in your final committee report, of current initiatives like that of the Parliamentary Centre will go a long way to propagate our Canadian expertise.

I also recommend that you review your 2010 committee recommendations, because the initiatives I've outlined need not be expensive. In that report, under the heading “Lesson and Examples”, it was noted that CIDA has funded projects designed and implemented by partner agencies for years. Canadian NGOs have developed relevant expertise working with public and private sector partners in countries around the world.

Gale Lee of CESO underlined the value of using retired and semi-retired volunteers to carry out this work. She said that the partners and clients “really appreciate the fact that volunteers are not doing this for any personal gain”.

Today Canada could populate comparable pools of political experts. Undoubtedly there are many MPs in the Canadian Association of Former Parliamentarians who would relish the chance to contribute to the parliamentary procedures in developing nations. The kind of program that was just outlined by Mr. Ruszkowski is an example. When the parliamentarians of Ghana receive the training, they can then do the necessary negotiating.

The 2010 committee recommended that the Government of Canada encourage the establishment of these kinds of committees so that they could move forward with this kind of initiative on a very low-cost basis. As stated, there are many Canadian retirees who want to contribute their expertise. Canada has the models on which we can build.

I look forward to your Q and A, and even more so to reading the report.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Abbott.

We'll start our first round of seven minutes, starting with the opposition.

Mr. Dewar, I believe you're going to share your time with Mr. Saganash.

[Paul Dewar, NDP, Ottawa Centre, ON]

Yes.

It's good to see you both.

It's a pleasure to see you again, Jim—if I may call you by your first name. I hope you're well. Thanks for your report and for your very precise recommendations.

I just wanted to underline your synopsis of the.... Were you really saying, and correct me if I'm wrong here, that the importance of investing in the public institution or the public capacity in countries that in particular have the extractive industries in their very...I guess nascent in their economies? Is that what you're getting at here, Jim?

[Jim Abbott]

Absolutely. The difficulty they have right at the moment is that they have a desire to move forward but they just simply don't have the parliamentary infrastructure with which they can control the businesses.

The businesses, on the other hand, are also looking for there to be a proper basis of being able to move forward, because they require a knowledge of what lays ahead of them—and that they are all going to be working on the same level playing field.

[Paul Dewar, NDP, Ottawa Centre, ON]

Just to be clear here, we're looking at the role of the private sector in development. In fact what you're telling us today is that there's a significant role for the public sector in terms of dealing with the private sector in jurisdictions.

Well, you mentioned Mongolia, but there are many others.

[Jim Abbott]

Yes, that's absolutely correct.

The difficulty, as I say, is that when you go to countries like Ghana, who have had this excellent training, they are equipped to be able to move forward.

I'm not suggesting for a second that we as Canadian parliamentarians—if you pardon me for my little lapse there—want to be telling them what to enact; we want to give them the power with which to enact it, and have the connection to the civil service so that whatever it is that is enacted can be enforced.

[Paul Dewar, NDP, Ottawa Centre, ON]

I will hand it over to my colleague, Mr. Saganash, but thanks again, Jim, for your intervention. It's good to see you again, even if virtually.

[Jim Abbott]

Thank you.

[Romeo Saganash, NDP, Abitibi—Baie-James—Nunavik—Eeyou, QC]

I thank Mr. Abbott and Mr. Ruszkowski for their presentations.

Mr. Chair, how much time do I have?

[The Chair, Conservative, Dean Allison]

You have five minutes; your colleagues left a lot.

[Romeo Saganash, NDP, Abitibi—Baie-James—Nunavik—Eeyou, QC]

My first question is for Mr. Ruszkowski, and I'll come back to Mr. Abbott, if I have time.

On your website, you list many partners with which you work around the world, but most of them seem to be either governments or think tanks.

Do you partner with the private sector for your projects?

[Jean-Paul Ruszkowski]

That is a very good question.

We have partnered with three British organizations: the Oxford Policy Management group, the Adam Smith Institute, and GRM International. These are private companies that work for profit. We have partnered also with ARD in the United States, which is owned by Tetra Tech, which is one of the largest corporations in the United States.

We have pre-qualified for contracts with USAID and with DFID with these four partners.

We establish relationships with partners around the world. In Kenya we have a partnership with the institute that does the training for parliamentarians in Kenya. We have a partnership in Costa Rica with Fundación para la Paz y la Democracia, FUNPADEM.

We are looking at other partnerships.

[Romeo Saganash, NDP, Abitibi—Baie-James—Nunavik—Eeyou, QC]

This committee is studying the role of the private sector in international development. Does your organization have an opinion on what is the proper role of the private sector in international development?

[Jean-Paul Ruszkowski]

I don't know if I'll be able to respond comprehensively to your question, but I want to give an example of why parliaments are important.

I was recently in Rwanda at a conference organized by the World Bank for parliamentarians. It was on development. The whole question was the role of the private sector. Many parliamentarians from Africa participated in the conference. I witnessed an exchange between a senior executive of a bank and a parliamentarian. In very brief terms the banker told the parliamentarian, “You learn about finance and then I will talk to you, because there is no point in talking to you unless you get educated.” I wouldn't say that the executive was very subtle, but there was a little bit of truth in what he was saying, in that parliamentarians are not elected because they know about finance or because they know about economics; they are elected because they have the trust of the people.

What I am trying to say is that in order for the private sector to thrive in emerging economies, there has to be an understanding of what the role of Parliament is in terms of legislation and oversight of the executive. In that respect it is very important for development purposes to have an important interlocutor with the private sector, which can be Parliament or the executive.

[Romeo Saganash, NDP, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Most of your projects seem to revolve around capacity-building for local governments and helping to build democratic institutions. Given the work that you do, would you agree that strong democratic institutions need to be in place before prosperity truly takes hold? Do you think you can build a strong, vibrant economic environment that will help raise people out of poverty?

[Jean-Paul Ruszkowski]

I was expecting that this question would be raised.

I would say that you cannot separate that. In other words, when you are developing a democratic culture, you're also developing a relationship of trust between the different stakeholders. I believe that if there is no prosperity, it is very difficult to have a harmonious situation with everyone. Prosperity brings the conditions under which people can actually work together. I believe that no growth is a danger for democracies, and it is not only in developing countries. We can see what has happened to Italy. Italy has a prime minister who nobody elected.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. Saganash.

We're now going to move over to the government side.

Mr. Van Kesteren, you have seven minutes, sir.

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

Thank you, Chair.

Hello, Jim. It's good to see you.

[Jim Abbott]

Good afternoon. Thank you.

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

You had many talks about this. I remember the times we would get together at night and discuss these very things over dinner. I want to direct your attention to Mongolia, because that's probably where you and I first started talking about this concept, and you had some experience there as well.

If you look at a country like Georgia, they managed to do something that a lot of countries have a whole lot of trouble with, and that's corruption. There has to be a willingness on the part of the government to embrace the basic principles of democracy. Am I right in saying that? And how do we encourage governments that have experimented with democracy that have a tendency to fall back into these old bad habits?

Can you tell us about the importance of that?

[Jim Abbott]

It's a very good question, Dave. Which comes first, the chicken or the egg, I guess is really what you're asking.

I believe what is part of this mix, part of the continuum, is the creation of a way in which the people of Mongolia, the people of Ghana, the people of whatever developing country, have an opportunity to have accountability on the part of their politicians. If you have a lot of corruption in any country anywhere, there's not going to be any kind of an effort at accountability.

As Canadians, we can encourage, and I'm sure we do, but what it all comes down to is a gradual process with so many moving parts that all have to come together to create a parliamentary system where there is accountability on the part of the parliamentarians, and that can only come from the pressure of the people of the country.

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

Would you agree that a free market system is as important as democracy?

I'll tell you what we witnessed in Ukraine. It was a society that had been stripped of all those principles. They no longer had a middle class. They no longer had the unguided hand.

Maybe one of the most important things is that they did away with private property. A lot of them have homes, but the government still owns that incredibly rich land. How important is that to influence governments, and can we do that? The very concept—you're talking about the study we did back in 2010. As parliamentarians, can we go to them, and do we have the right to encourage them along those free market principles?