Okay, beautiful.
Thanks very much for inviting me on behalf of Engineers Without Borders and making it possible for me to join from Kampala.
As you all know, my name is James Haga, and I serve as the vice-president of strategy and investment at Engineers Without Borders. EWB is a Canadian NGO that provides seed funding, talent, and mentorship to social enterprises throughout sub-Saharan Africa.
I'm going to focus my comments on four points. First, what can aid do? Second, where should Canadian aid go? Third, how should we spend Canadian aid? Fourth, beyond aid, what else can Canada do?
First, I want to make the very obvious point that aid is only one of the tools that can contribute to development. Obviously there are many other equally or arguably more important factors beyond aid. These include a thriving private sector, addressing illicit financial flows through tax reform and co-operation, and dealing with things like global public goods such as climate change. Obviously aid is not a silver bullet and is not able to address all issues that drive sustainable development.
That being said, what can aid do?
Despite having given aid for many decades, there is very little evidence that aid, taken as a whole, promotes economic growth in poor countries. Instead, it's better to think of aid as a tool designed to provide people with basic human dignity and to meet their immediate needs. Critically, aid can limit inequality as the conditions for growth take shape, making balanced economic growth much more likely in the long run, rather than allowing economic growth to be captured by a concentrated elite. Frankly, living in Uganda, I see that play out day by day.
Aid can also be used as a tool to catalyze and mobilize other forms of capital and can be used effectively to take on risks in a targeted manner, to prove and derisk scalable solutions NGOs aren't structured to take on and that commercial enterprises don't have access to sufficient patient capital to test.
Second, where should Canadian aid go?
We should all recognize that it's going to take several decades for countries to have governments that have enough resources to deliver basic social services for their people. That is true here in Uganda as it is in many other countries throughout sub-Saharan Africa where we're working. While we should continue to be supported and encouraged by growing private flows in investment in many parts of the world, in the meantime, we should focus our aid, as others who are appearing before you today have said, on providing basic minimum standards for the poorest and most marginalized people, spending aid frankly where private money won't go. We think there is something unique and special about what concessional money can do to reach people who are otherwise largely unreachable.
The question of countries of focus for Canadian aid is, in my view, a second order question. More important is targeting the most vulnerable with our aid because we know that aid can make a difference to them and is well-suited to meet their needs. Despite the fact that there isn't a great deal or very much at all in the way of evidence that supports the fact that no countries that concentrate their aid in the narrow or geographical scope are more effective, it does lend to reasonable logic that economies of scale and a more focused approach makes sense for a country like Canada.
Certainly, choosing to have countries of focus doesn't seem like a terrific idea to us by any measure, and I would agree with my colleagues that how we choose those countries is what's most vital. Again, the most vulnerable countries and people who are struggling in the most severe states of poverty is where we would focus.
Still, despite having said that, the first order question that we think is most critical should focus on how much aid Canada as a country should give. We're saying that as an organization which for many years has advocated and spoken out about the cause of aid effectiveness and delivering best results for our money, but discussions of effectiveness alone can't detract from the importance of increasing the amount of aid that countries like Canada can offer.
I won't go into great detail on the statistics, but if you compare us to other OECD countries, we are not doing particularly glowingly on the merits of how much we give as a proportion of our GNI. We think that this needs to go up. If we don't start making increases to our aid budget soon, we won't get to count ourselves as leaders in the global development conversation. I would also point out it is not just about giving as much aid as is humanly possible because that is what other countries are doing and it is something that is within our strategic interest. As emerging economies continue to grow and become more active participants in world affairs, being a part of this conversation is really going to be a significant opportunity for our country to help shape the world that our kids and our grandkids will inherit. To be a leader and to be considered a leader, we have to be ambitious and inspire others to be ambitious in meeting their challenges head on.
The next point I want to make is about how we should spend Canadian aid. I am not going to comment specifically on which issues or sectors are best suited for Canada to invest in. I think there isn't necessarily a big case to be made for Canada having a unique position in any one sector. It is simply about mobilizing the resources and the most effective talent towards a given issue. We are a smart enough country to be able to do that on any number of issues. Instead, more importantly, we would counsel that Canada pick a small number and stick to those for an extended period of time. In our view, having dozens and dozens of focus and sub-focus areas is akin to having no real priorities at all, despite the fact that they all merit attention. If the government can select a small number of areas, based on a simple and logical set of criteria, the impact of Canadian aid will have a much better chance of growing, along with a deeper understanding of the system dynamics we are working within as a country and as a government.
In practice, unfortunately, this means making tough decisions to stay out of certain areas. Undoubtedly, this will be politically hard to do, because NGOs similar to my own will hammer you and your colleagues and tell harrowing stories about the suffering people experience as a result of issue X, imploring the government to do something and to direct resources towards that issue. Obviously, we have a lot of sympathy for that, but we all know and can agree quite easily that making decisions like that is not the smartest way to go about doing things. We would really urge a bit of a hard line on making some calls around what we want to do and what we are not going to do. That is what coordination and having a level of focus are all about.
Similarly, we want to acknowledge that bilateral aid is likely overrepresented as a percentage of our total aid package. Changing this would have implications, of course: fewer aid initiatives bearing the Canadian flag, but more investment going into multilateral institutions, the best of which, but not all of which, are viewed as more efficient, less susceptible to political winds, and less likely to be captured by commercial interest.
In the absence of a lot of strong evidence to the contrary, one way to have a more harmonized and less duplicative system is to invest in these global institutions, and we would advise that. Ultimately, we should make it an evidence-based decision, a rational trade-off between multilateral and bilateral systems. If there is evidence that says one is better, we support going in that direction. Still, we think bilateral aid has an important role to play, and it is uniquely positioned to test new and innovative ideas, for instance, integrating outcome-based funding arrangements such as development impact bonds into the government's tool box. Additionally, by spending more money through multilaterals, Global Affairs Canada staff resources can be freed up to focus on other global development issues like tax co-operation, illicit flows, environmental issues, immigration, and trade policy. This is an area where the merger of CIDA with Foreign Affairs can bear some fruit, allowing development professionals to have an impact on development beyond the mechanism of just foreign aid.
I will move to my last point, which is about what Canada can do to advance the sustainable development goals beyond aid.
We know that in the coming months Canada will put into operation a development finance initiative, which is a private sector investment vehicle that is complementary to aid and aimed at fostering sustainable economic opportunities in challenging markets. Let's make sure we get this right. It's designed to reach its mandate by privileging high-leverage investments and by monitoring and measuring its social impact against the SDGs, a key part of how we move that forward.
Similarly there is an immense need to modernize the rules governing the non-profit and charitable sectors to enable and encourage more impact investment and revenue-generating activity, particularly in the seed stages of social enterprise development, which is an area we are on the leading edge of in Canada and internationally. About a year ago there was a report by the Monitor Group about the case for impact investing. It outlined the fact there are very few impact investors willing to assume the high risks and uncertain returns associated with investing in the earliest stage, socially impactful businesses in the developing world. J.P. Morgan has put out a study saying that only 9% of total impact investments under management are committed to seed and very early stage start-up businesses. We think that if Canada looked at changing the regulations around non-profit and charitable structures to enable to more impact investing, that very early stage could get much better service.
We agree with the recommendations made by the MaRS Centre for Impact Investing, that recommend a capital matching program to help foster more impact investment funds. This could take the form of a fund, capitalized by the government, which would co-invest with private investors and philanthropists in impact investment funds that require additional capital to close a funding round. This would also provide a proof point on the value, both social and economic, of impact investing. I think it is something that, if we're going to modernize and get our Canadian development agenda better, is a critical and innovative way to make some progress.
That's it for me. Thank you for listening.