Evidence of meeting #62 for Foreign Affairs and International Development in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was dfi.
A recording is available from Parliament.
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
EDC, in law, actually reports to the Minister of International Trade. It is an arm's-length crown corporation. It has its own financials, its own books.
Basically, the capitalization is being taken from the existing capital base of EDC.
9:25 a.m.
Liberal
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
It's EDC money that's taken from the fruits of their activities.
9:25 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
There's no actual money being transferred from the general revenues of the federal government to EDC. EDC has to find its own money.
Is there a separate board?
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
The governance will need to be defined as part of the corporate planning process. That said, we are talking about a new crown corporation, a wholly owned subsidiary of EDC, but a crown corporation in itself. As such, it will need to have its own board, a “fit for purpose” board.
9:25 a.m.
Liberal
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
EDC would appoint the board given that it's a wholly owned subsidiary.
9:25 a.m.
Liberal
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
That is something that will be set out in the parameters for designing this organization and conveyed to EDC in consideration—
9:25 a.m.
Liberal
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
This is a commercial crown corporation, which means that it's an arm's-length entity. It's arm's length so that it can behave in an independent manner and have the credibility to engage with private sector entities without others perceiving a potential risk of interference.
That being said, this is an agent of the crown and because of that, the governance around it has specific touchpoints at which ministers are able to provide strategic direction to the entity.
9:25 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
In theory, the crown could blow off the government if it decided that its priorities were different from those of the government.
9:25 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
No. Let me explain that.
The process for ensuring alignment with a crown corporation involves three notable events in terms of governance. The first one is a statement of priorities and accountabilities. The Minister of International Trade upon consultation with the Minister of International Development will send to the board of directors its priorities. It's basically giving them their homework.
In response to that, the board needs to generate a corporate plan. That corporate plan is provided to the ministers for consideration and they basically say, “Thank you for the statement of priorities and accountabilities. We've done our homework, and here's how we propose to deliver on the mandate you've given us.”
That corporate plan needs to be approved by the Treasury Board and it is the issue of an order in council such that an order in council is required in order for the corporation to actually execute that mandate.
May 16th, 2017 / 9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I'm not so much worried about the board itself. I'm more concerned about the government's priority. You'll be aware that the Auditor General has been highly critical of international aid priorities. Those seem to be changed as often as people's socks. His 2009 report was extremely critical of the lack of focus and poor priority setting, etc. If in fact the entity has to file a plan consistent with the government's priorities, and the government's priorities seem to change with some regularity, it is going to be very difficult to run a financial institution if in fact your major shareholder changes its priorities with every change in minister.
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
I can't speak to or defend the government's priorities. I think those are questions that are probably more appropriately posed to a minister of the crown.
9:30 a.m.
Liberal
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
The organization will need to be self-sustaining. The speed with which it attains that self-sustainability remains to be determined. It will depend on the portfolio that it constructs, and of course, the returns that it generates.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
BDC and Farm Credit have bounced around in their priorities. Over the years, I think they've sort of settled down to an expected return on equity. Do you expect a similar pattern with respect to this entity?
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
I think it remains to be seen. I wouldn't want to speculate. It doesn't even exist yet.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Finally, with respect to how this entity will function, will it be primarily a financial lending institution or will it be in effect an insurance entity?
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
That's a good question. In law, it will have access to all the instruments, so it will be able to do loans, take equity stakes, and provide guarantees. The extent to which it uses these instruments, so the degree to which and the sequencing over time, will depend on the organization itself. For example, loans tend to be less operationally intensive and, therefore, they can be done more quickly in terms of operationalizing than can other forms of transactions.
That said, there's nothing excluding it from doing equity earlier on rather than doing loans.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Mr. Allison raised the issue of it, in effect, being a microenterprise lender, which from an aid standpoint is a really good idea. From an administrative standpoint it's a disaster, because it costs so much to get these microloans out.
Is it realistic for a corporation centred in Ottawa to actually engage in microloans to various entities around the world?
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
Honestly, it depends. I can see that you could deal with this issue and structure microloans in various different ways, including providing funding to fund the funds. Now I'm getting technical, but there are various ways of dealing with this and—
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
In theory, you could lend to the Grameen Bank, for instance.
9:30 a.m.
Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development
That remains to be seen.