Foreign Affairs Committee on June 8th, 2017

[Peter Fragiskatos, Liberal, London North Centre, ON]

This is where the world is going, and most rational people would agree this should be an area of focus. Some might disagree.

You asked a question, and I'm looking at your note here about how this should all be categorized and whether or not the contributions made by a Canadian DFI should be booked as ODA.

[Aniket Bhushan]

Right.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I'm looking at a footnote in your brief here, “Only in specific instances such as grant-based technical assistance and capacity building components should they be reportable as ODA”. You go on to note, however, “there is evidence that developing countries care more about scale, speed and responsiveness of development finance partners and less and less about the modality and level of concessionality.”

Could you expand on that? What I interpret from that is although the financial contribution made by a Canadian DFI might not technically fit under the category of ODA, so you couldn't book it that way, what matters much more is the perspective of those countries that benefit. Those countries that are looking to grow economically might not care at all that it can't be booked as ODA. What they care about is investment.

Could you expand on that? That's how I interpret your point. Is that correct?

[Aniket Bhushan]

Your interpretation is correct and spot-on and expands my footnote to a whole paragraph almost. My point there is around the grant portion. I think the previous speaker also mentioned that there ought to maybe be a facility within Global Affairs Canada development that liaises on this specific portion of the DFI's work around the grant-based element. Now, because it is grant based and because it's technical assistance, it qualifies and it will qualify as ODA.

I'd like to take a step back. ODA, as a concept, is not a static concept. We know that over its history, the concept has only gone one way, which is expand, expand, and expand. More things count as ODA today, foreign aid, than they did in the past, so this is happening now as well, specifically as it comes to supporting the private sector using public dollars to leverage private investment. I foresee that in a few years, even as far as the donor part of this conversation, the DAC part of this conversation, it will become a moot point. But you're right that developing countries—there is data and research to show, especially for middle-income countries—care less and less about whether it's ODA or not. I'd argue they really don't care about whether it's called ODA or not.

It's donors looking to show how much they are contributing via ODA that care. Developing countries care about scale. They care about speed and responsiveness and they care about ownership, whether they have a say in directing the investment.

[The Chair, Liberal, Bob Nault]

Mr. Runde is back on.

[Peter Fragiskatos, Liberal, London North Centre, ON]

My last point is that I think it's very interesting you raise it, because I can see a potential critique coming that if it can't be strictly speaking booked as ODA, how does the DFI contribute to Canada reaching 0.7%?

From the perspective of Burkina Faso or Cameroon or Haiti or Afghanistan and Pakistan, that's really irrelevant. What they're looking for is investment. What they're looking for is to grow their economies. What they're looking for is meaningful partnership, and a DFI can help to facilitate that.

[Aniket Bhushan]

Yes, I think that's absolutely right. If you think about the numbers at scale here, this debate has come up before—and I've had to respond to this—the orders of magnitude are really not going to move the needle much in terms of how far Canada goes toward reaching 0.7% or not.

I'd argue that it's far more important to think in a more ambitious and longer-term and more scalable way about what we want to achieve here. Therefore, again back to my point about the mandate, the core, centrality of development additionality in the mandate and financial sustainability, those ought to be the objectives.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I would agree with you, and I think most Canadians would as well.

Have I time for another quick question?

[The Chair, Liberal, Bob Nault]

No.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Maybe in the next round.

Thank you very much.

[The Chair, Liberal, Bob Nault]

Thank you.

Mr. Aubin, you have the floor.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

My thanks to our guests for joining us. My questions go to our two witnesses. Perhaps we could go in the order of your opening statements.

Although I am not inherently against the idea of a development finance institute (DFI), I have one question. With $300 million over five years, is Canada just giving itself a lovely window onto the world without a real ability to act? I would also like to know whether, in the organizations you have been able to observe, what proportion of the annual budget goes to operating costs compared to the amount that goes for support and programming?

Do you want to answer that, Mr. Runde?

[Daniel Runde]

Someone has to translate that.

[Robert Aubin, NDP, Trois-Rivières, QC]

Go ahead, Mr. Bhushan.

[Aniket Bhushan]

So your question is what proportion of the budget is—

[Robert Aubin, NDP, Trois-Rivières, QC]

I was asking about the administration and operating costs of this institute, and about the funds that will go directly to programs in the field.

[Aniket Bhushan]

Yes, so overheads, administrative overhead. We don't know from the information that we have at hand. From what we know about DFIs, especially in starting up and standing up an institution, DFIs.... Depending upon how they want to invest, if they want to be very arm's-length investors and do what in the financial community anybody with a financial background would know as a “fund of funds” type of investment, they can get away with a smaller need there.

However, if a DFI really wants to be in certain countries, it needs to invest fairly significantly in what we call a ground game. It needs to know who to partner with, what deals are viable, and so forth. It could be a significant issue, if I have the question correctly.

We simply don't know what the proportion for the Canadian DFI ought to be or should be or how it's factored into the $300 million calculation.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

That certainly says a lot about the transparency of the DFIs you were talking about earlier.

Here is my other question.

Is the interpretation back up?

[The Chair, Liberal, Bob Nault]

Are you getting the translation?

[Daniel Runde]

Maybe not.

[The Chair, Liberal, Bob Nault]

No, sorry, Mr. Aubin. It doesn't seem to be working very well today.

[Robert Aubin, NDP, Trois-Rivières, QC]

I will keep going with Mr. Bhushan.

From what you know about the DFIs in the major OECD countries, are you able to establish a link between the public funding that comes from the state and the ability of a DFI to attract private investment?

For example, is there a link between the countries that come close to the 0.7% funding, or that reach it, and the ability of a DFI to attract private investment?

In other words, do the two go together in terms of growth, or, in a number of cases, is it a way to reduce the amount of state funding in order to provide work for the private sector?

[Aniket Bhushan]

There's a bit of nuance in that question that I don't want to lose, so even a modest translation would help.

[The Chair, Liberal, Bob Nault]

You have it translated just below you. Would someone show him where the translator is? That would have been helpful. I can tell we're having a rough day today. It's June, and it's Thursday. Hang in there, gang.

[Robert Aubin, NDP, Trois-Rivières, QC]

You should be able to hear me in English now, if it is working properly.