Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 11 - Evidence - Meeting of April 13, 2005
OTTAWA, Wednesday, April 13, 2005
The Standing Senate Committee on Foreign Affairs met this day at 4:07 p.m to examine the development and security challenges facing Africa; the response of the international community to enhance that continent's development and political stability; and Canadian foreign policy as it relates to Africa. Topic: Private Sector
Senator Peter A. Stollery (Chairman) in the chair.
[English]
The Chairman: Honourable senators, I will call the meeting to order. I see a quorum.
Welcome to this meeting of the Standing Senate Committee on Foreign Affairs. We are continuing our special study on Africa as ordered by the Senate on December 8.
[Translation]
Our meeting today is on the private sector in Africa, a topic that we also broached yesterday afternoon.
We will have the pleasure of hearing first from Mr. Yvon Bernier, Senior Director, Africa Region, Développement international Desjardins. DID is a Canadian company specializing in technical assistance and investment in the community financial sector in developing and emerging countries, and as the Minister of Finance indicated at our meeting yesterday, a success story in Africa.
[English]
We will then hear by video conference Mr. James Harmon who chaired the commission on capital flows to Africa. Mr. Harmon has spent much of his career as an investment banker and serves as Chairman of Harmon & Co., LLC, a firm that he founded to provide financial advice to corporations and governments. In 1997, Mr. Harmon was appointed by President Clinton, Chairman and President of the Export Bank of the United States, the U.S. equivalent of EDC.
We will hear from the Trade Facilitation Office Canada in the person of Mr. Brian Mitchell, Director, Africa. TFOC describes itself as a ``non-governmental, not-for-profit organization which has become the primary provider of information on the Canadian import market and a source of training for exporting and for investment attraction for developing and transition economy countries.''
I welcome you to the Senate of Canada.
[Translation]
Before we begin, I would just like to mention that we were also supposed to hear from the UN Commission on the private sector and development, but they had to cancel at the last minute. They will be sending us a written brief in the next few weeks.
[English]
I would remind our witnesses that we would like them to keep their opening statement to a reasonable minimum so that we can engage in a discussion with you sooner rather than later.
[Translation]
Mr. Bernier, I turn the floor over to you.
Mr. Yvon Bernier, Senior Director, Africa Region, Développement international Desjardins: Mr. Chairman, thank you for allowing us to discuss our experience in Africa in the community financial sector, which is part of the private sector.
The experience acquired by Développement international Desjardins over the last 35 years has convinced us that a strong private sector is indispensable to economic growth and the strengthening of civil society in developing countries.
It is undeniable that institutions offering financial intermediation in a dynamic and highly-performing private sector play a major role. In fact, many studies identify the direct link between access by a community to financial services — starting with the rate of bank ability — and the creation of national wealth.
Private sector businesses are, in most countries, the main vectors of job creation and economic development. On a continent where more than half the population is under 20, job creation and a reduction in economic inequity are essential to encouraging economic stability. We are convinced that an increase in the bank ability rate for the overall population is a driving force for private sector development. Mobilizing local savings deposits stimulates the demand for domestic products and allows individuals who demonstrate entrepreneurship to build up equity towards business start-ups while providing access to a source of financing that is adapted to their needs. The importance in developing nations of access to financial services in close proximity to the community has been recognized by the UN, which declared 2005 the international year of micro credit.
In some African countries, the rate of bank ability is one-tenth of 1 per cent and if this rate were transposed to Canada, it would mean that less than 35,000 individuals would have access to financial services. The non-availability of financing and adapted financial services is a strong break on the emergence and consolidation of effective private enterprises.
Through the excellence of the expertise developed by Canada in setting up an innovative and effective private sector, our country should play a primary role in developing the private sector in Africa.
It is our opinion that development strategies for community finance services must make it truly possible to develop the asset base of the community itself. Mobilizing community savings deposits encourages access to property and the means of production which are at the very heart of private sector development. This presupposes support for the creation of proactive institutions as financial intermediaries as well as the development and strengthening of locally- based leadership in order to ensure that these institutions survive. In our opinion, these institutions must be fully integrated into the formal financial sector and, of course, regulated by monetary authorities.
Access to community financial services obviously requires setting up local institutions with intervention strategies aimed at offering a range of services adapted to the growing needs of both clients and members-owners. While average loans of $CAN 700 made to clients by institutions receiving support from Desjardins in Africa meet the needs of the poorest, it should be emphasized that these institutions are able to set up a range of services to accompany their clients over time.
Accessibility is one of our chief concerns. Loans of around $25 are core products for poor clients. Those can then be increased by way of intermediary loans, individual loans for productive activities, for example, in agriculture or small business. Corporate financial centres have been set up for bigger loans and also for housing loans, accompanied by deposit and insurance products to safeguard the assets of clients or members of savings and credit unions.
The setting up of corporate financial centres is a good example of an innovative activity that plays a primary role in private sector development. These CFCs contribute to the creation of a unique centre of business financing expertise. This centre of expertise helps businesses to find bigger sources of loans or financing.
These businesses could have need of several thousands of dollars to finance growth. In general, the targeted niche is from $CAN 3,000 to $CAN 50,000. By supporting the creation of CFCs in Africa, Desjardins is helping consolidate entrepreneurship and job creation. Out of five CFCs, Senegal stands out as a rather compelling example. In less than 12 months, 1,000 loans were given to small businesses, for a total of around $CAN 8 million. So that has a significant impact on job retention and creation in Senegal, particularly in Dakar.
In rural and thinly populated areas, access to technology facilitates the delivery of low-cost services in close proximity to the client, deposit and loan services. A test in 2004 in Mali of a mobile application, Application mobile d'information sur les opérations, providing information on operations gave financial institution staff members the use of a pocket PC and handheld computer to deliver services to rural area communities. The challenge of access also affects Canada, where financial cooperatives are often the only institutions delivering services to rural communities. Technology is also at the centre of these services.
In Canada, 58 per cent of the 2,353 small communities have access to just one financial institution, and 76 per cent of those institutions are cooperatives or credit unions. Accessibility in Canada is still a challenge too.
Due to the fast pace of urbanization in developing nations, micro-housing programs also appear to hold promise. Canada has expertise in this area. A dynamic housing sector is recognized as a driving force for the development of local economies, job creation and the building an asset base.
Now let us turn to factors encouraging private sector development. According to our analysis, the success encountered in recent years by Canada in promoting the private sector can be explained by a long-term commitment to its partners. This continuity has in fact been instrumental in the maturity achieved by community financial institutions which today play a major role in private sector development. Desjardins partner networks operating in 13 countries in Africa today have nearly 2 million client-members — 40 per cent of whom are women — and provide services to over 10 million individuals through community-based services provided in close proximity to the client base, assuming a minimum of five people per family. In addition, this contributes to the strengthening of civil society by being routed in the community. These institutions belong to the community and are involved in local development. If you also count their 5,000 volunteers, it is also a learning experience in living democracy.
Développement international Desjardins recognizes that the State has a major role to play in creating conditions that are favorable to the emergence and development of the private sector. However, this should be a regulatory role avoiding direct intervention. In Africa especially, past efforts have shown that direct intervention by government in this area often hampers private sector development. As a result, we think that government should act as a facilitator and not as a promoter and even less as a direct operator. Support by government for promoting the private sector should be centred on regulation and supervision.
By its very nature, development of the private sector is difficult to reconcile with a strategy of budgetary assistance often proposed for developing nations. It would be utopian in our opinion to count solely on foreign investment as a panacea for private sector development.
While a gradual transfer of Canadian international aid budgets towards multilateral organizations has been observed in recent years, we feel that it is important for Canada to maintain a significant level of room to maneuver in terms of bilateral assistance. For example, in 2003, 80 per cent of Canadian aid in Africa was not managed by Canadian authorities. Including budgetary support programs, multilateral transfers and SWAPS, 83 per cent of the Canadian aid takes the form of direct transfers and is no longer managed under Canadian authority .
In conclusion, it is our opinion that Canada must pursue strategies aimed at developing a veritable local leadership by encouraging support based on specialized Canadian expertise. The value of this Canadian expertise must be utilized in promoting the private sector. Desjardins partners in Africa are concerned with maintaining their ties to institutions which have stood the test of time in the north. Canada's continuity in commitment to promoting the private sector is an element that should be maintained for sustainable development.
The Chairman: Thank you, Mr. Bernier.
[English]
I would like to apologize to Mr. Harmon who did not have interpretation at the beginning.
Mr. Harmon, please give us your presentation.
Mr. James Harmon, Chairman, Commission On Capital Flows to Africa: Mr. Chairman, honourable senators, thank you for inviting me to appear before you today to discuss capital flows to Africa. It is a pleasure for me to address you and I only regret that prior commitments prevented me from appearing in person.
Before I begin, I would like to commend you on your hard work and commitment to Africa's development. For some years I have respected Canada's leading role in support for developing countries. As Chairman of the Export- Import Bank of the United States between 1997-01, I followed with interest the good work of the Export Development Corporation. In June of 2002, the announcement at the G8 meeting in Alberta of the $500 million Canada Fund for Africa was encouraging. We viewed this fund as a potential catalyst for increasing capital flows to Africa and verified Canada's important leading role in support for Africa.
With the limited time that you have today, it is not necessary to summarize why or how Africa is at the margins of the global economy. With the time constraints in mind, I will not discuss the crisis in health care.
In the U.S., both President Clinton and President Bush have focussed more attention on development issues for Africa than all prior leadership. With the passage of the African Growth and Opportunity Act in the year 2000, trade with Africa became not only a means for stimulating economic development but also a rationale for deeper commercial engagement for the region. In addition to the U.S. Congress lowering duties and quotas, U.S. agencies became more active and stimulating capital flows to Africa. In January of 1998 for example, I was the Chairman of the Export- Import Bank in the United States and we were open in only 18 countries in Africa. Three years later Ex-Im Bank was open in 34 countries. During this period, the volume of credit from the Ex-Im Bank for the public and private sectors of sub-Sahara and Africa grew from $50 million a year to approximately $800 million per annum.
The number of transactions also increased significantly. For example, in Ghana the volume of transactions supported by the Ex-Im Bank increased ten-fold during this period.
I am pleased to say that the Ex-Im Bank has continued to focus on Africa in the years since I left. This trend underscores the vital role that the public sector can play when it is focussed on increasing capital flows to a region. The private sector will often follow the public sector. It is against this backdrop that the bipartisan Commission on Capital Flows to Africa was formed. Members included leaders from business and academia, former government officials, including the former President of Mexico and the former director of the IMF, and representatives of Africa, the UK, Germany and Japan. Consideration was given to steps that the U.S. could take on its own, as well as in the G8 context to enhance its commercial position in Africa while accelerating the regions integration into the global economy.
A copy of this final report is available on the Internet.
Engaging Africa's private sector and facilitating new investment in the region is challenging. The perception of risk is still high and identifying worthy projects can be difficult. Nevertheless, it is apparent that African entrepreneurs and African government officials increasingly view enhanced private sector activity as vital to Africa's development. It is critical as a means of job creation, skills enhancement, technology acquisition, income generation and integrating Africa into the global economy. At the same time, leaders in the G8 are taking steps to increase funds available for entrepreneurial activities. Public funds often stimulate private capital flows, especially, in perceived high-risk environments, such as Africa.
Recent increases in equity prices of publicly traded African companies, concurrent with higher commodity prices, have triggered an increase in the formation of private equity funds to invest in the region. It is important that this window of opportunity for attracting capital to Africa be sustained and expanded. This of course is where the Canada Fund for Africa will be valuable.
The Commission on Capital Flows to Africa published in June 2003, a ten-year strategy for increasing the availability of capital in Africa. This strategy was predicated on a series of recommendations, many of which are similar to the parts of the G8 African Action Plan adopted in Alberta in 2002.
I will briefly summarize the recommendations that we made as to those which pertain to the G8 and to other countries.
First, the G8 we should propose to the OECD that export credit agencies be allowed to offer 20-year repayment terms instead of the ten years for African projects and what is more important is to raise the ceiling of local costs from 15 per cent to 50 per cent for export value. This small little item that the OECD could do would expand the amount of capital for African projects very dramatically. What we mean is that when you support an export, whether it is pumps or an aircraft or whatever it may be for Africa, we are often limited at the export credit agency, whether it is ECD, the British or the Americans, we are limited by 15 per cent of the export value.
The Norwegian government recommended the elimination of this limitation four years ago and the OECD has not yet taken it up. However, allowing the export credit agencies of the G8 to support local costs for projects would increase significantly the amount of capital for the projects.
A significant portion of the ODA should be invested in strengthening the conditions of growth in Africa's private sector as it relates to the development of human capital. ODA should also be devoted to the establishment of long-term low-rate financing vehicles dedicated to small business in Africa, as well as to the provisions of related technical assistance. This is a critical item because we need to help support the SMEs in Africa.
The G8 should support an appropriate process to review the Heavily Indebted Poor Countries initiative, that is HIPC, and consider whether it is desirable to pursue debt relief proposals that go beyond HIPC. Frankly, HIPC has not worked and we need to review that process.
The G8 governments and the private sector entities should create an African financial fellowship program that would second professionals with finance capital markets, corporate finance, and economic policy experience to African countries to work in public and private institutions for a certain period. In exchange, each participating African country would commit two individuals for training for up to two years at qualified investment or commercial banks. This seemed to be a relatively easy thing because the private banks of the world would support this at their own cost. Therefore, at no public sector cost, we could have a very significant exchange of talent between the countries in the G8 and African countries. This would allow the G8 countries to become more familiar with the problems and challenges in the African countries, and allow the young talent in Africa to be trained at that various different financial institutions around the world.
The African Peer Review Mechanism together with NEPAD secretariat should be encouraged to publish a set of best practices for African governments seeking to increase FDI and encourage all African countries to seek a sovereign credit rating by an international credit rating agency. In that last recommendation there has been some progress.
I thank you again for inviting me to give you my comments. I would be pleased to answer questions when it is appropriate.
The Chairman: Thank you, Mr. Harmon. Mr. Mitchell, please proceed with your presentation.
Mr. Brian Mitchell, Director, Africa, Trade Facilitation Office: Honourable senators, thank you for this opportunity to address the topic that is the heart of our mission and mandate: the development of the private sector as a means to promote economic development and poverty alleviation.
More specifically our mandate is the promotion of export capacity within the small- and medium-sized enterprise sector and the promotion of imports by this sector from developing countries to Canada.
My particular responsibility at TFOC is the management of our Africa program. I have recently returned from an assessment mission in Mali, the fifth country in a program that we operate in partnership with the International Trade Centre and funded by CIDA's Canada Fund for Africa, called the Program for Building African Capacity for Trade.
One hour into a visit to Bamako, Accra or Dar es Salaam, and one can draw an immediate conclusion: the private sector and the entrepreneurial spirit it requires are alive in Africa. However, much of the entrepreneurial efforts are informal, inefficient and hampered by a variety of impediments.
What are some of the realities on the ground?
Last week we visited a regional exhibition of furniture producers from the West African region. There we meet a Ghanaian producer who faced the hurdle of it taking more than seven days to ship her products from Accra to Bamako, a distance of 1,000 kilometres. The journey was prolonged because of numerous formal and ad hoc check points, where documents were taken and often not returned until the next day and only after a bribe was paid. Moreover, at the border the producer had to pay a 40 per cent duty among other taxes on these locally produced goods, despite the fact that Ghana and Mali are members of a free trade zone as of January 1, 2005.
Later in the week, we met some mango producers who were frustrated because of a lack of credit to purchase the right quality of cartons needed have their produce accepted and transported without undo losses. They expressed further frustration with new phyto-sanitary standards effective in the EU this year that will required costly certification and may shut them out of northern markets altogether. Two others even shared horror stories of foreign buyers not paying them and wondered what to do next.
The entrepreneurial spirit is not easily extinguished. The room in which we met was filled with entrepreneurs who have joined together in various producer associations to try to proactively take on the challenges they face. They need help with transportation, infrastructure, financing, information and training, and access to buyers and other intermediaries. While Canada cannot tackle all of these issues, there are areas where we can act.
You have received our written submission and I would like to draw your attention to three recommendations. The first recommendation concerns the extension of Canada's least developed country, LDC, market access initiative to all low-income countries in sub-Saharan Africa. On January 1, 2003, Canada extended duty-free access for all but egg, dairy and poultry products to the 48 eligible LDCs. Although this initiative was announced in support of NEPAD in conjunction with CIDA's Canada Fund for Africa, and 34 African countries were included in this initiative, more than 90 per cent of the benefit measured in terms of increased exports to Canada in the affected areas, has gone to non- African LDCs.
Even though their economies are better placed to take advantage of this development-oriented preference scheme, Kenya, Ghana and Cameroon and 10 other low-income countries are excluded from the initiative. While related exports to the United States have grown from these low-income countries, where the Americans introduced a similar program in 2000 under AGOA, and while imports have increased from those countries to the U.S., imports to Canada have not increased.
A pan sub-Saharan African approach to trade preferences makes considerable economic development sense. It is hard to imagine any credible domestic criticism to such an approach. The principal objection typically raised is that it may not be WTO compatible. This position is well critiqued by the Blair Commission for Africa and, given Africa's abysmal position within the world's trading system, this excuse would appear to be more a case of lack of will and imagination. The American AGOA program was offered to a mixture of low-income and LDC African countries without reference to the WTO. To date, no formal objection has been raised against it.
The second recommendation I would like to highlight is the need for Canada to offer trade development foreign aid programs that complement our trade policy. This is part of the issue of policy coherence. Our foreign aid programs and objectives should complement and not contradict our trade policies, and vice versa. Surprisingly, since the LDC market access initiative was introduced two years ago, the government has not offered any specific programming to encourage LDC exporters to consider Canada as an export market. It is little wonder that while African exporters are well informed of the U.S. AGOA program, they often have no idea that Canada offered a similar and, in certain respects more generous, level of market access.
The third recommendation concerns the grants of duty and quota-free access to African and other LDCs by emerging economies, notably China, Brazil and India. Long-term export growth for African LDCs will come primarily from emerging markets rather than from OECD countries where growth rates, GNP and population are much lower.
The UNCTAD and not the WTO handles the granting of preferences by developing countries to each other. Talks within UNCTAD are stalled and after more than 30 years of existence, only 44 of the developing country members have adopted some form of modest and reciprocal tariff reduction scheme.
The best place and time to implement such a scheme is at the WTO during the current Doha Development Round. To bring this about OECD nations should negotiate preferential market access for LDC exports to the emerging economies in exchange for tariff and agricultural subsidy reductions by the developing nations. In lieu of asking for significant reciprocal cuts in MFN tariffs, the middle-income countries should offer duty- and quota-free access to LDCs. In this win-win-win scenario the LDCs gain greater market access and trade preferences; emerging economies achieve greater access to OECD countries; and, the overall impact on world trade and economic development will benefit the developed world, as will the diversification of LDC exports to other markets. This need not seem far- fetched. When asked about this approach in the recent round table meeting, the Canadian ambassador to the WTO suggested that this would be a very plausible negotiating stance for Canada within the current WTO round, provided his political masters endorse such a position.
In the Blair commission for Africa report, you will find the echo of these three recommendations. The extension of the market access to all low-income sub-Saharan countries; the complementing of development-oriented trade policy initiatives with corresponding trade development aid programs; and the use of OECD bargaining power in the current Doha-WTO round to secure preferential access for LDCs to emerging economies, such as Brazil, India and China can be found in that report.
Canada can directly address these three recommendations in its trade policy and foreign aid program. Our Canadian leadership should help the OECD nations to adopt these recommendations.
I look forward to your questions and the comments you may have in respect of our written brief.
The Chairman: Thank you. You made a good point because it is not as widely understood as it should be that the Doha round is upon us and that Canada has the ability to influence its outcome. It is important for Canada to improve the situation in Africa.
This committee is aware of the problems of subsistence agriculture and it is important to emphasize the importance of the Doha Development Round, the real thrust of which is the Canadian position in agriculture and access.
Senator Di Nino: I would like to start with what I take to be very good news. To set the stage, over the years we have often seen and heard of various programs of aid, assistance and capital for Africa. The problem does not seem to be getting any smaller. In fact, at times it seems to be getting worse.
It is nice to hear success stories. We heard one yesterday about franchising. Mr. Bernier is here with another success story.
Obviously, the Desjardins Group is working as a corporate entity. Are you working in cooperation with CIDA, EDC or any other Canadian government agency?
[Translation]
Mr. Bernier: Let me just clarify something first. Développement international Desjardins is a not-for-profit corporation that supports local organizations, financial cooperatives or local financial institutions. Our main partners that fund our operations currently are CIDA, first and foremost, and the World Bank, the International Fund for Agricultural Development, certain United Nations programs and USAid. In fact, we have a number of financial backers working with us on various programs mainly in Africa, but also on other continents.
[English]
Senator Di Nino: Do the funds available for this program come from CIDA, the UN or other agencies?
[Translation]
Mr. Bernier: The funds come mainly from CIDA and the World Bank. Those are the two main financial backers currently funding operations with local financial institutions in Africa.
[English]
Senator Di Nino: Do you provide funds to individuals and perhaps some SMEs to undertake commercial or business ventures?
[Translation]
Mr. Bernier: That is right. However, there is a distinction to be made. We provide technical support and advice to domestically-owned local institutions. These are cooperatives that belong to local members. We assist them with the transfer of technology so that they can provide deposit services to their clients and members, and subsequently loan services. We are talking about small loans, at first, and now we are reaching a credit niche for small and medium-sized businesses in Africa. So we are now focusing on financial services for SMEs. The organizations we support are getting bigger and bigger. In Africa, those organizations have mobilized over 300 million dollars Cdn in savings deposits. Those deposits are recycled through various channels to reach poor clients and also small and medium-sized businesses. That clientele has no access to mainstream financial services.
We have found that the bank ability rate in Africa is very low. The core products of the commercial banks are inaccessible to the majority of the population. Medium and big business have access to major credit. However, the informal sector and part of the formal sector do not have access to financial products. The institutions that are our partners provide this range of financial services in the 13 African countries in which we operate. Those services are provided to farmers in rural areas and to small business and merchants in urban areas.
[English]
Senator Di Nino: You speak of providing technical assistance. Are the individuals who provide this technical and other assistance Africans, or are they from other countries?
[Translation]
Mr. Bernier: They are African for the most part. We always partner with a financial institution which has its own clients and members. It has staff on the ground. We provide training to these people on various systems, be it management, supervision, control, credit product design, methodology or technology. We are currently involved in a large scale computer project in six countries. The same computer platform was introduced into these organizations to enable them, in the future, to conduct international transactions. We bring the technology, but we do not find the technology suppliers. We assist with implementation, user training, technological support and proficiency.
[English]
Senator Di Nino: I think that is one of the most important parts of your work.
I notice that your comments focused particularly on women. Is it an objective of yours to focus on women? If so, why?
[Translation]
Mr. Bernier: Above all, that is a goal. It is becoming an official goal. It is thus an integral part of the business plans of DID partner organizations. This goal is a priority, because women are among the poorest, particularly in Africa. They do not have access to financial services, even less than men. They always need their husbands' backing, which makes the job very difficult for them. However, women conduct a significant part of the business in Africa and a good part of the agricultural work in family businesses.
So we have specific products for that. I would say that the entry level products are primarily for women, for small groups of women who then become entrepreneurs and may subsequently get loans. For example, a woman entrepreneur from Senegal just got a $5,000 loan. She started five years ago with a loan of about $50. So you can see the progression.
In some financial institutions, 60 per cent of members are women, particularly in Senegal. Among our partners, the average is 40 per cent, however. These women make deposits and also get loans. They take out more loans than men at these institutions. So there are products targeted for women. They become full-fledged borrowers and their rate of repayment is excellent. In general, we have very few losses with loans to female clients.
[English]
Senator Di Nino: That is a good statistic.
Would you describe the program as successful?
[Translation]
Mr. Bernier: It would be hard for me to say that it is not a success. It is one of Canada's contributions that has truly been a success. If you take West Africa alone, these local institutions reach 1.5 million members. They are locally owned institutions run by local leaders. They employ about 5,000 volunteers in towns and neighborhoods in the major cities that have a credit union. It is a phenomenal democratic learning experience in countries where governance is really difficult.
They manage to self-regulate, and a great deal of time was spent on training for inspections, audits, accountability and operational integrity. For 30 years, we have been members of some networks, and in Burkina Faso, there are 350,000 member owners throughout the entire country virtually. Today, there is national coverage. I can tell you that it is a success. These organizations are now becoming professional. If we establish a parallel with the Mouvement Desjardins' first 30 years were actually quite marginal on the Quebec financial landscape. And after 30 years, there has been economic growth in Quebec and a second generation of credit union clients. Today, Desjardins has $100 billion in assets.
We have managed to bring together the six biggest micro lenders which alone account for 1,500,000 clients. They share the same technological tools and products. We are working towards regional integration with the creation of a cooperative bank and a central teller which will offer services not only to members to one single country, but rather to the five countries where the six cooperative networks are in operation. I think that the international community in general, and especially local leaders, would categorize this work as a success story. This goes to show that when there is ongoing and long-term support for organizations, positive outcomes do indeed result. Our focus is on the sharing of expertise, the provision of resources, and the development of local leaders and grassroots communities. We are talking about a long-term project here.
Recently, in Burkina Faso, during the Francophone Summit, several people visited these organizations and described them as offering a major economic contribution to the country and, especially, it is the micro lender which is garnering the lion's share of national savings. That is nothing to sneeze at.
[English]
Senator Di Nino: Thank you and congratulations.
Senator Corbin: I would like to put my question to Mr. Harmon. He has been waiting patiently on the sidelines. I certainly appreciate his putting aside time for us this afternoon.
Mr. Harmon, I do not recall that you referred to the recently published report from Prime Minister Blair's Commission for Africa. Have you had an opportunity to acquaint yourself with some of it main proposals and, if so, could you comment briefly.
Mr. Harmon: I testified before their staff on our own capital studies. I am slightly disappointed that there has been less discussion of the private sector than I expected.
I also thought that there were specific areas they could have focussed in on, one of which is export credit agencies of the G8 which do provide a very significant amount of capital to buy what the African countries need to buy. Sadly, from all of the G8 export credit agencies, something like 1 per cent or less of the capital is made available to African countries to buy what they need from everywhere. There were ways to do it differently.
If they had established a pilot program for Africa in which African projects would get a longer time to repay, maybe in which the local costs could be included in the financing. These were easy things to conclude; they have been floating around the OECD for a while.
The U.S. Treasury has not been as supportive on these areas, but I would have thought the Blair Commission for Africa knew about them and could have focused in on how all of the export credit agencies could have provided significantly more capital.
I would like to have seen other suggestions made on the SME area. I think it is an important work, because it has drawn the attention of the world towards Africa. I do not in any way want to be critical of the magnificent job that the Prime Minister and others have done. However, I would have preferred more attention towards the subject of how to develop the private sector in Africa more. In that regard, the public sector plays a critical role.
I gave one illustration of what export credit agencies could do, but we made suggestions in many other areas. Maybe it appears somewhere in the footnotes, but I thought I had read the report through and did not see some of these areas.
[Translation]
Senator Corbin: I would like to ask Mr. Bernier a question. I am particularly interested in the comment that you made — actually, I would like to make two comments about page 3 of your presentation. By its very nature, private sector development is difficult to reconcile with a strategy of budgetary assistance often proposed for developing nations.
As well, it would be utopian in our opinion to count solely on foreign investment as a panacea for private sector development. I would like you to further explain your viewpoint and for you to tell me about what you think of the first part of that statement.
As regards private development, I would especially like you to give us your appraisal of Canadian policy. In fact, this is what we are really interested in in carrying out this review.
Mr. Bernier: That is a good question and one that is not easy to answer. We are looking more and more closely at the direction the government is taking in terms of allocating Canadian funds to budgetary assistance programs. We understand that it is important to support the States. Over the recent decades, state infrastructure is in a major deficit position when it comes to management, and the means whereby to properly govern these countries. These areas need bolstering. We understand that budgetary assistance programs may be quite effective for the health and education sectors, which are fundamental state areas of jurisdiction, and which are essential to their development. So, when it comes to budgetary programs, Canada needs to be prepared to value Canadian know-how and to promote its expertise in these sectors.
Furthermore, in the case of both these sectors — and I will get to the private sector in a moment — governments that received budgetary assistance need to be transparent and accountable, especially when this budgetary assistance is accumulated through multilateral programs and bilateral programs from several countries. In my opinion, it becomes very hard to track these funds, and, at the end of the day, to really measure what Canadian taxpayers' money is being used on, and how it has served to promote Canada's interests when it comes to development. In our opinion, when it comes to the private sector, budgetary assistance programs are hard to reconcile with the way the private sector operates.
Should the State become the leader in terms of private sector development holding all the purse strings, I believe on the one hand that we would be weakening civil society and, on the other hand, it prevents local entrepreneurship which will be stuck in state business, or in state run corporations which will basically coordinate and allocate these funds. We doubt that this would be very successful. We are almost convinced of this. Currently,in 2003, only 6 per cent of assistance allocations financed by ACCI in Africa have been administered in parnetship with Canadian corporations. . This is really very little compared to 1999 levels, which totaled 40 per cent. I do not think that there are more positive outcomes.
There is a concern about transparency in the awarding of contracts, but there are many gaps. If you create budgetary support programs, you have to make sure there is transparency in the awarding of contracts. Currently, it is difficult to reconcile this with the interest of the private sector, which is self financing and has to work with local organizations. The private sector needs to benefit from direct support with businesses or local organizations. In our opinion, that must come under a global development plan with financial backers and business or between those sectors directly involved in their own trade facilitation offices to encourage private sector autonomy as much as possible. This is one of the gaps we have observed in budgetary support programs.
Senator Corbin: My second question is related to the next paragraph. You say that although you have noted over the last few years a gradual transfer of Canadian international aid budget towards multilateral institutions, you feel that it is important for Canada to maintain a significant level of room to maneuver in terms of bilateral assistance. Could you clarify a bit more what you mean exactly?
Mr. Bernier: That is the result of our observations as to Canadian aid for Africa. We have noticed that in the case of many programs, be it SWAP, the Sector-Wide Approach programs, other types of programs or even bilateral funding programs, Canada — and I am going to be critical in saying this, perhaps summarizing a bit — is signing a blank cheque to an organization which carries out the project and is hardly concerned with promoting Canadian interests. There has been tremendous growth over the last five years in transfers of this sort. How can Canadians ask where Canadian aid money has gone? I have seen $2 million cheques made out to the United Nations, in support of micro financing. I am convinced that even CIDA cannot tell what those $2 million were used for. We simply know that they went to some program.
It is as though there is less management work to be done for these programs, much less accountability. We hear there was a budget transfer to the United Nations or the World Bank in this type of program, but Canada is hardly involved in defining the program, program direction, or the allocation of funds. It is as though Canada is essentially a provider of funds not of Canadian expertise or know-how, and that it is not concerned with its own broader interests nor with the influence that it may have in various countries.
Senator Corbin: There was a recent announcement according to which Canada was going to target its aid to a smaller number of countries instead of scattering it out throughout the continent. Do you think this is an approach which will bear fruit on a longer-term basis?
Mr. Bernier: We are not against reducing the number of countries and improving the selection. There were 150 countries we were involved with. Under all these budget aid programs and bilateral transfers, Canada should be as demanding of its African partners as it is of its Canadian partners. These are public funds which are being disbursed and not always for a good cause. An accountability process is needed.
Canada has scattered small programs on a short-term basis throughout several countries and then pulled out. In the end, we get minimal results despite significant investments. If Canada reduces the number of countries and focuses on principles of governance, human rights, and democracy, et cetera, we could not object.
You should not excessively limit the number of countries, but you can make a selection and create a gateway. When countries comply with a number of requirements, they can receive aid. If we can manage long-term Canadian investments targeted to Canadian areas of excellence, it could lead to excellent results.
[English]
The Chairman: Mr. Harmon, the committee has heard repeatedly from government officials of perhaps three or four countries in West Africa that the World Bank and the IMF have done more harm than good to African countries. I always have to remind myself that the fund is a bank and the bank is a fund.
We have heard this from Zambia, Senegal, Nigeria and Mali, and perhaps from others that I do not recall. The best example I can think of may be Zambia where the agricultural sector has been liberalized with the assistance of the World Bank, I believe, but any protections had to be done away with. They had to get rid of any subsidies. The World Bank seemed to have applied rules to Zambia that we would not use in Canada or the United States. The result has been that Zambia has had a great deal of difficulty in its agricultural sector. You can accept that or not, but that has been the clear evidence to this committee.
Has the World Bank and the IMF done anything right in the developing countries? The World Bank has been more involved than the IMF. Have they done some good things?
Mr. Harmon: Yes, they have done some good things. The IMF gets a lot of criticism because of the HIPC area; HIPC has not worked. They have to find a way to accelerate debt forgiveness much more. HIPC's criteria have overshadowed much of what the IMF has done. The IMF has given much good advice and some bad advice.
I have worked with the IMF on a number of matters. When I was in the administration, I was critical of a number of things they did, but on balance I used to give them a B- grade. They did enough good work around the developing world to deserve that. They were a little too tough in some of the failing countries during the period of the Asian crisis. They went a bit too far in some areas but, by and large, I thought their advice was pretty sound in a number of countries.
Most people in Africa will talk to you about debt forgiveness. That has been the focus of the U.S. Congress, and they would probably like to do more in the area of debt forgiveness. That might also be the case for certain other countries.
At a minimum, the whole HIPC program should be reviewed and significant changes made. That would make a major impact on all the highly indebted countries in Africa. It has to come about at some point. It may be much more appropriate for Canada to lead that charge than the U.S., since all sorts of problems arise when the U.S. makes these proposals. I think there would be a lot of support for a review, certainly on the African side.
Our commission had a very serious argument and our only recommendation was on debt forgiveness. I do not think I am saying anything out of school. The former head of the IMF was on our commission. It was difficult for him to give up on HIPC, whereas the so-called foreign policy people on our commission, the people out of our State Department, recognized that more had to be done. I almost had three or four resignations from the commission before our final report was done because we could not bridge the gap even in this commission which was not then in the public sector. That is how strongly people felt about the HIPC program.
They have done a little better in the World Bank. In time people will recognize that departing President Wolfensohn has done a lot of good things relative to poverty. He has certainly made improvements in a number of countries.
I cannot speak to Zambia. Although I am going to be there shortly, I have not looked at what the World Bank has done there. In some of the other more difficult countries, such as Nigeria, I believe that the World Bank has been constructive. Even in Nigeria you will hear people talking mostly about debt forgiveness. That is the major item in reviews of what the World Bank and the IMF have or have not done.
The U.S. faces similar problems with regard to focussing on a limited number of countries rather than going across the board. Under President Bush there has been a proposal for a significant increase in foreign aid, but it was designed to be focussed on countries that were doing right by human rights, good governance and democracy issues and on countries that met certain criteria. Those countries that did not would not receive a significant amount of the aid.
It is quite a controversial matter. Some agree with it and others are concerned that there are many middle-level countries that have not made the necessary progress that will not receive any of this new aid.
It was much easier to get this through our Congress because it was very restrictive in terms of those countries that would be beneficiaries. There are many countries that are making some progress but not all the progress we would like, and they will not be beneficiaries.
Some people are not aware that in our African Growth and Opportunity Act for increasing trade the Congress of the United States wisely included provisions that obligated certain agencies in the United States government to have one director who was responsible only for Africa. It obligated us to have a task force, at the Export-Import Bank, for example, working only on Africa. It obligated us to report to Congress every year on what we are doing in Africa. That made a significant difference in monitoring the progress we were making in Africa in terms of support for training and funding. Every year I had to think and worry about whether we did enough in Africa.
Those provisions in this legislation were very significant to many agencies. They did not deal specifically with trade, but they had much to do with financing purchases in Africa. That is a little known but very helpful provision.
I am sorry that I cannot give you much more information on the World Bank's involvement in certain of the countries. However, I believe that the decision to go forward with the Chad-Cameroon pipeline was the right one. That is a massive project led by the World Bank that will be very significant in that region. It was controversial with regard to some environmental and resettlement issues, but it is still the right thing to do.
The World Bank came up with a very interesting mechanism to monitor the flow of revenue out of the pipeline that will lead to capacity building for both of those countries. I would give the World Bank an A- for that massive project.
Many serious people work very hard on projects for the World Bank, and over the last five years, I think the World Bank probably did a little better than the IMF.
The Chairman: That is very interesting. The committee may want to contemplate making a recommendation based on your answer on HIPC.
What does the acronym HIPC stand for?
Mr. Harmon: HIPC stands for the Heavily Indebted Poor Countries initiative.
The Chairman: The committee will certainly be looking at that.
When I asked about the World Bank, I was thinking more in terms of agriculture than some of the large projects.
You have given us some very interesting material to work with, Mr. Harmon.
Senator Robichaud: Mr. Harmon, you said a couple of times that the HIPC program has not worked. Could you tell us why you say that?
Mr. Harmon: The HIPC program was designed six or seven years ago based on the progress that any country was making in terms of certain specific financial ratios. If they were moving in the right direction, if their revenues, taxes and all the chosen measurements were improving, then after a three-year period of progress they would qualify to have their debt forgiven.
It is interesting that those countries that were working hard often did not control their own future. Let us take agriculture as an example. The whole question of cotton subsidies is terribly unfortunate. The U.S. government has to review this issue. It is a sad fact that it affects five or six critical countries in Africa and that we are spending an outrageous amount of money to subsidize our own cotton industry to the detriment of production in Africa. I hope we will tackle this problem.
Some of those countries cannot overcome that very serious problem. They cannot service their debt because of problems such as those in cotton farming. As a result, they do not qualify.
The ridiculous thing is that those countries that used to make all the problems could generally service their debt and did not need debt forgiveness as much as those countries that could not service their debt. Therefore, we are punishing the poorest countries because they are not able to overcome hurdles that I am not sure they can overcome under the circumstances of global markets. That was not factored in when this program was designed.
The IMF argued that we had to give it more time, that maybe in the next five years some of these countries would find a way to produce cotton and other products more cheaply and would increase their exports until they were sufficient to meet the ratio of their gross domestic product and other ratios. That has not happened. We have not been able to forgive enough indebtedness. Probably only two or three countries out of 30-odd African countries that we call HIPC have qualified for debt forgiveness.
They cannot service their debt, and as a result, they do not qualify for debt forgiveness. They continue to accumulate debt as the interest accrues. Many private sector investors and companies are frightened to go into some of these countries because they see the amount of debt they owe to other countries. That discourages foreign direct investment, and worst of all, in some cases the export credit agencies of the countries are not able to provide funding for the country because they still owe money.
For example, the United States opened the Export-Import Bank in Nigeria, which has a population of 138 million people. It is a very important country with enormous problems. President Obasanjo is trying to do the right things and has a very respectable minister of finance from the World Bank. She has done an excellent job.
However, Nigeria has a significant amount of debt that it cannot service and it cannot get a final agreement on debt forgiveness. As a result of that, export credit agencies, including Ex-Im Bank and EDC and others cannot provide additional funding for the public sector for whatever they might need. Whether it is to build a hospital or something else, they cannot provide the funding to provide the equipment for the country. We were allowed to do it with the private sector.
The IMF has restrictions that prevent these export credit agencies of the major countries from providing new funding until such time as their debt has been resolved. However, it cannot resolve that debt because we have set up a game in which they cannot win. It is so unfortunate. A lot of people recognize that.
Some countries in Europe, probably more than the U.S., are reluctant to address the question of debt forgiveness because that means they will have to go back to the appropriations in their respective legislative bodies and that will be something of a hit on their budgets because they have not written off the debt. Therefore, those countries that have a receivable from Nigeria or from other countries have not ``marked to the mark,'' as we say, the value of that receivable. They still carry it at the same cost with its accumulated interest, and if they suddenly had to write it off, they would have to go back to the legislative body and say, ``We have lost X dollars.'' Countries are unwilling to do that. That is a very serious problem.
Until we are able to find a way among the nations of the world to forgive the indebtedness of the poor in the world, I do not know how we overcome everything else. I would have liked the Blair report. Of course, aid is important, but I wish they had given as much focus on forgiving this indebtedness in these countries and give them a free start. It is like the restructuring of a failing company. You have to release them from the debt obligations before you can expect them to come back to full health.
Our report was controversial in this one piece, it was the only part of our report that we had a minority opinion rendered by the members of the IMF who were on our commission and they just raised some reservations in the footnote. It showed how difficult it was to even agree among one group in Washington on this sensitive area.
Senator Downe: I have a supplementary on the same topic. We have heard from a number of witnesses during the course of this study about the tremendous importance of agriculture to employment in Africa.
What do we have to do to lower those Western subsidies to our own farmers?
What hope do you see of governments taking action in that direction?
Mr. Harmon: I fall into the cautiously optimistic party that feels that finally there has been so much attention drawn to it that it will probably get resolved in the next few years. I wish it would be resolved in the next few months.
It is a political issue. In the United States, we have a farm belt that has a couple of critical states. No one running for office wants to tell the farmers that we will not continue the subsidy. Relatively few farmers benefit from the subsidy compared to the amount of money and the good that would come out of this. It is a ``no brainer'' as we say. This should be done.
I am cautiously hopeful that in the United States political arena, now that there is not an election coming up that we will have some change of position that might lead us to resolve this issue. The U.S. would argue in turn that we have to get the French and the European side to agree because they are just as concerned about their own subsidies as we are in the United States.
There was a moment in time about a year or two ago when we were close to an agreement with the European side. I felt that if we had gotten lucky, the world might have been able to resolve this issue. Just picking on cotton alone is so important. Now, I am hopeful that with certain positions in the United States political world that you could get this done in the next year.
I always figured that people listened to what you have to say in Canada because you are more neutral in some respects on some of these issues and people think very well of the work you have done in this area. To the extent that you encourage this resolution, it will be helpful. Things like the cotton subsidy area and HIPC debt forgiveness are critical areas for the future of Africa. The subsidy issue must be resolve and most reasonable people agree. It is a question of how to get it done.
Senator Downe: There is no question that we all are aware of the problem. The former Prime Minister of Canada used to tell President Bush that he did not have to give those farm subsidies because all those farmers were Republican and voting for him anyway, but he still gave the money. We hope there will be some progress in that area. Thank you.
The Chairman: I understand, Mr. Harmon, exactly what you are talking about because I have read a very good paper on the cotton subsidy issue. Mr. Murphy got it for me. We should circulate copies to the members, because the report reveals just how much of an impact the subsidies have on Senegal, Mali, and other African countries. It is something that is very difficult for the Americans to deal with because of the political issues in certain constituencies.
It is a powerful and informative paper. We have had witnesses here from African countries whose economies are devastated because they are very large cotton producers and they cannot compete with the U.S. subsidized cotton.
Senator Mahovlich: Mr. Harmon, is there one country in Africa that has a better investment climate than the others?
Is there one country in particular that others find attractive for investment, or do they all have the same problems?
Mr. Harmon: The problem we often find is that people think of Africa as one entity with all the same problems. That is not true at all. Mauritius has had a very significant success. It has had somewhat better human capital; therefore, it was able to utilize foreign direct investment more effectively in developing new businesses. It has benefited with its special relationship historically with India. It has also had very strong leadership in the last 20 years, so it is a success story.
Those people in Africa would argue that Mauritius is a different location, and because of its relationship with India, it is a little different. Botswana has done very well and continues to do very well. It sits next to Zimbabwe and it does not take a rocket scientist to figure out that when you have appropriate leadership, you are able to achieve great things anywhere in the world. Where you do not have appropriate leadership, you will have very serious problems.
You do not have time to go through all the countries, but the general trend towards democracy and good governance is encouraging in Africa. The general trend towards better leadership is encouraging. We still have a lot of cases where it is not there and the rest of the world is not doing enough, as we know from the Blair commission, but there are success stories in countries and Botswana is one of them.
The Chairman: I know that you have asked for a second round, Senator Di Nino, but I do not think we should let Mr. Mitchell get away so easily. We only have a few minutes left. I do not know how long the connection will last.
I would like to ask Mr. Mitchell a question. I am looking at your recommendations that the OECD countries should use their negotiating strength in the current Doha round to encourage the emerging economies such as China, India and Brazil, to provide a generous preferential tariff scheme for imports from LDCs, encompassing all or nearly all of sub-Saharan Africa.
We follow the Doha round and generally speaking, about 75 per cent of the people in sub-Saharan Africa work in subsistence agriculture. I was at a meeting in Dar es Salaam where the President of Uganda said it was 86 per cent. You can take your pick of figures, but it is high.
If the Doha Round will have any success, it will have to deal with that. We had the minister of finance last night who said that there might have to be different mechanisms than, for example, we might use in Saskatchewan, for subsistence agriculture in Africa.
If you do not deal with agriculture, how can you raise the standards of living of people where 75 per cent or 80 per cent of them work in agriculture?
We know nearly 150 countries participate in the Doha round and there are groupings. I have to have a list to remember all the acronyms for the G20s and the G8s and the 100 and the 90. I do not have the list in front of me.
Do you think it is realistic that China, India, and Brazil a developing country with its own problems in agriculture, will really provide a generous preferential tariff scheme for imports from LDCs, particularly sub-Saharan Africa, where most of the products will compete with their own tropical products?
Mr. Mitchell: Indeed, I do. In January of this year, China unilaterally extended duty free access to a large swath of product groupings to LDCs. It did that on a unilateral basis, not as part of any negotiations. There are these moves taking place already.
The challenge within the Doha round is some have characterized the Doha round as the last round. This is because the tariff levels in the Northern markets are so miniscule and it is really the agricultural areas that the issue that needs to be dealt with in the North. There are some high peaks that will be addressed no doubt in this round, but there is not much left to do.
In terms of the North and the OECD countries giving up, this is almost the last time they will have stuff on the table, if it is a successful round.
What do we get back?
Traditionally, it is a negotiation of I give you this and you give me something back. Speaking as an OECD exporter, there is no question one wants to gain access to markets like China and India and Brazil and see them lower some of their tariffs.
An alternate strategy is to say this piece of pie we call the word trading system, over the next 10 years or 20 years, the flow of trade as it grows, if it gross successfully, will not be forever developing country into the North, because our economies are relatively stagnant, particularly in the European Union.
Maybe not in the next couple of years, but the long-term growth for developing the least developed countries markets will be the emerging countries markets, such as India, Brazil, South Africa and North Africa. There is a large group of middle-income countries, but the leading ones are the three I mentioned.
If we want to develop a preference scheme to help pull those least developed countries along, generally we are talking about Africa here, now is the time to do it. Now is the time to set up a preference scheme that opens the access to those countries, to Brazil, India, China and the others. Their economies continue to grow at an explosive rate and as they start to shed off more and more traditional jobs because their labour costs rise, it opens the door for LDCs to begin to export there. That is why I put that forward.
Ambassador Stephenson acknowledged that given the development focus of this round this approach should be entertained.
The Chairman: Thank you. I have no more questions.
Senator Di Nino: Mr. Mitchell, the last one of your recommendations strikes me, although I would also like to discuss recommendation 3. The last one talks about the adoption of a coordinated approach to development assistance. As we have heard, one of the concerns is that we do have a scattered approach with everyone doing a little something all over the place. I wonder if you could expand on your comment a little more so that we understand it fully.
Mr. Mitchell: I will ask to clarify; are you referring to the recommendations in my longer report?
Senator Di Nino: Yes, I am referring to recommendation 5.
Mr. Mitchell: They are using this interesting approach in the U.K., and part of this recommendation stems from the U.K. approach. Last year, the North-South Institute was engaged to review the Department for International Development for the U.K., and their trade-capacity building programs.
One observation from that review is that the aid department in the U.K., the Foreign Assistance Department, and the Ministry of Trade, take a collective responsibility to grow imports into the U.K. from developing countries. They set targets and they want to see imports from African LDCs to grow from this percentage to that percentage. That type of coordinated effort that makes sense.
The Department of Foreign Affairs and International Trade without any programming on the CIDA side penned a duty-free access, complete open access, very transparent initiative to LDCs. Similarly, we may have aid initiatives where we try to promote particular capacity building in developing countries, yet we may still be hurting those countries with some of our policies, perhaps especially though the cotton subsidies.
Certainly, we can speak more generally in OECD terms of the cotton subsidies, et cetera, so there is an inconsistency in our policies.
Senator Di Nino: Report no. 3 in respect of the OECD trade schemes, states that they should be transparent and simple to administer. What do you mean by that statement?
Mr. Mitchell: One can refer to different programs but I will speak to the AGOA program and compare it with the Canadian program. I learned something new this afternoon about AGOA.
AGOA was not merely a policy instrument but rather contained many provisions, one of which required various departments to report on what they were doing to improve African exports to the U.S. However, and this is a critique at the OECD level, AGOA has many rules and nuances for a developing country and for the exporters. If the exports grow too rapidly into the U.S. then the preference is cut off. The granting of the preferences is arbitrary by nature, and if deemed that a country is no longer providing a sufficient support towards good governance and non-corruption, the removal of the preferences is a possibility. There are nuances, complications and difficult rules of origin within the AGOA system that can make it less successful than it could be.
Canadian programs have rules of origin that are relatively simple; 40 per cent must come from an LDC. That rule is fairly straightforward. Some would argue that the figure should be between 10 per cent and 20 per cent. When it comes to certain textile and clothing items, the rules are longer. It becomes difficult for exporters to work their way through that and ensure they do not trip themselves up and find that when their goods arrive in Canada a duty is applied when they thought it would be duty-free.
The Chairman: Mr. Harmon, you have given us interesting testimony that, to some extent, has confirmed some of the evidence that the committee has taken.
Mr. Harmon: Thank you. I thought Mr. Mitchell's last comments were thoughtful. If you read our AGOA legislation, I hope that you select the good and not the bad; the bad came about because of highly challenging political battles. There are some conditions in which countries no longer qualify under AGOA if they do not continue to make certain progress. That prompted those manufacturers who were to build plants to think about not building the plants in the countries that might lose their AGOA status. We thought that the exports from Africa to the U.S. were encouraging but, we frightened some American and Asian investors away from building textile plants in certain countries because they thought there was a risk that Congress would take action later to no longer allow them qualification under AGOA.
There was a great deal of good accomplished from AGOA but there was also some bad, which came about because of certain political battles from certain states. A reader could select easily the advantageous elements.
With the Canada Fund for Africa, I believe that you might be leveraging off $100 million, provided private sector investors match it and use it as a new fund to invest in Africa. That is a wise move and I wish we could do it in the United States. It is good way of providing a catalyst for the private sector to join with government to invest in Africa.
I was visited today by the Shell Foundation. I never realized that the Shell Oil Company Foundation was involved in the SME area in Africa. Shell is an example of a foundation, in conjunction with some others that provides technical assistance and funding for SME work in Africa.
If the committee is looking for other witnesses, it might want to consider someone from the Shell foundation. It is very forward looking and I know of no other foundation in the world that is focused on SMEs in Africa and is willing to recruit other private sector funding to support what they are doing. They are making a great deal of progress in some African countries. Committee members might be interested in hearing what they have to say.
The Chairman: We will take that advice and likely do something about it. I thank our witnesses for their testimony today.
The committee adjourned.