Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 23 - Evidence - Meeting of March 7, 2013
OTTAWA, Thursday, March 7, 2013
The Standing Senate Committee on Foreign Affairs and International Trade, to which was referred Bill S-14, An Act to amend the corruption of Foreign Public Officials Act, met this day at 10:30 a.m. to give clause-by-clause consideration to the bill; and to study economic and political developments in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, today the Standing Senate Committee on Foreign Affairs and International Trade is continuing its examination of economic and political developments in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities, and other related matters.
We are very pleased this morning to have appearing by video conference from Regina, Saskatchewan, Mr. Murad Al-Katib, the President and Chief Executive Officer of Alliance Grain Traders. I live in Regina and I see Mr. Al- Katib's work. I hear about him from government, business and community officials. I am pleased that he is here for two reasons. First, he can tell us a lot about starting a small business and growing it internationally from Regina, Saskatchewan. I am very proud that he can tell us something about working in Turkey as someone whose family settled in Canada but maintained their understanding and roots of their former country.
Mr. Al-Katib, I am very pleased that you are here. Welcome to the committee. I know that there will be many questions for you after your presentation. We hope to benefit from your advice before we visit Turkey. Perhaps you can highlight some of the issues that we should deal with when we are there.
Murad Al-Katib, President and CEO, Alliance Grain Traders: Thank you very much, Senator Andreychuk. I am delighted to speak to you about Turkey. I will begin by giving you some background on myself, my company and my perspective on trade and business with Turkey. I will direct my comments and perspectives to the economic advantages and opportunities Turkey can provide to Canadian companies and the Canadian economy as a whole as it seems others who have appeared before the committee have more than adequately discussed the geopolitical and strategic importance of Turkey and the country's relations with Canada and the world.
I have a unique perspective as a Canadian-born entrepreneur of Turkish background who throughout my life has travelled extensively in the region, specifically in Turkey, as well as someone who now owns and operates significant assets in that country.
I want to talk to you about an emerging market that is taking its place on the world economic and diplomatic stage with a strong banking system relative to others in the Eurasia region, a young educated population, a stable government, and a business environment that is conducive to investment and growth.
I was born in Davidson, Saskatchewan, to Turkish immigrant parents who encouraged the view of looking beyond the world at large and ensuring that one understands how the complex mosaic of different cultures fit together. Our family traveled to Turkey and other countries to learn about our culture, our language and the country of our family's origin.
My parents also encouraged the notion of economic development and the principles of entrepreneurship. My mother was the Mayor of Davidson, Saskatchewan, a community located in the centre of our province with a population of 1,200 people and a trading area of 5,000; quite an extraordinary thing for an immigrant woman who arrived in Canada in 1967 not speaking a word of English and went on to be elected in eight consecutive elections in 24 years, all opposed by local candidates.
My father immigrated to Saskatchewan as a British-trained family physician who has been active in his practice in Saskatchewan for 48 years and continues, at the age of 75, in full-time practice there.
At the dinner table in our household the conversation centred on how we could create another job on Main Street in Davidson and what impact that would have on the community, always with a view toward the broader world as well.
I finished my education at the University of Saskatchewan and ventured to the United States for post-graduate studies with the intention of never returning to Canada or Saskatchewan. After working at our Canadian embassy in Washington, D.C., I felt that the Saskatchewan export community was missing opportunities when it came to working in developing countries and emerging markets of the world.
I communicated this vision to our provincial government by writing an unsolicited letter to Premier Roy Romanow, and at the age of 23 I was hired as one of the founding staff of the Saskatchewan Trade Export Partnership, our international trade promotion agency, where I became one of our top international trade specialists in the public sector.
In 1999, one of my marketing efforts took me to Turkey to market the growing production of Saskatchewan's pulse crops to processors there. Pulse crops are specifically lentils, chickpeas, peas and beans. The region was a natural fit with my Turkish language skills and familiarity with local customs. Saskatchewan had grown to be one of the world's largest exporters of lentils, and much of our production was being exported as raw bulk commodity to processors in Turkey where the red lentils had to be peeled and split in half to be ready for human consumption.
Saskatchewan was exporting tens of millions of dollars of lentils to Turkey, and with it was going the higher value- added, wealth-creation jobs and economic activity. As a man with a true passion for Saskatchewan, I did not want to see the lentil story end up as a mustard story. We grow mustard, export it to the United States and France, and buy it at our supermarkets to put on our sandwiches when we have our lunch. I wanted to add the value here and reach the world market directly from Saskatchewan.
Saskcan Pulse Trading was born in 2001 with a strong partnership with Canada's largest customer in the world for lentils, a company called Arbel, a leading pulses and food processor from Turkey, who also agreed it made sense to reach the world directly from Canada. In fact, our company's founding principle is ``from producer to the world,'' a philosophy we practise every day. My partners from Turkey assisted with many of the key components to our company's ultimate success. In our sector, the pulses processing and exporting sector, Turkey has been the leader in the global trade for decades. My partners had over 50 years of involvement in the sector and we benefited in Canada from the access to technology to process the value-added lentils. Of course, that assisted in building infrastructure in Saskatchewan that eventually led to Canada's rapid movement upwards as a global leader in the pulses export sector.
In 2000, just prior to the formation of my company, Canada had limited area in the production of lentils. Today Canada is a leader in the global trade of lentils and a significant exporter of all pulses and specialty crops. We like to say that Canada, more specifically Saskatchewan, is no longer the breadbasket of the Prairies because, with almost 6 million acres estimated for the production of pulses in 2013 by Statistics Canada, the Prairies are a lot more than just cereal grains.
My company today, Alliance Grain Traders, is headquartered in Regina and has expanded from the one facility I built in Regina in 2001 to 29 processing plants located in five continents around the world. Turkey is a key part of our overall business. In that country we operate nine processing facilities, including one of the largest food production compounds in that country located in the port city of Mersin in Southern Turkey, the main agricultural seaport in and out of Turkey. Our total investment in Turkey now totals $150 million. We are an exporter to 108 countries around the world, exporting valued-added peas, lentils, beans, durum wheat products, pasta, rice and other value-added food items.
In our case specifically, the partnership between Canada and Turkey helped to grow a whole sector of our economy to become a multibillion-dollar sector in the Saskatchewan economy. With access to markets and customers, as my partners in Turkey provided, and raw materials supply and financing from the Canadian economy, we have created a significant global agri-food and food-ingredient company that will report over $800 million in exports in 2012 and employs almost 1,000 people around the globe. Other businesses in other sectors may have the potential to be successful in this way as well.
I want to be clear, however, that our company is not invested in Turkey because I am of Turkish origin. Our company has invested in Turkey because the investment makes sense. As I indicated to you in my introduction, Turkey is a good place to do business.
Let me walk through a few statistics to help illustrate this point. It is the eighteenth largest economy in the world, according to the IMF World Economic Outlook data for 2011. GDP growth is reported by the Turkish government's investment ministry at a staggering 220 per cent since 2002, with 2012 GDP estimated at $783 billion by the IMF. It has a stable banking sector and is a financial centre for the region. It is a food production and distribution centre, distributing and supplying agricultural and food products to markets throughout the region.
The country has a stable and democratically focused government in a region of relative instability. According to Forbes magazine, in 2012 Turkey ranked ninth on the list of the most billionaires in a country, with 34 — one spot ahead of Canada. It is a country with significant wealth and economic opportunity. It has the fastest growing economy in Europe and one of the fastest growing in the world. It is a populous country with 75 million people, with approximately 50 per cent under the age of 29 and a significant percentage of them well educated, particularly educated in Europe, North America and in local institutions.
It has a significant land mass and natural resources, as well as agricultural production and a very significant transportation infrastructure, with access from the Mediterranean Sea, the Black Sea and other seaports in and out of the country.
The country is strategically situated, both economically and geopolitically, with easy access to multiple markets, including Europe, Central Asia and the Middle East/North Africa region. It is a founding member of NATO and a long-time ally of Canada, the U.S. and other like-minded countries.
The country has a customs union agreement with the European Union, where it has been a candidate for EU accession for a decade, and many free trade agreements with a number of countries, both in the region and around the globe.
With one of the leading airlines in Europe, within a four-hour flight of Istanbul you are in London, Paris, Moscow or Dubai; and within 10 hours you can be in New York, Toronto, Singapore or Cape Town.
The world today is relearning what was known about Turkey long ago: the country itself is a trading crossroads between Europe and Asia. Turkey has traditionally been a springboard to regional markets, which continues to be true today. The list of FTAs that Turkey has certainly is a long one, including Albania, Bosnia and Herzegovina, Chile, Croatia, EFTA member countries, such as Switzerland, Norway, Iceland, Liechtenstein, Egypt, Georgia, Israel, Jordan, Macedonia, Montenegro, Morocco, Palestine, Serbia, Syria and Tunisia. You can see by the list that it is a free trading nation, one with significant desire to integrate into the world economy.
The Turkish government reports that Turkey can reach an estimated $23 trillion in GDP and 1.5 billion people in its direct regional access, including Europe, Russia, the Middle East, North Africa, Central Asia and the Caucasus.
Again, turning back to my experience, my partners in Turkey provided our start-up company with a key component to our business model, based on regional access and market development. Turkish companies have been doing business in the region for a long time. They are trading with generations. For example, in our company we are doing business with the grandchildren of the fathers or the grandfathers, with the relations that were had by the company we now own in Turkey. No other country in the region offers the kind of locational advantages and access to markets and relationships with its neighbours that one can find in Turkey.
As well, with civil unrest in the region such as the Arab Spring, the current crisis in Syria and the instability in Iraq, Turkey often provides a safer path to doing business in the region.
Again, in our company we have long been doing business in some of these countries in the region for some time through aid programs, in addition to selling and distributing food products to these markets. These regions are a very important part of our business, and our presence and contacts through Turkey assist us in smoothing the way. Similar results may be possible for other companies and sectors as well.
As Chair of the Small and Medium-Sized Enterprises Advisory Board to the Minister of International Trade, I have spoken before the Standing Committee on International Trade to provide my perspective on potential benefits Canada can realize through increased trade agreements with strategic and economically emerging market countries like Turkey.
As I am sure this committee is well aware, the Canadian-Turkey exploratory discussions have begun. As an entrepreneur doing business in both countries, I believe these types of developments and agreements are necessary and positive for both countries to continue the economic strength and opportunities they are presently enjoying.
I would like to share with you some recent export statistics from Statistics Canada regarding Canada and Turkey. Of the almost $850 million of trade between Canada and Turkey in 2012, exports are dominated by mining and related industries, as well as agriculture, with almost 10 per cent of all trade in 2012 in the pulses sector, including lentils, beans and chickpeas from Canada destined for Turkey and then for regional markets.
While this is a significant number, trade between Canada and Turkey is at its second-lowest level in the past five years, after a highest number in the past four in 2011, largely due to good crops in 2012. However, we see the opportunity in the pulses sector growing to several of hundreds of millions of dollars of annual export that will continue year after year, while pursuing important regional markets.
Similar statistics bear true in Saskatchewan where exports to Turkey are dominated by the pulses industry, accounting for 78 per cent of all exports from the province to Turkey. That is again at its lowest level due to the significant local crops. However, we see that potential continuing to grow and strengthen as the engagement and the relations between our countries continue to grow and our governments continue to be aligned in both economic and foreign policy in the region.
The agricultural sector our company is involved in is a good example of how Canadian companies providing a product or service required by another country — in this case Turkey — can grow a business into a successful endeavour involving two-way trade, technology transfer, foreign direct investment and regional market development. Governments are needed, though, to assist in clearing the way, to remove restrictions and barriers, and to bring countries and businesses closer together.
Turkey has traditionally been a significant production region for pulses, both for their domestic consumption as well as the traditional diet of Turkish people. As I mentioned earlier, it is also for a broader region, as well. Turkey has been viewed as a shipping and export origin for agricultural food products by everyone in that region. This will benefit Canada as we get further into partnerships.
The profile that makes it attractive as a place to do business, such as banking, social stability and economic growth opportunities, are the same reasons that both international and local Turkish companies view the country as a prime location to import, re-export and distribute. As the Turkish production levels of chickpeas has decreased over the past three or four years, Turkey has become an importer and will continue that trend, bringing Saskatchewan, Canada and Turkey closer together.
New opportunities to do business may arise, as well. For example, durum wheat exported from Canada to Turkey appeared as a new opportunity in 2012. Turkey is the fifth-largest production origin for pasta in the world. If I were to have asked this Senate committee who the largest world pasta exporter is, I think many of you would have guessed Italy. Few would have guessed that Turkey is the second-largest exporter of pasta in the world.
Our company is involved in pasta production and distribution in Turkey, as we own a company called Arbella Pasta. We are the largest export brand from that country, selling our product to 83 countries around the world using Canadian durum, processed in Turkey and exported to every corner of the globe.
Before going to questions, I would like to summarize. Turkey has been a country that the West has viewed as exotic and very different from the way we are used to doing things. While this may have been partially true in the past, Turkey is a modern, Western-looking country that is leading the way in terms of business and investment opportunity. In Turkey, the term ``Anatolian tiger'' is used to describe companies and entrepreneurs that have displayed impressive growth or built strong global businesses, many of these starting off as SMEs and many of them as prime targets for Canadian partnerships or for Canada to attract foreign direct investment into Canada to allow these ``Anatolian tigers'' access to the Americas. This describes the country very well.
Turkey is a good place to do business and one that Canada should embrace as a partner for future growth, opportunity and prosperity for our citizens.
I will end my comments there, and I am open for questions.
The Chair: Thank you Mr. Al-Katib. You have certainly put Saskatchewan on the map. I appreciate your perspectives on the ground.
[Translation]
Senator Fortin-Duplessis: Mr. Al-Katib, your presentation was very interesting. Since our two respective ministers signed a memorandum of understanding on agriculture and agri-food in 2010, we have observed an extraordinary expansion between our two countries in these areas. Even though there was a slight drop because of bad weather, progress has still been made in this area.
Based on your experience and the fact that you often return to Turkey and come back to Canada, you are certainly in a position to have observed all kinds of areas and all kinds of things when you go to Turkey.
In your opinion, what are the areas, aside from pasta, where our Canadian companies could create business relations in Turkey?
[English]
Mr. Al-Katib: Do you want to pose both questions, or shall I answer the first question first?
[Translation]
Senator Fortin-Duplessis: How could we position our Canadian companies?
[English]
Mr. Al-Katib: Thank you very much.
When I look at the economy, the agricultural sector has certainly been in an expansionary mode. We continue to see production around the world in emerging markets, not only in Turkey, but in countries like Turkey, India and China. In large consumption regions, we are seeing a production shift from certain crops produced in the past to different crops, whereby it is opening up opportunities for them to import certain commodities and export others.
In Turkey in particular, we see this opportunity in lentils, peas, chickpeas and beans. When people think of those commodities and are not informed of the size of the sector, many people think those are niche opportunities, but we are now looking at over $2 billion per year of exports from Saskatchewan of those particular commodities. This is not a niche opportunity where we are not looking at the opportunity to raise that to $3 billion and $4 billion of exports. We see Turkey as the main springboard for agricultural distribution of food products because of its current position where it is feeding Iraq and Syria, and it is very involved in Libya, Sudan, Egypt, Algeria, Tunisia and Morocco — the entire regional consumption. All of these countries are main importers of Canadian agricultural products.
What we see happening in our sector and what we hope will continue with the positive environment we have in this country is that we want to see more value-added production in Canada and more exports of finished or semi-finished products, ingredients and other things into different countries. However, we are not just being called on to provide raw material where all of the value-added production and wealth creation is done in other countries. That is what we are seeing in the agriculture sector today.
Opportunities in Turkey have major markets, with 75 million consumers with rising incomes. If you have been to Turkey or when you do travel there, you will see a country where a significant portion of disposable income is spent on things like food. It is an important part of their culture. They like to consume high-quality food. We see that as a great opportunity.
We see it in a more general sense in that Turkey is the springboard for access to those regional markets. When I advise other Canadian companies about opportunities in Iraq, Syria and Libya, I advise them to choose a safe haven regionally — somewhere where you have strong companies with strong relationships and a stable banking sector so we can get paid for what we do, since an important part of business is collecting your money.
We see Turkey as a country that will continue to exert its geopolitical influence, which in their policy is taking their political influence and converting it to economic opportunity. We want to be part of that, and we see that as a good opportunity for Canadians.
As to sectors where I see good opportunity, the mining sector will, of course, continue its development. Turkey is a main market for mining companies today. There are gold mining investments and others. We see very significant infrastructure spending coming on the continued development of the oil and gas sector and power generation.
We see an opportunity in the highly skilled, research-oriented, strong manufacturing sector in Turkey. We believe that Turkey will be a very strong science and technology partner for this country. There is significant knowhow and significant opportunity for collaborative development in that sector.
How do we position ourselves? One of the key things is that in many cases on the governmental side we have been an afterthought. We are not necessarily in the focus of the Turkish government in terms of their promotion efforts and their overall thought. That being said, in the last 24 to 36 months of engagement, we have had several ministerial visits and I am pleased about the pending visit of the Senate committee. Visits like this will continue the dialogue and continue to put Canada into the forefront of opportunity with Turkey.
We have had discussions with Turkish Foreign Minister Davutoglu and Minister Eker, a very forward-thinking agricultural minister, and we see the importance of the Canadian relationship escalating. There seems to be a desire for engagement. It is very important to align our policy objectives with theirs and bring companies together.
A very positive development is Export Development Canada's entry into Turkey with their office in Istanbul and a very strong focus on continuing their support of the engagement in Turkey of SMEs. We have seen EDC's appetite for this increasing. They have a strong understanding of the banking sector and the opportunities there.
Senator Wallace: Mr. Al-Katib, you obviously have a great deal of experience doing business with Turkey. You have been highly successful, and I commend you for that. You are very optimistic about the opportunities in Turkey and say it is a very good place to do business.
How would doing business in Turkey for small- and medium-sized Canadian companies compare with doing business with the United States? What are the major differences that they would encounter in doing business in Turkey and would those differences create some unease for them?
Mr. Al-Katib: In any emerging market entry, whether it is a sales opportunity, an investment or a more permanent presence, the differences in business culture, governmental regulation and the overall system of establishment and customs rules are very complex. We have to compare where we are today with Turkey and with the other economic superpowers that are growing in the emerging markets.
I am building a new plant in China and one in India. I have just entered Johannesburg, South Africa and I just opened in Russia. Compared to those, we find the business environment in Turkey to be much more conducive to investment. The regulatory environment is a little clearer there. One of the main things that attracts me is that the contractual rule of law is more transparent than we find in many other emerging markets. The ability to judicially exert contractual rights is a very important aspect of doing business. In many cases that is due to governmental recognition of their requirement to have functioning banking and financial sectors that strengthen corporate law in order to increase the chances of securitization on the banking sector side. That is what we saw in Turkey.
In 2001 we saw major bank failures. Governments had to take ownership of many banks and then totally change the foreign direct investment rules in the financial sector, encourage the entry of international banks and make significant changes to the capitalization rules of them. While in the 2008 crisis and the 2011 crisis European banks were in significant crisis, the Turkish banks were lenders in the overnight markets to the European banks. We see the banking sector and corporate law changes as quite positive.
That being said, again, in any emerging market we recommend finding strong partners that are established in the sector and will allow you to navigate the complexity of the regulatory system. Turkey certainly still only ranks in the mid-range on ease of doing business. When you look at the corruption index or the transparency index, it is still on the low end of good, but we see it improve.
I also look at the region. If I compare Turkey to Egypt, Algeria, Sudan, Syria, Iraq or Iran, it is a jewel in the middle of a very difficult environment.
Senator Wallace: Thank you, Mr. Al-Katib. That is very helpful.
Senator D. Smith: The item I was going to raise has been covered, but congratulations on your success. It is very impressive.
Mr. Al-Katib: Thank you very much, senator. I appreciate it. We have a lot of good people who have done a lot of hard work.
Senator Wells: I wish to congratulate you as well, Mr. Al-Katib, and to thank you for your comments thus far.
You have good partnerships, high investments and cultural ties that have good results. Would an FTA bring a formalized structure primarily in customs rules or tariffs? What additional benefit would it bring that you do not currently have?
Mr. Al-Katib: A comprehensive economic trade agreement would give us much more standardization on tariff rules and market access. Market access is a very important part of any sustainable trade relationship. When countries are in a fast growth mode, sometimes local political interests can lead to short-term decisions that will limit market access. For instance, in the agriculture sector in the past, Turkey has restricted imports at certain periods of the year during their local production cycle to provide more opportunities for local producers. We have urged the ministry of agriculture and others to recognize that a close relationship between Turkey and Canada and access of Canadian materials into Turkey creates opportunities locally there as well. We think that an FTA will clarify those rules. It will allow us to ensure we have alignment with Turkey in terms of using it as a springboard. We think that the overall certainty given by that agreement would be quite beneficial.
The other side is that with the recognition of the close economic ties it will be two-way. I have talked a lot about my investment in Turkey and using Turkey as a springboard. We also see very significant opportunities for Turkish companies to invest in Canada in order to access the United States and Mexico and the broader trade agenda that we have with the Americas.
We can use as a pitch with other countries the fact that we have a much more transparent access point for entering the Americas market. There is a perception by Turkish businesses that Canada is of preferential jurisdiction to the United States. There is an overall perception in many emerging markets that the United States is a more complex business environment, one with much greater chance of political and governmental interference, with a regulatory environment that is not so easy to navigate. We want to capitalize on that opportunity. Therefore, I like the formalization of the agreement to provide us with a jump start.
I have also been asked by the minister and the Prime Minister to look ahead of the curve. I am sitting on the Global Commerce Strategy renewal panel, so we have been working on that. One of the strong visions that many of us sitting on that type of committee continue to put forth is that we need to be ahead of the curve and not following the leader. Look at the Global Commerce Strategy and the definition of the BRIC countries as a priority. By the time we made that, many countries were already two bases into a home run; whereas when we look at countries like Turkey, Indonesia, Vietnam and other countries where we are seeing this new emerging structure, we want to get in, formalize our relationship and start building.
Senator Wallin: I just wanted a brief comment on this. I know you have talked about the importance of overarching agreements and trade agreements between countries. However, you have been very insistent on keeping your base in Saskatchewan, which is not an easy place to get to, yet you do an awful lot of travelling. Is there something to be said about relationships from a provincial base rather than a national base in your discussions?
Mr. Al-Katib: I am a strong advocate of region-to-region agreements as well, senator. However, when we look at the complexity of an environment like Turkey or any of these other nationals, the nation-to-nation agreement is the one that will actually advance the commercial interest, the geopolitical interest and the social agenda, including things like human rights and other things that are very important to us as Canadians.
Region-to-region agreements are nice complementary things, but we certainly are a strong advocate of driving the national agenda.
I have spent my entire career in our country building economic opportunities both in government and also in the private sector. I urge senators to understand that no country in the world is perfect in its historical presence — where it stands in history — where it is going currently and where it will go in the future. When we look at that region of relative, almost-disastrous neighbours, Turkey's position today is one that gives Canada a very significant opportunity to help to shape a region that will be both politically and economically important to our country.
The Chair: Mr. Al-Katib, you have certainly put Canada in a good position in your comments, and also Turkey. Can you tell me what impediments you have found that you think we as a committee, which can have a role in making recommendations to our government, could help remove? What are the impediments that you think we need to deal with? We have talked about the free trade agreement as a support. In your experience throughout all these navigations, what has been the difficulty and what continues to be the difficulty?
Mr. Al-Katib: We have a bit of history in this country with regard to our relationship with Turkey in terms of being a little unclear with our overall intention. Do we want to get closer or not? Over the last couple of years, a process of engagement has started to make it much clearer that we do have a long-term interest in economic, political and social ties with that country.
Imagine a small SME that grew to make a $150 million investment in Turkey. The on-again, off-again political messaging that we have had in relation to issues like the historical advance of the Armenian genocide and these types of things have made it very difficult for us to navigate on the commercial side. Regarding historical events, while having a very important place, we like to look forward at the economic agenda. We applaud the government's current engagement and discussion policy in multiple facets of both economic and political.
The overarching view that Canada wants to engage and to assist in looking at mutually beneficial opportunities has been one of the biggest things for us.
The other side where we saw very positive development is with EDC, which I mentioned earlier. I want to reiterate that the government's focus on Turkey as a regional centre on the financial side and locating EDC into Turkey has helped us to have a broader understanding of the Canadian banking sector in that region. The Canadian banks now understand much better than they have in the past. We see that as being quite positive, as well.
When we look at the impediment side, one of the big ones is not really a Canada-Turkey issue. The overarching political environment in neighbouring countries has been very difficult to navigate over the past four or five years. However, the continued resolve of Turkey to have both a policy of minimal conflict with its neighbours and its continued view of being a leader in terms of resolving some very difficult crises, like Syria, have been very positive in giving us confidence to continue forward.
Senator Duffy: Mr. Al-Katib, thank you for being with us. It is a very impressive story.
This perhaps does not relate so much to Turkey as domestically. You have talked about the growth of pulse crops in Saskatchewan. Those of us from rural areas are wondering about growing our rural agricultural economy. What is the value proposition on pulses compared to cereals, and how do you see the growth in pulses for your company and in general? Would you see pulses coming from places other than Saskatchewan?
Mr. Al-Katib: It is a very good question. I obviously focused on Saskatchewan as being a main place of our business, but we do also have processing plants in Manitoba and Alberta. There is a concentration of pulses on the dry edible bean side in Ontario and Quebec, as well. We do have a national pulses industry already. Looking at the growth profile, the overall acreage is growing mostly in Western Canada because of the large acreage base that we have.
The value proposition is a simple one. When I was a kid growing up in Davidson, Saskatchewan, every third or fourth field was summer fallow, so we had black dirt that we naturally allowed to replenish the soil. However, in the late 1990s we started into what we call continuous cropping. Instead of leaving a field to summer fallow, pulse crops or legumes naturally replenish nitrogen in the soil.
Pulse crops have the lowest water-use footprint per unit of protein of perhaps any other protein source. I will give you a small example. To produce a pound of protein from beans takes approximately 43 gallons of water. To produce a pound of beef protein, it takes 1,857 gallons of water.
When we look at the overall environmental footprint, pulses have the lowest carbon footprint of any crop grown in Western Canada or the northern-tier states. It is a continuous cropping, nitrogen-fixing, low-water-use crop that is non-GMO, high protein, high fibre and very nutrient dense.
When we look at that growth profile, we see the acreage in Canada going significantly upwards in the coming decade or two where we continue to see this multibillion-dollar opportunity develop into something much more significant.
We see the creation of opportunities in rural communities. Companies like ours are building value-added processing plants in this country. As I said earlier in my comments, the vision was from producer to the world directly. That tag continues to be one of the first things I wrote on a blank sheet of paper as a young entrepreneur. It is still on every business card, every brochure that I have in the several hundred million dollars of exports around the world. We see that being a very positive growth profile.
Market access, though, continues to be what actually creates the wealth. We always say to our farmer base that you may not produce because you can: You must produce because there is a consumer willing to pay you an economic price to grow that commodity that makes sense, makes money on your farm and creates opportunities for your family. It is up to companies like ours to create wealth by processing those into food and food ingredients and then allowing those ingredients to leave instead of raw commodities.
This is not just an agricultural message: It is an oil and gas message, an agriculture message and a mining message. These are major drivers of our Western Canadian and Canadian economy. We need to stop being commodity shippers and start being value-added shippers. We need transportation infrastructure. We need ports. We need infrastructure to get our product to market. That is where I see government needing to continue to focus its efforts.
Senator Duffy: Thank you. Congratulations.
Senator De Bané: Mr. Al-Katib, I want to tell you of my admiration for what you are doing. What I realize as a senator from the eastern part of Canada is that usually our businessmen concentrate on the closest and wealthiest market in the world, which is our neighbour. When you say, no, our market is the world, I would love to see all businessmen share your perspective.
When I look to Canada's place in Turkey, we are fortieth as a source of imports. There are 39 countries ahead of us. If I look to Canada's investment abroad, Turkey is thirtieth in where we invest money.
Do you have suggestions on what assistance business people could expect in order to attain their full potential? Why are we fortieth as source of imports to that country? Is it because the private sector thinks it is easier to do business with the closest neighbour, with the same commercial law and same way of doing business, rather than going abroad to Asia, to Turkey, et cetera? What is missing? Is it Export Development Canada? Ultimately, is it a lack of ambition in our business community? What is the problem? Why is Canada, a member of the G8, preceded by 39 countries in Turkey?
The Chair: Thank you, Senator De Bané. I had actually looked around and closed the list of questions, and now I have added to it and we are running out of time.
I will propose that Senator Johnson put her question and Mr. Al-Katib can then answer both.
Senator Johnson: I wanted to congratulate you as well, as my colleagues have.
I have one quick question about the economic turmoil in Europe. How is that affecting you and other companies from Canada doing this business, like Legumex in Winnipeg?
Mr. Al-Katib: The Europe question fits in very well with the question before, so let me start with both together.
I feel that, yes, we have been focusing our efforts very much on the United States, as we should have in the past, because it is a very significant market and continues to be one that dominates our exports. I do not advocate that we stop our focus on the United States because it is a market that will continue to be a very important part of our economy due to its close proximity.
From the governmental side, we need to recognize that emerging markets are our future growth. We need to look at global commerce strategies and strategies of our government, both on the Trade Commissioner Service, Export Development Canada and other service suites that we offer to look at the opportunities for the next 10 years that build for the 10 years after that.
I always say, when I have an opportunity, you as senators and our members of Parliament should realize one thing: Forward-looking Canadians will judge you on your decisions and how they will affect us 20 years from now, not 20 days, 20 weeks or 20 months. It is very difficult for you, as people sitting in a regulatory environment, to think 20 years ahead sometimes, but that is certainly where we need to go.
Why are our Canadian businesses fortieth in Turkey? I think part of that has been that we are a little bit late to the game, but we have not missed the game yet. The game is still going on.
Turkey's changes in the region, their governmental policies in the last decade, in my opinion, have given it the framework and the platform from which to have a long run of sustained growth. This is why I am advocating that when we look at our list of priorities, we have our developed-country priorities: the United States, and then of course we have the new Europe free trade agreement coming, which I think is a very positive development.
However, beyond that, we need the next eight. Who are the next eight in priority? That is a matter of debate. When I look at the next eight, I think there is a very strong case that a country like Turkey is in our next eight or ten priorities.
Part of what is changing this mindset is the Europe crisis, when we look at the sustained effects of the United States and meltdown of 2008, coupled with a macroeconomic meltdown due to the European crisis in 2011. This is proven.
When we look at the overall companies and countries that have weathered the economic storm, those that had a much more diversified book of economic activity have fared better than those that did not. One of the saving graces for Canada, of course, was our resource focus over the 2011-12 cycle. If you look at our resource focus, agriculture, mining and oil and gas are emerging-market-focused industries. As a result, we have a natural diversification built into some sectors of our economy that were quite hot in very much a crisis period.
We see this European crisis and its effect on Canadian business and the doubling effect of that 2008 and 2011 crisis back to back as maybe opening the eyes of some of the SMEs to say we need to make sure we have access to some of these higher growth opportunities, and we need to do it carefully.
This is why I advocate having governmental agreements like economic partnerships, FIPAs and double taxation agreements in place to ensure that we can take more of a targeted approach to partnership to allow SMEs to participate in this next wave of growth. That is one of the main things that is affecting it.
I do not think Canadian businesses are lazy. I think they are opening their eyes and taking advantage of opportunities and that the next 10 years will be much more positive.
The Chair: Mr. Al-Katib, thank you for spending this hour with us. Your enthusiasm and your positive approach speak highly for why you have been so successful in Canada, along with your parents in Davidson, Saskatchewan. You are an admirable advocate for small- and medium-sized businesses and how they can do business differently in different geographic areas. You have been extremely helpful to our study, and I am sure that your experiences will be the basis of many of the questions that we will put to the Turkish authorities.
We wish you continued success. I am glad that you will be sitting on some boards because the message from a young entrepreneur from a small town who started in a small business needs to be heard over and over again. Thank you.
Mr. Al-Katib: Thank you.
The Chair: Senators, we will proceed to our next topic, Bill S-14, An Act to amend the Corruption of Foreign Public Officials Act. We have heard from all the witnesses who asked to appear before us, but questions were raised in a letter from Mr. Denis Meunier. That letter was circulated to senators and the department was asked to respond to some of his questions. The Canadian Bar Association appeared before us yesterday and they also raised some concerns and questions. Therefore, honourable senators, I understand that we are agreed to have department officials join us at the table now to take questions from senators on any issues that have been raised before we consider whether we go to clause-by-clause consideration of the bill.
With us are Wendell Sanford, Director, Criminal, Security and Diplomatic Law Division; Marcus Davies and Maria Mascaro.
Senator Downe: No doubt you either listened to the testimony yesterday from the Canadian Bar Association or read the transcript of it. Do you have any comments on their presentation?
Wendell Sanford, Director, Criminal, Security and Diplomatic Law Division, Foreign Affairs and International Trade Canada: We did have an opportunity to read the transcript this morning. They essentially raise two points. The first is with respect to the length of possible sentences and the second is whether facilitation payments of very small amounts could result in a 14-year prison sentence. Our response to both points is that these are prosecutorial decisions. The probability of someone who makes a $20 facilitation payment receiving a 14-year prison sentence is zero — it will not happen.
There have been only five cases, and they have either been decided by the court or are currently before the court. It is significant to note that in the Niko Resources Ltd. case a $190,000 vehicle was offered. Even if the defence is facilitation payment, a $190,000 vehicle is certainly not that. It is our view that the prosecutors will have to decide what they will charge people with and upon what evidence they will charge them.
Senator Downe: When you were here with Foreign Affairs Minister Baird, I asked a question that you could not then answer. Have you consulted the Canadian Revenue Agency about this legislation? If so, what was their advice?
Mr. Sanford: We have spoken to them, but regrettably, we do not yet have their written response. They will respond in due course.
Senator Downe: I am sorry; that is not clear. You did consult them on the bill and they did not send you any information?
Mr. Sanford: They have not answered your question between the meeting last week and today.
Senator Downe: Is it correct that the Department of Foreign Affairs consulted them and received advice from them?
Mr. Sanford: No, sir. The advice was that they will get back to us, and they have not yet done so.
Senator Downe: To be clear, you consulted another department of government on legislation that is before Parliament and they said they would get back to you. When will that be; after the bill is passed? Is their input not important to this legislation?
Mr. Sanford: Yes, sir, it certainly is, but we have not yet received their responses.
Senator Downe: They are an amazing department on a number of levels.
We received comments from the former director general responsible for criminal investigations at the Canada Revenue Agency. I assume they have been given to you as well. He expressed concerns about the sharing of information. Have you seen that correspondence?
Marcus Davies, Legal Officer - Corruption, Transnational Organised Crime, Drugs; Criminal, Security and Diplomatic Law Division, Foreign Affairs and International Trade Canada: Thank you, senator. Perhaps I could also maybe just ask you, for the earlier question, to clarify the concern you had with Minister Baird. I am not clear on that. I can also address the issue about the correspondence from Denis Meunier, who listed himself as an asset recovery and terrorism expert.
Essentially he was bringing up a concern that falls under the Income Tax Act. It is not an OECD obligation under the CRA because the principle under the CRA is self-reporting. A foundation to our Income Tax Act is that we have self-reporting.
Where, in audits, they come across criminal evidence, it is not disclosed to law enforcement agencies. This is a policy matter that we understand is being looked at, and this would be for the Department of Finance to address. In particular, the CFPOA it does not touch on this. It is an income tax issue.
We understand that Finance has agreed to provide a response and deal with that issue. Because they are matters under consideration, they may be limited in what they can address. I can assure you that it is something they are aware of and are also aware of the recommendations.
The recommendation in question is not a recommendation coming from the OECD convention on combatting bribery of foreign business transactions. This is a general recommendation related to the convention but not a convention obligation. It is one of the recommendations in the secretariat for implementation measures at large.
Perhaps you could remind us of your question about Minister Baird and the CRA.
Senator Downe: The question has already been answered. When the minister was here I asked if the department consulted the Canada Revenue Agency. Officials were going to find out and let us know. We have found out today that they have consulted them, but the CRA has not gotten back to them.
Senator D. Smith: My question was basically the position of the bar association. I am wondering if there was very little input from members of the bar association to them before they made it, and experiences like they were talking about actually occurred. You have said, and I certainly agree, a 14-year sentence, the chances would be zero for a $20 payment.
I assume you had input from the department, which more or less was not concerned about the impact that these changes would have. Is that fair for us to assume?
Mr. Sanford: With respect to facilitation payments?
Senator D. Smith: Yes.
Mr. Sanford: This is one of the reasons why this aspect of the legislation will not be implemented on Royal Assent. It is to give time for the companies and the government to work with the companies to set in place procedures which will allow them to handle this adequately.
Senator D. Smith: Do you have any estimate of how many months or years it might take before that would be implemented? I think the undertaking we took on doing the OECD was about 98 or 99. What sort of time frame do you think it might take before it could be implemented?
Mr. Sanford: It is difficult for us to tell from the officials' level because it would be a cabinet decision.
The Chair: This negotiation with companies is going to take into account how to implement facilitation so they are ready and they understand what is acceptable and not acceptable. Would you be taking into account what our counterparts in the OECD will be doing at that time with their companies? It is a global issue.
Mr. Sanford: Yes, by all means. I brought the list this morning of the 40 countries in the OECD, 36 of which already have no provision allowing for facilitation payments. We will have strong discussions with them. We will obviously be discussing with the other three countries that still have facilitation payments, Australia, New Zealand and the United States, to see the way forward.
Senator Johnson: In this connection, what will the government's definition of a facilitation payment be? What does it constitute and under what circumstances?
Mr. Sanford: In the current legislation there is a series of provisions. The reality is that there have only been three cases completed and there has been no successful defence using facilitation payments. There is no body of law yet to determine exactly what an acceptable facilitation payment is.
Senator Johnson: In relation to humanitarian agencies and charities, there has been a lot of discussion, yesterday as well, about special consideration. How do we deal with that? Should they be forced to engage in facilitation payments to deliver urgently needed care?
Mr. Sanford: I think, again, that will be a question of prosecutorial decisions. It is not my position to say so, but when faced with an exceptionally difficult humanitarian situation, you can imagine the probability of a Canadian investigator, prosecutor or court reacting negatively in that situation. It will not be very high.
Senator Johnson: Should humanitarian agencies and charities be given special consideration? That may be a recommendation I would make.
Mr. Sanford: They certainly are not currently in the legislation. There is no special provision.
The Chair: I am resisting all my legal tendencies, but it is not a question of exempting charities: It is a question of what other people, with an intent to bribe or facilitate, will do. How do you exempt the nefarious people who could move into the charities if you block other areas? Am I making myself clear? In other words, the concern I have is, yes, moving goods to the people who need them would be one example. However, if you start exempting that scenario, then you know where the criminal activity moves to, and they have become even more vulnerable as charities. I have read the act. It is zeroing in on nefarious activity, not charitable activity.
Mr. Sanford: You have made the point strongly. As I noted from your comments in the transcript yesterday, senator, we are trying to set a high standard here and push back against corruption. The only way to push back against corruption is not by making many exemptions for it but by setting a very high standard and then examining the actual facts reasonably, given the circumstances you are faced with. However, you must have a high standard to begin with, otherwise it is a slippery slope.
Senator Wallin: Here is my dilemma: My sense is that yesterday there was agreement among the members of the committee that this is important legislation and we need to move forward with it as soon as possible. Can we do that? Can we — and I will hear views from both sides if there is a response — simply say we recommend that this process of consultation to clarify that key element move quickly, that we want to see that process started? Let us get on it and have someone come back and report to us at some point that progress is being made. However, it seems to me that you need the legislation to start that process.
Mr. Sanford: Yes.
[Translation]
Senator Robichaud: Once this bill becomes a law and everyone concerned has had time to understand all the sections of it, could a person who works for a company that does business outside of Canada end up with a criminal record for giving $20 to expedite that person's departure from the country? Like the examples we were given yesterday. Could that person end up with a criminal record? No distinction is being made here between small payments and much larger ones.
Mr. Sanford: It is possible. If it is a matter of a trial against an individual and if it is very serious.
Senator Robichaud: What do you mean by ``very serious''? I understand that there are different types of payments, but here we are talking about small payments of $20, and if charges are laid, no distinction will be made. Perhaps the person will not be sent to prison for 14 years, but he or she will still end up with a criminal record, right?
Mr. Sanford: If it is a very serious case, for example a $200,000 car.
[English]
If the person who was charged is found guilty, he will receive a criminal sentence and will have a criminal record.
[Translation]
Senator Robichaud: You are giving an indirect answer to my question. I mean a small payment. Yesterday, we heard that the amount could be $20, $30 or $40. I am not talking about a $190,000 car.
[English]
Mr. Sanford: The short answer is that, given prosecutorial discretion, there will be no charge against someone for a $20 offence. It will not happen, just as one will not be stopped for driving 61 kilometres per hour on a road with a speed limit of 60 kilometres per hour. If you are driving 200 kilometres per hour, you will hear about it.
Senator Robichaud: That is what I wanted to hear. Thank you.
The Chair: I will ask a legal question. If you are in a situation where your life is being threatened, will there not be some defence of necessity if there is a wayward prosecution? If your life is being threatened and you choose to do something to save yourself and someone does not see it that way, do you not have a defence in court from common law?
Mr. Sanford: Yes.
The Chair: The defence of necessity. Regarding some of the examples we heard that if I thought I was being threatened and felt I needed to do this, those would not lead to a criminal charge?
Mr. Sanford: It might lead to a charge, but it will not lead to a conviction if your defence is sufficient. There would be no criminal record in that case.
The Chair: Let us talk about facilitation. I understand what we now have and what we are looking at is that we want to do business as efficiently as we can and as fast as we can to beat out our competitors. However, that cannot be an excuse to go down what you called bribery or the slippery slope into facilitation and something bigger. Is that where the OECD has drawn the line?
Mr. Sanford: Yes. We set a firm barrier that says no facilitation payments allowed. We hope the 40 OECD countries look at each other in the eye and say, ``This is the rule, and we all agree that we will stick by it.'' Any one of us must decide whether we will draw that line and whether we will stick to it. To date, 36 countries of that group have said it. This legislation would propose to have Canada have the same standard.
Senator De Bané: Mr. Sanford, you have told us that a facilitation payment of $25 to have an exit visa stamped in a passport to speed up departure from a country will not be allowed; is that right?
Mr. Sanford: Senator, I have said that is illegal, as is driving 61 kilometres per hour in a 60 kilometre-per-hour zone. The question is whether anyone will be prosecuted for a $20 visa fee and the answer is that it will not happen.
Senator Baker: It will not happen?
Mr. Sanford: That is correct.
Senator Robichaud: You cannot guarantee that.
Mr. Sanford: I absolutely assure you that I cannot guarantee that, senator; that is true. I have 37 years at the bar. If I were prosecuting and an RCMP officer came into my office and said, ``$20,'' I would say, ``Excuse me, but I have better things to do.''
Senator Robichaud: I have paid fines for 15 kilometres over the limit.
Senator De Bané: We let the Crown attorney in his better judgment decide if he will lay a charge or not.
Mr. Sanford: Yes.
Senator De Bané: I see. Thank you, Mr. Sanford.
The Chair: Are there any other questions? Can we excuse the witnesses? They can remain with us in case something comes up. Thank you.
Honourable senators, are we prepared to proceed to clause-by-clause consideration?
Some Hon. Senators: Agreed.
The Chair: I am getting a couple of signals. Maybe I will pre-empt something. When I table the report on behalf of the committee, rather than doing observations, I think we have to signal something. I do know that the consultations will go on for some time. I remember the generic drug thing; we had to pass it and give some latitude for the government, because it is an international issue.
However, I think we should signal the issues, and they have been clearly pointed out here, so that we are on the record as a committee unanimously questioning CRA and indicating concern that Canada continue to lead its negotiations to complete that clause. Would that be acceptable?
Senator Robichaud: Will that be in your report when you report the bill?
The Chair: I will table the report and then speak to the report in my comments.
Senator Robichaud: But that will not be part of the report; it will be part of the comments after.
The Chair: No, it will be part of the comments on behalf of the committee. If I am wrong let me know, but I hear from you that we are strongly advocating a strong policy against bribery. I think that is our message. My personal input is that every dollar that goes away in bribery is going away from somebody in some development issue. I think we want to send a strong signal from this committee.
However, we have some administrative things we would like to put on the record but not be seen to be veering from that principle. It is sort of a non-partisan thing to me. Am I correct?
Senator Johnson: Yes.
The Chair: If I am not, please correct me now.
Senator D. Smith: That is my view.
Senator Johnson: Yes, you are correct, Madam Chair.
The Chair: Is it agreed, senators, that the committee move to clause-by-clause consideration of Bill S-14?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which is the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the bill carry?
Hon. Senators: Agreed.
The Chair: Is it agreed that I report this bill to the Senate?
Hon. Senators: Agreed.
The Chair: I think we can table it this afternoon and I will speak to it when we return after the break. I will consult with my deputy chair on the comments that I will make on behalf of the committee inside the report.
Senator Downe: The week we come back — perfect.
The Chair: Thank you, senators. As usual, we are efficiently ahead of the schedule. You might even get some lunch, but not courtesy of this committee; I am cheap. Thank you.
(The committee adjourned.)