Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 7 - Evidence - Meeting of March 6, 2014
OTTAWA, Thursday, March 6, 2014
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:30 a.m. to study security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters; and for the consideration of a draft budget.
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 study on security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
In our first session this morning I'm very pleased to have before us by video conference, Professor Dominique Caouette, Associate Professor, Department of Political Science, University of Montreal. Welcome. I see a nod so we have a connection by video conference.
Before us in person is Mr. Denis Côté, Coordinator, Asia-Pacific Working Group of the Canadian Council for International Co-operation; and Ms. Karen McBride, President and CEO of the Canadian Bureau for International Education.
I'm very pleased that you have responded to our request and we look forward to your presentations. We have questions at the end. We're going to be on limited time, so I would ask for the opening statements and I will go to Mr. Caouette first.
Dominique Caouette, Associate Professor, Department of Political Science, Director, CETASE (centre for East Asian studies), Coordinator, REDTAC (network for studies in transnational issues and collective action), University of Montréal, as an individual: Thank you for having me over. I would like to emphasize that the region is a very dynamic and fascinating one.
[Translation]
Thank you again for the invitation. The first thing I would like to stress is that the region is in a state of significant flux. The region is at a boiling point because it is located between two giants, India and China, and is being courted by them both.
The second thing to point out is that I have been asked to talk about four states: Burma, Indonesia, the Philippines and Singapore. That is fascinating in itself because we are dealing with two polar extremes. At one extreme, we have Burma, with a per capita income of $1,300 and at the other extreme we have Singapore with a per capita income of $55,000. That is more than Canada, with a per capita income of $52,000. Singapore is in a postmodern period, the third industrial revolution, while Burma is a country undergoing a major process of economic and political development. Between the two, we have the Philippines, with a per capita income of $2,700 and Indonesia at $3,790.
These are emerging countries. We talk of them now as the two new emerging powers of Southeast Asia. Indonesia has more than 250 million inhabitants, the most populous Muslim country in the world. The Philippines has a population of more than 110 million. They are quite fascinating countries, because they really are at a boiling point.
I think it is important to talk about what the four countries have in common: they are all multicultural states. The states were conceived on a basis of multiculturalism. The major challenges that the four states are facing, whatever their levels of economic and political development, have to do with the way in which they accommodate and live with that cultural diversity.
In Burma, of course, you have the Bamar, but you also have a multiplicity of ethnic groups. In the Philippines, more than 70 languages are spoken and, in Indonesia, more than 180 languages. In Singapore, the Chinese majority coexists with a Malay minority and an Indian minority. So the two regions are marked by the challenges of coexistence and economic development.
My second comment by way of introduction is to point out that these countries are going through fascinating processes of democratization at different levels. Singapore has held elections since its independence in 1965. The same party, the People's Action Party, has won each election. We are very familiar with Lee Kuan Yew, the leader of Singapore during the economic boom. The same party has always been in power. There are elections every four years; they are held regularly, supposedly democratically, and it seems that there is a pact between the people and the state: economic growth in exchange for a vote for the party in power.
The challenge for Singapore and Malaysia, which are next-door neighbours, is that they were together for a year and a half at the time of independence, before they became two separate states. There is a major movement called Bersih 2.0. Bersih means "clean,'' "cleaning.'' So the movement wants more democratic elections in Malaysia. We can expect a similar process in Singapore and we may well now wonder whether, given the standard of living, the people may begin to demand more political and social freedom. After all, it is still a semi-authoritarian state.
In Indonesia and the Philippines, there have been significant democratization processes. For the Philippines, it happened in the late 1980s, in 1986, with what was called People's Power, a popular revolution when people took to the streets. This was the forerunner of what we saw in the Middle East and the Maghreb two years ago, the so-called "Arab Spring.'' It was the same kind of movement; it brought people out into the streets demanding more democracy after 20 years of dictatorship under President Ferdinand Marcos. Since then, the democracy has been fragile: they have elections all the time, but, on three occasions, the people have taken to the streets to demand that the president be deposed.
Currently, the Philippines has one challenge of consolidating democracy and another challenge of economic development because, in the Philippines, production is made possible by its overseas workforce. Ten or eleven million Filipinos work overseas, a diaspora that sends back $21 billion each year. That is more than all the international aid and more than most of the Philippines' trade. The people are sending home the money they make.
In Indonesia, the democratic transition started in 1997-98. That was the end of the Suharto regime. The regime collapsed during the economic crisis because there was a huge amount of corruption. Ever since, Indonesia has been a kind of rare bird, because currently we are seeing relatively democratic elections. For a long time, it was thought that the military would retake power, but that has not been the case. The military seems ready to work with the current political regime. There will be new elections this year. This is an important transition. The dynamic mayor of Jakarta is expected to run for office. But there is a fly in the ointment: former military people with ties to the Suharto regime could disrupt things.
The major question in Indonesia is this: are economic development and the move towards democracy happening equally across the archipelago? Indonesia is made up of more than 17,000 islands. A large part of the wealth is concentrated in Java, one of the smaller islands. On the periphery, there are islands that provide a lot of resources and where the power of the central state is weak. Sometimes there are major human rights abuses, because there is a rush to develop natural resources in Indonesia. The three countries, Indonesia, the Philippines and Burma are extremely attractive to foreign investors because of their natural resources. That is probably a major line of inquiry: the link between natural resources and respect for human rights in Indonesia.
The fourth state, Burma, is going through a democratic transition after more than 30 years of authoritarian rule. The military took power in 1962. There were hopes for democratic reform in 1988-1989, when the National League for Democracy, with Aung San Suu Kyi at its head, won the election, but the military retook power. Only in 2010 did we see the current process of transition.
A number of states that had imposed sanctions on Burma, including Canada, have started to return. The big question for Burma is how will the process of democratization be handled? It will be done at two levels: are the military going to be ready to become businessmen, as we are seeing at the moment? Are they going to be ready to change from being soldiers to being rich and prosperous businessman? Are they going to respect the process of democratization that is taking place? And how is the country going to accommodate the various ethnic minorities that make up much of the population in the north of the country, on the borders with China and Thailand, a region that is also called the "Golden Triangle''? The region is currently the world's largest producer of amphetamines. So how are peace accords to be negotiated with the ethnic groups?
The four states are seeing significant economic development. Some people talk about them as emerging economies. There are issues of accommodating minorities, tensions generated by the abundance of natural resources and the respect for human rights and democracy.
So those are my preliminary remarks. I will leave some time for questions so that we can go into these different dimensions in more depth.
[English]
The Chair: Thank you, professor. I will go now to Mr. Côté.
[Translation]
Denis Côté, Coordinator, Asia-Pacific Working Group, Canadian Council for International Co-operation: On behalf of the Asia-Pacific working group of the Canadian Council for International Co-operation, I would like to thank you for this invitation and for the opportunity to share with you some thoughts on the issues of development and human rights in the Asia-Pacific region.
The Asia-Pacific working group is made up of more than 25 Canadian civil society organizations working with a large number of partners and on many issues all over Asia. The issues include food safety, health, education, women's rights, and climate change. Given the huge size of the region and the subjects that this committee is studying, we could have discussed many topics this morning. But in my brief presentation, I have decided to deal with three issues that our working group has recently been focusing on.
First, a word about the manner in which the Asia-Pacific region is perceived. In 2007, the Government of Canada's Global Commerce Strategy was already identifying the Asia-Pacific region as a priority for trade development and investment. In 2013, this direction was confirmed when the Global Markets Action Plan was published; it set out a series of measures designed to promote the interests of Canadian companies in major overseas markets. Clearly, as the economic weight of Asia begins increasingly to be felt in the global economy, it is no surprise that Canada should seek to benefit from the opportunities that the region offers. But that image of economic dynamism that is often synonymous with Asia also contributes to mask the fact that the region still faces enormous challenges in reducing poverty and in achieving human rights for all. For example, in its most recent report on food insecurity in the world, the Food and Agriculture Organization of the United Nations (FAO) pointed out that more than 500 million people are still suffering from hunger in Asia.
So I would like to draw your attention to three issues in particular. The first issue deals with workers' rights in the region. Last year, the collapse of the Rana Plaza building in Bangladesh, which killed more than 1,000 workers and injured more than 2,500, focused the world's attention on the often deplorable working conditions of many workers in the textile industry's sweatshops in the country and the region. I should actually say female workers because women make up the largest part of the industry's workforce.
Another example of the problems in the area of workers' rights in Asia is from Cambodia. Last January, after a demonstration for an increase in the minimum wage in the textile industries, striking workers were violently repressed by Cambodian authorities. The result: four people were killed and dozens were imprisoned because they were demanding decent working conditions. When governments in Asia compete to attract investments and increase their exports, they sometimes close their eyes to the appalling working conditions of their workers instead of fulfilling their obligations to protect the rights of those workers.
Another problem many Asian countries face is land hoarding. This is a process by which companies, often foreign, but domestic as well, buy or lease large tracts of land in developing countries, specifically for the large-scale production of food for export or for biofuels. This is an aspect of the race for resources that Mr. Caouette was talking about earlier.
The problem is that, though the land is sold or leased to those companies under the pretext that it is unused, that is rarely the case. Land hoarding often involves small farmers being displaced and losing their ability to make a living.
Since 2008, there has been a phenomenal growth in land transactions in developing countries, triggered specifically by the food crisis of 2007-08 and the constant rise in prices. In a number of Asian countries like Cambodia, Indonesia and the Philippines, this is a major development problem.
The third issue is trade and investment. For about two years, the working group has begun to pay more specific attention to questions of trade, of investments and of their impact on human rights in Asia. Although trade and investment can indeed contribute to the development and to the respect for human rights, this does not always happen in reality. They do so only when they consider the needs of vulnerable populations and are made in a way that helps the states to promote social development and environmental protection.
Free-trade agreements and investment treaties generally enshrine new rights for companies and investors in national and international legislation and give rise to policies that often reduce the ability of the governments of developing countries to put in place social and environmental policies that contribute to the achievement of human rights in those countries.
Canada has already announced that several free trade agreements and investment treaties in Asia are being negotiated and we foresee others in the future. We might specifically mention the free-trade agreement with India or the Trans-Pacific Partnership. As for investment treaties, discussions are under way with Indonesia, Mongolia and Vietnam, among others. Burma has also been identified as an emerging market in the Global Markets Action Plan.
But civil society organizations in Asia are concerned about the impact of these agreements. Last year, we had visits from representatives of civil society in India and Burma. In the case of India, a specific fear is often the impact that a trade agreement with Canada could have on small farmers in the country if Canadian agricultural exports begin to flood local markets. In Burma, a country which is still at the very beginning of an uncertain transition towards democracy, and which is still rocked by ethnic conflict, the concern is to see foreign investors come to an environment in which the legal and regulatory framework of the country is in no way structured to allow local people to derive any benefit at all from investment projects.
In conclusion, we feel that Canada should make sure that its trade, its diplomatic activity and its development policies strengthen the ability of the developing countries of the Asia-Pacific region to respect their human rights obligations. For example, in order to determine whether a free trade agreement is appropriate or not, an independent impact study on human rights should be conducted.
As Canada turns increasingly toward Asia, it is going to have to do more than simply promote the interests of Canadian businesses if it wants to be perceived as a real partner by the countries and populations of that region. It will have to, in particular, continue to support the efforts of the countries in the region to eliminate poverty and further the achievement of human rights for everyone.
[English]
The Chair: Thank you. Now I will turn to Ms. Karen McBride from the Canadian Bureau for International Education. Welcome.
[Translation]
Karen McBride, president and CEO, Canadian Bureau for International Education: I would like to join my colleagues in thanking you for this opportunity to continue the dialogue. I think that the links between Canada and this region in education have a great deal of potential and I look forward to taking part in this conversation.
[English]
First, I would like to make a few context-setting remarks. Let me talk briefly about the Canadian Bureau for International Education. We are a national NGO, not-for-profit organization, non-government organization. Our members are Canadian universities, colleges and institutes, K to 12 school boards, as well as language schools across the country. The sole focus of the organization is in fact to promote international cooperation in education.
The second contextual remark is that as a result of the role that CBIE plays nationally, we have been a key partner with the government in the evolution of its recently launched international education strategy. I'd like to touch briefly on what the key elements of that strategy are currently because that will set the context for my remarks with respect to our relations with ASEAN.
The strategy recognizes that there are several pillars or foundations to effective international education. It does at this stage, for example, acknowledge the importance of sending more Canadian students abroad to be able to get the international knowledge, skills and cross-cultural learning they will need to be our leaders. It acknowledges the importance of strengthening institutional partnerships in education at all levels. But the particular focus it has at this time is doubling the number of international students in Canada from its current 240,000 to more than 450,000 by 2022.
Having set that context, let me now turn to highlight some salient issues in our education relations with ASEAN. This discussion is very timely, because one of the activities CBIE undertakes is to host a national conference every year. In the course of that conference we always focus on one region of the world for a day. Last November that region was ASEAN. I have some relatively recent learnings that I would like to share with you as a way to stimulate our conversation.
The first thing that I think is really important is that education relations with Canada are clearly a priority for ASEAN countries. In fact, our ASEAN-Canada action plan for 2010-15 stipulates heightened cooperation in education as a high priority.
The other take away was that at the institutional level, at the level of our universities and colleges, there is great potential for cooperation with ASEAN and that is increasing dramatically as well. One thing of note, for example, is with respect to the recruitment of ASEAN students to Canada. It increased by 54 per cent between 2008 and 2012, from approximately 7,000 to over 10,000. Most of these students come from Vietnam, Malaysia, Thailand, Indonesia and the Philippines, but the enrolment forecasts are that the number of ASEAN students who will cross borders to study in different parts of the world will continue to grow, and there are no signs of loss of momentum.
When we listen to the ASEAN speakers we gathered together, there are two things that I think are really relevant and important. One is the huge, young population in this region, which our speakers talked about as being both a huge opportunity for economic prosperity, as well as a potential source of instability in the region. It was for both these reasons that they underscored why capacity development and education at all levels is of critical importance to the region.
The next thing I took away from the forum is that the country's interest in Canadian expertise is very high. We are especially good at many things in our education system, innovation and pedagogy, such as student-centred learning; integrating practical elements into the pedagogy; and distance education. We are particularly good at linking education to industry and education to community. We are particularly strong in our applied and basic research expertise in many sectors where the region and our country have similar interests.
There are many opportunities and the innovative models for cooperation and education are plentiful, but what we heard clearly from our speakers was that Canada is relying on its store of goodwill as a result of past initiatives it has made in supporting educational relationships — initiatives such as the Commonwealth Scholarship Programme and other scholarship programs. There are no new initiatives. I was sitting at a table with the commissioner for higher education of the Philippines and our ASEAN partners were asking, where is Canada as a partner?
Another key lesson I took away from the forum is we need to do more for our Canadians students, our young people, to engage with this region. One of my colleagues mentioned the diversity in the region and in countries. We have very little capacity to navigate this region in terms of our young people, our students. Only 3 per cent of our students go abroad for any part of their studies. Our partners in ASEAN, as in other parts of the world, are saying, "Please, Canada, don't just be a poacher of our students; be a partner. We want two-way flow of faculty, two-way flow of students.'' They want to have also that people-to-people linkage that not only fosters our future trade relationships but underpins our diplomatic relationships with the region going forward.
Making educational relations more of a foundational pillar of our engagement with the region does require us, I believe, to move quickly to expand the international education strategy, and the work or the anticipated results of that strategy, so that we aren't just focused on recruiting the best and the brightest from ASEAN to come to Canada and to stay in Canada. They need their human resource capacity equally.
How can we use educational relationships as a foundation for our trade going forward, for stability in the region, for promotion of democratic values? This is a critical time for the region. It is an incredibly strong potential that Canada has to make this a foundation of how we engage with the region. I think that there is a moment in time, with the launch of the international education strategy, that we can make it a really robust and value-added approach on behalf of Canada.
The Chair: Thank you. I do have a long list. I will start with Senator Fortin-Duplessis.
[Translation]
Senator Fortin-Duplessis: I thank all the witnesses for their presentations. My first question is for Professor Caouette: in a recent article you co-wrote and published last February in Social Transformations, you discussed various activism measures taken by non-government organizations in Asia. Among other things you mentioned that in Malaysia and Singapore, NGOs are characterized by their marked interest in economic development and consumption.
Can you tell us whether Asian NGOs who defend better ways of creating and redistributing wealth are in favour of free trade and an increase in trade among countries?
Mr. Caouette: When we study the region it is fascinating to note the growth of its NGOs. That is to some extent what the article you referred to tries to demonstrate, that is to say that according to the political evolution of countries, we have seen different civil organization developments. In the Philippines, because of the dictatorship, a lot of NGOs worked on human rights and democratic development. Afterwards, those NGOs turned their attention to the rights of aboriginal groups and minorities. I am thinking for instance of the conflict in Mindanao.
In semi-authoritarian or semi-democratic states like Singapore and Malaysia, the topics the NGOs dealt with were very much related to the economic boom, subjects that were less politically sensitive, such as the matter of the arrival on the market of products made by multinationals. Thus, in Malaysia we have seen a whole network created around the matter of powdered milk, for instance, in the 1970s, the arrival of pharmaceuticals, the opening of McDonalds, et cetera.
Currently we are seeing an increasing number of NGOs speaking up with regard to the global issues of multilateralism or trade. In Burma we see less of that because civil society is still in the process of constituting itself and the struggle has more to do with the right to political representation. Where Indonesia is concerned, however, as well as the Philippines and Singapore, free trade is hotly and loudly debated. A lot of civil society organizations are proposing a moderate approach, that is to say a temperate economic openness accompanied by certain accommodations. There is a whole well thought-out and well-expressed position on the fact that the agriculture of the Philippines or the agriculture in Indonesia cannot be opened up to free trade without putting in place protective measures for small producers. The big issue is to determine what legislation there will be around these investments. That is the problem in the region, I would say. The power of the state, especially in the countries of the archipelago — I am thinking of Indonesia, which is huge, 5,000 kilometres — to legislate in peripheral regions is not as great, by far; so when it comes to free trade, this means that environmental protection legislation, workers' protection, the guarantee of a minimum wage or the protection of women or their rights will often be tread upon to the benefit of commercial interests. That is why it is important to say yes to economic openness. These are countries whose prosperity depends on openness to global markets.
The second most important point is the development of a domestic market. A country may open up, but it must ensure that there is a redistribution within the country and that the regulatory framework is in place. The Philippines has the greatest number of laws and regulations on how things are to be produced, environmental matters, and the width of sidewalks. But the state is too weak. So there is a lot of corruption and patronage networks. This is why civil society groups are worried about a very rapid shift to free trade without any protections or rights guarantees, and the state's capacity to put in place laws that would allow this economic openness not to occur to the detriment of the population, which would remain poor. The Philippines and Indonesia are countries where wealth remains relatively concentrated, and thus very poorly distributed, according to the Gini coefficient, which you are probably familiar with and which reflects wealth distribution. And that may be the challenge. It is an important question which is being thought about considerably within NGOs in those four countries, but generally speaking, in that region free trade is clearly an important matter of concern.
Senator Fortin-Duplessis: My second question is for Mr. Côté. You will not be surprised when I say that the Canadian Council for International Co-operation has entrusted you with a titan's objective, the mission of eliminating poverty. Although your goal is noble, you have to set priorities. How do you see Canada setting its priorities regarding international aid in Asia? Should we grant priority to certain countries, or, rather, to certain dossiers?
Mr. Côté: Thank you for that question. In fact, in order to determine which country should have priority, Canada has already examined 20 core countries, where 80 per cent of its aid is distributed; there are five in Asia. I think they are Afghanistan, Pakistan, Indonesia, Vietnam and Bangladesh. So countries have already been chosen. There have been so many changes regarding priority countries in the past 20 years in connection with the international debt that I do not think it is necessarily justified to change the countries now. There are established networks. So I think it is simply a matter of continuing to use the networks that were created. Canada must continue its engagement in Asia not only through its commercial activities but also through its development aid which is important in order to create relationships with people on the ground such as in the area of education, for instance.
Senator Fortin-Duplessis: But in which countries do you think — you listed a series of countries where Canada is involved and donates aid — Canada would have the greatest chance of eliminating poverty? Which one would correspond best to your overall objective?
Mr. Côté: That is a big question.
Senator Fortin-Duplessis: You may answer briefly.
Mr. Côté: We have not examined the issue of which country is closest to eliminating poverty. There are countries where needs are greater. For instance, I know that Canada may be considering investing in Burma. Perhaps then public aid to Burma could play a large role in at least reducing poverty, but unfortunately I do not have any specific cases to cite. Our work is to try to eliminate poverty everywhere. We have not chosen any particular countries in which to concentrate our efforts.
Senator Housakos: My question is about the economic, commercial and political development in the Asia-Pacific region. Could you tell me whether you think the Government of Canada and large Canadian companies are making good use of the human resources available in Canada? When I say human resources, I am talking about hundreds of thousands and perhaps millions of Canadians whose country of origin is in the Asia-Pacific region. These new Canadians have come to Canada to have better economic opportunities. They are huge contributors to our country. Here is my question for you. Do the Canadian government and companies make good use of that resource? What do you think the next steps should be? What needs to be done to use this resource and build stronger links in that region to improve the commercial and political relationship?
Mr. Caouette: I want to begin by pointing out that Canada is not very involved with the ASEAN. Canada's trade relationships with those countries are underdeveloped compared with China, the United States and the European Union. We are 10th largest participant in the region in terms of trade.
The second thing that should be pointed out is that the Asian population in Canada is concentrated in three provinces. Ontario accounts for 52 per cent of the Asian population, British Columbia accounts for 24 per cent, Alberta has a significant proportion relative to its population — 12 per cent — and Quebec has 7 per cent. I should also mention that the Southeast Asian diasporas send much more money to their country of origin than Canada provides in terms of international aid. So the potential for channelling that money is tremendous. That is a challenge because many of these new Canadians of Asian origin send money to their extended families — their uncles, cousins, nephews.
There is enormous potential because many of them would like that money to go towards the economic development of those countries. Remittances make up a whole economy, and the money could be channeled into development projects, which would enable many people to contribute. For instance, an individual of Samar origin who has been living in Châteauguay for 30 years may want to invest in their island or their native community, but they may not know about the link between development NGOs and minorities or diasporas. There is so much work to be done both in Canada and within NGOs. My colleague Denis may have something to add to this.
As for development, many young Vietnamese who were born to boat people return to Vietnam to develop businesses. There is some significant activity in that region. So far, Canada really has not understood the major potential of having those links between Canadians of Asian origin and the local population. I think that so much could be done to contribute to the economic growth not only of Southeast Asia, but also of Canada, as we are not nearly as present in Asia as China and India are. They are major players there. Canada is the 10th or 13th participant in the region, so we are really behind in developing all that potential.
Ms. McBride: This is an excellent question, and I think some bridges can be built, in areas such as higher education.
[English]
In many countries, I've seen that the diaspora from those countries are the leaders of Canadian institutions efforts to build bridges with institutions in their home countries. Many choose to do that because they want to find a way to give back to their home countries. They have already developed the language skills and the cross-cultural capacities to form those bridges in areas where there is complementary research expertise, for example, that often underpins our commercial interests or our bilateral relationship with respect to commerce.
Lacking is some capacity to make that happen and to mobilize that more strongly and robustly. For example, there used to be programs funded by HRSDC that allowed institutions to link with universities and colleges in other parts of the world. In this case, it was NAFTA and the EU. Those created platforms that leveraged the knowledge, cross- cultural skill and language capacity of researchers, professors and students in our institutions in order to build those connections that would lead to sustainable ties in higher education and research. That resource in our institutions is a strong resource for building those bridges. It is as yet, I believe, an underutilized resource.
[Translation]
Senator Housakos: Thank you for the answer. There is no doubt that many new Canadians from those countries send money to help their families through difficult times. I appreciate your answer, but you said, professor, that Canada has not been making sufficient use of that resource to develop political and economic links. Do you have any concrete suggestions in terms of what we can do to convince those people that their country of origin is not just a place suffering from economic hardship, but also a place with economic opportunities for Canada and themselves? "Economic opportunities'' imply a two-way street. All countries involved in a solid trade relationship should be able to sell, buy and create wealth.
Mr. Caouette: In terms of concrete suggestions, various initiatives are currently being implemented at different levels. Some chambers of commerce — for instance, in Vietnam and Quebec — have been active. Indian and Canadian chambers of commerce have been in existence for a long time. Those links are most needed in countries lacking chambers of commerce, such as Burma, which has a small population.
A major dilemma for investors in the Philippines is the corruption. Yes, Canada has some corruption issues, and that is a known fact, but a regulatory framework is in place. A lot of people are hesitant to invest in the Philippines because they feel that the country has not changed and that economic networks are patronage-based. Some sort of an oversight mechanism should be implemented. For instance, Canadian business people or NGOs should provide guarantees because, when someone transfers money to their uncle, aunt, father, or another family member, they know that they can go back to the Philippines or Indonesia and that the money will be used to build a home or purchase a vehicle. We need tripartite agreements that also include civil society or NGO organizations, which could guarantee independent oversight of those economic development projects. That makes sense because both in the Philippines and in India, there are many NGOs, many organizations with trade expertise. So there is some significant potential because this approach would help develop certain economic sectors and would be beneficial for both Canada and Southeast Asia. Some safeguards would be included to ensure that workers in those sectors would also be protected through the tripartite arrangement.
This would be similar to the ALO model — where unions, entrepreneurs and states work together — but would involve a project to establish links between diasporas. This would be innovative, simple to do and would provide guarantees for people and diasporas in the country of origin, as many of them want to retire there and this kind of an approach also contributes to community development.
Given that international assistance is decreasing, so much potential could be explored in that area. Private interests would be used, but the civil society could also become a watchdog in this king of an initiative. Our trade with Southeast Asia accounts for 0.5 per cent of our overall trade activity. That is minimal compared with the potential, and China is clearly going to become involved much faster. China has fewer scruples when it comes to human rights issues and economic relations. So Canada has an opportunity to lead the way.
Canada has given up on the region. Until 2002, CIDA funded ASEAN and participated in tripartite dialogues. Today, we must make an effort to become involved in that region again, as we are trying to do in China. Southeast Asia is in a situation similar to ours, since Canada is also located next to a giant. Many countries are multicultural. Canada is a multicultural country where a lot of progress has been made in that area. So there is a connection between us and some significant potential.
[English]
Senator Ataullahjan: I have a two-part question for you, Mr. Caouette. Indonesia will be holding elections in April and July this year. What issues do you think will dominate leading up to the elections? What role, if any, will social media play in this? Is it being used by citizens to organize themselves into collective action?
[Translation]
Mr. Caouette: The Indonesian elections are two-tiered. On the one hand, Jakarta is connected to the world, and social media play a very important role there — including Facebook, which is booming. On the other hand, civil society organizations have come together for the sake of democratic action — various popular groups have developed an expertise in election monitoring.
Canada could play a role in rural areas, and it would be important for it to do so. How can impartial elections be ensured in remote regions that are not connected through Twitter and Facebook? Indonesia is an interesting country. A major decentralization policy has had success in a number of Indonesian provinces. The country has 17,000 islands, and 180 languages are spoken there. Research shows that, depending on the type of government in place, the decentralization policy has really helped distribute the benefits of economic growth. However, a traditional type of politician would cater to the elites and exclude others. In this year's elections, an eye should be kept on two things. The first consideration is the potential return of military authority. The mayor of Jakarta will oppose the former military members of the Suharto regime. The second consideration has to do with what I just talked about. Observers should perhaps be sent, not to Jakarta or Yogyakarta, which are large cities, mega cities — much bigger than Toronto or Montreal — but rather to remote regions where Canada has significant investments in the mining sector. These regions are rich in natural resources, and we could play a major role because social media are not necessarily used there. I will let Mr. Côté complete my answer.
[English]
Mr. Côté: I don't have any useful comments to add to what Dominique already said. Some of the members of our working group would have more expertise speaking about Indonesia. We have several organizations working in that country. I don't have anything else to add to what Dominique said in terms of the elections.
Senator Ataullahjan: The second part of my question is that Indonesia, gathering from the testimony we've heard, seems to be a very important player in the region. It also happens to be the most populous Muslim majority country. The country has had some dialogues with ASEAN nations with regard to inter-religious conflict. Could you comment on the current state of the conflict? How is Indonesia handling its religious minorities, including the Muslims? What about Islamic extremism in Indonesia? Normally Indonesia practices a moderate form of Islam, but there has been some struggle with an emergence of extremist movements.
[Translation]
Mr. Caouette: You may recall George Bush saying that there were two axes of evil. The second axis cuts across southern Philippines, Indonesia and southern Malaysia. In the early 2000s, attacks in Bali claimed many victims. The fascinating thing about Indonesia is the relatively peaceful coexistence of religious groups. There is some extremism, but it is not significant. Indonesia has different types of Islam, including a more traditional form related to intellectual leaders. However, it also has a much more indigenous Islamic movement — represented by the Nahdlatul Ulama group — found in various regions and around religious schools. Yes, there is some interest in more militant forms of Islam, but that interest is much lower than we may think. It was commonly said that transnational networks of radical Islamists were setting up in Indonesia. Over the past few years, we have seen that Islam actually coexists fairly well with other religions. As in Canada, the ideal of three founding peoples exists. Indonesia is still built on religious ecumenism — not only Islam, but also other religions. I think it is important to recognize that religious extremism seems to be emerging in areas with the most uneven economic growth, where the potential for such extremism seems to be significant. However, Indonesia does not really have the same level of interest as other countries in extremist attacks and Islamic Jihad. It is important to see Indonesia as a country that has successfully remained secular, even though it has a huge Muslim population. The political violence is less related to Islam than to issues of wealth distribution and political participation.
[English]
Senator Ataullahjan: My question is to Mr. Côté. You briefly touched on the collapse of the Rana Plaza in Bangladesh and there's been a greater interest since then on labour rights in Canada and around the world. Has there been any progress in improving the protection of workers' rights, specifically of government workers?
Mr. Côté: Thank you for the question. I don't have the precise details, but I know that ever since the event, there has been a push to encourage companies that hire people in Bangladesh to sign onto two different accords. I can't remember the exact names. One is, from what I understand, more of a voluntary kind of mechanism that companies can join. There's also another accord which companies can join, which is more mandatory and includes participation of the workers. A lot of organizations have been encouraging the corporations to join the second one, which would be probably more useful in preventing other similar disasters.
Senator Oh: My question is for all witnesses. When I toured Southeast Asia, I had a lot of complaints from the local manufacturers. We have a lot of multinational corporations that set up factories across Asia. When the labour costs went up, or the cost of living and the standard of living went up, all these big corporations, like Walmart, Costco, Loblaws, Target, Nike, Tommy Hilfiger and a lot of other EU companies, started moving away; they go to another country to look for cheap labour costs.
As Canadians, we pay more and we look after them more — like Filipino domestic help, Indonesian domestic help — when they come to work in Canada. We pay them and look after them far better than the multinational companies are looking after the labour force. These multinational companies make huge profits. They pay $1 per item in Asia and they sell them for $9.99 in the U.S. market. Can you comment on that? I think this violates workers' basic and human rights.
[Translation]
Mr. Caouette: The question is very relevant. I think it is also important because countries like Singapore have very high wages and labour is expensive there. So we are no longer talking about cheap labour, as the market is domestic. I should point out that the region is experiencing a significant domestic market emergence. We are talking about 600 million consumers — the equivalent of the European Union. The question is, who will benefit from the development of a major domestic market? As for the multinationals, we are currently seeing the development of a two-tiered strategy. Large companies such as Walmart, Carrefour and McDonalds are setting up in big cities and leaving the rural regions to local companies. It is important to point out that there are some big agri-food and production companies, be it in Malaysia or Indonesia. We are seeing a divide between the big city markets and regional markets. It is important to allow local companies to develop that domestic market, while at the same time protecting the rights of Indonesian, Vietnamese, Malaysian companies to have access to their own market. Otherwise, cheap labour industries become dependent on outsourcing.
For instance, Japanese industries outsourced to Korea; Korea, in turn, moved its most polluting industries that require the most labour to Thailand, Malaysia and Indonesia. Now, the industry is outsourcing to countries with cheaper labour, such as Vietnam and Cambodia. So you are correct, workers' rights are affected. Delocalization is taking place toward countries with the cheapest labour.
I think that the solution to this, first, is domestic market development — so the development of the middle class in those countries. Second, local companies — Vietnamese, Indonesian and Filipino — should be provided with support, so that they can compete with industrial giants. That is why I said in my presentation that free trade was not a be-all- and-end-all solution. Local companies have to be able to grow, and migrant workers must be protected. A local company has more interest in protecting its workers, since part of its production is purchased by them. So it is logical that those companies are less likely to outsource. Of course, some Singaporean and Malaysian multinationals across the region are as large as the big multinationals. However, I think that small and medium-sized local companies are definitely a key player not only in economic growth, but also in worker protection.
[English]
Senator Oh: Mr. Côté, do you have any comments?
Mr. Côté: I think Mr. Caouette gave a very comprehensive answer.
I would add that, as mentioned earlier, you have to make sure that trade agreements, when they are negotiated, don't prevent states from legislating in favour of labour regulations — so there are labour chapters in these agreements.
In addition to what Mr. Caouette was saying, we have to make sure agreements don't prevent states from implementing workers' rights.
Senator Robichaud: I have to be quick, Madam Chair.
The Chair: I was hoping you would put your name on the list earlier before we came to 11:30.
Senator Robichaud: I will be quick. Ms. McBride —
Senator Downe: Point of order. This is the first question from this side, and we have been very generous going back and forth. I know Senator Robichaud just came on. I think he should have his question and hopefully a follow-up, chair.
The Chair: The problem is that we have one hour and we have another panel. I have been encouraging everyone to put their names down on the list, and I just received Senator Robichaud's indication. That's why I'm allowing him to do it; I'm not cutting him off.
Senator Downe: No, the point of order is that some people put on their names on the list even before the witnesses are heard. Obviously Senator Robichaud heard discussion that generated the question, which I think is only fair, and we should show more flexibility.
The Chair: Then we will have to extend the time to do that.
Senator Downe: The other possibility would be to try to rotate between the two, and maybe we don't have to put our names on the list. But we should certainly try to balance out the questions more than we have at this meeting today.
The Chair: Senator Downe, I have been trying to get everyone involved. I do the best I can. I encourage people to respond and put their name down. I keep looking at you to see if you are interested in the question. So I think that's an unfair comment.
Senator Downe: You do a good job most times, but unfortunately when you said, "Senator Robichaud, keep your question short,'' that isn't fair. You did not ask any others to keep their questions short today.
The Chair: I will respond again, Senator Downe. I have managed the list according to the time, and I keep looking at new members to add their names. There weren't any, so I allowed the questions to go on for those who were on the list. Senator Robichaud indicated just a moment ago that he wished to speak, and I'm affording him the opportunity. I don't know what else I can do.
Senator Downe: The procedure on next round, then, would be that we will all ask to be on the list right now, and that would work for both sides. Is that appropriate?
The Chair: That would be great. I will turn to you immediately as deputy chair, which I normally do, and if you don't wish to question the witness, you can pass. If that would be helpful in balancing it better, I will do so.
[Translation]
Senator Robichaud: Ms. McBride, you talked about your participation in a forum where some criticism was expressed over the fact that there have been no new Canadian initiatives or exchanges in education. Could you comment on that please?
[English]
Ms. McBride: Yes. There are many institution-led initiatives in the region; I would like to be clear on that. Many universities and colleges across our country are engaged with partners in the region.
What I heard at our forum mainly came from government speakers and institutional representatives from the region. They bemoaned the lack of government-sponsored scholarship programs. They talk about the impact those scholarship programs had in helping to develop human capital in the region; for example, the Commonwealth Scholarship program.
I'm sure you all know that those programs are suffering from a thousand small cuts. It's not a very robust portfolio of scholarship programs as it has been in the past, which is not to say that the model from the past couldn't be improved — I believe it could. But we heard that message from ASEAN partners who said Canada's not doing much by way of funding scholarships, funding joint projects, and helping them connect with Canadian universities and colleges to have joint curriculum in areas that are going to foster the growth of SME and sustainable environmental practices. There is a big opportunity to do that, from our perspective, for relatively little investment.
The Chair: I would like to thank all of the panellists for their contribution. It has certainly been helpful. We are touching areas we haven't before, and this will certainly enhance our study. Thank you for coming by video conference and in person.
Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is continuing its study on security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region and other related matters.
On our next panel here, we have Professor Pitman Potter, Professor of Law and HSBC Chair in Asian research, University of British Columbia, by video conference. I trust that the professor can hear me. Just a nod would help. Thank you. We also have before us, Mr. Scott Gilmore, Chief Executive Officer of Building Markets.
Welcome, gentlemen, to the committee. I'm going to start with Professor Potter. We would ask for an opening statement. We hear from our witnesses, and then we would like to put questions to you. Welcome to the committee.
Pitman Potter, Professor of Law, HSBC Chair in Asian Research, University of British Columbia, as an individual: Thank you. Honourable senators, ladies and gentlemen, good morning. I am pleased and honoured to meet with you this morning to discuss issues related to security and economic development in the Asia-Pacific region. I understand you are particularly interested in the economies of Myanmar, Indonesia, the Philippines and Singapore. I understand, as well, that some of you have received and reviewed the recent report by the Asia Pacific Foundation of Canada entitled Advancing Canada's Engagement with Asia on Human Rights — Integrating Business and Human Rights. With your leave, I'd like to open with a few comments on each of these.
First, managing the relationship between security and economic development depends, in part, on how we conceive of economic development itself. This involves, largely, the tensions between focusing on growth or on the distribution of opportunity. As indicated in the example of China's policies in minority nationality areas, such as Xinjiang and Tibet, efforts to resolve social tension through promotion of economic development have had mixed results, particularly where economic development is conceived largely in terms of capital investment in construction and infrastructure, without concomitant investment in local human capital. As well, managing security and development can depend on how we conceive of security. In some circumstances, efforts to promote security work to undermine economic development as electronic surveillance impedes Internet access and development of an information-based economy. On the other hand, attending to issues of human security, access to food, shelter, medical care, and so on, can support conditions for equitable and stable development. The security and development question depends, in large part, on how we approach both elements of this relationship.
Turning to the Asia Pacific Foundation report for a moment, the APFC report attempts such a balanced approach by emphasizing the need to integrate business and human rights policies. Noting that human rights involves a wide range of key issues, including civil and political rights but also extending to economic, social and cultural rights, the report offers observations and suggestions as to how to move forward with engagement on Asia in ways that support both human rights and business relations. From my perspective, coordination of business and human rights, or trade and human rights, as I suggest in another context, will be essential to effective policies on both sides of that dynamic. This is a key element of security and development, and so, as the report suggests, an integrated approach, from my perspective, is one that is most likely to result in both human rights protection and expansion of trade and business opportunities. I hope this very short statement is helpful as a prelude to our discussion. I'd be very happy to respond, as best I can, to any questions the honourable senators have.
The Chair: Thank you. I'm aware of your report, and I think it's excellent and should be part of our evidence here. So I would ask that it be filed with the committee for circulation as part of our evidence. Would that be in line with committee members and with Professor Potter? Agreed?
Hon. Senators: Agreed.
The Chair: I will then turn to our next witness, Mr. Gilmore, please.
Scott Gilmore, Chief Executive Officer, Building Markets: Thank you, senators, very much for the invitation to speak to you today. Southeast Asia and the Asia-Pacific region have been an important part of my life and career for the last 20 years. To give you an understanding of the perspective that I'm bringing to the room, I began my experience there as a Canadian diplomat. I was posted to Indonesia as a trade commissioner. I then worked in East Timor for the United Nations, in their peacekeeping mission, where I was responsible for building an economic security program. I have been the deputy director for South Asia in the Department of Foreign Affairs, looking after the broader region. I left in 2004 to launch Building Markets, which is a social enterprise that finds local entrepreneurs and connects them to global opportunities.
In that capacity so far, we have been able to do over $1 billion worth of deals in the Asia-Pacific region, creating over 70,000 jobs. Our business model, as a non-profit, is to put teams of up to 30 people, for example in Burma, on the ground, mostly local staff, who go and find local entrepreneurs who are capable of trading internationally and assist them to do so. As a result, using Burma as an example again, we have over 1,500 local businesses that we work with. It gives us an intimate knowledge of what's going on in these local economies and what their capacity is.
The message I'm bringing to your committee today is that Canada is not doing well enough in these frontier markets, particularly in the Asia-Pacific. If we define the Asia-Pacific frontier markets as those countries that include Pakistan, India, Bangladesh, Burma, Laos, Cambodia, Vietnam, Indonesia, Papua New Guinea, Malaysia and Timor, these countries all have two things in common. One, they are some of the fastest growing economies in the world that will dominate the global economy in the next 20 years. Two, the Canadian private sector is all but absent in these regions, which is a shame because, if you take a loot look at all of the fundamentals, they are impressive and demonstrate that these markets are quickly evolving into economic powerhouses, for example, in improved stability. Since 1990, there's been a 51 per cent drop in political violence in frontier markets, which has stimulated positive economic and political reforms. They are filled with abundant natural resources. These economies possess 41 per cent of the world's oil and 26 per cent of its natural gas. In Burma, to use that example, the energy and mining sector is expected to increase by $20 billion over the next 15 years.
By the way, there's not a single Canadian energy firm on the ground in Burma right now. These are countries with growing workforces. Primary education intake has risen by over 50 per cent since 1990. In Cambodia, there are 200,000 new entrants into the labour force every year. Thirty-three per cent of the world's population will live within frontier markets by 2050. In fact, already, countries like Burma are within a five-hour flight of half of the world's population. These are growing economies. The GDP growth in frontier markets is similar to what the BRICs growth path was 10 years ago. Over the next five years, the projected annual real GDP growth for Asian frontier markets is 7.5 per cent, more than three times what's predicted for Canada.
Vietnam's anticipated GDP growth is expected to be 33 per cent over the next the four years. In Burma, consumer spending is expected to triple over the next 15 years to $100 billion. This combination of middle class growth, urbanization and increased natural resource demand is presenting massive investment opportunities, particularly in transport, insurance, construction and logistics. These are all sectors where Canada has world-leading expertise and capacity, and yet, once again, sectors that are all but invisible when you are on in the ground in places like Yangon.
For example, I recently took a British investor to Burma. He's one of many investors who have flown in. He has $2 billion under management and recognizes the potential for Burma. We spent 10 days on the ground, kicking the tires as it were, of some of the most remarkable enterprises I have come across in our work globally. We met with officials at the Canadian embassy, which was in the process of being set up — this was last year — and we discovered there had only been six or seven visits by Canadian businesses at that time, and this is in Yangon, a city that is now filled with branch offices for corporations from London, Sydney, Singapore, Shanghai, Rio and Paris, yet there is nobody there from Bay Street.
The same thing can be observed across the region. Canada's private sector and trading relations are focused right now on a handful of emerging economies like China, and they are being outclassed even there by other G8 nations.
To paraphrase Andrea Mandel-Campbell, who was the author of Why Mexicans Don't Drink Molson, Canada is demonstrating once again that we are not a trading nation; we are a trade dependent nation. We are being left behind, and now the news that I have to deliver is even worse, which is that what the Canadian government can do to change this is very limited. This is a problem that sits on Bay Street, not in Ottawa.
I will leave you with four things that I think should be considered by the Canadian government to try to ameliorate the situation. First, the merger between DFAIT and CIDA should be congratulated. This is an excellent step in the right direction, and I have said so to Minister Baird and Minister Paradis. There is a fact that has to be understood, that Canada's beachhead in these economies is often the CIDA development programs. Unfortunately, I'm not seeing the same enthusiasm amongst senior trade officials than I am seeing amongst the senior political leadership. They need to work harder to recognize that there is a win-win situation in terms of how Canada deploys its aid money.
As an example of that, I would strongly encourage the Canadian government to support the launch of a development finance institute, like we've seen in the U.K. with the CDC, and in Washington with OPEC. This would encourage the rather timid Canadian private capital to invest in these markets, and this could, perhaps, be launched as a sub-unit of EDC.
The third thing I would recommend is that the Canadian government consider subsidizing scholarship programs. We have done a remarkable job as a nation, as have our provinces, over the last decade to encourage students from Asia to study in Canada. But we've neglected our own students. We've neglected encouraging them to go to Asia, to learn foreign languages. Just as an aside, Canada's ability with languages is shocking, particularly in our private sector, which is totally inexplicable given the important role immigrant communities play in Canada and in our multicultural fabric. I would encourage the Canadian government to consider scholarship programs in that regard.
Finally, I would encourage the Prime Minister to visit the region as quickly as possible. I think a trip to Burma would be a wonderful way for him to spend his summer.
Those are my comments.
The Chair: Are there any questions? Senator Robichaud or Senator Smith?
Senator D. Smith: I'm fine.
The Chair: Thank you. Senator Fortin-Duplessis, you have the first question.
[Translation]
Senator Fortin-Duplessis: Mr. Gilmore, my first question will be brief. We have heard from a number of witnesses during our study on the Asia-Pacific region, and we have noticed that there is a considerable divergence of opinion when it comes to business opportunities in Burma.
You seem very optimistic. You touched on this briefly in your presentation, but could you tell me what argument you would use to convince the skeptics that Burma is the next Asian Klondike?
[English]
Mr. Gilmore: I think to explain the divergence of opinion, which I see in my own organization and with some of the investors we have worked with in New York and London, it's not a question of "if.'' It's a question of "when.'' The fundamentals in Burma are undeniable. It's a country of 80 million people that sits between two of the world's largest economies. It is sitting on mountains of resources. It has a growing workforce and access to growing markets, and, as I said earlier, a growing middle class.
However, Burmese business law is 99 years old. It was drafted before they even had telephones. When you visit a Burmese bank right now, you will see Harry Potter-like ledger books, big massive leather-bound ledger books; you won't see computers.
The changes that are necessary will take some time. This Klondike market will not appear next year, but it will appear, and in order for Canada to participate in that, we can't show up late. We need to be on the ground now.
The Chair: Is there anything you would wish to add in this conversation, professor?
Senator Robichaud.
[Translation]
Senator Robichaud: As for doing business in this region, in Burma's case, the chicken and the egg issue arises. Where do we begin and how can we encourage Canadians to do business over there? You say that the country's laws are quite obsolete. So we cannot blame investors for not wanting to go there, as it is very difficult for them to set up.
[English]
Mr. Gilmore: Well, it may be a character flaw on my part, but I'm happy to blame anybody. As you say, the laws there are obsolete, but the laws of finance are universal. What I see when I'm on the ground in Burma is that British, American, Chinese and Australian investors, who have to obey the same financial laws of being able to return a reasonable amount of money on their investment, are on the ground, doing the math, and coming to the conclusion that Burma is a place to be and invest.
In Canada, we have such a conservative business culture, that, granted, has done us well during some global downturns, but nonetheless that is forcing us to sit on the sidelines in a country like Burma. I don't know if there is much the Canadian government can do, which is why I repeat this message more often on Bay Street than in Ottawa, that there is money to be made in places like Burma, in these markets, and in the future, there will be even more money to be made, and we can't wait to make our presence know there. We need to be investing there right now, not necessarily investing capital but investing time, resources and making sure that Canadians are aware of the potential.
Senator Robichaud: We can't wait, but we are waiting; aren't we?
Mr. Gilmore: When you say "we,'' the Canadian government is not waiting. The Canadian government has opened a mission there. I would have opened it a decade ago, but it's there now. It's not a particularly large mission, but nonetheless, it is a mission. Who is waiting are the businesses on Bay Street, who, frankly, find it easier to do business in Baltimore than they do in Burma. We live in a very comfortable neighbourhood so we don't travel much, sadly.
The Chair: Professor Potter, is there anything you wish to add to the comments of Mr. Gilmore?
Mr. Potter: I've done quite a fair bit of work with private firms investing in China, so, obviously, there are some differences there, but Burma today looks a lot like China in the late 1970s and early 1980s after they first embarked on their market opening policies. Many of the inadequacies described with regard to the Burmese system today were quite evident in China in the early 1980s.
One of the dilemmas, of course, is that businesspeople are better suited, frankly, than academics or others, to determine their own interests. I think what the government, the consulting sector and the NGO sector can do is to create conditions that allow businesses to thrive once they have already decided to go into a market. I think that the issues of language training, exposure to the region and getting more information or more boots on the ground, so to speak, are all very useful steps in creating a level of confidence and awareness among the business community that will allow them to invest with comfort. But I think at the end of the day those decisions are made by businesses. Our role in the policy or academic sector, consulting sector, is really to provide tools and assistance once businesses have made that bottom-line investment decision.
I defer to my expert colleague on these areas, because I'm mainly a specialist on China, and not on those regions. I would say that the issue of investing first and getting in early, with the China experience, many of the firms that have been the most successful in China have been ones that have watched developments, had some positive engagement with China's emerging economy back in the 1980s and 1990s, but that were somewhat cautious and circumspect about going all the way in.
It is certainly true that a number of Canadian firms have been in China for many years and have benefited from the relationships and the networks that were created for them, and so there are reasons to get in early. But I think it also has to be balanced against the business case for investment.
At the end of the day, when we look at the pattern of Japan businesses, European businesses, particularly Scandinavia, investing in China in the 1980s and early 1990s, there was a sense of getting a place at the table, participation in the market, but being careful about the amount of exposure that's taken on. I think that is the kind of cautious approach that will serve business well in the long run and seems to be the case with these emerging markets.
I do think we want to put in place the policies and the supports that were referred to in terms of language and exposure to the country, prime ministerial visits and so on, which I think can be extremely useful in creating a climate of comfort for business investing in these areas. But at the same time, businesses really are in the best position to determine their own investment strategies, and we want to assist but not substitute our judgment for theirs.
Senator Ataullahjan: My question is for you, Mr. Gilmore. I was recently in Pakistan on a five-week personal visit. I saw the huge explosion in the American companies; a lot of them are there. Yet, of Canadian companies, the one that has a visible profile is Second Cup, which has opened two cafés there and seems to be doing very well. There is money that people are spending. What can we do to convince Canadian businesses that while there are security issues there, people are spending money and people are out and about leading a normal life? Just a note: I was very happy to see on your website that out of the over 8,000 businesses you assisted in Afghanistan, 272 were female-owned. I thank you for that.
Mr. Gilmore: Senator, before I respond to your question, I want to note that I agree with Professor Potter's comments that Canadian businesses historically have hurt themselves, not only in China but also in the Russian experience of going in fast and sometimes too big and not seeing the returns they were expecting. It is important to note that there's a difference between going in and investing huge and going in and at least having a seat at the table. The point I was making aligns with the point Professor Potter was saying was that at the very least they need to have a seat at the table.
Regarding Pakistan, I'm glad you raised that point. I try to point this out every time I speak publicly, that it's widely unrecognized that right now we're living through the most miraculous time in human history. More people have been lifted out of extreme poverty in the last 15 years, measured in relative or absolute terms, than at any other time in human history. It's spectacular. In fact, there are people as diverse as Jeffrey Sachs, as well as Wall Street plutocrats, who are predicting that we may all but eliminate extreme poverty by the year 2030.
This shift is because of that economic growth that you witnessed in Pakistan. Eighty-six per cent of the jobs globally, whether it is in Mississauga or in Lahore, are created by small- and medium-sized enterprises. It's that economic growth that we have seen in South Asia and China and Latin America that has led to this miraculous reduction in poverty.
One of the points I try to make to policy-makers as well as the private sector is that going there is not just good business sense, it is good social sense. This is the route to ending poverty, through the creation of jobs, not necessarily charity.
The security issue is one that we come across everywhere we work, whether it is Liberia, Haiti, Burma or Afghanistan. Frankly, it's all very relative. We have an office in New York and I stay in Brooklyn. Every morning when I get up and go for a run, every once in a while I feel I have taken a wrong turn and found myself in an awkward neighbourhood. At the same time, I'm perfectly happy to run through several neighbourhoods of Kabul because I know them well. I know what security is, and I'm accustomed to them.
Like the executives at Second Cup have learned, and those at SNC-Lavalin and some of the Canadian mining companies, there are almost no security situations in the world that aren't manageable. We can speak from experience. We ran very large country teams in Kandahar and Helmand province outside the wire for over three years in Afghanistan and did it without serious security risks.
When you're sitting in the boardroom in Bay Street and look at what's going on in Pakistan, it seems impossible. You can't even imagine whether or not Air Canada flies to Lahore. What would you do once you landed on the ground? Is there even a Sheraton and do I need an armed guard? Once you have spent 30 minutes on the ground and three days on the ground and three months on the ground, you very quickly go from being absolutely terrified to being able to work very comfortably in these environments.
We encourage companies in Bay Street to take that risk. Go and spend a week, go with somebody who knows the country, go with a Pakistani-Canadian, for example, and you'll be amazed at what you find.
Senator D. Smith: I'm going to make a comment and invite you to respond to it, with regard to your thoughts on Bay Street. I live on Bay Street, and also my law firm that I chaired for many years has big offices there, but we're all over the world.
A lot of investors are very cautious, unless they're really satisfied that the money they're investing, they're going to be protected by a rule of law that works. With regard to Myanmar, you know the arbitrary things that have been going on there for a while. I think progress has been made, but it takes quite a while.
In Eastern Europe, for example, I think we're the biggest law firm in Poland right now, but it took quite a while for outside investors to be satisfied that the money they were investing in businesses was going to be the benefit of a rule of law they had confidence in.
We're in four or five former Soviet republics and foreign places in China. We're in only one place in Africa, and that's Cairo, because you know what happened to the Heenan firm, and a lot of them since then have joined us; but they don't want to function in a society where corruptions and payoffs and that stuff is routine, and it's not worth it.
Are you satisfied that the rule of law that currently exists in Burma or Myanmar will function in a way that investors from Canada will be able to rely on?
Mr. Gilmore: Again, I agree with something Professor Potter said earlier, which is the only people who can determine whether they should be investing in a country like Burma are the investors themselves. You're right; the Canadian Bay Street investors and Canadian law firms have been very conservative in not going into countries like Burma or parts of Africa. But their counterparts in Wall Street and in the city, in Paris and Johannesburg and elsewhere, have looked at the exact same facts, and often they have the exact same demands on their portfolio and have come to different conclusions.
In Burma, you're absolutely right. Two of the greatest weaknesses in that economy are rule of law and informal corruption. They're very problematic, and they are holding the country back. There are some remarkable efforts being made by the current government to legislate reforms in this regard, but it's still a huge problem, but again it's a manageable problem.
There are a lot of American financial companies on the ground in Burma right now. There's no sector in the world that's more heavily regulated than the American financial sector. They're able to find a way to do it cleanly and profitably. There really is no excuse why Canadian firms aren't coming to the same conclusion.
Senator Johnson: Professor Potter, you were the chair of the task force, Advancing Canada's Engagement with Asia On Human Rights - Integrating Business and Human Rights, that came out in September. You directed recommendations at three different groups of stakeholders: governments, the private sector and civil society. Can you tell us, please, in what way do the roles and responsibilities of governments, private-sector companies and civil society organizations differ with respect to Canada's foreign policy goals and international human rights objectives in Asia?
Mr. Potter: When we drafted that report we aimed the recommendations at different sectors, there certainly was a section on general recommendations as well. We identified different sectors because we recognized they have different roles to play in the relationship. We may be all singing from the same song sheet, so to speak, but we may be singing in harmony, which means we're not doing everything each other is doing.
For government, for example, there are a number of recommendations on programmatic initiatives that can provide the kinds of supports, encouragement and knowledge that businesses and NGOs need to interact with Asia effectively. Language and training are two examples.
With regard to the private sector, part of the question there is — and this actually touches on the rule of law, which is a question that was addressed a moment ago — part of that question is encouraging the private sector to be active in economies, but also to avoid allowing themselves to be complicit in human rights violations. Regrettably, we have seen firms, not simply from Canada but from other investing countries, be implicated in human rights violations around extractives. There have been efforts to address this issue. We wanted to encourage firms to be aware of the environment they're going into, of the human rights implications of their projects, and to avoid being implicated in human rights violations.
In terms of NGOs, a major purpose of that is to empower local rule of law people, and local trade and human rights folks so that the knowledge base in local economies is strong such that it can create not only better conditions locally but also more inviting conditions for foreign business. The idea was really to integrate the pursuit of human rights not only on the civil and political side, which are critically important, but also on the economic, social and cultural side.
The government, the NGO sector and the private sector all have an important role to play, but those roles vary. Again, I go back to the harmony metaphor: If we are all singing from the same song sheet, we may have some level of functional specialization and differentiation.
If I may, I will use this opportunity to speak for a second on the rule of law question that was raised a bit earlier. One of the things that the rule of law question raises — and I think we need to speak frankly about it — is that rule of law efforts challenge existing elites and regimes. We've been looking at rule of law effort in China for the last 30 years, and one of the major issues around that is to what extent is it going to constrain the power of the Chinese Communist Party? A similar issue is at play in Thailand, Burma and other areas of the region, even in Singapore.
From the standpoint of a foreigner like myself, I ask: What sort of rule of law are we talking about? Are we really talking about a clear set of rules that can dictate how businesses operate? That's certainly part of it. Or are we talking about a set of standards that hold the government as well as business to account?
That latter question, which, in my mind, is really the true rule of law question, is extremely sensitive and extremely discomforting to many existing elites who owe their position not to the rule of law but to any number of other ways of exercising power.
So I think the rule of law question is not simply a question of an instrument to facilitate business; it's really a very important question about social and political transformation, and local existing elites and regimes are very aware of the threat it poses to their privileges.
Second, on the corruption front, one reason why law firms — with which I'm somewhat familiar — are very uneasy about the corruption problem is because of the various liabilities that they and their clients can face under foreign corrupt practices legislation in Canada, the U.S. and by international treaty. These are not simply abstract questions of saying corruption is a drag on the economy, it raises transaction costs, or is a moral question. There is a specific kind of legal liability question that impedes businesses and firms from getting too involved.
I won't belabour it here, but we could get into a very long discussion about the origins and the conceptualization of corruption and the thinking of corruption from what I would call a relational standpoint, which is much more local- culture oriented, or the transactional standpoint, which is more familiar to Canadians and North Americans. But at the end of the day, it is a culturally embedded condition that needs to be understood in its local context, but often that local context creates very significant conflicts for businesses, for law firms and advisers, and that's one reason why people stay clear.
[Translation]
Senator Verner: I have just one question. You are really pushing companies to invest in the Southeast Asian region. If you were to invest, which industry would you say has great opportunities for success? Which industry would you invest in?
[English]
Mr. Gilmore: Senator, as it turns out, I'm in the process now of launching a $75-million SME investment fund for these frontier markets, in partnership with the Canadian-run investment firm in the U.K. called CitiFinancial. This fund was actually recently written up by Forbes magazine.
We've identified in our work overseas in these emerging markets or frontier markets that some of the fastest- growing sectors are the small- and medium-sized enterprises. They are also simultaneously those that are most starved for capital.
We're not the only ones; the Canadian government about five years ago, under the leadership of Minister Flaherty, championed the SME sector in the G20 context. It's been a priority of both the British and the American governments as well.
As I mentioned earlier, from a social perspective, I'm investing in that sector because, like I said, 86 per cent of the jobs in these countries are being created by SMEs. Female-owned SMEs are an important part of that. So that's where we're putting our money.
[Translation]
Senator Verner: I understand the role small and medium-sized companies play. It is interesting to see that many of the companies you have helped are managed by women. Which industries have those women chosen to become involved in? Are we talking about finance? Service companies? Are we talking about manufacturing? That is what I mean more specifically when I talk about industries.
[English]
Mr. Gilmore: That's an excellent question. It varies from country to country. For example, in Afghanistan, we did a great deal of work with female-owned garment-manufacturing businesses, which made sense because of the social norms. Businesses that have a large female component in terms of the labour force were often run by women, and that ended up being the garment sector. In Africa, we have seen female participation across all the sectors. In Haiti, it's focused on the artisanal side.
One of the reasons we support female-owned business and prioritize them is that they are often actually some of the local entrepreneurs who are the quickest to adapt to international business norms, whether on transparency or quality issues. Female entrepreneurs, if I can generalize, are very quick to change their business practices and learn from their partners.
One of the reasons we don't prioritize females — I'm not going to call it a myth — but there is an unfounded belief in the development world that female-owned businesses have a larger impact on the economy; that if you invest a dollar in a female entrepreneur, it will have a larger impact on GDP than a dollar on a male entrepreneur. It is also a belief that her profits are spent in a more socially conscious way on her children and others. Unfortunately, this has never been backed up with data. This belief has been circulated so widely that it's become a truism. It's been shown in micro-finance that female entrepreneurs are more like to pay back their loans, but that's not the same as saying they will have a bigger impact on the economy; so we invest in them for a different reason.
The Chair: Professor Potter and Mr. Gilmore, thank you very much. It's been extremely helpful to look at human rights, rule of law and the perspectives that you have put before us. It will be extremely helpful as we try to craft our recommendations on the policies that we think the government should pursue.
Mr. Gilmore, your wealth of knowledge of business and experiences helped to translate what has been an issue for this committee for a long time: Why don't Canadian businesses invest in these alternate markets to the one next door. On behalf of the committee, I thank both of you for your input. It has been extremely valuable and we thank you for taking the time to be with us. Professor Potter, we'll be looking forward to your report so we can file it as part of our evidence.
Senators, we will turn to another housekeeping issue. We'll take a moment to shut down the video conferencing, et cetera.
The steering committee was given instructions that this committee wished to travel as part of its fact-finding on the Asia-Pacific study. We did not narrow the focus until recently as to which countries. As you know, you gave instructions that we would be looking at the countries of Burma, the Philippines, Indonesia and Singapore. We also agreed that we wouldn't go to all of these but that we would pick one or another and that we would put in the budget for two countries: Singapore seemed to be where Canada was concentrating some of its financial resources, et cetera, and to include one other country might be of value to the committee.
The budget before you is what our clerk put together with a stop in Vancouver so we can get the input of the Asian activity in Vancouver as a committee activity; and then there would be a fact-finding to Indonesia and Singapore. This could change if we think another country, like Burma, would be more important to go to. The costs would be in the same neighbourhood.
We have had instructions, as every other committee has had, that all senators are entitled to travel if there is a committee. I understand that that may or may not continue to be the rule; I have no idea. I do know that some committees have put in a budget with less than the full complement of members. That may be for other reasons. We've not reached more than nine on one trip and generally about seven senators who eventually go on a trip. This budget is crafted for 12 senators, so the cost is that much higher.
There's also in the budget per diems for those travelling based on the number of days that we're estimated to be away. We also have figures for hospitality and working meals. That is almost what I call double in there, because if we do the working meals, we won't do the per diems. That's how it is stated.
There's also contemplation that we need costs for interpretation and materials in Vancouver and those costs are fairly high. I have discussed the matter but, unfortunately, Senator Downe is not here. He was in favour of the budget in conversation. I know Senator Johnson thought the figures were high. It is here. We're to file our budget by tomorrow, so it is in your hands as to what you wish to do with the budget.
Any comments?
I propose to go to the committee, when they ask me to justify it, and say that we are the Foreign Affairs Committee. It is very difficult for us to gain credibility if we don't deal with counterpart countries we are commenting on. Even though our recommendations are to the Canadian government, very few reports gain credibility if we have not talked directly on the ground to our counterparts. That's the uniqueness of the Foreign Affairs Committee. I know they may be limiting travel.
As well, we've put the budget as contemplated in full but we would undertake to find the cheapest airfares. We've had to put them in the way they are. As soon as we know when we're going to go, this time I will ask senators to commit to going not with the usual flexibility as we've had people drop out in the last week. It's costly and not very good. We will give you advance warning so that we know exactly how many people are travelling. We're not going to restrict anyone, but this budget is based on all, and we know that never happens. We hope that will be taken into account.
I'd also undertake to go back to the committee when we have firmed it up, if they provisionally approve it, on the actual cost. Airfares will depend on whether we are going in June or September and how we combine the countries. That is simply impossible unless you put a date to it. This would be our global budget, the broadest budget. Obviously, we'll try to reduce these costs drastically to something more acceptable. That's the psychology or approach that I'll take.
Senator Johnson: I don't disagree with what you're saying. I feel that at this time this figure is too much, with that many senators travelling. Are we not being asked to cut back on the number of people who go on these delegations now?
The Chair: I have not been. Parliamentary associations have been asked, but that's through the joint interparliamentary council. That's my point. I had the discussion with the clerk. I used to put in a guess as to how many would go, and I was told I definitely could not restrict senators from their rights, and that I had to put in a budget for 12. If that committee wishes to cut us down, then I'll be guided by their instructions on any issue in here, whether it is timing or anything else. We're bound by what the Internal Economy Committee does.
My qualifier has always been that they must treat all committees in the same way. If they're cutting us back, then they had better cut everyone else back. I don't expect any special favours, but I want equal treatment. That's the whole approach I take. We will submit this budget. We'll send a letter saying that I want to appear to explain it, the qualifiers that we have put in, the preconditions, and that we're open in this environment to do what they're doing with all committees. On that basis, is there a mover of the budget?
[Translation]
Senator Fortin-Duplessis: I so move.
[English]
The Chair: Any further discussion?
Senator Verner: A question, if I may. I understand what you said about senators being asked to confirm their travel. Do you have any idea when it would be?
The Chair: No. I don't know the dates yet, but it depends on that; and we need to discuss it. We've always left things open and encouraged senators to participate. A lot of good work happens overseas: Brazil and Turkey, for example. That marks how we're going to do it because that's how we get our counterparts' input. Even though we get some witnesses here, it's not the same. As soon as we know when we're ready to go, then we'll have the discussion to know if it's a convenient time to be away from the Senate and how we manage the times for the other side. Often we've said we'd like to go at a certain time but then they're either not sitting as parliamentarians or they're in the middle of an election or something.
We do not know yet. We are going such a long distance and it is an expensive route. All roads lead to Asia now; it's not like going where you can get some hot deals on airfare. These are competitive routes. If we get tickets, we're going to try to get the kinds of tickets that are efficient and cost-effective. That means we will have to nail them down and to stick to those tickets. As soon as we know more, we hope to give you enough time to respond and we'll go from there.
Senator Verner: Thank you.
The Chair: Agreed?
Some Hon. Senators: Agreed.
The Chair: Thank you. The meeting is adjourned.
(The committee adjourned.)