Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 8 - Evidence - Meeting of March 27, 2014
OTTAWA, Thursday, March 27, 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.
Senator Percy E. Downe (Deputy Chair) in the chair.
[English]
The Deputy Chair: Colleagues, I'd like to call the meeting to order. Today the Standing Senate Committee on Foreign Affairs and International Trade is continuing our study on security conditions and economic development in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.
In our session this morning we are pleased to welcome Dr. Toh See Kiat, Chairman and Director, Goodwins; and Mr. Ken Sunquist, Former Assistant Deputy Minister, Asia and Africa and Chief Trade Commissioner, DFAIT and Former Canadian Ambassador to Indonesia.
I understand you both have opening remarks. Gentlemen, who would like to go first?
Ken Sunquist, Former Assistant Deputy Minister, Asia and Africa and Chief Trade Commissioner, DFAIT and Former Canadian Ambassador to Indonesia, as an individual: Good morning. I'm delighted to join you here today. This is my first time back since I left the public service and foreign service two years ago. After a career as a trade commissioner and 20-plus years abroad, I've watched your deliberations and read the transcripts of your previous witness with much interest, and with hope that the public policy issues will be discussed and consensus reached.
I will make a brief opening comment and respond to your questions. I focus primarily on economic issues, but am happy to expand in the question and answer portion.
Your colleague, Senator Andreychuk in a previous meeting referred to all roads leading to Asia. I'd like to add that after departure from Asia and DFAIT, my interests have remained focused on Asia. I currently work with the Centre for International Business at the University of Saskatchewan, the China institute at the University of Alberta, with the University of Regina and North Star Trade Finance of Vancouver to assist SMEs in their operations.
My experience has convinced me, as well as most economists, that the future lies for us in Asia. We are a nation of the Asia-Pacific region.
As a director of CARE Canada, our largest development NGO, my perspective of Canada's role in Asia demonstrates security, economic trade and investment, as well as development issues, are vital.
You are aware that the region encompasses over 50 per cent of the world's population. Let me give you another perspective. Economists tell us that over 50 per cent and growing of the world's goods and services are produced and consumed in a corridor between Japan and India. We ignore this region at our peril.
My last assignment in DFAIT was assistant deputy minister for Asia and Africa, with responsibility for bilateral relations with 95 countries, as well as chief trade commissioner with over 1,000 officers in 150 cities around the globe. This time convinced me that Asia is the most dynamic region globally.
There is a realignment of economic power under way. There is a realignment of political power under way. There is an essential need for strategic engagement policy with the new centres of power. We are quickly moving to a conclusion of our agreement with Europe, and we are all aware that the U.S. is, and will remain, our best partner and friend. But Asia is quickly, if not already, the most important region in our future.
As President Obama put it, the USA faced the need to pivot to Asia. Are we prepared and ready to do that as well?
This change of focus is a challenge for Canada as we move from a challenge of proximity to the U.S. marketplace to a tyranny of distance with the new world. This puts a premium on transportation and connectivity that has domestic, as well as international, impacts. Ports, airports, transport, visa, education are all linked to this challenge.
While most focus on Asia starts and stops with China, we need to look further and deeper at our relations in the region. China is the second largest economy of the world and sometime between 2020 and 2030 it will pass the U.S. Successive federal and provincial governments have placed a focus on China, yet our investments in China remain relatively small and our trade as a percentage of Chinese imports is only now regaining the level of post-Team Canada exercises. But Chinese investment to Canada continues to grow, and in particular the growth of highly visible investments in energy and resources has impacted on our investment policy and regime.
Tourism from China is at record levels and growing quickly. Students from China are here in record numbers, so our ability to attract trade and investment, tourism, and students is working well, but Canadian business success lags our competitors. From a strategy and public policy perspective on economic relations, we need to continue building our trade commissioner base in China to assist the private sector, and we need to review and move forward with the complementarity study jointly agreed upon.
On Japan, we have excellent relations across a broad spectrum that we too often assume or overlook. Japan is a leading investment trade innovation partner and we must continue on the path towards an economic framework agreement.
Progress in India moves more slowly, but is an excellent partner for security and economic relations. Attention to issues, from nuclear cooperation to visas, is fundamental to forward momentum.
Let me turn to the ASEAN region and Indonesia. It is where we can and should capitalize on relations and enhance Canadian success. Building from Minister Emerson's global commerce strategy in 2007 that provided the resources — and more importantly the framework — to Minister Fast's global market action plan that maps out the countries and sectors of priority and Minister Baird's focus on economic diplomacy, we have the tools and the direction.
From a government and business perspective there have been real achievements and results. Our ambassador to Indonesia is cross-accredited as ambassador to ASEAN. We have embarked on an ASEAN plan of action, a joint declaration on trade and investment is in place. A Canada-ASEAN Business Council has been established, and an Asia Pacific Foundation survey indicated Canadian companies are both active and profitable in the ASEAN region.
Trade is up 19 per cent over the past five years and inward investment to Canada even greater. Outward investment to ASEAN surpasses our investments to China and India combined. Immigration from ASEAN countries, as well as students and temporary workers in large numbers, come from the region. As a priority, we must ensure that our Prime Minister and ministers take part in ASEAN and APEC summits. On Indonesia in particular, a country with a long- term relationship with Canada, we are headed in the right direction. It is the world's largest Islamic country. It has embraced democratic reform, is a member of the G20, ASEAN and APEC, is our leading trade and investment partner in ASEAN, and is a role model for how Canadian companies can operate and succeed in Asia. I can speak more about that later, but let me quickly wrap up my comments.
Some of your previous witnesses have noted a lost decade in Asia and blame this on governments or Bay Street, and while there may be a kernel of truth, the major reasons for our lack of success are generally much deeper. Fewer people today than a decade ago support the concept of Canada as an Asian nation. We see it in the response to inward investment and in the participation of Canadian companies in Asia. Other factors are industrial structure, where we have a small number of large companies and large number of SMEs. These in turn require greater support of the federal government trade commissioner service, Export Development Canada, the Canadian Commercial Corporation, and provincial agencies such as STEP, the Saskatchewan trade people that were previously here as witnesses, as well as other organizations.
We also have a blessing in disguise: The largest market in the world is on our doorstep. It seems relatively easy to export from Moose Jaw, Saskatchewan, to Minot, North Dakota; but if you are globally competitive you could be in Mumbai or Myanmar as well.
The ease of trade with the U.S. also has a profound impact on the way we do business. We like transactional buy and sell, but Asia is all about relations, personal, company-to-company and country-to-country. Senator Smith in an earlier meeting commented on his office in Hong Kong and the long term investment in relations. This is true at the political level, at the company level, and for our educational institutions. Investment of time and effort will pay dividends. Asia likes to do business with friends, not the cheapest price.
Finally, Canada needs a coherent strategy for the federal and provincial governments with a focus on Asia and ASEAN in particular. Parliamentarians and business leaders alike must be involved. The economic diplomacy of Ministers Baird and Fast must encompass a whole of DFATD and the government to ensure success for all sectors in the Canadian economy. Trade negotiations with Korea need to be finalized. The Trans-Pacific Partnership must remain a priority. We need to move forward with Japan, India and China, and for the first time we must place a priority on Canada-ASEAN FTA to match the competitors. We need to retain and enhance our trade representation in the region. I hope that this committee can suggest goals for our trade investment, tourism, education and innovation with respect to the region.
I'll leave it at that, Mr. Chair, until question period.
The Deputy Chair: Thank you for the presentation. We will hear from Mr. Toh.
Toh See Kiat, Chairman and Director, Goodwins, as an individual: Good morning, Mr. Chair and senators. I am happy to be invited before this august committee. I appear as an individual and speak not as an economic or security expert but as a Singaporean who spends part of his year in Canada. The picture I paint is a broad one. If there are any details which the honourable senators want, I shall try to find them.
Singapore is the second largest export market for Canada in Southeast Asia and the second largest foreign direct investment, FDI, destination. Export Development Canada's agent office outside China is based in Singapore. There is a Canadian chamber of commerce, a Canada-Singapore business association, even a Canadian international school in Singapore. Despite this, the Canadian presence in Singapore could be stronger. Singapore has no free trade agreement with Canada, while it has 18 with others including the U.S.A. Canada's negotiations froze after eight rounds in 2007, but I can't imagine why.
Why is the U.S.A. interested in Singapore? Speaking as an independent observer, Singapore is a gateway to China, and many Chinese officials look at Singapore as a model for Asian development. We even have an executive MBA class in the university that is conducted in Mandarin. We call it the ``mayors' class'' because so many mayors and deputy governors come for this class. There is a lot that Canada could do. I have colleagues in the Nanyang Technological University who are Canadians.
The problem could be the Canadian experience and perhaps the wrong perceptions of Singapore. First, Singapore is seen as an expensive place. The Economist Intelligence Unit ranked Singapore as the most expensive city in the world in 2013. Second, as one witness who appeared before this committee recently said, Singapore has a ``very strong authoritarian slant,'' in the same class, according to this witness, as Vietnam, Laos and Cambodia. I have been to Vietnam — it is a chalk and cheese comparison. Reputedly, I suppose, this is where chewing gum and the TV serial Sex In the City are banned; so I cannot blame the witness for this kind of conclusion. Third, it is a very small country with a population as big as that of Greater Toronto and crammed into a space the size of Toronto. It can't be a very big market for people and it sounds like a very claustrophobic place. Perhaps there are many other myths about Singapore, but let me dispel those three.
Housing and private cars are ridiculously priced in Singapore. It is actually a policy of the government to do so. Practically everything we have is imported so it is expensive. Despite this, if you do not need to eat filet mignon, live in high-end apartments in the shopping and tourist district or drive luxury cars, it is cheaper to live in than Toronto is. I know because I live in both cities. In a 2013 survey of 109 cities in the world on the cost of the living for an average citizen, the Asia Competitiveness Institute ranked Singapore at number 60 of the most expensive. Toronto is number 33; Montreal is number 38; and Calgary is number 41. They are all more expensive than Singapore.
As for the authoritarian slant, there are 614 people for every police officer in Singapore. Compare this to 303 in Tokyo; 252 in Hong Kong; 249 in London, England; and 242 in New York City. The so-called ``police state'' has proportionately nearly three times fewer police than New York City. Chewing gum is not actually banned. You may chew freely. Only the sale and importation of gum are banned. If you bring it in on an Air Canada flight, you may chew as much as you want. If you have a medical prescription for it, we allow you to import and chew nicotine- flavoured chewing gum.
We certainly have more legal restrictions on what you can do than Canada has, but that has to be so in a postage- stamp-sized city of multiple religions, races and nationalities, which has had racial riots fewer than 50 years ago. The peace we have painstakingly built is carefully guarded, preserved and treasured.
As for being a small market, Singapore is the place to locate your business headquarters, not to sell to. It is within seven hours' flight time to 3.1 billion people with a GDP of US$10.6 trillion, in 2010 figures. It is the port of call for more than 100 shipping lines linked to 600 international seaports and 100 airlines linked to some 200 cities, with 5,400 flights taking off from Changi International Airport every week. Companies pay only 17 per cent corporate tax with many generous tax holidays, incentives and exemptions, especially for companies that base their international or regional headquarters in Singapore.
I have four copies of a book, Accessing Asia Through Singapore, printed by the Singapore Business Federation. I will leave them with the committee for reference; and I can arrange to have more copies sent to you if needed.
What can Canadians do to tap the centre of wealth where the top personal income tax is effectively lower than 15 per cent, the GST is only 7 per cent and which has the highest per capita concentration of millionaires in the whole world?
Let me conclude my opening remarks with some suggestions. First, Singapore is fast becoming the place to do research and development in clean, green technologies — what I call the ``five cleans.'' These are Canadian technologies, too. The five cleans are clean air, clean food, clean energy, clean water and clean waste. That sounds like a contradiction, but we can turn waste into fertilizer and animal feed.
There is actually a sixth clean, clean government, which may not be easily exportable, but we do try. We do have causes in the Lee Kuan Yew School of Public Policy. I taught the MBA in the Nanyang Technological University where we teach leadership principles drawn from our experience in Singapore.
Canadians can tap into these various clean technologies and sell to us and to Asia. Canadians could tap into various government grants and incentives to develop and export such clean technologies to the 3.1 billion people around us who very badly need them.
Second, Singapore is positioning itself to become a premium education hub. Major international schools have Singapore campuses and collaborations: INSEAD, ESSEC, Sorbonne, Yale, MIT, Wharton, UC Berkley and Duke, just to name a few. Singapore universities, two of which are in the top 100 universities in the world, attract the cream of Asia and are sending these students on exchange to the West, including Canada. As Chair of the National University of Singapore Alumni Association in Toronto, I have been receiving these students and their parents in Toronto. They do not only pay money to the professors who teach them; they also pay money for their accommodation and the various tourist places they visit and other services that they pay for.
Singapore parents, too, are sending their children to international education in the U.K. and the U.S.A. Many have not heard of Canadian universities or do not think very highly of them. This is an anomaly that needs redressing. After all, the University of Toronto is placed sixteenth in the whole while UBC and McGill are tied at thirty-first. These are the rankings of The Times Higher Education rankings; other rankings may be different.
Incidentally, the National University of Singapore is ranked sixteenth and NTU, the technology university, is ranked about 41.
Third, Singapore is promoting itself as a hub for services and high-end manufacturing. We have high labour costs, but when you come to high-end manufacturing, there is a high premium and a high margin of profit.
These exports are the exports of the future: data services, information and telecom services and products, media and entertainment. There are good actors and films produced in Canada, too, and you can produce them in Singapore. Universal Studios, for example, and some of the Disney Studios are in Singapore.
We have pushed for financial, legal, dispute resolution and accounting services to be hubbed from Singapore, just like they're hubbed from London and New York.
Regarding medical services, we are the doctors for the region. We have emphasis on biomedical and pharmaceutical products. We created a whole island just for pharmaceutical products and the industry. We have emphasis on precision engineering and optics, logistic services and services and supplies to the oil and gas industry.
I named all these because I know Canada has world leading companies in all these industries. Why are they not looking to Singapore? It is time they do.
There is much more I would like to say, but your time is precious, so I shall end here. I'll be happy to take the senators' questions. Thank you very much.
The Deputy Chair: Thank you very much for that presentation. Having had the opportunity to visit your country twice — and, coming from Canada, I almost consider it a city state — it's an amazing country; that is, the prosperity and the infrastructure that you have built up. You alluded in your comments to the clean government and the efforts you have taken in that area. Your whole story is amazing. The prosperity you've built for the people who live there is a role model for not only the countries in the region but around the world. I very much enjoyed your presentation.
I did not realize until you stated it that we were in negotiations for a free trade agreement, and somehow we failed but the Americans succeeded. That's something we will pursue. I appreciate you are not an expert in that, but we will pursue that and see what we can find out.
[Translation]
Senator Fortin-Duplessis: My thanks to our witnesses for their interesting presentations. My first question goes to Mr. Sunquist. Our committee has already visited China and India and, at the moment, we are turning our attention to other countries in Southeast Asia. I would like to ask you a question about what is happening in Indonesia.
It is generally accepted that infrastructure is one of the most important aspects in fostering trade and economic development. A number of international investors are pointing out the poor quality of infrastructure in the Philippines and Indonesia. A recent survey of Japanese business people also reveals that the poor quality of infrastructure in Indonesia is the main obstacle to investment there. For a number of years, the Indonesian government has been saying that infrastructure is its main priority.
Have you noticed any improvement in the quality of infrastructure in Indonesia? Is the desire of the Indonesian government to improve its infrastructure translating into huge investment in the area?
Mr. Sunquist: Thank you for your questions, senator. If possible, I would like to reply in English.
Senator Fortin-Duplessis: Of course, you may reply in English.
[English]
Mr. Sunquist: I did speak about China, Japan and India because those are the big three. As my colleague just said, Singapore is an excellent entry into China and vice versa. It is clear that China, as an economic superpower, is now starting to lead the whole region. You have to understand how China works to understand ASEAN works and how the rest of the region fits into that, whether it's security issues like the South China Sea, or trade, or anything. Let me come to your question about improvement to infrastructure.
Indonesia has had a few ups and downs along its path, but it is clear, as a responsible member of G20, as a leading member of ASEAN and a leading member of APEC, that the institutional infrastructure has certainly been enhanced over the last couple of decades. On the soft side, things like corruption, which was a huge issue 15 years ago — and no one is saying that it's all better, but it is much improved if you look at the human rights indexes.
I look at the infrastructure as more than just the physical parts. The banks, the financial services, the democracy index — there's a whole host of them — and including the legal situation. There's no question that while every country has room to improve, if you took today, compared to when I was ambassador a decade ago, compared to the decade before that with the dictatorship, I think any unbiased viewer would say that there have been remarkable achievements at a time when there have been other issues, such as terrorism. There were a couple of shocks: the Asia crisis of the late 1990s to the 2008 meltdown. Yes, there are definite improvements in infrastructure and in the quality of it.
I could go on talking about individual parts, but it has also been the receptivity of Indonesian authorities to have foreign investment and foreign firms involved in some of that quality as well. I'm not sure if that gets to the heart of your question, but improvement, yes, in all fields.
[Translation]
Senator Fortin-Duplessis: Before you answer, I would like to make a quick comment. They still have mobile offices in Indonesia. There are people who have companies, but who do business from their vehicles. Perhaps that shows a lack of infrastructure in terms of a road system. Now I would like to hear your answer, Mr. Toh.
[English]
Mr. Sunquist: If you were to look at the skyline of Jakarta or Surabaya, it would rival most advanced Canadian cities. There is no question that the office and telecommunications facilities are much better. The port facilities are a little bit antiquated and need work, but in fact there is a lot of Singaporean investment into the port systems. It's clear that those things are being addressed.
It is also a country that has had more than its fair share of disasters, tsunamis. When you say people working out of cars, I haven't seen that, but if you take the north, Ache, where they had a succession of problems from terrorism to tsunamis, the rebuilding is an ongoing effort. I mentioned my involvement with CARE Canada. Indonesia is one of the direct reports of our CARE offices there, and the range of issues has always been on response to disasters, from volcanoes to tsunamis. But in fact much of that is now changing to gender, democracy and human rights issues, and continuing the long-term development type of thing. I just don't think it is as bad as living out of cars for foreigners' offices, but I could certainly be mistaken.
Mr. Toh: I would like to add that where infrastructure is concerned, of course, much needs to be done. But I agree with Mr. Sunquist that Jakarta has adequate infrastructure for business and for industry. In fact, it has a current governor, who they call ``Jokowi,'' who is very popular and has done a lot for Jakarta. In fact, he is so successful now that he is running for president, so we have hope. I trained Indonesian government officials in NTU myself, and they are all eager to improve themselves.
I wanted to add that if Canadians are worried about investing directly in Indonesia, Indonesia has two islands that are about 45 minutes away by boat from Singapore, by fast catamaran. We have services there. The two islands are Batam and Bintan. Singapore has actually pumped in a lot of money jointly with Indonesians to develop these two islands as tourist resorts and industrial zones. You can invest in Indonesia but be close to Singapore and export your goods and services through Singapore, and so avoid all the infrastructure problems of Indonesia. The flight time from Singapore airports to anywhere in Indonesia is one to two hours, so you can get to the heart of Indonesia without being there.
Senator Johnson: Welcome this morning. Your presentations were excellent, especially about chewing gum. It's going to be hard to go without it.
Mr. Toh, Singapore's domestic product grew by 6 per cent; and in 2013, by 4.1; is that true?
Mr. Toh: I think it's probably 5.
Senator Johnson: It's forecast to grow by another 4.5 in 2015. Which sectors of your economy are likely to experience the most growth? Secondly, what are the main challenges facing Singapore's economy?
Mr. Toh: The growth areas, I would say, relate to our efforts to push for more services to be delivered from Singapore. One of the things that we have discovered to be a growth industry is dispute resolution in Singapore. We are seeing a lot of arbitration cases come to Singapore, because of several reasons, one of which would be backlogs in the countries where the disputes arose, and also because of the other political and economic problems, but also because we have very good expertise in Singapore. We have seen the legal industry open up, and the arbitration industry is now totally open to any Canadian arbitrator to come. You don't even need a licence at all; just open up shop. You don't need to open it in a car; you get good offices.
We actually have a strong emphasis, as I mentioned, on data services and the infocomm, pharmaceutical and biomedical industries. There are lots of growth industries, which would include tourism. We are a small city. We have 5.6 or 5.7 million people and we have 10 million tourists a year. We have more tourists than residents.
In terms of challenges, of course I mentioned the expense. A lot of expatriates want to maintain a lifestyle that is western, maybe Canadian, and they might find it very expensive. But we have a proactive government and they are working to reduce this as much as possible. It is not a badge of honour to be the most expensive city for expatriates.
Secondly, there is the challenge of space. We have very little space. As I said, we are a little bigger than Toronto, 712 square kilometres. That means we have to be proactive in siting many of the space-demanding industries outside of Singapore. We are working, as I mentioned, with Indonesia on the islands of Bintan and Batam, 45 minutes away, and just half an hour away across two bridges is Johor, Malaysia. Johor is building a big industrial zone and they are working at passport-free access. They call it Iskandar, which is named after the Sultan of Johor, I believe the father. And the Iskandar region is going to be the hinterland of Singapore.
Senator Johnson: You commented that space could pose a problem, given that you have a big influx of migrant workers. How is that affecting the economy?
Mr. Toh: As I mentioned in my presentation, we are trying to emphasize high-end and precision engineering and industry so that the labour cost will not faze you. You don't need to depend on migrant workers; you depend upon highly trained Singapore labour. You need to look at those industries which require that. In terms of space, as I mentioned, we do have all these different incentives for industries and services that need space. We actually do put them into high-rises; we have high-rise factories just like we have high-rise apartments.
Senator Johnson: Mr. Sunquist, do you have any comments on that?
Mr. Sunquist: Just a brief comment. I think the statistics that I have seen demonstrate that actually about 60 per cent of Canadian companies have operations or offices in Singapore because as a headquarters location, as a place with a legal system that is trustworthy, for language reasons and for transportation reasons, very often you find regional headquarters and the service industry working out of Singapore. It just makes sense.
If you start to look at some of the sectors where Canadian companies are doing well in the region, aerospace would probably have to be closer to the country. So if you're going to be in Indonesia, the Philippines or in Thailand, you are usually selling agri-food to the end users, though you may use agents or others out of Singapore.
In the whole automotive industry, interestingly enough, Indonesia is now the leading importer of vehicles in the whole region. With clean tech, Singapore takes a lead, but if you visit the other countries, you recognize the need, which is the best way to put it. With ICT and oil and gas, ICT is probably more around Singapore, oil and gas around Malaysia, Vietnam and Indonesia.
I think it depends on the type of operation you are going to run. If you take Manulife and Sun Life, there is nothing that makes a Canadian feel better than going to Indonesia and seeing 20 to 30 offices on all the islands. They invariably fly that huge Canadian flag, much larger than anything we see on top of the Peace Tower, on 30 or 40 offices across the place. Manulife and Sun Life are in the country; their relationships have to be there and their senior people have to be there. BlackBerry looks at Indonesia as one of its major markets. It's a very profitable market.
Singapore is on a higher level, which is what Singapore is trying to attract, based on different types of companies.
Mr. Toh: I would also like to point out that we are building a big aerospace park. All the airline industry people are very excited about the space we are creating for aerospace, and Canada could come.
Where agri-food is concerned, you may think that Singapore is such a tiny little place that there is no space for farmers. As in all cases, we have multi-storey farms. We get into technology by using hydroponics and aeroponics. We see this as great potential for export to the Middle East where they have no arable land or water. We have very high- end agricultural technologies that could be worked on together with Canada.
Senator Oh: Welcome to the committee. With respect to Canadian companies compared to Australian companies doing business in Asia, Australia has no manufacturing base, which Canada has, yet Australian exports to Asia are far higher as compared to Canadian companies. Does that mean Canadian companies are not aggressive enough to do business?
Mr. Sunquist: Let me take a first stab at it. I think my colleague, looking at Canadian operations in Singapore, might have a different perspective.
I think Canadian companies are aggressive, but you have to realize that this is Australia's backyard. If you look at the whole issue with Indonesia and East Timor, the operations were out of Australia. Australia was involved in the relationships for ships carrying refugees. It's part of a security package Australia is interested in.
I think Canada's placement vis-à-vis the U.S., vis-à-vis America's policy, our emphasis on dealing with our past, if you want to put it that way, with Europe; and our future, which is in Asia, means that we get spread thin. Whereas Australia has clearly seen from a foreign policy and business policy perspective that Asia is their backyard, so they put their time and emphasis there as opposed to just about anywhere else.
You will find that they are aggressive. They have certainly been winning the battle vis-à-vis Canada for the last couple of decades throughout the region, but it's been a gradual shift by the Australian people and by Australian governments to recognize this. If you look back 20 years ago, immigration policy vis-à-vis the rest of Asia was abhorrent. Today, you see Asian immigration. Twenty years ago, they saw themselves as kind of part of the U.K. I'm being a little facetious, but they saw them as their natural connection. Today, they welcome investment from China and they're active in Indonesia, Singapore and Vietnam. By and large, Australia is one of our major competitors throughout the region, but then so is the U.S.
I think I gave some examples about why Canadian companies have not been as successful; it is because they have not developed the relations there and looked at more of a buy-sell transactional basis. It is also true that Canadian people have turned inwards a little bit, which is regrettable.
Mr. Toh: Mr. Chair, I am a guest here in Canada, so I wouldn't want to be rude. I do not know whether it is because Canadian companies are not aggressive, but I certainly agree with Mr. Sunquist that perhaps your priorities are different because you are so far away from where we are compared to Australia.
I have also pointed out that perhaps you have misperceptions of Singapore. I think much more can be done, although we already have so many Canadian companies and FDIs, as I mentioned.
I think Canadians, like all Western, so to speak, businesspeople, are very professional and very calculated in their movements. If they don't make much money in Singapore or Asia, they wouldn't come, especially if they are making enough money nearby.
Relationships could be just one problem. From Asia's perspective, I think Canada hasn't shown enough commitment. I mentioned for example, specifically, negotiating a free trade agreement with us for some years and then freezing it since 2007, so you are not really interested in us.
Senator Oh: The Republic of Singapore has had the same government since independence from Malaysia in 1965. What would you comment on for the next 20 years? Do you think it will be the same government again?
Mr. Toh: Mr. Chair, I do not possess the skill of prophecy and prediction of the future; I leave that for the fortune tellers outside of this house.
I would say that the current government is not going away anytime soon. We have more and more opposition now with younger people, who want to have a more diverse voice in Parliament. We have created all sorts of things to let them hear the voice of alternative parties.
It is not the ruling party's fault that the opposition parties cannot win a seat, but they are getting more and more seats in. Right now, there are at least 9 or 10 opposition members in Parliament out of 90, so that is not too bad in terms of a comparison with 1965 when there were zero.
At the same time, we have created something called a nominated member of Parliament because the population says we need good people in there, but they are not going to run for elections. We decided that we wouldn't have enough space for a second house, an upper house, so our nominated members are sort of like a second chamber located within the first chamber. It's one chamber with two types of MPs: the elected ones and the nominated ones, nine of them, making a total of 99.
We actually have a very special MP called the NCMP, the Non-Constituency Member of Parliament. These three are opposition members who won the best votes; they were the best losers of the opposition. They get a pass — do not collect $200, pass Go and get into Parliament straight away.
Senator Ataullahjan: Thank you for your presentations this morning. I have two questions. The first one is for Professor Toh.
The question is focused on your expertise in intellectual property and e-commerce. Infringement of intellectual property laws is widespread in the Asia-Pacific, such as counterfeit products, movies and software, and it seems the issue is not with the type of laws or the number of laws, but the enforcement of the IP laws. It is an issue of implementation. Are Asia-Pacific nations aware of this issue, and are they doing anything about it? What about the international community?
Mr. Toh: Thank you for the question. I believe that you're right in that enforcement is lacking in many countries. Some of the laws, actually, are first class, because many of the countries are members of the WTO, and therefore signatories to the TRIPS agreement on intellectual property. With respect to China, for example, I have, as a lawyer, looked at the laws, and they have probably near perfect laws, but as you and I know, enforcement is the second issue.
The thing I like to tell my intellectual property class is that when China begins to feel the pinch themselves from the loss to their own intellectual property, then they will start getting serious. I say that because in the 1960s, for example, the U.S.A. was not even serious about copyright, and then in the 1980s they became the major producers of copyrighted material. They are now serious about IP, and I see the same path for China, Indonesia and so on, the big giants — India, for example.
As far as Singapore is concerned, I do deal with intellectual property disputes in Singapore, surprisingly. For example, I was arbitrating in one case between a Taiwanese investor and a Chinese company, and there was an infringement of IP, and they had arbitration in Singapore. We mentioned Indonesia earlier. They arbitrate in Singapore because we are bankers to the world, and Indonesian and Chinese companies have assets in Singapore, and when you need enforcement you don't need to go to Indonesia or China. You just enforce it on the banks in Singapore.
Senator Ataullahjan: Mr. Sunquist, one of the witnesses yesterday said that Indonesia is dependent on its raw material exports, most of which go to China. With the risk of possible economic downturn, the same witness also said that Indonesia would lose momentum. Would Indonesia still be an attractive economic opportunity for Canada? What about Indonesia's human capital? It's the fourth most populous country in the world. How developed are its human resources?
Mr. Sunquist: Thank you; both are excellent questions for me.
I commented earlier on how China is now having a pervasive influence over the whole region, so that Singapore does massive investments into China. Indonesia gets massive investments from China. Indonesia is also in some ways like Canada, rich in resources, so you can look at LNG exports going to Japan from the northern islands, bauxite to the world, coal for their energy. Yes, they are a focus of attention from other countries for development of their resources, and if you look at the worldwide economy, if that slows down, then they're at risk, similar to us, although a different type of risk.
I think the other thing is that Indonesia has very vibrant — I hate hyphenated people, and I don't usually use those terms — Chinese-Indonesians, and the business class in Indonesia for a long time had proportionally more ethnic Chinese citizens than others. The connections are incredible. In fact, one of our former Governor General's parents had lived and worked in Indonesia. You have a lot of connections between China and Indonesian citizens. If you take the Fujian province in China, immigration to Indonesia was very large. The connections are plentiful.
I think the larger question is the latter one you had about human capital. Efforts on education for the last several decades have been to move people, especially in the urban areas, but increasingly in the rural areas, up the ladder. With respect to the number of universities, some may be good and some not so good, but the dedication towards education is really being felt. The labour force is becoming increasingly skilled. There will always be the low-cost labour operations there, but there are fewer of them today because, in fact, that whole labour force has moved up.
Indonesia, like much of ASEAN, with the exception of Singapore, is still largely rural, and that's where the human capital needs the development.
Senator Demers: This question is for Mr. Sunquist, and Professor Toh may want to join in, too.
Indonesia has a sizeable and relatively youthful population with 54 million people, 30 per cent of whom are under 30. Most of these young people aspire to join the country's emerging middle class. However, according to the OECD, investment in education remains stubbornly low compared to the other ASEAN members. What has the government done to improve the education level, and do you see a good probability of the next government investing in more education for its people? Canada has a considerable international reputation for providing education, products and services. Are we currently taking advantage of this market position with regard to Indonesia?
Mr. Sunquist: That actually runs into the previous question as well, the human capital in the under thirties. It's a country that is exploding in population. I was there a decade ago, and we were using figures of about 210 million for the population. Today, the figures are 240 million. You can see there's this huge growth of young people.
The education levels in the urban areas have improved; there's no question there. I think the education issues in the rural areas are exactly where you were at. It's where our old CIDA spent time and effort, U.S. aid and many others, trying to work with them. There are also the madrasas, the Muslim schools, that don't show up in some of the statistics. Then there are a lot of the private universities. I'm not sure that's a policy of the government to try to encourage more of the private schools because then they don't pay for them the same way, but there is a lot that goes under-reported, but not enough to make a heck of a difference.
You ask a question for which I use the line that I'm not a soothsayer here as well. I'm not sure what the current or the next government will do about education. It's just the population is demanding a better life for their young people than the life they have themselves. So there are two demands: one around education and one around environment. Those get wrapped up in jobs as well.
I would say that, yes, there will be increasing resources spent on education because that's the future of the country.
Mr. Toh: I'd like to add that Indonesia knows that it has to invest in education. It is such a huge country, and they have so many needs. From my own experience, more and more Indonesian students are coming to Singapore both in the National University and in NTU, where I teach.
I have taught government officials. They send the government officials to Singapore. Rich Indonesians have always sent their children to Singapore to study.
There is something that Canada can do. I would like to put on record, many years late, I suppose, but to thank Canada for the money it put into the Colombo Plan. Many of our ministers and leaders in business and universities, they were on the Colombo Plan. They have studied in Canada and they have enriched Singapore. Thank you so much, Canada. You could do the same for Indonesia.
Senator Demers: Thank you for your answers; they were clear.
With the emergence of Jakarta Governor Joko Widodo, an Indonesian frontrunner for the national presidency, what is the prospect for stronger growth and prosperity for the country's young yet undereducated population? It comes under what I asked you, but if you could expand a little bit more, I would appreciate it.
Mr. Sunquist: It's clearly a changing of generations in governance of Indonesia. That would be the starting point, although you've got a relatively young current president who I first met when he was a general in the Indonesian Armed Forces and was their representative in Parliament. He was one of the leaders of moving the Armed Forces out of politics, and later on ran for presidency. He was elected because people viewed him as being the best opportunity to provide clean government for Indonesia.
The little guy who sees corruption, it means more to them than to anybody else because it's everything they've got. Corruption is a very serious issue.
So you have a president from the military who promised clean government and economic growth and has somewhat delivered on those.
You see the current mayor of Jakarta, and there may be a couple others, who are a younger generation more in tune with some of the under thirties and the idea that economic development is a requirement for the future of Indonesia. That's why you see them taking a role in the G20 and ASEAN and APEC. They know their future depends on making those investments and being successful in them.
There's a generational issue. Ten years ago, you could go anywhere in Singapore and meet any senior person and the chances are they would say they have been to McMaster University on the Colombo Plan. That plan ended years ago, and we've lost touch with what I would call the leadership of Singapore now.
If you looked at Indonesia and take the ethnic Chinese there, many of them went to Singapore. Actually, the second destination for many of them used to be the old Concordia University, later Sir George Williams, or vice versa. That was where they went. The ethnic Indonesian went to UBC and others.
There are great differences. I like the question about the possible presidency of a dynamic mayor who recognizes the other issue there which is the big city issues, whether it is pollution, crime or jobs, and lives with them on a day-to-day basis. That's what you want.
Senator D. Smith: Singapore is a fascinating city. I have been there. I loved the history and hung out at the Raffles Hotel. It gives a new definition to the word ``clean.''
You mentioned there was some connection with McGill. Do you know what that connection is?
Mr. Toh: I mentioned that McGill is ranked 31 in world ranking of universities. Currently, I don't think there's an active program with McGill, but there are programs with Ryerson and with the University of Toronto. We have exchange programs going on.
Senator D. Smith: Ryerson is coming on strong. It seems to me it's a logical fit for one of the business schools to have a twinning program. I would think that if they were to really explore that, Singapore is such a gateway to the whole area that it would be incredibly impressive.
I always loved that Mel Gibson movie, The Year of Living Dangerously. Did you see that one?
Mr. Sunquist: I have a baseball cap that says that, and it was given to me by the American ambassador shortly after we had a fiasco around gold, but anyways.
Senator D. Smith: It is a great one.
You did say that corruption has gone down. When you look at the 2013 Corruption Perceptions Index, Singapore was number five, which is good. But it still had Indonesia at 114. Do they have aggressive programs to reduce that? You think it wasn't as bad as it was, but to be 114, it requires a lot of work. What can you tell us about how they're trying to get it down?
Mr. Sunquist: Don't mistake me: 114 is terrible. When I was there a decade ago, let's say it was probably around the 150, 155 mark, so it is a relative improvement. Corruption is still the number one cited difficulty for Canadian business and dealing in that market.
The issues were corruption, inconsistent laws and IP ranked in that kind of order; so it's an issue that has to be dealt with. I think there's been varying degrees of lip service and real effort. It's getting better but not fast enough for most people.
Senator D. Smith: I just can't resist telling you that I used to stay a lot at a hotel in Paris where their most famous export, Mata Hari, used to live, and I couldn't walk in the door without thinking of her.
Mr. Sunquist: Corruption is an issue throughout the region, but not more so than others. There are other places in Asia that ranked lower on that list, but it's an ongoing battle.
Senator D. Smith: Well, Myanmar is quite a bit higher, 157. We had some witnesses yesterday and they were talking a lot about it.
Mr. Sunquist: One of the problems is you go through a couple of decades of a dictatorship that had, as people used to call it, the ten per cent rule. Ten per cent of everything was skimmed; it's a cultural thing that you have to outgrow. It's a generational outgrowth. It's a lot of different issues that take some time.
And, please, I'm not an apologist for the system, nor am I defending.
Senator D. Smith: But you see there's progress.
Mr. Sunquist: I see progress. I see Canadian companies who believe there's progress, but they will all comment on the fact it's still there.
Senator Moore: With regard to the question by Senator Ataullahjan about intellectual property, Mr. Toh, what is the intellectual property regime in Singapore, and what is it doing to curb the production of counterfeit merchandise?
Mr. Toh: I believe the intellectual property laws we have in Singapore are state of the art. In fact, it has been raised to a level even above our treaty obligations under the TRIPS treaty in the WTO, and it's largely because of our U.S.- Singapore free trade agreement. A lot of our rules are there because the U.S. insisted on them in order to sign the free trade agreement.
If you are concerned, senators, about protecting Canadian intellectual property, get a FTA with Singapore.
Senator Moore: I know that the protection of intellectual property was and still remains a key issue between Canada and the U.S., but I've seen the merchandise coming out of Singapore. Is the Singapore government is aware of that and are they aware of the negative impact it has on people looking to do business there?
Mr. Toh: Mr. Chair, I believe this is one of the misperceptions. There are some counterfeit goods that will come out from a free port like Singapore, but they might not even have landed in Singapore. They could have just transited through Singapore.
When I was first in Toronto, for example, I went into a video shop in a very famous mall in Scarborough, which shall remain nameless. I think you know where it is. I saw videotapes of a very popular Singapore show. It's pirated. I called up my friend who is the CEO of the studio who produced it and said, ``Do you know this?'' He said, ``I don't, but how do I pursue it in Canada?'' The problem was Canada, not Singapore. I'm sorry to say that, because to enforce this particular issue, they didn't see it worth their time to come over to Canada to pursue that intellectual property breach of their rights. But Singapore, I can categorically say, is very strict. We have customs officials empowered to seize any pirated goods if they see them.
I do not think that we are the source of the pirated materials. It is probably in transit through Singapore, perhaps from Malaysia or Indonesia or even China.
Senator Moore: I found it interesting that Singapore and Canada worked for eight years trying to reach a trade agreement, and it didn't succeed. What were the main stumbling blocks? Are you aware of what happened back then?
Mr. Toh: I'm sorry, senators, I'm not privy to that negotiation, but I believe there was some disagreement over some things and it just stopped there. I have no idea of what was actually the big problem.
Senator Moore: What about your comment, Mr. Sunquist? Would you know anything about that?
Mr. Sunquist: Can I say unfortunately, yes? Yes. The free trade discussions with Singapore kind of went up and down, and it was paused by both countries at different points.
I vividly recall under the direction of Minister Emerson one time flying out there to see if we could jump-start some of the discussions.
To do a free trade agreement, there has to be a willingness on both sides to look at the issues and what you want to do. Two of the major issues at that time, going back to 2006-07, were freedom of labour mobility and another issue related to financial services between Singapore and Canada.
Senator Moore: To achieve some kind of reciprocal arrangement?
Mr. Sunquist: Yes. Those were stumbling blocks at that time. Whether they would still be the same type of thing today, I don't know. Times have changed. Discussions from TPP and Canada's discussions in Europe have changed the playing field.
[Translation]
Senator Fortin-Duplessis: My question is for Mr. Toh. I liked hearing that the economy of Singapore is a success story; you testified to that at great length. I would like to follow up on the questions from Senator Ataullahjan and also from Senator Moore about intellectual property.
They asked you questions about intellectual property in Singapore. But I would like to know if other governments in Southeast Asia are doing more in the area of intellectual property?
[English]
Mr. Toh: The regimes in Southeast Asia particularly have got membership in the WTO, as I mentioned, and because of that they need to put in minimum standards for IP. As far as I'm aware, all of them have those requisite laws, so they remain able to enforce them, but I think the earlier question was, how are they enforcing them? Are they serious about enforcing them? For that, I cannot speak for any government.
I would just say that perhaps one of the things that Canada could do as a country would be to say that there are things you can do government-to-government that would ensure that they respect the intellectual property of Canadians.
I want to emphasize again that Singapore is very serious about its image. To be honest, when I grew up in the 1950s and 1960s, we were known as the piracy capital of the world. We no longer are, and we have changed our laws so much that it is practically impossible to pirate anything in Singapore. If any piracy exists, it would be because of the regional countries around us.
Senator Ataullahjan: Mr. Sunquist, my question is to you. You mentioned madrasas in Indonesia. Do these madrasas offer free education? Are they mostly in rural areas or are there some in urban areas? Traditionally, in many other countries, madrasas are popular because they offer free education and people who can't afford to send their children to regular schools send them to madrasas. Is that true in Indonesia, too?
Mr. Sunquist: I believe that to be so. It used to be almost entirely rural and my understanding is it was free.
One the big issues for Canada, if we look at it from a CIDA perspective, is the urbanization of poverty. As we've urbanized, we have also moved poverty from the rural areas into the urban areas. It's a big issue in much of Asia. I don't think we've grappled with it well enough. We still have a more traditional view of development, and we need to move to that urbanization of poverty.
One of the things that has happened is that madrasas have moved into the urban areas as well. I understand they're doing fairly well. I don't pretend to be an expert on it other than knowledge that they exist and they're popular with the group of people who don't have another means of education.
The Deputy Chair: On behalf of the committee, I would like to thank the witnesses today, not only for your time — we know how busy you are — but for the wisdom in your presentations. They will greatly assist the committee as we go forward preparing out report.
(The committee adjourned.)