Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 21 - Evidence - May 30, 2017
OTTAWA, Tuesday, May 30, 2017
The Standing Senate Committee on Banking, Trade and Commerce met this day at
2:03 p.m. to examine the subject matter of those elements contained in Divisions
3, 8, 18 and 20 of Part 4 of Bill C-44, An Act to implement certain provisions
of the budget tabled in Parliament on March 22, 2017 and other measures.
Senator David Tkachuk (Chair) in the chair.
The Chair: Welcome. Before I get into the formal part of the meeting,
I'd like to welcome Senator Maltais, our new member. Thank you for coming back
again, because he was a member for a while.
I know there was some concern among members about making sure we get to the
Senate previous to adjournment so that we get marked present just like in
school. I don't think we're going to be so long that we won't be able to get
back. We've got this group and then we have a single witness, and then we're
done for today.
Senator Wallin: If we have chamber approval, are not we considered as
The Chair: No, we're not. We're considered here, but not considered
there until we're actually there. I don't think we'll have a problem with that.
Good afternoon and welcome to our invited guests and members of the general
public who are following today's proceedings of the Standing Senate Committee on
Banking, Trade and Commerce either here in the room or listening via the Web. My
name is David Tkachuk and I am the chair of the committee.
Today we are continuing our subject matter examination of Bill C-44, An Act
to implement certain provisions of the budget tabled in Parliament on March 22,
2017 and other measures, and in particular Divisions 3, 8, 18 and 20 of Part 4
of the bill. Honourable senators will know that our committee must report our
findings to the Senate by Wednesday, June 7, 2017.
During today's first portion of our meeting, we welcome before us witnesses
that we had to cancel a couple of weeks ago due to an already very lengthy
meeting that went late. I am therefore pleased to welcome you gentlemen, and
thank you for joining us today. We appreciate this very much.
From the Business Council of Canada, Brian Kingston, Vice President, Policy;
from the Canadian Chamber of Commerce, Hendrik Brakel, Senior Director,
Economic, Financial and Tax Policy, and Ryan Greer, Director, Transportation and
Infrastructure Policy; and from the C.D. Howe Institute, Benjamin Dachis,
Associate Director, Research.
Please proceed with your opening remarks and then we will go to our question
and answer session. Who wants to kick this off?
Hendrik Brakel, Senior Director, Economic, Financial and Tax Policy,
Canadian Chamber of Commerce: Thank you very much. We're pleased and
honoured to be here with you today. We appreciate the opportunity to talk about
the federal budget. We hear from our members all the time that it's of vital
importance to Canadian businesses across the country, so we want to make three
First, we're very concerned about the competitiveness of Canada. We've had
nine consecutive quarters of falling business investment in Canada, and we've
had two years of zero export growth. Back in 2015, we would have attributed the
weak investment to declining natural resource prices, but now we're seeing
weakness spreading into a variety of investment sectors including machinery and
equipment, software and research and development. It may be that the
renegotiation of NAFTA is having a chilling effect, but we think it's absolutely
critical to improve our competitiveness and to bring down the cost of doing
business in Canada.
Our members tell us all the time that Canada is a great place to do business,
but it's an expensive place. Wages are high and rising. Taxes are rising —
provincial corporate taxes, CPP contributions, carbon levies — and EI premiums
are stuck at high levels. What's worse is that many countries are lowering tax
rates right now, including Japan, Spain, Israel, Norway, Italy, the U.K. and,
most importantly, at some point the United States. Our concern is that our
competitiveness challenges will become acute if and when the U.S. is able to
lower corporate income taxes, and this could impede our ability to attract and
retain foreign investment so we think urgent action is needed.
The second item we wanted to mention is good news for the attraction of
foreign investment. We think raising the review threshold for the Investment
Canada Act to $1 billion generally, and $1.5 billion for trade agreement
partners, is something we completely support and have been asking for for a long
time. Among the high-income OECD countries, these types of formal investment
review and approval processes are rare. Only Canada and Australia have these
types of processes.
In our view, the review process under the Investment Canada Act is quite
complex and it adds a significant regulatory burden. The foreign investors we've
heard from point to uncertainty about how to interpret the requirements. The
criteria for Canadian benefit are so vague, looking at everything from
employment to supplies to supply chains; it's complicated. It increases the time
and cost of investing in Canada for a large transaction and it creates the
perception — which is an unfortunate perception — of a regulatory and political
environment that discourages foreign investment.
We strongly support the increased thresholds. We think it's a great idea and
is something we've been recommending for years.
With regard to infrastructure bank, I will turn it over to Ryan Greer.
Ryan Greer, Director, Transportation and Infrastructure Policy, Canadian
Chamber of Commerce: I will add a few points on the infrastructure bank.
We're cautiously optimistic about the CIB and its potential, while acknowledging
the caveat that we still don't know how the bank will function, the leadership
and the types of projects it will be diving into first. But we think the biggest
benefit of the bank could come from its intelligence function.
Right now, the federal government and Infrastructure Canada have little to no
strategic infrastructure policy capacity right now so if, as this new
institution develops, its data and analysis function can take a national view on
helping policymakers identify some of Canada's long-term challenges, it could
prove very valuable in the long run.
Certainly, Infrastructure Australia is an example we have heard cited and, if
it does some similar work to Infrastructure Australia, it could prove more
valuable over the long term, I think, than the financing component.
I think the initial mandate of the bank is a bit narrow when it comes to data
analysis, but as the bank matures and as governments figure out how it will
function and how to use it, it could prove an important policy function as we
more ahead. Anything the bank can do to help make it easier to move large
projects forward faster in Canada will be beneficial.
An example is the Via Rail high-frequency rail proposal. The proposal is for
Via to own their own tracks which will require them to raise private equity. The
government has been sitting on this proposal for some time. It's been a "go
slow'' approach. If the CIB could help structure a deal in finance and help move
along this project and others like it, that would be beneficial.
Broadly, bringing different levels of government and other stakeholders,
including First Nations, together for public projects often takes long delays.
Even many successful projects — we can look toward major bridge projects and
even successful projects such as the Canada line out in B.C. — take a long time
to bring all the public-private stakeholders together and find agreement.
If the bank can be a bit of a clearinghouse for certain P3 projects like
these to bring them together quickly and get these projects moving forward
quicker — projects that are important to the national economy — we think that
would be very beneficial as well.
I'll stop with my last point, which is that the chamber will continue to note
that if the federal government wants to make it easier for the private sector to
invest in infrastructure, then they should make it easier for the private sector
to invest in infrastructure. Creating an attractive investment environment is
more than just the government taking a risk share; it's actually about ensuring
that some of the regulatory paralysis and permit delays and challenges the
private sector faces are addressed to truly encourage private investment in
Brian Kingston, Vice President, Policy, Business Council of Canada:
Thank you for the invitation to take part in your consultations on Bill C-44. I
will start with a few reflections on Budget 2017. I will specifically comment on
the infrastructure bank, the invest-in-Canada hub and raising the investment
The Business Council of Canada represents the chief executives and
entrepreneurs of 150 leading Canadian companies in all sectors and regions of
the country. Our member companies employ 1.7 million Canadians, account for more
than half the value of the Toronto Stock Exchange, contribute the largest share
of federal corporate taxes and are responsible for most of Canada's exports,
corporate philanthropy and private-sector investment in R&D.
In our pre-budget submission, we urged the government to adopt a laser-like
focus on competitiveness as the key to generating long-term economic growth and
ensuring a better life for all citizens. You'll hear similar themes between my
comments and those from the chamber. You will hear some similar themes between
my comments and those of the Chamber. Canada needs a focused strategy to
encourage new business investment, attract international capital and enhance our
ability to compete in the global economy.
Among our recommendations, we called on the government to streamline the
approval process for private sector infrastructure projects, develop a
comprehensive plan to broaden the tax base and bring down rates, and set out in
detail a fiscally sustainable path to balanced budgets with a commitment to an
explicit debt-to-GDP target. Acting on these recommendations would, among other
things, help to position Canada as a global trade and investment hub. We believe
this is increasingly important in the face of growing protectionist and
We applaud the government's efforts to establish the Canada infrastructure
bank to attract private sector and institutional investment to new
revenue-generating infrastructure projects. Targeted spending on productivity
and trade-enhancing projects would bolster Canada's long-term competitiveness.
In our view, the infrastructure bank should be designed to stimulate, through
open and competitive bidding, projects that would not otherwise be pursued by
federal, provincial or municipal governments.
But injecting new capital alone will not improve the Canadian infrastructure
environment. The federal government can lay the groundwork for new major
infrastructure projects by ensuring that regulatory approval processes are
transparent, predictable, fact-based and capable of rendering decisions in a
Turning to foreign investment, the Business Council of Canada has long called
for the creation of a single window to attract major investments to Canada. For
that reason, we welcome the creation of the invest-in-Canada hub in Bill C- 44.
Canada's ability to attract foreign investment has diminished. In the early
1980s, the stock of inward FDI as a share of GDP was higher in Canada than in
countries such as Australia, Norway, Sweden and the U.K. Today, unfortunately,
that situation is reversed; we lag all four of those countries as a destination
for foreign investment.
Over the same period, our country's share of global FDI has fallen from
almost 8 per cent to 3 per cent. According to the 2016 World Investment Report
compiled by the United Nations Conference on Trade and Development, Canada does
not even rank among the top 15 prospective host economies for multinational
investment for the 2016-18 period. That survey is based on a survey of
We believe that the invest-in-Canada hub and the adoption of a streamlined
single-window approach to facilitating new investments could help reverse these
worrying investment trends.
Finally, our council generally believes that foreign investment is, except in
unique circumstances, beneficial to Canada. For that reason, we support raising
the Investment Canada Act review threshold to $1 billion.
With that, I conclude my remarks. Thank you.
Benjamin Dachis, Associate Director, Research, C.D. Howe Institute:
Thank you very much. For those of you not familiar with the C.D. Howe Institute,
we're a national non-partisan public policy think-tank.
I will be discussing some of the recent research I've done on the case for
private infrastructure and the infrastructure bank particularly and is available
on the C.D. Howe Institute website, as well as work that we're going to be
publishing in a couple of weeks by my colleague Steve Robins of Harvard
The key message from our work is that the government's move to create an
infrastructure bank is very much a step in the right direction. It's now time to
get the details of it right. We think the bank requires independent governance,
a deep commitment to evidence-based decision-making and less political
involvement in negotiating with potential private sector and local and
First of all, it's really important to remember the benefits of using private
investment in place of taxpayer-supported debt. Government funding for
infrastructure has two hidden costs on the economy. The first is a greater risk
on the taxpayers, and the second is the economic harm of taxation.
One of the common arguments you will hear favouring government infrastructure
investment is a lower rate of interest for the government compared to pretty
much everyone else. It sounds like the government should take on the borrowing,
right? Not so fast. This lower borrowing rate is the result of lenders viewing
taxpayers as the guarantors of any cost overrun or late delivery. Sharing risk
with institutional investors instead can be a better deal for everyone.
Second, every taxpayer dollar the government uses for infrastructure has to
come from someone's taxes, and those taxes mean some businesses don't make an
investment and some people work less. Governments can reduce the economic harm
of this by relying on users instead of taxpayers to pay for infrastructure, with
institutional investors providing the financing in place of governments. That is
the case for private sector investment.
The question now is, how do we do it right? First of all, where necessary,
Ottawa and the provinces should be creating independent regulatory bodies
overseeing the infrastructure assets to ensure that their owners, either
governments or private sector owners, act in the public interest and for
long-term sustainability. Importantly, that should not be the role of this
Our forthcoming work will point to a number of key design elements of the
proposed infrastructure bank that I will finish on. The first is on governance.
The bank should have a single objective in its mandate, clearly defining what
projects the bank should pursue. Its independence should be enshrined in the
legislation in a way that protects it from day-to-day political interference,
and it should have an independent board with fixed terms.
Second, the federal government is going to need to create standardized
project planning and create consistent cost, benefit and risk metrics. It should
also require the collection of this data for any projects receiving federal
funding and having more than, say, $100 million in the capital costs. Budget
2017's commitment to better data collection in infrastructure is definitely a
positive step in this direction.
Finally, for the bank to be viewed as credible, rigorous and fact-based, it
must be seen as independent of the political needs of the government of the day.
Australia's experience with Infrastructure Australia is very instructive. When
it was first established, it operated with a board with limited independence and
even had members from government departments on the board. That discouraged
states and municipalities from participating. They saw the bank as being
As a result, in 2014, the Australian government amended its mandate to create
a truly independent board to address the concerns of states and municipalities.
Board members there now can only be replaced for cause, and one quarter are
appointed on the advice of other levels of government.
Statutory independence means that the minister may not give direction to the
bank on the content of any analysis, nor require the bank to proceed with
projects with negative net benefits. Any initial deployment of public resources
should be approved by the minister of infrastructure and communities or together
with the cabinet. That's absolutely needed to have the appropriate level of
democratic oversight, but that kind of ministerial approval should happen at the
very beginning of the process. Once the bank begins to procure with private or
other government partners, the bank should have the ability to proceed to close
a transaction without further ministerial approval because that will ensure
market confidence in the procurement process.
In sum, the government's proposal for an infrastructure bank is an excellent
idea if done correctly, and the broad strokes of a good proposal are in the
legislation. More institutional safeguards are necessary. The best way to do so
is an important question that this committee is going to need to look at and
consider as it investigates this bill.
With that, I look forward to your questions.
The Chair: Thank you very much. Does the budget legislation that we
presently have before us meet your definition of proper governance?
Mr. Dachis: No, it's definitely lacking in sufficient safeguards for
governance. One of the key things we don't see in the governance right now is
the independence of the board. You want to see things like fixed terms and the
ability to terminate only for cause.
We also don't see a lot in the legislation as is, and this is something
that's questionable as to whether it should be in the legislation because really
that hard-wires us into the legislation, is the process of how the bank goes
back and forth with the government. There has to be that back and forth but it's
not enshrined in the legislation right now as to when exactly the minister can
intervene, and whether the legislation should in fact say that is a good
Questions about board governance absolutely should be in the bill. Other
aspects of the independence of the bank might be best left to the corporate plan
and the day-to-day practice and informal institutions as to how the bank works.
The Chair: I have one more question before I get to my list. The bank
itself, the infrastructure bank as it's called, is it really a bank? As one
newspaper columnist clearly stated, it's only a bank because the federal
government can use that term "bank'' but it doesn't take deposits or meet with
the public. It deals with these large projects much like an authority would. But
we also heard witnesses here say basically what it will do is subsidize projects
so that they would become investment opportunities. In other words, without the
government subsidy, they're a bad investment, but with a government subsidy,
it's a good investment. Is that what we should be doing? Why do we need an
infrastructure bank for that?
Mr. Dachis: Yes, so first of all, I wholly agree. Bank is a terrible
name. This is really just a legacy name that makes it look like it's following
through on an original campaign commitment during the last election. If you go
back to the original campaign proposal, what they had then was very different
from what they have now.
I was critical of the original proposal, which was that the federal
government would effectively be loaning out to lower tiers of government based
on its lower interest rate, which, as I mentioned earlier, is a terrible
argument and terrible reason for the government to take on any type of
But you're absolutely right, and the next question is whether this is a
really now just a method for subsidizing projects, and it probably is. Now that
said, subsidization of some infrastructure is a good thing. The very presence of
infrastructure has a wider effect on the economy that, in some cases, has a
bigger benefit than what an individual private operator would experience in its
So this infrastructure bank, if designed correctly, can be used to encourage
infrastructure that wouldn't otherwise be created, which has a broader public
benefit than that which any private owner of, say, a pipeline or electricity
transmission would experience, so things that have broader economic benefits,
such as transportation. Transportation infrastructure has wider economic
benefits. That's exactly the kind of project, as long as there is a revenue tool
attached to it, that the bank can and should support.
The Chair: I will go though our list starting with Senator Massicotte.
Senator Massicotte: I have a lot of questions but will try to be
This question is addressed to the gentlemen here physically. You heard Mr.
Dachis of the C.D. Howe Institute. He has improvements to make to recommend to
the infrastructure bank. All of you are supportive of the bank. You think it's
good for the economy and efficiency and competitiveness, but you don't make a
comment on the need for greater independence. As you know, there are two schools
of thought. Some people say we should not do this thing and we should invest
public money and forget the private sector, and others say we should leverage
whatever money we have to get a bigger bang for the buck. Are you okay with the
governance as proposed in the act and, if not, what specifically would you
recommend to make this work?
Mr. Kingston: As it stands now, we're comfortable with the legislation
and how it outlines governance for the bank. We believe time will tell whether
or not it's operating without day-to-day political interference. Our hope is
that that would be the case, and we believe, at least in the broad stokes of the
legislation, that it will be possible, but I don't want to say definitively that
it will because we will have to see once it's fully established and operational
if that's actually the case.
Senator Massicotte: The act as is provides for approval of projects by
the minister, and he has publicly since declared that he would review every
project. When you continue with the answer, consider that.
Mr. Greer: To echo Brian's comments, the act right now is very much a
blank canvas, and until we have bank leadership and we see the operational
details, having a good sense of how it will operate is difficult.
Going back to my comments on some things we think the bank could do a good
job of down the road that are not currently narrowly lined up in its mandate
around intelligence and analysis will be how this evolves, so it could very well
be that we find that if governments are clearing the board and it becomes a
vehicle for politically driven projects that will have swung too far in one
direction, vice-versa a government could find the bank of little strategic use
and maybe not provide the upfront capital or otherwise prioritizing projects
through the bank if it felt like it wasn't advancing the overall strategic
direction of the government. It depends upon seeing this thing in operation, how
it's really working, to pass judgment on the canvas they've lain out.
The Chair: This is the bank. As far as we know, there is no further
legislation. The legislation for the bank is what's in front of us now. Do you
think that's sufficient to ensure independence?
Mr. Greer: Sorry, my comment was to note that we're not going to know
how well it's functioning until we have it up and running. The bank and the act
are so broad, we still are having a little bit of trouble telling exactly what
kind of projects and private funding it will crowd in, and I don't think there
is much they could spell out in the act to give us a clearer picture until this
thing is operational. For us, it's wait and see, correct and evaluate as we go
along, to make sure we end up with the best institution possible.
Senator Massicotte: Let me jump a little bit. Everybody is in favour
of the Investment Canada hub, including the C.D. Howe Institute. I am having a
little difficulty. I agree with the single-window efficiency; you know who to
call and get information. Maybe I'm missing something. I don't know why we're
creating a corporation with a separate board, an organization of that
significance, of that complication, and trying to cause it to be a separate
company, and yet there are a lot of people, all the counsellors in the current
scheme helped immensely. What are your thoughts on that?
Mr. Brakel: We had round tables across the country with business
people, and we asked them about the FDI and what they wanted. They said they
wanted something specialized, not just another government department writing
papers about how Canada is a nice place and Canada has a lot of opportunities.
They wanted specialists who are really good at individual decision-making.
If you go to South Carolina because you're thinking about building a
manufacturing plant, there is a person who will meet you at the airport and say,
"You need to talk to this municipality. This is the zoning you need. This is the
person you have to talk to get an electricity connection.'' They are a really
specialized concierge person who knows.
I think that's what business people were saying would be more helpful than
just tacking another set of tasks onto the Trade Commissioner Service or
something like that. That's why we like the idea of having specialists in Canada
knowing which level of government, which office and who to call to give you help
as a foreign investor.
Senator Massicotte: Any comments from the C.D. Howe Institute?
Mr. Dachis: Not on this part of the bill, no.
Senator Tannas: Sometimes you get ideas that are vague enough and
perhaps everyone can impute your own wishes on it. Some of you talked about
independent governance and that it should be enshrined in the legislation. Here
is the legislation. It's not enshrined.I come back to the question of, is there
enough detail here?
Now, I'm going to drag you into the political considerations that we have.
This is a budget bill. It has to get passed for lots of urgent reasons. It's
seemingly familiar. I recall a campaign promise from this government that they
wouldn't do this because this was a cardinal sin of the previous government. Yet
here we are, the middle of June before this gets its way through to being
presented, and we're being asked to rush this.
So we have a political consideration, which is this: Should we, as the
Senate, carve this out, send the rest of the budget bill off so that everybody
gets paid and things happen over the summer, and then we take the time to study
the legislation as it then exists in a little nugget and try to be helpful? Is
this important enough, in your view, that we should take the time to make sure
we get it right, or is there an urgency that you can tell us about that would
maybe make us think we ought to let it go, that it is good enough?
Mr. Greer: I guess it would be difficult for the Chamber to comment on
whether this group and the Senate has enough time to fully study and consider
what's before it. All I would say is that when the commitment was first made in
the Liberal platform, when the government announced they were proceeding, when
they provided some more detail in the Fall Economic Update and when we saw this
bill, we were happy to contribute and give our two cents to the department, the
minister and their staff and the interim team putting this together at all
stages and will to continue to do so, but it would be difficult for us to
suggest whether there has been enough time here for your to study it.
Senator Tannas: Are you saying good enough, or are you saying there is
a lot more work to do? I think it was actually you that did say something about
legislation, that there needed to be enshrined in the legislation the
Mr. Greer: I would leave that to this committee to determine whether
it has had enough time.
Senator Tannas: Okay. Thank you. Anyone else?
Mr. Dachis: I think Ryan had a good idea, namely that when you think
about what to do with this act and the bank itself, one valid approach would be
to let it go ahead but look at it carefully.
There are a couple of simple and potentially uncontroversial things you want
to propose. One is that maybe in a year or two, you have a second look at this
to ask, "Did we get this right? Is the independence right? Does the board
structure need to be looked at.'' Rather than have this go ahead as is and it's
written in stone forever, do you want to impose minor tweaks like that, such as
not necessarily a sunset clause but a review clause.
Senator Tannas: That is interesting.
The Chair: That's worked really well in the past. It seems to me that
government institutions never go away — at least I can't think of any. I suppose
there are some, but none I can think of right now.
Senator Wetston: My experience in this particular area, having dealt
with infrastructure from a regulatory perspective, suggests that it's a positive
development to proceed with infrastructure development in this country. I think
it's absolutely necessary. I would hope that we're able to proceed more
expeditiously rather than less. That's not an answer, however, to some of the
issues that are being raised here.
Mr. Greer, didn't we see you recently on the corridor study?
Mr. Greer: You did.
Senator Wetston: You're making a habit of appearing here, I see.
You're welcome any time, but I do recall your testimony.
I have a question for Mr. Dachis and perhaps one to the panel here. When I
speak to individuals outside of the Senate about this project, the biggest
concern that they raise is independence. Governance. I think it's being
addressed here, but I was a little bit surprised, Mr. Dachis, by your thought
about introducing another regulatory element to this by having independent
regulatory bodies that would also be responsible for oversight of these
particular projects. Can you elaborate on that and why you feel we need to
introduce more oversight in this area?
Mr. Dachis: It depends on the area. In some areas, competition is
perfectly sufficient to ensure that any private actor acts in the best interest
of the overall economy and isn't acting like a monopolist. A good example would
be any potential rail investment, where any private rail investor operating
between, say, Toronto, Ottawa to Montreal would be in pretty fierce competition
with airlines, with individual drivers and that sort of thing. However, when it
comes to private investment in everything from electricity, to water, to a
number of areas that are, by their nature, very much a natural monopoly, we have
to be careful about making sure these sectors have that regulator in place.
With your experience in the Ontario Energy Board, Howard, you know a strong
regulator like that can absolutely protect public interest when it's a private
or a public operator. That's an important thing to emphasize; that is, an
independent regulator is going to be very effective in protecting the public
interest, regardless of whether the owner is the private sector or the public
sector. In fact, it would be more effective to have more private money put into
infrastructure because that regulator is going to be seen as being able to go
after these entities much more clearly if they're not meeting environmental
standards or acting in the public interest because if it's a government
regulator and a government operator, it's really just going to be going after
the taxpayer, at the end of the day, to finance new infrastructure improvements.
Senator Wetston: This is the subject matter of a longer debate. We
could have the debate but not here. The bottom line I'm suggesting is there is
already a lot of oversight. When you try to build something at the municipal
level, whatever it might be, an infrastructure project, you're going to have a
lot of municipal involvement in the approval process. There is no question about
it. I know what you're concerned about here. I'm just raising this issue with
you to say that you want an efficient least-cost process rather than adding more
regulatory oversight to these particular projects. We can have that discussion
at another time.
I raised that, chair, because I think it's a matter that I would question
from the point of viability or necessity. I see your point.
Perhaps the panel might want to address this next issue. When you're talking
about independence here, you can't really look at this independence in the same
way as you might in the independent appointment of a regulatory body that has
both potential compliance, enforcement and quasi-judicial responsibilities. This
is not what this is. This is expected to be an expert board bringing its
expertise to projects that might be supported on the government side as well as
on the private sector side. The question I have — and any of you can respond to
this — is that I see the importance of independence and of good governance
structure, but I'm not quite sure why it is that the necessity of having an
independent institutional model to the point that's being recommended is
absolutely necessary in this case. I wonder whether any of you could comment on
that a bit more.
Mr. Kingston: I would be happy to start. From our perspective, the
independence relates to the bank's ability to analyze and structure projects.
That's where we see a desire to have no political interference there. The bank
needs to be able to operate under the direction of the CEO and choose projects
it believes are viable and in the interests of the country. As long as there is
total independence there, that's most important to us.
The Minister of Finance having approval over loan guarantees is completely
reasonable when you're looking at the sums of money that are involved here. It's
a balance in terms of independence. The bank needs to operate independently, but
when public funds are involved, there has to be some accountability.
Mr. Greer: We'll see from investors whether that balance is struck.
Capital will flow if investors think it is depoliticized at this operational
level, and the capital won't flow if they feel there's not that independence.
The investors and the private money that's crowded in or not crowded in will be
the telltale sign.
Senator Wetston: You want to avoid political meddling, is really what
you're getting at.
Mr. Greer: Yes.
Senator Wetston: And the expert board will provide that kind of
The other question is the selection of the products, because these are not
the otherwise readily identifiable projects. These are the ones that are not
readily identifiable, and if they come forward, who makes the decision on these
projects? Obviously, a lot of money will be spent on them.
Mr. Greer: We'll have to wait and see, because as per the mandate of
the bank, proposals will come from different levels of government. It will
accept unsolicited proposals from the private sector. It's not clear to me how
those will be evaluated operationally. Any loan guarantees or capital risk from
the government will need to be approved by the Minister of Finance. We're still
waiting to see what that approval process will look like.
Mr. Dachis: We want to have political involvement in some capacity
early in the process, but once that project is decided on in broad strokes, the
bank has the independence within that final decision-making to go forward.
This goes back to the early question about governance, which is in a paper
we're going to be putting out very soon. We're going to recommend the bank not
be as independent as the CPPIB or the OTTP or an independent regulator. The
definition of what this bank is dealing with is a political activity. Taking
people's money from Toronto or Timmins and reinvesting more of that somewhere
where those people are not is a redistributional aspect that is inherently
political. That does require political oversight, unlike the CCPIB, which is
taking one person's money and giving it right back to them without that
Senator Ringuette: My first question is a good follow-up to your
current comment, Mr. Dachis. On page 3 of your document, you say that the key
design element of the proposed infrastructure, and then you go on to 1 and 2.
In number 2, you say that the federal government is going to need to create
standardized project planning and create consistent cost benefit and risk
metrics, and yet your recommendation number 1 on governments says that the bank
should have a single objective in its mandate clearly defining what projects the
bank should pursue.
You're wanting both worlds at the same time. You're saying that the federal
government needs to standardize the project planning, the cost analysis and the
risk metrics, but on governance, this bank needs to be the sole decider of which
project they will pursue. It's pretty hard for me to determine exactly where you
stand in regard to federal government involvement in the planning and execution
versus independent governance of the bank.
Mr. Dachis: Let me be more specific. What I mean in that second
proposal about consistent metrics is it's going to be flooded with applications
for potential investment proposals, from Ontario, British Columbia, cities, you
name it. It's going to need to come up with a way to compare all those different
proposals. It should lay out what that proposal template is, and that way it can
decide, out of those innumerous proposals it's going to get, which it should
pursue, because it's not going to be able to pursue every single project it
receives an application for.
That's what we mean by its mandate. Its mandate should be that, once it gets
these applications, it has to have a clear idea as to which ones it will put
real money toward. Does that clarify your question?
Senator Ringuette: Yes. But last week we had a group of experts saying
that they were hoping that the bank would have extensive project requests, but
there was some doubt.
The second thing is that Infrastructure Canada, for the last almost two
decades, has been receiving and compiling infrastructure requests. There is
already a slate of proposals for the bank to look at without this deluge of
Mr. Dachis: It needs a clear criteria as to which ones it will choose.
Why will it choose those? Will it choose the ones that are most in the public
interest based on how you define whatever public interest might mean? Does the
public interest define whatever a politician wants to do at the end of the day?
Does it mean something that is going to cover its costs? Does it mean something
that has the widest economic benefit or widest economic and social benefit? You
have to have a clear criteria as to which ones you want to pursue.
Senator Enverga: Thank you for the presentations. It looks like our
business sector is buying into the idea of having an infrastructure bank. I
heard something mentioned that is a good idea. You mentioned that we should go
ahead, but time will tell; it's unsure.
There's also the question of independence. There's even a recommendation that
says that it might not be related, but it could be related too, with regard to
developing a comprehensive plan to broaden the tax base and bring down rates,
setting out a detailed, fiscally sustainable path to balance budgets with a
commitment to a debt-to-GDP ratio.
With all this uncertainty and questions about independence, will the business
people invest their money at this time, or would you be waiting for more
Mr. Brakel: The challenge we've always had is there is no shortage of
money in Canada. We have huge banks, pension funds and insurance companies. When
we've asked people whether they would invest in an infrastructure bank, they say
that as a pension company, their fiduciary responsible is to maximize the return
for the risk they're taking. They are saying the infrastructure bank can help
An infrastructure project like a water treatment plant or a bridge is a
25-year project, and it's very hard for a bank to do the analysis, is it going
to make money? They'll do it for very large projects. There's not a credit
rating or a balance sheet, so it is very difficult for them to analyze the
risks, and because by nature these are projects of a long duration, it's
sometimes difficult for the private sector to invest in these long-term things.
An infrastructure bank that is set up by the government and is capitalized by
the government would be a better risk for a Canadian business or an investor
than would just be some municipal infrastructure project in Saskatoon.
Senator Enverga: So you're investing here because there is a guarantee
that the public will pay just in case?
Mr. Brakel: In some ways, yes. That's certainly a possibility, if
there were guarantees and the bank is selling bonds. Again, it comes back to,
we're not sure what sort of projects this infrastructure bank is going to be
offering. They could offer infrastructure bonds. They could combine a whole
bunch of smaller projects together and then sell those, or they could be looking
at big, strategic, gigantic $2 billion bridges and things like that so that a
Canadian investor would come in and take a piece of it, but it would be
credit-wrapped or back-stopped by the government. That's kind of the idea.
If you look at the reports from the Federation of Canadian Municipalities or
associations of engineers, the infrastructure needs in Canada are so enormous,
$800 billion, that we really want to get more dollars there that don't come from
our taxpayers. If the infrastructure bank can help in that regard, that's why
the business community supports it.
Senator Enverga: The conclusion is, you want it done; businesses will
do it because there is no risk for business people other than the fact that our
taxpayers are on the hook just in case the business fails.
Mr. Brakel: In the case of a loan guarantee, then the guarantee is
coming from the government, so that does reduce it, but there are other ways .
The business community could invest in equity. The idea is that the
infrastructure bank pulls more money into the infrastructure deal. There are
many ways to structure it.The private sector would share in some of the risks,
The Chair: With loan guarantees, what kind of risk is that? Let's be
serious here. If you want to build a bridge, why wouldn't a municipality just
build a bridge and charge a toll? Why would they need the infrastructure bank?
Mr. Brakel: The cost of borrowing for municipalities is higher.
The Chair: Really?
Mr. Brakel: Canada is triple A.
The Chair: Almost all borrowing is backed by the provincial
governments; at least in our province it is.
Mr. Greer: If I can add, the real benefit is bringing in the private
sector builder or operator to find out, as Ben was alluding to in his opening
remarks, the true cost of the bridge, the lifecycle cost of the bridge. In terms
of building and maintaining it in the most efficient way, that's where bringing
in the private sector as that partner brings the real benefit, not just to the
community, not just the taxpayers but to the overall economy by having an asset
that is managed in a manner that keeps it not only as a revenue tool but
maintained over its lifespan of 20 to 30 years.
The Chair: So it's expertise, not risk.
Mr. Greer: I think it's some of both.
Senator Maltais: I will give you time to put on your earpiece. You
see, that's the benefit of living in a bilingual country.
I listened carefully to your testimony; I am not going by your submissions.
All three of you said that establishing an infrastructure bank seemed like a
good idea. We could also call it an investment company, basically it would be
the same thing. But the kicker is that you do not know how it will work. You're
waiting for regulations.
My main question concerns the governance of such an agency. As Mr. Dachis
rightly said, the institution must be non-political, the government must not be
able to intervene in its governance. Initially, the loan guarantees will be
approved by the Minister of Finance, who, as far as I know, is not a public
servant. The Minister of Infrastructure will then decide which projects will be
included. He is not a public servant either. But you forgot someone: the
Minister of the Environment. He or she will be the one making the decisions with
respect to the final phase of the project. Ask some senators here, they will
have a lot to say about it. That's already a lot of fingers in the pie.
Is your understanding that the bill provides us with a guarantee against this
risk right now?
Mr. Brakel: You are right. That is yet another question we have. We
are concerned about some of the measures in the bill, but we are waiting to see
how it will play out. Political influence can be positive, if it is to ensure
strategic projects in Canada, such as a huge bridge or projects that are in the
order of billions of dollars.
For the bank to work and for the project to attract private sector funding,
it must have some independence. However, as Mr. Dachis said, we believe that
there must be some government influence. Implicitly, the bank's objective is to
create infrastructure in Canada. It is a political objective.
Senator Maltais: You can actually draw a parallel with a child's first
day in kindergarten: the parent holds the child by the hand. That is what you
are telling me, and that is also my understanding of the bill.
However, Mr. Dachis said something important: if there are losses in a
project, the bank will be the one absorbing the deficit. But the bank is the
In real life, if the Royal Bank, for example, invests $100 million in a
project and loses it, not all Canadians will suffer the loss, but all the
shareholders of the Royal Bank.
The Champlain Bridge had a public-private partnership structure, which
included a toll. The government decided to withdraw the toll. Who will
compensate for this loss of profits? Is it the infrastructure bank? Can it
Mr. Brakel: All banks have reserves. A large bank or large institution
that makes investments will suffer losses; that's normal. It is expected that
the bank will have the capital and reserves necessary to suffer any losses that
may arise from time to time.
Senator Maltais: Yes, I understand, but in this case, the reserve of
the future infrastructure bank is all Canadian taxpayers.
Thank you, Mr. Chair, that's all.
Mr. Kingston: I'd just like to make a point. Canada has a very long
and I would argue very successful track record of undertaking P3s, so I think
we're well positioned in that space and in our infrastructure community to
proceed with projects like that.Over the last 22 years or so, there have been
over 200 projects with a total spend of nearly $100 billion. Of course, there
will always be risk in large-scale infrastructure projects. I think Canada has
some real expertise here in that, and I expect that some of those people would
be brought into the infrastructure bank. We're optimistic. I don't want to
speculate on the structure, the various deals, as that will depend on the
project itself, but I think Canada is well positioned given our track record
The Chair: Would the infrastructure bank mean the end of P3s?
Mr. Kingston: Absolutely not. My understanding is that P3s could still
be funded through the bank. They may not be, but it's not the end of P3s.
Mr. Dachis: It's really important to distinguish what the bank is
going to do versus what P3s are. P3s have traditionally meant what you see here
in Canada, especially Ontario. They have really just been private investment as
a way to offset a lot of the risk on the taxpayers through construction. If the
project goes over budget or is severely delayed, P3s as they're structured in
Ontario leave taxpayers whole. At the end of the day, for a lot of these
projects in which we see P3s in Canada, demand risk is still on taxpayers. If
there aren't enough people using a road or a subway, it's taxpayers who pay.
The bank is a great idea for moving that risk one step further, putting less
of that risk on the taxpayers and putting it on to private developers for, say,
a new subway line or new revenue-raising project. That's an important innovation
that this bank can offer.
Senator Marwah: I want to go back to the concept of governance. Mr.
Dachis, the point you made is that one of the criteria of good governance is
that you have a board with fixed terms. I've been in private enterprise all my
life and I've yet to come across a board with a fixed term. No board has a fixed
term in the private world. Shareholders have a right to remove board members if
they don't perform or don't meet certain criteria. Why do you think they should
have fixed terms here?
The second point is that shareholders can remove a board member. In this
particular case, the only shareholder is the government, so why shouldn't they
be allowed to remove board members if they don't meet certain tests?
Mr. Dachis: Obviously, for cause, that's a very clear criteria. That's
the kind of criteria that you see in the governance structure for directors of,
say, the CPPIB, and that's a standard thing and absolutely should be a criterion
for them being fired.
When it comes to public versus private companies, this is where you get into
the question of political interference versus shareholder interference. They are
two different fundamentally different things. We have many concerns about
political interference with infrastructure projects all across the country and
for a very long time, so that's where that motivation comes from.
Senator Marwah: Who removes the director? If the government can't
remove them, then who can?
Mr. Dachis: The government can remove them for cause, for sure, but
this goes to the fundamental governance of the bank and the right sort of
parameters of governance. When it's proposing a project and wants to go through
with it, it has to get that type of approval from the government. That makes a
ton of sense, but day-to-day interference in the bank can be insulated with this
Senator Marwah: I don't think anyone is disagreeing that they can't
interfere with the concept of the risk analysis, which projects they can and
can't take, and which projects meet the economic objective. But surely they can
decide to remove certain directors if they aren't meeting the test. Your only
question, then, is one of cause. You think they should have a cause that should
be predetermined as to how you can remove a director? Is that the only thing?
Mr. Dachis: This is something the committee should feel free to look
into some more as to whether that's the right test or if that is too high of a
test that they propose back to the government.
Senator Carignan: My first question is for Mr. Brakel. You responded
to Senator Maltais by saying that, in your opinion, the project had other
problems. You have raised other issues, other disadvantages, or concerns. Could
you name those other concerns?
Mr. Brakel: Our concern is about the bank's independence in
decision-making. The fact that the loan guarantees must be approved by the
minister was the main concern. How will that work? Will it be cumbersome to
present the projects to the minister? That was the point.
Senator Carignan: Speaking of the bank's independence, you have seen
in the bill that it is an agent of the Crown. Have you considered the legal
consequences of the bank being an agent of the Crown?
Mr. Brakel: In terms of —
Senator Carignan: In terms of jurisdiction, in terms of environmental
studies, in terms of the projects in which the bank could invest, for example,
as well as in terms of prosecution and immunity from prosecution against the
Mr. Brakel: That is a very good question. I am not a lawyer. I do not
think we have studied that aspect of Crown corporations.
Senator Carignan: You are talking about the bank's independence, but
you have not covered the provision that says that the bank is an agent of the
Crown. You talk more about the oversight, the appointment, the terms and
conditions, and that's enough for you to worry about the bank's independence.
Mr. Brakel: That is not a concern. For example, Export Development
Canada and the Business Development Bank of Canada are Crown corporations with
some influence and government mandates, but they operate quite independently. We
have some concerns about the bill. However, if the bank works really well, like
EDC or BDC, we will be happy. For now, it is difficult to predict how things
Senator Carignan: You say that the bank will absorb the losses, that
the bank will have to bear a project's losses, and that this will encourage the
private sector to invest. Should we not change that in order to create
infrastructure insurance rather than an infrastructure bank?
Mr. Brakel: There is a difference between a guarantee and insurance.
Senator Carignan: Comprehensive insurance means the same thing: you
invest, and if there is a loss, you assume it; if there is a profit, it will
come back to me.
Mr. Brakel: As Mr. Kingston explained, in our experience, there are
very few losses in those types of infrastructure projects. However, it can
happen and, in this case, the bank needs the reserves and capital to absorb
Senator Carignan: If there are very few losses, why does the federal
government not retain responsibility for infrastructure? Would that not be
preferable for taxpayers?
Mr. Brakel: It's just to attract a lot more money in infrastructure.
We often hear that pension funds in Canada invest in ports in Australia or
airports in Latin America. We would like the money to be invested here. We would
rather see the private sector pay for those expansions than taxpayers. If we
look at the massive amounts of money that we need to invest in infrastructure in
Canada, we are talking about over $800 billion over the next decade. Those are
If the chamber of commerce recommended that the government spend $200 billion
on infrastructure, we would be caught off guard. Those are huge amounts. That is
why we want to attract the private sector.
Senator Carignan: That is nothing for the Government of Canada's
budget, which will have a $30 billion deficit.
Mr. Brakel: We would rather see lower deficits, and the infrastructure
costs assumed more by the private sector than by the government and taxpayers.
Senator Massicotte: Basically, my question will be one of interest.
We've had witnesses in this respect earlier, a couple of weeks ago. They always
talk about P3 and the success of privatization of infrastructure projects, and
they often mention Highway 407 in Toronto. I'm not from Toronto, so maybe
someone from Toronto can help me. What is it that was so successful about
Highway 407 that we can learn from? My attitude is a little bit different. If
they were so successful and made so much money, I get the feeling it wasn't a
very good project for the taxpayer and somebody got shafted there. Maybe it was
so good the other side decided there must have been something wrong when they
planned the thing and structured the investment. Can someone help me out? Why is
it so successful, and why isn't it? Maybe we have something to learn from this
Mr. Dachis: I am happy to tackle that, as I am currently in Toronto.
Thanks again for letting me video conference in.
The fundamental political problem with the Highway 407 sale was that the
government built the thing itself and then sold it as a whole to a private
construction consortium, which ended up being eventually being sold to CPPIB and
other partners. The fundamental issue was that the value of it, after the fact,
was much higher than what the government got in the initial sale.
But second of all was the sort of lack of understanding of the terms upon
which the operator could increase tolls, and tolls went up a little bit more
than people were expecting initially. So that's the political concern.
But, at the end of the day, this project got built, and it's a very
successful highway for travellers in the 905. In fact, we've seen more toll road
extensions being built. This goes back to what I've said before to the House
committee on this, which is that the lack of road pricing, the lack of user
fees, is why we can't have nice things in Canada. If we relied more on user fees
like we see on the 407 for more highway projects, more appropriate user fees for
everything from water to electricity to transit even, we'd have a lot better
infrastructure all across the country.
Senator Ringuette: Well, at the end of the day, I guess we can
speculate on whatever and however we want, either the financial issue or the
political issue or whatever, but I think, Mr. Greer, you had it right, and, Mr.
Dachis, you wanted a review process. There is a review process in the
legislation at clause 27. Every five years, there will be a review of this
legislation by the minister. That review will be tabled to both chambers, the
Senate and the House of Commons, to also review, so there is a double review
every five years of what is going on.So, if there's any adjustment to be made, I
guess then at least the opportunity will be there every five years.
Mr. Greer: I would just add: The best evaluation of the political risk
with the bank is going to come from investors themselves. If the balance hasn't
been struck, we're going to know sooner than five years from now whether how
we've set this up is the right balance or not.
Senator Ringuette: Exactly. Thank you.
Senator Wetston: Just a brief question: I just want to follow up a bit
on the risk associated with these projects. I'm going to categorize these as
projects that might not otherwise get built. It's my understanding that the
infrastructure bank is to encourage the construction of infrastructure projects
that are not being built either by government or by the private sector but are
important, whether it's wastewater treatment or bridges or roads.
I know user fees is a bit of a challenging issue. We had one recently in
Toronto with the Don Valley, in which there was a potential opportunity there,
but, unfortunately, that didn't proceed. I use Highway 407 a fair bit, being in
Toronto. I can't answer your question completely, except I agree with Mr.
Dachis, if you don't mind my saying, chair, that the early construction and
financing and sale was the problematic area. Today, I would say — and I can't
confirm it — that I think it's a very successful highway and fills a very
important need in the GTA today. But its early history was a bit challenging.
The question I would have for Mr. Dachis or, potentially, Mr. Greer, is: Who
takes the construction risk in these projects? Who takes the operational risks,
and can you distinguish for me, because we have a lot of this in our society,
between taxpayers and ratepayers? Because these are revenue-generating projects.
Can you elaborate on that concept generally and how you see it in the way that
I've just described it, either Mr. Dachis or Mr. Greer or anyone else who feels
that they can respond to that question?
Mr. Greer: When it comes to P3 projects generally and then the types
of projects that can be considered under this bank, there's all kinds of
flexibility to how to structure a deal and where that risk flows, but, really,
the benefit is, I think, as Ben was alluding to in his previous remarks, the
ability to share the risk, to spread out the risk, to transfer risk from the
public sector to the private sector often. When it comes to construction and
operation, depending on the deal — design and build; design, build, operate —
there are ways to distribute that risk. So I think the flexibility within
different P3 deals and within the bank is a chance to distribute that.
The added wrinkle of the bank is that, with taxpayer equity, there will
potentially be revenue-generating projects, but there will also be taxpayer
contributions alongside the ratepayer, depending on the revenue tool that's
associated with it and how the deal is structured and how the government
provides assistance. There is a great deal of flexibility within current P3
structures and even more within this bank to structure those kinds of deals.
Mr. Dachis: To be specific with one example of what the bank might
look at, you can look at the most recent Quebec budget in which they kind of
jumped the gun on the infrastructure bank's design when they laid out a proposal
for what's called the REM, which is the light transit project all across the
island of Montreal, in which they laid out specific recommendations, the
specific idea of how the federal government could own a partial equity stake
along with the Caisse de dépôt. The Caisse de dépôt would get a certain rate of
return, the federal government would get a different rate of return, and you can
structure this based on some kind of subordinate equity. But, again, if you want
to look at a specific proposal as to how this might work in terms of that
subsidization, where there is still that user fee component, the REM model is
very unique in having both a user-free component and also a very innovative
land- value-capture component, which are really just user fees by another name.
That's a great model to look at for how this might work.
Mr. Brakel: Just one very quick example of how it could be structured:
Look at Via Rail's proposal for passenger rail. When you take the train from
here to Toronto, it takes five hours because the train goes at 50 miles an hour
because it's sharing the track with cargo trains. They could build their own
dedicated passenger rail. Trains will go twice as fast, so you'd get to Toronto
in two hours. The total cost of that is about 2 and a half, maybe 4 billion all
in. Who should pay for that? The infrastructure bank could come in, and Via Rail
could issue bonds. The infrastructure bank could buy them all up. The
infrastructure bank could provide a guarantee because Via Rail doesn't have a
credit rating. It's completely government, so how does it get structured? Via
Rail could sell shares to the infrastructure bank, or the government could give
$2 billion to Via Rail. So we'd love to see the infrastructure bank come in and
do a big project like this in a way that pulls private sector money in. Things
like that are where the infrastructure bank could make a big difference.
The Chair: Okay, well that is interesting. This whole thing has been
Senator Massicotte: Last question, Mr. Dachis: David Dodge, previous
Governor of the Bank of Canada, issued a letter to the Minister of Finance,
which is public; we all got a copy. He was so negative on the inefficiency of
political decision-making, whereby municipal leaders often choose projects that
are political and give them profile and are not necessarily consistent with the
long-term interests, strategic interests, of Canada. He was recommending that
not only should there be the $35 billion that you're currently talking about but
this form of structure should also be applicable through the other $90 billion
being spent in conjunction with the municipalities. Do you have any comments on
that proposal or that suggestion?
Mr. Dachis: I have a number of problems with the perverse incentives
created by a number of federal grants to local tiers of government. That's a
topic for another day. I like to think of the infrastructure bank as sort of
like training wheels for thinking about getting more private infrastructure
money together. Then we can start thinking about how it would work elsewhere.
The Chair: Thank you, witnesses.
I am pleased to welcome by video conference Mr. Colin Hansen, President and
CEO of AdvantageBC. I understand you will speak to us about Division 20, the
invest in Canada act. Please proceed with your opening remarks. It will be
followed by some questions from our members.
Colin Hansen, President and CEO, AdvantageBC: Thank you very much. I
appreciate the fact that members have to be back up on the Hill fairly soon, so
we can make this as short or as long as the committee would like.
First of all, it's great to be back presenting to Standing Senate Committee
on Banking, Trade and Commerce. I had that honour a little over a year ago with
regard to the interprovincial trade barrier report that was produced, which I
commend the committee for.
To reiterate and remind members of my own background and that of AdvantageBC,
my involvement in international commerce and Canada's international
relationships goes back to the 1980s when I served as vice- president of the
brand new Asia Pacific Foundation of Canada. In 1996, I was elected to the B.C.
legislature, where I served for 17 years, including 10 years in cabinet, three
and a half year of those as the Minister of Finance and three years as the
Minister of Economic Development.
The issues around attracting foreign direct investment into Canada is
something that has been a big part of my life. That is what led me to my role as
president of AdvantageBC three years ago.
AdvantageBC is an organization that is non-government, non-profit and funded
entirely by our members, which are primarily corporate members. The mandate is
to reach out to companies around the world and promote British Columbia as a
place from which they can do international business, particularly in the
financial services sector, the idea being that if you want to build a robust
international business environment in a community like Vancouver, you have to
have a solid base of financial services in order to attract those companies. We
have done that with some success over the years.
A lot of our focus is Asia-Pacific. Vancouver being Canada's gateway to the
Pacific, I always remind people that East Asia is our near west, not the Far
East. We're working with companies and investors that are keenly interested in
Canada as a place for investment. They recognize there are tremendous
opportunities, but a lot of it is being able to show them where those
opportunities are and how they can best explore how they can benefit from
investments in Canada. We try to work with these companies.
I think the idea behind the FDI hub that is provided for in Division 20 of
this legislation is a very excellent concept and, I think, will meet a gap in
Canada if it is put together the right way. I have no reason to believe, at this
stage, that it's not on the right track. I have had good meetings with
departmental officials in Ottawa and Vancouver, and they are definitely
sensitive to some of the concerns. I can just reiterate what those concerns
would be to the business community in British Columbia in particular, but I
think it's a common concern in other parts of Canada as well.
First of all, it has to complement the existing activities we already have.
It would not be well-spent taxpayers' money to be duplicating existing efforts.
I know in some of the communications about the hub they talked about the role
that municipal economic development commissions and also provincial governments
play in attracting foreign direct investment, but we have to go broader than
that because there are a lot of non-government organizations, like AdvantageBC,
who play a very important role in this outreach and welcoming of foreign direct
investment. I'm thinking of the sister organizations that I work with very
closely: Finance Montréal, for example, on financial services; the Toronto
Financial Services Alliance; and Calgary Economic Development, which we work
very closely with when it comes to building Canada's brand in the area of
international financial services.
The other point is that as this organization is set up, it has to be a very
decentralized model. Canada is a big expansive country, and the stronger that
the outreach is based in each region of Canada to serve that region, I think the
better off the public interest would be served.
I want to close by giving an example of the kind of collaboration that I
think helps build the Canada brand internationally, and that's with the four
city organizations that I mentioned early: Finance Montréal, Toronto Financial
Services Alliance, Calgary Economic Development and ourselves.
We built this collaboration, first of all, with the idea that instead of us
going out and trying to promote Vancouver, Calgary or Toronto at the expense of
other Canadian cities, we're far better off to work together to build a Canada
brand and fly the Canadian flag rather than trying to solely promote our own
parochial interest. We put together the funding from our four organizations to
have a substantial presence at the Asia Financial Forum in Hong Kong a year ago
last January, which was very successful in promoting that Canada brand and why
foreign direct investment into Canada would be desirable.
The second thing that we did following up on that is we commissioned the
Conference Board of Canada to do a study looking at the relative strengths of
those four financial centres in Canada. It had never been done before. There
have been national studies done looking at the aggregate numbers, but if we want
to market Canada internationally, we need to understand the makeup and how the
strengths of each of these cities complement each other. The way I look at it is
our strengths are greater than the sum of our parts.
That Conference Board report that came out last summer, entitled Stronger
Together: The Strengths of Canada's Four Global Financial Centres, is a
great addition to how we can understand that sector so we can better build our
The Chair: In testimony earlier on in our hearings, there were a
number of questions regarding the fact that we already have, through our
embassies and trade officers, plenty of representatives around the world doing
this very thing. Are they not doing this work? If not, what are they doing?
Mr. Hansen: We work very closely with the Trade Commissioner Service
around the world, but particularly in East Asia. I can tell you that I am very
proud, as a Canadian, of the kind of service that we get from our Canadian staff
at our embassies and our consulates. They are enormously helpful to the work
that we do, and I hear that from the business community generally.
But the niche where there is a gap is in terms of once you identify a company
or investor that has a particular interest in Canada, we'll often get questions
such as, "Do you know of any operating mines that are for sale? We are
interested in buying one.'' The new thing is technology companies. There is a
growing interest of investing into Canadian technology companies, either at the
start-up stage or with mature companies that have well-established business
We have the strength of our Canadian staff on the ground in these companies,
but they also need to have somebody to pick up the thread on the Canadian side
to actually do the kind of hand-holding and to coordinate the interest of some
of the municipal, provincial and the non-government organizations such as
AdvantageBC. That is where I think this FDI hub can be a significant benefit to
The Chair: From what I gather, this federal investment will be like a
Treasury Board Crown — they call it a departmental Crown — that will be fairly
independent, outside of the public service and will be hiring people to promote
investment. Why wouldn't we just hire someone in the embassy whose sole job
would be to promote investment from that country in which the embassy is to
Canada? Why would we need a separate organization and all this stuff?
Mr. Hansen: As I say, I have great respect for the work done by our
public servants in Canada and abroad, but with the hub and the direction it's
going, from the feedback I've got, they want to recruit some entrepreneurial
individuals who have business experience and understand where an investor is
coming from so that they can anticipate the needs and make sure that those
efforts are as fruitful as possible.
This is an organization that's going to have to be very flexible and
resilient. They're going to have to be prepared to be available to assist,
whether it's on weekends, evenings or putting in long hours. That's not to say
that our public servants don't do that, because they do, but in addition to
that, we need individuals who have the practical entrepreneurial business
The Chair: That's kind of interesting.
Senator Enverga: It looks like you are basically doing what the
infrastructure bank is being proposed to do right now. Am I right about that?
What would be the advantage of having a bigger organize like the infrastructure
bank as opposed to your organization right now?
Mr. Hansen: I'm not going to pretend that I understand the background
on the infrastructure bank. I have not followed it as closely as I have the
evolution of the FDI hub, but the FDI hub is looking to attract investors to
come in and support Canadian activities in a very broad sense, whether it's in
agriculture, technology or the resource sector. From my understanding, that will
have a much broader focus than the specific infrastructure focus that the
infrastructure bank would have.
Senator Enverga: In your organization, are the taxpayers at risk at
all, or is it a totally private organization?
Mr. Hansen: No. AdvantageBC is a totally private organization. We are
member-funded. We receive no government funding. We serve a marketing role for
the province when it comes to attracting international business into British
Senator Enverga: Can you attract something in a bigger scope, like for
the whole country, like the infrastructure bank would?
Mr. Hansen: Our mandate is very specific to British Columbia, but we
certainly collaborate very closely with our sister organizations in other cities
across Canada. We have seen much greater benefit from us working together on
some of these marketing initiatives rather than trying to be parochial in our
outlook, especially when we're working internationally.
Canada has a very strong brand, and anyone who is trying to attract
investment and business to come to Canada, first and foremost, if they're not
flying the Canadian flag first, they will not be as effective.
Senator Carignan: As I listen to you, I'm wondering whether our brand
is strong enough. What organization, what investment would it take to strengthen
Canada's brand? My question is more specific. Practically speaking, you said
that a foreign investor wanting to know which companies are for sale in Canada
should be helpful to us. However, I do not see that in the mandate of the bill.
Do you see that?
Mr. Hansen: As I've looked at the bill, it's the framework for setting
up the operations. As most things are in legislation that are being proposed by
governments, they become frameworks, and the devil is often in the detail. I
enjoyed listening to some of the discussion with the earlier witnesses with
regard to the infrastructure bank. It's sort of a similar case where the
framework is here, but really a lot comes down to how it's implemented. That's
key to the success of both of these organizations.
Senator Carignan: In that example, if Invest in Canada simply refers
to the brokerage company, which has information about the companies that are for
sale and their sector, brokerage companies already exist. The question may be
about how we should establish a code of ethics for members who want to invest in
Canada so that they do not use their preferred brokerage company over another.
We may well have some problems.
Mr. Hansen: That's a very valid point. In the operations of this
initiative, as I said at the outset, they have to be very careful not to
duplicate effort and, frankly, not do what the private sector is already doing
and can do more effectively. But when it comes to filling a gap that is there,
they can play an important role.
The other thing is to recognize that it's not just individuals from around
the world who are getting on airplanes and coming to Canada and saying, "I want
to invest.'' We have to do more to take advantage of the very positive brand
that Canada has internationally to reach out and make sure that Canada is, in
fact, on their radar.
As an example, there was a FDI forum that was held in Shanghai. It's a world
forum that is annually in different parts of the world. It happened to be in
Shanghai this particular year. I wasn't there, but my colleague from AdvantageBC
was there, reaching out to investors to say, "You should come to Canada. You
should look at the opportunities there.''
The posts abroad can do some of that, but they have very limited budgets in
terms of how they could do that kind of outreach. My hope is that part of the
money that's being invested in this FDI hub will also facilitate some of that
outreach to make sure that Canada is, in fact, on the radar of these
Senator Carignan: During your meetings with the officials, you said
that they assured you that the organization would be complementing what is
already in place. What did the officials tell you about the content of the
legislation? What the officials say is not the law. Did they refer you to
Mr. Hansen: I did not get into conversations with them about the
specific legislation —
Senator Carignan: I will just finish my question, and you will see.
What provisions in the legislation allow you to say that the organization
will be complementary and will not be replacing what is already being done? You
said that AdvantageBC is doing a great job. Instead, should we not be giving
more money to AdvantageBC, for example?
Mr. Hansen: First of all, AdvantageBC does not receive government
funding and has not received any government funding in many years. I am quite
proud of that, because this is supported by the private sector, which benefits
from our work.
When I made the statement about making sure that this initiative complements
existing efforts, that's not based on what I see in the legislation but, rather,
what I read in terms of the pronouncements that have been made of the intent of
government in setting up this organization. As I say, from the discussions I
have had with officials, I think they recognize the importance of making sure
that this does not duplicate existing effort.
The Chair: There being no further questions, the meeting is adjourned.
Thank you very much, Mr. Hansen.
Mr. Hansen: Thank you.
(The committee adjourned.)