Proceedings of the Standing Senate Committee on
National Finance
Issue No. 25 - Evidence - February 14, 2017
OTTAWA, Tuesday, February 14, 2017
The Standing Senate Committee on National Finance met this day at 9:31 a.m. to study the federal government's multi-billion dollar infrastructure funding program.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Welcome to the Standing Senate Committee on National Finance, colleagues and members of the viewing public. The mandate of the committee is to examine matters relating to federal estimates generally, as well as government finance.
Today, we continue our study on the design and delivery of the federal government's multi-billion dollar infrastructure funding program.
My name is Larry Smith, senator from Quebec, and I chair the committee. Let me introduce the other members of the committee. To my left, from Ontario, Senator Woo.
Senator Woo: British Columbia.
The Chair: Sorry, from British Columbia. It's great to see the pride in British Columbia, and the response was very quick. I apologize, sir. Thank you very much. From British Columbia, Senator Woo. From Ontario — I got so excited about North Bay — Senator Moncion.
[Translation]
From Montreal, we have Senator Pratte.
[English]
To my right, from New Brunswick, the snowiest province in Canada, with 75 centimetres of snow and boots full of it to show us, Senator Percy Mockler.
[Translation]
To his right, there is Senator Éric Forest, from Quebec.
[English]
And then we have Senator Paul McIntyre sitting in and helping us out. Thank you very much, senator, for participating today.
To his right, from The Rock, Senator Beth Marshall, and, of course, from northern B.C., Senator Neufeld. Thank you very much, gentlemen.
[Translation]
Today, our witness is taking part in our work by videoconference. From Toronto, we welcome Tiff Macklem.
[English]
Mr. Macklem is the Dean of the Rotman School of Management since 2014. Before that, he served as a Senior Deputy Governor of the Bank of Canada, where he played a leading role in efforts to ensure stable financial systems worldwide. Notably, he helped to steer the Bank of Canada through the financial crisis of 2008, making it the envy of global peers. He also had experience previously at the Department of Finance as Associate Deputy Minister.
In May 2016, he published an article with co-authors David Dodge and Kevin Lynch, entitled For Canada's growth, a second phase of infrastructure investment is key, which was circulated in preparation for this meeting.
Mr. Macklem, welcome. I understand that you have an opening statement. We will have questions afterwards. The floor is yours, sir. Thank you very much for your participation today.
Tiff Macklem, Dean of Rotman School of Management, University of Toronto, as an individual: Thank you for the opportunity to appear. I've had the privilege, in previous roles to appear before you and various Senate committees. It's a pleasure to be back now, as an individual, from my new perch from the Rotman School of Management.
Senate committees play a vital role, and today's topic, infrastructure investment, is very important to Canada's growth and prosperity.
Let me introduce my remarks with six points.
The first point is that Canada's trend or potential growth is slowing, and strategic infrastructure investment is part of the solution to Canada's growth problem.
The government's infrastructure plan has a first phase that's now well under way, and it is focused on projects that begin immediately and play out over a few years. This first phase involves hundreds and hundreds of projects across the country. These projects will certainly create some welcome jobs and will help communities and people in need, but they're not going to do a lot to spur medium- to long-term growth. That's really the focus of the second phase, and that's what I'm going to focus on in my remarks.
For much of the last 40 years, Canada's potential or trend growth has averaged about 3 per cent. But if you look over the next 20 years, it's probably going to be more like 1.5 per cent, or only half what it has been. That reflects declining labour force growth as baby boomers retire in large numbers, as well as a reduction in aggregate productivity growth.
This growth problem is not going to be solved by monetary stimulus or by fiscal priming. It's going to require investments in talent and equipment. It's going to require innovative new products to sell, and it's going to require access to new markets.
Strategic infrastructure that unlocks private sector investment, supports innovation and provides gateways to new markets is an essential part of the solution.
My second point is that the infrastructure deficit in Canada is large. There is a range of estimates about what the infrastructure gap is in Canada. What they all have in common is that they're all very large numbers. But if you step beyond the numbers, the needs are readily apparent.
We have an enormous country that relies very heavily on trade. We need to gain better access to rapidly growing markets in Asia and elsewhere. That's going to require large gateway infrastructure investments so we can get our agri- food products, oil and gas, manufactured goods and new technology products to these markets. These gateway infrastructure investments will unlock business investment that will create new production capacity, creating new jobs and new incomes.
If you look at our cities, we have among the most livable, safest, diverse cities in the world, but if we're going to capitalize on that advantage, we need to deal with congestion. Montreal, Toronto and Vancouver are among North America's most congested cities. We need to ensure that we have multi-modal transportation networks that move people, goods and services within our cities and beyond.
We also need infrastructure that supports innovation and looks to the future. As an example, transportation is likely going to be transformed in the coming years by electric and autonomous vehicles, smart corridors and artificial intelligence. We need infrastructure investments that put Canada at the vanguard of this coming transformation. This will include things like smart transportation infrastructure that communicates with vehicles to improve traffic flow, makes our roads safer and also reduces greenhouse gas emissions.
My third point is that investing in truly strategic infrastructure is going to involve making some difficult choices. This is going to require a clear policy anchor and a clear metric to assess economic value.
The objective should be to raise medium- to long-term productivity growth, measured as gross domestic product per worker, over the next 10 to 20 years. The primary filter for strategic infrastructure proposals is whether they would be of the scale and scope, and have the impact, to raise productivity levels in Canada. So the sorts of economic variables you would want to look at are the private sector investment multiplier; in other words, how much private sector business investment would this infrastructure investment unlock? You would want to look at the efficiency gains and the direct and spill-over benefits from the infrastructure investment.
Probably the simplest and clearest operational metric of economic value is the ability of the infrastructure investment to generate future revenue streams. This is going to require some way of measuring, metering and charging for the service that is provided by the infrastructure.
The future revenue stream is important both from a fiscal perspective and to leverage private capital. That leads me to my fourth and fifth points.
My fourth point is that it is appropriate to borrow today to fund infrastructure, provided those investments generate a future revenue stream.
If you put it in the negative, beyond the need for short-run fiscal stimulus for macro stabilization, we shouldn't borrow to fund infrastructure that will not generate concrete future revenue streams. In other words, infrastructure investments that do not generate a readily measurable revenue stream should not be funded from current tax revenues.
The key point here is that it's going to be very important to be explicit with the revenue streams associated with strategic infrastructure investments. As the Senate Finance Committee, my advice to you is to put as much scrutiny on the future revenue stream from the infrastructure investments as on the expenditure stream required to build them.
My fifth point is that investing in the scale required to meet our strategic infrastructure needs will require leveraging private capital.
Squaring the scale of the infrastructure investments required with prudent public borrowing will require additional sources of finance. Fortunately, there is a lot of private capital out there, and it will willingly partner with infrastructure that creates a revenue stream when the risk-return calculus is attractive and when there is a commitment to scale and a pipeline of projects.
The public sector will in many cases need to take a lead in green field infrastructure projects because the myriad of uncertainties that are very difficult to price will often scare private capital away. But I would emphasize that in designing these green field projects, the public sector should nonetheless look at and assess the revenue generation potential from the infrastructure, because that's going to be important in creating the opportunity to either sell or lease that to the private sector down the road. It's also a test of the productivity value of the investment itself.
There are also opportunities for asset recycling through the sale of existing assets, and that has the potential to increase the overall stock of infrastructure by providing incremental funding opportunities for governments in investing in new infrastructure.
My sixth and final point is that a well-designed Canadian infrastructure bank could be instrumental in supporting strategic infrastructure in Canada.
For the infrastructure bank to be effective, it's going to be very important that it has a clear mandate and sufficient operational independence from government to attract first-class infrastructure talent and to make expert assessments on project proposals.
The governance of the Canadian investment bank is going to be critical. Something in the spirit of the Canadian Pension Plan Investment Board would likely provide an appropriate balance between the pursuit of public interests and the independence to execute within a clear mandate.
In closing, let me emphasize that getting the strategic infrastructure we need in Canada is a productivity imperative, but it's not just going to happen. It's going to require a very clear policy objective, a clear metric of success, and an institutional structure with the credibility and resources to execute.
I have to say I'm encouraged by the recommendations of the Advisory Council on Economic Growth and the government's announcement of the new Canadian infrastructure bank. The Senate certainly has an important role in encouraging sound implementation of these initiatives and overseeing their effective execution.
With those six points, I would be happy to take your questions.
Senator Woo: Thanks, Tiff, for the presentation. I'm really intrigued by your idea of strategic infrastructure as a tool for raising productivity and hence the need to focus on revenue streams. Presumably you mean some cost-benefit analysis that focuses on rates of return over the long term and multipliers in the private sector.
Where do you think the locus of decision making should be in assessing the net benefit, the present value of these projects? Should it rest with Infrastructure Canada, some government body, or are you suggesting that this new Canada infrastructure bank, with the right governance structure, with the right market base incentives, will be able to come up with the right decisions based on the natural incentives that are built into a quasi-public/private bank structure?
Mr. Macklem: Let me expand on what I meant by revenue streams.
If you think of the outputs of most strategic investments, they are readily measurable. If you think of gateway transportation, you can look at the value of goods that are passing through that gateway transportation infrastructure, for example, through rail, trucking and ultimately through our ports to markets in Asia and elsewhere. With things like clean water and waste water you can easily measure, and we already do, the volume that's going through those systems. In energy systems, you can measure the kilowatts that are delivered. When you're talking about transportation of people, people pay to take the Go Train or take the SkyTrain. You can put tolls on roads. These things are all measurable, and if they have value, people and businesses will be willing to pay for them and that generates a direct revenue stream. That's really what I was talking about.
To your question of how we get this balance between the public interest and the private partnership, where the private sector can play a very helpful role is in the selection and assessment of the projects, in providing capital, in assessing the present value of those revenue streams, and then, critically, in the delivery, the procurement and in the execution.
In terms of decision making, it's going to be very important for our democratically elected governments to play an important role. In getting the balance, you'd probably want something like the infrastructure bank to provide an assessment, give that to the government, and then for the government to provide a yes or no decision as to whether this is a project they think is worth going forward further. You would want that public decision to come fairly early in the process.
Once that decision is taken that this is a project in the public interest, I think you'd want to hand it back to the infrastructure bank and provide them with the operational independence to execute that project.
The infrastructure bank will be able to bring a lot of expertise in how to structure it, how to bring in private capital, how to deliver it, execute and also in procurement.
Senator McIntyre: Mr. Macklem, thank you for your presentation.
You raised six interesting points. In point number five, you made it clear that the requirement to reconcile infrastructure needs with sound public finances will require additional sources of finance. My understanding is that in your view the British and Australian experiences demonstrate the private sector's willingness to invest in these kinds of projects. What could Canada learn from these countries about attracting these kinds of partners?
Mr. Macklem: It is important that we don't reinvent everything here. There are some good examples out there. I'd stress a few lessons.
First, I mentioned the potential of asset recycling by either selling or leasing assets that federal, provincial and municipal and governments already own. This has the potential to create the fiscal space for these various levels of government to then invest in new strategic infrastructure that will be important to growing our economy and creating a more prosperous society.
Much of the publicly owned infrastructure in Canada is owned at the provincial and municipal level. One of the things that particularly the U.K. has done well is create incentives for the bundling of this into diversified bundles that are attractive to the private sector.
To give a concrete example, think about clean water and waste water systems. Those are typically at the municipal level, and there are many relatively small municipal clean water and waste water systems. One thing they have done in the U.K. is bundled those so that a range of municipalities come together and create a water authority that covers a broader area. That then achieves a scale and a diversification in these systems that can be leased or sold to the private sector for the delivery. That frees up new resources for the municipalities to invest in new infrastructure.
The more general point on this one is there are a lot of opportunities at all levels of government. It's probably not going to happen, though, without some leadership from the federal level. The federal government will need to take a leadership role in coordinating this and providing incentives for provinces and municipalities to participate. That's one thing we can learn.
The more general thing we can learn is that there is a vast amount of private capital out there looking for long-term, real returns. So there is a real opportunity in infrastructure investment. We know, though, that it is very important for the private sector to de-risk these investments. That's where a number of the features of a Canadian infrastructure bank could be helpful. We've seen this both in the U.K. and in Australia, where we reduce regulatory uncertainty by getting, as in my response to Senator Woo's question, approvals from the government early in the process; where we have highly professional infrastructure experts that have experience dealing with the private sector in structuring, delivering and executing these projects; and where the infrastructure bank may need to take an equity position or offer some government guarantees to deal with some of the uncertainties, particularly in the early phases of the project.
Those are some of the things I think we can learn from other countries.
[Translation]
Senator Forest: Thank you very much for taking part in our meeting. In my opinion, the challenges of infrastructure have two crucial components. The first is that we have some catching up to do, as we fell behind in providing quality infrastructure that is up to standard, and we must do the necessary updates so that we may be competitive in our globalized economy.
However, this is a challenge shared by federal, provincial and municipal governments. To me, a very important objective would be to create a national infrastructure strategy. Within such a strategy, in your opinion, how can we reconcile federal, provincial, and municipal objectives?
[English]
The Chair: That's quite the question.
[Translation]
Ms. Macklem: That is perhaps the most difficult question. I have already mentioned that I agree that it is very important to create a national strategy.
[English]
I'm getting the translation overlaid, so maybe I will just speak in English because it's hard hearing the feedback. Sorry.
I completely agree. A national strategy is going to be very important, and it's clear that the government wants to move in this direction, which I take as very positive.
You're absolutely right that this will involve an important element of getting the federal government, the provinces and the municipalities working together more constructively. In my previous answer, I gave an example of where they've done that effectively in the U.K. Australia is also taking a strong federal leadership role.
I think the model needs to be a cooperative one, where the federal government provides incentives for the provinces and municipalities to work together and to also work with the federal government. I would underline that having a clear federal mandate with clear objectives is the place to start.
The infrastructure bank, I think, can be a centre of excellence in all the various elements of delivering strategic infrastructure. And by bringing together this talent, this centre of excellence, hopefully that will become something that the provinces and the municipalities want to work with.
I do agree that we have a long tradition in this country of three levels of government, and we haven't always been able to get them to work together as well as we should. Getting them to work together better is going to be a key success factor for this project.
[Translation]
Senator Moncion: I very much enjoyed your presentation. My question concerns the fourth point of your presentation, where you spoke about investments in today's infrastructures which could generate potential revenue. You say that what doesn't generate future revenue should be financed by current revenue.
Currently, I am not convinced that we are taking into account the aspect of projects that is tied to revenue that these projects could generate later on. Rather, I think that we examine them on the current basis concerning financing. That refers to the costs of infrastructure that you mentioned, costs which are increasing, because there is perhaps an imbalance in the financing.
Could you please clarify this section for us?
[English]
Mr. Macklem: Certainly.
Deficit spending makes sense in two situations, one where you need short-run macroeconomic stimulus to smooth out the business cycle. I would interpret an important element of phase one of the infrastructure program is to generate some aggregate demand, create some spending in the economy, and that will create welcome jobs and hopefully move our economy back to its potential or trend GDP more quickly.
The second instance where it makes sense to borrow is when the investment today generates a future revenue stream. If you think of a business making an investment — building a new plant, for example — it works very naturally. It builds that plant so that it can create production in the future, which will sell those goods and create a revenue stream. In assessing whether it should build that plant, it looks at the cost of building it relative to the future revenue stream.
So whether it's the government itself doing infrastructure investment or they do it through a vehicle like the Canadian infrastructure bank and bring in private capital, the key is the quality of that future revenue stream. Really what I was emphasizing is that where the government is going to borrow, whether it's the government itself borrowing or the private sector is putting capital into the project, the quality of that future revenue stream is going to be critically important.
There are, of course, infrastructure investments that are important but will not generate a future revenue stream. For example, with investments in social housing, there's a serious infrastructure gap in First Nations. Social infrastructure. It's going to be harder to find direct revenue streams coming out of these projects. That doesn't mean they're not important; it just means that they should be funded out of current tax revenues as opposed to borrowing.
Senator Woo: If I could pick up on that question, it's very complex, but there is such a thing as a social cost-benefit analysis, which calculates the benefits to a project that may not be captured by private returns and which uses a discount rate that is different from the market rate.
Would you include some of these kinds of projects in what you call phase two strategic investments? When you think of climate change mitigation, for example, there isn't a revenue stream necessarily, but there is a huge benefit potentially in mitigating disaster from floods and other calamities brought about by the change in the climate.
There are two parts to my question. First, a lot of the justification for phase one infrastructure spending was not only to boost aggregate demand in the short term; it was also on the basis of the very unusual interest rate environment we're in now, with currently negative rates, and how it made a lot of sense financially for the government to borrow since it was so inexpensive to do so. Are you concerned that as we enter the taper or the reversal of the low interest rate regime — maybe you have a view on that — can we be as confident about borrowing in a period when interest rates may be rising more rapidly?
Second, should we consider projects that are based not on market interest rates but on some sort of social rate of discount because there are genuine benefits to the Canadian economy that will come from these strategic investments?
Mr. Macklem: On interest rates, I used to testify very regularly on those types of topics in previous roles. I agree entirely that the low interest rate environment we have been in has made it a good time to borrow. As I underlined in my comments, I think there is a need and an opportunity, and the low rates have only reinforced that.
I think as you plan forward, it would be prudent to assume that interest rates normalize over some period, and you'd certainly want to factor that into account when you do the cost-benefit analysis for projects.
On your second question with respect to various types of infrastructure investment that yield broader social returns, I agree entirely that there are various different types of spillover and externalities from various infrastructure investments.
I want to underline two things. It's going to be very important to be clear about which infrastructure investments generate a future revenue stream that is direct, can be monetized and can be used to pay back on the borrowing, and infrastructure investments that don't provide direct future revenue streams. That means we probably need two types of programs, and we need to be very clear.
The danger is that a lot of things are called "infrastructure,'' and if we mix them all up, I think we will do a disservice to taking clear evidence-based decisions and there's a risk that we won't like the fiscal consequences down the road.
Senator Pratte: Thank you for this very interesting testimony.
One of the reasons many institutional investors are so keen on infrastructure is that interest rates have been very low for long-term investments in bonds, especially. Is there a risk that as interest rates rise, as they probably will, this enthusiasm for investment in infrastructure will diminish a little in the medium and long term?
Mr. Macklem: I think there's some risk that will diminish a little bit, but I would underline that there is strong demand for real returns that are long term. The liabilities of pension funds by their nature are very long term and they're largely real return liabilities. They are looking for long-term real assets that they can use to match against their liabilities.
That's not dependent on the interest rate environment. As interest rates normalize, it will certainly make the job easier for pension funds reaching the kind of returns they need to fund their future payouts, but the fundamental need for long-term real return assets is there, and particularly against a background of an aging society, that is very important. This is not a fad. This is going to be here for a good amount of time.
Senator Pratte: Thank you.
Senator Mockler: With your experience, Mr. Macklem, there are a few subjects I would like to touch on, and this is relative to when you talked about First Nations. I'd like to have your opinion on what we should do in the context of the challenges we have with First Nations within the new vision of deficit financing.
Where I come from in New Brunswick, we're always told by governments that we should have a social licence before approving infrastructure, for example, if your endeavours are in green energy or in fossil fuels. Can you apprise us of how you would define social licence?
If we give a mission to the infrastructure bank so that we're fair across Canada from coast to coast to coast, what would that mission be?
Mr. Macklem: There are several questions there. I'll do my best. I won't pretend to be an expert on all these topics.
With respect to First Nations, my point was that there is a very real infrastructure gap. We have both a moral and an economic imperative to address that.
I think there's also an opportunity to partner with First Nations communities, with businesses in these areas. The First Nation population is the most rapidly growing labour force in Canada. We have both a moral and an economic imperative to improve labour market participation rates in First Nation communities. There is a double win here: build the infrastructure that is needed in those communities, and also create the skills and draw people into the labour force.
On the issue of social licence, yes, in order for investments to be sustainable and successful, there needs to be a degree of the social licence for those to move forward. I think my message in response to one of the previous questions was that we need to draw in private capital, which is going to be critical to getting the infrastructure investments on a scale that we need to really have an impact on our growth and productivity in this country. What's going to be important in the process of getting government approval and social licence is to get that done and completed early in the project and allow that to proceed efficiently. Once that social licence and government approval is there, that reduces an important source of uncertainty. That's going to be important to bring in private capital.
On your third question, the mission of the infrastructure bank, as I indicated, when we're looking at strategic infrastructure that is really going to have a medium- to long-term growth impact on this country, a clear objective should be projects of the scale and the scope that will increase productivity in Canada.
Some of the economic variables you would want to look at in pursuing that mission are things like the private sector investment multiplier: How much business investment will this infrastructure stimulate? Think about a gateway transportation project. If you increase the access and scale of ports in British Columbia to get products to Asia, how much would the private sector build new capacity to take advantage of that new market? You'd also want to look at the efficiency gains, the direct and the spillover benefits.
In terms of its mission, if there's a very clear and direct revenue stream and the benefits are very large, you might not even need the public sector. The public sector mission is that there is a market failure. There are projects that would be of economic benefit, but there is sufficient uncertainty so that they don't meet a private sector hurdle rate.
I think the mission of the infrastructure bank is going to be to provide expert project assessment and also delivery. And where there is that market failure, it would provide some equity, sub-debt and some guarantees to get a project that has a clear economic benefit. It would get it to a point where you can draw in private capital and provide the additional leverage of the private capital to get these projects on a scale that would have an impact on our economy.
The Chair: We have about 10 minutes left. If we could have questions that are to the point, that would be great.
[Translation]
Senator Forest: My question will be brief. You mentioned the importance of the aging population. Canada is facing a large demographic challenge concerning the workforce. The workforce is increasingly mobile. Workers are called upon to choose their professional challenges, in addition to the environment in which they would like to raise their family. We talk a lot about the basic infrastructures that must be present, particularly for roads, drinking water and wastewater treatment. We also talk about strategic infrastructures. However, there is also the entire dimension of community or social infrastructure. Our communities must be attractive to draw in new families that will generate renewal and the new talents that will ensure the development of our businesses.
How do you see this dimension, with respect to your statement on the importance of giving priority to strategic infrastructures? What about the social and community infrastructure aspect, which is necessary for attracting new families to our communities? In your opinion, what role do social and community infrastructures play?
[English]
Mr. Macklem: I focus my remarks mostly on the need for strategic infrastructure to improve growth and productivity. I would underline that in order to be able to invest in social infrastructure and our communities to create the kind of society we want in Canada, we need to have the incomes and the tax revenues so that we can afford that. We need to grow the pie so that there is a bigger slice that we can put into social investments.
If we don't grow the pie, we are going to have a very difficult time. The reality of an aging society is that it's pretty much certain that we will be devoting more of our resources to health care, because as we age, that's when we use a lot more health care. Unless we can get more rapid growth, the share of the pie is going to be growing very slowly. Once you take into account growing health care costs, the share that's left to invest in our society is going to grow very slowly.
A key aspect of the infrastructure program has to be to increase our medium to long-term growth. My key point is if that we continue to deliver infrastructure the way we've delivered it, I don't think we're going to get much of a growth payoff. Going back to your first question, we need a more strategic approach that is truly focused on infrastructure investments that will increase medium- to long-term growth, and we need some institutional arrangements to make that happen.
Coming back to investments in more social infrastructure in our communities, those are important. One of my key messages is that in thinking about the infrastructure program, it's going to be important to keep clear and separate which infrastructure investments generate a clear future revenue stream and which do not. If you mush them all together, it's not going to be clear where we have the fiscal capacity to invest.
Senator Mockler: I like your nomenclature when you say medium- to long-term growth. I also like it when you talk about more rapid growth for our economy, to grow the pie and to think with a strategic infrastructure vision.
My question to you, then, is this: Would Energy East be such a project?
Mr. Macklem: I'm not going to get into the specifics of any specific project, but I will say that whether it's oil and gas, the agri-food business or manufacturing projects, we have to do a better job of getting our products to our east and west coasts. We need to diversify our trade. Canadians have been learning a lot about trade in recent weeks thanks to discussions emanating from south of the border, and I think almost everyone in Canada is now well aware that 75 to 80 per cent of our trade is with the United States.
That has been a great engine of growth for us, but what we've seen in the last 10 years or so is that the U.S. has not been the engine of growth globally that it once was, and it's very important that we do a better job of increasing our trade and investment access to more rapidly growing economies in Asia and elsewhere.
Certainly yesterday's meetings were very encouraging, but some of the signals coming out of the United States only underline the importance of diversifying our trade.
So, yes, I think we do need to have a very concerted discussion in this country about how we will build and invest in gateway infrastructure, whether it's oil and gas or other goods and services, and how we will export those to the world.
Senator Woo: I have a quick question on asset recycling. It used to be called privatization; some people call it "marketization'' or ''equitization,'' but asset recycling sounds the most palatable.
I will get right to the point. Do you have a specific list of prime targets for asset recycling? And why have you identified these ones?
Mr. Macklem: I think an important first step would be to do an audit, across the country, of municipal, provincial and federal levels of assets that have the potential to be recycled. I would stress that in some cases that will be selling to the private sector. In other cases, though, it could be leasing. The private sector could simply take an interest. There is a whole continuum of arrangements that should and could be considered.
I think some of the ones that have been done successfully, like the clean water and waste water systems I mentioned in the U.K., have created a water authority and brought together a range of municipalities to create a diversified portfolio. I think there are some opportunities there. When you look at things like our airports, there are opportunities there as well. As I said, I think an important step would be to do a systematic audit and look at the opportunities.
I would stress, though, that in order for us to be able to seize those opportunities, we will have to change the way we're organized. If you take water, for example, there are many water systems that are too small and too fragmented to be of interest to the private sector. We have to find ways to bundle these into bigger assets and create a pipeline so it's not just a one-off thing, but the private sector sees that there is a pipeline of future opportunities that will be of much greater interest to them.
The Chair: Colleagues, we have had a very interesting discussion. We thank you very much, Mr. Macklem. Your points were well taken, and it gives us food for thought. We're hoping to have our first interim report for infrastructure delivered by the end of this month. We certainly thank you for the input that you've given us today. We appreciate your time, sir.
Mr. Macklem: Thank you, chair. It has been a great pleasure.
The Chair: Colleagues, we will try to have the executive summary to you by the end of the day. We ask you to accelerate getting any comments, wordsmithing through to our scribes so we can have something possibly done by tomorrow night. It depends on your input.
We have a very exciting session tomorrow with half of our meeting on the report and then we will hear from Michael Sabia. That should be very interesting, because we'll have an hour with him to discuss the topic we were discussing today in terms of infrastructure. He is a key player in Quebec and Canada, and it will be very interesting to see the feedback we get from him on specifics. Then we will continue with reviewing the report in the second hour.
Thank you very much for your time.
(The committee adjourned.)