Budget Implementation Bill, 2017, No. 2

Third Reading

December 13, 2017

The Honourable Senator Yuen Pau Woo :

Honourable colleagues, I would like to add my voice to the debate on Bill C-63, focusing my comments on Division 2,Part 5, concerning Canada’s membership in the Asian Infrastructure Investment Bank.

This measure, one of many in the bill, is much more than a line item in the budget. It is about deepening Canada’s engagement with the fastest-growing and most dynamic region in the world. I support this section of the bill because it is good for infrastructure investment in less developed parts of Asia, which is a way of unlocking economic growth in these areas, in turn reducing poverty and improving the quality of life for many.

For a decade now, the world economy has been sluggish at best, with the traditional engines of growth in industrialized countries not performing as they did in previous decades, which is why there is an urgent need for new sources of wealth creation in the world. Investment in infrastructure, especially in lower-income areas, can unlock economic growth in these areas, with important spillover benefits to surrounding regions and for the world economy more generally.

Canada has always played an important role in international development, including infrastructure investment in less developed countries, and has used both bilateral and multilateral channels for the delivery of its international assistance programs. Canadian involvement in multilateral development banks goes back to 1945, with the creation of the Bretton Woods Institutions, namely the International Bank for Reconstruction and Development, also known as the World Bank, and the International Monetary Fund. As a mid-sized country dependent on trade with the world and friendly relations with other nations, Canada depends on multilateralism to achieve many of its international objectives.

Today, Canada is a member of all the major multilateral development banks, and our contribution to so-called international financial institutions constitutes more than a third of our development assistance worldwide. These include the African Development Bank, the European Bank for Reconstruction and Development, the Caribbean Development Bank, the Asian Development Bank and the Inter-American Development Bank. Membership in the AIIB would be consistent with Canada’s long-standing commitment to international development, which is good for the recipients of international assistance and good for Canada.

According to the Asian Development Bank, there is an infrastructure gap in Asia amounting to some $20 trillion. Investments are needed in road, air, rail and maritime transportation; power generation and distribution; basic sanitation; telecommunications and much more. Some of the projects that are already underway or that are being contemplated will allow large numbers of previously marginalized populations to have access to information, ideas, services and markets that we take for granted in the industrialized world.

As a country that has overcome many infrastructure challenges over a vast territory and many geographies, Canada has internationally recognized expertise in the various aspects of infrastructure development, from engineering and design to environmental- and social-impact assessment. Canadian companies will benefit from the massive investment in infrastructure that is underway in Asia, in part fostered by the creation of the AIIB. Our membership in the bank will provide companies with access to information and networks that can better position them to be successful in bidding on projects across the region.

I would note that the AIIB is only part of a much larger push on infrastructure investment across Asia, Africa and Europe that is led by the People’s Republic of China, under its so-called “One Belt One Road” initiative. One Belt One Road is the equivalent of the post-war Marshall Plan for Europe, except it is bigger, much bigger. It envisages the building of trade-enabling infrastructure to link Asia, Europe and Africa, drawing inspiration from the historic Silk Road of trade and cultural exchange from about 200 BC to the 1400s, as well as from maritime routes between East Asia and Europe that were for centuries the principal avenues for trade between the two regions.

On January 3 this year, a train left the eastern seaboard of China, and 12,000 kilometres and 15 days later, it arrived in London, England, with 34 containers filled with consumer products. London is the fifteenth European city to have freight rail linkages with China. By 2020, it is expected that there will be as many as 5,000 freight rail trips a year between China and Europe, and that will be because of the massive infrastructure investment in the region that is already underway.

Let me now address the concern that the AIIB, under China’s leadership, may violate international standards on governance and ride roughshod over social and environmental concerns on projects that it funds. This is an area that bears careful monitoring, and as a member, Canada, along with like-minded countries, should pay special attention to it. But this is precisely the value of a multilateral institution that is involved in international infrastructure investment projects, as opposed to projects undertaken on a bilateral basis. By creating the AIIB, China is in effect saying that it wants to be a multilateral player when it comes to international investment in infrastructure.

Now, Beijing may not yet know how to be a multilateral player in terms of adjusting to international norms and practices, but we should surely be pleased that the next global superpower is taking the multilateral route rather than pursuing its objectives on a strictly bilateral basis.

In any case, the early reports on AIIB’s approach to environmental assessment of projects are encouraging. Referring to the bank’s Environmental and Social Framework, the World Resources Institute had this to say:

...the Framework’s vision recognizes many of the issues such as climate change, gender, biodiversity and ecosystems, resettlement, labor practices and Indigenous Peoples that AIIB will encounter as it begins to make investments. It also makes very important commitments around transparency, information disclosure and public participation that exceed those of a number of national development banks...

One of the reasons Canada has joined the AIIB is to have a role in influencing the social and environmental standards for bank-financed projects.

In fact, we are in good company with a number of the 80-plus members of the bank, including the U.K., France, Germany, Norway, Australia and New Zealand. We should be humble enough to recognize that we may, in fact, learn a thing or two from the AIIB about how to plan, finance and implement major investment projects. Our recent track record, from dams to bridges to pipelines, has not exactly been stellar.

Since the creation of the AIIB, 24 projects have been approved. Let me give you a flavour of the types of projects supported by the bank to date.

The Dushanbe-Uzbekistan Border Road Improvement Project, costing US$106 million, was financed by both the AIIB and the European Bank for Reconstruction and Development. The Indonesian National Slum Upgrading Project, at a cost of US$1.7 million, was co-financed between the AIIB and the World Bank. The Gujarat Rural Roads Project in India, a project that cost US$658 million, is financed jointly by the AIIB and the government of Gujarat.

Honourable colleagues, in addition to adding Canada’s voice to the governance of the bank and contributing to the success of projects, our membership in the AIIB will bolster Canada’s credentials as a serious player in Asia, not just to sell our stuff across the Pacific, but to be a participant in the long-term economic development of the region.

It also signals our recognition of China’s growing weight in the international economy, and Beijing’s desire to be a bigger player in international economic governance. We can pretend that China is not playing a larger and sometimes disruptive role in the region, and leave them to continue on their merry way, or we can work with them, through multilateral vehicles such as the AIIB, that de facto reduce Beijing’s ability to do as it pleases.

Colleagues, the creation of the AIIB is the Bretton Woods moment of our generation. We were proud to be at what economic historians call “the creation” in 1944, and we played a role in the shaping of the post-war order that provided the rules of the game for the next 70 years. As we contemplate the evolution of these rules and norms over the next 70 years, Canada should not stay on the sidelines. Joining the AIIB is a necessary but not sufficient step in this direction.

As it is, we are late in joining the AIIB, but not too late. We can make it happen today by voting in favour of Bill C-63.