In the course of its hearings, the Committee was provided with an introduction to some compelling ideas which it believes warrant more in-depth work by the Government of Canada. The following sections provide an overview of what the Committee heard and why it feels further attention and action is merited regarding:

• Diaspora communities and remittances; and
• Innovative development finance mechanisms.

Remittances and the Role of the Diaspora

Several witnesses argued that diaspora groups have the potential to make a significant contribution to the achievement of development objectives. In 2012, the International Organization for Migration and the Migration Policy Institute jointly published a handbook entitled Developing a Road Map for Engaging Diasporas in Development. This handbook reviewed best practices and challenges, providing a menu of options in six key areas in which “Diasporas have played an important and positive role...”:

• Remittances;
• Direct investments;
• Human capital transfers;
• Philanthropic contributions;
• Capital market investments; and
• Tourism.[310]

Canada has an important role to play in enabling such diaspora activity, given that it is home to a significant number of diaspora communities with language skills and knowledge of local cultures and markets around the world. Canada is second only to the United States among OECD donor nations in terms of overall sources of remittance flows to developing countries.[311]

Carlo Dade told the Committee that diasporas are “one of the principal private sector actors.”[312] While CIDA has worked with Haitian and other diaspora groups for many years, he argued that the Government of Canada needs to significantly increase its understanding of diaspora communities, and improve the flexibility and creativity with which it deals with them in the pursuit of development objectives. He argued that this engagement will require a change of both perspective and perhaps even personnel in CIDA. But, he said that there is “huge potential” in helping to professionalize such groups as development actors, noting that “we see this potential being realized in projects. USAID, the French, the Spanish are using these projects to increase development outcomes...”[313]

Facilitating Remittances

Diaspora groups have long been recognized as an important source of financial resources for developing countries. According to the World Bank, officially recorded remittances amounted to some US$372 billion in 2011, and are expected to reach $467 billion by 2014.[314] The primary impact of remittances has traditionally been at the level of families. Carlo Dade told the Committee that even without a direct focus on development projects:

This is money that goes to pay for nutrition, education, health care, and housing. This is not wasteful spending, as some of the more paternalistic elements of the academic community view remittances. These are investments in human capital development. This is the same sort of thing that CIDA is trying to fund. If you improve human capital there’s a direct impact on development; it’s extremely important what the diasporas are doing.[315]

He added that while the amount varies by country, estimates are that 5 to 15% of total flows are also directed towards collective development projects. In practical terms, he noted that the Montréal-based Regroupement des organismes canado-haïtiens pour le développement (ROCAHD) for example, has financed the building of schools, health clinics and other collective projects in Haiti.[316] Katleen Félix of Fonkoze also spoke to the Committee of the Haitian diaspora, which she said remits $1.8 billion annually to that country.[317] As noted earlier in the report, remittances from the Haitian diaspora to Haiti following the 2010 earthquake in fact exceeded all international assistance combined.

At the same time, given that the Canadian government does not report official remittance statistics, discussions of remittances originating from Canada must rely on figures generated by developing countries and on other estimates.[318] Carlo Dade stated that despite years of advocating for a change in collection and reporting methods, “we still…don’t have figures for remittances from Canada, and that's something that really needs to be addressed.”[319] Noting that the characteristics of diasporas differ depending on their country of origin and residence, he added: “We know extremely little, almost nothing, about this phenomenon in Canada, so research is desperately needed...we just haven’t done the research. But there’s huge potential...”[320]

Given their impact, donor governments that are home to diaspora groups have typically focused on facilitating remittances. Daniel Runde told the Committee that in order to increase transparency, the UK’s DFID used aid money to publicize the cost of sending money through Western Union and other services, after which the costs began to decrease.[321] Carlo Dade argued that,

A lot of the work in reducing costs has already been done. The systems set up by the Inter-American Development Bank and by groups like Fonkoze are already in place and are being used in Canada. It's simply a matter of making sure that groups here have access to these systems.[322]

While this may be true for remittances to Haiti and other countries in the Caribbean and Latin America, work remains to be done with respect to the broader issue of the connection between diaspora communities and international development. Dr. O’Neill told the Committee that members of the Filipino diaspora in Canada pay almost twice as much to send money to the Philippines as their counterparts in the United States. She wrote that: “In the US, remittance fees to the Philippines average US$7.66 per transaction (or 3.8 percent of the total amount sent); in Canada, Filipino migrants spend CAD$14.78 (or 7.39 percent of the total amount sent).” She said that 16% of that country’s GDP comes from remittances. Underlining the potential of mobile banking to facilitate remittances, she added that:

...we are testing a system where diaspora living abroad can now use mobile money networks to transfer a portion of their remittance directly to educational institutions in the Philippines to pay school fees for their relatives, as opposed to simply sending cash money. This is a win-win. The migrant knows that the money is being spent for the purpose they intended and we leverage these remittances for development outcomes.[323]

A number of other options exist for facilitating remittances. For example, the 2012 handbook for engaging diasporas in development that was cited above included the following menu of program and policy options related to remittances:

1. Strengthen remittance infrastructure
• Inform the diaspora about existing remittance transfer mechanisms;
• Create more efficient channels of remittance transfer; and
• Strengthen the financial institutions that migrants already use.
2. Provide opportunities for more productive investment of remittances
• Cross-sell complementary financial services such as remittance-backed mortgages; and
• Securitize remittance flows.[324]

A number of these strategies would likely be useful in the Canadian context.

Broader Partnerships

While remittances will remain an important contributor to the achievement of development objectives, diaspora groups are increasingly being viewed more broadly as development actors: a source of ideas, knowledge and skills that are relevant to a number of issues.

In her testimony, Dr. O’Neill told the Committee that “We have really reached out, particularly in the diaspora... because they have huge skills and are very motivated to go back to help their home countries in some way.”[325] In May 2011, U.S. Secretary of State Hillary Clinton announced a new strategy for diaspora engagement at an inaugural Global Diaspora Forum, which also saw the launch of a new platform for partnership called the International diaspora Engagement Alliance (IdEA).[326] By 2012, IdEA had over 1,500 diaspora community partners, and had launched three regional entrepreneurship competitions, in Africa, Latin America and the Caribbean.[327] CIDA provides funding to this Caribbean Idea Marketplace, which also receives additional funding from Scotiabank.[328] In her opening remarks at the second Global Diaspora Forum in July 2012, Secretary Clinton stated that:

...I am particularly delighted to welcome our friends from Canada, because working together on diaspora issues makes perfect sense, since both of our countries have been blessed by having so many people from all over the world add to our diversity and our efforts. And so for me, having Canadian involvement in this just makes good sense.[329]

CIDA has cooperated with diasporas in a number of ways over the years, funding groups directly when they have experience implementing development projects, and encouraging them to partner with experienced organizations both in Canada and in their home countries when they do not.[330] At the same time, Carlo Dade noted that many countries have established bureaucracies to deal specifically with diaspora groups, and that it is generally easy to develop initial contacts. However, he also said that,

...there are these great networks. It's low-cost and easy to tap into, but it requires a change in culture; it requires a change in thinking about development. You really have to change the people on the official development side to become more flexible, more creative, and more entrepreneurial in their thinking. It requires a huge leap of faith, to some degree, by the development community to be able to work with these groups, and that's been a major obstacle. It's been overcome at the [Inter American development bank]. It's been overcome at USAID. It's been overcome in Europe. Canada, as the honourable Minister of International Cooperation noted, is late to the table on this. I think even CIDA recognizes that they're the odd man out in the international development community.[331]

Daniel Runde suggested to the Committee that Canada could “engage with diasporas in a number of ways.” In addition to leveraging volunteerism on the part of diaspora communities, he suggested the possibility of using “CIDA money in very limited amounts to build the capacity of diaspora communities to organize themselves better so they can do these sorts of things, I'm not saying huge amounts of money, but small capacity-building grants to do that.”[332]

More generally, Khalil Sharriff argued that as a result of its demography, Canada has an opportunity to assist members of diaspora groups who are educated and who have developed particular competencies that can contribute to the development of their home countries. In a suggestion that might apply more broadly to the issue of harnessing the diaspora for the achievement of development outcomes, he argued that “... the asset we have in Canada to underwrite human resource potential in the developing world through the diaspora is very, very important. I think we should start experimenting as widely as we can to see what might work.”[333]

Innovative Financing Mechanisms

Several witnesses argued that the Government of Canada could explore innovative mechanisms to provide financing to developing countries and development initiatives. While such mechanisms can involve specific stand-alone institutions or instruments, they can also entail creative use of existing ones.

Development finance institutions are among the mechanisms currently used around the world for this purpose. Such institutions can be multilateral, as in the case of the World Bank’s International Finance Corporation (IFC) — of which Canada is a founding member — or bilateral, as in the case of institutions established by other donor countries. As one paper explains:

Development finance institutions (DFIs) occupy an intermediary space between public aid and private investment... Distinct from aid agencies through their focus on profitable investment and operations according to market rules, DFIs share a common focus on fostering economic growth and sustainable development. Their mission lies in servicing the investment shortfalls of developing countries and bridging the gap between commercial investment and state development aid.[334]

The world’s oldest bilateral development finance institution is the UK’s CDC Group plc (public limited company), which was established in 1948. Its Website explains that:

CDC does not provide aid. Instead, our job is to invest UK money in a commercially sustainable way in the poorer countries of the developing world…. Helping businesses to grow and, in doing so, creating opportunities for people in the poorest nations to help themselves, is at the heart of what we do.[335]

The CDC has a balance sheet of some US$4.2 billion, is self-financing through its profits, and has received no new government money since 1995. While it operated for a number of years on the basis of private equity funds that it invested in poorer countries, Gavin McGillivray of DFID told the Committee that the CDC had been “very substantially reformed” over the last 12 months, and had just published its new strategy at the end of May 2012. He said that “Under the reform of CDC, it will focus its business more closely on sub-Saharan Africa and South Asia. It will be able to deploy more flexible funding instruments — not just private equity but also debt guarantees and direct investment. It will be able to take more risk and it will be driven by development impact.”[336]

He also outlined a number of the ways in which DFID cooperates with the private sector that are relevant to financing. Among other mechanisms, he noted that DFID runs several “challenge” or competitive funds whereby it shares the costs and risks of an initiative with private enterprise. He added: “Another way we share the costs and risks with private enterprise in doing business in more difficult markets is through funding of equity and guarantees.”[337]

In the United States, the Overseas Private Investment Corporation (OPIC) was established as a separate agency of the U.S. government in 1971. It too operates on a self-sustaining basis at no net cost to American taxpayers. According to its Website, OPIC

...mobilizes private capital to help solve critical world challenges and in doing so, advances U.S. foreign policy. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalyzing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.[338]

In his testimony before the Committee, Daniel Runde argued that Canada could do more in this area. He said:

Canada needs to develop development finance tools similar to those of the International Finance Corporation and most of the other G-7 nations. The ability to share private risk in complex contexts such as Haiti and Afghanistan will be critical in the future for Canada. These are instruments that are not currently used on a bilateral basis. They provide project finance to for-profit infrastructure projects. They support loan guarantee programs, or even make available the use of grant instruments at CIDA to share risk, especially in some of the more complicated contexts. That is going to be important.[339]

Noting that there was probably no appetite for creating new bureaucracies in an environment of fiscal restraint, he added his opinion that “CIDA could perfectly well have some additional instruments that can allow for this...”[340] Wendy Hannam of Scotiabank recommended that “CIDA should have flexibility to fund feasibility studies, co-invest, or assist in risk mitigation for private sector projects.”[341]

For his part, Toby A.A. Heaps of Corporate Knights argued that Canada was well placed to assist developing countries that need large amounts of capital for sustainable energy and other infrastructure projects. Noting that the international bond market is now roughly twice as large as the equity market, he argued that, among other mechanisms, the Government of Canada could increase the credit enhancement products provided by its export credit agency, Export Development Canada (EDC), from less than 1% to the 5% or 10% range. This would have the effect of “lending our balance sheet so that countries can get a lower cost of capital, and in return for that, we could get some of the business.” He stated that “This is how the world works. I'm not saying that I'm the biggest fan of the tied-aid approach, but nations, if they're going to put their credit on the line, have to have some benefit.”[342] Adding that our financial system is predisposed to continue financing what it has financed in the past, he said:

If we want to achieve sustainable development in relevant timeframes, we're going to have to scale up private sector finance, redirect the trillions of dollars that are already flowing, and start tilting them toward more sustainable development investments. That's where we can make the biggest contribution...

In the specific case of Canada, he went on to suggest that,

EDC is a great institution to work through, it is superbly well positioned to lead this new vanguard of sustainable development, but it will need a nudge to ramp it up.[343]

Overall, while innovative instruments as described above cannot be the only source of capital for developing countries, the ability to harness new and additional financing through them could be an important source of future development efforts.