FAAE Committee Report

SUPPLEMENTARY OPINION BY THE OFFICIAL OPPOSITION

THE CONSERVATIVE PARTY OF CANADA’S THOUGHTS ON CANADA’S NEW

DEVELOPMENT FINANCE INSTITUTE

Introduction:

Over the course of the past ten months, the Standing Committee on Foreign Affairs and International Development (FAAE) has studied the implementation of Canada’s new Development Finance Institute (DFI), first introduced in Budget 2015, by the previous Conservative Government and subsequently re-announced in Budget 2017 under the current Liberal Government. Both budgets earmarked an investment of $300M over 5 years as the initial capital to set up a DFI in Canada.

It is the opinion of the Conservative Party Members of the Standing Committee that the report tabled has not accomplished the goal of balancing witness testimony with respect to risk, re-investing in the DFI and the report has failed to provide recommendations on how the DFI should be structured.

The Conservative Party of Canada (CPC) Members would like to extend their thanks to all witnesses who took part in this study and wish to submit the following supplementary opinion with additional recommendations for consideration by the Government in setting up Canada’s new DFI.

Structure of the DFI

The report as presented by the Committee has failed to provide recommendations to the Government regarding how the funding ($300M over 5 years) should be spent and how the DFI should be structured.

Risk Taking and Risk Assessments

Committee Members heard through witness testimony that the initial investment of $300M over 5 years earmarked by the Government of Canada should have “growth and expansion of the DFI…in-built from the start”[1].  Ultimately, the end goal of the DFI is for the Institute to become self-sustainable, with the ability to re-invest earned capital in order to allow it to grow. The Conservative Party Members support the Government’s investment of $300M over 5 years (as was initially announced in the previous Conservative Government in Budget 2015), however, it is their opinion that initial investments made by the DFI should seek to take a lower risk so as to ensure that the DFI can build on its initial $300M investment. The DFI should then begin to take on higher risk investments once new earned capital is gained.

As stated by Diana Noble (CEO, CDC Investment Works):

“Remembering that unless businesses are successful, no impact happens is incredibly important. Pushing into white unoccupied space sounds great in principle because they’re white, but they’re also white because other people think they’re too hard.”[2]

It is therefore the view of the Conservative Party of Canada’s Committee Members that recommendation 2 should be amended to read:

Recommendation 2

The mandate of Canada’s DFI should focus on the core objective of catalyzing private investment for international development; clearly state the institution’s objective of balancing development goals with financial returns; affirm that the DFI is a complement to, not a substitute for, official development assistance and aid agencies; and acknowledge that it must grow to reach profits where it is strong enough to take on an emphasis on development impact with an acceptance of greater financial risk.

Re-Investing in the DFI after the first 5 years

 Committee Members heard throughout testimony that the DFI should be provided with ample time to prove itself. Witnesses testified that a timeline of 10 years would be a recommended amount of time for the DFI to prove its effectiveness. The Conservative Party Members of the Committee are in agreement that the DFI should be given time to prove its’ concept, however, are reluctant to agree that additional funding should be earmarked after the initial investment of $300M over 5 years has ended. A fulsome assessment is recommended prior to reinvestment to ensure that appropriate additional funding is needed. That is, a re-investment may not require an additional $300M over 5 years given that much of the initial overhead costs will have been used from the original investment.

Additionally, one example provided by Rohinton Medhora, President of the Centre for International Governance Innovation (CIGI) suggested that in order to expand the DFI without relying on the taxpayer, “one thought is that over time a higher proportion of the EDC revenues might be devoted to the DFI”[3].

Protecting the rights of all potential investors

In recent months, the Liberal Government has introduced a values test for organizations applying for funding under the Canada Summer Jobs program. The policy places many applicants in the unacceptable situation of having to choose between their deeply held beliefs and receiving support from the government for projects that are important to Canadian society. As no change has been made since this values test was introduced, it is clear that other Government funding opportunities may be subjected to the same values test. The Conservative Party of Canada believes that all Canadians should be treated equally by their government, regardless of their faith or conscience. The right to freedom of belief and opinion is guaranteed by Canada’s Charter of Rights and Freedoms and values tests such as these should have no place in a multicultural society such as Canada.

As a result of recent events, the Conservative Party Members of the Committee are concerned with the final sentence of the Committee’s recommendation 4 of the report which states: “At the same time, the DFI should ensure that it operates in a way that is not discordant with Canadian values and interests.”

Therefore, the Conservative Party Members of the Committee recommend the following changes to Recommendation 4 to read:

Recommendation 4

The Government of Canada and Export Development Canada should allow the new DFI to pursue its mandate in an independent manner, free from requirements to align its operating processes with broader government or corporate policies. At the same time, the DFI should ensure that it operates in a way that is not discordant with Canadian values and interests including the right to freedom of belief and opinion as guaranteed by Canada’s Charter of Rights and Freedoms.