Thank you, Mr. Chairman.

I want to thank you and other members for inviting the NSI to comment on the proposed amendments to this bill. It's an honour for the institute, Canada's oldest independent development think-tank—and, I might add, ranked for the past two years as the world's leading development think-tank by the Global Go-To Think-Tank survey. Despite our annual budget of less than $5 million, we were also ranked in the same survey as Canada's leading development think tank.

In addressing the significance of the bill, I wanted to briefly describe the global context in which the bill is being considered. I don't do it as a lawyer or as an expert on the amendments themselves, but rather as a Canadian development economist concerned about the defining challenges of 21st century global development. I also do it as someone who has worked in international development since 1970, including 30 years with the World Bank, including 14 years living in and managing financial support to some of the most corrupt countries on the planet, according to Transparency International's Corruption Perceptions Index—and I won't name them in this room.

I know first-hand the insidious and devastating effect that corruption, fed by an absence of representativeness, transparency, and accountability—the three pillars of good governance—has on a society's economic and social health. It's not pretty and it's not how Canadian or any other taxpayers' resources should be used.

As noted in the recent “Africa Progress Report 2013”:

Transparency and accountability are the twin pillars of good governance. Taken together, they are the foundation for trust in government and effective management of natural resources—and that foundation needs to be strengthened.

As also suggested by this eminent international panel, the absence of these pillars is especially damaging in resource-rich states where the financial stakes and temptations to maximize personal gains by political and economic elites, including foreign investors, are high. The unprecedented growth in demand for natural resources, particularly extracts coming largely from the emerging economies, is producing both volatility and rising commodity prices, with global competition for resources intensifying, especially in Africa where the potential is as yet relatively unexploited. For Canada, a globally connected resource-rich country whose economic health depends increasingly on its capacity to globalize its trade relations, the intensified competition constitutes a particular challenge. The comfort zone of producing primarily for domestic consumers and the U.S. market is quickly evaporating.

As noted by the Conference Board of Canada in 2012, the past decade has effectively been a lost decade for Canadian exports:

The 2000s were a “lost decade” for Canadian exports of both goods and services, as essentially no growth in volumes occurred—even though the volume of global trade in goods expanded by 68 per cent during this period.... We have lost export market share to emerging markets in a wide variety of products, including Canadian stalwarts like wood and paper products.

During the same period, as noted recently by the former Governor of the Bank of Canada Mark Carney, “We've dampened our [2013] forecast of exports because we're seeing a competitiveness challenge...”. Indeed, among the G-20 countries during the same period of 2000 to 2012 Canada was one of eight economies that lost market share of world exports, by about 37%, just behind the U.K., which had the biggest loss of about 40%. The 12 gainers were led, not surprisingly, by China with a gain of 170%—but Australia also saw a gain of 50%.

This loss of market share in exports at the global level is also consistent with a loss of competitiveness of Canadian extracted investments in Africa. Whereas in 2007 Canada was the leading investor in mining on the continent, notwithstanding an increase in the stock of Canadian investment from just under $3 billion to about $31 billion today, we are now fifth, exceeded by China, Australia, South Africa, and the countries of the European Union.

We recently discussed some of these issues at NSI's Ottawa forum entitled “Governing Natural Resources for Africa's Development”—and here I should add that both Dean Allison and Lois Brown made important contributions to that discussion—and addressed how Canada could elevate itself in that sector to being a leader on the continent in natural resource exploitation and investment.

This is at a time when African governments themselves and members of the G-8 are increasingly concerned about using mineral and energy resources more effectively, thereby ensuring that they become the economic blessing they should be rather than the curse they have tended to be.

Indeed, a senior vice-president of one of Canada's leading mining investors in Africa said during the conference that Canadian mining companies could no longer compete on the basis of cost alone, that we needed other attributes.

Enhancing the Canadian brand is one of them, as is being a policy-maker on dealing with corruption in natural resource exploitation, rather than being a policy-taker. Canada needs to be seen as a leader in setting global best practice standards, especially at a point in history where African governments, many of them democracies, are taking active measures to enhance domestic resource mobilization and stem the illicit outflow of financial resources.

Just to give you an example, it's estimated that the outflow of illicit funds in the form of mispriced trade, transfer pricing, etc., from Africa was about $63 billion in 2012, exceeding the inflow of aid and foreign direct investment of about $62 billion. The new Africa mining vision that was developed by the African Union in collaboration with the UN Economic Commission for Africa sets out a compelling agenda for facilitating such changes by shifting the focus from simple mineral extraction to much broader developmental imperatives in which mineral policy integrates with development policy. This means effective regulations governing extractive companies, the strengthening of institutional capacity, and policies that ensure that resources generated are spent to produce sustainable and more equitable outcomes.

For the international community, this means creating a level playing field where natural resource investors are subject to the same set of rules, building on the U.S. Cardin-Lugar amendment and the EU transparency directive adopted by the Europeans earlier this week, so that companies operating in Africa apply the same accountability principles and the same standards of governance that they are held to in rich countries. They should also recognize that disclosure matters.

In our view, Bill S-14 is an important step in that direction, in that it would strengthen the accountability of Canadian firms operating in developing countries and seek to apply the same standards as applied in Canada. We therefore commend the government for preparing it.

On its own, however, it falls short of what is needed for Canada to be seen as a global leader in stemming corruption in that it only deals with one of the pillars of good governance, namely, accountability. Indeed, China adopted its eighth amendment to its criminal code, a law not dissimilar to the Canadian legislation, in 2011. What is also needed is regulation that requires transparency on the part of Canadian investors. Per the call of Prime Minister David Cameron in the lead-up to the G-8 meeting later this month:

we must lift the veil of secrecy that too often lets corrupt corporations and officials in some countries run rings around the law. The G-8 must move toward a global common standard for resource-extracting companies to report all payments to governments, and in turn for governments to report those revenues. This will encourage more investment in resource-rich countries and level the playing field for business.

In my discussions with members of the Mining Association of Canada, some of whom participated in our recent forum, I've heard the same desire expressed, along with concerns that rising resource nationalism in Africa and elsewhere will first target the firms from those countries seen as being less rigorous in their application of laws to stem corporate corruption by their own firms. Indeed, the Africa Progress Panel report explicitly cited Canada, stating: “Not all the opposition [to stronger regulation] emanates from industry. The Canadian government has opposed the introduction of mandatory standards.”

Canada being perceived by African governments and civil society as one of those recalcitrants is neither good for our brand nor for our competitiveness in the medium term. The statement, therefore, by Prime Minister Harper yesterday in London that Canada “will establish new, mandatory reporting standards for payments made to foreign and domestic governments by Canadian extractive companies” is a welcome development, and the government is to be warmly applauded for this step.

This new policy will help change perceptions and enhance our brand, and should it include compliance with the Extractive Industries Transparency Initiative, Canada would align itself with 23 countries that are currently compliant with this initiative. An additional 16 are candidate countries, including Australia and the United States. France and the U.K. will apparently announce their compliance during the G-8 summit, while Germany recently informed EITI's former chairman—who's a German—that it too is on the verge of joining.

Canada's compliance would demonstrate our full commitment to transparency and provide comfort to Africa's governments and civil society that Canadian extractive firms investing in Africa are being subject to the same standards they would be in Canada.

This would contribute both to Africa's economic development and Canada's economic prosperity. It would also move Canada, once again, into a position of global leadership in the area of natural resource governance.

Thank you, Mr. Chair.

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