Minister Fantino's keynote address to the Economic Club of Canada titled 'Reducing Poverty - Building tomorrow's markets'
November 23, 2012, Toronto, Ontario
It has now been a few months since Prime Minister Harper asked me to be the Minister of International Cooperation, and I am enjoying the job immensely.
It is a great honour and a privilege.
As you can imagine, it has been a busy time for me and a fascinating experience seeing international development work first-hand, as Canada continues to respond to situations around the world.
In my brief experience, it is clear that Canada is respected on the world stage for the work the Canadian International Development Agency does.
You may know that my previous professional life was in law enforcement, spending the latter part of my career as an executive within various police departments.
However, as the Ontario Commissioner of Emergency Management and more recently, as Associate Minister of National Defence, I have had the opportunity to see CIDA's work with my own eyes.
On a trip to Afghanistan as Associate Minister of Defence, I saw young Afghan girls heading to school, wearing their backpacks.
And it reminded me of my own grandchildren. I was impressed then, and I remain so, knowing that these girls were going to school because of the assistance Canada provided.
I must say, I am impressed with the depth of knowledge and experience in CIDA and the vast network of capable partners, as well as the development results we are achieving on the ground.
CIDA truly does help save lives, empower people, and strengthen communities, while reflecting the Canadian values of compassion and generosity.
During my transition to this role, I have been astounded by the results we can achieve when the international community-including developing countries, donors and most importantly people themselves-work together towards a common goal.
Despite the global economic crisis, the world is on track to reduce by half the number of people living on less than $1 per day by 2015.
I have witnessed firsthand the deep sense of gratitude to Canada and Canadians, that people feel when they see the red maple leaf flying high above a CIDA project.
We should be proud of this gratitude.
We should not shy away from the the long-term opportunities this gratitude can translate in to.
As our Prime Minister has said, Canada is a compassionate neighbour.
Our work at CIDA reflects the best of Canadian values.
But there is more to our development work than the values we express everyday in every corner of the globe.
We at CIDA are cognisant of the global economic situation and its affect on Canadians.
We understand the instability around the world and how it affects us.
That is why CIDA is committed to contributing to Canada's long-term prosperity and security.
I want to take this opportunity to talk to you about Canada's international development objectives.
And how we, collectively, including the private sector, can contribute to these objectives and benefit from it in a meaningful way.
A Rapidly Evolving Global Context
Today, the line between domestic and global is a moot point.
We can no longer insulate ourselves from events happening around the world.
What happens in other countries ultimately has a local impact, and not just on TV, or on the Internet, but in our communities and our homes.
When the American or European economy suffers, we see the difference in our bank accounts.
When there is political unrest in the Middle East, we pay for it at the gas pumps.
When there is an unseasonal frost in Brazil, our coffee at the grocery store is more expensive.
When China's Gross Domestic Product is lower than expected, the global capital markets feel the negative effects immediately.
These days, Canada would be happy to have GDP growth of 3 percent.
But when China's GDP drops below 8 percent, the world is instantly concerned!
This is the reality we live in.
An interconnected world in which events play out, in real time, with a domino effect.
The shape of poverty is shifting beneath our feet.
Incredible transformations are happening in economic, technological and demographic terms.
Growth rates are higher in many developing countries than in developed ones.
Trade between developing economies is on the verge of surpassing their trade volumes with developed economies.
Mobile phone penetration rates in developing countries are approaching those in the developed world.
Developing economies are investing in our economy more and more.
At the same time, commodity prices are making basic food staples less affordable for many of the poorest people, regardless of where they live.
Poverty - Contextualizing the Challenge
Last year we welcomed the seven billionth person to the planet.
Of this number, an estimated 1.2 billion are young people between the ages of 10 and 25-and nearly 90 percent of them live in developing countries.
This demographic shift alone presents both an opportunity and a challenge.
Youth in developing countries are an incredible resource.
They have the potential to make great contributions to their communities, societies and economies.
But, when their expectations of education and jobs go unmet, opportunity can quickly turn to despair.
We have seen this in countries like Mali, where this despair is often preyed upon by those who wish to destabilize the world and our way of living.
Even when we see impressive macro-economic growth in the developing world, we must be cognisant of the disparity and the risks it poses.
The benefits of growth don't always reach those who need it most.
To be sustainable in the long term, access to opportunity, such as through basic education, must reach the poorest and most vulnerable.
The Importance of Development
We are operating in a new world of development.
Forty years ago, Canada's Development Assistance was a lifeline for the poorest people in developing countries-and it still is.
However, today, the Government of Canada's development program represents a much smaller share of resources flowing into developing countries.
Last year, the Government of Canada provided $5 billion in development assistance.
Foreign Direct Investment now outpaces this development assistance at a rate of five to one.
Canada's private donations to developing countries in 2010 was an estimated $2 billion, and remittances from Canada were estimated at more than $15 billion-nearly three times as much as CIDA's total development program.
And those numbers do not include the billions of dollars invested directly by Canada's private sector, investments that continue to grow.
So, as Canada's official development channel, CIDA is operating in a very different global context.
But, let me tell you why development still matters and where it fits on the continuum between poverty and prosperity.
Most Canadians are familiar with our humanitarian assistance in times of disaster and crisis.
We all remember the 2010 earthquake in Haiti, the famine in East Africa and the ongoing food crisis in the Sahel region of West Africa.
It is at these times that CIDA provides vital life-saving services to people in their time of need.
Quickly, and efficiently, we work with the best partners in the business to provide basic necessities such as food, shelter, and clean water.
But that is not all we do.
Not everyone realises that the bulk of CIDA's work focuses on long-term development.
This is the less visible, but no less important, work of growing and strengthening individuals, families, communities, and countries to be more resilient and self-sufficient over the longer term.
We do this by working directly with developing countries to help them provide basic services, like health and education, to their citizens;
To help them improve their agricultural sectors so they can feed themselves and their families;
To help them provide a safe and secure future for their children and youth, from improved child health to better access to quality education;
To help create the conditions for sustainable economic growth to help their people lift themselves permanently out of poverty;
And to help build up the institutions, laws and regulations that govern their economies, so they can become more desirable and stable trading partners, and a place where investors want to put their money.
Development work also benefits Canadians.
It safeguards Canadian security by addressing sources of instability and preventing threats before they reach our borders-our work in fragile states like Afghanistan is a good example.
We are all aware of the sacrifice our troops have made in securing the country and in doing so, making the world a bit safer.
CIDA is also doing its part to complement the work of our Canadian Forces.
In southern Afghanistan, with a Canadian private sector implementing partner, CIDA has recently completed, its commitment to rehabilitate the Dalha Dam.
This may seem like an altruistic exercise. But let's establish the facts.
Without access to irrigation, farmers in this region could only farm one crop - poppy - the root of opium.
These farmers were preyed upon by Al Qaeda operatives who sold opium to finance global terrorism.
Today, I am proud to say, through Canadian investments and human capital, water is flowing through the canals of Kandahar province.
Many of these farmers are seeing the first yields of pomegranates and saffron - a crop that is known to be "worth its weight in gold".
The most important outcome of this exercise is that these farmers and their families now have options.
They can reject extremist ideology and provide for their families.
Beyond the security imperative, there is an economic imperative to our development work.
The Importance of Economic Growth to Development
You may be surprised to hear that the export and investment markets you covet, like Brazil, Thailand, Costa Rica and South Korea, were all development partners of CIDA, until recently.
When we help other countries grow their economies, we connect Canadian businesses to some of the world's fastest growing markets.
Which leads me to CIDA's Economic Growth Strategy and the opportunities for Canadian businesses that work in foreign markets.
The Government of Canada has tools that help business ventures abroad.
However, unlike my colleagues Minister Baird and Minister Fast at Foreign Affairs and International Trade, who aim to lower tariffs, achieve common business standards, and negotiate and sign trade agreements, CIDA takes an upstream approach to economic growth. We help to make countries and people, trade and investment ready.
CIDA can help develop the capacity to negotiate with other countries, implement international commercial agreements with Canada and other trading partners, and help firms benefit from these agreements. We will be doing more of this in the future.
However, CIDA's primary work in this realm helps developing countries create the right conditions to make capital available for companies to invest in jobs, to connect businesses to markets, and to encourage investment, innovation, training and trade.
Our Economic Growth Strategy focuses on three things: building economic foundations, investing in people, and growing businesses.
First, CIDA supports governments in developing countries to build the necessary legislative and regulatory frameworks required to allow for private sector led growth in their economies.
For example, our work in r is one of our best achievements in improving regulatory capacity.
As Latin America's seventh largest economy and with a population of 30 million people, Peru has been the continent's fastest growing market in the last five years, expanding more than 8 percent in 2010.
Canadian firms have seen this opportunity and capitalized. In 2011, foreign direct investment was $7.6 billion, largely in the extractives sector.
Our government recognized this important relationship and acted.
In 2009, our Government concluded a Free-Trade Agreement with Peru.
Building on this, CIDA has focused its work in areas that are also to the benefit of Canada's prosperity.
The growth experienced in Peru has pumped up demand for energy resources, including from an oil and gas sector that has expanded in recent years with the discovery of significant reserves.
With our worldwide expertise in the natural resources sector, Canada, through CIDA, helped Peru implement a new natural gas regulatory framework, based on recognized industry standards.
We also worked with the Peruvian government and its private sector to build up capacity of the relevant regulatory agencies.
In turn, this has created opportunities for Canadian companies to do business and enhanced stability for those already operating in the sector.
As you are aware: Fair, transparent and foreseeable regulation can enable private sector led growth in this important sector.
But the large-scale capital investment required for such growth, to create employment and economic benefit, can be squandered with shortsighted, reckless policies that create political risk for the private sector.
We see this today in other countries in the Americas, where governments have begun to nationalize extractive industries, including Canadian firms, without compensation.
Canada will continue to dissuade our partner governments in the developing world from such shortsighted policies.
The second part of our Economic Growth Strategy focuses on growing businesses.
The developing world relies on small- and medium-sized enterprises for much of its economic growth.
Too often, these small businesses come up with a great idea for a product, only to watch it fizzle because they are without the necessary tools to turn their concepts into commercially viable success stories.
This is why CIDA targets these businesses, helping to enhance their financial viability, productivity, and competitiveness.
We also work to include women in our education and demand-driven training programs.
They are often excluded from the formal economy in the developing world.
When women have more access to credit, they are more likely to open up bank accounts, sign contracts and incorporate their businesses.
Add access to the same technical assistance and resources as men, and women become drivers of both economic growth and long-term human development for their families and communities.
Globally, women-owned businesses now represent roughly a third of all business.
They include women like Vu Thi Ha, who owns a factory that makes terracotta pots in northern Vietnam.
She wanted to expand her business and become more competitive by using new technology.
But there were several steps she had to take, such as developing business and marketing plans, and obtaining a bank loan.
To jump-start her enterprise, she signed up for a business development course given by the Vietnamese province in partnership with CIDA.
The course gave her the boost she needed to move ahead and become more competitive in her market.
Vu Thi Ha is just one of many successful business owners in Vietnam who benefitted from CIDA's support.
Between 2007 and 2010, in Vietnam alone, CIDA helped 1,200 small and medium-sized businesses-90 percent of them owned by women-increase their profits.
Investing in People
This brings me to perhaps the most important aspect of CIDA's Economic Growth Strategy: Investing in people.
Often, this is a matter of helping people gain better access to credit, insurance, training and financial services.
As mentioned, this is especially critical for women, who often face legal, social and cultural barriers to economic opportunities.
I'll give you another example.
In the Caribbean region, CIDA is helping to establish 18 national technical and vocational training programs in 12 countries, to give citizens the skills they need to participate in the labour market.
While the Caribbean has potential, the region is simply not growing.
This has negative effects on its economic prospects, as well as the fabric of society.
We are not immune to these ill effects.
Canadian banks hold significant public and private debt through the Caribbean, and drugs and crime throughout the region often spill over in to our own communities in Canada.
Canada's investments there provide the poorest and most marginalized people with the opportunities to fully contribute to their society.
This in turn, helps Caribbean countries better respond to the needs of Canadian companies and makes it possible for them to supply Canada with certain goods and services, while increasing their demand for ours.
This is important, as the Caribbean region grows into a bigger market for Canadian investment and goods and services.
While a free-trade agreement with the Caribbean is pending, there is already a significant volume of trade with the region, averaging about $2.3 billion per year.
And that is in addition to the significant Canadian direct investments in the region.
The Way Forward
As I look ahead, it is clear to me that we must build upon our successes, such as the ones in Peru, Vietnam, and the Caribbean.
CIDA can help to build enabling conditions that improve the role of women, the rule of law, and regulatory frameworks.
I believe that the key to building prosperity lies with broadening our partnerships, seeking innovation, and continuing to focus on aid effectiveness.
As it stands, CIDA collaborates with a broad range of actors, including developing country governments, donor partners, non-governmental organizations, multilateral institutions, and the private sector.
And while we have a long history of working with the private sector as executing agencies, the fact is we need to engage more.
The private sector is the driver of long-term economic growth globally.
Without an increasing presence in the developing world, we will not achieve the development goals we are committed to at CIDA.
The private sector in Canada is our largest pool of human, technical and financial resources.
For more than 40 years, it has participated in Canada's development programs overseas by supplying goods and services and by executing projects.
Now, our private sector has even more industrial and commercial activities in developing countries.
As you have diversified in to the developing world, Canadian companies have shown themselves to be socially responsible.
You invest in the communities in which you operate.
You act in a transparent and accountable way with local governments.
And most importantly: This has contributed to your bottom line.
This is why Canadian investments and Canadian development assistance is welcomed in developing countries.
While there have been some setbacks, these are all valuable experiences for our country in the movement towards a more stable, integrated global economy.
As developing countries grow and open themselves up to more foreign investment, Canadian companies have an opportunity to share their expertise and business practices, in a mutually beneficial way.
Canada's mining and extractive sector is a prime example of how a government agency like ours can partner with the private sector to advance global development objectives.
This is a huge opportunity for both Canada and developing countries.
Especially when you consider that almost one-third of the Toronto Stock Exchange Index is comprised of the natural resource sector.
Canadian companies in the extractive sector account for almost half the mining activities in the world, and represent approximately 12 percent of Canada's direct investment abroad.
These companies boost economic growth and provide high-value jobs to thousands of workers in Canada and around the world.
CIDA is working to help the Canadian mining, oil and gas sector to partner in development with local governments and NGOs for mutual benefit.
The fact of the matter is that our firms are a key contributor to reducing poverty and helping people benefit from their own resource wealth.
Let me give you a few examples of how CIDA is expanding the economic impact of local mining operations by establishing nearby community development projects.
In Burkina Faso, we are working with Plan Canada and IAMGOLD to help youth receive training and job skills that meet labour market needs in various sectors, including mining, sales, tourism, carpentry and mechanics.
In Ghana, a project with World University Service of Canada and Rio Tinto Alcan will improve education and access to clean water for more than 130,000 residents in 12 mining communities.
I will take this opportunity to clarify a misconception about these projects that has been perpetuated by the media and some organizations here in Canada...
…That CIDA is subsidizing mining companies.
This simply isn't true.
CIDA does not subsidize Canadian companies.
We do not subsidize NGOs for that matter.
We are an outcomes driven agency.
We use any and all legitimate vehicles, including the private sector, available to us to meet our stated objectives.
The fact is developing countries are using natural resources - more and more - as a key economic driver to create jobs and provide governments with revenue to deliver services.
In 2008 alone, exports of oil and minerals from Africa, Asia, and Central and South America were worth about $1 trillion-nine times the value of international development assistance to these regions.
Trends show that this will only increase.
This is why it is important that extractive industries work in a way that benefits everyone involved.
And this is why CIDA will continue to work with the sector.
Last year at the Commonwealth meetings in Australia, Prime Minister Harper announced that CIDA is leading the creation of an international institute on the extractive sector and development to help developing nations harness their resources to generate sustainable economic growth and reduce poverty.
We asked Canadian universities to submit proposals for how they would establish and operate the new institute.
It is my pleasure today to announce that the University of British Columbia, working with Simon Fraser University will be hosting the new Canadian International Institute for Extractive Industries and Development.
I'm pleased to see representatives from the respective Universities here today.
We look forward to working with them and the Canadian private sector on the implementation of this important work.
This new institute will build on Canadian leadership in mining, oil and gas to increase the capacity of developing countries to manage natural resources in a way that is sustainable and fuels economic growth.
Beyond the extractives sector, we will continue to find new ways to be more effective.
By working with our partners and learning from sectors in Canada-like health sciences-we will gain a clearer picture of whether, and how, a particular development intervention worked.
CIDA supports innovative approaches through research partnerships, working with organizations piloting these methods, and testing and scaling up innovative ideas to solve development challenges.
I am excited about some of our new partnerships, such as with the Gates Foundation on our mutual goal of eliminating polio.
The global development community is beginning to adopt a number of novel funding approaches such as "Pay on Results" and "Competitive Funds".
Indications are that some development challenges may be better addressed by using these new approaches rather than more traditional methods, and that they are more likely to draw competitors who focus directly on results, accountability and innovation.
For example, the foundation, Grand Challenges Canada, has recently run a fourth round of its "Stars in Global Health" challenge, which "enables innovators in low and lower-middle-income countries and Canada to develop their bold ideas with big impacts to improve global health conditions."
This attracts applications that demonstrate scientific, technological, social, or business expertise, competing for initial grants of $100,000, with possible additional funding up to $100,000.
This exemplifies what the private sector can bring to the table: Specialized expert solutions to development problems.
Companies are also more likely to back high-risk solutions.
They simply need access to the right tools to do so.
This is why we in the development industry must also be open to the utilities that drive private sector led growth - the issuing of loan, loan guarantees, bonds and equity investments.
I'm pleased to see that the social sector worldwide is adopting some of the principles and tools of the private sector. Such as the issuing of "social bonds".
These are things we at CIDA are reviewing very closely as they can allow us to leverage our resources for greater impact.
I will also say, development can drive innovation and industry from time to time.
Following the earthquake in Haiti, it was noted that only two banking machines were still working in the country.
As a result, line-ups to use the machines were long, but while they were waiting, development workers and others were all busy talking on their cellphones.
This led to an idea to transfer money through cellphones and funding of $10 million for a workable system for cellphone banking soon helped people to pay for everything with their cellphones.
This technology is now being promoted as the future for all consumers worldwide.
My impression of international development so far is that it is a global process that strives to move people from poverty to prosperity.
This process is not simple; it is complex.
And, it is not easy; it is extremely difficult.
But it can and is making a real difference.
Canadian business leaders like you can and should work with CIDA to seek a more prosperous, secure world, while reflecting the Canadian values we cherish.
This will not only help us meet our goal of eradicating poverty.
It will also help build Canada's market opportunities for the future.
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