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CANADIAN DEVELOPMENT REPORT 1998
The private sector now
dominates North-South
relations. But are trade and
investment substitutes for
foreign aid? What should
corporations contribute to
the welfare of the global
community, particularly its
poorest citizens? How
should government trade
promotion programs
support their efforts?
In tackling these questions,
this volume surveys the
activities of Canadian
corporations—in the
financial, manufacturing,
mining, infrastructure/
engineering, and
management consulting
sectors—in developing
country markets, explores
social and environmental
responsibility issues, and
examines the need for
public and private sectors
to work together for
development.
In addition, a 45-page
statistical annex analyzes
the full range of Canada’s
relations with countries in
the South.
ISBN 1-896770-17-7
Printed in Canada
C ANADIAN D EVELOPMENT R EPORT 1998
CANADIAN
CORPORATIONS AND
SOCIAL RESPONSIBILITY
C ANADIAN
C ORPORATIONS
AND S OCIAL
R ESPONSIBILITY
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C ANADIAN D EVELOPMENT R EPORT 1998
C ANADIAN
C ORPORATIONS
AND S OCIAL
R ESPONSIBILITY
E DITED
BY
MICHELLE HIBLER
AND
ROWENA BEAMISH
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THE NORTH-SOUTH INSTITUTE
The Institute is a charitable, not-for-profit corporation established in 1976 to provide professional, policy-relevant
research on “North-South” issues of relations between industrialized and developing countries. The results of this
research are made available to policymakers, interested groups, and the general public to help generate greater
understanding and informed discussion of development questions. The Institute is independent and nonpartisan
and cooperates with a wide range of Canadian, overseas, and international organizations working in related
activities.
The contents of these essays represent the views and findings of the authors alone and not necessarily those of the
North-South Institute’s directors, sponsors, or supporters, or those consulted in their preparation.
CANADIAN CATALOGUING IN PUBLICATION DATA
Main entry under title:
Canadian corporations and social responsibility : Canadian
development report, 1998
(Canadian development report, ISSN 1206-2308)
Includes bibliographical references.
ISBN 1-896770-17-7
2.
4.
5.
I.
1. Social responsibility of business—Developing countries.
Corporations, Canadian. 3. International economic relations.
Economic assistance, Canadian—Developing countries.
Sustainable development—Developing countries.
Hibler, Michelle II. Beamish, Rowena III. North-South Institute
(Ottawa, Ont.) IV. Series.
HD60.5.D48C36 1998
306.3’4’091724
C98-900501-1
Editorial Team
Rowena Beamish, Michelle Hibler (Editors)
Anne Chevalier (Translation and Production Coordination)
Design
Printing
Paul Edwards Design
The Lowe-Martin Group
© The North-South Institute/L’Institut Nord-Sud, 1998
Price
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THE NORTH-SOUTH INSTITUTE
GRATEFULLY ACKNOWLEDGES
THE GENEROUS FINANCIAL SUPPORT
OF THE FOLLOWING DONORS IN
THE PUBLICATION OF THE
CANADIAN
DEVELOPMENT REPORT 1998
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DONATION
AND
FUNDRAISING POLICIES
DONATION POLICY
A registered charity, the North-South Institute accepts cash and
in-kind donations from government departments, foundations,
academic institutions, not-for-profit organizations, corporations,
and individuals. These are accepted with the understanding that
the donor gives them freely with no expectation of receiving
benefits in return, and that the donation does not compromise
the Institute’s independence in the way it undertakes research,
the conclusions it reaches, the policy recommendations it makes,
or the way it disseminates the results of its activities.
FUNDRAISING POLICY
The North-South Institute adheres to ethical principles and practices with respect to donors’ rights, fundraising practices, and
financial accountability. Copies of our most recent annual report
and financial statement, a list of current members of the NSI
Board of Directors, and a copy of our ethical fundraising code can
be obtained by writing the Institute.
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PATRONS
(DONATIONS OF $10,000 OR MORE)
Canadian International
Development Agency
Agence canadienne de
développement international
General Motors of Canada Limited
IDRC
CRDI
INTERNATIONAL DEVELOPMENT RESEARCH CENTRE
CENTRE DE RECHERCHES POUR LE DÉVELOPPEMENT INTERNATIONAL
C A N A D A
POWER CORPORATION OF CANADA
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SUPPORTERS
(DONATIONS BETWEEN $5,000 AND $9,999)
AGA KHAN FOUNDATION CANADA
FONDATION AGA KHAN CANADA
Department of Foreign Affairs
and International Trade
Ministère des Affaires étrangères
et du Commerce international
R. HOWARD WEBSTER FOUNDATION
LA FONDATION R. HOWARD WEBSTER
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CONTRIBUTORS
(DONATIONS BETWEEN $1,000 AND $4,999)
CANADIAN LABOUR CONGRESS
CONGRÈS DU TRAVAIL DU CANADA
SOCIAL JUSTICE FUND
LE FONDS DE JUSTICE SOCIALE
Steelworkers Humanity Fund
Fonds Humanitaire des Métallos
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C ONTENTS
FOREWORD
i
The Right Honourable Joe Clark
ACKNOWLEDGEMENTS
iii
Roy Culpeper
OVERVIEW
CHAPTER ONE
1
THE CORPORATE STAKE IN SOCIAL RESPONSIBILITY
13
Roy Culpeper and Gail Whiteman
CHAPTER TWO
MAKING ECONOMIES SERVE PEOPLE
35
THE FINANCIAL SECTOR
Robert Walker and Marc de Sousa-Shields
CHAPTER THREE
ETHICS IN THE MARKETPLACE
55
THE MANUFACTURING SECTOR
Ann Weston
CHAPTER FOUR
BEYOND BEST PRACTICE
73
THE MINING SECTOR
Moira Hutchinson
CHAPTER FIVE
PURSUING SUSTAINABLE DEVELOPMENT
INFRASTRUCTURE
AND
91
ENGINEERING
Gail Whiteman and Susan Brandum
CHAPTER SIX
THE BUSINESS OF DEVELOPMENT?
109
MANAGEMENT CONSULTING
Marlene Benmergui
CHAPTER SEVEN
SELLING CANADIAN VALUES
E N C O U R A G I N G P R I VAT E S E C T O R A C T I V I T Y
117
IN THE
SOUTH
Ted Paterson
LIST OF CONTACTS
135
STATISTICAL ANNEX
139
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F OREWORD
T
here has recently been much discussion as
to what constitutes appropriate behaviour
for Canadian corporations operating internationally. The actions of corporations flying the
Canadian flag help define Canada’s reputation
abroad, just as the actions of governments
establish the policy, legal, and regulatory
framework within which corporations act.
As the capacity of nation-states becomes more
restricted, however, the imprint of global
business is becoming more pronounced. Given
that the role and influence of multinational
corporations continue to grow, and that the
power of governments to compel is diminishing,
the question arises as to whether or not
the responsibility of business should grow
concomitantly with its influence.
This edition of the North-South Institute’s
Canadian Development Report considers the
question of corporate responsibility in the
global marketplace to be a leading issue for the
21st century. The report focuses on the activities
of Canadian corporations in the developing
world, where the challenges of social and
environmental responsibility are apt to be most
acute. In keeping with the Institute’s approach,
the report seeks a balanced judgment on both
what Canadian firms have achieved in the past
and what they may strive to achieve in the
future. It does this by lauding the good corporate practices (and there are many examples)
as well as identifying the bad. And it makes
several recommendations to corporations,
governments, and the Canadian public, aimed
at enhancing the social and environmental
performance standards of Canadian businesses.
Striving for higher levels of social and environmental performance does come at a cost. Some
might say that such efforts impair the competitiveness of Canadian businesses in the global
marketplace. To be sure, there are profits to be
made by adhering to the lowest possible
standards for workers, the community, or the
natural environment. And there may, indeed, be
lost commercial opportunities in adhering to
higher standards. But there are two extremely
good reasons for aiming considerably higher
than the lowest common denominator.
The first relates to our values as Canadians.
At home, we treat issues such as human rights,
workplace standards, and responsible stewardship
over the natural environment very seriously. The
importance we attach to these values is integral
to our international reputation as a fair and
democratic society. It is no doubt also reflected
in Canada’s consistently high ranking at or near
the top of the United Nations’ Human
Development Index. In our conduct abroad,
our standards should be no less than those we
strive to achieve at home. Indeed, what countries are better placed than Canada to defend
these values in the global marketplace?
Second, ethically and environmentally responsible conduct can actually be good for business.
Canada is a trusted country, a respected country,
and those attributes are of benefit to corporations
doing business in its name. More to the point,
however, firms striving to enhance their workplace, community, and environmental standards
actually strengthen the climate for business.
By contributing to the well-being of their
stakeholders and the sustainability of the
natural environment, firms invest in their
own long-term profitability.
The Canadian Development Report 1998 conveys
these and related messages with insight, conviction, and considerable persuasion. I commend
the Institute’s staff and collaborating authors for
a timely and highly useful contribution to a set
of issues that is bound to attract the increasing
attention of corporate decisionmakers, public
policymakers, and citizens in general.
The Right Honourable Joe Clark
i
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A CKNOWLEDGEMENTS
T
his second volume in the North-South
Institute’s annual series investigating
Canada’s dynamic relationship with the
developing world, the Canadian Development
Report (CDR) 1998: Canadian Corporations and
Social Responsibility forms part of the Institute’s
broader research on the theme of markets and
social equity.
Because this was the Institute’s first major enterprise examining the role of the corporate sector
in sustainable development, the volume’s planning, writing, and production required the active
participation and support of a great number of
individuals and organizations. We would like to
thank all those who offered their advice and
suggestions, particularly members of the NSI
Board of Directors and the CDR’s advisory
committee—The Right Honourable Joe Clark,
Ghislain Paradis, and Deborah Turnbull—who
helped determine the project’s overall direction
and content. For their advice in the planning
stages of this work, we would also like to thank
John Robinson at the Canadian International
Development Agency (CIDA); Chris Greenshields
and Ross Snyder of the Department of Foreign
Affairs and International Trade; and
David Sevigny of the Department of Finance.
This report has required a great effort on the
part of the Institute’s staff. Vital support was
provided by all members of Research,
Communications, and Administration who
invested a great deal of energy individually and
collectively to ensure this volume’s success.
In particular, we would like to thank
Karen Gervais for administrative and logistical
support and Sanjiv Mehta for valuable research
assistance. Institute Communications staff
member, Anne Chevalier provided logistical and
technical support and coordinated translation
and production. Another member of the Communications team, Melanie Gruer, contributed
editorial and logistical assistance. A special
thank you goes out to lead translator Hervé
Rombaut and to Michel Limbos and Sylvie Lee
et associés for their painstaking work, as well as
to Paul Edwards of Paul Edwards Design.
Each member of staff who contributed a chapter
is acknowledged as its author, although in each
case, the final text was a product of internal and
external peer review and much internal discussion. We were fortunate to have retained the
services of accomplished researchers and writers
who authored or co-authored four of the
chapters in this report. The collaboration of
Michael Jantzi of Michael Jantzi Research
Associates Inc. was crucial in research and data
gathering, as were the efforts of NSI Information
Specialist Gail Anglin who provided background
resources for the text and data. For their
insightful comments on early drafts of the
text, we would like to thank Charles Barrett,
Vicky Berry, Gerald K. Helleiner, Andrew Jackson,
Robert Kerton, John Kozij, Jim Moore,
Nigel Roome, and Jessie Sloan.
The data in this year’s CDR was assembled by
Senior Researcher Andrew Clark, who has since
left the Institute to join CIDA. He was assisted
by Lawrence Latim who completed an internship at the Institute before returning to his
post at the Ministry of Works, Transport, and
Communications in Uganda, and Kerry Max
who joined the Institute as Researcher in
December 1997. The Institute would like to thank
the many government officials from Statistics
Canada; the Departments of Finance, Foreign
Affairs and International Trade, Citizenship and
Immigration; and the Export Development
Corporation who helped us compile the data
for the statistical annex. In particular, we would
like to thank Lucie Laliberté, Director, Balance
of Payments Division at Statistics Canada and
CIDA statistical analysts Jean-Willy Ileka and
Hélène Mainville.
A very special thank you is reserved for the
dozens of Canadian companies who gave
researchers and writers of their time and shared
valuable insights and information. We particularly acknowledge the generous financial
contributions of the CDR donors, listed at the
beginning of the report, for their support of this
major endeavour.
Roy Culpeper
President
The North-South Institute
iii
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Page 1
O VERVIEW
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Page 2
O VERVIEW
CORPORATE
I
n recent years, we have witnessed a burgeoning
SOCIAL
interest by private investors in the developing
RESPONSIBILITY IS THE
OVERALL RELATIONSHIP
world. As a result, Canada’s trade and investment
OF THE CORPORATION
now dwarfs its aid to the South. But are trade and
WITH ALL OF ITS STAKE
HOLDERS
-
should corporations contribute to the welfare of the
. THESE
INCLUDE CUSTOMERS
EMPLOYEES
global community, particularly its poorest citizens?
,
What should they contribute to environmental
,
COMMUNITIES, OWNERS/
INVESTORS
,
GOVERN
-
Development Report 1998 (CDR) surveys the
COMPETITORS.
activities of Canadian corporations in developing-
OF SOCIAL
country markets, explores social responsibility issues,
RESPONSIBILITY
and examines the need for public and private sectors
INCLUDE INVESTMENT IN
COMMUNITY OUTREACH
EMPLOYEE RELATIONS
,
,
CREATION AND MAINTE
E N V I R O N M E N TA L
inspires like an example, this volume follows author
after irresponsible companies,” he advised, “we
should be contributing to making the responsible
corporations so successful that we will shame the
RESPONSIBILITY AND
MANCE
to work together for development. Because nothing
Paul Hawken’s advice: “Rather than simply going
-
N A N C E O F E M P L O Y M E N T,
FINANCIAL PERFOR
sustainability?
In tackling these questions, the Canadian
M E N T, S U P P L I E R S A N D
ELEMENTS
investment substitutes for foreign aid? What
-
.
others into joining in.”1 Thus, in this volume, we
“give credit where credit is due” and highlight
incidences of positive social responsibility—best
CANADIAN CENTRE FOR
practices so to speak. The list of examples cited is
BUSINESS IN THE COMMUNITY,
by no means exhaustive.
THE CONFERENCE BOARD OF
CANADA
This second volume in the North-South Institute’s
annual series investigating Canada’s dynamic
relationship with the developing world, CDR 1998
forms part of the Institute’s broader research on the
theme of markets and social equity.
2
Corporate social and environmental responsibility is becoming the business issue of the 21st
century. During the past few years, corporate
leaders such as Courtney Pratt of Noranda Inc.
have spoken publicly about the need to make
social and environmental concerns a part of
everyday business. Meanwhile, corporations of
all kinds, on all continents, are commissioning
independent “social audits” to monitor and verify their social and evironmental performance.
Others are distributing their ethical manifestos
by post, fax, and e-mail. Still others are joining
associations and displaying symbols certifying
that production complies with environmental
or labour standards. For a growing number of
Canadian and international firms, social
accountability is part of their mission
statements and operating culture.
While corporate responsibility may occupy
centre stage in a number of Canadian corporate
boardrooms, it has also invaded Canadians’
living rooms. During the past few months, for
example, radio ads for ethical funds have asked
if your investment dollars supported repressive
military regimes and child labour. Newspaper
headlines reported on “Buying goods, with a
side of ethics”2 while Ottawa city council
debated a donation from Nike Inc. because of
the company’s poor labour record in developing
countries. Many Canadians flocked to theatres
to watch the inept hero of the Hollywood
comedy Billy Madison triumph when his business
competitor fails to define “business ethics.”
Why has the spotlight turned on corporate social
and environmental responsibility? First, because
of globalization. The United Nations, for instance,
reports that transnational corporations—45,000
firms and 280,000 foreign affiliates—account for
two-thirds of the world’s trade in goods and
services and employ some 73 million people.3
In the post-Cold War era, global markets have
made it possible, even desirable, for firms to do
business on six continents, 24 hours a day.
As Roy Culpeper, President of the North-South
Institute, and NSI Researcher Gail Whiteman
explain in the first chapter of this report, private
capital flows have increased five-fold during
the 1990s, and now account for more than
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BOX 1 GETTING MORE THAN WE GIVE
Are developing countries dependent on aid from Canada and other industrialized countries? Not
more so than we are on them. Canada and other rich countries reap enormous material benefit
from their trading and investment relations with the Third World. In light of the theme of this
edition of the Canadian Development Report, which focuses on commercial activities in the developing world, the increase in Canada’s earnings from the developing world is highly revealing.
CANADIAN LOANS
($
B I L L I O N S
AND
INVESTMENTS
IN
DEVELOPING COUNTRIES
)
1996
1995
Debt owed to public agencies .............................................. $12.81 ........$14.88
Debt to chartered banks..........................................................24.53 ..........13.34
Bonds........................................................................................1.79 ............1.68
Stocks .......................................................................................8.23 ............5.73
Foreign direct investment........................................................16.07 ..........16.02
Total..................................................................................... $63.43 ........$51.65
Sources: Canada, Public Accounts of Canada, 1996; World Bank, Financial Flows and the Developing Countries, May
1997; Statistics Canada, Canada’s International Investment Position 1926 to 1996, 1997.
Canadian loans to and investments in developing countries rose by almost a quarter, from
$52 billion in 1995 to $63 billion in 1996. Most of that increase is due to a growth in loans
outstanding by the chartered banks to the developing countries (about $11 billion). However, it is
also worth noting that the outstanding investment in portfolio equity (stocks or shares) grew by
more than 40 percent, from $5.7 billion to $8.2 billion.
The income derived by Canadian agencies and investors also grew somewhat:
ESTIMATES OF INCOME FROM CANADIAN LOANS TO AND INVESTMENTS IN DEVELOPING COUNTRIES
($
B I L L I O N S
)
1996
1995
Debt owed to public agencies ................................................ $0.74 ..........$1.02
Debt to chartered banks............................................................1.42 ............0.91
Bonds........................................................................................0.12 ............0.08
Stocks .......................................................................................0.53 ............0.29
Foreign direct investment..........................................................1.61 ............1.60
Total....................................................................................... $4.42 ..........$3.91
Source: Computed by The North-South Institute.
Continuing the comparison begun in the Canadian Development Report 1996-97 1 between
these “inflows” into Canada (through incomes reaped by Canadian public and private agencies
from the developing world) and the “outflows” represented by official development assistance
(including support to Eastern Europe and the former Soviet Union), we note with concern that
the disparity between inflows and outflows has widened. The concern arises particularly from
the fact that our official development assistance (ODA) declined from $3.1 billion in 1995 to
$2.7 billion in 1996.
CANADIAN INCOME
PER
DOLLAR
OF
ODA
1996
1995
Income from all sources ($billions) ........................................... 4.42 ........... 3.91
ODA ($billions) .........................................................................2.68 ........... 3.10
Ratio .........................................................................................1.65 ............1.26
In other words, rising loans and investments and a rapidly falling aid program, combined to
provide Canada in 1996 with an income of $1.65 for every $1 spent on the aid program—
an increase of almost a third (or 31%) percent over the past year.
-ROY CULPEPER
NOTES
1 N.B. adjustments have been made here to the 1995 figures to account for the exclusion of Barbados, Singapore, and South Korea from
1996 data. See “Statistical Annex, ‘Technical Notes’,” p. 184.
3
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80 percent of investment capital flowing from
industrial to developing nations. Accompanying
this rapid increase in private flows was a sharp
drop of official flows in the 1990s—official
development assistance as well as bilateral and
multilateral loans from government-run
agencies. As a result, private investment has
supplanted aid as the main channel of relationship between developed countries such as
Canada, and countries of the South. In a similar
vein, Canada’s trade with developing countries
now accounts for almost one-third—some
$39.5 billion in imports and exports—of our
non-US trade. This dramatic increase in
North-South commerce has generated both
widespread benefits as well as questions about
the socioeconomic role of corporations in
developing countries.
Consider also that today’s corporate giants are
bigger than most sovereign nations. For example, the 1995 sales of the world’s five largest
corporations exceeded the gross national
product (GNP) of China. And while Canadian
corporations do not rank among the world’s
largest, they are nonetheless formidable entities
in their respective sectors and in comparison to
mid-sized developing countries. For example,
the 1996 gross revenues of BCE Inc., Canada’s
largest corporation, exceeded the 1995 gross
domestic product (GDP) of countries such as
Côte d’Ivoire, Sri Lanka, Guatemala, Ecuador,
Uruguay, and Vietnam.
Modern information and telecommunications
technology is also enabling small and mediumsized enterprises to carry out business in remote
markets. And individual private investors are
getting into the act by purchasing and selling
emerging market shares through mutual and
pension funds, as well as brokered deals. However, as the recent financial crisis emanating
from Asia has demonstrated, investing in the
emerging markets can be risky and fraught with
uncertainty.
found evolution in the philosophy of corporate
governance. The conventional view has long
held that corporations have only one social
responsibility: to maximize their profits as long
as they adhere to “the rules of the game, without
deception or fraud.” But this view has come
under increasing criticism from both within and
without corporations because the “rules of the
game” are often perceived to be slanted in favour
of business, and business is often seen as too
ready to lay off employees or despoil the environment. Thus, accusations of a race to the bottom
have been levied by labour critics against corporations’ investments in developing countries. In
response, business and advocates of economic
liberalization accuse of “protectionism” those
wanting to impose trade restrictions on goods
produced with child labour or under conditions
below acceptable Northern standards. The issue,
however, is what is worth protecting — the rights
of traders and investors to unfettered markets, or
the rights of workers to basic labour standards
and citizens to a sound environment?
Tracing the evolution of thought about issues
of markets and social equity, Culpeper and
Whiteman argue that self-interested behaviour
in a market system may not be in the best
interest of either society as a whole or the
natural environment. There are three reasons for
corporations to move beyond a fixation with
the bottom line: first, the business world is
unavoidably embedded within social and
natural systems; second, the marketplace by
itself cannot resolve environmental and social
issues; and third, it pays to be responsible.
In fact, the corporate world is under increasing
pressure to contribute something to society, to
be responsible to a “body politic known as
stakeholders.”4
How can companies incorporate social
responsibility into daily operations and international management practices?
• By reintegrating ethics into business culture.
THE CORPORATE STAKE IN SOCIAL
RESPONSIBILITY
Global markets present corporations with new
opportunities and new challenges, particularly
in developing countries where customs,
standards, and the legal/regulatory framework
governing working conditions and environmental stewardship are radically different.
Accompanying the dramatic shift in the circumstances in which firms operate is an equally pro4
• By adopting a systems-centred approach to
stakeholder management. This supposes
that the firm’s long-term interests must take
into account the welfare of its employees,
customers, the communities in which it
operates, and the health of the natural
environment.
• By adopting an international code of conduct
that addresses social and environmental
inequities.
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• By broadening corporations’ accountability
for their actions and unintended
consequences.
Like it or not, say Culpeper and Whiteman,
there is every reason to expect that markets will
continue to spread around the world. In fact,
they can potentially play an important role in
alleviating the grinding poverty in which a large
part of humanity still lives. But the globalization of markets can also undermine the framework of laws adopted to protect the economic
welfare of individuals and communities and the
integrity of the natural environment. And international charters and conventions have not yet
produced a set of rules that are monitored and
enforced throughout the world. The ideal would
be an effective system of global governance to
oversee the functioning of markets and ensure
social and environmental responsibility. Such
an objective may be difficult to achieve, at least
in the near future. In the meantime, there is an
important role for governments, acting together
or alone. Corporations should adopt
a business culture that accepts social and
environmental responsibilities that are not yet
required by law in the jurisdictions in which
they operate.
CANADIAN FIRMS IN THE GLOBAL ECONOMY
Canada’s largest firm, BCE Inc. was only
number 162 in the 1997 Fortune 500 list of the
world’s largest corporations. Canadian firms are
strongly oriented in their business dealings
toward the United States, like the Canadian
economy as a whole.
The absolute size of a corporation, however,
is a misleading indicator of its relative importance in global markets. In some sectors, internationally active and competitive firms tend to
be considerably smaller than, say, the giant
transnationals in the automotive or petroleum
industries. Canadian firms are particularly competitive internationally in sectors such as mineral exploration (where firms are quite small), as
well as mineral development and
production; in engineering/consulting services
(again, where annual turnover is relatively small
relative to the manufacturing sector); and the
telecommunications industry.
No matter what sector they are in, Canadian
firms doing business abroad are ambassadors for
Canadian values, whether or not they want to
be. The way they deal with workers, clients,
communities, and the host government—and
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their respect for the natural environment—
inevitably sends signals to the host country
about what Canadians think is important and
nonnegotiable. These signals are particularly
strong during missions of Team Canada, when
business people are accompanied by senior
politicians from across the country.
STAKEHOLDERS
Unfortunately, the news stories splashed on the
front pages of Canada’s daily newspapers often
paint a dismal picture of less-than-responsible
behaviour: fraud in remote jungle mining
operations; chemical spills in environmentally
fragile rivers; displaced populations; exploited
workers. Seldom heard are the success stories,
examples of how Canadian corporations
contribute both to social welfare and environmental stewardship in developing countries,
even while remaining competitive. Because
these stories could serve as models to guide
companies in their developing-country operations, the Institute has chosen to highlight
some of them in its study of social responsibility
in various corporate sectors.
PERSONS OR GROUPS
T H A T H A V E O W N E R S H I P,
RIGHTS
,
OR INTERESTS
IN A CORPORATION AND
ITS ACTIVITIES
The Canadian financial services industry, which
opens our survey, is highly concentrated: only 22
firms are listed on the Toronto Stock Exchange
300, an index of the largest and most actively
traded companies: six banks, nine investment
and mutual fund companies, three insurance
companies, and four financial management companies. Historically, there has been tremendous
continuity in the industry: the five largest banks
in 1997 were also the largest in 1901.
As Robert Walker and Marc de Sousa-Shields—
current and past Executive Directors of the
Social Investment Organization (SIO)—explain
in this report’s chapter on the financial sector,
the major banks rank among Canada’s largest
corporations in terms of revenues, assets, and
profitability. On a world scale, Canada’s financial sector is tiny: Canada’s largest bank—the
Royal Bank of Canada—ranks number 50 in the
world. Canadian banks, however, are deriving
an increasing proportion of their income
outside Canada and are making bold forays
into the emerging markets.
In May 1997, the SIO listed six banks and one
mutual fund company as leaders in Canadian
corporate social responsibility: Bank of Montreal,
Canadian Imperial Bank of Commerce, Investors
Group, National Bank of Canada, Royal Bank
of Canada, Bank of Nova Scotia, and the
5
,
PA S T,
PRESENT OR FUTURE
.
MICHAEL C. DECK,
CORPORATE CODES AND
ETHICS PROGRAMS:
MANAGING
FOR ETHICAL PRACTICE,
KPMG CANADA
FINANCIAL SERVICES
ARE
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Toronto-Dominion Bank. These firms display
their corporate responsibility primarily through
their relationships with employees and communities, and their charitable donations, within
Canada. It is more difficult, however, to assess
their performance overseas. The difficulty stems
from assessing not just the direct impact of the
lenders, but also the impacts of the projects and
borrowers they support through their loans.
BOX 2 THE IMPORTANCE
LINKAGES
OF
CANADA-DEVELOPING COUNTRY
Are some developing countries more important to Canada than others?
The simple answer is “yes.” In 1994-96, China was the most important
country for Canada in terms of combined immigration, trade, and aid.
A distant second and third were India and Mexico. Comparing continents,
Asia ranked highest.
Looking at individual indexes, China was most important in terms of trade,
while India ranked highest on the human relationship index, and Egypt in
terms of aid.
These rankings were obtained by averaging three separate indices—for
immigration, trade, and aid—which serve as a statistical representation
of people linkages, economic ties, and political ties, respectively. The immigration index measures the immigration from each country as a percentage of total developing-country immigration. The trade index presents
each country’s imports and exports as a percentage of Canadian trade with
all developing countries. The aid index measures each country’s proportion
of bilateral aid in 1995-96.
The five most important countries to Canada by continent are:
A
A
S I A
China
India
Philippines
Bangladesh
Indonesia
F R I C A
A
Egypt
South Africa
Algeria
Ghana
Côte d’Ivoire
M E R I C A S
Mexico
Brazil
Haiti
Jamaica
Chile
THE IMPORTANCE OF CANADA
Looking at the other side of the coin, to which developing countries does
Canada matter most? The clear winner is Guyana, followed distantly by
Jamaica and St Lucia. Of the top 10 countries for which Canada is most
important, seven are from the Caribbean, one from Central America—Costa
Rica—and two from Asia—the Maldives and Malaysia.
The Caribbean’s high ranking is due in large part to the relatively high
proportion of its citizens who emigrate to Canada. Trade is also important:
for instance, imports and exports to and from Canada account for 32 percent
of Guyana’s gross domestic product. Caribbean and African countries also
rank high on the aid index which measures bilateral aid received from
Canada as a share of total aid. St Lucia ranks highest on this index.
Canada is most important to the following five countries or country
groupings on each continent:
A
A
S I A
Maldives
Malaysia
Bangladesh
Philippines
Oceania
F R I C A
Ghana
Angola
Niger
Benin
Togo
A
M E R I C A S
Guyana
Jamaica
St Lucia
Costa Rica
Trinidad and Tobago
Source: The Canadian Development Report 1998, “Statistical Annex, Table 11: ‘Canada-Developing Country
Linkage Indices’,” p 180.
6
Indeed, Walker and de Sousa-Shields consider
that it is at the level of the global financial
system that financial institutions can inflict the
most social and environmental harm. And that
capacity is growing as a result of globalization,
deregulation, trade liberalization, and the
proliferation of new financial products.
How can financial institutions be made to serve
social and economic needs, especially in the
international arena? Policy options suggested by
Walker and de Sousa-Shields include social and
environmental clauses in trade agreements;
enhancing corporate disclosure regulations to
include social performance; recognizing
shareholder rights and allowing shareholders to
advance proposals on “general economic, political, racial, religious, social or similar issues;” and
introducing legislation to require financial
institutions to disclose financing activities related
to the equitable distribution of capital—in short,
making banks more accountable to communities.
The authors add that there is also a vital role for
individuals: by becoming more financially
literate; by considering screened investment
portfolios; by supporting responsible shareholdership; by promoting the development of codes of
conduct and progressive sourcing policies; and
by supporting the credit union movement and
alternative institutions for micro- and small
business credit.
MANUFACTURING
Manufacturing has grown rapidly in developing
countries where it now employs 10 percent of the
workforce. But while this is generally lauded for
the benefits it brings—knowledge, skills, employment, income—questions have been raised about
the distribution of the benefits and costs, for the
workers, their environment, and for competitors
in the informal sector. Manufacturing accounts
for an important share of Canadian foreign direct
investment (FDI) abroad.
In the chapter on manufacturing, Ann Weston,
NSI Vice-president, says that developing countries court FDI to provide the finance, technology, training—and often market outlets— needed
to generate employment and exports. Canadian
investment in manufacturing in developing
countries is probably as focused on supplying their
domestic market with goods and services as on
exports. But do they contribute to host country
development? A number of positive contributions
can be cited in technology transfer, environmental protection, equitable labour practices, and
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industrial and community development by such
companies as Northern Telecom Ltd, the Bata
Shoe Organization companies, British Columbia
Packers Ltd, and Premdor Inc.
Moreover, Canada’s manufacturing companies
are introducing codes covering ethical, environmental, and labour practices in all their operations. While these are important steps toward
increasing accountability, they also raise questions about standards, coverage, monitoring,
and enforcement. Among industry associations,
the Canadian Apparel Federation has launched
a number of initiatives to encourage its members to protect the rights of workers overseas.
Canadian retailers and consumers have a role to
play in encouraging manufacturers to be socially
responsible, by buying from suppliers that do
not employ child labour, for example, and if possible, avoiding suppliers operating under repressive regimes. Others advocate a “buycott”—
encouraging companies that meet certain standards. For instance, this is the strategy of groups
favouring fair trade labeling. Canadian and other
unions have also been active in the fight for
workers’ rights globally, notably the Canadian
Labour Congress; the International Textile,
Garment, and Leather Workers’ Federation; the
Communications, Energy, and Paperworkers
Union of Canada; the Canadian wing of the
United Steelworkers of America; and the
Canadian Auto Workers’ Union.
Weston considers that informed analysis and discussion of corporate practice requires additional
studies on trade and investment at the corporate
level. She also recommends more public and regular stocktaking of corporate performance involving local groups in the definition of standards
and monitoring. Among incentives, she suggests
awards for best practices and the removal of
additional tariffs from countries that enforce
minimum labour standards. Finally, developing
country governments and organizations need to
be supported in their efforts to implement
effective social, economic, and other policies.
MINING EXPLORATION, DEVELOPMENT,
AND PRODUCTION
Canada leads the world in mineral exploration,
and is a leading supplier of capital to the international mining industry. Canadian firms account
for about 20 percent of global exploration expenditures. Alcan Aluminum Ltd, Noranda Inc., and
Inco Ltd—Canada’s three top minerals firms—
are among the top 10 global operators.
E
N
T
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P
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R
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1
9
9
8
Canadian firms are heavily involved in
exploration in the former Soviet Union as well
as in Latin America. To a lesser extent, they are
exploring in Asia and Africa where the lure is
predominantly gold. This increase in Canadian
exploration abroad has been taking place in the
context of a major restructuring of the mining
industry in developing countries.
How do Canadian firms perform abroad? As
author Moira Hutchinson writes in the chapter
on the mining industry, there is little data to
support the oft-cited benefits of multinational
mining investment—technology transfer,
employment creation, provision of capital, and
export earnings. But mining, by its very nature,
has an undeniable environmental, social, and
economic impact. A number of concerns have
been raised about Canadian mining operations:
• Several Canadian companies have investments in three countries with repressive
regimes—Burma, China, and Indonesia.
• Corruption is seen to be a problem in a
number of countries with significant
Canadian mining investment.
• Canadian companies have been involved in a
number of conflicts over Aboriginal land entitlements, notably in Panama and Guyana.
• Core labour standards are seriously restricted
in many countries with significant Canadian
mining investment. Labour regulations are
not enforced in others.
• Environmental disasters have been associated
with Canadian companies, most recently in
Guyana and the Philippines.
• Communities can experience a range of
negative social and economic impacts,
particularly remote communities close to
small ore bodies.
Companies and critics alike support the establishment of a standard based on best practice or
“best of sector.” To date, the mining industry
advances this concept only in the environmental area. It is implied in the code of the Mining
Association of Canada—the first such code in
the world—that members must endorse. The
Ontario Mining Association and International
Council on Metals and the Environment also
bind members to environmental charters.
However, only 13 percent of exploration properties and 26 percent of production properties are
owned by Canadian companies subscribing to
these codes.
7
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THERE
IS GROWING EVI
DENCE THAT
SUCCESS
]
-
[BUSINESS
DEPENDS NOT
ONLY ON BOTTOM LINE
PROFITS
VA L U E
,
BUT ON THE
-ADDED
A
BUSINESS CREATES
ADDING
.
VA L U E D E P E N D S
ON CREATING A POSI
-
TIVE RELATIONSHIP
WITH PEOPLE
—
EMPLOYEES, CUSTOMERS,
AND SUPPLIERS AS WELL
AS OTHER STAKEHOLDERS
I N A W I D E R C O M M U N I T Y.
THROUGH
Page 8
V E R V I E W
Codes notwithstanding, individual companies
and their critics alike are endeavouring to promote good practices. Alcan, Battle Mountain Gold
Co., Cominco Ltd, Falconbridge Ltd, Inco,
Noranda, Placer Dome Inc., and TVX Gold Inc.
have been recognized by the Conference Board of
Canada, the Social Investment Organization, the
United Nations Environment Programme, and the
World Bank for their work with local communities, the environment, and their local employees.
But, says Hutchinson, most of these good practices occur at the production stage of mining:
more problematic are the exploration and
closure stages. Ultimately, says Hutchinson,
accountability, not best practice, will determine
whether Canadian companies contribute or not
to social equity in developing countries. Among
needed mechanisms are community consultation and participation; respect for workers’ basic
rights; codes of conduct; and corporate governance principles that maximize stakeholder
access to information and decisionmaking.
COMMUNITY
I N V O L V E M E N T, B U S I N E S S E S
CAN BUILD THEIR
REPUTATION WITH ALL
THESE GROUPS AS WELL
AS DEVELOP THE SKILLS
AND EXPERIENCE OF
THEIR EMPLOYEES
AND CREATE A MORE
ECONOMICALLY
PROSPEROUS AND
V I B R A N T S O C I E T Y.
NEIL SHAW,
CHAIRMAN, TATE & LYLE
INFRASTRUCTURE AND ENGINEERING
Infrastructure—from roads to dams and canals,
energy and communications, water and sanitation—is a pressing need in developing countries
as population increases, cities mushroom, and
economic growth spurs demands for additional
services. To meet this need, a growing number
of developing country governments, with the
support of international funding agencies, are
turning to the private sector to both develop
and manage projects. Among the benefits cited
are greater efficiency, more effective management practices, and greater fiscal accountability.
But private sector involvement is not a panacea,
warn NSI Researcher Gail Whiteman and author
Susan Brandum in the chapter on infrastructure
and engineering: social and environmental costs
can still be incurred.
Whiteman and Brandum argue that “sustainable
infrastructure” is essential. In developing
countries this requires, first, improving the efficiency of existing infrastructure, and second,
finding more efficient ways of meeting demand.
This presents opportunities for Canadian firms
in energy, water supply, waste management, and
telecommunications. The focus of most large
Canadian companies, such as public electricity
suppliers, is making technology more efficient
and thereby reducing waste. But while this is
practiced at home, it is seldom part of their
overseas operations. That has been left largely to
smaller companies.
8
Integral to all infrastructure development are
engineering services. Canada is the world’s
fourth-largest exporter of engineering services.
Nine Canadian companies are in the top 200
international design firms. In terms of market
share, Canadian firms—among the world’s most
competitive and best respected—are fifth in Asia
and second in both Latin America and Africa.
Engineering consultants, for their part, play a key
role in development, far greater than suggested
by the dollar value of their activities. A large part
of their work consists in planning and implementing infrastructure projects in the power,
water, and telecommunications sectors. As such,
they are able to influence or determine the social
and environmental impact of the projects they
design. They also transfer technology and knowhow to local counterparts through collaborative
arrangements and strategic alliances.
Often, the implementation of projects diverges
from the plans or recommendations of the
engineers. While Canadian firms have been
involved in controversial projects such as the
Three Gorges Dam in China and the Chamera
Dam in India, they have also won awards for
social and environmental impact planning,
such as Acres International Ltd’s hydropower
feasibility study in Nepal.
It is encouraging, the authors note, that some
Canadian companies are taking the initiative
and moving beyond economic criteria.
Canadian funding agencies, for example the
Export Development Corporation (EDC), do not
yet include social or environmental criteria in
their assessments of projects they support.
How can engineers make a difference? By taking
a stronger stance on development issues, say
Whiteman and Brandum; by becoming leaders
in environmental management; by employing
evaluation methodologies that combine social,
environmental and economic impacts; and by
introducing sustainable development
accounting or independent monitoring systems.
Increased professional development is also
needed in the areas of business ethics and
sustainable development.
MANAGEMENT CONSULTING
According to the World Bank, trade in goods
will soon be supplanted by services which
accounts for 20 percent of world trade and
continues to exhibit strong growth. While
Canadian service companies cannot be considered major players globally, their contribution is
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BOX 3 GOOD INTENTIONS: CODES
O
P
OF
M
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R
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P
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1
9
9
8
CONDUCT
“Every organization has an ethics program, whether it knows it or not,” says business ethics
expert Steven Brenner.1 An increasing number now also have a corporate code.
Very simply, a business code of conduct is a statement of principles business agrees to abide by
voluntarily over the course of its operations.2 There are three basic types of corporate codes:3
• A code of ethics states the values and principles that define the purpose of the company.
“These codes are expressed in terms of credos or guiding principles. Such a code says: ‘This is
who we are and this is what we stand for...’.”
• A code of practice interprets and illustrates corporate values and principles, and is addressed
to the employee as an individual decisionmaker. It says: “This is how we do things around here.”
• A code of conduct says “this is what you must (or must not) do.” Codes of conduct
typically consists of a list of rules: “Thou shalt and Thou shalt not.”
Looking at 32 Canadian companies with international operations, KPMG Canada found a
marked difference between the codes of subsidiaries of American corporations and those of
Canadian companies. “With few exceptions, the code of the US parent stood as the code of the
Canadian subsidiary, unchanged and firmly rooted in US law. The Canadian corporations were
more apt to include a clause requiring adherence to laws ‘foreign and domestic’ ”4 and “reflect
the Canadian values of tolerance, co-operation, and compromise and appeal to these guiding
principles rather than merely impose narrow legal rules prohibiting certain conduct.”5
A number of broader codes have also been promulgated:
• The Principles for Business developed in 1994 by the Caux Round Table in Switzerland represent the first international ethics code created as a result of collaboration between business
leaders in Europe, Japan, and the United States.
• The Principles for Global Corporate Responsibility: Benchmarks for Measuring Business
Performance, launched in September 1995 by the Ecumenical Committee for Social
Responsibility, the Interfaith Center on Corporate Responsibility, and the Taskforce on the
Churches and Corporate Responsibility.
• The OECD Convention against international corruption, signed in December 1997 by 29
leading industrial countries members of the Organisation for Economic Co-operation and
Development and five nonmember countries.
• The International Code of Ethics for Canadian Business, signed by 13 Canadian companies in
September 1997.
NOTES
1 Steven N. Brenner, “Ethics Programs and Their Dimension,” Journal of Business Ethics, Vol. 11, 1992, p. 391-99, as quoted in
Michael C. Deck, “Corporate Codes and Ethics Programs: Managing for Ethical Practice,” presentation at “Business Practices under
NAFTA: Developing Common Standards for Global Business,” conference, University of Colorado at Denver, December 8-10, 1994.
KPMG website at: http://www.kpmg.ca (consulted March 1998).
2 Craig Forcese, Commerce with Conscience? Human Rights and Corporate Codes of Conduct (Montreal: International Centre for Human
Rights and Democratic Development, 1997), p. 14.
3
Michael Deck, “Corporate Codes and Ethics Programs.”
4
Ibid.
5
Max Clarkson; Michael Deck; and Richard Leblanc, Codes of Ethics, Practice and Conduct, Management Accounting Issues Paper 13
(Hamilton: The Society of Management Accountants of Canada, 1997), p. 19.
increasing. The growth leader is commercial
services, particularly management consulting.
A large part of the work carried out by Canadian
management consultants in developing countries is under the auspices of the Canadian
International Development Agency (CIDA) and
other international development agencies. As
distinct from consulting engineers, management
consultants deal with issues such as public sector restructuring and legislative and regulatory
reform—in effect, the very business of development, says journalist Marlene Benmergui in the
chapter on management consulting.
Also growing is the trade in legal services,
although little of that business is with developing countries. Nevertheless, Canadian lawyers
are making a significant contribution to increasing skills and strengthening the legal systems in
new democracies through a volunteer program
launched by the Canadian Bar Association.
SELLING CANADIAN VALUES
Canadian government support can contribute
to the success of our corporations overseas. The
promotion of Canadian prosperity is clearly the
principal objective of most Canadian policies
9
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BUSINESS
IS A CRITICAL
E L E M E N T O F S O C I E T Y.
IT
INEVITABLY HAS A
GREAT IMPACT ON HOW
SOCIETY DEVELOPS
IT
.
HAS A RESPONSIBILITY
T O P L AY T H AT R O L E
WITH HIGH ETHICAL AND
MORAL STANDARDS
,
WITH CONSCIOUSNESS
AND WITH PURPOSE
.
COURTNEY PRATT,
CHAIRMAN, NORANDA INC.
“BUSINESS ACCOUNTABILITY:
SHAREHOLDERS,
STAKEHOLDERS OR SOCIETY?”
ADDRESS TO THE CANADIAN
CLUB OF TORONTO,
SEPTEMBER 29, 1997
Page 10
V E R V I E W
and programs. In foreign policy, trade missions
have been at the top of the government agenda,
under the Team Canada banner.
During the past five years, the government has
taken a number of steps to foster Canadian
business success abroad: trade diversification;
multilateral agreements; coordination between
government departments and the implementation of the International Business Strategy; a
clear focus on fast growing emerging markets
and niches; increased cooperation between government and the private sector; the promotion
of small and medium-sized enterprises; better
monitoring; and heavy use of information technology to facilitate consultation and networking.
But, says Ted Paterson, NSI Director of Finance
and Special Projects, in the chapter titled
“Selling Canadian Values,” the strategy has not
been working. Canada’s trade with the fastest
growing markets has been declining while our
dependence on the US continues to increase.
Moreover, 70 percent of exports are supplied by
fewer than 100 firms.
What are the benefits and costs of Team Canada
missions? While they serve the public relations
needs of politicians and participating firms,
they have not translated into greatly increased
trade. They have, however, led to a downplaying of environmental security, human rights,
and democracy. Paterson notes that the
Canadian government, in fact, does little to
require or even encourage Canadian businesses
to promote respect for human rights overseas,
although the promotion of Canadian values and
culture is one of the three pillars of Canada’s
foreign policy.
KEY CONCLUSIONS
AND
Canada enjoys an enviable reputation in
developing countries. How can it capitalize on
its competitive advantage? First, by following
through on its foreign policy objectives. This
would require abandoning trade missions to
countries whose policies are inconsistent with
fundamental Canadian values and requiring
that firms which receive subsidies in support of
international activities sign codes of social and
environmental conduct, among other measures.
Also essential, says Paterson, is for Canada’s aid
program to reassert the priority of developmental
rather than commercial objectives.
CONCLUSION
This compact survey of Canadian financial,
mining, manufacturing sectors, and infrastructure/engineering consulting firms shows that,
for many Canadian companies, social responsibility is an integral part of doing business and is
critical to performance and success. Others,
however, continue to view corporate social
responsibility as “a discretionary activity—to be
engaged in when better financial performance
results in the availability of resources for
philanthropic initiatives, employee relations
or community investment.”5
Ensuring that corporations engage in ethical
behaviour, however, is not only an issue for the
private sector. It requires the active participation
of both governments and individuals. The
bottom line is that we all play a role in shaping
how corporations conduct their business and
must ourselves act responsibly by exercising our
economic power—by selective shopping,
investment screening, and workplace decisions.
RECOMMENDATIONS
KEY CONCLUSIONS
• Corporations operate not just within the marketplace, but also within social and ecological
systems whose well-being is vital to the companies’ prosperity and their very survival.
• In addition to their shareholders, corporations’ “stakeholders” encompass their employees,
customers, the communities, and the natural environment in which they operate.
• Social and environmental responsibility should therefore be regarded as investments yielding
rich dividends, both in terms of the firm’s long-term competitiveness, and the health of the
system which it is a part.
• It is not sufficient for corporations simply to say they intend to be socially and environmentally
responsible: they must also be held accountable for their actions (or inaction).
• The Canadian government has privileged trade promotion, to the detriment of development,
human rights, and environmental considerations.
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KEY CONCLUSIONS
V
E
AND
L
O
P
M
E
N
T
R
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P
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RECOMMENDATIONS
R
T
1
9
9
8
(continued)
KEY RECOMMENDATIONS
FOR CORPORATIONS
• CEOs and managements can start by implementing codes of ethics for their own firms and
integrating personal ethics into their business culture.
• Corporations should adopt international codes of conduct aimed at:
• improving the well-being of their employees and customers and of the communities in which
they operate;
• proper environmental stewardship;
• the observance of basic human rights; and
• ethical business practices.
• Codes of conduct must address issues of corporate accountability and ensure that corporate
behaviour is independently monitored and verified.
• Companies should adopt some form of sustainable development accounting.
• Corporations need to adopt governance principles and practices that maximize the access of
stakeholders to information and decisionmaking.
• Corporations need to adopt evaluation methodologies that combine social, environmental, and
economic considerations.
FOR GOVERNMENT
• The Canadian government should systematically make information available on human rights
conditions and environmental concerns in countries targeted by trade missions or in which
Canadian firms desire to do business.
• The Canadian government should not financially support commercial activities in countries
whose policies are inconsistent with fundamental Canadian values.
• Canadian values, particularly with regard to observing basic human rights and environmental
responsibility, need to be integrated into programs supporting the commercial activities of
Canadian firms and administered by CIDA, the EDC, or other agencies and programs of the
federal or provincial governments.
• The Canadian government should reverse the funding cuts of the past decade to the
international aid program and favour programs addressing poverty and basic needs.
FOR CANADIANS
• Shareholders need to exercise their rights to influence corporate social and environmental practice.
• Canadians must act responsibly by exercising their economic power as educated consumers of
products and services, and as investors in mutual funds, RRSPs, and pension plans.
OTHER SUGGESTIONS
• Further research is needed on how to transform corporate responsibility into accountability.
• Best practices in all sectors need to be recognized and promoted.
NOTES
1
Paul Hawken, Keynote Address, Recycling Council of Ontario
17th Annual Conference, Hamilton, October 2, 1996.
4
2
5
Susan Semenak, “Buying goods, with a side of ethics,” The Ottawa
Citizen, August 11, 1997, p. C3.
3 United Nations, World Investment Report 1997: Transnational
Corporations, Market Structure, and Competition Policy (New York:
United Nations, 1997), p. xv.
KPMG, “The Age of Ethics,” February 1998. Website:
http://www.kpmg.ca (consulted in March 1998).
Janet Rostami, Corporate Social Responsibility: Taking Action to Meet
the Challenge, Members’ Briefing (Ottawa: The Conference Board of
Canada, January 1998).
11
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Page 13
O
H A P T E R
N E
T HE
C ORPORATE
S TAKE IN
S OCIAL
R ESPONSIBILITY
Roy Culpeper and Gail Whiteman
R
I
O Y
C
U L P E P E R
N S T I T U T E
T H E
N
.
O R T H
M A R K E T S
G
- S
A N D
I S
P
A I L
O U T H
R E S I D E N T
W
I
O F
H I T E M A N
I S
N S T I T U T E
,
S O C I A L
E Q U I T Y
N
T H E
A
O R T H
- S
O U T H
R E S E A R C H E R
S P E C I A L I Z I N G
I S S U E S
A T
I N
.
13
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Page 14
H A P T E R
O
N E
T HE C ORPORATE S TAKE IN
S OCIAL R ESPONSIBILITY
MY
F U N D A M E N TA L
HYPOTHESIS IS THAT IF
THE
CANADIAN
BUSINESS COMMUNITY
CAN COME TOGETHER IN
A COMMITMENT TO
MAKING A DIFFERENCE
IN BUILDING THE
SOCIETY OF THE NEXT
MILLENNIUM
CANADIAN
,
THEN
C O R P O R AT I O N S
WILL BE ABLE TO MAKE
A MEANINGFUL
DIFFERENCE IN SHAPING
A SOCIETY THAT IS
—
BETTER FOR ALL OF US
BUSINESS
,
EMPLOYEES
,
T H E E N V I R O N M E N T,
OUR COMMUNITIES
.
COURTNEY PRATT,
CHAIRMAN, NORANDA INC.
ADDRESS TO THE CANADIAN
CLUB OF TORONTO,
SEPTEMBER 29, 1997
C
anada is the world’s eighth largest trader,
with US$192 billion of merchandise exports
in 1995, or 4 percent of the global total. In
terms of services like insurance and tourism,
Canada ranks 15th as an exporter with a 1.7
percent share, earning US$18.4 billion.1 And
while our trade is heavily concentrated on the
United States, Canadian trade with developing
countries accounts for almost a third—some
$39.5 billion in imports and exports—of our
trade with the rest of the world (see Statistical
Annex, Table 6, p. 139).
Trade, in fact, has supplanted aid as the main
channel of relationship between Canada and
countries of the South. Trade in both directions
has grown greatly during the past 20 years, and
investment even more in recent years. This is
likely to continue: securing trade is set down
unambiguously in the Canadian government’s
1995 foreign policy document, Canada in the
World.
This shift in relationship gives rise to a number
of questions concerning the role and responsibilities of the private sector in developing
markets. Do conscience and commerce mix?2
Should businesses help improve human rights,
labour standards, environmental stewardship? Is
it even possible? Do corporations have the
ability or power to influence (for good or ill)
social equity and environmental standards? As
the private sector rapidly becomes a pre-eminent
actor, both domestically and in the international
marketplace, answers to such questions are
increasingly urgent.
Problems of social inequity and environmental
degradation are exceedingly complex. Their
solution will therefore require persistent, ingenious, and multi-faceted interventions and
demand the active participation of businesses,
governments, and civil society. If the policies
and actions of any one of these actors alone is
likely to be inadequate, corporations have a
particular stake in social responsibility. In today’s
global markets, business must be part of the
solution rather than part of the problem—social
responsibility is both good for society and for
business. For this to happen, however, the dominant culture and practices of business must
14
change. In particular, the prevailing ethic of
competitively driven self-interest must give way
to a more cooperative ethos in which the benefits accruing to society and the environment are
integrated into business policy and decisionmaking along with the more conventional
profit motive.
There are promising signs that the prevailing
culture and ethical practices of corporations are
changing. Perhaps foremost is that business
people now openly acknowledge that corruption
and bribery (with respect to foreign as well as
domestic governments) are ethically reprehensible. Indeed, an international consensus on the
issue has resulted in the adoption by the
Organisation for Economic Co-operation and
Development (OECD) of an international code to
limit such conduct (see Box 1). Progress on other
forms of ethically objectionable corporate behaviour—child labour, oppressive or exploitative
working conditions, etc.—lags behind, although
there is a considerable amount of discussion
about the issues. On yet other issues, such as the
relationship between corporate behaviour and
human rights, there is little consensus. However,
the launching of the International Code of Ethics
for Canadian Business by a group of Canadian
firms in late 1997 is a step in the right direction
(see Box 2). Finally, many leading corporate
executives are speaking out on the need for
businesses to demonstrate social and
environmental responsibility.
GLOBALIZATION AND
NORTH-SOUTH RELATIONS
Globalization has become the seemingly
unstoppable force governing international
economic and political relations. Private
markets today drive the global economy and
dominate North-South economic relations.
Globalization can be a tremendous force for
good: it can generate employment, income, and
economic growth. It can help develop or use
human resources, transfer technology, and
increase productivity. It can thus help raise
standards of living and vastly improve the quality
of life. Globalization has the potential of making
the world a better place in which to live for all its
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BOX 1 OECD CONVENTION AGAINST INTERNATIONAL CORRUPTION
Corruption and bribery occur in both the developed and developing world. But while experts
agree that the problem is widespread, its actual dollar impact is unknown.1 Corrupt practices
affect not only the global trading system, but can also lead to a misallocation of scarce public
resources, particularly in the developing world, and help sustain corrupt authoritarian regimes.2
Transparency International3 defines corruption as “the abuse of public power for private gain.”4
Canadian firms have two reasons for combating global corruption: first, a level playing field that
does not tolerate corruption allows them to compete fairly and openly in the global marketplace;
and second, Canadians have an obligation to help foster transparent and democratic accounting
systems and noncorrupt business practices.5 While corruption is not believed to be widespread in
Canada, it is perceived to be in some countries where Canadian firms operate, such as Indonesia
and Nigeria.6
On December 17, 1997, 29 leading industrial countries (OECD members), and five nonmember
countries (Argentina, Brazil, Bulgaria, Chile, and the Slovak Republic) signed the OECD
Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions. All signatory countries agreed to make the bribery of foreign officials a crime
wherever it occurs.7 Before the signing of this Convention, only the United States, through its
Foreign Corrupt Practices Act, made it a criminal offense for a US firm to pay bribes abroad.8
OECD member countries have agreed to introduce domestic legislation to implement the
Convention and to ratify it by the end of 1998.
The OECD Convention focuses on “active corruption” or “active bribery”—meaning the offence
committed by the bribe giver. The Convention establishes a standard to be met by signatory countries
and “seeks to assure a functional equivalence among the measures taken.”9 Actions that are not
prohibited by the Convention include small “facilitation” payments made in some countries to induce
public officals to perform their functions—an activity which is to be addressed by individual countries
in support of good governance—and payments to political parties. In addition, it is not an offence if
an “advantage is permitted or required by the written law or regulation of the foreign public official’s
country, including case law.”10 Culprits may receive criminal sanctions, including fines and
imprisonment.11
According to the nonprofit NGO, Transparency International, there are a number of outstanding
issues. Like any international code, a key problem is effective monitoring. Since the Convention
adopts a “soft law” approach—a recommendation for action by national governments that is
not legally binding—effective implementation at the national government level needs to be
evaluated at an international level. In addition, monitoring corporate compliance is difficult since,
in many cases, neither party may willingly admit to corrupt practices. Instead, the Convention
will help companies that are unwilling to participate in bribery by providing them with
international grounds for nonparticipation. In addition, Transparency International believes that
the OECD initiative will help strengthen domestic anti-corruption movements in developing
countries.
NOTES
1 Robert Johnstone, “ Corruption and International Business,” Newsletter, CIIA, vol. II, (1) (Toronto: Canadian Institute of
International Affairs, 1997).
2
Transparency International, Press Release, “OECD Anti-Corruption Convention leaves critical questions still open,” November 5,
1997, Berlin. For more details see http://www.transparency.de/press/1997.1.3.oecd-convention.html
3
A nonprofit NGO which operates at both an international and national level through its National Chapters, Transparency
International emphasizes the need for increased public transparency and accountability in international business activities and public
procurement. The organization also provides international Standards of Conduct. To contact Transparency International Canada,
e-mail Dr Wes Cragg at ti-can@busy.yorku.ca
4
Transparency International, Press Release, November 5, 1997, Berlin, p. 2.
5
Johnstone, 1997.
6
Ibid.
7
In OECD countries like Japan and Germany, companies are not held responsible for criminal acts. Instead, the Convention outlines
the need for penalties as a meaningful deterrent. See Transparency International, Press Release, November 5, 1997.
8
Ibid.
9
Commentaries on the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, OECD
website http://www.oecd.org
10
Ibid., p. 2.
11
Canada, Department of Foreign Affairs and International Trade (DFAIT), News Release (No. 214), December 18, 1997.
15
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BOX 2 INTERNATIONAL CODE
S
TA K E
OF
I N
S
ETHICS
O C I A L
FOR
R
E S P O N S I B I L I T Y
CANADIAN BUSINESS1
Canadian business has a global presence that is recognized by all stakeholders2 as economically
rewarding to all parties, acknowledged as being ethically, socially, and environmentally responsible, welcomed by the communities in which we operate, and that facilitates economic,
human resource, and community development within a stable operating environment.
P R I N C I P L E S
B E L I E F S
We believe that:
• we can make a difference within our sphere
of influence (our stakeholders)
• business should take a leadership role through
establishment of ethical business principles
• national governments have the prerogative to
conduct their own government and legal
affairs in accordance with their sovereign rights
• all governments should comply with international treaties and other agreements that
they have committed to, including the
areas of human rights and social justice
• while reflecting cultural diversity and differences, we should do business throughout
the world consistent with the way we do
business in Canada
• the business sector should show ethical
leadership
• we can facilitate the achievement of wealth
generation and a fair sharing of economic
benefits
• our principles will assist in improving
relations between the Canadian and host
governments
• open, honest and transparent relationships
are critical to our success
• local communities need to be involved in
decision-making for issues that effect them
• multistakeholder processes need to be
initiated to seek effective solutions
• confrontation should be tempered by
diplomacy
• wealth maximization for all stakeholders
will be enhanced by resolution of outstanding human rights and social justice issues
• doing business with other countries is good
for Canada and vice versa
A/Concerning Community Participation
and Environmental Protection, we will:
• strive within our sphere of influence to
ensure a fair share of benefits to
stakeholders impacted by our activities
• ensure meaningful and transparent consultation with all stakeholders and attempt to
integrate our corporate activities with local
communities as good corporate citizens
• ensure our activities are consistent with
sound environmental management and
conservation practices
• provide meaningful opportunities for technology cooperation, training and capacitybuilding within the host nation
B/Concerning Human Rights, we will:
• support and promote the protection of international human rights within our sphere of
influence
• not be complicit in human rights abuses
C/Concerning Business Conduct, we will:
• not make illegal and improper payments
and bribes and will refrain from participating in any corrupt business practices
• comply with all applicable laws and conduct
business activities in a transparent fashion
• ensure contractor’s, supplier’s and agent’s
activities are consistent with these principles
D/Concerning Employee Rights and
Health & Safety, we will:
• ensure health and safety of workers is protected
• strive for social justice and promote freedom
of association and expression in the workplace
• ensure consistency with universally accepted
labour standards, including those related to
exploitation of child labour
V A L U E S
We value:
• Human rights and social justice
• Wealth maximization for all stakeholders
• Operation of a free market economy
• A business environment which mitigates
against bribery and corruption
• Public accountability by governments
• Equality of opportunity
• A defined code of ethics and business practice
• Protection of environmental quality and
sound environmental stewardship
• Community benefits
• Good relationships with all stakeholders
• Stability and continuous improvement
within our operating environment
A P P L I C A T I O N
The signators of this document are committed
to implementation with their individual firms
through the development of operational codes
and practices that are consistent with the vision,
beliefs, values and principles contained herein.
NOTES
1
Thirteen Canadian companies developed the Code in
September 1997: Alcan Aluminum Ltd; Beak International Inc.;
Cambior Inc.; Chauvco Resources Ltd; John Neville Inc.; Komex
International Ltd; Liquid Gold Resources Inc.; Profco Resources
Ltd; Pulsonic Corp.; Reid Crowther International Ltd; Sanduga &
Associates; Shell Canada Ltd; and Wardrop Engineering Inc.
2
Should include: local communities, Canadian and host governments, local governments, shareholders, the media, customers
and suppliers, interest groups, and international agencies.
Source: http://www.uottawa.ca/~hrrec/busethics/codeint.html
16
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inhabitants. But even proponents of globalization
admit that it has definite downsides: unemployment, widening income disparities, and environmental degradation have so far accompanied
globalization.3 So how, in a world dominated by
global market forces and private sector interests,
can social and environmental equity flourish?
Market capitalism is nearly universal today. This
may suggest that there is global consensus about
the advantages of market-based economies. But it
is evident that there is not just one “model” of
market capitalism: the market economy in the
United States differs from Canada’s more “mixed”
economy and considerably from Western Europe’s
and Japan’s. In each, there is a different balance
between the responsibilities of states, market
agents, communities, and households.
The demise of the communist system throughout
much of the world makes it possible to ask
searching questions about the market-based
economy. How “fair” are free markets? Given
widening income disparities in the industrial
countries during the past 20 years, how equitably
distributed are the benefits of market-based
economies? What is their impact on different
segments of society—workers, households, and
communities? What are corporations’ rights and
responsibilities toward society? Toward commonproperty resources and the natural environment?
How does diminishing state power affect all?
Searching questions have also been raised about
corporate governance. Are major shareholders a
corporation’s only, or even the primary, “stakeholders?” What responsibilities do corporations
have toward their customers and clients? toward
consumers generally? toward their employees
and the communities in which they operate?
toward future generations and the environment?
In a market-driven global economy, issues of
corporate conduct, ethics, and governance have
come to the fore. These issues are both more
stark and complex in developing countries
where standards, legal systems, and customs
differ from those in industrialized countries.
THE GROWING ROLE OF
P R I VAT E F O R E I G N I N V E S T M E N T
IN DEVELOPMENT
DEVELOPMENTS OVER THE LAST DECADE
Since the late 1980s, the role of private foreign
investment in developing countries has
expanded greatly, both in relative and absolute
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terms. This is due to a number of overlapping
developments: global official development assistance (ODA) has substantially declined; the level
of foreign direct investment (FDI) in the developing world has increased significantly, as has
that of portfolio investment; and there has been
an ongoing move toward a deeper and broader
form of economic integration between developed and developing worlds. Private investment
flows have been highly concentrated in about
one dozen developing countries, however.
The 1980s also witnessed changes of fundamental importance in North-South relations. First,
the aftermath of the debt crisis led to a wave of
economic liberalization, reform, and openness
to foreign investment. Second, developing
countries in East and Southeast Asia experienced
unprecedented economic growth, based primarily on higher investment rates and export promotion. Until the recent financial crisis in Asia,
this model seemed successful and highly attractive to other developing countries, which have
begun to actively compete for foreign direct
investment. Finally, a wave of political liberalization resulted in the spread of democracy
through many of the non-OECD countries.
These combined events set the stage for a strong
commitment to privatization, which created
many new opportunities for private sector firms.
The increase in private investment flows to
developing countries has been both swift and
dramatic. Corporations have actively entered
new and expanded markets. The postwar domination of private by official flows has been overturned in the first half of the 1990s (Table 1),
returning perhaps to the pattern that existed
before the Great Depression. Most countries,
including the remaining centrally planned communist states such as the People’s Republic of
China, have now embraced market-based
economies. As a result, the linkages between
rich and poor countries are driven by private
TABLE 1 Aggregate Net Long-Term
Resource Flows to Developing Countries, 1990-96
(US$BILLIONS)
1990 1993 1996
Aggregate Net Resource Flows 100.6 212.0 284.6
Official Development Finance
56.3 55.0 40.8
Total Private Flows
44.4 157.1 243.8
of which: FDI
24.5 67.2 109.5
Portfolio Equity Flows 3.2 45.0 45.7
Source: World Bank, Global Development Finance, 1997, p. 3.
17
GOOD
CORPORATE
ETHICS HAVE TO BE THE
FOUNDATION OF OUR
BUSINESS
.
AL FLOOD, CHAIRMAN,
CANADIAN IMPERIAL
BANK OF COMMERCE
QUOTED IN ROBERT WALKER,
“THE ETHICAL IMPERATIVE,”
THE FINANCIAL POST 500,
1997, P. 28.
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G L O B A L E C O N O M Y,
WITH ITS BORDERLESS
FLOW OF GOODS
,
CAPITAL AND IDEAS
,
CANNOT FUNCTION
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investment, trade, and commerce even more so
than before. (It should be noted, however, that
the poorest countries, particularly those of subSaharan Africa, remain largely outside the ambit
of these new global markets.) One indicator of
the relative importance of the private and
public sector linkages is captured in Table 1.
R
E S P O N S I B I L I T Y
assess, monitor, and limit environmental and
social impacts. As a result, the replacement of
ODA-financed infrastructure by privately and
locally financed infrastructure is likely to raise
many of the same issues. There is a danger that,
without the involvement of public aid agencies
in infrastructure projects, environmental and
social standards will be laxer.
WITHOUT A GLOBAL
ETHIC
THE DECLINE IN OFFICIAL FINANCING FOR
DEVELOPMENT
.
JOHN DALLA COSTA,
“MORAL CRISIS BEHIND ASIAN
MESS,”
THE GLOBE AND MAIL,
MARCH 26, 1998
From 1990 to 1996 there was a sharp drop in
official flows (comprising both ODA and other
official flows, such as bilateral and multilateral
loans). After a sharp fall in 1993 and a partial
recovery in 1994, ODA dropped by nearly
10 percent in real terms (adjusted for inflation
and exchange rates) in 1995. As a share of the
gross national product (GNP) of OECD
Development Assistance Committee (DAC)
members, ODA fell to 0.27 percent, its lowest
level in 45 years. The ODA/GNP ratio fell in
15 out of 21 DAC member countries, including
all the G-7 countries. Huge cuts in the United
States ODA program reduced that country from
the number one position to fourth place by
1995, with a program less than half the size of
Japan’s, and less than those of both France and
Germany.4 Canada, which had been known as
one of the more committed aid donors until the
1990s, cut its aid budget by 40 percent between
1989 and 1997.
There are strong reasons to believe that private
foreign investment, even without numerous
questions about its social responsibility and
impact, is not and will not be a perfect substitute for foreign aid (publicly funded official
development assistance). Private investment
has, in fact, generally complemented ODA: for
example, two of the key sectors of interest to
foreign investors are natural resources and manufacturing, sectors not traditionally given much
support through ODA. In other sectors, such as
infrastructure, private foreign investment is
replacing ODA. But this substitution may come
at a price.
For several reasons, over the past decade, aid
agencies have backed away from infrastructure
projects in developing countries. These reasons
include dwindling funds and the costliness of
infrastructure projects. Moreover, much negative publicity has surrounded the adverse environmental and social impacts of poorly planned
or implemented infrastructure projects. In
response to criticisms, the World Bank and
other agencies have implemented procedures to
18
THE RISE OF PRIVATE FOREIGN INVESTMENT
Investment by transnational corporations—a
central, defining feature of globalization—has
expanded enormously since the Second World
War. Such investment facilitates “deep
integration” between different countries and
communities as global firms source inputs of
manpower, capital, raw materials, and
intermediate products from wherever it is best
to do so, and sell their goods and services in
all the major world markets.
In 1995 there were 45,000 transnational corporations (TNCs) with 280,000 foreign affiliates.
Their estimated global sales were US$7 trillion;
since 1987 such sales have exceeded exports of
goods and services by a factor of 1.2 to 1.3. Most
TNCs are headquartered in developed countries,
although by 1995, 7,900 of the 45,000 were
based in developing countries.5
Foreign direct investment by transnationals—the
activity through which they establish and grow
their foreign affiliates—is now a major force
shaping globalization. In 1996, these flows
amounted to US$350 billion worldwide, and
resulted in a global FDI stock of US$3.2 trillion.
Of the $350 billion FDI total, some US$129
billion, or 37 percent, went to developing countries.6 A good proportion of FDI is concentrated
in the hands of the 100 largest TNCs (ranked by
the size of foreign assets), which own $1.7 trillion
of assets in their foreign affiliates, controlling an
estimated one-fifth of global foreign assets.
Since three-quarters of the investment of affiliates was financed by means other than FDI from
their parents (e.g., through commercial banks
and equity markets, both at home and abroad),
their actual investment in 1996 was $1.7 trillion,
about one-fifth of world gross capital formation.7
In other words, TNCs and their affiliates have a
substantial role in global investment.
There has always been controversy over the role
of FDI in development, and although the debate
is muted in the 1990s, many of the underlying
issues still remain (see Box 3). This is in part
because of a heavy concentration of FDI among
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BOX 3 FOREIGN DIRECT INVESTMENT
P
M
AND
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1
9
9
8
DEVELOPMENT
Until the 1980s, Foreign Direct Investment (FDI) was one of the most hotly debated topics in
North-South relations. It was viewed, at best, as a mixed blessing, and at worst, as a sort of neocolonialism. As a result of such attitudes, nationalization and expropriation of transnational corporations’ developing-country assets was not uncommon during the first three postwar decades,
imparting to FDI a high level of political risk. In the 1990s, the debate has cooled as many developing countries welcomed, even enticed transnationals (TNCs) to invest through favourable tax
or other policies. TNCs and FDI are now widely seen as an effective route to modern technology
and employment, to export markets and industrial growth.1
Nonetheless, some important underlying issues remain. For example:
• a favourable investment climate is a strong factor in attracting FDI, but the response to more
liberal terms in developing countries is often overestimated;
• if tax incentives are offered, there is clearly a cost in terms of foregone revenues;
• an increasing part of world trade is internal to TNCs. While this is efficient for corporations, it
may not be optimal for developing countries;
• transfer pricing of intra-TNC transactions remains an important problem, as developedcountry hosts recognize, but most developing countries do not have the capability to deal
with it effectively; and
• the terms on which FDI is provided to developing countries are likely to be the products of
bargaining, in which TNCs typically have more bargaining power than their hosts.
Even though one of the key advantages of FDI is that it usually transfers technology to the host
country—a rather attractive prospect for poorer countries striving to increase productivity—
these advantages can also negatively affect the development of local technological capabilities
and skills. Innovative activity by TNCs is typically concentrated in a few developed countries.
Upgrading skills and capabilities in developing countries involves high learning and other costs
which TNCs are typically unwilling to bear. Therefore, developing countries may be unwise to
rely solely or principally on FDI (or more generally on markets) to encourage technological
development and extension to the domestic economy, as well as local human development.
Ultimately, the development of indigenous skills and technology must rely on local government
initiatives.
The older debate on FDI is resurfacing in the context of a Multilateral Agreement on Investment
(MAI) (see Chapter 3, p. 58). A cornerstone of that agreement, currently being negotiated
principally among the developed member countries of the OECD, is the principle of national,
nondiscriminatory treatment of foreign investors by host countries. This would in effect disallow
many developing countries (if they were to become MAI signatories) from implementing
policies adopted in the past, for example selective measures to protect domestic industry and
technological development, as well as performance requirements (for example, on exports) on
FDI to achieve specific developmental objectives.
Moreover, many developing-country critics have compared the proposal for an MAI—which
would be legally binding upon signatory governments—with three past initiatives undertaken
under the auspices of the United Nations,2 aimed at establishing codes of conduct for
transnational corporations: industrialized countries insisted these would be nonbinding and
voluntary. Finally, the fact that the MAI has been negotiated in a forum dominated by the
developed countries (the OECD) rather than a more universal forum such as the World Trade
Organization, adds to the developing countries’ apprehensions that the economic, social, and
political objectives of development are likely to be marginalized in the treaty.
NOTES
1
See Gerald K. Helleiner, “Transnational Corporations, Foreign Direct Investment and Economic Development,” in H.B. Chenery and
T.N. Srinivasan, eds, Handbook of Development Economics, vol. II (London: Elsevier Science Publishers, 1989), pp.1,441-480; and Sanjaya
Lall, “TNCs: The New Custodians of Development?” in Roy Culpeper, et al, eds, Global Development Fifty Years After Bretton Woods
(London: Macmillan, 1997), pp. 169-91.
2
See A.V. Ganesan, “Strategic Options Available to Developing Countries with regard to a Multilateral Agreement on Investment,”
unpublished paper prepared for the Group of 24, January 1998. The three UN codes referred to are: the Multilaterally Agreed Equitable
Principles and Rules for the Control of Restrictive Business Practices, adopted by UN Resolution in 1980; the Draft UN Code of Conduct
on Transnational Corporations (negotiated but not yet adopted); and the Draft International Code of Conduct on the Transfer of
Technology (negotiated but not yet adopted).
19
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TABLE 2 Transnational Corporations’ Gross Revenues and
Developing Countries’ GNP, 1994-95
Corporation
Revenues
HQa
(US$ billions)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
General Motors Corp.
Ford Motor Company
Mitsui & Co. Ltd.
Mitsubishi Corporation
Itochu Corporation
Royal Dutch/Shell Group
Marubeni Corp.
Exxon Corporation
Sumitomo Corporation
Toyota Motor Corporation
Wal-Mart Stores Inc.
General Electric Co.
Nisho Iwai Corp.
N.T. & T. Corp.
IBM Corp.
168.4
US
147.0
US
144.9
Japan
140.2
Japan
135.5
Japan
128.2 UK/Neths
124.0
Japan
119.4
US
119.3
Japan
108.7
Japan
106.1
US
79.2
US
78.9
Japan
78.3
Japan
75.9
US
Developing
Country
(US$ billions)
GNP Population
(millions)
China
Brazil
Korea
Russia
India
Argentina
Mexico
Indonesia
Thailand
Turkey
South Africa
Saudi Arabia
Poland
Greece
Malaysia
47 Low-Incomeb
697.6
688.1
455.5
344.7
324.1
281.1
250.0
198.0
167.1
164.8
136.0
125.5
117.7
90.6
85.3
316.9
1,200
159
45
148
929
35
92
193
58
61
42
19
39
11
20
1,050
Notes:
a
Location of TNC’s head office.
b The world’s poorest countries other than India and China.
Source: Fortune, August 4 1997; World Bank, World Development Report 1997.
the largest TNCs, and also in part because the
largest TNCs tend to be headquartered in the
US, Europe (particularly the United Kingdom,
Germany, and France), and Japan. Many of
these huge corporations have gross revenues or
sales exceeding the GNP of all but a handful of
developing countries (see Table 2).
There are some particularly striking contrasts
between TNCs and developing countries.
Together, sales of the world’s five largest corporations, with aggregate revenues exceeding
US$735 billion, exceed the GNP of China (a
country with more than one-fifth of the world’s
people). General Motors Corp. alone is bigger
in this sense than Thailand (with 65 million
people), and all but eight other developing
countries. General Motors and Ford Motor
Company have aggregate revenues exceeding
the total GNP of 47 of the world’s poorest countries, home to more than one billion people.
Royal Dutch/Shell Group is larger and Exxon
Corporation slightly smaller than Saudi Arabia,
the world’s largest oil-exporting country. The
revenues of Wal-Mart Stores Inc. are more than
half as much as the entire GNP of Indonesia, a
country of more than 190 million people.
While Canadian corporations do not rank
among the world’s largest, they are nonetheless
formidable entities in their respective sectors
and in comparison to mid-sized developing
countries (see Box 4).
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It would be a mistake, however, to consider economic globalization a phenomenon that involves
only large transnational corportations. Because
of modern information and telecommunications
technology, small and medium-sized enterprises
are also able to carry out business in remote
markets, in a manner unthinkable even half a
century ago. Individual private investors are also
getting into the act. One of the most remarkable
and unprecedented developments of the 1990s
has been the growth of cross-border portfolio
equity investment (see Table 1). The purchase of
share capital, once almost wholly confined
within national boundaries, now occurs between
countries in a number of ways. And an increasing
proportion of the transactions take place between
industrialized and developing countries, many of
which have opened their stock markets for
investment by nonresidents for the first time—
and in some cases established stock markets for
the first time. Individual investors in industrial
countries now participate in such cross-boundary
transactions by purchasing and selling “emerging
market” shares through mutual and pension
funds, and through brokered deals involving
particular Southern firms.
At the end of the 1990s, both the behaviour of
TNCs and the role of FDI are changing.
Traditionally, TNCs expanded their territorial
horizons primarily to exploit their core competencies or competitive advantages. Increasingly,
however, global firms seek to enhance their
advantages by acquiring, or gaining access to,
strategic assets, new resources, and capabilities—
part of a phenomenon called “alliance capitalism” by John Dunning. Instead of the traditional
hierarchical relationship (between parent and
affiliate), such alliance behaviour often involves
cooperative arrangements, whether for technical
service or subcontracting agreements, or more
informal inter-firm understandings.8
GLOBAL MARKETS
SOCIAL EQUITY
AND
DILEMMAS OF THE MARKET SYSTEM
Markets have existed as long as human
communities, but it is only since the industrial
revolution two centuries ago that the “market
system” has increasingly dominated society—
first at the national level, and now at the global
level. Social theorists have long criticized the
impact of the market system on society and,
more recently, on the environment. In the 19th
century, political economists such as Karl Marx
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9
9
8
BOX 4 CANADA’S LARGEST CORPORATIONS
REVENUES ($BILLIONS)
Corporations
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
BCE Inc.
Northern Telecom Ltd
Royal Bank of Canada
CIBC
Bank of Montreal
George Weston Ltd
Bank of Nova Scotia
Trans-Canada Pipelines Ltd
Thomson Corp.
Imperial Oil Ltd
Alcan Aluminum Ltd
Noranda Inc.
Loblaws Supermarkets Ltd
Imasco Ltd
Toronto-Dominion Bank
Sector
C$
US$
Telecommunications
Telecommunications
Banking
Banking
Banking
Food
Banking
Energy
Publishing
Energy
Metals
Mining
Food
Management
Banking
28.64
17.79
16.47
14.88
13.00
12.81
12.40
10.83
10.72
10.51
10.39
9.88
9.87
9.45
9.07
20.91
12.99
12.02
10.86
9.49
9.35
9.05
7.91
7.93
7.67
7.69
7.21
7.21
6.90
6.62
Notes: It is clear that Canada’s largest corporations are smaller than the world’s leading transnationals. The largest Canadian firm, BCE
Inc., is number 162 on the Fortune 500 list. Nonetheless, it is worth observing that BCE’s gross revenues in 1996 exceeded the 1995 GDP
of countries such as Côte d’Ivoire, Sri Lanka, Guatemala, Ecuador, Uruguay, and Vietnam, and equaled 80 percent of Nigeria’s GDP. If
the world’s transnationals are ranked according to assets rather than sales, Canada has four corporations in the top 100: Seagram Ltd
(number 30); BCE Inc. (61); Thomson Corp. (64); and Northern Telecom (Nortel) (78). See UN, World Investment Report 1997:
Transnational Corporations, Market Structure and Competition Policy, New York, 1997.
Source: Report on Business Magazine, July 1997.
and John Stuart Mill, social activists such as
Robert Owen, and novelists such as Victor Hugo
and Charles Dickens deplored the social
inequities of the market system that took root
with the industrial revolution. In the 20th
century, John Maynard Keynes pointed out that
a key lesson of the Great Depression was that
the market system does not guarantee full
employment—indeed it may result in an
underemployment equilibrium that leaves a
substantial portion of the population without a
source of income. While the solutions proposed
by some of these thinkers have come under
considerable attack, that does not diminish
their critique of the problems of the market
system, many of which, including chronic
unemployment and widening income
disparities, continue to plague market-based
economies.
Another 20th-century thinker, Karl Polanyi,
argued in The Great Transformation that, with
the market system, the economy became “disembedded” or separated from society for the
first time in human history. The system of selfregulating markets that has emerged has turned
labour and natural resources into commodities
to be bought and sold, used, and sometimes
destroyed. In Polanyi’s view, this dramatic transformation in relationships both among members of society, and between society and nature,
has had such a wrenching impact that it has
provoked “counter-movements” to protect soci-
ety and the natural environment. These
counter-movements have led to laws and regulations governing the way in which market
actors behave, and establishing minimal labour
and environmental standards.9
Similarly, the eminent Canadian political economist C.B. Macpherson traced the rise of the concept of “economic justice” (the establishment of
fair prices and just distribution of social income
and wealth) to markets and merchants achieving
relative autonomy from the state and other
social relations, although he saw this beginning
to happen two centuries before the industrial
revolution. Like Polanyi, Macpherson held that
the social order had to adopt defence mechanisms against the encroachment of markets on
accepted notions of fair prices and a just distribution of wealth. In contrast to Polanyi, however,
Macpherson was pessimistic about the future—
he viewed the achievements of liberal and socialdemocratic states in the 20th century as
temporary successes in the struggle for economic
justice in a world increasingly dominated by
markets and corporate power. However, he also
thought that the huge disparities between the
Third World and the developed countries would
keep the concept of economic justice alive.10
The issues of markets and social equity are contentious enough within a single political jurisdiction, such as the nation-state. They become
far more complex when business transactions
21
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A
COMPANY MUST
ESTABLISH AN ACTIVE
SOCIAL RESPONSIBILITY
COMMITTEE AT THE
BOARD OF DIRECTORS
LEVEL
. ITS
MANDATE
MUST GO WELL BEYOND
CORPORATE PHILAN
THROPY AND
-
“ASSESS
THE IMPACT OF THE
CORPORATION ON ALL
ITS STAKEHOLDERS AND
BE A VOICE TO URGE
BALANCE
.
RICHARD J. MAHONEY,
EX-CEO OF
MONSANTO
“TAKING THE INITIATIVE ON
STAKEHOLDER RIGHTS,”
BUSINESS & SOCIETY REVIEW,
NO.
97, 1996, PP. 21-25
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take place across jurisdictions in which the laws
and regulations differ substantially. To the
extent that the standards of corporate behaviour
are prescribed by law or custom and commonly
observed (and this may be far from being the
case), there is little leeway within the nationstate to gain a competitive advantage in the
domestic marketplace by diverging from the
norms. But the globalization of trade and investment has profoundly changed the context of
social norms in the marketplace.
Globalization has posed a basic conundrum for
all international transactions. Whose standards
of behaviour should apply—those of the home
or host country? The dilemma is: if foreign
investors or traders abide by lower host country
standards (such as labour standards), they are
open to the charge of exploitation. But if they
abide by higher home country standards, they
may lose the host market to third country
competitors with fewer scruples.
Thus, accusations of “a race to the bottom” are
levelled by labour critics against corporations‘
investments in developing countries. On the
other hand, business and advocates of economic
liberalization accuse of “protectionism” those
wanting to impose trade restrictions on goods
produced with child labour or under conditions
below acceptable Northern safety or
environmental standards.
The driving force underlying many of these
quandaries is competition on a global scale. The
Group of Lisbon, a coalition of 19 distinguished
scholars—many with strong links to the business
community—from North America, Europe, and
Japan, attributes to “excessive competition” the
decline of the welfare state, increasing poverty
and chronic unemployment, and/or widening
income disparities in the industrial countries,
and the further de-linking of the world’s poorest
countries from the global economy. It issues a
visionary call for “cooperative global governance” to ensure environmental sustainability,
social solidarity among present and with future
generations, the protection of cultural diversity
and freedom, and participatory democracy.11
MARKET BEHAVIOUR AND SOCIAL EQUITY
Underlying the tension between market behaviour and social equity is an apparent conflict
between the self-interested motivations of profitmaximization, pursued through competition,
and the collective interests of society that result
from cooperative behaviour. The pre-eminence
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of self-interest as the engine of economic efficiency in a competitive economy goes back two
centuries to Adam Smith,12 the father of modern economics. The 20th-century version of the
“Invisible Hand” doctrine was articulated by
Milton Friedman. In a well-publicized essay in
The New York Times Magazine, he provided an
early definition of corporate social responsibility:
[T]here is one and only one social
responsibility of business—to use its
resources and engage in activities
designed to increase its profits so long as
it stays within the rules of the game,
which is to say, engages in open and free
competition without deception or fraud.
[For business to do otherwise is economically reprehensible and] fundamentally
subversive. . . in a free society. 13
Friedman’s definition of corporate social responsibility, which defines the currently dominant
view, albeit with much dissension, raises immediate questions. First, how are the “rules of the
game” derived? The issue of the obligatory social
responsibilities of firms is highly political, particularly since there may be disagreements concerning community standards on which to base
the laws governing admissible corporate conduct. There is also a question of monitoring and
enforcing the rules to prevent “deception and
fraud.” Even with the best enforcement systems,
however, one must expect that a value system in
which self-interest is paramount will lead to a
certain amount of both deception and fraud.
Critics of the dominant view begin with the fact
that businesses do not exist in a vacuum, but
must operate within a framework of laws, rules,
and conventions.14 Indeed, the notion of
“laissez-faire” underlying Friedman’s model is a
serious misconstruction of what “free markets”
actually require and entail. Free markets, and
the system of private property, depend for their
existence on law. Markets are a legal construct
which facilitate certain transactions (such as
contracts), while laws prohibit others (such as
trespass). Moreover, the legal framework goes far
beyond defining property rights and contract
obligations to defining social norms that may
also limit freedoms (for example, laws forbidding racial discrimination). Finally, businesses
may also have “supererogatory” responsibilities—those beyond legal requirements—that
they may be motivated to meet.
Even while Friedman expounded the 20thcentury version of the Invisible Hand doctrine,
it was under challenge by other mainstream
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economists who demonstrated through game
theory that cooperation can be superior to selfinterested competition, not just for the welfare
of society, but for the competitors themselves.15
Similarly, scholars like Amartya Sen have
pointed out that commercial or economic success is not simply a matter of the self-interested
pursuit of profits, and that moral codes of
behaviour can enhance corporate productivity
and competitiveness.16 If so, the dichotomy
between the interests of society and those of
corporations is false, making plausible win-win
combinations of corporate responsibilities and
social interests.
Sen’s critique of the dominant view runs much
deeper. One premise of this prevailing view holds
that maximizing self-interest constitutes the only
form of “rational market behaviour” and other
forms of behaviour (involving duty, loyalty,
goodwill, or ethically motivated conduct) will
undermine the efficiency of markets. Both these
assumptions are highly questionable: nonselfinterested behaviour is neither “irrational,” nor
does it necessarily undermine efficiency. Sen
argues that standard economic models do not
recognize the differences between cooperative
and competitive behaviour, and therefore do not
give guidance in many situations—for instance,
when economic actors can choose either cooperative or competitive strategies to deal with issues
that have collective impact.
Defenders of the dominant view assert even
more strongly that self-interested behaviour
approximates actual real world behaviour. This
assertion, which usually underlies the conventional position on the social responsibilities of
corporations, is equally contestable. In Japan,
for example, which is a market-based economy,
many commercial relationships are based on
duty or loyalty, including labour market conventions such as lifetime employment. While
they no doubt entail an economic cost, these
relationships have arguably enhanced productivity and played an important role in Japan’s
industrial competitiveness and extraordinary
growth rate. At the same time, they have contributed to social cohesion, at least until the
1990s. The implication is that it is quite plausible for corporations to both compete in the
marketplace and take on social responsibilities
that enhance their commercial success.17
Other social commentators have stressed that
cooperative relationships are fundamental to
wealth creation and social stability. Recently,
author Francis Fukuyama underlined the
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importance of social solidarity, or trust, for longrun economic survival and productivity.18
Pointing to examples of industrial organization
in Japan, Germany, and the United States, he
asserts that certain forms of behaviour by firms,
their workers, and clients cannot be explained by
the motivations of profit-maximization and selfinterest. Indeed, in many instances, such
behaviour seems to be distinctly at odds with the
self-interest of the parties involved. Fukuyama
argues that the creation of economic wealth and
stability depends on “social capital”—the ability
of people to work together for common purposes
in groups and organizations—which in turn
requires shared norms and values and the
subordination of individual interests to those of
the larger group.
Even leading proponents of globalization, such
as John Dunning, have concluded that cooperation is as important as competition for corporations seeking strategic assets as they position
themselves in the global marketplace. However,
Dunning’s conception of “alliance capitalism”
where he sees cooperative behaviour taking
place, is very restrictive. The strategic cooperation he refers to focuses primarily on the interaction between “wealth-creating constituents.”
Such “cooperation” is not unlike oligopolistic or
even collusive behaviour aimed at promoting
the interests of the cooperators at the expense of
nonparticipants. Of course, the same criticism
can be levelled at Fukuyama’s model of “trust:”
a firm may cooperate with its workers and
suppliers primarily to get a competitive edge
on rival firms.
THE MARKET ECONOMY AND THE
ENVIRONMENT
Self-interested behaviour in a market system
may not always, or typically, lead to the best
outcome for society as a whole. For similar
reasons, self-interested behaviour in a market
economy may not be in the best interests of the
natural environment in which the economy
and society must operate.
Indeed, critics such as Herman Daly warn that a
global economy based purely on competitive,
self-interested behaviour portends grave, possibly devastating environmental consequences.
Such critics argue that the environment is often
treated by agents of the global market system as
a free source of natural resources, and a free
“sink” in which to dispose of waste products.
The former leads to resource depletion and the
latter to ecological degradation.
23
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WHAT I
LEARNED FROM
THE RAINFOREST IS EASY
T O U N D E R S TA N D .
CAN USE LESS
HAVE MORE
LESS
,
,
WE
AND
. CONSUME
AND BE MORE
I S T H E O N L Y W AY.
. IT
FOR
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Instead, such critics urge the adoption of genuinely sustainable development strategies, in
which the global economy is viewed as a “subsystem” of the global natural environment.19 As
a subsystem, the economy cannot for long
remove from (or inject into) the environment,
without replacing (or withdrawing) resources
that are necessary (or inimical) to life on the
planet. Sustainability, therefore, is the ability of
the economic subsystem to coexist in harmony
with the larger environmental system.
Corporate activity affects much more than the
bottom line. Business fundamentally changes
and shapes society and the natural environment,
in both positive and negative ways. While many
of these costs and benefits are not currently
included in a company’s financial statements,
their effects are tangible. A business operates
explicitly as an economic actor through the market system, but also implicitly as a moral and
environmental actor as its economic actions
permeate the related social and ecosystems.
What does this mean for corporate actors in the
global market system? Visionary thinkers such
as Paul Hawken speak about redesigning the
economic and production systems to ensure
“true cyclicality,” so that there is virtually no
waste that cannot be digested by natural
processes.20 Such thinking points in the direction of “natural capitalism,” where “natural capital” (the earth’s renewable and nonrenewable
resources) is considered an integral part of the
capital with which businesses must work.
Second, the marketplace cannot by itself resolve
environmental and social issues. Some, including the Government of Canada, argue that a
strategy of “constructive engagement” will
eventually instill liberal values through trade
and commerce, even with regimes that are
socially repressive or environmentally irresponsible. For their part, corporate actors engaged in
trade and commerce are typically unwilling or
unable to influence social or environmental
conditions in foreign countries.23
THE INTERESTS OF
BUSINESS
,
AND THE
INTERESTS OF THE
E N V I R O N M E N T, A R E N O T
INCOMPATIBLE.
ARE THE
JAPANESE
OMOTE AND URA
CHINESE
THEY
,
THE
Y I N A N D YA N G
,
PRODUCT AND PROCESS
,
CORPORATE RESPONSIBILITY:
BEYOND PROFITS
ECONOMY AND
E C O L O G Y, M I N D A N D
SPIRIT
—TWO
ONLY
TOGETHER CAN WE
HALVES
.
MAKE THE WORLD
WHOLE
.
TACHI KIUCHI, MEMBER OF
THE
BOARD OF MITSUBISHI
ELECTRIC CORPORATION.
KEYNOTE ADDRESS,
“WHAT I LEARNED IN THE
RAINFOREST,” WORLD
FUTURE SOCIETY,
JULY 19, 1997
Canadian corporations have far-reaching
impacts on society and the health of the planet
itself. Some of these impacts are positive, others
are negative. Given that the marketplace does
not always demand that corporations become
more socially responsible, it is crucial that business culture recognizes this need internally. But
a sustainable change in corporate culture
requires commitment at all levels of the corporation, including its leadership. While any cultural change is challenging, the shift to social
and environmental responsibility is not easy.
But the adoption of global social and environmental responsibility can lead to many positive
results. As Courtney Pratt, Chairman of Noranda
Inc., suggests: “If the Canadian business community can come together in a commitment to
making a difference in building the society of
the next millennium, then Canadian corporations will be able to make a meaningful difference in shaping a society that is better for all of
us—businesses, employees, the environment,
our communities.”21
The first step is for corporations to recognize
why they need to move beyond Friedman’s fixation with the bottom line. There are at least
three reasons for doing so.
First, the business world is unavoidably
embedded within social and natural systems.22
24
Third, it pays to be responsible. Increasingly,
corporate image is linked to profits—or net
worth, to be more precise. There is an important
relationship between corporate ethics and the
perceived value of the firm: studies show that
unethical corporate behaviour negatively affects
stock performance.24 Increasingly, external
stakeholders are demanding that business
deliver sustainable results in more ways than
return-on-investment. Companies like Nike Inc.
have learned the hard way that a negative image
in the public domain can affect sales, particularly when linked to the threat of consumer
boycotts. On the other hand, companies that
are perceived to be socially and environmentally
responsible may gain a competitive advantage
over more traditional firms. The Body Shop
International PLC is an example of one firm
whose profitability is further enhanced through
its image of good corporate citizenship.
It is important to note, however, that increasing
a firm’s net worth does not necessarily mean
increasing its short-term profitability. Corporations must often incur costs when they choose
to operate in a socially responsible manner. At
first glance, in a market where other corporate
actors choose to ignore broader responsibilities,
socially responsible firms may seem at a competitive disadvantage. But socially responsible firms
can survive, indeed thrive, in a competitive environment even if they incur higher costs. Socially
responsible firms can enhance their long-run
prosperity by increasing employee commitment,
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building customer loyalty, generating cooperation among suppliers and subcontractors, differentiating themselves from the competition, and
by lowering recruitment and labour costs (as
employees acquire social value).25
Of course, those firms with market power or
highly differentiated products will have greater
flexibility to adopt supererogatory standards of
behaviour and to act in a socially responsible
manner. Firms operating in highly competitive
markets and/or producing undifferentiated
products may have much less latitude to go
beyond what is required by law and custom. To
do so may mean to go out of business. This
important distinction brings us back to the key
role of governments in establishing the rules of
the game, in particular the social and environmental standards to which firms must adhere,
thereby also determining the fixed or overhead
costs that all firms must incur.
A mature corporation is one that evaluates both
its intended and unintended economic, social,
and environmental impacts. A responsible
corporation seeks balance in its operations
because it recognizes its moral obligation to do
so. It also recognizes that such behaviour makes
good business sense. Encouragingly, enlightened
chief executive officers (CEOs) from around the
world are beginning to understand the limits of
short-term economic self-interest. As Noranda’s
Courtney Pratt explains: “Business is a critical
element of society. It inevitably has a great
impact on how society develops. It has a
responsibility to play that role with high ethical
and moral standards, with consciousness and
with purpose.”26
TOWARD CORPORATE SOCIAL AND
ENVIRONMENTAL RESPONSIBILITY
A recent study of a number of US firms that
have consistently demonstrated social responsibility suggested some commonalities:27
• Strong, progressive senior management.
This is a core attribute of a socially responsible company. These corporate leaders consistently demonstrate “moral imagination”—
the ability to perceive the moral relationships
behind competing economic relations.28
• Catalysts for social change. Companies
assume this role by filling unmet social needs.
• Responsible corporate practices. These
actions lead to competitive advantage in the
marketplace.
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Social and environmental responsibility can
mean a variety of different things. For some,
the definition stresses the social dimension of
corporate responsibility, asking companies to
become better “citizens” and to actively
contribute to the development of equitable
global communities. Environmental considerations are viewed through the lens of society, of
the need to protect the natural environment for
future generations. For others, corporate
responsibility stretches beyond human selfinterest and incorporates the millions of nonhuman stakeholders who share the earth. From
such a perspective, ecological sustainability
becomes the key criteria in business
decisionmaking.
Vision is one thing. Action is another. A key
challenge facing companies is how they can
incorporate “corporate social responsibility”
into daily operations and international management practices. We see at least four ways in
which Canadian companies can become more
socially and environmentally responsible.
1 REINTEGRATE ETHICS INTO BUSINESS
CULTURE
Ethics have always existed within the hallways of
business. But in the mainstream business culture,
ethics have often been viewed as separate from
proper business practice. Many theorists (such
as Chester Barnard and Milton Friedman)
believed in a clear division between business
and society, between the actions of a person
acting on behalf of the corporation and the
actions of that same person acting in private.
In his or her private life, a business executive
may indeed have social responsibilities, but
these don’t usually intrude upon business life.
As Milton Friedman suggested, “If there are
social responsibilities, they are the social
responsibilities of individuals, not of business.” 29
As early as the 1930s, the prevailing culture
demanded that corporate employees separate
their personal ethics from their work.30 That is,
“every participant in an organization may be
regarded as having a dual personality—an organizational personality and an individual
personality.”31 Business actions were “de-individualized” in the name of the corporation.32
When people became “company men and
women” their personal ethic (and personality)
was minimized. In many cases, this attitude is
still pervasive in business and business education. Hence, the old adage: “It’s a business
decision, not a personal decision.”
25
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This corporate doctrine rationalized a sort of
schizophrenia, a corporate culture that has
separated employees and executives from their
personal ethics and rewarded the development
of dual personalities. In this milieu, corporations
have tended to be governed by an “emergent
morality,” which can resemble a labyrinth of
“moral mazes.”33 By viewing the corporate actor
as separate from the individuals who work for
the corporation, a schism is perpetuated
between business and personal ethics. Business
actions are decoupled from the prevailing social
system.
In such an environment, the unintended social
and environmental side-effects of business activity which are cumulative and dispersed (as with
global warming) or geographically distant (as in
the developing world), become even harder to
track—and easier to ignore.
John Darley of Princeton University argues that
even the most ordinary corporations have the
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potential for “evil” or wrongdoing. Sunk costs
and a commitment to an existing course of
action, coupled with fragmented information
and the diffusion of managerial responsibility,
contribute to a business environment which can
negatively affect society and the environment.34
Such effects can be both intended and unintended. Combined with the fact that adverse
effects often seem abstract or intangible, while
financial gains appear concrete, many seemingly benign business situations have the
potential to become harmful.
Reintroducing personal ethics into business
may be a partial solution. But because ethics are
culturally determined, this may not be easy in a
pluralistic society. On an international level, the
situation becomes even more complex.
Different cultural norms govern behaviour in
different ways. What seems right here, may not
be right there. This creates a dilemma for
transnationals attempting to operate ethically.
BOX 5 CORPORATE EXECUTIVES NEED ETHICS TRAINING
As KPMG Business Ethics and Integrity Services1 suggests, corporate executives need to be
trained in ethical decisionmaking. Managers need to develop and utilize “moral imagination”
alongside traditional business skills. Business ethicists2 recommend six key steps for corporations
attempting to make moral business judgements:
1 Use moral imagination. Corporate executives need to develop the ability to effectively
perceive the moral relationships behind competing economic relations. Role playing can be
an effective means for developing more acute ethical perception.
2 Identify and order the moral factors of a situation. For executives to incorporate
moral choices into business decisionmaking, they need to learn how to identify and then
prioritize the moral impacts of a given decision. In many cases, decisions are not clear-cut
and moral choices remain in a grey area.
3 Evaluate the moral choices. While difficult, moral choices often need to be made,
whether operating at home or at the office. Increased transparency in moral evaluation can
help executives effectively identify the trade-offs inherent in any situation. Clear corporate
principles and processes help executives fully evaluate the moral outcomes of a decision.
4 Build tolerance of moral disagreements and ambiguity. In any moral choice, disagreements are bound to occur. There is usually no clear-cut “right” answer. In particular,
decisions which cross international borders are bound to result in cultural criticisms.
Executives should be trained to be tolerant of such disagreements and to expect ambiguities:
corporate critics should not be seen as “enemies” who are “wrong.” Instead, tolerance and a
desire for rapprochement should be instilled throughout the corporate culture.
5 Integrate managerial competence and moral competence. Moral issues in management are not an isolated phenomenon. Such issues permeate corporate life. Managers need
to become as competent with moral management as they are with economic administration.
6 Instill a sense of moral obligation throughout the organization. Integrity and moral
obligation are essential to management practice. These qualities can be consistent with the
free enterprise system; corporate culture needs to recognize and embrace the coexistence of
morals with profit.
NOTES
1
See KPMG website at http://usserve.us.kpmg.com/ethics
2
Charles W. Powers and David Vogel, Ethics in the Education of Business Managers (Hastings-on-Hudson, NY: The Hastings Center, 1980),
pp. 40-45.
Source: Archie B. Carroll, “In search of the moral manager.” Business Horizons, March-April, 1987, pp. 7-15.
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BOX 6 PRINCIPLES FOR GLOBAL CORPORATE RESPONSIBILITY: BENCHMARKS
MEASURING BUSINESS PERFORMANCE
9
8
FOR
Proposed by the Ecumenical Committee for Corporate Responsibility (ECCR),
the Interfaith Center on Corporate Responsibility (ICCR),
and the Taskforce on the Churches and Corporate Responsibility (TCCR)
This document, prepared by three ecumenical associations, begins by recalling that the churches, through their own
investments, are often shareholders, and thus partially owners of companies. This obligation as owners requires that
greater care be given, not only to the financial situation, but to the impact of the activities of companies on general
well-being. The document successively examines the wider community in the broad sense, the national communities,
and the enterprise. In each of these parts, it establishes principles on action, criteria to be adopted, and references to
be used in assessing the performance of enterprises in the light of the previously defined criteria. This box refers to
the section dealing with the action of enterprises vis-à-vis shareholders, employees and clients, suppliers, and
subcontractors.
3. The enterprise
providing the essential social
infrastructure of child care, elder
care and community services
P R I N C I P L E S
which allows workers, especially
3.1.P.1. The company’s corporate women who have traditionally
governance policies balance the done this work as unpaid labour,
interests of managers, employto participate as employees (text
ees, shareholders and other com- proposed by ICCR only).
pany stakeholders.
3.1 Shareholders
tunity 2000” and the UN
Declaration on Gender Equity.
3.3.P.4. There is a commitment
to fair trading practices.
3.2.B.5. A code for the employment of disabled persons at least
as rigorous as the Code for the
Employment of Disabled People
produced in the United Kingdom.
3.3.P.5. The company accepts its
responsibility to use its purchasing power to encourage good
corporate citizenship among its
suppliers.
3.2.B.6. The company respects
the rights of its employees to
3.2.C.1. No discrimination in its organize in trade unions or
policies of employment and
other appropriate worker repreremuneration, whether by race, sentative bodies to monitor
age, sexual orientation, disability working conditions and does
or religion.
not engage replacement workers
3.2.C.2. Training, development, during a dispute.
promotion, and advancement
3.2.B.7. International Labour
opportunities within the compa- Organization (ILO) Conventions
ny are available to all employees. are complied with: No. 29
(forced labour); No. 87 (freedom
3.2.C.3. All those who work
of association); No. 98 (right to
within and on the company’s
engage in collective bargaining);
premises, whether permanent,
No. 100 (equal remuneration);
temporary or contractual, shall
receive equal protection especial- No. 105 (abolition of forced
labour); No. 111 (prohibition of
ly in provision of equipment
discrimination); No. 122
and information concerning
their health and safety at work. (employment policy); and
No. 138 (minimum age).
3.2.C.4. Employees are free to
establish and join workers’ orga- 3.2.B.8. The company shall have
nizations without discrimination a process to establish a sustainable wage, such as a market basor interference and to engage
freely in collective negotiations ket survey or some other
to regulate the terms and condi- appropriate method.
C R I T E R I A
C R I T E R I A
3.1.C.1. Ensuring shareholders’
participation and rights to information while protecting the
interests of other stakeholders.
3.1.C.2. The company respects
the right of shareholders to submit proposals for vote and to ask
questions at the annual meeting.
R E F E R E N C E S
3.1.B.1. The company observes a
code or codes of best practice or
has drawn up its own comprehensive corporate code such as
General Motors’ 28-point
Guidelines for Corporate
Governance. The code that the
company observes must be at
least as rigorous as the Cadbury
Code of Best Practice (UK).
3.1.B.2. Shareholders are
informed about significant and
material violations of corporate
policies (including codes of conduct), adverse decisions by tribunals or courts, and results of
internal audits or analyses of
corporate activity.
3.2 Employees
P R I N C I P L E S
tions of their employment.
3.2.C.5. Paying a sustainable
wage to all employees.
3.2.C.6. The company provides
equal pay for work of equal
value, with goals and timelines
to implement this policy.
3.2.C.7. The company provides
3.2.P.1. The company has a univer- social support to enhance
sal standard governing its employ- women’s economic empowerment practices and industrial rela- ment. This includes centres for
tions. The standard includes gen- child care, elder care and the
uine respect for employees’ rights care of persons with disabilities.
to freedom of association, labour
B E N C H M A R K S
organization, and free collective
3.2.B.1. International Labour
bargaining and is nondiscriminaOrganization (ILO) standards.
tory in employment.
3.2.B.2. The Convention on the
3.2.P.2. The company values its
Rights of the Child as it relates
employees and their contributo labour practices.
tions in every sector of its
3.2.B.3. The ECCR Wood/
operations.
Sheppard Principles on equal
3.2.P.3. The company pays adeopportunity of employment for
quate wages to enable employpeople from ethnic minorities or
ees, especially women, to meet
an equally rigorous code.
the basic needs of themselves
and their families and to provide 3.2.B.4. An appropriate and rigorous code with regard to equal
discretionary income.
opportunity of employment for
3.2.P.4. The company recognizes
women based around “Opporthe need for supporting and/or
3.2.B.9. Developing concrete
goals to provide women with
true and equal participation in
decision-making.
3.2.B.10. Providing adequate
technical training which contributes to advancement of all
employees, particularly women.
3.2.B.11. The company encourages or participates in the creation of child-care centres and
centres for the elderly or
disabled where appropriate.
C R I T E R I A
3.3.C.1. All advertisement and
labeling of products is complete,
fair and honest. Only claims
which can be substantiated and
fulfilled are made by the company, its employees and its agent.
3.3.C.2. Care is taken by the
company not to denigrate or
supplant alternative natural
products.
3.3.C.3. No engagement by the
company in cartels, spheres of
influence, or patent protection to
the exclusion of others’ rights.
3.3.C.4. The company is scrupulous in its negotiations and contractual arrangements with other
companies. This includes fair
dealing, prompt payment and the
avoidance of corrupt practices,
bribes and questionable payment.
3.3.C.5. The company seeks out
suppliers who meet the same
standards on environmental and
social grounds as the company
sets for its own products.
3.3.C.6. The company will not
enter into contracts with suppliers who use any form of forced
or compulsory labour.
B E N C H M A R K S
3.3.B.1. The company receives
positive evaluations from independent consumer organizations.
3.3.B.2. Appropriate consumer
codes are followed (cf. Infant
Formula marketing codes).
3.3 Customers, suppliers
and contractors
3.3.B.3. Where either advertising
standards legislation or codes
P R I N C I P L E S
exist, they are complied with and
this compliance is regularly dis3.3.P.1. The company ensures
closed (see British Codes of
that its products and services
meet customer requirements and Advertising and Sales Promotion).
product specification.
3.3.P.2. The company is committed to marketing practices which
protect consumers and which
ensure the safety of all products.
3.3.P.3. The company will not
market its products to consumers for whom they are not
appropriate.
Source: TCCR, Toronto,
September 19, 1995.
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WE
HAVE NO SET
ANSWERS TO ANY OF
[...]
THE DILEMMAS
HOWEVER,
WE DO KNOW
T H AT, W I T H A N O P E N
AND HONEST APPROACH
,
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Despite the complexity, Wharton University
professor Tom Donaldson says that this is not
an excuse for either cultural relativism or
cultural imperialism.35 He believes that all
businesses, whether at home or abroad, can
follow three ethical principles:
• Respect core human values (respect for
human dignity and basic rights, and good
citizenship);
A WILLINGNESS TO
DISCUSS AND COMMUNI
CATE
-
• Consider the context of the situation.
,
WE CAN HELP TO
MOVE THE PUBLIC
DISCUSSION FORWARD
WE
IN THE INTER
.
-
NATIONAL BUSINESS
COMMUNITY CERTAINLY
DO NOT SEEK IN ANY
WAY T O D I C TAT E
ANSWERS TO ANY OF
THESE PROBLEMS
THEY
• Respect local traditions; and
.
ARE SOCIAL AND
While these principles are exemplary, a more
critical question is how can they be implemented? For instance, Donaldson’s final principle of considering the local context could be
used as a loophole to justify a business decision
that may seem inappropriate from an external
perspective. European management theorists
Ian Jones and Michael Pollitt argue that there
are at least three levels of integrity in business
life: the personal, the corporate, and the macroeconomic (or systemic). They acknowledge the
obvious: that personal and societal ethics fundamentally interact with corporate ethics. 36 A
reintegration of the personal and communal
into corporations is the first step to changing
business culture. But it is only one step.
POLITICAL ISSUES
WHICH REQUIRE A
BROAD
SUS
-BASED
. WE
CONSEN
-
ARE ACUTELY
AWARE OF THE NEED TO
PARTICIPATE IN AN
I N F O R M E D A N D R AT I O N A L
INTERNATIONAL
DISCUSSION OF THESE
COMPLEX AND DIFFICULT
CHALLENGES
.
COR HERKSTROTER,
CHAIRMAN OF THE COMMITTEE
OF
MANAGING DIRECTORS,
ROYAL DUTCH/SHELL GROUP.
ADDRESS TO THE
NETHERLANDS ASSOCIATION
FOR INTERNATIONAL
AFFAIRS,
AMSTERDAM,
OCTOBER 11, 1996
2 ADOPT A SYSTEMS-CENTRED APPROACH TO
STAKEHOLDER MANAGEMENT
The term “stakeholder” has rapidly entered business vocabulary. Many firms talk of “their”
stakeholders and how corporate activities
address their needs. R.E. Freeman first identified a stakeholder in 1984 as “any group or individual who can affect or is affected by the
achievement of the organization’s objectives.”37
But a company’s use of stakeholder analysis
does not, in itself, constitute social or environmental responsibility. The firm’s motivation must
be taken into account.
For example, stakeholder management can be
firm-centred or system-centred.38 In the first
instance, stakeholders are narrowly defined to
reflect those groups that have “direct relevance to
the firm’s core economic interests.”39 A firm-centred
approach is often no more than a refinement of
the old corporate strategy of self-interest and is
more concerned with the bottom line and public
relations than with genuinely satisfying external
stakeholder claims. Corporations that talk of
their stakeholders in this way may be missing
key groups which do not have direct economic
28
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influence over the corporation. This approach to
stakeholder management does not represent
social and environmental responsibility.40
In the second instance, stakeholders are identified in the broadest terms possible “in order to
participate in a fair balancing of various claims
and interests within the firm’s social system.”41
The system in question is a broad amalgam of
the communities, as well as the numerous
ecosystems in which the company operates or
has an impact. Unlike the firm-centred
approach, the company moves beyond its own
interests, and recognizes that it shares social
systems and the natural environment, which
become more equitably represented. The
Taskforce on the Churches and Corporate
Responsibility (TCCR) adopted this approach in
its Principles for Global Corporate Responsibility
(see Box 6), which attempt to remove the corporation from the centre of the stakeholder model.
(To our knowledge, no Canadian company has
yet adopted these principles.)
If a company interacts with its stakeholders
without clearly integrating business ethics, it is
likely to follow a public relations approach
whereby it may say the right things but not
actually do them. If a company focuses solely
on business ethics, it may miss other important
stakeholder considerations because it is focused
primarily on its own stake. By combining ethical management with stakeholder assessment, a
company can more easily approach a sustainable system-centred approach to business.
3 ADOPT INTERNATIONAL CODES OF CONDUCT
Historically, Canadian corporate codes focused
on issues of corruption and conflict of interest.
Self-protection motivated the adoption of international codes.42 The focus on legal and economic issues is unquestionably still important,
particularly as Canadian businesses increasingly
operate abroad. Recently, for example,
Bombardier Inc. lost a $450-million contract in
Mexico, allegedly due to corruption, nepotism,
and political interference.43 As this case illustrates, ensuring a level playing field continues to
be a pressing issue for Canadian business.
Corruption remains such a major stumbling
block of global commerce, in fact, that the
OECD recently established the Convention on
Combating Bribery of Foreign Public Officials in
International Business Transactions. The
Convention rejects most forms of bribery anywhere in the world and provides transnationals
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(with head offices in OECD countries) with a
legitimate reason for just saying “no.” It will
also strengthen anti-corruption movements in
developing countries. Despite potential limitations (such as the difficulty of effective
monitoring and follow-up, and the failure to
include all types of purchase of influence),
the Convention holds promise.44
But corporations need to look beyond their
own self-interest. Despite failed attempts to
establish binding codes of conduct for transnationals,45 the existence of the Convention
provides an important precedent for other
international codes. With the proper motivation, legally binding international codes of
conduct that address social and environmental
inequities are now possible.
In late 1997, a group of 13 Canadian companies46 led by John McWilliams, Senior vicepresident of Canadian Occidental Petroleum
Ltd., developed an “International Code of
Ethics for Canadian Business” (see Box 2).
Praised by politicians and business groups
(such as the Alliance of Manufacturers and
Exporters Canada), this code has also been
criticized for its voluntary nature and its lack of
accountability mechanisms. The code contains
four general principles concerning the
community and environmental protection;
human rights; business conduct; and employee
rights, health, and safety. A compelling vision,
the code does not provide direction for its
application: its vagueness on how to monitor
and enforce its guidelines is its chief limitation.
It is nevertheless the first step in a difficult
journey.
A 1996 survey47 of Canadian multinationals
showed that only 21 of 98 companies surveyed
had international codes of conduct, although
22 companies reported that they applied more
rigorous environmental and labour standards
than required by the local regulations.
Overall, however, the survey suggested that, for
Canadian business, social responsibility and
human rights promotion were not a priority.
In fact, only 14 percent of large Canadian transnationals had international codes that dealt
specifically with human rights issues, 14 percent
had guidelines for operating under repressive
regimes, few had adopted all of the OECD core
labour rights, 14 percent included effective
mechanisms for accountability, and few
provided employees with ethics training.
The existence of such codes is not a sufficient
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indicator of corporate social responsibility. A UK
study48 found no statistical evidence to suggest
that corporate codes led to better performance.
Instead, it appeared that the “soft” stuff—the
process of education and decisionmaking that
accompanied the adoption and application of
corporate codes—was equally important. Thus,
while corporate codes can provide managers with
direction and ethical guidance, they can also
help define an organization’s “core values.”49
4 BROADEN CORPORATE ACCOUNTABILITY
In the final analysis, corporate actions speak
louder than vision statements. Unquestionably,
Canadian companies need to broaden their
spheres of responsibility. But they also need to
be socially and environmentally accountable
for these actions and for their unintended
consequences.
A number of mechanisms exist to increase
Canadian corporate accountability. First, companies need to adopt international codes of conduct that specify an effective means of verifying
performance. As Tachi Kiuchi, Member of the
Board of Mitsubishi Electric Corporation
explains, “Humans have the best individual feedback systems anywhere in nature—our eyes,
our ears, our minds. But our collective feedback
systems—at the community and company
level—are nowhere near as developed.”50
Independent monitoring of corporate codes is a
useful way to gain objectivity and integrate
external perspectives. The US Council on
Economic Priorities (CEP) recommends a threestage corporate monitoring system.51 First, the
company itself monitors its activities, searching
for both positive and negative impacts. Results
are then evaluated by a second party, such as an
independent auditing firm. At the third stage,
an independent group monitors and evaluates
the process. Such third-party monitoring can
ensure that noncommercial interests and critical
perspectives are adequately presented. Such
monitoring can, and should, take place on a
local and global basis.
Environmental and sustainable development
reporting is a related mechanism of corporate
accountability. By systematically reporting the
social and environmental costs of doing business, a company provides a more balanced
picture of its operations and long-term viability.
Sustainable development reporting adopts a
holistic approach which looks at the economy,
the environment, and society as an integrated
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whole. Yet only a handful of Canadian companies provide this type of noneconomic reporting
(see Box 7). This is a key area of opportunity for
companies aiming to become more socially and
environmentally responsible.
While essential, such reporting tends to occur
after the fact. Independent monitoring and sustainable development reporting provide important information on the impacts of corporate
behaviour. But it is equally important for corporations to integrate accountability into daily decisionmaking: corporate accountability should not
only be an annual event. For example, in his
BOX 7 SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL REPORTING
IN CANADIAN COMPANIES (1997)
Company Name
Industry Type of Reporting
Sector
B.C. Hydro
Power
Environmental Review none
Ontario Hydro
Power
Hydro-Québec
Power
Sustainable
Development Report
Environmental
Performance Report
Manitoba Hydro
Power
Sustainable
Development Report
Environment, Health
Northern Telecom TelecomLtd (Nortel)
munications and Safety Report
Dofasco Inc.
Placer Dome Inc.
Steel
Mining
Noranda Inc.
Mining
Rio Algom Ltd
Inco Ltd
Barrick Gold Corp.
Falconbridge Ltd
Mining
Mining
Mining
Mining
Developing
Country Operations with
SD/Environmental
Reporting
Egypt, Peru
Costa Rica, Haiti,
Colombia, India,
Morocco, Laos,
Turkey, Vietnam,
China
none
Developing
Country Operations without
SD/Environmental
Reporting
China, Pakistan,
Nepal, Colombia,
Brazil
none
none
Guatemala,
El Salvador, Honduras,
Nicaragua, Panama,
Lesotho, Uganda,
Jamaica, Brazil,
Namibia
none
China, Malaysia,
Mexico, Puerto Rico,
Thailand
Environmental Reports na
na
Annual Report
none
Papua New Guinea,
Philippines, Venezuela,
Chile
Environmental, Health Chile, Zambia
none
and Safety Report
Environmental Report Chile, Peru, Argentina
Annual Report
none
Indonesia
Annual Report
none
Peru, Chile
Sustainable
Dominican Republic, none
Development Report Chile
Notes: na=not available
Sources: CMA, Accounting for Sustainable Development: A Business Perspective, Management Accounting
Issues Paper 14 (Hamilton: The Society of Management Accountants of Canada, 1997); Blair W. Feltmate,
“Making sustainable development a corporate reality,” CMA Magazine, March 1997, pp. 9-16; and data
collection by the North-South Institute, 1998.
The survey of corporations and their environmental or sustainable development reporting activities
was conducted by Dr Blair Feltmate, President of Sustainable Systems Associates Ltd. While no single,
universally accepted definition of sustainable development was applied across all industrial sectors, or
even to each company within sectors, Feltmate defined sustainable development in such a way as to
encompass the notions of environment, economy, and society as an integrated whole, and took into
account the notion of the well-being of present and future generations.
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report Putting Conscience into Commerce: Strategies
for Making Human Rights Business as Usual,
Craig Forcese recommends that Canadian corporations undertake detailed human rights
impact assessments prior to making decisions
about international investment.52 Similar to an
economic assessment, a human rights assessment
recognizes that corporate activity affects human
rights internationally in a variety of ways. In
addition, we recommend that companies undertake a broader assessment that includes social
and environmental considerations.
Canadian companies such as engineering firm
Acres International Ltd are already making
important strides in this area. Acres has
developed a methodology to assess social and
environmental impacts of different courses of
corporate action. It then includes these costs
with economic and technical considerations
to determine the best—not simply the most
economic—course of action (see Chapter 5).
Finally, increased transparency in all business
activities and decisions will ultimately help
ensure that corporations are more fully accountable for their actions. By recognizing the information rights of external stakeholders, a company
can build consensus among a variety of different
constituents. Such broad-based consensus can
help secure long-term social and environmental
sustainability within the market system.
COSTS AND BENEFITS
The market system brings both benefits and
costs to society. On the positive side, there is no
question that the spread of markets, through a
deepening of the division of labour, technological progress, and an enhancement of productivity, has led to higher living standards for much
of the world’s population. But many people
have not benefited or have been marginalized
by the advent of markets. And market actors
have been blind to these social costs, as well as
to environmental costs.
Like it or not, however, there is every reason to
expect that markets will continue to spread.
Among other things, the market system
promises to play an important role in alleviating
the grinding poverty in which a substantial portion of humanity still lives, and reducing material scarcity and deprivation for countless others.
As the market system developed around the
world, societies—to greater or lesser degrees—
adopted measures (laws, regulations, and codes at
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BOX 8 MANAGERS’ ETHICAL CONCERNS
In November 1996, the Toronto-based consulting company KPMG Canada carried out a Business
Ethics Survey among 1,000 private and public Canadian companies ranging in size from less
than $50 million in annual revenue to more than $5 billion. Chief executive officers provided
more than half of the 251 responses, suggesting that ethics is a top priority for many companies.
Two-thirds of respondents reported having a code of ethics—mainly large companies—and
40 percent had a senior manager responsible for the company’s ethics program. Only 21 percent
claimed any kind of training in connection with their ethics program, however.
Managers considered the following to be the 10 most and least important ethical issues.
The Top 10
The Bottom 10
1
2
3
4
5
1
2
Integrity of books and records
Worker health and safety
Security of internal communications
Quality and safety of products and services
Receiving inappropriate gifts, favours,
entertainment, and bribes
6 Security and use of proprietary knowledge
and intellectual property
7 Discrimination on the basis of sex, race,
or religion
8 Privacy, confidentiality, appropriate use
of employee records
9 Sexual harassment
10 Reporting fraud or compliance failures
Membership on boards of other corporations
Business practices forbidden at home,
permissible abroad
3 Political activities
4 Office-level environmental practices
5 Foreign bribery or “grease” payments
6 Use of company time
7 Use of company name
8 Outside business or employment
9 Employees’ rights with respect to
mandatory health testing
10 Protection of whistle-blowers
Source: 1997 KPMG Business Ethics Survey Report, Toronto, February 1997.
the national and subnational levels) to protect
the economic welfare of individuals and communities and the integrity of the natural environment against the intended or unintended actions
of firms and investors. Such measures have not
always been adequate to the task, but there is
widespread consensus that any market system
must have a duly established and enforced legal
framework establishing “the rules of the game,”
within which the precepts of social equity and
environmental responsibility must be observed.53
The globalization of markets has posed a dual
challenge to social equity and environmental
responsibility. First, as countries compete with
each other for footloose investment and trading
opportunities, globalization has sometimes
undermined the framework of rules established
at national and subnational levels. Second,
international charters and conventions, such as
the UN Declaration of Human Rights, and
agencies such as the International Labour
Organization (ILO) have not yet produced a set
of “international rules of the game” that are
monitored and enforced evenly throughout the
world.54 This has presented investors and
traders with a poorly defined, and in some cases
almost nonexistent, legal or institutional framework in which to resolve issues pertaining to the
rights of workers and communities in which
they operate, or to ascertain their responsibili-
ties vis-à-vis the local environment.
Undoubtedly, the best solution would be to
create the necessary global framework so that
international conventions on human rights are
in fact universally observed, and organizations
such as the ILO have the requisite monitoring
and enforcement capabilities. What is needed is
an effective system of “global governance” to
oversee the functioning of global markets and
ensure social and environmental responsibility.
There is an important role for governments acting
multilaterally or alone. It is hoped that international discussions will, over the next decade, move
in this direction. Indeed, the recently adopted
OECD Convention on bribery is a promising
indication that governments are getting serious
about establishing a set of rules appropriate to the
global marketplace. But while prohibiting bribery
will increase profitability by reducing transactions
costs, the opposite may be true for other agreements,
for example on child labour.55 It also remains to
be seen how this and other conventions will be
monitored and enforced, because that is the litmus
test of any framework of rules.
In the meantime, corporations active in global
markets are themselves under increasing pressure from various stakeholders—their own
workers, the union movement, consumers,
nongovernmental organizations, environmen31
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talists, ethical shareholders, churches, and so
on. What unites these groups and individuals is
a conviction that corporations must go beyond
the narrow objectives of short-term profit maximization to accept social and environmental
responsibilities that are not yet required by law
in the jurisdictions in which they operate.
There are, in fact, good reasons why such ethical
behaviour also makes good business sense, not
necessarily in terms of quarterly profits, but of
the firm’s net worth, its resilience, and longterm survival capabilities. There are also many
straightforward commercial opportunities for
firms to provide innovative solutions to the
challenges of sustainable development.
Generally, however, a significant shift in the
prevailing business culture will be required to
convince firms of the commercial wisdom, as
well as the moral necessity, of adopting more
ethical and responsible policies.
R
E S P O N S I B I L I T Y
Some corporations have demonstrated their
belief that “good ethics make for good business”
by adopting codes of conduct, individually or
collectively. Most informed observers agree56
that such codes amount to statements of intent
more than policy that is systematically operationalized, since they generally lack monitoring
and enforcement provisions. Nonetheless, they
are a step in the right direction. The next steps
require systematic provisions for implementation, monitoring, and enforcement. This, in
turn, might require new procedures, even
institutions similar to financial auditing firms,
capable of undertaking arms-length social and
environmental audits.
The challenge of corporate social responsibility
in global markets is here to stay. It is certain that
debate will intensify on what it means, and how
to translate it into action. It is also clear that
progress will require the engagement of the
business community, governments, and civil
society.
NOTES
1
WTO, Focus (Geneva: WTO, May 1996), No. 10.
2
Craig Forcese, Putting Conscience into Commerce: Strategies for
Making Human Rights Business as Usual (Montreal: International
Centre for Human Rights and Democratic Development, 1997); also
by Forcese, Commerce with Conscience? Human Rights and Corporate
Codes of Conduct (Montreal: International Centre for Human Rights
and Democratic Development, 1997).
15
See Samuel Brittan, “Economics and Ethics,” in Samuel Brittan
and Alan Hamlin, eds, Market Capitalism and Moral Values (Aldershot:
Edward Elgar, 1995). Game theory, illustrated by the “prisoner’s
dilemma,” suggests that a strategy of self-interest may lead to a thirdbest outcome compared to a strategy based on trust and cooperation.
16 Amartya
Sen, On Ethics and Economics (Oxford: Basil Blackwell,
1989); and Sen, “Moral Codes and Economic Success,” in Brittan
3 John Dunning, “The advent of alliance capitalism,” in Dunning and and Hamlin, eds, Market Capitalism and Moral Values. See also
Sunstein, Free Markets and Social Justice.
Khalil A. Hamdani, eds, The New Globalism and Developing Countries
17 Amartya Sen, “Moral Codes and Economic Success,” in Brittan
(Tokyo, New York, Paris: United Nations University Press, 1997).
and Hamlin, 1995.
4 World Bank, Global Development Finance, Analysis and Summary
Tables, Vol. 1, 1997, pp. 35-6.
5
United Nations, World Investment Report 1997: Transnational
Corporations, Market Structure, and Competition Policy (New York:
United Nations, 1997), p. xv.
6
Ibid., pp. xv-xvi; xx.
7
Ibid., p. xvii.
8
Dunning and Khalil, p. 29.
9
See Gregory Baum, Karl Polanyi on Ethics and Economics (Montreal
and Kingston: McGill-Queen’s University Press, 1996); See also
Robert Heilbroner, Twenty-First Century Capitalism (Concord, Ont.:
Anansi, 1992), ch. 4, for a similar critique of the “market system.”
10 C.B. MacPherson, The Rise and Fall of Economic Justice, and Other
Papers (Oxford and New York: Oxford University Press, 1985), pp. 1-20.
11
The Group of Lisbon, Limits to Competition (Cambridge and
London: MIT Press, 1995).
12 Smith’s doctrine of the “Invisible Hand” is captured by his assertion that “It is not from the benevolence of the butcher, the brewer
or the baker that we expect our dinner, but from their regard of
their own advantage.” The doctrine holds that through the pursuit
of self interest, the economy is guided as though by an invisible
hand, to maximize wealth and prosperity. However, unlike some of
his latter-day followers, Smith also recognized corporate power,
business collusion, and the role of the state as important.
13
Milton Friedman, “Social Responsibility of Business is to Increase
Its Profits,” The New York Times Magazine, September 13, 1970, pp.
32-33.
14 For example, Cass R. Sunstein, Free Markets and Social Justice (New
York and Oxford: Oxford University Press, 1997).
32
18 Francis Fukuyama, Trust: The Social Virtues and the Creation of
Prosperity (London: Penguin, 1996).
19 Herman E. Daly, Beyond Growth: The Economics of Sustainable
Development (Boston: Beacon Press, 1997).
20 Paul Hawken, The Ecology of Commerce: A Declaration of
Sustainability (New York: Harperbusiness, 1994) and Growing a
Business (Toronto: Collins, 1987). Also “Natural Capitalism: The
Next Industrial Revolution,” an address to the National Round Table
on the Environment and the Economy, Ottawa, March 21, 1995.
Hawken mentions several technological examples, such as a new
ink that makes de-inking of newsprint environmentally benign.
(Many inks currently used are highly toxic so that de-inking solves
the problem of preserving the newsprint but creates another.)
21 Courtney Pratt, Address to The Canadian Club of Toronto,
“Business Accountability: Shareholders, Stakeholders or Society?”
September 29, 1997.
22 Paul Shrivastava, CASTRATED environment: GREENING organization studies. Organization Studies, 1994, 15 (5), pp. 705-726.
23
See Forcese, Putting Conscience into Commerce.
24
S. M. Rao and Brooke Hamilton III, “The effect of published
reports of unethical conduct on stock prices,” Journal of Business
Ethics, vol. 15 (2), 1996, pp. 1,321-330.
25 Robert H. Frank, “Can socially responsible firms survive in a competitive environment?”in David M. Messick and Ann E. Tenbrunsel,
eds, Codes of Conduct, Behavioral research into business ethics (New
York: Russell Sage Foundation, 1996).
26 Pratt,
27
“Business Accountability,” September 29, 1997.
See Steven D. Lydenberg,”Companies with a social vision: A
review of Aiming Higher by David Bollier,”Business & Society Review,
no. 97, 1996, pp. 75-76.
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28 See Charles W. Powers and David Vogel, Ethics in the education of
business managers (Hastings-on-Hudson, NY: The Hastings Center,
1980).
29
Friedman, “Social Responsibility of Business,” p. 33.
30 Chester
Barnard, The Functions of the Executive (Cambridge, Mass:
Harvard University Press, 1938/1968).
31
Ibid., p. 88.
32
See Charles Perrow, Complex Organizations: a critical essay,
3rd edition. (New York: Random House, 1986).
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45 Earlier efforts to create international codes for transnational activities met with significant resistance among both the private and public
sectors. As David Schilling and Ruth Rosenbaum of the Interfaith
Center on Corporate Responsibility suggest, “early UN attempts to create a global code of conduct failed because individual governments
were not able to reach legislative assent to a ‘Code of Accountability
for Transnational Corporations’ and many companies opposed it.” See
David M. Schilling and Ruth Rosenbaum, “Principles for global corporate responsibility,” Business & Society Review, no. 97, 1996, p. 55.
34 John M. Darley, “How organizations socialize individuals into
evildoing,” in Messick and Tenbrunsel, eds, Codes of Conduct.
46 They were: Alcan Aluminum Ltd; Beak International Inc.;
Cambior Inc.; Chauvco Resources Ltd; John Neville Inc.; Komex
International Ltd; Liquid Gold Resources Inc.; Profco Resources Ltd;
Pulsonic Corp.; Reid Crowther International Ltd; Sanduga &
Associates; Shell Canada Ltd; and Wardrop Engineering Inc.
35
47
33
Robert Jackall, Moral Mazes: The World of Corporate Managers
(New York: Oxford University Press, 1988).
See Thomas Donaldson, “Values in tension: Ethics away from
home,” Harvard Business Review, September/October 1996, pp. 48-62.
36
Ian W. Jones and Michael G. Pollitt, “Economics, ethics and
integrity in business,” Journal of General Management, vol. 21 (3),
1996, pp. 30-47.
37
See R.E. Freeman, Strategic Management: A stakeholder approach
(Boston: Pitman Publishing Inc.,1984), p. 46.
38
Ronald K. Mitchell; Bradley R. Agle; and Donna J. Wood,
“Toward a theory of stakeholder identification and salience:
Defining the principle of who and what really counts,” Academy of
Management Review, vol. 22 (4), 1997, pp. 853-86.
39
Ibid., p. 857, (italics in original).
40
Ibid.
41
Ibid., p. 859.
42
Maurice Lefebvre and Jang B. Sing, “The content and focus of
Canadian corporate codes of ethics,” Journal of Business Ethics,
vol. 11, 1992, pp. 799-802.
43 See Laura Eggertson, “Chrétien seeks probe in Mexico,” The Globe
and Mail, Report on Business, September 29, 1997, pp. B1, B5.
See Forcese, Commerce with Conscience?
48 L.V.
Ryan, “Ethics Codes in British Companies,” Business Ethics,
vol. 3 (1), Summer 1995, p. 55.
49
See Donaldson.
50
Tachi Kiuchi, Keynote Address to the World Future Society:
“What I learned in the rainforest,” July 19, 1997.
51
Forcese, Putting Conscience into Commerce, p. 28.
52
Ibid.
53
For a recent review of the question of the interaction between
states and markets, see the North-South Institute, States, Emerging
Markets and Development, Briefing Report, Ottawa, December 1997.
54 It should be noted, for example, that the United States has never
ratified the ILO’s labour standards.
55 In any event, if it is properly done, combating child labour will
require more than business codes. It would require parallel actions
to ensure that the child workers’ families do not suffer a loss in
income, and that educational opportunities are available in ways
that do not penalize children or their families.
56
For example, see Forcese, Putting Conscience into Commerce.
44
Transparency International, Press Release, “OECD AntiCorruption Convention leaves critical questions still open,”
November 5, 1997, Berlin.
33
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S ERVE P EOPLE
THE FINANCIAL SECTOR
Robert Walker and Marc de Sousa-Shields
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R G A N I Z A T I O N
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N
F O R
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N V I R O N M E N T
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F O R
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O F
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E N T U R E S
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O M M U N I T Y
U E R N A V A C A
,
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M AKING E CONOMIES
S ERVE P EOPLE
ETHICS
AND ECONOMICS
ARE OFTEN REGARDED
AS OPPOSITES
,
INEXTRICABLY
.
JOHN DALLA COSTA,
“MORAL CRISIS BEHIND ASIAN
MESS,”
or every complex and difficult question,”
H.L. Mencken wrote, “there is a simple
and easily understood answer. And it is wrong.”
BUT
THEY ARE IN FACT
INTERTWINED
“F
THE GLOBE AND MAIL,
MARCH 26, 1998
Much the same could be said of assessing the
social and environmental performance of
Canadian corporations. While some observers
draw clear and simple distinctions between
good and bad, ethical and unethical, others recognize that conduct can vary widely not only
within industrial sectors, but also within companies. In addition, widespread consensus on
the range and nature of corporate obligations to
society has yet to be reached. The question is
complicated further when corporations operate
in developing countries, where cultural values
and social norms can differ substantially.
The inherent complexity of evaluating the
performance of Canada’s financial services
industry, however, is especially challenging for
that growing spectrum of individuals, groups,
and organizations who care about the social and
environmental performance of the private
sector. Why?
First, the operations, products, and services of
the financial sector are esoteric even at the best
of times. While most Canadians have little difficulty understanding that forest products firms
cut down trees and that mining companies dig
rocks out of the ground, few are familiar with
the ins and outs of the London Interbank Offer
Rate or the whys and wherefores of many new
financial products such as “puttable convertible
bonds,” “synthetic convertible debt,” or
“variable cumulative preferred stock.”
Second, globalization and the advent of information technologies have affected the providers of
financial services, again perhaps more than any
other sector. This is because the world of finance
essentially involves trading bits of information
embedded in prices. For transactions to occur, no
cargo is transported. No harbour facilities, no rail
cars, no trucks, no containers, no mills. No
customs officers. Little or nothing is physically
warehoused outside of massive computer databases. Boundaries, distance, and culture are all
superfluous to earning profit by directing and
facilitating the flow of capital around the world.
For most of us, this emerging form of economic
36
organization bears little resemblance to the
working world we have known.
Third, the financial sector—and in particular
banks—often evoke emotional reactions from
many Canadians. Historically, in the world of
commerce and industry, the financial sector has
enjoyed a deified status at the pinnacle of
power. Banks offer a safe haven for life savings
and provide loan capital for major consumer
purchases and worthy businesses; trust companies provide sophisticated asset management for
the more fortunate; insurance companies provide for us in the event of property loss or personal disaster; securities dealers allow the more
adventurous among us to seek greater fortune in
the world of stocks and bonds. And new players,
the mutual fund companies, allow an increasing
proportion of Canadians to play the market
with professional, but cost effective, portfolio
management.
But we do not always look upon these deities as
benevolent. Every business, for example, needs
money. Banks will provide loans to this business
rather than that one, deciding which will prosper and which will wither on the vine. The
winners walk away satisfied (though perhaps
disgruntled by terms and conditions) and the
losers are outraged. Despite playing a critical
economic function, the financial sector is
loathed by many.
With these caveats in mind, how should
Canadians assess the social and environmental
impacts of our financial services companies in
developing countries?
ASSESSING
SECTOR
THE
FINANCIAL
Any such practical assessment is limited by
three factors: a lack of information concerning
Canadian corporate activity overseas; the lack of
resources currently devoted to monitoring and
reporting on that activity; and domestic regulations with few provisions to enforce adequate
disclosure of business activity, both at home and
abroad.
To understand the current state of our capacity
to evaluate Canadian financial institutions, we
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begin by describing the sector in its domestic
and global context. In doing so, we provide
some sense of the scope and scale of the
changes wrought by a range of forces now
having an impact on the industry.
to be augmenting their capacity to inflict harm
to society while maintaining the fundamentals
of the system, people around the world are
feeling powerless to advance progressive social
change or even preserve the gains of the past.
We then turn to the question of how Canadians
might assess the social and environmental
performance of Canadian financial institutions
in developing countries. We suggest that an
appropriate assessment of the financial services
sector must occur on two levels: at the level of
the firm; and at the level of the global financial
system.
But we are not powerless in the face of these
phenomena. Individuals, organizations,
institutions, and national governments can
engage in a broad range of strategies to
reconnect the financial economy with the
productive economy and restore the financial
services sector as a critical and positive force in
our economy and society.
These two levels, of course, are linked. What is
critical is that a range of forces—globalization,
information technologies, deregulation, proliferation of new financial instruments—are fundamentally altering the industry and leading to a
situation in which the “financial economy” is
becoming increasingly distanced from the “productive economy”—the world of productive and
physical enterprise. In developing countries and
around the world, rapid changes in the financial
services industry can mean that an increasing
proportion of the population does not receive
the financial services it and a modern economy
need; that good businesses may go without adequate loan capital, or that suspect businesses
receive it; and that entire economies will continue to experience floods and droughts of capital with severe social and political implications.
This is no simple task, however. Canadians are
constantly barraged by the message that
globalization, continued environmental
degradation, and technological displacement of
workers by corporations pursuing competitive
advantage are forces not subject to the will of
society or individuals. Within the context of a
debate framed in this way, discussion of the
public good is subsumed by a deference to private
sector interests and a set of historical forces
thought to be as ineluctable as the movement of
tectonic plates. As a first step to reconnecting the
financial economy to the productive economy,
we as a society must reject this perspective and
reassert that economies exist to serve people.
What’s more, all this can happen without damage to the financial system as a whole. As experienced in the last half of 1997, systemic forces
can bring about the liquidation of individual
financial institutions in particular geographical
locations, while the system as a whole persists,
fundamentally unchanged and with most
institutional players unaffected.
Thus, individual antipathy toward financial
institutions is augmented today by a sense of
helplessness concerning the flow of capital
across borders, and the capacity of society or
governments to do anything about it when
those flows are thought to harbour negative
social and environmental impacts.1 In Canada,
the negotiation of the Multilateral Agreement
on Investment (MAI), in particular, has led to
the establishment of grassroots organizations
ready to oppose its adoption by parliament. If
Canadians fear the loss of sovereignty over areas
that used to be a matter for national policy, people in developing countries are even more vulnerable. And as the financial institutions appear
In the context of the 1990s, this assertion may
appear heroic or naive. We should note, however,
that post-Second World War leaders saw this claim
as self-evident. The participants who gathered at
Bretton Woods, New Hampshire in 1944 believed
that revolutions in Russia and China, two world
wars, and the Great Depression were the direct
result of a world in which workers had been left
unprotected from the vagaries of economics and
trade. To avoid future social dislocation and war,
these leaders sought to design a system in which
an active role for national governments was
maintained to ensure that growth and equity
went hand in hand, and to ensure that
economies served the needs of people.2
Though the Bretton Woods system may have
failed on many accounts, its architects
identified social dislocation and social
sustainability as a fundamental problématique.
As today’s leaders proceed with deregulation,
trade enhancement, and financial liberalization
agreements, we should be reminded: the system
and its institutions will not prevail in this form
over the longer term should large segments of
our society conclude that they no longer
operate in the public interest.
37
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THE CANADIAN FINANCIAL
SERVICES SECTOR:
A DESCRIPTION
THE DOMESTIC STRUCTURE
For many years, the Canadian financial services
sector has enjoyed a smooth operating environment. Heavily regulated, cocooned by high
barriers to entry, protected as governmentsanctioned providers of essential economic
services, and respected by many as critical to
the functioning of a modern society, much of
Canada’s financial services industry has been
operating profitably since the mid-19th century.3
Banks in particular have long been regarded as
critical to the economy. Since the Great
Depression, governments have believed that
these major players cannot be permitted to fail.
The Canadian Deposit Insurance Corporation
(CDIC) and the assurance that governments
would step in to support troubled institutions in
order to avoid the spectre of bank runs and systemic failure have long underpinned the industry
to an extent not enjoyed by any other sector.4
This has fundamentally shaped the industry’s
structure. For instance, because entry has been
limited by government, the Canadian financial
services industry is highly concentrated. Only
22 financial services firms are listed on the
Toronto Stock Exchange 300, an index of
Canada’s largest and most actively traded companies: six banks, nine investment and mutual
fund companies; three insurance companies;
and four financial management companies.
BOX 1 THE TSE 300 AND THE
FINANCIAL SECTOR (as of July 1997)
Banks and Trusts
Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank
of Commerce
National Bank of Canada
Royal Bank of Canada
Toronto-Dominion Bank
Midland Walwyn
Capital Inc.
Sceptre Investment
Counsel Ltd
Trimark Financial Corp.
Insurance Companies
E-L Financial Corp. Ltd
Fairfax Financial
Holdings Ltd
Investment Companies
Great-West Lifeco Inc.
and Funds
Financial Management
AGF Management Ltd
Companies
Dundee Bancorp Inc.
Fahnestock Viner
Holdings Inc.
First Marathon Inc.
Investors Group Inc.
Mackenzie Financial Corp.
38
Newcourt Credit Group Inc.
Power Financial Corp.
Edper Group Ltd
Trilon Financial Corp.
Historically, there has been tremendous continuity in the industry, particularly among the
chartered banks. The five largest banks in
1997—the Bank of Montreal, Royal Bank of
Canada, the Bank of Nova Scotia (Scotiabank),
Canadian Imperial Bank of Commerce (CIBC),
and the Toronto-Dominion Bank—were also the
five largest in 1901.5
THE FOUR PILLARS
Bank failures during the Great Depression
prompted the federal government to regulate
financial institutions more heavily by segregating the industry into four areas of activity, with
little overlap in products and services permitted.
The four “pillars” of the financial services sector
historically include:
• chartered banks which accept short-term
deposits and provide personal and business
loans;
• securities companies which transact purchases
and sales of secondary equities and underwrite new stock issues;
• trust companies which manage estates and
trust funds, although they have some ability
to accept short-term deposits and provide
mortgage financing;
• insurance companies which sell insurance.
Mutual fund companies are relatively new
entrants in the financial services sector. Mutual
funds provide professional management of a
diversified portfolio of holdings actively
invested on the behalf of unit holders. Although
their roots go back to the 1930s, mutual funds
are a 1990s phenomenon. A combination of a
protracted bull market, “baby boomers” with
money to invest, and low inflation has led to
unprecedented growth for mutual fund companies. In 1987, 50 such companies controlled
approximately $20 billion in assets. In 1997,
about 150 fund companies managed some
$260 billion in assets and offered the Canadian
public more than 1,200 funds.6
DEREGULATION
The deregulation of the financial sector began
in 1980 when the government revised the Bank
Act to allow foreign banks to establish subsidiaries (Schedule II banks) in Canada. Because
limits were retained on asset growth and on the
right to establish branches, foreign banks operating in Canada primarily loaned to business,
drawing on asset bases established elsewhere.
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A second round of deregulation in 1987 relaxed
limitations on domestic ownership and financial
institutions were permitted to provide a full range
of financial services. This assault on the traditional four pillars is often referred to as “the little
bang,” in reference to the “big bang” deregulation
that took place in England that same year.
Canada’s major banks have been winners under
deregulation. In the wake of the little bang, each
has acquired and/or developed a securities arm.
The Bank of Montreal bought Nesbitt Burns Inc.;
the Royal Bank took on RBC Dominion Securities
Inc.; Scotiabank operates Scotia MacLeod Inc.;
and CIBC acquired Wood Gundy Securities Inc.
The Toronto-Dominion Bank established an
in-house securities operation and has focused on
the discount brokerage business. Only three securities dealers—First Marathon Securities, Gordon
Capital, and Midland Walwyn—remain as major
independents. The banks have also bought up
most of Canada’s trust companies. (As of writing,
Canada Trust is the only major Canadian trust to
remain independent).7
Insurance companies represent the final frontier, and many industry analysts anticipate that
banks will begin acquiring the more lucrative
prospects as deregulation continues.8 Mergers,
acquisitions, and consolidation among the
banks will result in major changes and greater
corporate concentration as the major players
call for continued deregulation and policymakers remain predisposed to oblige.9 In fact, in
January 1998, the Royal Bank and the Bank of
Montreal announced plans to merge.
THE GLOBAL CONTEXT
The major banks rank among Canada’s largest
corporations in terms of revenues, assets, and
profitability. Historically, they have also compared
favourably to North American banks overall, with
Royal Bank, CIBC, Bank of Montreal, and
Scotiabank all ranking in the top 10 in 1991.10
On a world scale, Canada’s financial sector is
tiny. Canada’s largest stock market, the Toronto
Stock Exchange, is considered to be of a lower
order than the major centres in New York,
Tokyo, and London.11 Canada’s largest bank, the
Royal Bank, with assets of US$157 billion
ranked number 50 in the world in 1997. The
Bank of Tokyo-Mitsubishi Ltd ranked first with
assets of US$648 billion.12 (Recently, however,
problems in Japan’s financial sector give
evidence to an overvaluation of its banks.)
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As globalization continues and trade and
investment restrictions fall, Canadian financial
institutions—and in particular the banks—are
deriving an increasing proportion of their
income outside of Canada.13 With the growing
threat of increased competition both at home
and abroad, Canadian financial institutions are
looking to augment their asset bases and market
positioning to enable them to compete internationally. And to grow assets internationally,
industry analysts agree, Canadian financial
institutions must first establish a major presence
in American capital markets.
CIBC has perhaps been the most aggressive in
this regard. Operating through Wood Gundy it
has acquired the Argosy Group Inc., a New York
investment banking firm specializing in the high
yield debt market. CIBC has also bought
Oppenheimer & Co. Inc., a Wall Street brokerage
house respected for the quality of its US equity
research.14 The Bank of Montreal operates in the
United States primarily in the Chicago area
through Harris Bankcorp Inc., its wholly owned
subsidiary. Toronto-Dominion has recently
acquired Waterhouse Investor Service, the third
largest discount broker in North America. The
Royal Bank’s attempt to purchase the London
Life Insurance Company in 1997 may signal an
attempt to model itself after England’s Lloyd TSB
Group PLC, specializing in both banking and
insurance.15
A PRESENCE IN THE DEVELOPING WORLD
Though small, most Canadian banks have long
maintained some measure of physical presence
in many developing countries. In several cases
this has amounted to providing offshore
services to clients seeking shelter in tax havens
such as Bermuda, and throughout the
Caribbean.16 With globalization, however,
Canadian financial institutions—along with
much of corporate Canada—are making adventurous forays into the volatile but rapidly
growing emerging markets of the Third World.
Some are more adventurous than others. CIBC’s
strategy, for example, is to become an international leader in underwriting and syndicated
project finance. Within the context of the
developing world, CIBC has made forays into
the private power industry in Taiwan through
its investment banking arm.17
Billing itself as the “first NAFTA bank,” the Bank
of Montreal has acquired a 16 percent equity position in Grupo Financiero Bancomer, a leading
39
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MONEY LAUNDERING
WHILE
SHORE BANKING SER
VICES FOR CLIENTS
,
FINANCIAL INSTITU
-
-
TIONS TAKE GREAT
PAINS TO AVOID MONEY
LAUNDERING
:
THE
-
PROCESS OF CONCEAL
ING THE NATURE
SOURCE
,
,
OR LOCATION
OF CRIMINAL PROCEEDS
EXPERTS
.
ESTIMATE
GLOBAL MONEY LAUN
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DERING TO INVOLVE AS
MUCH AS
US$300
L I O N A N N U A L L Y.
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Mexican retail financial institution, to provide
customers with a full range of services including
commercial, corporate, and private banking; brokerage, leasing, and factoring services; and foreign
exchange trading and warehousing.18
-
PROVIDING OFF
Page 40
-
THE
INFLUENCE WIELDED BY
CRIMINAL ORGANIZATIONS CONTROLLING
The Bank of Montreal is also one of only eight
foreign banks permitted to conduct business in
Beijing. Although not allowed to conduct business in Chinese currency, the new branch can
accept foreign currency deposits, make foreign
currency loans, discount bills, and make investments. While most Canadian banks have been
able to provide referral services through “representative banks” in China for several years, the
Bank of Montreal now has a significant advantage over its rivals in the world’s largest
potential market.19
Scotiabank, however, has historically been the
most aggressive Canadian financial institution
internationally, with ties to the Caribbean that
go back more than a century. The only
Canadian bank with extensive consumer banking operations abroad, it operates in nearly 50
countries. It is expanding aggressively in Asia
and recently established an office in Hanoi, the
first Canadian bank in Vietnam. With branches
in Malaysia, Thailand, and China, and as the
only Canadian bank operating in India, it is
currently exploring opportunities in Pakistan,
Bangladesh, and Sri Lanka.
THIS WEALTH HAS LED
SOME WORLD LEADERS
TO DEEM MONEY LAUN
-
DERING A GEOPOLITICAL
PROBLEM WHICH
,
LEFT UNCHECKED
,
IF
THREATENS THE POLITI
-
Scotiabank planned to spend $200 million in
1997 to extend and deepen its South American
network through acquisition and investment. It
now owns 16 percent of Grupo Financiero
Inverlat, a Mexican financial company that controls Mexico’s second and fourth largest banks.
It also has a 25 percent interest in Banco
Quilmes, Argentina’s seventh-largest private
bank and a 29 percent interest in Chile’s Banco
Sud Americano.20
CAL AND SOCIAL FABRIC
OF FRAGILE DEMOCRA
-
CIES AND DEMOCRATIC
INSTITUTIONS.
Source: Charles A. Intriago,
“Money Laundering Controls
in Offshore Banking Clients,”
Offshore Finance Canada,
May/June 1997. See also
“Money Laundering: That
Infernal Laundering Machine,”
The Economist, July 26, 1997.
Canada’s mutual fund industry has also established a presence in developing countries by
developing and marketing emerging market
mutual funds. There are now 48 such funds in
Canada with assets of $4.3 billion: most are
exceedingly new, dating only from the early
1990s. Investors and fund managers regard
emerging market funds as potentially lucrative
but highly volatile and therefore of limited interest to most mutual fund investors seeking stable,
predictable returns. The foreign property rule
limiting investors to a maximum 20 percent of
tax-sheltered savings in foreign securities also
hampers the growth of emerging market funds.21
40
E VA L U AT I N G P E R F O R M A N C E
CHECKS AND BALANCES ON CORPORATE
PERFORMANCE
Ongoing efforts to assess the social and environmental performance of Canadian corporations
date back to the mid-1970s and have been
conducted consistently by the various groups,
organizations, and investment professionals
that compose the social investment movement.
Social investment can be defined as the integration of social, ethical, and environmental values
into the investment decisionmaking process.
In general, social investors can pursue three
strategies to perform this integration: screened
investment portfolios; shareholder action; and
alternative investments in credit unions,
cooperatives, and community loan funds. All are
designed to advance social and environmental
progress through investment capital and
socially responsible businesses.
The social investment movement is rooted in
the churches, anti-war protests, and early environmental groups. Its modern origins in the
United States can be pinpointed to an eightmonth period between 1969 and 1970 during
which the US invasion of Cambodia prompted
many Americans to reconsider their holdings in
companies producing weapons for the war in
Southeast Asia; the inaugural Earth Day put
corporate environmental performance under
the microscope; and Ralph Nader’s campaign
against General Motors gave rise to the first
effective shareholder action focusing on product
safety and hiring practices.22
In Canada, initial issues for social investors were
apartheid in the Republic of South Africa and
human rights violations in Chile and Brazil.
Canadian churches have been at the forefront.
In 1975, a coalition of church-based organizations established the Taskforce on the Churches
and Corporate Responsibility (TCCR) to facilitate
shareholder action on these and other issues,
such as the environmental impact of forest
products and mining companies, relations with
Aboriginal people, and bank lending practices.23
SOCIAL AND ENVIRONMENTAL SCREENS:
BAROMETERS OF PERFORMANCE
To assess the performance of Canadian corporations and establish socially responsible investment portfolios, the social investment
movement developed a number of criteria and
performance benchmarks. Much of this is now
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embedded in investment “screens” established
by market demand, research companies, nonprofit groups, environmental organizations, and
social development groups.
There are two types of screens. Negative or
exclusionary screens define social criteria which,
if not satisfied, eliminate companies from an
investment portfolio. The best known screen
would be that which was applied against
companies with operations or significant
holdings in South Africa under apartheid.
Positive or qualitative screens define social
criteria which can be applied on a sliding scale.
While some companies may be excluded
because of an established pattern of noncompliance with environmental regulations, for
example, others will be included in a portfolio
because their performance, while perhaps far
from perfect, is better than that of its industry
peers. Such qualitative assessments can be
highly nuanced and allow investors to establish
a diversified portfolio by investing in companies
from a wide range of industries. This “best of
sector” approach represents a frank acknowledgement of the gritty reality of the Canadian
economy and, ideally, is accompanied by active
shareholdership to influence corporate directors
and management in positive directions.
BOX 2 SOCIAL INVESTMENT SCREENS
The screens employed by Michael Jantzi
Research Associates Inc. are made up of 90
indicators of corporate social and environmental performance in 10 different issue
areas.
• Negative or exclusionary screens include:
military production; nuclear power; and
operations in countries with intolerable
human rights records.
• Positive or qualitative screens include:
community relations; diversity;
employee relations; environment; international performance; products
and corporate practices; and corporate
governance.
ASSESSING CANADA’S FINANCIAL SECTOR
A May 1997 review of corporate social responsibility by the Toronto-based Social Investment
Organization listed six banks and one mutual
fund company as leaders in Canadian corporate
social responsibility: Bank of Montreal; CIBC;
Investors Group; National Bank of Canada;
Royal Bank of Canada; Scotiabank; and the
Toronto-Dominion Bank.24
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This may surprise some observers. It shouldn’t.
Canada’s major banks are often found in the
portfolios of many social investors, including
the portfolios of socially screened mutual funds.
Canada’s banks have a relatively good history of
progressive employment equity policies and
generous community donations programs, even
though they draw the ire of Canadians unhappy
with their lending practices, high service
charges, large profit margins, outsized executive
salaries, and cozy corporate governance regimes.
As a white collar industry, banks find it relatively easy to comply with environmental regulations. And bank performance overseas has not
recently been targeted by the social investment
movement as a cause for concern.25
Two research problems today confront the social
investment industry and the use of social
screens to evaluate overseas performance. The
first is how we assess the full social and environmental impact of financial institutions. If banks
do not themselves pollute, are they lending to
corporations that do? How can we fully evaluate
the downstream impacts of the lending policies
of Canadian banks and investment houses?
The second problem concerns the difficulties
associated with researching the performance of
Canadian financial institutions overseas. The
demands being placed on a small network of
researchers and nonprofit groups tracking the
performance of Canadian corporations abroad
are onerous to say the least. For-profit companies will take up this challenge on a case-by-case
basis in response to requests for information
from investors and media coverage of particularly lurid or interesting international stories.
But no comprehensive assessment of an entire
industrial sector will be possible without a
significant increase in resources from the private
sector, foundations, or government.26
CANADIAN FINANCIAL
INSTITUTIONS AND THE
GLOBAL FINANCIAL SYSTEM
Although small, Canadian financial institutions
do participate in the global financial system,
and it is at the level of the system that the
potential to inflict negative social and environmental impacts on developing countries may be
greatest. In addition, the system’s capacity to
inflict harm is growing.
Many would argue, of course, that the financial
services industry has never served developing
countries terribly well. The Latin American debt
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crisis of the 1980s and subsequent adjustment
programs is just one instance when financial
institutions benefited at the expense of
developing countries.
In the past, however, the threat of default on
loan payments emanating from capitals in
Mexico, Brazil, or Argentina at least gave the
financial sector pause. The fate of Southern
economies was tied, not only to specific lending
institutions, but to the global financial system
as a whole. Developing countries, at least potentially, could have prompted a systems collapse.
No longer. Today, while individual financial
institutions may suffer, the financial sector as a
whole can engage in reckless lending, corruption, and harbour woefully inadequate internal
controls—as in the case of the savings and loan
scandal in the US, the collapse of Barings
Investment Bank, and the devastation of
Crédit Lyonnais—and flourish, the system left
in place, fundamentally unchanged.
Worse, it can flood Southern economies with
capital one day, withdrawing it the next.
Domestic economies can be left devastated—as
in the case of Mexico in 1995—while Northern
financial institutions never step off the road to
prosperity.27
For many observers this is the mark of a sector
that, in many ways, is evolving into an
autonomous, self-contained economy—the
economy of the financial sector—divorced from
the productive economy in which people make
things, provide services, and require the basic
financial services critical to the functioning of a
modern economy.
What is happening? Globalization. Information
and communication technologies have eliminated distance and borders, leading to a proliferation of new products and services and
fundamental changes in business organization
and techniques, while hastening the transformation of domestic economies. The financial
sector has perhaps been transformed more than
any other.
THE OLD WAYS
In the past, the financial sector was heavily regulated, bank-centred, typically localized with
commercial lending operations run out of bank
branches. Its essential economic and social functions were clear. Among the more critical was to
deliver capital to the economy’s most productive and efficient enterprises. To sustain the
42
institution, risks were of course minimized:
lenders could not afford to be wrong very often.
Risks were minimized in two ways. The first,
broadly acknowledged, was through collateral
requirements. The second, often ignored, was
through the establishment of long-term relationships between lenders and borrowers; the
acquisition of deep expertise in specific industries; and a capacity to assess the quality of a
management team—providing guidance and
support where necessary. In many ways, bankers
were the first management consultants and few
ever wanted to call a loan: to do so was to admit
failure, that the lending officer had misjudged
the company.
THE NEW APPROACH
The new financial sector will be essentially
unregulated. It will be global rather than local.
It will be stock and bond market-oriented, as
Canada and Europe follow the American model
of corporate finance in which capital tends to be
raised through the stock market. It will create
distance between financial institutions and borrowers as critical functions become increasingly
automated through sophisticated computer programs and lending checklists. Future small business lending, at least, will take place over the
telephone and the internet.
This system will be oriented toward the elimination of firm-specific risk. Financial institutions
can do this for a number of reasons including
the proliferation of liquid securities markets
around the globe; by developing a sophisticated
capacity to use derivatives and other financial
instruments to hedge bets; and by establishing
the assembly of assets as a profit centre (through
a variety of trading activities), rather than a cost
centre (as was the case when banks had to accumulate assets primarily by paying interest on
savings accounts held by individual
depositors).28
To further understand the evolving financial
sector, it is useful to look at financial markets
and instruments a little more closely and in
historical context.
NEW WINE, OLD BOTTLES
In many ways, there is little that is new about
stock markets or the global reach of capital.
Stock markets were established in the 17th century as Dutch and English East India companies
issued shares to the public to finance imperial
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FOREIGN EXCHANGE MARKETS
BOX 3 WHAT IS
A
DERIVATIVE?
Derivatives are a broad class of securities
whose prices are derived from the prices of
other securities. Though there are more
than 1,000 different variations, derivatives
basically come in two forms: options and
futures (traded on regulated exchanges);
and forwards, swaps, collars, swaptions, and
literally hundreds of other custom-made
instruments (mostly traded “over the
counter”).
The basics of derivatives are usually
explained by reference to an ancient Greek
named Thales of Miletus. Ridiculed for his
poverty, Thales set out to prove he was poor
by choice, not by necessity. An astute
observer of the stars and weather patterns,
he forecast a bumper crop of olives one
year. Before the fruit began to ripen, he circulated among the owners of olive presses
and paid them a small fee for the right to
rent their presses during harvest, but only in
the event that he needed them. Thales paid
only a fraction of the actual cost of rental.
And the rental rate negotiated was low. The
press owners were glad to take the cash, not
willing to risk what would happen in the
event of a crop failure.
When the harvest came in, Thales rented
the presses and charged the olive growers
what he pleased, because he controlled all
the means for producing olive oil. Of course,
had the crop failed, Thales possessed the
right not to rent: all he would have lost
would have been the one-time payment for
the right to rent. Thales had invented the
“option.”
Source: Gregory J. Millman, The Vandal’s Crown: How Rebel
Currency Traders Overthrew the World’s Central Banks (New York:
The Free Press, 1995).
enterprises. In return, investors were granted a
share of profits in the form of dividends. Since
investors did not want to wed themselves irrevocably to the company, share certificates were
made freely transferable, thus transforming a
stream of future dividends into an easily
tradable capital asset.
What is new is the scale and scope of financial
markets, the proliferation of exotic financial
instruments, and the extent to which much of
the activity of the financial sector is performed
not to finance production, but to earn speculative returns. Indeed, some industry observers
allege that banks may now be trading as much
for their own account as for the benefit of their
clients.29 The institutions and instruments that
allow them to do so are now entrenched in the
global financial system. They include:
In the past, foreign exchange was an intermediate process. A multinational corporation would
take profits in German marks, for example, and
convert them to American dollars to purchase
equipment from a John Deere manufacturing
plant in Ohio. An investor would liquidate a US
treasury bill and convert it to Japanese yen to
purchase shares in companies listed on the
Tokyo stock market.
Today, foreign exchange has become an asset
class in itself, separated from any other underlying stock or bond. The foreign exchange
market is primarily about trading in money
rather than monetary claims on real assets. In
an April 1992 survey, it was found that, on
average, US$880 billion changed hands daily, an
amount equal to approximately one week of
America’s GDP, and one month’s worth of
global production. Only 12 percent of the transactions involved productive world customers:
75 percent of daily turnover was in transactions
solely between foreign exchange traders.
In 1996, the International Monetary Fund (IMF)
estimated daily currency trading averaged
US$1.3 trillion.30
THE TOBIN TAX
IN
AN EFFORT TO
R E S T R I C T S H O R T- T E R M
SPECULATION
,
REDUCE
V O L AT I L I T Y, A N D
INCREASE GOVERNMENT
REVENUE
, NOBEL PRIZE-
WINNING ECONOMIST
JAMES TOBIN
PROPOSED
INSTITUTING A TAX OF
BETWEEN
AND
0.1
0.25
PERCENT
PERCENT ON
ALL FOREIGN EXCHANGE
TRANSACTIONS
. THE
DERIVATIVES
PROPOSAL HAS BEEN
The use of derivative instruments is often justified by citing their use by agricultural producers
as futures and options to purchase a form of
insurance in the event of crop failure. Leaving
aside the distinction between derivatives such as
futures and options traded in organized and regulated exchanges and the proliferation of exotic
instruments traded over the counter (OTC),
it is important to note that about 70 percent of
trading in derivatives is in financial futures
(e.g., interest rate futures). Only 15 percent
involves trading derivatives with agriculture
produce as the underlying asset.
CRITICIZED AS DIFFICULT
OTC derivatives trading took off in the 1980s
and 1990s. In 1986 the notional principal in
interest rate swaps was US$400 billion with
another US$100 billion in currency swaps outstanding. By the end of 1993, notional principal
on interest rate swaps totaled US$6.2 trillion
and currency swaps US$1.8 trillion. By March
1995, the notional value of outstanding OTC
derivates was US$47.5 trillion. There was a further US$17 trillion in derivatives traded in stock
and mercantile exchanges. In aggregate, the
global derivatives market is now twice as large
as world output and much larger than the stock
43
TO ENFORCE AND LIKELY
TO INCREASE THE COST
OF CAPITAL BY
DISCOURAGING
“GOOD”
CAPITAL FLOWS
(E.G.,
TO FINANCE TRADE
WELL AS
“BAD”
)
AS
ONES
.
FOR A COMPREHENSIVE REVIEW
OF THE PROS AND CONS OF THE
TOBIN TAX, SEE JANE INCH,
“CONTROL OPTIONS FOR
INTERNATIONAL CURRENCY
SPECULATION,” PAPER
PREPARED FOR THE
HALIFAX
INITIATIVE COALITION,
DECEMBER 1996.
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of fixed income-securities in member countries
of the Organisation for Economic Co-operation
and Development (OECD— US$24 trillion).
Even the replacement value of OTC derivative
positions at US$2.4 trillion is three times as large
as the capital of the world’s 75 largest banks.31
BONDS AND TREASURY BILLS
Government bonds and treasury bills represent
loans that can be easily traded on the market.
They are a pledge on the part of government
(or increasingly, corporations) to pay a future
stream of interest payments and the return of
the principal at the bond’s maturity. From a
portfolio manager’s perspective, these instruments offer a virtually risk-free investment
opportunity, requiring little or no credit analysis, beyond taking note of credit ratings provided by Moody’s or other rating services.
The explosion of debt in the 1980s vastly
increased bond traders’ power to demand
austere fiscal and monetary policies of governments around the world. Under our current
financial system, “the higher a government’s
debt, the more it must please its bankers.”32
Historically, the credit market—which includes
loans arranged through a variety of instruments
and institutions, from bank loans to complex
bond products—has represented the heart of the
financial system, far outstripping the stock market in terms of trading activity. This too is
changing. The Government of Canada’s July
1997 announcement that, as a result of deficit
reduction, it need no longer offer new debt
issues, has created some consternation on Bay
Street. As fund managers move from safe treasury bills and government bonds to corporate
debt and commercial paper, Canadians looking
for secure pensions will need to be apprised of
reduced liquidity and increased risks associated
with equity-based investment opportunities. In
this sense, at least, there is an additional downside to debt-reduction, beyond that of reduced
public services.33
FINANCIAL MARKETS IN DEVELOPING COUNTRIES
Stock exchanges are now proliferating in
Malaysia, Chile, Taiwan, Thailand, the
Philippines, Korea, India, Mexico, Brazil,
Indonesia, Argentina, and China. These account
for just 13 percent of world stock market capitalization and are dwarfed by markets in London
and New York.34 Investors in the North now
have the capacity to buy up and desert stock
44
exchanges in these countries. Over the past 20
years, Mexico, more than any other country, has
learned that the impacts of such flows can be
devastating.
THE IMPLICATIONS OF INCREASED GLOBAL
LIQUIDITY: FINANCIAL CRISES IN MEXICO
Succeeding financial crises in Mexico can be
traced back to the establishment of the
Eurodollar market in the 1970s, when massive
volumes of American dollars were deposited
(primarily by OPEC countries recycling
“petrodollars”) in European (primarily London)
banks. As the decade progressed, other currencies joined the dollar, the market spread to
other financial centres, and American banks
moved offshore to join the fray. But the
Eurodollar market remained outside domestic
monetary systems and the control of national
monetary authorities.
As depositors became willing to hold dollars in
European accounts, banks began to put this
money to work by extending loans to developing
countries pursuing a strategy of indebted industrialization. With this investment opportunity—
and recession in many countries of the North—
international commercial banks assumed
responsibility for recycling Eurodollars to the
South.
Mexico was among the prime recipients of these
loans. And it soon became the most desperate
and persistent example of the problem of international indebtedness. Three times in less than
two decades Mexico has found itself
sliding toward national insolvency.
BAILING OUT THE 1982 MEXICAN DEBT CRISIS
The first Mexican debt crisis occurred in 1982. It
would be difficult to overstate its impact on the
international financial system and financial
institutions. Two points are salient here.
First, the 1982 crisis and succeeding crises later
that decade led to the creation of new financial
instruments for dealing with developing country indebtedness. The establishment of Brady
bonds in 1989 allowed the world’s largest international banks to convert approximately US$40
billion in Mexican government debt to 30-year
bonds, much of it with guaranteed rates of
return.
Second, the 1982 bailout, engineered primarily
by the US government, established a creditor
strategy that has guided subsequent rescue pack-
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ages imposed on debtor nations around the
globe. The strategy typically includes a combination of banks, governments, and international organizations acting as lenders of last
resort, providing liquidity to the debtor while
negotiating the rescheduling of debt repayment;
a severe adjustment or austerity program
imposed upon the debtor; and assigning primary responsibility for enforcing adjustment
and certifying eligibility for financial assistance
to the IMF. Although the details of the packages
vary and continue to evolve, the primary underlying principle of the strategy remains the same:
the fault—and therefore the major task in
resolving the debt problem—rests with the
debtors, not the creditors.35
THE 1995 MEXICAN PESO CRISIS
This premise is highly contentious. The peso’s
collapse in December 1994 and the subsequent
flight of capital through much of 1995 suggest
that something is wrong with the fundamentals
of global finance and the social efficacy of the
IMF program.36
To be sure, domestic economics and politics
provided proximate causes for the 1995 peso
crisis. With a current account deficit of 8 percent of GDP, the Chiapas uprising in January
1994, the assassinations of several prominent
Mexican political figures—including Luis
Donaldo Colosio, the presidential candidate of
the ruling Institutional Revolutionary Party—
bond traders, money managers, and foreign
exchange dealers had no shortage of excuses
for bailing out and finding a safer haven for
capital.37
But it is also clear that the crisis would not
have occurred in the absence of a rapidly
evolving and exceedingly liquid global financial system. Most certainly, the peso would not
have attained such heights in the absence of
massive flows of capital into Mexico’s financial
markets to service trade deficits and foreign
debt. Crucially, nearly 75 percent of the
US$98.5 billion that entered Mexico between
1989 and 1994 came in the form of short-term
portfolio investment, and not as long-term
direct investment in productive enterprise.
Even The Economist has noted: “The form of
Mexico’s crisis was shaped by the financial
innovations of recent years; and advances in
information and communications technology
caused it to be propagated globally in a way
that is without precedent.”38 The far-reaching
implications of the crisis were noted by
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Michel Camdessus, the Managing Director of
the IMF, who called it “the first crisis of the
twenty-first century.”39
The social impacts of the crisis are also clear. In
1995, per capita income in Mexico dropped
8.5 percent. Nearly 1 million jobs were lost.
Mexico swung from 4.4 percent growth in real
GDP in 1994 to a 6.2 percent contraction in
1995. As the price of imports increased, inflation
became rampant, and real purchasing power
decreased by nearly 30 percent. By September
1995 the minimum wage was sufficient to purchase only one-third of the basic food basket.40
DOMESTIC POLICY OPTIONS?
In the end, the Mexican government felt it had
little or no capacity to deter the flight of capital.
As the upward pressure on the peso began to
erode export competitiveness, the government
could have intervened to contain currency
appreciation by lowering interest rates. But this
would have added to already flourishing inflationary pressures. An intervention to sterilize
the inflationary impact by increasing interest
rates, in turn, would have inflicted costs on
investment, borrowers, and workers and augmented the problem of currency appreciation
by attracting even more foreign exchange. In
effect, Mexico was fundamentally incapable of
dealing with the economic crisis. It had no
policy arrows in its quiver.
This might be thought odd given the existence
of a range of policy options already in place in
other Latin American countries, designed to
deal specifically with the kinds of problems
Mexico was experiencing. Some countries, for
example, have created national stabilization
funds to cushion the economy when commodity prices weaken and maintained controls
aimed at discouraging sudden inflows and outflows of capital. Chile has led the world in this
regard by enacting laws requiring portfolio
investment to remain in the country for a minimum of 12 months. As a result, its economy has
proven to be relatively immune to the dreaded
“tequila effect:” the spread of financial crisis
from one country where the threat may be contained by concerted action to other countries in
the region.41 It is worth noting that Chile
remains the darling of emerging market
investors, despite having implemented these
controls.42
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T H E WAY O F T H E W O R L D :
MORE FINANCIAL
LIBERALIZATION
Participation in international trade agreements
may have prohibited Mexico from following the
Chilean example. Article 1109 of the investment chapter of the North American Free Trade
Agreement (NAFTA) specifically prohibits
domestic restrictions or controls on cross-border
flows of capital including profits, interest,
dividends, and fees.
Despite the apparent efficacy of the Chilean policy response, it appears that multilateral trade
organizations are intent on continued financial
liberalization and placing more limits on the
ability of national governments to control the
flow of capital across borders. Current initiatives
include:
The World Trade Organization’s Financial
Services Agreement
Covering more than 95 percent of the global
financial services market, this agreement gives
banks, insurance companies, and securities
firms greatly enhanced access to international
markets. Signed in December 1997, the agreement commits 70 countries to liberalizing their
markets, starting in March 1999. Although some
major Asian and Latin American countries are
still permitted to use protectionist measures in a
limited number of cases, the agreement establishes a clear set of binding rules for trillions of
dollars worth of business in financial services.43
The IMF Supplemental Reserve Facility
The IMF has developed the Supplementary
Reserve Facility, designed to enhance its capacity to bail out countries that have lost foreign
investors’ confidence. Coming in the wake of
1997 financial crises in Thailand, Indonesia, and
South Korea, the enhanced plan signals a shift
in IMF bailouts, shortening their duration and
raising the interest rates charged to borrowing
governments. This will have the effect of tightening the screws on developing countries while
ensuring a quick return to capital markets. In
addition, even supporters of increased trade
liberalization are beginning to worry that the
bailout packages distort proper market incentives. On several occasions, The Economist has
warned of the “moral hazard” involved when
the knowledge that the IMF will ride to the
rescue leads investors to engage in behaviour
they would otherwise avoid.44
46
The Multilateral Agreement on Investment
Currently under negotiation under the auspices
of the Organisation of Economic Co-operation
and Development, the Multilateral Agreement
on Investment (MAI) will require signatory states
to: treat foreigners no less favourably than
domestic investors; limit performance requirements for investors to meet specific conditions
in exchange for access to national economies;
accept a dispute-resolution mechanism allowing
investors to sue governments for damages when
they believe laws violate the MAI; and ban
restrictions on the repatriation of profits and the
movement of capital across borders.45
Proponents claim that the MAI will increase
global prosperity by freeing investors from distortions and inefficiencies caused by excessive
market regulation. Those opposed claim that
the MAI will restrict the capacity of government
to enforce environmental laws, promote job
creation, or protect cultural industries. To them,
the agreement represents yet another major
BOX 4 CURRENCY CRISES IN THE
“SUBMERGING” ECONOMIES
SOUTHEAST ASIA
OF
Until recently, some observers have taken
comfort in the belief that Mexico was a
unique case. The currency crisis in Thailand
in the summer of 1997 and the subsequent
meltdown of several Southeast Asian
economies suggest that the international
financial system may want to brace itself for
a succession of future crises. As a mountain
of bad debt crushed Thailand’s weaker
financial institutions, foreign investors withdrew funds from the country, propitiously.
The baht went into free fall, and other Asian
countries have been affected. It is anticipated that GDP growth in Thailand in 1997
will fall somewhere between a contraction
of 1 percent to 4 percent growth (with a
disastrous second half), compared to several
years during which growth exceeded 8 percent.1 With a string of financial institution
failures, even Japan has been affected.
Observers note that the size of Japan’s
financial problems rival those of the rest of
Asia combined.2
NOTES
1
Paul Shere, “Bangkok Calls on Foreign Banks,” The Globe
and Mail, August 8, 1997.
2
”Showdown Nears in Japan,” The Globe and Mail,
December 5, 1997 and “BIS Warns of Fallout From Asia,”
The Report on Business, December 9, 1997. While certain sectors of the Canadian economy are expected to suffer (particularly the forest products industry and mining), the financial
services industry will find ways to benefit. See Bruce Little,
“Asian Woes Expected to Spill Over,” The Globe and Mail,
December 9, 1997.
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surrender of national sovereignty to private
investors and multinational corporations.
What cannot be doubted is that the MAI will
increase global liquidity and the ease with
which investors can move portfolio investment
in and out of capital markets around the world.
What is uncertain is whether or not signatories
will be able to implement policies that hinder
the flows of portfolio investment and so-called
“hot money” that exacerbate currency, financial
sector, and stock market crises.
RECONNECTING TO SOCIAL
RESPONSIBILITY
Powerful forces generated within the financial
sector are not adequately serving social and
economic needs in many countries. And as witnessed in Asia during the latter part of 1997,
they are inflicting harm upon hundreds of millions of people. In the face of such forces, the
essential challenge is to identify, develop, and
implement strategies for reconnecting the financial sector to productive functions, human
needs, and socially responsible development.
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good corporate citizenship includes providing
products of value, satisfying employees,
maintaining a commitment to the community,
and safeguarding the environment.47
But the task of reconnecting the financial economy to the productive economy and human
needs cannot be left to CEOs alone. There is a
role for everyone. Financial institutions, after
all, are part of society, our history, our culture.
They only abide by the “rules of the game” that
our society generates, maintains, and tolerates.
Fundamental change will only come by revising
those rules. In general, this means changing the
following: people’s social expectations concerning the behaviour of corporations and our own
behaviour as investors and consumers; the
norms and standards maintained by industry
associations and professional trade organizations concerning acceptable member behaviour;
and the rules, regulations, and legislative
regimes established by parliament, interpreted
by the courts, and enforced by the government.
T O D AY,
THE CHALLENGE
FOR THE SOCIAL
INVESTMENT MOVEMENT
MOVES TO A NEW
F R O N T:
TO
DEMONSTRATE THAT
CORPORATIONS CAN ACT
AS AGENTS FOR
PROGRESSIVE SOCIAL
CHANGE
.
ROBERT WALKER AND SUSAN
The following strategies may help achieve these
changes.
FLANAGAN, “THE ETHICAL
IMPERATIVE,” IN
It is possible to do so by insisting first that
economies exist to serve society, not vice versa.
The firewall between traditional economic
“imperatives” (defined in conventional terms of
growth, profit, and development) on the one
hand, and social needs (as defined by fundamental human rights, social justice, and environmental protection) on the other, serves to
perpetuate a false dichotomy. In the parlance of
the social investment community, all investments, all consumption, and all financial and
economic decisions are fundamentally social in
content because each decision will have social
and environmental implications downstream,
regardless of whether the decisionmaker is
aware of these implications or not.
Despite the pervasiveness of this dichotomy,
there are dissenting voices. And the chief operating officers (CEOs) of major Canadian financial
institutions may be among them. Al Flood, CEO
of the Canadian Imperial Bank of Commerce, has
said that “people are much better informed and
they are concerned about things like corporate
ethics. And for us to succeed we must maintain
their trust and confidence. Good corporate ethics
have to be the foundation of our business.”46
Matthew Barrett, CEO of the Bank of Montreal,
also maintains that corporate social responsibility
should inform corporate practices and can be the
key to sound financial performance. For Barrett,
POLICY OPTIONS
THE FINANCIAL POST 500
MAGAZINE,
TRADE AGREEMENTS—THE NEED FOR SOCIAL
AND ENVIRONMENTAL CLAUSES
MAY 1997, P. 28
Current trends toward financial liberalization
appear as unstoppable today as industrialization
in the mid-19th century. While a critical examination of the principles underlying liberalization are necessary, so too are efforts to work
within existing multilateral organizations to
ensure the inclusion of social and environmental clauses in trade agreements as they are negotiated. The NAFTA side agreements, though
perhaps weak, provide an interesting model for
efforts to establish rules to protect the environment, regulate labour markets, and reassert
some measure of national control over national
economies. The ultimate objective should be to
establish a regime that encourages corporate
social and environmental responsibility and
helps reconnect the world of finance to the
world of productive enterprise.48
ENHANCING CORPORATE DISCLOSURE
REGULATIONS
The discussion paper released by the Canadian
government’s Taskforce on the Future of the
Canadian Financial Services Sector in June 1997
identified disclosure as a key to a healthy and
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competitive financial services sector and an issue
of concern for revisions to the Bank Act. Unfortunately, the taskforce has chosen to maintain a
narrow interpretation, limiting the industry’s concept of disclosure to issues such as the cost of
banking services, executive compensation, and
corporate governance. Financial institutions are
also required to report on direct foreign investment and acquisitions. But they are required to
disclose lending targets, loan exposure, and loan
loss provisions only when such policies pertain to
critical operations of the financial institution.
Canadian financial institutions listed on the
Toronto Stock Exchange (which includes all the
major banks) also fall under securities regulations of the Province of Ontario. Securities regulators require more information than the Bank
Act, and do not require mandatory nonbusiness
related disclosure. Prospectuses require detailed
business and industry risk factors assessments
and disclosure of other material business or legal
information that would influence an investor’s
investment decision. Information on material
environmental liabilities is required, but only if
such considerations would have a significant
effect on the fair market price of a company’s
stock value. Thus, legal suits related to a large oil
spill would require disclosure, while decimation
of the Brazilian rainforest or stockpiling
hazardous waste would not.49
Mandatory annual corporate reports typically
contain business and financial reporting items;
increasingly, mention of social performance is
usually related to charitable works or environmental performance. Only rarely are related
international “social” issues raised. In addition,
neither federal agencies regulating financial
institutions nor the Canadian Bankers’
Association maintain or track data concerning
domestic, let alone international, lending
patterns and practices.
Western commentators have repeatedly pointed
to inadequate disclosure regulations and a fundamental lack of accountability as underlying
causes of the 1997 meltdown in Asian financial
markets.50 Before proceeding too much further
with this critique, it may be useful for industry
representatives and regulators to reflect and
expand upon disclosure regulations in Canada.
LINKING SOCIAL VALUES AND RESPONSIBLE
SHAREHOLDERSHIP
Although often overlooked by investors, ownership of common stock confers rights and
48
responsibilities. These include a share in profits,
voting rights at annual meetings, and the right
to propose corporate policies.
In the United States, socially responsible
investors have long used shareholder rights as a
powerful tool for influencing corporate social and
environmental practice. A wide range of groups,
including church-based organizations, pension
funds, and mutual funds, maintain proxy voting
guidelines and engage in active shareholdership
as a standard feature of their operations.
The Bank Act and the Canada Business
Corporations Act, however, perpetuate the
dichotomy between the financial sector and
economic needs by allowing corporations to
exclude shareholder proposals deemed by directors to have been put forward for the purpose of
“promoting general economic, political, racial,
religious, social, or similar issues.” Shareholders
may advance only those resolutions relating
directly to the financial health of the corporation. Corporations have used this rule to refuse
circulation of resolutions that attempt to connect
a company’s social and financial performance. In
the US, however, governing legislation recognizes
social and environmental factors as potentially
significant to a company’s business. In most
states, fiduciary law allows specifically for the
consideration of corporate decisions’ effects on a
variety of nonshareholder interests.51
In the US, shareholders and the courts can hold
corporations accountable for social and environmental impacts through shareholder actions.
Concerned shareholders, for example, have the
right to file resolutions at annual general
meetings. The federal Securities Exchange
Commission, which is responsible for the regulation of the US investment industry, allows
noneconomic factors to be considered for
proxy circulation if a proposal is significantly
related to a corporation’s operations. More than
this, “a company may not omit a shareholder
proposal related to social or political
policy...unless the policy has virtually no connection to the company’s operation.”52
Importantly, resolutions are circulated to all
shareholders in advance of the meeting, at
which shareholders are given the opportunity to
discuss and vote on the issues raised.
Underlying these considerations is US legislation recognizing broader interests of society and
that “ethical issues... also may be significant to
the (company’s) business, when viewed from a
standpoint other than a purely economic
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one.”53 This view is supported in the majority of
US states by fiduciary law which allows trustees
“to consider the effect of their decision on a
variety of nonshareholder interests.”54
GREATER ACCOUNTABILITY TO COMMUNITIES
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portfolios—as a guaranteed way to limit the universe of stocks from which to choose, thereby
reducing diversification, increasing risk, and
limiting the potential for maximum financial
return within risk parameters established by
clients, advisors, and managers.
Again in the US, the Community Reinvestment
Act (CRA) requires all federally regulated banks to
disclose detailed financing activities related to
the equitable distribution of capital in local and
minority communities. The CRA’s performance
categories are: community credit needs; marketing and types of credit offered and extended; geographic distribution and record of opening and
closing of offices; discrimination or other illegal
practices; and community development.55
“When I go into a bank, I get rattled,” Stephen
Leacock wrote in his 1910 classic, My Financial
Career. Banks rattle most people. More material
on the financial sector is crucial to overcome
this fear. Heightened awareness of the industry
will allow people to begin to make the connection between their values and their investment
decisionmaking.
Importantly, the act provides assessment and
enforcement mechanisms to ensure some degree
of compliance. The Bank of Montreal’s purchase
of the Harris Bank, for example, was temporarily
blocked by regulators because its former owners at
the Bank of Chicago were not in compliance with
the CRA. No similar legislation exists in Canada,
although the Canadian Community Reinvestment Coalition advocates the inclusion of similar
provisions in Canada’s Bank Act.56
BOX 5 INTERNATIONAL SOCIAL INVESTMENT CRITERIA: SELECTED SOCIAL
ENVIRONMENTAL MUTUAL FUNDS
WHAT INDIVIDUALS CAN DO
Ethical Funds Inc.
The EFI family of funds seeks corporations
that encourage progressive industrial relations, strive to comply with environmental
regulations and the implementation of environmentally conscious practices, and conduct
their business in and with countries providing
racial equality within their boundaries. The
fund does not seek corporations that profit
significantly from the sale and/or manufacture of tobacco, nuclear energy, or military
equipment.
IMPROVE FINANCIAL LITERACY
The dichotomy between economic imperatives
and social needs is perpetuated by much of the
literature surrounding the world of finance, economics, and investment. The bulk of this comes
in two forms. The first, the popular literature
written for individuals investing for personal
financial security, has played a central role in
encouraging many to invest in today’s markets
either through mutual funds, investment clubs,
or self-directed portfolios. The second form of literature is the highly technical, increasingly mathematical studies designed for the owners and
managers of capital and finance theorists. In the
words of Mencken (writing on the dense nature
of economics): “The amateur of such things must
be content to wrestle with their professors seeking the violet of human interest beneath the
avalanche of their graceless parts of speech.”57
These two streams of finance literature rarely
question the social and environmental impact
of capital flows.58 The literature surrounding the
investment industry, for example, explicitly dismisses these questions—and the application of
social and environmental screens to investment
Investors Summa
Owned by the Investors Group, Investors
Summa will not invest in companies whose
practices openly or passively support
repressive regimes.
Clean Environment International Equity
Clean Environment does not have an exclusionary country screen for repressive regimes.
Rather, it seeks to invest in a globally diversified portfolio of companies that fit the
environmental concept of sustainable
development.
Both Ethical Growth and Investors Summa
have exclusionary screening criteria which
preclude investments in companies operating
in countries which, like Burma and South
Africa before the end of apartheid, have universally criticized human rights records. Other
countries with poor human rights records,
particularly those with large market potential
such as China and Indonesia, are not necessarily precluded. Investments in corporations
operating in these countries tend to be
considered on a case by case basis.
Source: Social Investment Organization, Social Investment
Directory, Toronto, Summer 1997.
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CONSIDER SCREENED INVESTMENT PORTFOLIOS
Socially responsible investors are the most significant private sector actors encouraging social
and environmental corporate performance.
Currently, hundreds of thousands of Canadians
hold more than $5 billion in 14 socially screened
mutual funds and six socially responsible
labour-sponsored venture capital corporations.59
But these represent only the tip of the iceberg.
It is impossible at this time to estimate screened
assets held by pension funds, charitable foundations, high net worth individuals with selfdirected portfolios, and funds being screened by
discretionary managers.
With more than $600 million in assets, the
Ethical Growth Canadian Equity Fund offered
by Ethical Funds Inc. is the largest screened
mutual fund in Canada. Ethical Growth investments are based on a number of social and
environmental criteria. As mentioned above,
because of relatively good social performance,
the fund typically holds several of Canada’s
large banks in its portfolio at any given time.
Most other Canadian ethical funds such as
Investors Summa and Clean Environment also
hold bank stocks from time to time (see Box 5).
These funds represent only a tiny fraction of
gross market capital. Unless they grow and
begin engaging in shareholder action, their full
social impact will not be felt.
One of the largest barriers to more rapid expansion of socially responsible investment in Canada
has been the perception, held by many mainstream financial advisors, that screened portfolios
do not perform as well as unscreened. This perception is false: screened mutual funds in Canada
BOX 6 SELECTED CANADIAN SOCIALLY
RESPONSIBLE MUTUAL FUNDS
Assets ($ millions)
(as of October 16, 1997)
Selected Canadian Equity Funds
Ethical Growth Fund
Investors Summa
628.0
260.4
International Funds
Clean Environment International Fund
Ethical Pacific Rim Fund
Ethical Global Bond Fund
Ethical North American
Total Assets
10.7
30.0
12.5
94.5
$1,036 million
Source: Selected Canadian Socially Responsible Mutual
Funds were reported in The Globe and Mail on October 16,
1997. The numbers reported are for the month ending
September 30, 1997.
50
have emerged as top performers across fund categories. Dozens of US studies also demonstrate
empirically that screened investment portfolios
can and do offer competitive rates of return: in
some cases, they can outperform industry
benchmarks and peer group averages.60
SUPPORT RESPONSIBLE SHAREHOLDERSHIP
Despite regulatory barriers, shareholder action
in Canada is possible. In fact, Canada’s financial
institutions have been the target of several
actions led by Canadian churches and the
Taskforce on the Churches and Corporate
Responsibility. In addition to the issue of
apartheid in South Africa, the churches have
pushed the banks to disclose information and
provide debt relief on loans to Southern countries. The most successful action took place at a
Bank of Montreal shareholder meeting when 5.8
percent of shareholders supported South African
divestment.61
Despite TCCR’s leadership (see Box 7), shareholder action in Canada has been sporadic. A
recent landmark case instigated by minority
shareholder activist Yves Michaud, however,
indicates that interest in shareholder action may
be on the rise. The case involved Michaud’s
right to circulate a resolution on two corporate
governance issues to National Bank and Royal
Bank shareholders. The Quebec Supreme Court
ordered the banks to circulate the resolution,
possibly paving the way for shareholders to
forge the link between corporate social responsibility, financial performance, and ultimately the
intimate connection between economic and
social well-being.62
Of course, not every individual or institutional
investor will be in a position to lead the charge
as filing and co-filing proposals requires a great
deal of research and coordination. What is necessary, however, is for every investor to put in
place the decisionmaking processes, the protocols, and the proxy voting guidelines that will
allow them to vote their shares responsibly and
to play a critical role in reconnecting the world
of finance and investment to human needs.
SUPPORT THE DEVELOPMENT OF CODES OF
CONDUCT AND PROGRESSIVE SOURCING POLICIES
Since the introduction of the Sullivan Principles
calling for divestment in South Africa, codes of
corporate behaviour have attracted growing
attention as a tool for increasing corporate
social responsibility and public accountability.
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BOX 7 THE TCCR AND CANADIAN FINANCIAL INSTITUTIONS:
SHAREHOLDER RESOLUTIONS ON INTERNATIONAL ISSUES, 1983-95
Year
Bank
Issue
Outcome
1983
1984
CIBC
Bank of Montreal
Bank of Nova Scotia
Bank of Montreal
Bank of Nova Scotia
Royal Bank
Bank of Montreal
Bank of Nova Scotia
Royal Bank
Loans to Southern countries
Divest from South Africa
Divest from South Africa
Southern country debt relief
Southern country debt relief
Southern country debt relief
Southern country debt relief
Southern country debt relief
Southern country debt relief
2.25 percent in favour
5.8 percent in favour
3.2 percent in favour
Resolution withdrawn
Resolution withdrawn
Resolution withdrawn
Resolution withdrawn
Resolution withdrawn
Resolution withdrawn
1990
1991
Notes: In all cases, TCCR found banks steadfastly opposed debt relief for debtor countries, preferring instead to renegotiate, swap, writeoff, sell, or otherwise dispose of Southern debt. Nevertheless, TCCR’s diligent work in corporate boardrooms has resulted in a slow acceptance by some executives of broader social responsibility.
Source: “Shareholder Proposals in the Canada Business Corporations Act: Recommendations for Revisions of S.137,” by Moira
Hutchinson for Michael Jantzi Research Associates Inc., June 1996.
Often developed by nongovernmental organizations, codes of conduct provide a reference
point for assessing corporate behaviour on nonbusiness related issues and can help inform the
development of social screening criteria.
Many codes have enjoyed some success,
although typically, single issue codes such as the
MacBride Principles on employment practices in
Northern Ireland, or very broad codes such as
the Caux Round Table Principles for Business,
have received the greatest attention and corporate support. More demanding codes, such as
the TCCR-sponsored Benchmarks for Measuring
Corporate Performance (see Box 6, p. 27), or the
Coalition for an Environmentally Responsible
Economy (CERES) Principles have received
greater critical acclaim from social and environmental activists, but far less acceptance by the
business community.63
Measurement and enforcement of codes remain
problematic, not only because compliance is voluntary, but also because proposed measures are
typically hard to quantify and are inconsistent
across industrial sectors. How, for example, can
the environmental impact of a forest company, a
software firm, and a bank be assessed using the
same measure? Codes also tend to be aimed at
corporations operating in the North and are less
appropriate for the South where social and
cultural standards and inadequate physical
infrastructure present compliance barriers.
Unfortunately, there are presently no specific
social or environmental codes for financial institutions, and those codes that do exist relate
primarily to operating activities.64
SUPPORT THE CREDIT UNION MOVEMENT
As local financial cooperatives, many credit
unions maintain a commitment to make significant contributions to the communities in which
they operate. The credit union movement in
Canada is also committed to social and economic development in developing countries,
with projects aiming to help people become
more self-sufficient. International development
is coordinated by the Canadian Co-operative
Association and funds are raised throughout the
cooperative sector. In addition, the Credit
Union Central of Canada, the national trade
association of credit unions across the country,
is a member of the World Council of Credit
Unions. With affiliated members in 80 countries,
the Council directs financial and leadership
resources to credit union extension throughout
the world. Some credit union systems, such as
the Mouvement des caisses Desjardins’
“Développment international Desjardins” have
dedicated international development programs.
SUPPORT ALTERNATIVE INSTITUTIONS FOR
MICRO- AND SMALL BUSINESS CREDIT
Over the last two decades, micro-credit, or the
provision of loans to micro- and/or small businesses for the purpose of generating increased
business income, has grown as a development
tool. Micro-lending in developing countries was
pioneered by the Grameen Bank in Bangladesh.
The World Bank now estimates that there are
more than 7,000 micro-lending institutions
worldwide, involving more than 13 million
clients and more than US$19 billion.65
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. . .BY
DIRECTING
C A P I TA L R E S P O N S I B LY,
WE CAN ENCOURAGE
MAJOR CORPORATIONS
TO COMPETE NOT ONLY
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The Toronto-based Calmeadow Foundation is a
recognized world leader in micro-credit and has
been involved in the establishment of a number
of projects including the development of Banco
Sol in Bolivia and ProdFund, an international
micro-bank financing organization. Calmeadow
is also active in building micro-credit capacity in
South Africa.66
ON THE BASIS OF THEIR
FINANCIAL PERFOR
-
MANCE BUT ON THEIR
SOCIAL AND ENVIRON
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MENTAL RECORDS AS
WELL
.
ROBERT WALKER AND SUSAN
FLANAGAN, “THE ETHICAL
IMPERATIVE,” IN THE
FINANCIAL POST 500
MAGAZINE, MAY 1997, P. 28
Scotiabank established a similar micro-credit program in Guyana in 1993. Though not well publicized, the program now boasts more than 3,000
clients and loans thousands of dollars annually.
Bancomer, a large Mexican bank in which the
Bank of Montreal has a significant stake, is also
reported to be developing a micro-credit program.
Mennonite Economic Development Associates
(MEDA) also actively finances small business
development internationally. In addition to
more traditional types of development work,
MEDA offers a number of financing tools to
small and micro businesses in developing countries including Bolivia, Nicaragua, Haiti, and
Jamaica. Similarly, through its Dutch parent, the
Ecumenical Development Society (EDS) provides
loans to a range of development projects and
businesses in several countries, including
Zimbabwe and India. EDS has also helped
finance “fair trade” businesses such as
Bridgehead Canada, which purchases goods
directly from producer groups.67
Alternative financing provides an important
function as high impact social equity models. It
remains, however, relatively insignificant in the
face of more traditional flows of international
financial resources. But the growth of such models is important in that they raise the standards
to which other financial institutions can be held
accountable.
MAKING ECONOMIES SERVE
PEOPLE
Assessing the performance of the Canadian
financial sector involves understanding and
confronting all the subtleties and nuances of
social screening and industry benchmarks, as
well as addressing fundamental questions of cultural values and economics. It also requires
grappling with how changes in the global financial system are establishing a new set of incentives for financial institutions around the world.
52
Globalization, information technologies, deregulation, trade liberalization, and the proliferation of new products are fundamentally altering
finance services corporations, the industry, and
the rules of the game. This is leading to a situation in which the financial economy—the
world of debt, equity, bond trading, currency
exchange, and commercial lending—is becoming increasingly distanced from the productive
economy—the world of productive physical
enterprise.
Given the power, complexity, and geographical
spread of this industry, reconnecting these
worlds will be no easy task. But, as we have
seen, individuals and institutions have access to
a variety of strategies that can be employed
immediately.
More than anything else, reconnecting these
worlds will require appropriate levels of public
accountability and informed investors, consumers, and legislators. In the absence of balanced analysis of the sector’s performance in
developing countries, public interest and public
policy are left dangerously uninformed. The need
to augment resources and increase the reporting
capacity of the social investment movement is
crucial. Similarly, there is a need to advocate for
international agreements that integrate social
and environmental concerns, equivalents to the
Community Reinvestment Act, and the establishment of new institutions independent of the
existing major players, capable of meeting
demand generated by those with low incomes.
If the information available on the impacts of
the financial sector does not increase, however,
financial institutions will remain immune to all
efforts to increase their accountability. The current trend toward greater disclosure of shareholder-related information goes some distance
to advance institutional transparency, but, as
with other sectors, this may not be enough to
promote broader stakeholder interests, certainly
over the short and medium terms.
To start making these changes, we must first
articulate the nature of our problem. Today, few
of the major players would acknowledge the
central problématique of the Canadian development and social investment communities or
recognize that, in order for a just society to be
sustained, economies must serve people.
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NOTES
1
“Today it seems that the heads of governments may be the last to
recognize that they and their ministers have lost the authority over
national societies and economies that they used to have.” For perspectives on the loss of national sovereignty see Susan Strange, The
Retreat of the State: The Diffusion of Power in the World Economy
(Cambridge: Cambridge University Press, 1996).
22 For an introduction to social investment see Peter Kinder; Steven
D. Lydenberg; and Amy L. Domini, Investing for Good: Making Money
While Being Socially Responsible (New York: Harper Collins Publishers
Inc., 1993). For a Canadian perspective see Eugene Ellmen’s
The 1997 Canadian Ethical Money Guide (Toronto: James Lorimer &
Company, 1996).
2 See Ethan Kapstein, “Workers and the World Economy,” Foreign
Affairs, May/June 1996. For a classic treatment of the links between
social dislocation and war in the 20th century see Karl Polanyi, The
Great Transformation: The Political and Economic Origins of Our Time
(Boston: Beacon Press, 1957).
23
3
For historical overviews see Graham D. Taylor and Peter
Baskerville, A Concise History of Business in Canada (Toronto: Oxford
University Press, 1994) and James L. Darroch, Canadian Banks and
Global Competiveness (Montreal and Kingston: McGill-Queen’s
University Press, 1994).
4
Some industry observers argue that the existence of these guarantees in certain countries establishes a perverse set of incentives and
prompts banks to engage in reckless activities. See “Coping With
the Ups and Downs,” The Economist, April 27, 1996.
5
See Canadian Annual Financial Review (1901) and The Financial Post
Magazine, “Top 500 Investor’s Handbook Edition,” May 1997. By
way of contrast, most investment firms in the US are youngsters.
Morgan Stanley, among the oldest and most prestigious of the
“bulge bracket” firms, was established only in the 1930s. Over time,
various institutions have entered and exited, either fading from
glory (Dillon, Read, or Kuhn, Loeb) or exploding infamously
(Drexel Burnham Lambert).
6
See Shirley Won, “Mutual Fund Assets Set Record,” The Globe and
Mail, Report on Business, July 16, 1997.
7
Current regulations state that no more than 10 percent of any
class of shares of a Schedule I bank may be owned by a single
investor, or by investors acting in concert. This has the practical
effect of limiting foreign control. The Task Force on the Future of
the Canadian Financial Services Sector is exploring questions of foreign ownership and it is expected that sooner or later this barrier
will fall. See Discussion Paper, June 1997.
8
See for example, Dennis Slocum, “London Life Expected to Gain
Muscle After Sale,” The Globe and Mail, June 28, 1997; Dawn
Walton, “Bank’s Entry Worries Insurance Industry,” The Globe and
Mail, July 1, 1997, and Dennis Slocum, “More Banks, Insurance
Alliances Expected,” The Globe and Mail, August 11, 1997.
9
See John Partridge, “Banking Task Force Nixes Ban on Takeovers,”
The Globe and Mail, Report on Business, July 12, 1997. For an indication of the direction of the next round of revisions to the Bank Act
see, Task Force on the Future of the Canadian Financial Services
Sector, Discussion Paper, June 1997. See also Andrew Willis,
“Banking On It,” The Globe and Mail, December 13, 1997.
10 See Darroch, 1994. Historically, American banks have been
restricted domestically to the state within which they are incorporated. This has kept American banks relatively small and the industry fractured. The same pressures of globalization, however, are
leading to rapid consolidation south of the border.
See Renate Pratt, In Good Faith: Canadian Churches Against
Apartheid (Waterloo, Ont: Canadian Corporation for Studies in
Religion, 1997).
24 See Robert Walker and Susan Flanagan, “The Best of the TSE 300”
and “The Ethical Imperative,” The Financial Post Magazine, May 1997.
25 See MJRA, Profiles. Note that any concern over the social or environmental performance of a Canadian financial institution will be
indicated by MJRA only in the event that a major controversy is generated. Canadian researchers have no capacity for independently
researching Canadian corporations in developing countries on a comprehensive basis and must rely on standard media sources. Note also
that during the 1970s and 1980s Canada’s major banks were targeted
by the Taskforce on the Churches and Corporate Responsibility’s
campaign against apartheid in South Africa. See Pratt, 1997.
26 Founded in 1993, Michael Jantzi Research Associates Inc. analyzes
the social and environmental performance of Canadian corporations. The company maintains a database of approximately 450
Canadian companies and has a wide-ranging clientele consisting of
fund managers, pension funds, charitable foundations, and
nonprofit organizations.
27 For a discussion of the potential for systems collapse see “The
Domino Effect: A Survey of International Banking,” The Economist,
April 27, 1996.
28
For fuller descriptions of the transformations taking place see
Martin Mayer, The Bankers: The Next Generation (New York: Truman
Talley Books/Dutton, 1997); Gregory J. Millman, The Vandals’
Crown: How Rebel Currency Traders Overthrew the World’s Central
Banks (New York: The Free Press, 1995); William Wolman and Anne
Colamosca, The Judas Economy: The Triumph of Capital and the
Betrayal of Work (New York: Addison-Wesley Publishing Company,
Inc., 1997). For a reassuring examination of the economic function
of speculation see “Pennies from Hell,” The Economist, February 3,
1996. For an accessible discussion of risk see Peter L. Bernstein,
Against the Gods: The Remarkable Story of Risk (New York: John Wiley
& Sons, Inc., 1996). For a window on the origins of modern portfolio theory and the quest to eliminate firm-specific risk from investment portfolios, see Harry M. Markowitz, “Portfolio Selection,”
Journal of Finance, March 1952 and Harvey E. Bines, “Modern
Portfolio Theory and Investment Management Law: Refinement of
Legal Doctrine,” Columbia Law Review, 1976.
29
Bank for International Settlements, Central Bank Survey, (Basel,
Switzerland: BIS, 1992). See also, Jane Inch, “Control Options for
International Currency Speculation,” paper prepared for the Halifax
Initiative Coalition, December 1996, and Ted Fishman, “Our
Currency in Cyberspace,” Harper’s, December 1994.
30
Bank for International Settlements, Central Bank Survey, 1995 and
IMF, International Capital Markets 1996.
See Geoffrey Dobilas, “The Canadian Financial System in
International Perspective,” in John Britton, ed., Canada and the
Global Economy: The Geography of Structural and Technological Change
(Montreal and Kingston: McGill-Queen’s University Press, 1996).
31
12
33
11
See Richard Blackwell, “Canadian Banks Improve in World
Rankings,” The Financial Post, July 5, 1997. See also, Karen Howlett
and Andrew Willis, “Domestic Giants, Global Pipsqueaks,” The
Globe and Mail, Report on Business, June 28, 1997.
13
“Banks Without Borders,” The Globe and Mail, December 16, 1997.
14
“CIBC Buys Oppenheimer,” The Globe and Mail, Report on
Business, July 23, 1997.
15
See Karen Howlett, “Brokers Differ on Route South,” The Globe
and Mail, Report on Business, July 1, 1997 and Michael Jantzi
Research Associates Inc. (MJRA), Investor Profiles, Toronto, 1996.
16 For a window onto the world of tax havens see the periodical,
Offshore Finance Canada.
17
CIBC, Annual Report, 1996.
See Doug Henwood, Wall Street (New York: Verso, 1997).
32
“Bond Watch,” The Globe and Mail, Report on Business, July 16,
1997. See also “Letter to the editor,” from Jim Stanford, economist
with the Canadian Auto Workers, Report on Business, July 25, 1997.
Ibid.
34
See International Finance Corporation, Emerging Stock Markets
Factbook, Washington, D.C., 1995.
35 For discussions of the broad implications of the Mexican debt
crises see Robert Gilpin, The Political Economy of International
Relations (Princeton: Princeton University Press, 1987) and Eric
Helleiner, States and the Reemergence of Global Finance: From Bretton
Woods to the 1990s (Ithaca: Cornell University Press, 1994).
36
“Ten Lessons to Learn,” The Economist, December 23, 1995January 5, 1996.
37 For lurid details of the events leading up to the crisis, see Andres
Oppenheimer, Bordering on Chaos: Guerillas, Stockbrokers, Politicians, and
Mexico’s Road to Prosperity (Boston: Little, Brown and Company, 1996).
18
See Monica Ballesca, “Foreign Banks Invade Mexican Market,”
The Financial Post, December 12, 1996.
38 “The domino effect: A survey of international banking,” The
Economist, April 27, 1996.
19
39
“Bank of Montreal Confirms Beijing License,” The Globe and Mail,
Report on Business, December 21, 1996.
20 See Bank of Nova Scotia, Annual Report, 1996 and John Partridge,
“Scotiabank Pushing Deeper in South America,”The Globe and Mail,
Report on Business, April 1, 1997.
21
See The Globe and Mail, “Report on Mutual Funds,” July 17, 1997.
The Economist contends that while the chances of system-wide
financial breakdown have diminished, the costs, if it should
happen, are mounting. See “The domino effect: A survey of international banking,” The Economist, April 27, 1996.
40 John Dillon, Turning the Tide: Confronting the Money Traders
(Ecumencial Coalition for Economic Justice and the Canadian
Centre for Policy Alternatives, 1997).
53
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41 G. Pierre Goad, “Not Being Mexico Isn’t Always an Edge,” The
55 “A Capital Idea: The Case for Reinvestment Requirements and
Globe and Mail, August 1, 1997; Paul Sherer, “Thailand Closes 42
Accountability Mechanisms for Financial Institutions in Canada,”
Finance Companies,” The Globe and Mail, August 6, 1997; Paul
Democracy Watch, April 1994.
Sherer, “Bangkok Calls on Foreign Banks,” The Globe and Mail,
56 For more information write: Democracy Watch, P.O. Box 821,
August 8, 1997; and Marcus W. Brauchli, “Austerity Injures National Station B, Ottawa, Ontario, K1P 5P9.
Pride in Asia: Currency Woes Put Some Countries Projects on Hold,” 57
Quoted in Doug Henwood, Wall Street.
The Wall Street Journal, August 26, 1997.
58 Ibid.
42 “Financial Virtue Bolsters Chile,” The Globe and Mail, December
59 See Tricia Hylton and Robert Walker, “Screened Investment
8, 1997.
Funds in Canada, 1987-1997: A Decade of Growth, A Time of
43 See “WTO Reaches Accord as Asians Agree to Open Finance
Performance,” SIO Forum, vol. 8, no.1, Jan/Feb 1998. When referring
Industry to Foreigners,” The Wall Street Journal, December 15, 1997,
to market share it is necessary to distinguish between the mutual
and Heather Scoffield, “Agreement Opens World Financial Services
fund and the venture capital industries. According to the Canadian
Market,” The Globe and Mail, December 15, 1997.
Venture Capital Association, the labour-sponsored funds dominate
44 “The Domino Effect: A Survey of International Banking,” The
the venture capital industry in Canada. The six funds tracked by the
Economist, April 27, 1996 and Michael M. Phillips, “IMF Develops
SIO (those that apply social screens in their investment decisions)
Plan for Speedy Bailouts,” The Wall Street Journal, December 10,
make up almost 40 percent of this $7.1 billion industry. Few
1997. Note too that proponents of increased financial liberalization observers will miss the irony of labour unions dominating the most
are also calling for the amendment of IMF Article 6 which condones entrepreneurial and romantic segment of investment capitalism.
controls on capital movements.
60 See for example John B. Guerard, Jr., “Is There a Cost to Being
45 See for example, Laura Eggertson, “Treaty to Trim Ottawa’s Power:
Socially Responsible in Investing?” Vantage Global Advisors, August
Equal-Treatment Rules for Foreign Firms Could Limit Research, Job- 1996; Stanley J. Feldman; Peter A. Sokya; and Paul Ameer, “Does
Creation Targets,” The Globe and Mail, April 3, 1997.
Improving a Firm’s Environmental Management System and
46 Al Flood, quoted in Robert Walker and Susan Flanagan, “The
Environmental Performance Result in a Higher Stock Price,” ICF
Ethical Imperative,” The Financial Post Magazine, May 1997, p. 28.
Kaiser Consulting Group, 1996; and Lloyd Kurtz and Dan
DiBartolomeo, “Socially Screened Portfolios: An Attribution
47 Matthew Barrett, “Good Citizenship is Good Business,” Policy
Analysis,” Journal of Investing (Fall 1996).
Options, December 1996.
48 See Michael Hart, “What’s Next: Negotiating Rules for a Global
Economy,” Occasional Papers in International Trade Law and Policy,
No. 36, (Ottawa: Centre for Trade Policy and Law, The University of
Ottawa and The Norman Paterson School of International Affairs,
Carleton University, 1995.)
61 See Moira Hutchinson, “Shareholder Proposals in the Canada
Business Corporations Act: Recommendations for Revisions of
S 137,” for MJRA, June 1996.
49 See Randall Morck and Masao Nakamura, “Banks and Corporate
Governance in Canada,” in Ronald J. Daniels and Randall Morck,
Corporate Decision-making in Canada (University of Calgary Press, 1995).
63 See Principles for Global Corporate Responsibility: Benchmarks for
Measuring Corporate Business Performance, available from the Taskforce
on the Churches and Corporate Responsibility. It includes the CERES
Principles and other codes of corporate conduct.
50
“Showdown Nears In Japan,” The Globe and Mail, December 5, 1997.
62 See Robert Walker, “Shareholder Action: Social Investment’s Next
Frontier?” SIO Forum, vol. 7, no. 1, February 1997.
51
For an excellent study of these issues see “The Promotion of
Active Shareholdership for Corporate Social Responsibility in
Canada,” prepared by Moira Hutchinson for Michael Jantzi
Research Associates Inc., November 1996.
64 For a recent overview of corporate codes of conduct see Craig
Forcese, Commerce With Conscience? Human Rights and Corporate
Codes of Conduct (Montreal: International Centre for Human Rights
and Democratic Development, 1997).
52 See Lovernheim v. Iroquois Brands, 618 F. Supp. 554 (D.D.C.
1985) and discussions in Richard Roberts, “Shareholder Proposal
Reform—A Search for Objectivity in Rule 14a-8,” 22 Securities
Regulation Law Journal, 235 at 239 (1994) cited in Owning Up: The
Case for Making Corporate Managers More Responsive to Shareholder
Values, published by Democracy Watch, Ottawa, March 1997.
65 See Barbara Calvin, “An Introduction to Micro-Credit and MicroFinance,” a presentation to Glendon College, York University,
February 1996.
53
Securities Exchange Act of 1934, Release No. 12999, 41 Fed. Reg.
52, 994, 52 997 (1976).
54 See Stephen Bainbrige, “Interpreting Nonshareholder
Constituency Statues,” 19 Pepperdine Law Review, 971 at 973 (1992)
cited in Owning Up: The Case for Making Corporate Managers More
Responsive. Note that a broad coalition of groups in the US led by
the Social Investment Forum believe that proposed changes to SEC
rules will decimate shareholder action there.
54
66 Interview with Barbara Calvin, Director, International
Operations, Calmeadow Foundation, July, 1997, Toronto, Ontario.
67 See Eugene Ellmen, The Canadian Ethical Money Guide (Toronto:
James Lorimer & Company, 1996).
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H R E E
E THICS IN THE
M ARKETPLACE
THE MANUFACTURING SECTOR
Ann Weston
A
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O O R D I N A T O R
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E S T O N
I S
V
A T
I C E
T H E
- P
N
R E S I D E N T
O R T H
- S
R
A N D
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I
E S E A R C H
N S T I T U T E
.
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A N U FA C T U R I N G
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E C T O R
E THICS IN
THE M ARKETPLACE
TRADE
R E Q U I R E S T R U S T,
AND THE MORE INTIMATE
AND COMPREHENSIVE
GLOBAL TRADING
BECOMES
,
THE MORE WE
NEED GLOBAL NORMS
FOR GENERATING AND
MAINTAINING THAT
T R U S T.
JOHN DALLA COSTA,
“MORAL CRISIS BEHIND ASIAN
MESS,”
THE GLOBE AND MAIL,
MARCH 26, 1998
“B
efore you finish eating breakfast this
morning, you will have depended on
half the world. This is the way our universe is
structured...” Most Canadians would agree with
Martin Luther King Jr. We would find it quite
difficult to go through a day without using at
least one product manufactured elsewhere,
whether it be clothing, an electronic gadget, or
even processed food. Many of those goods are
produced in developing countries.
than a fifth in other regions.1 The expansion of
manufacturing behind protective tariff barriers,
following the import-substitution model, is not
as prevalent in the 1990s as it was in the past.
To succeed today manufacturers must compete
in more open markets. And indeed, many developing countries have greatly increased their
exports of manufactures: from 1975 to 1995, the
share of manufactures in developing country
exports rose from 28 to 83 percent.2
Increasingly, however, questions are being asked
about the way in which these goods are produced. Here we examine the role played by
Canadian companies, whether as retailers or as
investors in goods manufactured abroad. We
concentrate on the activities of firms with head
offices in Canada, on the assumption that they
are more likely to be influenced by Canadian
government and public pressure than subsidiaries of American firms. What do they see as
their corporate responsibility toward developing
countries? Have they made special efforts to
improve the development impact of their
manufacturing linkages to the South?
While this expansion is generally lauded, questions have been raised about the distribution of
the benefits of manufacturing production and
some of the associated costs, for the workers,
for their physical environment, and for
competitors in the informal sector.
We also explore how Canadian consumers and
workers can use their links to promote better
conditions in the manufacturing sector in developing countries. Even where the linkages are
less direct, Canadians can play a part—workers,
for instance, through their union humanity
funds have supported efforts to improve
working conditions in other countries.
MANUFACTURING‘S
IMPORTANCE TO THE SOUTH
AND TO CANADA
Many analysts still consider manufacturing as
the basis for the development of a modern
economy. In addition to generating employment and income, it can help disseminate technologies, knowledge, and skills. It can also
create demand for inputs and support services.
Approximately one in 10 people in low- and
middle-income countries now work in manufacturing. Output has grown most rapidly in East
Asia, where manufacturing now accounts for
one-third of economic output, compared to less
56
In Canada, manufacturing has had to adjust to
many pressures—from changes in production
technologies and industrial organization, to
new consumer preferences, variable macroeconomic policies (notably interest and
exchange rates), and domestic market liberalization. Opportunities have emerged with the
reduction of barriers to Canadian manufactures’
exports, and total output has grown, but
employment in the sector has declined steadily.
Manufacturing jobs fell from 1.9 million in
1990 to 1.7 million in 1995, barely 16 percent
of total Canadian employment. The largest fall
was in textile products and clothing. The most
important industry is now transportation,
accounting for 13 percent of all manufacturing
employment.3
TRADE LINKAGES
Trade is the most familiar link between Canada’s
and developing countries’ manufacturing sectors.
As Table 1 shows, Canada had a trade deficit of
US$13.4 billion in overall manufactures trade
in 1996, of which some 70 percent was with
developing countries. Manufactures represented
just more than half of Canadian exports to
developing countries, but some two-thirds of
our imports from those countries. In the past,
our bilateral trade deficit in textiles—especially
clothing—was a cause for concern, partly as a
result of the falling employment in this industry
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TABLE 1 Trade in Manufactures with Developing Countries (1996, $US billions)
World Developing
Countries
Africa
Asia
less Japan
Of which
Latin
China America
Of which
Mexico
Machinery/
Transport Equipment
Exports
Imports
78.67
87.22
3.85
9.61
0.27
0.03
2.31
6.07
0.43
0.87
1.27
3.51
0.38
3.30
Textiles/Clothing
Exports
Imports
2.89
5.86
0.17
2.36
0.01
0.04
0.11
2.19
0.00
0.64
0.05
0.13
0.02
0.11
Other Consumer Goods
Exports
Imports
9.94
16.02
0.41
2.89
0.03
0.01
0.25
2.47
0.02
1.47
0.13
0.41
0.02
0.32
Total Manufactures
(including others)
Exports
Imports
125.84
139.26
7.60
17.11
0.42
0.22
4.95
12.14
0.83
3.38
2.23
4.75
0.50
3.98
Memo: All Products
(incl. nonmanufactures)
Exports
Imports
201.58
170.86
14.44
23.42
1.16
1.52
9.43
14.22
2.09
3.61
3.85
7.68
0.88
4.41
Notes: Developing countries include Africa, Asia less Japan, and Latin America.
Source: WTO, Annual Report, Geneva, 1997, Table A8.
in Canada. Today, the deficit in machinery
and equipment is nearly three times as large
as that in textiles and clothing, and growing.
Our imports of manufacturing from Mexico—
predominantly automobiles and car parts—
exceed our exports by some US$3.5 billion,
even more than our trade deficit with China.
As discussed in Chapter 7, much government
effort has focused on promoting Canadian
exports of services and technology, of
manufacturing inputs, and of manufactures
themselves to developing countries. But beyond
some assistance with marketing and minor
tariff cuts for the least-developed countries,
there is little discussion in Canada of the
promotion of imports of manufactures from
developing countries. This is probably due to
Canada’s existing trade deficit, which may grow
even faster following cuts in our tariffs and
quotas resulting from the GATT Uruguay Round
negotiations.4
In sharp contrast to the US, there is much
less evidence of export processing in Canada—
that is, sending Canadian components to
developing countries for additional, labourintensive processing, then re-exporting to
other countries or re-importing into Canada.
Nonetheless, it is clear that a number of
Canadian industries are being restructured and
integrated into a production chain linking
plants in many countries around the globe.
This process has been driven by an acceleration
of investment flows, as well as by trade
liberalization.
INVESTMENT
Anecdotal evidence suggests that while the top
Canadian manufacturers do a lot of business in
developing countries, it is largely limited to
sales of goods made in Canada or products from
plants based in other countries. Investment
linkages between the Canadian manufacturing
sector and developing countries are much
murkier, although undoubtedly growing.
Most of the discussion in Canada about foreign
direct investment (FDI) has dealt with ways of
promoting investment flows into Canada. This is
considered critical to access new technologies
and stimulate domestically owned firms, in addition to ensuring the growth of globally competitive Canadian-based companies.5 Even the
government’s industry-specific strategies make
little reference to using Canadian direct investment abroad (CDIA) as a strategy for increasing
competitiveness. An exception is the reference to
manufacturing initiatives and joint ventures in
Mexico as a mechanism enabling suppliers of
Canadian agricultural technology and equipment to increase sales.6 Nonetheless, there is
growing recognition that CDIA is important: this
presumably underlies the government’s enthusiasm for negotiating several bilateral investment
treaties (many of them with developing countries), as well as the Multilateral Agreement on
Investment (MAI), currently under discussion at
the Organisation for Economic Co-operation
and Development (OECD) (see Box 1).
Certainly CDIA has grown faster than inward
investment in the last decade, although it
57
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H A P T E R
BOX 1
T
H R E E
T
H E
FROM FTA
M
TO
A N U FA C T U R I N G
S
E C T O R
MAI....
In the last decade, Canada has participated in
several international agreements which govern
our trade and investment with other countries.
These include:
• The Canada-US Free Trade Agreement
(CUSFTA), in effect from 1989
• The North American Free Trade Agreement
(NAFTA), from 1994
• The World Trade Organization (WTO),
from 1995
• The Canada-Chile Free Trade Agreement,
from July 1997
• The Canada-Israel Free Trade Agreement,
from 1997
Canada is also taking part in ongoing negotiations over free trade in the Americas (FTAA), in
Asia-Pacific (within APEC), and under a
Multilateral Agreement on Investment (MAI),
as well as contemplating bilateral deals with
Europe and Mercosur, in South America, among
others.
In many respects these agreements have created new opportunities for Canadian firms to
sell products overseas, or to import goods for
distribution in the Canadian market. As in the
past, liberalization of markets through tariff cuts
has been an important element. Also important, however, are a number of newer elements,
including commitments to:
• reduce (arbitrary) government intervention
in markets, for example, by limiting the use
of subsidies, anti-dumping duties, or health
and sanitary regulations;
• reduce discrimination against foreign firms, for
example, banning requirements that foreign
firms use local inputs, hire local managers,
export a certain amount, transfer technology;
and allowing them access to government
procurement contracts or subsidies; and
• entrench intellectual property rights, that is,
to limit copying of products without due payment to companies that developed them.
Some have questioned whether this combination of liberalization and deregulation globally
has gone too far, whether the reduction of government controls over markets has given corporations too much flexibility. For instance, under
CUSFTA and NAFTA, the removal of virtually all
tariffs has accelerated the rationalization of several industries and relocation of many factories
across borders. The WTO will eventually prohibit all countries, developing as well as developed, from linking a company’s imports to its
exports of local products, even though ending
these and other types of local content requirements may reduce the incentive for foreign
firms to develop backward linkages.
In Canada’s case, if the Canadian government
failed to treat foreign firms equally or to enforce
patents, or if it introduced health standards
58
without a scientific basis, its actions might be
challenged under WTO rules by the government of any member country whose exporters
are affected. Under the NAFTA, the company
itself could challenge the Canadian government
in many instances.
Of course there are exceptions, though whether
these are permanent or should be phased out in
the foreseeable future is a matter of some
debate. In the case of subsidies, for instance,
governments can continue subsidies to disadvantaged regions, or to whole industries, or to
cover costs of updating equipment to meet new
environmental standards. In general, the WTO
allows developing countries more exceptions
and longer time-periods than others to respect
the new rules, although they enjoy less special
and differential treatment than was the case
under the General Agreement on Tariffs and
Trade (GATT). For example:
• The WTO recognizes that subsidies may play
an important role in economic development
programs (Article 27.1 of the Agreement on
Subsidies and Countervail Measures).
Developing countries can continue to use
subsidies related to privatization of state
companies (Article 27.13).
• Least-developed countries have seven years
to abide by the TRIMs rules, and neither they
nor other developing countries have to follow the rules if they have balance of payments problems (Agreement on TradeRelated Investment Measures, Article 4).
The debate about how far international rules
should limit government action has reached
fever pitch in the context of the MAI negotiations underway at the OECD in Paris. Although
only 29 countries are directly involved, a few
large developing countries are observing the
process, including Brazil. The goal is for the
assembled members and others to eventually
sign the agreement, and for its transfer from the
OECD to the WTO.
A global treaty would help to rationalize the
proliferating and often confusing array of more
than 1,200 bilateral and regional investment
treaties, many of them now involving developing countries. As US business analyst John Kline
notes, “the resulting international regulatory
environment for transnational business threatens to become a morass of binding and
nonbinding partial instruments that overlap on
some issues while leaving broad areas of FDI
policy and transnational business activity uncovered by effective regulations or guidelines.”1
At the same time, the MAI is clearly intended to
raise investment standards—in the sense of
expanding the scope of obligations on government and, as a corollary, the freedoms granted to
companies—going well beyond those agreed in
most treaties and certainly beyond those in the
WTO:2
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• The definition of investment is much
broader.
• Members would be expected to eliminate
restrictions on foreign ownership (e.g., of
shares of local companies, or companies in
particular sectors), and on the transfer of
capital and earnings.
• They would also have to end requirements for
the appointment of nationals to the boards of
directors of foreign companies or as senior
managers; and for the transfer of technology.
• Some countries would like culture and a
number of publicly provided services (e.g.,
health and education) to be excluded from
the agreement. But the bulk of exceptions
would likely be listed by countries in their
individual schedules, and future negotiations
could focus on their elimination, i.e., the
extension of MAI rules to these areas.
• Disputes may be resolved through intergovernmental consultations. Alternatively, as
in the NAFTA, corporations could sue governments directly if their intellectual property
rights or rights to invest and market products
were considered to be violated.
• The commitments would be binding for
much longer—a country could withdraw
from the treaty after six months’ notice, but
investors operating there at the time would
be granted MAI rights for another 15 years.
• The MAI would limit the discriminatory use
of subsidies, e.g., for domestic and not
foreign firms. There are no rules yet to limit
let alone phase out, tax breaks and other
incentives, to avoid the costly competition
for investments which several developing
countries have experienced. Some OECD
countries favour negotiations within three
years on this topic.
• On labour and the environment, it is proposed that members would not encourage
investments by lowering domestic standards,
although this would probably be a “best
efforts” commitment. It seems unlikely that
MAI will go beyond even the limited NAFTA
provisions on these issues, let alone include a
binding commitment to core international
labour standards.
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• There is little mention in the MAI of foreign
companies’ obligations. Rather, the purpose
is to reduce the obligations which government
can require of them. The OECD Voluntary
Guidelines for Multinational Enterprise
(agreed in 1976) may be included in the
text. These, however, are not rules but
recommendations covering taxation, competition, employment and industrial relations,
environmental protection, etc., to help
companies ensure that their operations are in
harmony with the national policies of the
countries within which they operate.
If the OECD countries are able to resolve their
differences and conclude the MAI in May 1998,
increased membership would then be sought by
taking the treaty to the WTO. This would require
the support of at least two-thirds of WTO members. At the Ministerial Meeting in Singapore in
December 1996, however, members only tentatively agreed to create a working group to examine the relationship of trade and investment, as
well as one on trade and competition (including
anti-competitive practices). Developing countries are likely to hesitate at accepting new limits
on their policies to maximize the benefits and
limit the costs of foreign investment.
As Martin Khor of the Third World Network has
said: “The proposed foreign investment treaty
would deprive developing countries of a large
part of their economic sovereignty... It removes
the rights of states and the powers of governments to regulate foreign investments and
investments in general as well as other key elements of macroeconomic policy, financial management and development planning.”3
As the Joint NGO Statement on the MAI notes:
“Governments must ensure that they do not
have to pay for the right to set environmental,
labour, health and safety standards even if compliance with such regulations imposes significant financial obligations on investors.”4
Nor is it clear that MAI membership is really
critical; already in 1996, some US$200 billion of
private capital flowed to developing countries.
For countries overlooked by these flows, other
types of macroeconomic reform are likely more
important than acceptance of the MAI in
attracting investors.
NOTES
1
“International Regulation of Transnational Business: providing the missing leg of global investment standards,” Transnational
Corporations, vol. 2, no. 1, February 1993.
2 The following comments are based on the May 1997 draft of the treaty. OECD, Multilateral Agreement on Investment: Consolidated Text and
Commentary, Paris, May 1997. DAFFE/MAI(97)1/REV2.
3
“The WTO and the Proposed Multilateral Investment Agreement: Implications for Developing Countries and Proposed Solutions.”
Manila: Third World Network, mimeo, 1996 (pp. 18-19).
4
NGO/OECD Consultation on the MAI, Paris, October 27, 1997.
59
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THE
ALLEGATION THAT
MULTINATIONALS ARE
EXPLOITING THE THIRD
WORLD IS OFTEN
MISGUIDED
THE
.
U S U A L LY,
“EXPLOITATION ”
CONSISTS OF LETTING
DEVELOPING COUNTRIES
MAKE USE OF WHAT
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remains at about 70 percent of inward investment stocks. The bulk (some 60 percent) of
Canadian investment each year is still attracted
to the US, but developing countries now
account for some 20 percent of CDIA, to date
some $34.6 billion.7 One problem with this data
is that it may not capture the phenomenon of
strategic alliances which many Canadian companies now consider more important and less
risky than FDI for building global capabilities.8
These alliances can involve co-production, comarketing, cross-licensing, or joint research and
development (R&D) rather than the creation of
a separate entity.
ECONOMISTS WOULD
CALL SOURCES OF
COMPARATIVE
A D VA N TA G E
LABOUR
,
—CHEAP
S AY, O R A
GREATER TOLERANCE OF
POLLUTION
.
THAT
IS
HOW POORER COUNTRIES
GROW LESS POOR
.
“COMPANIES AND
THEIR CONSCIENCES,”
THE ECONOMIST,
JULY 20, 1996, P. 16
Manufacturing accounts for an important share
of CDIA, although the level varies according to
the definition used: from 1986 to 1992, it
accounted for 21 percent of the total flows,9 or
44 percent of the stock in 1991 (this includes
some resource-based industries such as primary
metals and wood/paper),10 down from 56 percent in 1960.11 Generally, it is fair to say that
manufacturing is less important than construction and financial services, but more important
than natural resources even though the latter
has recently attracted much media attention.
Among the top 10 developing-country locations
for CDIA, five are major exporters of manufactures: Brazil, Singapore, Hong Kong, Indonesia,
and Mexico. Between January 1994 and August
1997, Canada invested US$1,427 million in
Mexico: this made Canada the fifth largest
foreign investor and represented 5 percent of
total investment in Mexico during that period.
As much as 50 percent of Canada’s investments
were in manufacturing; 32 percent were in
financial services; 10 percent in mining; and
8 percent in commerce.12 Three-quarters of the
manufacturing investments were in food,
beverages, and tobacco.
Of the top 20 outward-oriented Canadian-based
firms (that is, those with the largest foreign
assets), only seven are in manufacturing:
Seagram Company Ltd (food and other products); Thomson Corporation, Moore
Corporation Ltd, and Thomson Newspapers
(printing and publishing); Northern Telecom
Ltd (Nortel) (communications equipment);
Noranda Inc. (lumber and wood); and
Bombardier Inc. (aircraft and parts).13
Manufacturing accounts for a much larger share
of US FDI today. Certainly the importance of
foreign subsidiaries is underlined by the fact
that intra-firm imports account for nearly twothirds of US manufactures imports (63 percent
60
in 1993), compared to less than half (49 percent) for all imports.14 Most of the linkages
between US firms at home and in developing
countries are vertical, and involve specialization
in different stages of the production and
distribution chain.
By comparison, most Canadian linkages have
been horizontal—Canadian firms produce the
same goods abroad as in Canada, but are going
beyond the small Canadian market to exploit
their established expertise in international markets.15 Some are integrating vertically, however,
transferring lower-skill production to countries
with less costly labour while retaining higherskill tasks, including R&D and marketing, in
Canada. While the growth, productivity, and
profit performance of outward-oriented firms
has generally been superior to domestically
oriented firms, their employment growth was
lower—at least for 1986-91—reflecting greater
restructuring and rationalization.16
The North American Free Trade Agreement
(NAFTA) may increase horizontal trade, as the
opportunity to produce for the whole North
American market will lead companies to cut the
number of product lines made at plants in each
country. There will also be increased vertical
integration and the closure of inefficient plants
owned by Canadian multinationals both inside
and outside North America in cost-driven sectors like auto parts and textiles.17 “Vertical linkages and alliances with Mexican firms could
help Canadian firms improve their relative cost
and productivity performance.”18
While Canadian investment in manufacturing
in developing countries has recently expanded,
it is not new. The Bata Shoe Organization companies have produced shoes in developing
countries for many years—it has been in India
for 65 years, for example. Its investments in
Zambia, Cameroon, and Madagascar in the
1970s were supported by the International
Finance Corporation.19 In 1997, Bata produced
shoes and hosiery in 60 countries—43 of them
developing—and employed some 57,000 people.20 Seagram has produced rum in Jamaica and
Puerto Rico since the 1930s, moving into
Argentina in the 1960s, and into Brazil, Mexico,
and Venezuela by 1979. Massey Ferguson had a
joint venture in India from 1961, produced
tractors in Mexico from 1966, was in South
Africa and Argentina from the early 1960s, and
in Peru from 1973. Before its collapse in 1976,
it was the leading producer of farm machinery
in Brazil, Mexico, and Argentina.21
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Nortel’s first plant outside Canada was a joint
venture with the Government of Turkey in
1969. It established a pilot plant in Malaysia in
1973, bought factories in Brazil in 1976, and in
1981 entered a joint venture in Mexico to
assemble telecommunications equipment.22
Nortel also owns factories in China, Malaysia,
and Thailand. Its plants in China, for instance,
produce telephone switches, semiconductors,
integrated circuits, and other telecommunications equipment. According to the Canadian
Auto Workers, some of these foreign facilities
have replaced production in Canada.23 Only
two of Magna International Inc.’s 118 manufacturing operations and 20 product development units, with 32,000 employees, are in
developing countries—Mexico and, since 1996,
China.24 In December 1997 Magna announced
plans to produce engine parts in Brazil through
its ownership of Tesma International Inc.25
Bombardier Inc. has a plant at Sahagun,
Mexico.
Dominion Textile Inc. has had plants in Tunisia
and Hong Kong since 1981 and in 1991,
through a French company, built a nonwovens
plant in Malaysia to supply the Far Eastern market. Another nonwovens plant using state-ofthe-art technology is being built in Argentina by
its US-based subsidiary, at a cost of $45 million,
to supply South American hygiene markets, in
particular the Mercosur trade zone.26
Canada Malting Co. Limited has a plant in
Argentina and soon will expand to other parts
of South America as well as to China. John
Labatt Limited has had shares in a brewery in
Mexico since 1994. Cott Corporation has interests in bottling operations in South Africa. In
China, Maple Leaf Foods Inc. bought shares in a
hog feed mill in 1996 to promote sales of its
“shure-gain” feed. Chai-Na-Ta Corporation,
which grows ginseng in Ontario, has shares in
two Chinese companies where Canadian ginseng is processed into tonics and pharmaceuticals. In 1996 McCain Foods Limited built a
french fry factory—reportedly the first in Latin
America—in Argentina at a cost of $35 million.
As much as 80 percent of the 110 tons of daily
output is to be sold in Brazil, primarily through
fast-food outlets (bypassing the 14 percent
Brazilian tariff on imports from Canada).27
In addition to direct investment, Canadian
manufacturing companies have entered into an
increasing number of subcontracting relationships for the final assembly or their products, or
the local production of components, by devel-
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oping country firms. For instance, final assembly of transit vehicles for Bombardier Inc. now
occurs in Malaysia.28 The Xian Aircraft
Company in China has manufactured subassemblies for Canadair CL-215 and CL-415
amphibious aircraft since 1980, while Shenyang
Aircraft Company makes doors for Bombardier’s
de Havilland Dash-8 planes.29
In the food processing industry, there are a
number of Canadian companies with overseas
franchises—Con Agra Inc. has Country Style
Donut outlets in Thailand, while there are Saint
Cinnamon Bakery Ltd outlets in Korea and
Indonesia.30 Yogen Fruz World-Wide Inc. from
Markham, Ontario has nearly 3,500 outlets in
80 countries, including at least 30 in Latin
America, Asia, Africa, and the Middle East.31
Although the number of Canadian clothing
manufacturers with plants in Canada has shrunk,
only a few have relocated some of their production to developing countries—Vogue Bras and
Pimlico Apparel Ltd which now operate in
Mexico, for example—and a few to the US.32
This is in sharp contrast to the restructuring of
the US industry which has involved many
companies moving assembly operations offshore.
The share of the Canadian clothing market
supplied by foreign-owned firms in developing
countries and in the US has grown sharply.
CONTRIBUTION TO DEVELOPMENT
Developing countries court foreign direct investment to provide the finance, technology,
training, and often market outlets, needed to
generate employment and exports. Canadian
investment in manufacturing in developing
countries, such as it is, is probably as focused on
supplying their domestic market with goods and
services as on exports. For companies such as
Bata, production for local consumption remains
a clear priority. In contrast, companies such as
Magna in Mexico, Dominion Textile in Tunisia,
and McCain’s in Argentina produce for export
regionally or back to North America.
In addition to the usual questions about the
amount of capital invested, technology transferred, labour hired and trained, and goods produced, many other issues need to be considered:
the appropriateness of the technology, training,
and products; working conditions and environmental practices; backward linkages; pricing and
transfer pricing; competition with local firms for
scarce local resources and customers; the company’s relationship to the government through
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payment of taxes; and, more generally, its relationship to the community—for example,
through charitable donations.
Recent assessments have been cautious about
the impacts of FDI on development. As the
International Monetary Fund (IMF) noted:
“There is no reason why, in principle, the positive effects should be dominated by the negative effects or vice versa. This indeterminacy is,
perhaps, why debate about the multinational
corporation has long been lively and subject to
‘sea change’.”33 A recent report by the secretariat of the UN Conference on Trade and
Development (UNCTAD) suggests that not all
countries can benefit from technology transfer
and other spillovers. Rather, this will depend
on the level of development and local government policies: “there is a threshold level of
income before FDI can make a significant contribution to overall growth performance. [...]
The general body of evidence suggests that the
nature and extent of any spillovers to domestic
firms is industry-specific and depends on how
domestic policymakers manage FDI.”34
Moreover, the new production technologies
may allow FDI to be even less locally integrated:
“the determinants and organization of FDI flows
have become complex[...]. The consequence
may well be that FDI becomes more footloose
than in the past, relying heavily on imported
inputs from other affiliates and with fewer linkages with and technological spillovers to the
host economy.” Whether FDI and increased
trade lead to higher wages in manufacturing
may partly depend on measures, such as education policies, to enhance labour productivity.
But even this may be weakened by what
UNCTAD calls “the stronger bargaining power
of capital against labour associated with
globalization.”35
Compared to the substantial literature on the
operations of US multinationals, there is a
dearth of publicly available information about
Canadian companies involved in manufacturing
in developing countries. What follows are a few
examples of their practices, both good and notso-good, in a number of areas.
IN TECHNOLOGY TRANSFER
Northern Telecom (Nortel) showed leadership in
its decision to disseminate free of charge,
through the UN Environment Programme, an
environmentally important innovation. This
technology, which involved the replacement of
62
ozone-depleting substances (chlorofluorocarbons or CFCs) in the cleaning of semiconductors by citric acid, led to an 85 percent
reduction in Nortel’s own CFC use. Countries to
which the technology was released include
Brazil, China, India, Mexico, and Turkey.36 By
the year 2000, Nortel aims to halve its total pollutant releases and solid nonhazardous waste,
reduce its paper purchases by 30 percent, and
raise its energy efficiency (but not its total
energy use) by 10 percent.37
Nortel has also sponsored an annual Canadian
Award for International Development for the
advancement of technical capability. The 1997
winner was Thiessen Equipment Ltd of British
Columbia for developing a method for repairing,
recycling, and producing stronger drills used in
mining in Chile, thus reducing metal waste.38
IN ENVIRONMENTAL PROTECTION
In response to concerns about water pollution,
Bata built its tannery in Bangladesh to environmental standards which were far more stringent
than local guidelines, and in full compliance
with those of the World Bank.39
In the Solomon Islands where it has engaged in
fish catching and processing since 1990, British
Columbia Packers Ltd, a George Weston
subsidiary, has introduced “dolphin-friendly”
catching methods to comply with US legislation, as well as various programs to reduce and
recycle waste.40 Questions must be asked, however, about the long-term viability of Canadian
catching methods in countries such as China,
South Africa, and Namibia where the Canadian
processing industry is seeking raw materials and
Industry Canada has called on Canadian missions to support “business sourcing strategies.”41
A number of companies report that they adhere
to the same environmental standards in their
developing country operations as in Canada.
Premdor Inc., one the world’s largest manufacturers of wood and steel doors, is one of them.
Premdor requires its plant managers in Mexico
and in Canada to report on environmental
performance to the Canadian head office: these
reports are subjected to environmental audits.
In some cases, however, even these standards
have been questioned. For instance, Royal
Group Technologies Ltd, which produces polyvinyl chloride or PVC doors and other building
products in Argentina, Colombia, China, and
Mexico, has been criticized for its promotion of
PVC which is the largest end use of chlorine and
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which Greenpeace is seeking to ban internationally. To its credit, Royal Group has chosen to use
organo-tin as a stabilizer, whereas many other
PVC producers use heavy metals such as lead
and cadmium. It also operates a major PVC
recycling plant.42
IN LABOUR PRACTICES
In the case of autoparts, sociologist Kathryn
Kopinak’s survey found one Canadian company
had not transferred new technologies to its two
plants in the Nogales region of Mexico. In fact,
some of the higher skilled jobs were returned to
Tillsonburg, Ontario following customer complaints about the defect rate at the Mexican
plants. As the company’s CEO explained:
“Tillsonburg is becoming the brains of our operation and our facilities in Mexico couldn’t exist
without it. We found that with smaller production runs and more technical work, we could do
it better here.”43 Kopinak concludes that: “It
cannot be said... that simple assembly is disappearing among maquila industries. The new
labour process with work teams, quality-control
circles, and rotation of multiskilled workers has
not been implemented. Most workers have jobs
that are considered low-skilled.”44
Other labour practices in two plants owned by
the same company were also criticized. In both,
shift quotas were constantly raised and job definitions expanded, while real wages were cut
more drastically than in other plants.45 The
company responded to complaints by threatening to move more jobs back to Canada. Finally,
backward linkages were weak, with the company buying very few goods or services locally.
Workers at Custom Trim Ltd’s plants in Mexico
have also complained of unfair treatment. In
May 1997 workers at the Valle Hermoso plant
(Custom Trim has five other maquila plants—
one in Matamoros, three in Contro Ramirez,
and one at Ciudad Victoria) organized wildcat
strikes. Despite a settlement, including a commitment of no reprisals, 28 workers were fired.
One of the workers who visited Canada in
August 1997 on a speaking tour organized by
the Canadian branch of the United Steelworkers
of America (which represents workers at the
company’s Waterloo plant), was subjected to
intimidation and death threats on his return to
Mexico. Another worker at the Matamoros plant
was fired after falling behind in production
because of work-related injuries.46
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IN INDUSTRIAL DEVELOPMENT
Bata has been involved in an initiative to promote decentralized industrial development in
northeast Thailand, thereby reducing congestion in Bangkok and increasing employment
opportunities in one of the country’s poorest
regions. The Thai Business Initiative in Rural
Development (TBIRD), launched in 1989 by the
Thai Population and Community Development
Association (PDA) in collaboration with the
Thai Chamber of Commerce, has received support from CIDA and other donors. PDA has brokered partnerships between companies and
communities: these usually involve training,
infrastructure development, and the provision
of small loan funds for the establishment of cottage industries or small-scale enterprises whose
output is purchased by a partner company.
Since it began working with TBIRD in 1990, Bata
has helped create four producer cooperatives
where several hundred workers—including many
young women—make shoes. Bata provides
inputs, technology, and training and purchases
the finished products.47 Although wages are similar to those in Bangkok (about $8.90 daily or
27 percent above the minimum wage), the lower
property costs and relatively high productivity
are projected to keep the shoe industry in
Thailand competitive with factories in Vietnam,
China, and Indonesia for at least another eight
to 10 years.48 The 1997 decision by another 40
companies, including Nike Inc., to move to this
region is proof of the strategy‘s success.
Bata’s involvement has earned the company
credit in such circles as The Prince of Wales
Business Leaders Forum.49 The role of an organization like PDA has probably been most critical in ensuring that the right structures are in
place to maximize the social benefits from the
introduction of export-led production in the
region. This may provide a model that the
Canadian private sector and government could
support to improve the extremely harsh conditions facing workers in some of the newer economic zones. Such intervention cannot remove
the risks of producing for increasingly competitive global markets, however, and there will
always be scope for improving environmental
and labour standards.
IN COMMUNITY DEVELOPMENT
Many Canadian companies with foreign subsidiaries make charitable contributions—at least
to organizations based in Canada. For instance,
63
WE
AUDIT OUR
CONTRACTORS
”
S AY S
A B E G L O W I N S K Y,
PRESIDENT
OF
INCREDIBLE CLOTHING
IN
TORONTO,“AND
IN
TURN WE ARE AUDITED
BY OUR CUSTOMERS
THEY
.
ARE CONCERNED
ABOUT EMPLOYEE
S A F E T Y, C H I L D L A B O U R
A N D T H E E N V I R O N M E N T.
CANADIAN APPAREL
FEDERATION,
“APPAREL ONTARIO,”
APPAREL CANADA,
SPRING 1997, P. 5
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THE LABOUR
THE
LABEL COALITION
(LBLC)
THE
BEHIND
HAS CALLED ON
GOVERNMENT
CANADA
OF
TO FOLLOW
THE EXAMPLE OF THE
US
BY LAUNCHING A
PROCESS TO DEAL WITH
THE PROBLEM OF
APPAREL SWEATSHOPS
IN
CANADA
AND
IMPORTS MADE IN
SWEATSHOP CONDITIONS
IN EXPORT PROCESSING
ZONES IN
ASIA
AND
LATIN AMERICA.
LBLC—A
COALITION OF
CANADIAN
LABOUR
,
C O M M U N I T Y, R E L I G I O U S
AND INTERNATIONAL
DEVELOPMENT GROUPS
WANTS THE GOVERN
—
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H A P T E R
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T R Y, U N I O N A N D H U M A N
RIGHTS ORGANIZATIONS
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Magna International’s Corporate Constitution
includes a commitment to allocate up to
2 percent of its pre-tax profits “for charitable,
cultural, educational and political purposes to
support the basic fabric of society” and at least
7 percent for research and development.50 Since
1974 Dominion Textile has given aid to some
70 Canadian charitable and nonprofit organizations located in communities where its employees live and work. Through the Canadian
Imagine Caring Company program, Dominion
Textile and Bata, among others, are committed
to donating at least 1 percent of their Canadian
pre-tax profits to philanthropic causes—this
amounted to nearly $140,000 for Dominion
Textile in 1997.51
Similar efforts need to be made for developing
country communities in which Canadian
corporations operate, both on a voluntary basis
and through the payment of taxes. For instance,
companies might consider supporting the
creation of health clinics within their factories
or the communities where their workers live.
Bata has a long tradition of promoting its
workers’ welfare, for example, through health or
educational services. It also supports various
local community projects. However, this tends
to be on an ad hoc basis linked to local needs
rather than an explicit strategy, mechanically
linked to profit levels.
CODES
ETHICS
MENT TO CONVENE A
TASK FORCE OF INDUS
Page 64
OF
C O N D U C T:
MARKETPLACE
IN THE
Increasingly, Canada‘s manufacturing companies are introducing codes covering ethical,
environmental, and labour practices in all their
operations, whether in Canada or abroad. Here
are some examples:
TO DISCUSS THESE
ISSUES
.
LETTER FROM ROBERT
JEFFCOTT, LBLC STEERING
COMMITTEE, TO PRIME
MINISTER JEAN CHRÉTIEN,
MAY 8, 1997
• Dominion Textile requires outside contractors
to comply with its environmental policy and
standards; it conducts health and safety audits
at each of its plants; and its code on business
ethics—in place since 1990—is reviewed annually by senior management. The company
apparently applies environmental and labour
standards developed for Canada in countries
where national standards are lower.52 In 1997,
it received a Canadian government award for
its efforts to reduce the use of greenhouse gas
emissions. Also in 1997, the Social Investment
Organization and the Financial Post Magazine
cited Dominion Textile as one of 50 major
companies quoted on the Toronto Stock
Exchange that have demonstrated leadership
as corporate citizens.53
64
• Magna has had an “Employee’s Charter” since
1988, based on fairness and concern for people. It includes a commitment to promote job
security (for example, through training to
ensure products remain competitively priced);
a safe and “healthful” working environment;
fair treatment (“equal employment opportunities based on an individual’s qualifications
and performance, free from discrimination or
favouritism”); and competitive wages and
benefits. Magna also believes that every
employee should own company shares.
Finally, it endeavours to provide employees
with information about developments in the
company and the industry.54 Only two of
Magna’s North American plants are unionized: instead, grievances are reviewed by
in-plant fairness committees.55 In Mexico,
however, Autotek, a Magna subsidiary, is
fully unionized and workers receive various
benefits, such as a special medical plan. They
are also entitled to 10 percent of Autotek’s
profits, as required by Mexican law.56
• Nortel believes it should show ethical leadership in the global community: “Employees,
shareholders, customers, and suppliers are
not the only stakeholders in Nortel activities—the corporation has broader social
obligations as well. A global corporation faces
a special challenge: to uphold consistent corporate standards of ethical business conduct,
while also respecting the culture and varying
business customs of every community and
country in which it operates.” In regards to
employees, it commits to “treating individuals with respect, following fair and equitable
employment practices, and protecting and
enhancing employee health and safety.” In
addition, it is committed to seven core values:
respecting national and local priorities;
contributing to the well-being of local communities; using corporate power responsibly
in relation to the political process; protecting
and enhancing the environment; competing
in an ethical and legitimate manner; supporting the international scientific community;
and ensuring accountability to a broad range
of stakeholder groups.57
• Spar Aerospace Ltd has a relatively narrow
code limited to relations with suppliers and
employees and using host country
standards.58
• While some of Bata’s literature stresses the
safety of its products and of workers using its
products,59 it is also Bata’s stated policy to
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“provide equality of opportunity without discrimination, to promote on merit.”60 Its
unpublished code, introduced more than a
decade ago, sets out strict policies for suppliers, as well as its own operations; for instance
Bata tries to ensure that its suppliers do not
use child labour.61
While such efforts are an important step toward
increasing accountability, they often raise many
questions:
BOX 2 WORKING TOGETHER
ON
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About standards: Is there scope for gradual
improvement? toward an international
norm, for instance? or toward Canadian
norms where these are higher?
About coverage: Are they applied to all factories
including minority shareholdings and
contractors?
About monitoring: Is this undertaken by independent agencies and with public reporting?
RIGHTS
Canadian and other unions have been active in the fight for workers’ rights, globally. As the President of the Canadian
Labour Congress (CLC), Bob White, said when he launched the CLC’s “Break the Sweat” campaign in 1997: “Sweatshops
are as unacceptable now as they were a hundred years ago and it is our responsibility to uphold workers’ rights here and
around the world.”1
Several unions—both national (predominantly in the North) and international—have been working in various ways to promote labour standards internationally, whether through linkages with international trade agreements, codes of conduct,
collective bargaining, or even training. For many years, for example, the International Textile, Garment, and Leather
Workers’ Federation has pressed for improved conditions and respect for human rights in these manufacturing industries.2
The International Confederation of Free Trade Unions (ICFTU) developed a model code of conduct which the International
Federation of Football Association (FIFA) used in 1996 to set standards for suppliers making FIFA-licensed products. These
include a ban on child labour, fair wages, and decent working conditions. Licensees must allow inspections at any time, and
the ICFTU and other unions will be involved in policing the agreement.3 An international toy industry code introduced in
1996, however, has been criticized by some unions in producing countries as giving too much emphasis to child and prison
labour rather than to the right to organize and bargain collectively, and for failing to incorporate independent monitoring.4
In the US, one union has negotiated a contract with certain employers which includes overseas human rights considerations. In 1995, the textile workers’ union (now UNITE) and the Clothing Manufacturers’ Association negotiated a national
agreement with standards to be applied by certain employers when making or even buying certain products internationally. The rights cover wages, hours, forced labour, child labour, freedom of association, nondiscrimination, health, and
safety.5 In the case of repeated violations, the union can ask for early remedial action or, failing this, binding arbitration in
the US, including a recommendation that the company stop purchasing products from foreign manufacturers unable to
comply with the standards.6 While this is an interesting precedent, it may not be very effective given the limited product
coverage, as well as the union’s weak monitoring provisions and overseas capacity.
This approach has not yet been tried in the Canadian manufacturing sector, although certain unions have begun informal
discussions with workers in Brazil and other countries about the scope for transnational collective bargaining. In the early
1990s, the Communications Workers of Canada (now the Communications, Energy, and Paperworkers—CEP—Union of
Canada) joined with unions in other countries to coordinate organizing and bargaining with Northern Telecom.7 In
December 1997, the 180,000-strong Canadian Steelworkers formalized a strategic alliance with Mexico’s new Authentic
Labour Front or FAT (Frente Autentico del Trabajo) which has 50,000 members.8
In the automobile sector, the Canadian Auto Workers’ Union, supported by the CAW Social Justice Fund, has offered health
and safety training to Mexican workers belonging to some 25 reform unions in the public and private sectors.9 The
Steelworkers have organized solidarity tours for Mexican workers from Custom Trim maquila plants. This company has cut
employment at its plant in Waterloo, Ontario while expanding production at six plants in Mexico.10 The CEP Humanity
Fund has supported groups in Mexican and Central American maquilas that are organizing to improve the rights and
working conditions of workers producing garments, electronics, and other manufactures.
Several solidarity initiatives have involved workers from Canada and developing countries employed by the same foreign
company. A number of Canadian and US unions have joined FAT, for example, to protest the intimidation of unionization
efforts at a Mexican auto parts factory belonging to US-based Echlin Inc., and launched actions against the nonenforcement
of labour rights in Mexico under the NAFTA labour side-agreement.11 Through Echlin’s shareholders they have also pressed
for the company to adopt a corporate code that would include workers’ rights to organize and collective bargaining.
NOTES
1
CLC, CLC-Hot Issues, 1997at http://www.clc-ctc.ca p. 1.
Jean-Paul Sajhau, Business Ethics in the Textile, Clothing and Footwear Industries: Codes of Conduct (Geneva: ILO, 1997), p. 3.
CLC, The Morning NAFTA, Ottawa, December 1996.
4 Craig Forcese, Putting Conscience into Commerce: Strategies for Making Human Rights Business as Usual (Montreal: ICHRDD, 1997), p. 39.
5 Sajhau, p. 4.
6 Forcese, p. 60.
7 Interview with Gary Cwitco, Communications, Energy, and Paperworkers Union of Canada (CEP), February 1998.
8 Interview with Gerry Barr, United Steelworkers of America-Canada (USWA), December 1997.
9 Canadian Auto Workers (CAW), Safety and Environment Newsletter, vol. 5, no. 4, April 1997, pp. 9-10.
10 USWA-Canada, News Release, “Steelworkers Sponsor Visit by Mexican Workers Fired by Canadian Company,” August 14, 1997.
11 US Department of Labor, Bureau of International Labor Affairs, 1998.
2
3
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About enforcement: What action is taken if
standards are found to fall below target levels?
Too often companies develop these codes with
little consultation about their content or implementation with groups working on labour rights
or environmental standards in Canada, let alone
in the developing countries where they operate.
Many Canadian companies view corporate codes
as part of good business practices, regardless of
where they operate. In a number of cases, however, pressure from US client companies—themselves under pressure from labour, human rights,
and consumer organizations—has provided an
added incentive. Some of Dominion Textile’s standards on the environment and ethics, for
instance, are needed to comply with requirements
of customers such as Levi Strauss & Co. Inc.62
In September 1997, 13 Canadian companies
with international operations initiated an
International Code of Ethics for Canadian
Business (see Chapter 1, p. 16). Drawing on a
common vision, beliefs, and values, the code sets
out a number of principles relating to community participation and environmental protection,
human rights, business conduct, employee rights,
and health and safety. For instance, signatory
companies are expected to provide opportunities
BOX 3 CANADIANS
AGAINST
for technological cooperation, training, and
capacity building in the countries where they
have investments. They will also ensure consistency in their workplaces, with universally
accepted labour standards. Each company is
expected to develop its own operational code or
practices consistent with these overall guidelines.
Clearly this is only a beginning—further efforts
are needed to elaborate the code, notably to
clarify which International Labour Organization
(ILO) standards will be adhered to, how the
code is to be monitored and enforced, and how
accountable firms will be. There is not yet any
suggestion that an external monitoring agency
should be used, or that the reports of such an
agency should be made public. It should be
noted that even when such evaluations are carried out, however, they may not be conclusive:
for example, the overall positive evaluation of
Nike labour practices, reported recently, was
rejected by labour and human rights groups
who considered the methodology flawed.63
The Canadian government might consider honouring those Canadian multinational companies
with the most comprehensive and well-implemented codes of conduct for their overseas activities. This would build on a US precedent where
the Commerce Department awards American
CHILD LABOUR
In 1997, the Canadian government launched a “child labour challenge fund” which is intended to assist manufacturers,
particularly smaller ones, and business associations develop plans for the eventual elimination of child labour.1 This followed
the recommendation by a parliamentary committee that the government encourage the creation of private-sector taskforces
(composed of overseas business partners, local communities, and civil society groups) on labour practices in those sectors
where there is significant exploitation of child workers.2
Up to $200,000 annually will be available over two years in matching funds (of $10,000 to $50,000 each) for projects that
involve NGOs, unions, and academics in Canada and abroad. Eligible initiatives include research and training in the development
of voluntary guidelines, codes of conduct, and consumer labeling practices. Proposals will be considered by a committee chaired
by Senator Landon Pearson, Foreign Affairs Minister Lloyd Axworthy’s special advisor on children’s issues, and which includes
representatives from labour, the NGO community, and business. Such funds could, for instance, have been used to support
efforts by the international football association (FIFA) to develop a code of labour practice for the production of soccer balls.
The parliamentary committee also stressed that child labour in the manufacture of exports is the tip of the iceberg—many
more children work in services and agriculture, or to produce goods for domestic consumption. To address the causes of child
labour, a comprehensive strategy is needed, in which trade measures can only play a symbolic part. Canada already supports
other initiatives, such as the ILO’s International Program on the Elimination of Child Labour (IPEC).3
Nonetheless, the committee also recommended that the government implement the Rugmark scheme (which identifies
carpets as being made without child labour) for an initial two-year period.4 It will then be assessed before the government
proceeds with an independently monitored product certification and inspection system for goods whose production is
identified with child exploitation. The committee also recommended that, should the adoption of a voluntary set of guidelines
prove ineffectual, the government consider introducing legislation.5
NOTES
1
DFAIT, Press Release, No. 78, “Child Labour Challenge Fund,” April 23, 1997 and October 9, 1997 at http://www. dfait-maeci.gc.ca
Canada, Standing Committee on Foreign Affairs and International Trade (SCFAIT), Sub-Committee on Sustainable Human Development, Ending Child Labour Exploitation,
Ottawa, 1997, p. 43.
3 CIDA, Political and Social Policies Division, Policy Branch, Approaches to Child Labour, Hull, January 1997.
4 Canada, SCFAIT, Ending Child Labour Exploitation, p. 40. Some retailers in Canada support an initiative known as “Care and Fair” which encourages producers, suppliers, and
consumers not to deal with carpets made with child labour, primarily through the distribution of literature. It also seeks to raise funding for programs to benefit children.
5 Ibid., p. 42.
2
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companies that best meet the 1995 Model
Business Principles.64 Another approach would
be to ask the Ottawa-based International
Development Research Centre (IDRC) to create a
“Manufacturing and Sustainable Development in
Asia” initiative, analogous to their recent initiative on mining in Latin America (see Chapter 4,
p. 79). This could bring representatives from
internationally active Canadian manufacturing
companies together with labour and environmental groups, from both developing countries and
Canada, to promote labour and environmental
practices, as well as other measures that
contribute to local development.
While it is important that companies assume
greater responsibility for their activities and
those of their suppliers, there are a number of
issues to consider. One concern must be the
extent to which this new approach would divert
resources and attention from enhancing the role
of the ILO and national governments. The proliferation of codes could also pose a problem. For
example, differences could create compliance
difficulties for developing country manufacturers
making goods for more than one company. The
codes will also complicate the introduction of
social labeling schemes, whether by the ILO65 or
nationally. For this reason, some have favoured
the development of industry or sector-wide
codes, such as that recently agreed with US
clothing manufacturers.66
THE CONSUMER CONNECTION
While Canadian direct investment in manufactures in developing countries may be relatively
limited, Canadians as consumers—and Canadians
companies as retailers—have many linkages to
manufacturing in developing countries.
In Canada, campaigns such as the “Clean
Clothes” of 1993-94—and more recently the
Labour Behind the Label Coalition led by the
garment workers’ union (the Union of
Needletrades and Industrial Textile Employees
or UNITE)—try to increase retailers‘ responsibility
for the conditions in factories producing the
goods they sell. For example, they have endeavoured to persuade them not to sell goods made
under very oppressive conditions in Burma.
Although most firms in joint investments with
Burma’s military regime are based in Thailand
or Hong Kong, a recent report found clothes
from Burma being sold by Sears Canada Inc.,
Hudson’s Bay Co., Reitmans Canada Ltd, Tip
Top Tailors, and even Zellers Inc., despite
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Zellers’ company policy of not sourcing garments in factories that employ child labour.67
The National Action Committee on the Status of
Women has picketed Canadian toy stores to
protest against poor labour conditions of workers,
mostly women, in foreign toy factories.68
Some have called for a buycott rather than a
boycott—the adoption of positive measures to
encourage trade with companies that meet
certain international norms. This is the strategy
pursued by most “fair trade” organizations such
as the Fairtrade Labelling Organization
International and Transfair Canada, which have
each developed registers of fair trade organizations (such as coffee cooperatives) and certified
food products, including coffee, tea, and honey.69
The Bay has a business ethics policy, but no system for monitoring its sourcing abroad that is
open to independent external auditing. It is left
to Bangalore and/or Hong Kong regional offices
to determine whether suppliers meet certain
human rights criteria.70 The Bay does, however,
try to ensure that its suppliers apply national
standards in host countries, unless they are
unconscionably low. The Bay is reported to be
developing a stricter code with the Retail
Council of Canada and the ILO.71 It appears
that the planned code will be quite comprehensive, covering issues such as unionization, child
labour, relations with communities, environmental protection, and product safety, as well as
the full range of independent inspection/
enforcement mechanisms.72
In response to pressure from its members, the
Mountain Equipment Co-op (MEC) introduced
a sourcing policy in 1997. This gives priority to
Canadian manufacturers and others that are
proactive in improving the living standards of
their employees, are socially responsible, and/or
are cooperatives. They must also meet MEC’s
product standards. MEC may also provide financial and technical support and training to help
develop their businesses and meet MEC specifications. The standards with which suppliers are
expected to comply include nondiscriminatory
and nonexploitative employment practices; no
forced labour or physical/mental disciplinary
tactics; compliance with national wages, benefits, and working conditions, even if the producer is in a “protected zone” which exempts it
from these national standards; and enlightened
environmental and packaging standards. There
is no reference to respect for trade union rights,
nor to minimum or adequate wages. Suppliers
are expected to agree to inspection visits at any
67
. . .
IF A MERE TWO
PERCENT OF CONSUMERS
BECAME MORE VOCAL
ABOUT THEIR ETHICS
,
THEY COULD PRESSURE
MANUFACTURERS TO
ADOPT FAIRER TRADE
PRACTICES
.
HOWARD ESBIN,
BRIDGEHEAD INC.,
QUOTED IN
SUSAN SEMENAK,
“BUYING GOODS, WITH A
SIDE OF ETHICS,”
THE OTTAWA CITIZEN,
AUGUST 11, 1997, P. C3
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TO WORK BOTH NIGHT
A N D D AY, L I K E
BUFFALOES TETHERED
. NOT
A
SINGLE MOMENT OF THE
D AY I S T H E R E F O R R E S T.
THE
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time, including by external monitors, with cancellation of contracts if they fail to meet the
standards. The broad wording used, however,
leaves considerable scope for interpretation by
MEC buyers. MEC management is developing
more detailed guidelines.73
ARE BEING MADE
TO TREES
Page 68
MOTORS OF THESE
Additional pressure has also been generated by
the US “No Sweat” campaign launched in May
1997. Discussions by major retailing and manufacturing companies with officials, trade unions,
and human rights groups led to a US Code of
Conduct for clothing and shoe manufacturers
operating in the US and overseas. Companies
will be allowed to use a “No Sweat” label, provided they meet the following standards: payment of a minimum wage according to national
standards; a maximum work week of 60 hours;
at least one day off a week; no child labour,
prison labour, or physical abuse. The conditions
are to be audited by an independent monitor.
These efforts have been criticized as too weak:
certainly, both the standards and the monitoring
processes could be taken considerably
MACHINES BECOME
HEATED LIKE FURNACES
THE
.
SUPERVISORY STAFF
ARE NEVER SATISFIED
HOWEVER MUCH WE
PRODUCE
.
WORKER IN A FACTORY IN A
FREE TRADE ZONE IN
SRI LANKA, TAKEN FROM
WOMEN WORKING
WORLDWIDE, AT
BOX 4 INITIATIVES
OF THE
CANADIAN APPAREL FEDERATION
The Canadian Apparel Federation (CAF), the national industry association representing apparel
producers, has launched several initiatives to protect the rights of workers overseas. It also
encourages members to develop labour policies by organizing workshops and preparing a general policy manual. This would help promote best human resources practices in the industry and
help companies comply with provincial labour laws.
In addition, the CAF has commissioned a Swiss company, the Société Générale de Surveillance
(SGS), to help define a social accountability process including certification, monitoring, and
enforcement. This would draw on SGS’ work in compiling international and corporate standards
and codes, and in advising other companies in this area (including, somewhat ironically, The
Walt Disney Co. which has recently been heavily criticized for its purchasing practices).1 A case
could perhaps be made for the development of a universal standard in this area through the
International Standards Organization (ISO)—analogous to the ISO standards for the
environment, for instance.2
To demonstrate their commitment to fair labour practices, the CAF has developed a statement
of responsibility on human rights and labour standards which could be used as the basis for an
industry-wide code of conduct:
HTTP://WWW.POPTEL.ORG.UK
“Members of the Canadian Apparel Federation are committed to the fair and rational practice of business in Canada and abroad. Basic to this commitment is the fair and equitable
treatment of employees in the wages, working conditions, and benefits. In no case do we
support the use of child labour, prison labour, discrimination based on age, race, national
origin, gender or religion, the violation of legal or moral rights of employees, or destruction or harm to the environment.”3
Some clothing manufacturers would like provincial labour ministries to increase their involvement in many ways, notably by more active enforcement of laws and more expedient inspections, as well as by teaching workers and employers about their rights and obligations. This is
considered necessary to change the public’s perception of homeworking as a violation of workers’ rights. Others favour the introduction of a licensing scheme for both domestic and overseas
contractors.4 This would require the support of retailers—notably through the Retail Council—
many of whom buy directly from suppliers abroad or subcontractors in Canada.
To ensure consistency across Canada, the CAF would like the federal government to specify
certain minimum standards. This would also help diffuse criticism of the CAF for its standards
which some consider too high and others too low, as well as for its involvement in monitoring
and enforcement. Information on violators would need to be publicly available: this has not
been Canadian practice, but there is a move within NAFTA for all three member countries to
share this information publicly.
Although some incentive is needed to ensure adherence to the code, the CAF wants to avoid a
code of compliance which automatically terminates contracts with factories (and workers/
communities) if the code is violated. A recent Canadian example involved Woolworth which cut
off purchases from two contracting firms, Unité Fashions and Well Trend, whose homeworking
practices were alleged to have violated Ontario labour standards.5
NOTES
1
See CLC, CLC-Hot Issues, 1997.
In late 1997, the US Council on Economic Priorities launched such a standard for ethical sourcing known as Social Accountability
8000 or SA8000. Financial Times, December 12, 1997.
3 Canadian Apparel Federation (CAF), Apparel Canada, Spring 1997 http://www.apparel.org
4 Ibid.
5 The Toronto Star, June 16, 1997.
2
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further. For example, they could include international norms and nonprofit, locally based monitors, rather than accounting companies alone.74
Nor is it clear what action will be taken should
producers fail to comply with the standards.
Building on this work, the US Department of
Labor now publishes a list of “Trendsetters”—
those US retail companies that have agreed to
ensure that their suppliers do not use sweatshop
labour.75 This approach could be adopted by the
Canadian government.
Canadian producers operating under license
from US companies, such as Levi Strauss and
Haggar Corp., and others making goods for sale
in the US will often face pressure to comply
with these new standards. Many Canadian
producers also recognize the importance of
standards to discourage unfair competition,
whether from sweatshops in Canada or elsewhere, as well as to avoid criticism from consumer or labour groups.
CONCLUSIONS AND
RECOMMENDATIONS
This brief survey of Canadian links with manufacturing in developing countries underlines the
need for more systematic collection of data.
While trade data is readily available, information on Canadian investment linkages is much
scarcer. As explained in the technical notes to
the Statistical Annex (p. 184), disclosure rules
limit Statistics Canada’s capacity to provide
investment figures that are disaggregated by
country, let alone sector. A partial picture can be
gleaned from statistics released by some host
countries, however.
1 UNDERTAKE RESEARCH ON CORPORATE
ACTIVITY IN TRADE AND INVESTMENT
Because there is little systematic information
at the corporate level for either trade or
investment, more studies need to be carried out
on trade and investment if we are seriously to
engage in analysis and discussions of corporate
practice.
Many Canadian manufacturing multinational
companies have recognized that their performance will be evaluated, not only in terms of
profits, but also by their contributions to the
economic and social development, as well as the
environmental sustainability, of the communities in which they operate. Some have set certain goals in these areas, and an increasing
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number have adopted codes of conduct. But
there is considerable room for improvement in
the scope, standards, and process for creating,
monitoring, and enforcing them.
2 INVOLVE STAKEHOLDERS
In particular, more public and regular stocktaking of corporate performance is needed, as
well as early involvement of local groups
(unions, human rights organizations, and
other nongovernmental organizations) both in
the definition of appropriate standards and in
their monitoring. Specifically, it would seem
important for companies to clarify issues such
as compliance with national labour and environmental standards, and contributions to
local charities. Where national standards are
weak, they should set precedents for
improving them.
JONES APPAREL GROUP
USES CONTRACTORS
EXCLUSIVELY AND
WOULD LIKE THEM TO BE
LICENSED
. THAT
WOULD
PROVE THAT THE
CONTRACTORS ARE IN
B U S I N E S S L E G I T I M AT E LY,
THAT THEY ARE
FINANCIALLY
3 HIGHLIGHT BEST PRACTICES
Drawing on the example of a forthcoming
study on the North American clothing industry
by the North American Commission for Labour
Cooperation, Canadian manufacturers, in collaboration with others, could organize annual
meetings to highlight best practices. Another
approach would be to create a “Manufacturing
and Sustainable Development” initiative to
bring together Canadian multinational manufacturing companies with Canadian and
developing-country labour/environmental
groups to promote practices that contribute to
local development.
Canadian distribution companies also have a
role to play in persuading manufacturers and
consumers to assume responsibility for the way
in which goods are produced. Several initiatives
have been launched, but these need to be rationalized and strengthened.
4 CREATE SPECIAL AWARDS
The CIDA annual Awards for International
Development, granted to Canadian businesses
working in developing countries (see Chapter 7,
p. 130), should include a specific category for
“exemplary labour practices.” The selection
panel would include representatives of labour or
of groups working on labour issues, such as the
Maquila Solidarity Network. These awards are
usually sponsored by a Canadian company: in
the case of labour practices, sponsorship could
also be provided by labour humanity funds.
69
RESPONSIBLE AND ARE
PAY I N G T H E I R W O R K E R S
THE WAGES AND
BENEFITS REQUIRED BY
L AW.
THAT
WOULD GIVE
US A LEVEL OF
C O M F O R T.
CANADIAN APPAREL
FEDERATION,
“APPAREL ONTARIO,”
APPAREL CANADA,
SPRING 1997, P. 4
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5 REMOVE TARIFFS ON SELECTED IMPORTS
7 SUPPORT DEVELOPING COUNTRY EFFORTS
Under the General Preferential Tariff, the
Canadian government should consider
removing all tariffs on imports of textiles,
clothing, and footwear from least-developed
countries that agree to endorse and enforce
certain minimum labour standards. These tariff
preferences could be withdrawn if an
investigation by the ILO found that the
standards were being violated and that the
government had subsequently failed to
introduce corrective measures.
Finally, to ensure a net positive impact of
foreign companies, measures are needed to
support the efforts of developing-country
nongovernmental and other organizations,
as well as governments, in the design and
implementation of economic, social, and other
policies.
6 BUILD A CONSENSUS AROUND MULTILATERAL
STANDARDS
In conjunction with the Canadian government
and other organizations, Canadian companies
could help develop a consensus around
multilateral standards, reinforcing the work of
the ILO and other international organizations.
Some codification of the responsibilities of
multinational corporations is overdue.
NOTES
1
World Bank, World Development Report 1997, p. 237.
15
Chow, 1994.
2
IMF, World Economic Outlook, May 1997, p. 73.
16
Rao et al, p. 108.
3
Statistics Canada, http://www.statcan.ca
17
4
See Ann Weston and Ada Piazze-MacMahon, “Guidelines for Trade
After 2000. How much has been gained in shift to the WTO?”
Briefing No. 39 (Ottawa: The North-South Institute, 1996).
5
See for example, Team Canada, Canada’s International Business
Strategy 1997-98, Overview, 1996.
6
Industry Canada, Canada’s International Business Strategy— Industry
Strategies 1997-1998, Abridged Volume. Available on IC homepage at
strategis.ic.gc.ca
7
Statistics Canada, unpublished data. Unless otherwise specified,
all dollars are current Canadian.
8 Sunder Magun, The Development of Strategic Alliances in Canadian
Industries: A Micro Analysis. Working Paper No. 13 (Ottawa:
Industry Canada, 1996), p. 27.
Lorraine Eden, ed., Multinationals in North America. The Industry
Canada Research Series. (Calgary: University of Calgary Press,
1994), pp. 244-46.
18
J. Knubley; M. Legault; and S. Rao, “Multinationals and Foreign
Direct Investment in North America,” in Eden, ed., p. 188.
Gunderson and Verma note that “the wage and employment effects
of outward FDI are likely to be in the same directions as those from
import competition, having the greatest adverse effect at low-wage
levels in Canada.” Nonetheless they argue that the evidence about
the impact of CDIA on total employment is ambiguous (1994:189).
19
20
Niosi, p. 54.
See http://www.bataindustrials.com (May 12, 1997).
21
Niosi, p. 156.
22
Ibid.
23 Canadian Auto Workers (CAW), “Nortel Workers Angered Over
Franklin Chow, “Recent Trends in Canadian Direct Investment
Abroad: The Rise of Canadian Multinationals,” in Steven Globerman, Award Presentation,” Contact, May 5, 1995.
ed., Canadian-based Multinationals, The Industry Canada Research
24 See Magna homepage at http://www.magnaint.com and
Series (Calgary: University of Calgary Press, 1994), p. 39.
/corporateconstitution.html (May 13, 1997).
10 Someshwar Rao et al, “Canadian-based Multinationals: An
25 The Globe and Mail, December 4, 1997.
Analysis of Activities and Performance,” in Globerman, 1994, p. 70. 26
Dominion Textile, Press Release, July 23, 1996 at
11 Other important areas of CDIA are infrastructure (32 percent of
http://www.domtex.com. In December 1997 Dominion Textile was
flows during 1986-92, or 17 percent in terms of 1993 stocks, accord- bought by the Polymer Group of North Charleston, South Carolina.
ing to UN, World Investment Report 1996, New York, p. 285) and
27 The Financial Post, May 24, 1996, p. 6.
financial services (26 percent of total CDIA flows or 35 percent of
28 Bombardier Inc., Press Release, January 19, 1996 at
flows outside the US, Chow, p. 38). This is a different picture from
1980 when less than a fifth of Canadian investment was in develop- http://www.bombardier.com
29 Bombardier Inc., Press Release, May 13, 1997 at
ing countries (Jorge Niosi, Canadian Multinationals, Toronto:
Between the Headlines,1985, p.169), and manufacturing accounted http://www.bombardier.com
for the largest share, with 42 percent of total CDIA (the same level
30 Food Institute of Canada, “Food Trends in Korea”
as in the US) compared to 21 percent in oil and gas, 14 percent in
http://www.foodnet.fic.ca August 1996; and The Financial Post,
finance, and 10 percent in mining/smelting (Niosi, p.57)
1997, p.16.
9
12 Secretaría de Comercio y Fomento Industrial, “Inversión de
Canada en México,” November 1997.
13
Does not include lumber and wood as manufacturing. Rao, et al,
1994, Table 3.
14
UN, World Investment Report, p. 104.
70
31
Yogen Fruz, http://www.pathfinder.com October 13, 1997.
32
Interview with Canadian Apparel Federation, June 1997.
33
In ILO, The ILO, standard setting, and globalization. Report of the
Director General. http://www.ilo.org Geneva, 1997.
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34 UNCTAD, Trade and Development Report, 1997. Globalization,
Distribution and Growth. New York, 1997, pp. 92-93.
35
Ibid., p. 91.
36
Michael Jantzi Research Associates Inc. (MJRA). Various company
notes, various dates.
37 MJRA, 1997; for further information on Nortel Habitat, see the
company’s homepage.
38 CIDA, News Release (97-59), “Minister Boudria Presents Canadian
Awards for International Development,” Ottawa, May 26, 1997.
39
Interview with Bata official, September 9, 1997.
40
MJRA, June 1996.
41
Fish and Seafood Products, March 20, 1997.
42
MJRA, 1997.
43
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62 Levi Strauss has had two sets of guidelines since 1992—one for
the selection of countries (including widespread observation of
human rights) and the other for companies (e.g., no child labour or
discrimination, a ceiling of 60 hours per week, good health and
safety, although no reference to trade union rights). Monitoring is
carried out by Levi’s employees, though summaries of these audits
are published regularly. Sajhau suggests Levi’s permanent dialogue
with workers’ representatives and business partners has been as
important in dealing with social problems. Jean-Paul Sajhau,
Business Ethics in the Textile, Clothing and Footwear Industries:
Codes of Conduct (Geneva: ILO, 1997), p. 25.
63 In the case of the International Code of Ethics for Canadian
Business, neither the Canadian labour movement nor international
development organizations were involved in the drafting process.
CLC, CLC-Hot Issues, at http://www.clc-ctc.ca (1997).
Kathryn Kopinak, Desert Capitalism (Montreal: Black Rose Books,
1997), p. 123.
64 Forcese, Putting Conscience into Commerce: Strategies for Making
Human Rights Business as Usual (Montreal: ICHRDD, 1997), p. 73.
44
Ibid., p. 185.
65 As
45
Ibid., p. 154.
46 United Steelworkers of America-Canada (USWA-Canada), News
Releases, ”Steelworkers Sponsor Visit by Mexican Workers Fired by
Canadian Company,” August 14, 1997; and “Death Threats Shadow
Mexican Workers After Canadian Tour”, September 12, 1997.
the ILO Director-General has noted, “labelling may, depending
on its origin or the methods used, risk being arbitrary, singling out a
particular right or product or being put to improper use.” He proposed the ILO consider awarding “an ‘overall social label’ to countries complying with a set of fundamental principles and rights and
agreeing to have their practices supervised by an international
inspection on the spot which is reliable and legally independent.”
ILO, The ILO, standard setting, and globalization.
47 Jane Nelson, Business as Partners in Development. Creating wealth
for countries, companies and communities (London, UK: The Prince of
Wales Business Leaders Forum, in collaboration with the World
Bank and UNDP, 1996); also CIDA News Release, May 26, 1997.
66 Forcese has also called for country guidelines. Putting Conscience
into Commerce, p. 34.
48
67
Craig Forcese, Commerce with Conscience? Human Rights and
Corporate Codes of Conduct (Montreal: ICHRDD, 1997), pp. 45, 50.
Canadian Friends of Burma, Dirty Clothes: Dirty System, Ottawa,
1996, pp. 23-26. In August 1997, the Canadian government introduced limited sanctions against Burma. Burmese products will no
longer enjoy reduced tariffs under Canada’s General Preferential
Tariff (GPT); this will not affect clothing imports, however, which are
not covered by Canada’s GPT, whether from Burma or any other
country. Also Canadian exports to Burma will require an export permit and this will usually only be given to goods for humanitarian
purposes (Burma Links, October 1997:1). Most major US clothing
wholesalers/retailers, on the other hand, responding to consumer
boycott threats, have agreed to no longer sell goods made in Burma.
53
Dominion Textile, Annual Report 1997.
68
54
Magna, Annual Report 1996 http://www.magnaint.com
69
55
Financial Times, no date.
56
MJRA.
The Bangkok Post, March 24, 1997, p. 12.
49
The Forum, through its “Partners in Development” program in
collaboration with the World Bank, the UNDP, and other international agencies, aims to foster sustainable development by supporting linkages between responsible businesses and local communities
(Nelson, 1996).
50
See Magna website, http://www. magnaint.com
51
Dominion Textile, Annual Report 1997.
52
57
Nortel, homepage http://www.nortel.com
58
Forcese, Commerce with Conscience? 1997.
59
See, Bata, “Working class heroes and technology for the working
man...” from www.bataindustrials.com (May 12, 1997).
60
Bata, no date.
61
Interview with Bata official, September 9, 1997.
Forcese, Putting Conscience into Commerce, 1997, p. 39.
Laure Waridel, Coffee with a Cause. Moving Towards Fair Trade.
(Montreal: Les éditions des intouchables, 1997), p. 61.
70
Canadian Friends of Burma, 1996.
71
Forcese, Putting Conscience into Commerce, p. 49.
72
Ibid.
73
Mountain Equipment Co-op, “MEC Sourcing Policy,” mimeo,
October 26, 1997.
74
75
Forcese, Putting Conscience into Commerce, p. 27.
Sajhau, p. 4.
71
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H A P T E R
O U R
B EYOND B EST
P RACTICE
THE MINING SECTOR
Moira Hutchinson
M
O I R A
H
U T C H I N S O N
S P E C I A L I Z I N G
O N
R E S P O N S I B I L I T Y
D E V E L O P M E N T
I S
A
I S S U E S
A N D
R E S E A R C H
O F
C O N S U L T A N T
C O R P O R A T E
,
S O C I A L
I N T E R N A T I O N A L
.
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B EYOND B EST P RACTICE
MANY
BIG COMPANIES
TAKE MORAL ISSUES
MORE SERIOUSLY THAN
EVER
.
THEY
HAVE
ETHICS COMMITTEES
,
ETHICS OFFICERS AND
ETHICS CODE
.
THE
TROUBLE ARISES WHEN
THEY MUST TAKE HUGE
STRATEGIC DECISIONS,
SUCH AS WHETHER TO
INVEST IN MINERAL
-
RICH COUNTRIES THAT
HAVE CRUEL OR VENAL
GOVERNMENTS
.
“COMPANIES AND THEIR
CONSCIENCES,”
THE ECONOMIST,
JULY 20, 1996, P. 15
M
ining plays a key role in Canadian economic, social, and political development.
Indeed, Canada exported $29 billion worth of
minerals in 1994, making it the world’s largest
exporter in this sector.1 Canada ranks as the
world’s largest producer of potash, uranium, and
zinc, and ranks among the top five producers
for 15 other minerals.2
Canadian mining corporations are also major
players on the world stage. Canada is the global
leader in mineral exploration, and has also
become a leading supplier of capital to the international mining industry.3 The three top
Canadian minerals firms—Alcan Aluminum Ltd,
Inco Ltd, and Noranda Inc.—are among the top
10 global mining operators.4 In 1991, Alcan,
Inco, and Noranda were among the top 20
outwardly oriented Canadian-based firms in
all sectors.5
Some business spokespersons have suggested
that Canadian companies almost inevitably
make a positive contribution to sustainable
development and equity abroad because they
carry with them Canadian values and experience.6 Mining companies, as key actors in the
Canadian economy, seem as likely as those in
other sectors to make such a contribution.
But what values do they carry? What impact do
they have on sustainable development and
social equity in developing countries?
The media has focused considerable attention
on the activities of Canadian mining companies
abroad following events such as the environmentally disastrous tailing spills at Placer Dome
Inc.’s operations in the Philippines and Cambior
Inc./Golden Star Resources Ltd’s in Guyana, as
well as the dramatic bidding war in the context
of highly visible corruption and the subsequent
revelation of fraud attending Bre-X Mineral
Ltd’s operations in Indonesia. Perhaps not
surprisingly, media reports have focused largely
on the implications for investors. The questions
being asked by communities and unions in host
countries about the impact of mining investment on their lives have received much less
attention in Canada, despite the efforts of some
journalists, unions, human rights groups, and
social investment organizations.
74
Critics are challenging Canadian mining companies to demonstrate that their international
environmental, social, and labour standards are
at least the equivalent of their domestic standards. New international trade agreements, such
as the Canada-Chile agreement, require only
that signatories comply with their own national
labour codes and environmental standards. This
is often a modest yardstick, even in Canada
where the adequacy of domestic standards is
being questioned in the wake of such tragedies
as the Westray coal mine collapse.
Simultaneously, mining companies are pressing
for less government regulation.7 The shift of
investment from Canada to developing
countries, combined with pressure for change
in the balance between the companies’
obligatory and supererogatory responsibilities,
is seen to be an invitation to lower standards
everywhere. But mining companies argue that
international “cookie cutter” and “command
and control” approaches to standards are not
helpful. They emphasize the appropriate
application of “best practices.”8
In the final analysis, however, the problem is
not whether to define standards of corporate
responsibility or “best practices” for mining
companies, or what the standards should be,
but who should define standards and how to
monitor their implementation. Despite the
best intentions, best practice approaches and
codes of conduct without mechanisms of
accountability, governmental or other, will not
provide people with the capacity to protect
their interests. That capacity underlies real
social equity.
INVESTMENT TRENDS
The minerals industry begins with the
exploration for and production of basic ores
and concentrates. This is followed by metal
production and industrial fabrication. Our
discussion focuses on Canadian corporate
involvement in primary mineral exploration
and production (mining and concentrating)
in developing countries.
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The extent of Canadian investment in primary
mineral exploration and production in developing
countries can be indicated only indirectly.
Statistics Canada data on the amounts of investment in the broader metallic minerals and
metal products sector shows that in 1995,
Canadian direct investment was $4.97 billion in
countries other than the United States, United
Kingdom (UK), other members of the European
Union (EU), Japan, and other member countries
of the Organisation for Economic Co-operation
and Development (OECD). This represents a
significant increase from $1.8 billion in 1985.
Between 1985 and 1995, Canadian direct investment in this sector increased from 17.6 percent
to 21.5 percent of total Canadian direct
investment in these countries.9
Increased mineral investment abroad followed
from the stock market fall of 1987 and the
subsequent recession which slowed exploration
and mine development in North America.
While decisions to invest are clearly complex,
company spokespersons, such as Michael
Knuckey of Noranda, attribute the move abroad
to “a dawning realization by our industry that
some governments in Canada firmly believed
that mining was passé,” and to “changes in
political systems, liberalization of investment
policies, and the adoption of enticing new
mining laws [that] have created an appearance
of reduced political risk in many places that
were clearly off limits in the past.”10 Unions and
environmental groups, however, have charged
that some Canadian mining companies were
motivated by lower environmental and labour
standards abroad.11
The extent of Canadian mining activity abroad
can only be estimated. André Lemieux of
Natural Resources Canada found that, at the
end of 1996, companies listed on Canadian
stock exchanges held interests in more than
4,900 exploration or producing properties in
Canada and 3,400 properties abroad. Apart from
holdings in Canada and the US, two dozen
nations (Box 1) account for 80 percent of the
balance of the mineral property portfolio held
by companies listed on Canadian stock
exchanges.12
Most of the properties in which these companies have interests are at the exploration stage.
The ratio of exploration properties to the total
number of properties held abroad by Canadian
companies has increased, while it has remained
roughly constant in Canada. Lemieux comments that “because exploration is more risky
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BOX 1 CANADIAN MINERAL PROPERTY
PORTFOLIO WORLDWIDE:
COUNTRIES ACCOUNTING FOR 80%
OF FOREIGN HOLDINGS OUTSIDE
THE US, 1995 AND 1996
Companies of all sizes listed on Canadian stock exchanges
Countries
Mexico
Chile
Indonesia
Peru
Venezuela
Argentina
Ghana
Brazil
Bolivia
Tanzania
Australia
Ecuador
Guyana
Philippines
Zimbabwe
South Africa
China
Burkina Faso
Panama
Russia
Botswana
Cuba
Suriname
Costa Rica
Estimated
Properties
(numbers
rounded)1
Estimated
Companies2
280
140
140
140
130
120
100
90
80
70
60
60
50
50
50
40
40
40
30
30
30
20
20
20
114
50
89
45
37
42
32
42
28
11
25
26
27
18
17
16
15
17
19
9
18
13
5
19
NOTES:
1 The property estimates draw on Lemieux, “Canada’s Global
Mining Presence,” Figure 4, in Natural Resources Canada,
Minerals and Metals Sector, 1996 Canadian Minerals Yearbook:
Review and Outlook (Ottawa: Natural Resources Canada, 1997),
p. 8.4; and the author’s research using the MIN-MET CANADA
database. The number of properties is used to represent the relative value of the investments. However, as many as one-third of
the properties may not be owned by Canadian-based or
Canadian-controlled companies: we were unable to find an efficient way to develop summary statistics that include only companies headquartered or incorporated in Canada. To arrive at
the one-third estimate, we drew on research conducted for the
Steelworkers Humanity Fund, comparing sections of the MINMET CANADA database with information from Micromedia’s
Compact D/Canada database, produced by Micromedia Limited;
Diane Giancola, ed., Canadian Mines Handbook 1996-97 (Don
Mills, Ontario: Southam Magazine & Information Group, 1996),
pp. 451-61; and Patrick Whiteway, “Our Annual Survey of
Canada’s Top 40 Mining Companies,” Canadian Mining Journal,
117:4 (1996), p.8.
Other factors also limit the validity of using property count as a
proxy for value: properties vary widely in acreage, reserves, and
state of exploration and development; junior mining companies
tend to buy at earlier stages in exploration, at lower prices and
higher risk, while senior companies buy when prospects are
more surely defined.
2
The estimate for numbers of companies is based on Giancola,
Canadian Mines Handbook, 1996-97, pp.451-62.
75
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than production, it would appear that Canadian
companies have assumed, over a relatively short
period of time, increasing amounts of geological
and country risk abroad.”13 The strong and
increasing Canadian presence in exploration has
been insufficiently recognized in discussions of
the corporate responsibility of the Canadian
mining sector. The implications for social equity
of the exploration phase of the mining cycle
will be discussed later.
In 1996, the worldwide mineral exploration
market for precious metals, base metals, and diamonds was $6.3 billion. The data prepared by
Lemieux about global trends is based on the
activities of larger companies worldwide,
defined as those with annual exploration budgets larger than $4 million. There were 223 of
these in 1996, and they were expected to spend
$4.8 billion on exploration. The Canadian-based
companies were expected to spend $1.3 billion
on exploration, with $958 million of that outside Canada. The proportion of Canadian-based
aggregate budgets allocated to exploration outside Canada has risen from 43 percent in 1992
to over 70 percent in 1996.14
As shown in Table 1, among regions in the
developing world, Canada had its greatest presence in the exploration market of the former
Soviet Union, where Canadian exploration
represented 45 percent of total exploration.
In dollar terms, however, Latin America and the
Caribbean were the sites of the greatest
Canadian activity. In 1996, several Canadianbased companies planned the largest exploration programs in several countries of the
region: Barrick Gold Corp. in Chile, Bolivar
Goldfields Ltd in Colombia, Placer Dome in
Costa Rica, KWG Resources Inc. in Cuba and
Haiti, Eldorado Gold Corp. in the Dominican
Republic, Greenstone Resources Ltd in
Honduras, Triton Mining Corp. in Nicaragua,
Teck Corporation in Panama, Cambior in
Suriname, and Rea Gold Corp. in Uruguay.15
This increase in Canadian exploration abroad
during the past 10 to 15 years has been taking
place in the context of a major restructuring of
the mining industry in developing countries.
Privatization is proceeding in many countries.
The World Bank and other international and
regional development banks have supported the
strengthening of infrastructure. The common
objectives are to enhance overall economic and
industrial growth, improve efficiencies in mineral recovery and use, acquire advanced technologies, reduce environmental impacts, and
improve safety conditions.16 Countries which
once actively discouraged foreign investment
have been revising mining policies and rewriting legal regimes to encourage and protect it.
The Canadian industry has promoted these
changes through their input to the Canadian
government on development assistance and free
trade agreements. The Mining Association of
Canada (MAC) sees the trade agreements as
providing “certainty in investment.” At the
same time, it has expressed concern about
efforts to use trade-related measures to “push”
environmental goals and as “instruments for
social change.”17
FINANCING NEW AND EXPANDED OPERATIONS
TABLE 1 Exploration Budget1 of the World’s Larger
Companies and of the Larger Canadian-Based
Companies,2 by Region (1996, $millions)
Region
Exploration
Market by
Region
Latin America
$1,300
and the Caribbean
Africa
$570
Southeast Asia and China
$400
Former Soviet Union
$100
Regional
Canadian
Canadian
Market as % of Exploration
Exploration
Worldwide
Market by Market as % of
Market of $4,800
Region Regional Market
27
$485
37
12
8
2
$112
$120
$45
20
30
45
NOTES:
1
Exploration budgets are for precious-metal, base-metal, or diamond exploration.
2
Larger Canadian-based companies are those with worldwide budgets of at least $4 million.
Source: Calculations based on André Lemieux, “Canada’s Global Mining Presence,” in Natural
Resources Canada, Minerals and Metals Sector, 1996 Canadian Minerals Yearbook: Review and Outlook,
Ottawa, 1997, pp. 8.2- 8.8
76
Substantial capital is required to introduce new
mining and processing technologies and
expand capacity. The World Bank and national
bodies are sources of public lending. Private
funding by the “senior”18 mining companies
can take the form of joint ventures, licensing
agreements, leases, concessions, permits,
management contracts, and international
subcontracting.19 Senior companies have access
to lending institutions and can also raise capital
through a variety of other means, including
retained earnings, cash flow, and equity
markets. Generally unable to raise exploration
funds from banks because of the high financial
risk of exploration,20 “junior” exploration
companies rely primarily on equity investment
through public financing or joint ventures with
larger companies.
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Keith Brewer and André Lemieux of Natural
Resources Canada have analyzed Canada’s position as the world’s leading supplier of capital for
the mining industry since the early 1990s, especially through the global exploration programs
of Canadian-based junior mining companies.21
Their data shows that capital is being raised from
investors in both Canada and abroad. In 1996,
almost $7 billion was raised in Canadian dollar
issues through Canadian securities markets to
finance the domestic and foreign projects of
Canadian mining companies. Of this total, $5.5
billion was in the form of equity and $1.3 billion
in the form of debt.22 The equity financing for
mining accounted for about one-quarter of all
Canadian-dollar equity issues raised in Canada,
but less than 5 percent of debt.
Canada’s dominant position in mine finance
has been attributed in part to the legal framework for raising funds in Canada, which is “conducive to risk taking, to the valuation of mineral
assets, and to the buying and selling of those
assets among prospectors, investors, developers,
and producers.”23 The tax burden on profits
generated from minerals is comparable to or less
than in other mineral producing jurisdictions.24
Flow through share financing, which refers to
nondepreciable investments such as mutual
funds, is a unique provision of the Canadian tax
system which, in the late 1980s, contained features that also contributed to large amounts
being raised for mineral exploration.
Investment in countries that might previously
have been considered too unstable, such as the
Democratic Republic of the Congo (formerly
Zaire) and Sierra Leone, has been made possible in
part because of the willingness of investors and
managers to take risks with money pouring into
mutual funds. The relationship between financing
mechanisms for mining and mining’s social and
environmental impact is only beginning to be
explored. The social investment movement has
focused its attention, through screening of investment funds and shareholder activism, on the
larger public companies. Public and private sector
banks have scrutinized the senior companies. But
companies funded through highly speculative
financial markets, such as the Vancouver Stock
Exchange, appear to have escaped examination.
THE IMPACT ON NATIONAL
DEVELOPMENT
Until quite recently, negative environmental and
community impacts from mining were tolerated
on the grounds that mineral resources could gen-
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erate substantial wealth and stimulate national
economic development. Unfortunately, mineral
wealth is not always effectively converted into
the lasting capital needed to support a broadbased process of sustainable development. A 1994
conference on the contribution of the mineral
industry to sustainable development described
the effects on mining as “Dutch Disease”25:
This condition occurs when a new mineral
discovery or an increase in mineral prices
creates a mineral boom. In this situation,
the exchange rate tends to appreciate,
causing other tradable sectors of the economy—notably agriculture and manufacturing—to become uncompetitive and
eventually to decline; mineral wealth is
dissipated and the outcome over the
longer term, in the absence of an effective
policy response by government, is stagnating and even negative growth for the economy as a whole.26
Some countries appear to have been successful,
nevertheless, in expanding the mineral sector
while diversifying and improving the economy
as a whole. Chile is often cited as an example,
although the conference report suggests that it
remains to be seen whether the diversification
process underway will lead to long-term sustainable development. Orlando Caputo Leiva, a
Chilean economist who headed Chile’s state
copper company in the early 1970s, argues that
Chile’s long-term economic development is not
being well-served by “copper fever.” He predicts
a global surplus in copper production from 1995
to 2000 that will precipitate a significant drop in
prices. The global overproduction is due almost
exclusively to the increase in copper production
in Chile, and within Chile by the production
increases of large foreign companies. The fall in
copper prices would mean huge losses for Chile,
but a number of foreign companies could benefit
as they use the cheaper resource as raw material
for other operations. 27 Nor is the Chilean model
applicable to all mineral economies. Not all
have Chile’s quality minerals and favourable
location. Other factors such as income levels,
population size, and agricultural resources may
also limit the options for diversification.
No research has been carried out enabling conclusions to be drawn about whether Canadian
mining investment in general, in particular
countries, or even a particular mining operation
contributes or not to sustainable development.
Technology transfer, the generation of employment, provision of capital, and export earnings
77
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LOCAL
COMMUNITIES
SELDOM REMAIN
NEUTRAL WHEN AN
INTERNATIONAL
COMPANY OR
CONSORTIUM IS
GRANTED A CONCESSION
TO EXPLORE FOR OR
DEVELOP RESOURCES IN
THEIR AREA
.
WAYNE DUNN, “DON’T
BE AN
‘UGLY CANADIAN’,”
THE GLOBE AND MAIL,
MARCH 19, 1998
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are often referred to as benefits of multinational
mining investment.28 We found no data, however, establishing overall effects in relation to
these factors. One study of technology transfer
to developing countries (not specific to mining
companies) suggests that benefits are generally
limited to the joint ventures or local subsidiaries
of multinationals and are not diffused to domestic firms.29 Figures could be assembled on the
jobs created at specific exploration and production sites, but these would not include either
the short- or long-term spin-off and displaced
employment impacts. They would also need to
account for imported (or exported) labour.
While some cite Chile’s mining sector as a positive example of the economic benefits of
Canadian capital investment and the generation
of export earnings, others see it as a special, or
unproven, case and point to Guyana where, since
production commenced at Omai Gold Mines,
gold seems set to replace sugar, rice, and bauxite
as the single largest contributor to the GDP,
threatening balanced sectoral development. 30
Western mineral investment in a number of
transitional economies has been targeted at gold
during a period of “relatively safe, relatively
rapid, high rate of return on investment.
Evidently, mining companies require confidence
in legislation and favourable market conditions
before considering huge investments into the
base metals and industrial minerals.”31 Thus, the
deals between Tenke Mining Corp. and successive dictators to develop a copper-cobalt site in
the Congo were questioned, not only because
the current leader, Laurent Kabila, is accused of
presiding over an army guilty of genocide, but
because base metal producers who rely on railways to transport their production are particularly vulnerable to civil unrest. Gold or diamond
miners are less vulnerable because they can fly
their production out of the country.32
It is the price of gold, however, that has made it
the primary Canadian exploration target in
Africa. In the Philippines, one-third of projects
involve gold; in China, half; and in Russia, gold
and diamonds are the major targets.33 The
junior companies leading exploration may,
however, be diversifying their exploration
efforts in response to flat gold prices and rising
prices of base metals.34
Developing-country governments generally welcome Canadian investment, despite the uncertainty of mining investments’ contribution to
sustainable development. The World Bank has
been encouraging governments toward “open
78
economic policies” and a “liberalization of mining policies” to create the “enabling environment” needed to attract capital. At the same
time, it is concerned that “exploration successes
will not necessarily translate into mines, related
industries, employment, and the increase in
national wealth if the requisite conditions are
not in place.” Issues it cites as hindering the sustainable growth of the sector are: “the fragile
nature of the macroeconomic reforms, the continued existence of legal and regulatory impediments in some countries, the weakness of public
mining institutions, the constraints on the
growth of the small and medium mining sectors, and the inadequate treatment of the environmental and social aspects of mining.”35
A newer theme in World Bank and industry
analyses of mining’s contribution to sustainable
development is the recognition that “increasingly over the last decade, sustainable development is being addressed from the perspective of
the local communities, as well as that of
national economies.”36 This might imply recognition that sustainable development requires
the participation of local communities in decisions about development. On the other hand, it
may simply be a response to local communities’
growing opposition to mining operations. At
any rate, mining companies, the World Bank,
and Canadian government agencies are considering new approaches to working with local
communities, unions, and nongovernmental
organizations to address environmental and
labour issues, social and cultural needs, and
economic development.37
The Canadian International Development
Agency (CIDA) currently supports a few small
projects focused on community needs related to
mining development. Through the United
Steelworkers of America (Canadian National
Office) and the Canadian Auto Workers, it also
supports labour sector development in the mining sector. However, most of its financing in this
area is allocated to improving mining administration, promoting the use of Canadian technologies and services, and supporting Canadian
private sector development initiatives. Industry
and government concern about growing community opposition in several developing countries to Canadian mining operations is evident
in the September 1997 announcement by the
Ottawa-based International Development
Research Centre (IDRC) that it would commit
$1 million a year, for three years, to support
research on mining and sustainable development in the Americas (see Box 2).
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CONCERNS
By its very nature, mining has an undeniable
environmental, social, and economic impact.
An extractive industry, it often operates in hinterland areas, at the centre of Aboriginal land
claims, and in isolated and dependent communities. Working conditions are high risk unless
carefully regulated and monitored. Moreover,
large projects produce highly visible wealth
which may not be widely distributed. Finally, it
is an export-oriented industry in a rapidly
changing global economy.
The Canadian media, as well as nongovernmental human rights, environmental, labour
and social investment organizations, have
reported a number of concerns relating to the
operations of Canadian mining corporations in
developing countries. Some of these are also
noted in company reports and speeches. But
not all incidents make the news. What is
reported often depends on the capacity of local
groups to organize and communicate their
concerns. Issues arising from the operations of
smaller companies, companies whose Canadian
links are obscure, or companies with no
Canadian operations are also less likely
to be publicized in Canada. Moreover, one
company’s substandard performance over long
periods may go unreported while a single
incident caused by another will make the
headlines.
Some of the complaints explored below about
mining operations in developing countries have
also been made about operations in Canada.
There is a difference, however in the extent to
which mechanisms exist in Canada to facilitate
efforts to hold corporations accountable to governments, communities, and employees for their
social and environmental practices.
REPRESSIVE REGIMES
When companies invest in countries with
repressive regimes, communities find it difficult,
if not impossible, to press for fair labour conditions, good environmental practices, or the
return of revenues to the community. The claim
that industry will be a catalyst for positive change
has been refuted by analyses of the impact of
foreign investment in apartheid South Africa38
where, for example, companies were required to
cooperate with national security forces used to
suppress popular opposition. More generally,
benefits from the mining operation accrued to
the regime and were used to extend repression.
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BOX 2 A CANADIAN INITIATIVE
In September 1997, at a meeting of Mines
Ministers for Latin America, the Caribbean,
and Canada, held in Arequipa, Peru, Canada’s
International Development Research Centre
(IDRC) announced a $1million a year initiative
to support research on mining and sustainable
development in the Americas.
Citing the current boom in mining throughout
the Americas, Carlos Serés, IDRC Regional
Director for Latin America and the Caribbean,
explained that “at this time, everyone from
community groups to mining companies
wants to ensure that mining contributes to
sustainable development.” Mining Association
of Canada president George Miller, said that
“this initiative provides an opportunity for
Canadian mining companies to show leadership in sustainable development. As the dominant source of mining capital in the region,
Canada has special responsibilities.”
Being guided by a team representing the mining industry, environmental groups, international development interests, and researchers
from Canada and Latin America, the initiative
will support research for a better understanding of the complex relationship between
mining and sustainable development, with
special attention to local communities.
Source: “Canadian Initiative to Improve Environmental Impact of
Mining,” IDRC News, No. 11, September 22, 1997.
Human rights advocates suggest that, in some
instances, the only appropriate response to a
repressive regime is disinvestment or a policy of
“no new investment,” if this is consistent with
the strategy of internal or exiled opposition
groups. In other cases, conditions should be put
on investment, such as no participation in joint
ventures with the regime, refusal to provide
kickbacks and payoffs, and refusal to operate in
areas where security or military force is used to
establish or maintain the operation. Companies
should speak out against human rights violations and be prepared to pull out if such public
action endangers employees or operations.
Canadian companies have investments in three
countries that appear on most lists of repressive
regimes: Burma, China, and Indonesia. The
investment in Indonesia is the largest and the
most publicized following the Bre-X scandal.
Most of the companies arrived in 1996, following early reports of Bre-X’s exploration, and
Canadian investment is now said to represent
75 percent of all mining investment in the
country.39 The Canadian Mines Handbook,
1996-97 lists 89 Canadian companies in
Indonesia, including major names such as
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Barrick, Inco, Inmet Mining Corp., and Teck.
Inco is a long-term investor, operating a massive
nickel mine: its expansion plans in Central
Sulawesi are being opposed by some Indigenous
and previously transplanted groups. Indochina
Goldfields Ltd is in a joint venture partnership
with the government of Burma. In China, the
Canadian Mines Handbook lists 15 companies,
including Barrick and Viceroy Resource Corp.
CORRUPTION
Bob Parsons, vice-president of the Prospectors
and Developers Association of Canada, is among
those who have spoken out about the effects of
corruption on mining development.40
Corruption can take the form of kickbacks and
payoffs, or deals with state agencies and political leaders for mining rights that never come up
for open auction. These practices affect the
prospects and profits of mining companies.
They also work against social equity in that the
wealth generated by the mine is unlikely to be
well-distributed. This issue is being addressed at
the international and national government
levels, but corporate policy decisions and
reinforcement are also needed.
Corruption is perceived to be a serious problem
in a number of countries with significant
Canadian mining investment (Table 1):
Argentina, Bolivia, Brazil, Chile, China, Ecuador,
Indonesia, Philippines, Russia, and Venezuela.41
Corruption usually goes unreported, but the
Bre-X scandal brought the issue into the limelight in relation to the Indonesian regime and
the willingness of Canadian companies, such as
Barrick Gold, to make deals with President
Suharto’s family. Special payments and arrangements have also been made in countries
embroiled in civil war: Tenke Mining and Branch
Energy Ltd, acquired by Diamond Works Ltd, are
alleged to have acquired or secured properties
through indirect support for rebel forces in the
Congo and Sierra Leone, respectively.42
INDIGENOUS PEOPLES’ RIGHTS
Indigenous peoples and mining companies are
often in conflict because separate legal regimes
exist for surface and subsurface land entitlements. Believing that people and land constitute
a spiritual and material unity, Indigenous peoples
make no distinction between these entitlements.
However, “legislation usually privileges the mining company’s rights through entitlements to
expropriate land and establish easements.”43
80
A number of incidents involve Canadian mining
corporations. In Panama, for example, Tiomin
Resources Inc. is proposing to develop an area
where there are unsettled land issues between the
government and the Ngobe-Bugle Indigenous
people who have complained about the lack of
consultation and potential environmental
impact. There is also conflict over Western Keltic
Mines’ involvement in exploration in Indigenous
territory in Panama. In Guyana, Indigenous peoples had a minimal role in the consultation about
the opening of Omai Gold Mines—in which
Cambior is the majority and Golden Star
Resources the minority owner—and they have
suffered from linguistic, social, and economic
dislocation as a result of mining operations.44
WORKPLACE STANDARDS
According to the Organisation for Economic
Co-operation and Development, freedom of
association is nonexistent or seriously restricted in
a number of countries.45 Core labour rights are
seriously restricted in Bolivia, Botswana, China,
Indonesia, Panama, the Philippines, Tanzania,
and Zimbabwe, all countries with significant
Canadian mining investment (Box 1). Without
the freedom to form effective unions that can
monitor workplace health and safety practices,
the likelihood of corporate neglect is greatly
increased.
Even in countries not included on the OECD’s
problem list, such as Chile, workers are nonetheless concerned about a lack of effective labour
rights and the impact this has on workplace
standards.46 For example, the president of the
Mining Confederation of Chile has charged that
pressure for profits, unconstrained by effective
labour legislation, took priority over health and
safety in incidents at Barrick Gold and Placer
Dome operations. Through exchanges between
Canadian and Chilean miners it became evident
that Chilean collective bargaining agreements
with Canadian companies contained far fewer
provisions for health, safety, and the environment
than Canadian agreements.47 The MAC has
responded to such charges by citing its members’
commitment to bring the highest standards to
bear, whether operating in Canada or abroad, and
it points to the awards received by Barrick and
Placer Dome for their operations in Chile.48
In other countries where Canadian investment
is significant, such as Guyana, adequate labour
regulations are said to exist on paper, but
governments do not have adequate human and
financial resources to enforce them.49
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ENVIRONMENTAL IMPACT
In recent years, environmental disasters have
been associated with Canadian companies in
Guyana and the Philippines. Guyana’s government commission of inquiry attributed a major
cyanide spill into the Essequibo River in 1995 to
inadequate construction and design of the tailings dam at Cambior/Golden Star Resources’
Omai Gold Mines. Cambior is contesting a class
action suit for reparation of environmental
damage and damages for each of the class members, filed in Quebec by Recherches internationales Québec on behalf of individuals in
Guyana. The award would be used to establish a
sustainable economic development fund for the
region.50 Cambior has replied that the commission found the company’s response to the dam
failure prompt and effective, and that no
evidence was found of a serious threat to life, or
hazard to the health of workers and residents.51
In 1996, in the Philippines, a major tailings spill
occurred at the Boac site of Marcopper Mining
Corp.—a Philippine company in which Placer
Dome had a 40 percent interest. Placer Dome
paid for technical work and financial compensation, then proceeded with earlier plans for
divestment. Critics in the Philippines charge
that the rehabilitation and compensation plans
were inadequate.52 In addition, there are continuing calls for environmental rehabilitation
and compensation in connection with the disposal of tailings into Calancan Bay from
Marcopper’s Mount Tapian site from 1975 to
1991. Critics contend that Marcopper ignored
expert recommendations and government
orders regarding an alternative disposal system,
and that Placer Dome, as the partner with mining expertise, should accept its share of responsibility. 53 Placer Dome agrees that the tailings
system would not meet today’s standards, but
argues that it is unfair to apply these standards
retroactively. It also disputes claims made about
the tailings’ impact on the fishery.54
Environmental concerns have been expressed
at various times about the explorations and
operations of many other companies and countries. Some complaints have arisen over the
Canadian takeover and expansion of old mines,
for example, by Greenstone Resources Ltd in
Nicaragua; others over the exploration for new
operations, such as by Placer Dome in Costa
Rica and Breckenridge Resources Ltd’s proposed
silver mining operations in Tibet’s fragile
plateau ecosystem; over long-established mines,
such as those operated by Inco in Indonesia
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and Falconbridge Ltd in the Dominican
Republic; and over minority interests, such as
Inmet’s 18 percent ownership of Ok Tedi in
Papua New Guinea.
While it is relatively easy to list companies associated with environmental problems, it is more
difficult to assess and compare their performance. Factors such as the mine’s age, its location, and the products need to be considered.
Organizations monitoring corporate practices,
such as Michael Jantzi Research Associates Inc.
and Ethicscan Canada Ltd, find it difficult to
obtain the kind of information they require to
assess Canadian operations abroad. For example, Ethicscan cites the lack of agencies to monitor compliance in many countries and the
infrequency with which violations are prosecuted.55 The factors that make information
unavailable also make it easier for corporations
to behave irresponsibly.
ECONOMIC AND SOCIAL IMPACT
Variables such as the scale of operations, the
mine’s distance from communities, and the
expected life of the project are related to the
social and economic problems experienced by
communities.56 A remote community close to a
newly discovered small ore body that is
expected to be rapidly depleted, for example,
will be among the most vulnerable. There is a
greater likelihood that the operator will be small
and inexperienced, that new infrastructure will
not be developed, and that basic health and
safety precautions will not be taken. A new ore
body that is potentially a “world-class” mine in
a remote location is more likely to attract an
operator using state-of-the-art management and
technology. Negative social impacts may
nonetheless arise from massive and rapid
migration of workers to the area.
Potential problems include:
• The creation or rapid expansion of communities in remote areas can lead to high rates
of alcoholism and sexually transmitted
diseases, a shortage of adequate housing, and
overcrowded roads. In North America, this
problem is commonly dealt with by adopting a “fly in, fly out” policy. In developing
countries, this practice has sometimes been
opposed. For example, landowners at the
Porgera mine in Papua New Guinea have
criticized Placer Dome’s “fly in, fly out”
practices because they lose the mine-related
business.57
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MY
EXPERIENCE OVER
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WELL
-KNOWN
CANADIAN
MAJOR
P L AY E R S
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• Environmental damage can have secondary
effects, such as reduction in wildlife or fish
needed for subsistence. Residents in the area of
Inmet Mining’s Ovaçik project in Turkey, for
example, fear that the use of cyanide in the
gold recovery process will have an adverse
impact and they have opposed the loss of olive
trees caused by the mine’s development.58
ABROAD IS THAT
CANADIAN
CORPORATE
VA L U E S R A N K A M O N G
T H E V E R Y H I G H E S T.
CANADIAN
COMPANIES
SHOULD RECOGNIZE THIS
AS AN ASSET AND APPLY
THEIR STANDARDS AND
BEST PRACTICES
WHEREVER THEY GO
.
TOM D’AQUINO, PRESIDENT
AND
ON
CEO, BUSINESS COUNCIL
NATIONAL ISSUES,
“GLOBALIZATION, SOCIAL
• The local and regional economy’s dependence on the mine for income and employment can lead to problems when the mine
closes. Inco, for example, mothballed its
operations in Guatemala in 1982, but
problems with land access remain.59
• Communities can be disrupted or displaced
when new mines open or old ones expand.
Greenstone, for example, is involved in controversy over the adequacy of its response to
the dislocation of artisanal miners in
Nicaragua.60 Golden Knight Resources Inc.
has suggested that the government’s land
commission and army may need to intervene
to clear mining areas in Ghana.61 Vista Gold
Corporation’s purchase, temporary closing,
and modernization of two old mines in
Bolivia led to the deaths of seven miners and
a police officer in clashes between miners,
police, and troops.62
PROGRESS, DEMOCRATIC
DEVELOPMENT AND HUMAN
GOOD, BETTER, BEST
PRACTICES
RIGHTS,” ADDRESS TO THE
ACADEMY OF INTERNATIONAL
BUSINESS, ANNUAL GENERAL
MEETING, BANFF, SEPTEMBER
27, 1996
Some companies and critics alike support the
establishment of a standard based on “best
practice.” Companies may see the promotion of
standards based on “best practice as economically achievable” as an alternative to government regulation. Some environmental groups,
such as the Environmental Mining Council of
British Columbia, support the development of a
best practice standard as a way of establishing a
“bottom line” set of criteria against which to
judge activities. To enable public interest groups
to base their arguments on the need for responsible development, the Council has produced “A
Social Movement Perspective on ‘Best Practices’
and Environmental Mining Reform.”63
Other critics of mining companies reject a best
practice approach and argue for legally binding
international standards on the grounds that the
concept of best practice is inherently relative.
Best practice is defined in terms of what other
companies in the industry are willing to do, not
necessarily what they could or should do. They
also argue that because best practice is not
82
mandatory, a company may apply it in one situation but not another if not pressured to do so
or if it would entail an “unacceptable” level of
profits.64 In some developing countries there
are no strong public interest groups to provide a
check on the definition of best practice or its
implementation.
Closely related to the concept of best practice is
that of “best of sector.” Used by the social investment movement, it recognizes the unfairness of
comparing companies across sectors—resource
companies with software companies on environmental performance, for example. Using this
approach, social investors may include in their
portfolios a mining company whose environmental record is far from perfect or from meeting a best practice standard. The recognition of a
company as the best among its peers is seen to
contribute to upward pressure on all companies.
PROMOTING BEST PRACTICE
To date, the mining industry advances the concept of best practice only in the environmental
area, although discussions are being initiated
about the possibility of developing social guidelines. An intergovernmental working group on
Aboriginal issues is also endeavouring to codify
best practices in Canada for relations between
mining companies and Aboriginal communities.
The concept of environmental best practice is
not spelled out in industry codes, but it is at
least implied in the MAC code, the first such
national code in the world. Association
members must endorse an environmental code
which states that “in all jurisdictions, in
addition to complying with legislative requirements, member companies will diligently apply
technically proven and economically feasible
measures to advance protection of the
environment throughout exploration, mining,
processing, manufacturing, and closure.”65
The International Council on Metals and the
Environment (ICME) also has an Environmental
Charter that commits members—which include
eight of Canada’s largest mining companies—
to adopt measures to foster environmentally
sustainable economic development. The
Council’s activities include research and publications on advances in environmental practice.
Do such industry-wide efforts to support environmental best practice affect Canadian operations in developing countries? There is no clear
answer, or even a full understanding of what
constitutes a “Canadian” company. At the end
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of 1996, companies of all sizes listed on
Canadian stock exchanges held interests in
3,400 foreign mineral properties.66 Not all these
companies are registered or have headquarters
in Canada (we estimate that perhaps one-third
are based outside Canada) although they are
associated with Canadian financing. Regardless
of where they are based, many are not among
the 100 of 3,000 companies registered in
Canada that are reported to have comprehensive environmental policies.67 Nor are they
likely to have producing properties, or even
exploration properties, in Canada that could
provide the best practice basis for operations
abroad. Many are also unlikely to participate in
forums where best practices are discussed—the
Mining Association of Canada, the Ontario
Mining Association (which endorses the MAC
BOX 3 RECOGNITION
OF
GOOD
OR
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P
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1
9
9
8
code), or the International Council on Metals
and the Environment.
We estimate only about 12 percent of
Canadian companies operating in developing
countries are “industry leaders.” Or, using a
different source of data, that only about 13
percent of exploration properties and 26 percent of production properties in developing
countries are owned by Canadian-based industry leaders.68 We define industry leaders very
generously to include companies that,
although they may be far from leaders, have
made some commitment to best practice
and/or may have been influenced by Canadian
best practice. This group includes members of
the Mining Association of Canada, the Ontario
Mining Association, and the International
BEST PRACTICE
Company
Good / Best Practice
Source of Recognition
Alcan
Aluminum Ltd
In Jamaica, on reserve bauxite land, Alcan operates a commercial agricultural division and leases land to
tenant farmers. Its agricultural division is the largest producer of milk and beef in Jamaica, provides agricultural technology to local farmers, and extension services, fertilizer credit, and marketing assistance to tenant farmers. It is also working to bring land affected by the mining operations back into productive use.
The Conference Board
of Canada1
Battle
Through its 88% interest in Empresa Minera Inti Raymi in Bolivia, Battle Mountain operates the Kori Kolli
Mountain Gold Mine. Inti Raymi has established a foundation to support projects to improve the health, education, and
Co.
standard of living of communities around the mine.
The Social Investment
Organization2
Cominco Ltd
In 1995, the Cominco operation at Quebrada Blanca, Chile, received the José Tomás Urmeneta Award
for its technological innovations under harsh weather conditions and its high level of concern for the
environment. The operation was also highlighted in a report of the United Nations Environment
Programme (UNEP) and the International Council on Metals and the Environment (ICME).
Institute of Mining
Engineers of Chile;
UNEP3
Falconbridge
Ltd
In the Dominican Republic, Falconbridge adopted a human resource development, benefits, and health
and safety standards package that is comparable to the one it offers in Canada. It has excellent labourmanagement relations, and its unionized labour force has gone on strike only twice in 25 years, the last
time in 1986.
The Conference Board
of Canada4
Inco Ltd
In Indonesia, expatriates form less than 2% of the company’s workforce, and senior positions, including
that of president and chief executive officer, are held by Indonesians.
The Conference Board
of Canada5
Noranda Inc.
Noranda’s environmental reporting was praised in a report of the UNEP and the ICME. Noranda has pro- UNEP6
duced five environmental reports since 1990: the 1994 report was judged by the The Financial Post to be
the best among resource companies in Canada.
Placer Dome
Inc.
Placer Dome’s process for integrating community consultation and participation in project definition and World Bank
implementation at Minera Las Cristinas in Venezuela was described as “a paradigm shift” in a workshop Conference on Mining
report from the World Bank Conference on Mining and the Community, May 1997.
and the Community7
TVX Gold Inc.
In Brazil, TVX helped establish and continues to fund the “Cruzada do Menor,” an independent charitable organization that feeds disadvantaged children and provides them with vocational training.
The Social Investment
Organization8
SOURCES:
1
Stelios Loizides and George Khoury, Corporate Responsibility in Developing Countries: Key Success Factors (Ottawa: The Conference Board of Canada, 1996), pp. 8-9.
The Social Investment Organization (ed.), Canadian Mining Industry Social Investment Profile, Toronto, 1997, p. 16, based on information from Michael Jantzi Research Associates Inc.
3 Cominco Ltd, “One Company, One Standard.” Electronic reprint from Orbit, Cominco’s Quarterly Magazine, Summer 1996 (http://www.cominco.com/about/values.html),
date accessed: 06/05/97.; and UNEP and ICME, Case Studies Illustrating Environmental Practices in Mining and Metallurgical Processes, 1996, pp. 30-31.
4 Loizides and Khoury, p. 17.
5 Ibid., p. 5.
6 UNEP and the ICME, 1996, pp. 6-7.
7 Alyson Warhurst, “Mining and Community Workshop Report: Consultative Process.” World Bank Conference on Mining and the Community, Quito, Ecuador, May 6-8,
1997, p. 11.
8 The Social Investment Organization, Canadian Mining Industry Social Investment Profile, 1997 p. 16, based on information from Michael Jantzi Research Associates Inc.
2
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WHEN
IT COMES TO
ETHICS
,
COMPANIES ARE
MEASURED NOT BY
THEIR CODES OF
CONDUCT OR VISION
STATEMENTS, BUT BY
WHAT THEY ACTUALLY
. STILL,
THE
‘SHOULDS’
AND
DO
‘OUGHTS’
ARE GOOD
,
AND THEY SHOULD
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Council on Metals and the Environment. Also
included are companies that might, because of
their size and production base in Canada,
reflect best Canadian practices. These latter are
among the top 40 Canadian mining companies
in terms of 1995 revenues, are incorporated
and headquartered in Canada, and have at
least one property in Canada,69 but are not
listed as members of industry associations.
The geographical distribution of industry leaders is far from even. Only about 4 percent of
Canadian companies with interests in
Indonesia are in this group, for example. On the
other hand, Chile—often cited by the Canadian
industry as a model for overseas mining development—had 31 percent.70
BECOME EVEN MORE SO
GOOD PRACTICES AT HOME AND ABROAD
WHEN THEY CHANGE TO
‘WE
W I L L’
.
MICHAEL DECK,
“COMPLIANCE REAL TEST OF
NEW CODE,”
KPMG ETHICS
& INTEGRITY SERVICES
HTTP://WWW.KPMG.CA
While it is easier to define best practice in the
environmental area than in other areas, there is
increasing evidence that individual companies
and their critics are endeavouring to promote
and identify good, if not best, practices in other
areas. A review of some company promotional
literature and company profiles prepared by
other organizations (see Box 3) showed that, in
addition to environmental best practices, good
practices in the areas of employment, health
and safety, and community support (housing,
education, infrastructure, community economic
development, etc.) were frequently highlighted.
There was almost no reference in company literature to good or best practices in other “concern” areas such as investment in countries with
repressive regimes, corruption, and respect of
Indigenous rights.
Social investment and policy organizations and
mining companies themselves identified the
following good practices in international
operations.71
Environment:
• revegetation, reforestation of mined-out
areas, land brought back into production;
• production without major process emissions
or tailings ponds;
• independent stakeholder committee to
monitor implementation of environmental
recommendations;
• “de facto ecological reserve” maintained
around an exploration camp, in which key
habitats and ecological sites are identified
and protected;
• agreement with partners to carry out a project
84
in accordance with the environmental laws
applicable in the company’s home province.
Workplace standards:
• hiring and training local people for technical
and management positions;
• top wage and benefits packages in the host
country;
• good relationships with unions;
• awards for working hours without lost-time
accidents;
• on-site medical programs for employees.
Economic and social impacts on communities:
• consultation with communities prior to mine
opening and concerning resettlement sites;
• financial and technical support for education, youth training, and crime prevention;
• construction of employee housing, local
hospitals, and schools;
• support for community economic development, such as a textile cooperative;
• agreement with local independent miners’
cooperatives to provide them with mining
areas within the company’s concession and
purchase the ore they produce;
• statement of principles governing the conduct of exploration projects, prepared for
local employees, communities, and
government authorities.
It is highly unlikely, however, that mining industry participants and observers would agree that
these actions necessarily constitute “good” practice, in Canada or abroad. Each case must be
judged individually. For example, who appoints
the “independent stakeholder committee” that
monitors environmental implementation? Does
a record number of working hours without losttime accidents indicate good safety procedures or
is it indicative of a system that penalizes workers
for reporting accidents? Does a unionized labour
force with a low number of strikes suggest good
labour relations or a country whose laws are hostile to independent unions? What did “consultation” with communities represent when it came
time to make decisions about resettlement?
FROM EXPLORATION TO CLOSURE
Most of the good and best practices identified
above are applicable at the production stage of
mining. Social equity and sustainable development require that much more consideration be
given to the exploration and closure stages.
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Ian Thomson and Susan Joyce of Orvana Minerals
Corp., a mining company engaged in exploration
in Bolivia, suggest that the dynamics of the company-community relationship at the exploration
stage are different from the production stage:
Exploration is a dispersed and transitory
activity characterized by uncertainty and
ambiguity: a problematic situation from the
point of view of company-community relations. This is in marked contrast to mining
which takes place at fixed locations and over
extended periods of time. Where a mine
exists, company-community issues can be
focused around the relatively stable realities
of a productive commercial venture.72
The mining industry is ill-equipped to deal with
social and environmental issues in the exploration phases. Part of the problem, according to
Thomson and Joyce, is due to the high number of
mineral industry professionals who found themselves working internationally for the first time
when junior, high-risk venture capital companies
became the dominant force in mineral exploration between 1991 and 1997. Mining codes may
provide for a right to explore, but companies
often consider this as an unconditional right to
go where they want and do what they want. As
junior companies have no long-term vested interest in the potential impact of their actions, community relations are a secondary consideration.
Moreover, a property may pass through the hands
of several companies before it is developed.
Thomson and Joyce propose:
There is potential for leadership by the
operating companies who should recognize
the enhanced value offered by projects that
come to them in social “good standing.”
An assessment of the socio-economic situation surrounding a project should be part
of the due diligence and valuation conducted when a property is optioned or purchased. Payment of a premium price for
delivering projects maintained in “good
standing” through exploration would help
provoke the acceptance of new standards
for industry practice.73
If Canadian operating companies agree to develop
a property that has not come to them in social
“good standing,” it is unlikely that later efforts to
establish good relations with the community (or
what remains of it) by building schools, contributing to charitable foundations, and so on will be
seen as examples of best practice or as evidence of
concern for social equity. A case in point are
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Cambior/Golden Star operations in Guyana
where local and Indigenous peoples had no role
or rights in law, and the companies agreed to a
consultation process that involved only companies and the state. In response to community
opposition, the process here as in similar cases,
became one of ad hoc consultation in the development phase and inadequately addressed the
communities’ social equity concerns.74
At the other end of the cycle, a few mining
companies are now giving more serious consideration than before to the question of what
happens after a mine closes. They consider that
it is in their best interest to ensure the mine’s
contribution to sustainable economic development, since it will ensure their future welcome
in the host country and other countries as well.
Placer Dome notes that mining companies
have long made social investments in the
immediate vicinity of their operations, but this
has generally meant schools, hospitals, and
other facilities intended primarily for employees.
In some countries, however, Placer Dome
suggests that mining companies have not been
able to assume that the central government
would invest some of the mining revenues back
into the broader community. The company
must therefore provide these benefits to retain
community support.
In Papua New Guinea, Placer Dome has contributed to local infrastructure and community
development, with the financial burden eased
by a tax credit arrangement. But it sees the need
to extend social expenditures to a much larger
area and population group. “In this, mines take
on the responsibility themselves of translating
their industrial investment into sustainable
social and economic development for a significant part of the country.”75 However, its experience leads it to believe that: “A different model
is needed for structuring the responsibilities of
mines, governments, and local communities to
achieve long-term social and economic
improvement in frontier zones.”76
In Venezuela, Placer Dome hopes to provide a
“new model for a multi-institutional approach
to community development made possible by a
new mine.”77 Its goal is “diversifying the
institutional involvement in community
development around the mine.” To do so, it
is undertaking a feasibility study, with the
Canadian International Development Agency’s
participation, of how it can collaborate in community development projects at Las Cristinas
with Canadian nongovernmental and for-profit
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organizations, in partnership with Venezuelan
counterparts. Greenstone Resources in
Nicaragua has also been discussing a “round
table” approach to the social issues associated
with its mining projects. It says it would like
coordination and input from local communities
and Aboriginal groups, the national government, aid and environmental NGOs, and
CIDA.78
Aid agencies and nongovernmental organizations will no doubt have to consider the implications of a “multi-institutional approach to
community development made possible by a
new mine” if the communities affected were not
involved in the initial decision to develop the
mine. Questions of consultation and participation, beginning with the decision to explore, are
critical. As well, the lack of reinvestment of
mining revenues into the community by
governments is not always the result of corrupt
or elite-serving regimes. In some cases, it can be
due to pressures by international financial
institutions to reduce social expenditures in the
name of the macroeconomic reforms required
to attract international investment in the first
place.
ACCOUNTABILITY:
BEYOND BEST PRACTICE
Accountability, not “best practice,” is the key to
whether or not Canadian companies will contribute to social equity in developing countries.
Social equity cannot be “delivered” through the
export of Canadian environmental practices or
charitable contributions to community organizations. We need to challenge the acceptance of
unequal power relationships which underlies
much discussion of the “responsible” corporation.
This may be most obvious in dealings with
Aboriginal communities. According to
Hans Matthews of the Canadian Aboriginal
Minerals Association, there are no mining
company “best practices” with respect to
Aboriginal peoples. He recommends focusing
instead on the processes of interaction between
companies and communities. The issue, he says,
should not be described as Aboriginal participation in mining company decisions affecting
Aboriginal communities, but the reverse:
Aboriginal communities may invite mining
companies to consult with them about possible
development on Aboriginal land.
Power is also central to relations between
unions and management. Judith Marshall of the
86
Steelworkers Humanity Fund participated in an
exchange between Cominco Ltd workers in
Canada and Chile. 79 Cominco says it meets
Canadian benchmarks for worker safety and
environmental management in overseas operations, even though local laws may allow for
lower standards. But, says Marshall, when
Chilean miners shadowed the operations of the
union over a two-week cycle in Canada, their
biggest surprise was the quality, depth, and regularity of communications with management
in the workplace. The collective agreements in
the Chilean mines contained nothing concerning the role of the union within the workplace.
Nor were there grievance procedures to ensure
compliance even with the meagre protections
the contract offered, she noted.
Even though Canadian mining companies have
long had full joint health, safety, and environment committees in their Canadian mines—and
laud them as a factor in creating safe mines in
Canada—they have argued against establishing
these committees in their Chilean operations
because Chilean law does not force them to do
so. The ongoing communication between
Canadian and Chilean unions working for the
same companies has raised the latter’s expectations. “If we’re talking best practices from the
Canadian mining industry,” said Marshall,
“probably collective bargaining is one of the
most important practices to export.”
We leave unexamined the much larger issue of
accountability to host governments. The weakness of many developing-country governments
in dealing with corporate power is well documented. Mining companies are frequently successful in obtaining the conditions and laws
they require for investment. The literature of
several companies refers to such negotiations:
the exoneration of taxes worth $80 million dollars on a project; changes in the restrictions on
the export of gold bullion; reliance on governments to move communities from properties
designated for development; and so on.
ACCOUNTABILITY MECHANISMS:
SOME RECOMMENDATIONS
The accountability mechanisms outlined below
do not assume a radical restructuring of relationships between corporations and communities, unions, and NGOs. Rather, they are modest
approaches already used in many places, that
deserve further support or, in some cases,
rethinking.
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COMMUNITY CONSULTATION AND PARTICIPATION
It is clear that mining companies should
develop consultation and participation
processes for all stages of projects, from beginning to end, and require evidence that these
have taken place when they assume ownership
of a property from another company. These
processes should not be restricted to environmental matters, but encompass social and economic issues as well. The objective should be
the communities’ real participation and collaboration, not co-option.
The larger questions about how to identify the
stakeholders, the forms of consultation needed
at different stages of exploration and development, and the roles of state, company, and
community were a focus of a 1997 World Bank
consultation in Quito, Ecuador in which a number of Canadians participated. They are also
being addressed by a group of Latin American
and Canadian NGOs, coordinated by
CoDevelopment Canada, which has established
a Community Action Group on Canadian
Mining in Latin America to find solutions to the
lack of company-community consultation, and
suggest ways of engaging mining companies.
A draft proposal for a Community DecisionMaking Model has been developed.
Some strengthening of community groups, both
North and South, is also taking place through
new networks. For example, a Continental
Action Network on Canadian Mining Activities
in the Americas was established at a 1996
meeting in Saskatoon.80
RESPECT FOR WORKERS’ BASIC RIGHTS
Freedom of association and the right to organize
are fundamental human rights, and unions are
essential if mining companies are to be truly
accountable to employees. Many Canadian
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mining companies operate in countries where
these rights do not exist or are compromised in
law or in practice. While some may believe they
bear no further responsibility, they should consider the current direction of discussion of corporate responsibility. In the US, the Council on
Economic Priorities recently announced that several companies have agreed to the SA8000 code,
which is linked to the International Standards
Organization (ISO). This code requires companies
to actively support the formation of independent
unions in their own workplaces in situations
where fundamental rights are denied, and
promote their respect by governments.
Canadian mine workers are also supporting
stronger mine workers’ organizations in developing countries through exchanges such as
those described above and by providing financial support for health, safety, and community
projects. For example, the Steelworkers and the
Canadian Auto Workers actively work with
miners in countries such as South Africa, Chile,
Brazil, and Peru.81 CIDA provides some support
for labour development, on the grounds that
trade unions in the South are key forces for
development and strong civil societies. Given
the extent of CIDA’s support for the mining
industry in developing countries,82 it should
greatly increase its support for the unions that
assert social, environmental, and labour rights
in mining communities.
CODES OF CONDUCT
Most senior mining companies have environmental codes. Some have also been involved in
setting standards for environmental management and performance through ISO 14001,
dealing with “Environmental Management and
System Specification,” a program of the
International Standards Organization established
in 1996. Noranda, for example, already noted
CHANGE
Many Canadian groups carry out research, or support projects and advocacy work about the impact of Canadian mining
companies in developing countries. This list excludes government departments and universities, and several groups
whose experience in Canada may be relevant, but who are not currently or generally directly involved in mining issues in
developing countries. It also excludes international organizations in which Canadians participate.
Canadian Aboriginal Minerals Association
Canadian Auto Workers
Canadian Council for International Co-operation
Canadian Environmental Law Association
Canadian Institute for Environmental Law and Policy
CoDevelopment Canada
Common Frontiers
Environmental Mining Council of British Columbia
Ethicscan Canada Ltd
Friends of the Earth Canada
International Development Research Centre
Michael Jantzi Research Associates Inc.
Mining Association of Canada
Prospectors and Developers Association of Canada
Save the Children Canada
Social Investment Organization
Taskforce on the Churches and Corporate Responsibility
United Steelworkers of America, Canadian National Office
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for its environmental management and
reporting systems, began in 1995 to benchmark
its auditing methodologies against the new ISO
protocols as they were developed.
Surveys suggest that barely half of the major
Canadian mining companies with overseas
operations have general codes of conduct, and
even fewer explicitly address issues such as
investment in, or trading with repressive
regimes.83 Most codes of conduct examined
make only general reference to policies of nondiscrimination and respect for human rights,
fair wages, and high standards of safety and
occupational health. Placer Dome stands out for
its special code regarding relations with
Aboriginal peoples. No mining company makes
provision for independent monitoring and
public reporting, a key feature of codes that are
taken seriously by the public.
Mining industry associations should consider
assisting their members and others in developing a common code of conduct for overseas
operations. James Cooney of Placer Dome argues
that country-specific codes would increase the
potential for positive change, based on consistent action by a group of like-minded corporations and input from NGOs.84 There is a
precedent for such an approach. In 1987-88,
Canadian churches asked a number of mining
companies showing renewed interest in investing in Chile (then a military dictatorship) to
consider a set of investment guidelines. The
guidelines dealt with possible corporate cooperation in activities aimed at legitimizing the military regime, and cooperation with security
forces in the arbitrary arrest, kidnapping, torture, and intimidation of employees. The only
response was a statement by one company that
Chile had a strong mining tradition and an
acceptable political and social climate.85
Mining company codes should include responsibility for the operations of sub-contractors. They
should also refer to and reinforce the ILO
Convention and Recommendation on Health
and Safety in Mines, adopted in June 1995.
Because ILO conventions are adopted through a
tripartite process of companies, governments,
and unions, they enjoy a high degree of legitimacy. Moreover, the Canadian government
should assist the development and implementation of codes of conduct by requiring companies
to adhere to an independently monitored code
as a condition of access to CIDA, the Export
Development Corporation (EDC), and other
government programs.
88
CORPORATE GOVERNANCE
Communities and other stakeholders in developing countries may have little access to the
decisionmaking processes in Canadian companies. To enhance accountability, companies
should adopt corporate governance principles
and practices that maximize the access of all
stakeholders to information and the company’s
decisionmaking processes. Among the information that should be available are the results of
independent audits of environmental and social
performance in relation to codes of practice.
Financial, environmental, and other reports—to
the standard of best practice for such reports in
Canada—should be made available to communities, employees, and other stakeholders in the
host country, in the language of the country.
Shareholders can also support communities
whose concerns have not been dealt with by
local and headquarters management of publicly
held companies, by submitting a shareholder
proposal regarding the policy or practice in question. Canadian mining companies have received
relatively few such proposals, but Alcan, Inco,
Placer Dome, Noranda, and Rio Algom Ltd have,
in the past, circulated shareholder proposals on
social or environmental issues.86 At times, some
companies, such as Inco, however, have used
their power to limit the use of the proposal
mechanism. Moreover, a coalition of companies—
including Alcan—is seeking further restrictions
to the use of shareholder proposals in proposed
reforms to the Canada Business Corporations
Act.87 A generous, rather than restrictive,
approach to the use of the shareholder proposal
should be encouraged.
TOWARD ACCOUNTABILITY
These suggestions of some very modest
approaches for increasing accountability of
mining companies to local communities and
workforces are made at the same time as new
global trade and investment policies are securing
the rights of corporations to operate freely
wherever they choose. Mining companies have
contributed to the climate of support for deregulation which has eroded the capacity of governments to impose standards. However, even some
corporate leaders are beginning to worry publicly
that the pendulum has swung too far toward
simple reliance on market mechanisms. They
foresee a public backlash which will force a
reexamination of how issues of social equity and
environmental standards are going to be effectively factored into national and global economic
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structures. The increasing resistance of developing-country communities to mining operations is
one indication of this backlash, and their growing
ability to mobilize support from around the world
provides hope that they can insist on and develop
real capacity to decide whether and under what
conditions mining will take place. The development of protocols for community consultation,
codes of conduct, access to corporate decisionmakers, and support for the right to organize and
bargain collectively in the workplace are all small
contributions to their exercise of the right to
decide.
The Canadian government has been involved
for some time in the creation of conditions
favourable to the promotion of Canadian
mining interests abroad. Now it appears to be
moving in the direction of helping companies
respond to community resistance to exploration
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and development. One approach being examined
is the provision of financing for the delivery of
programs by Canadian and host country
nongovernmental organizations, in cooperation
with a Canadian mining company, to bring
greater economic sustainability and better social
infrastructure to the affected community.
But accountability, not the delivery of programs
for community economic development, is the
key to ensuring that Canadian mining companies
contribute to social equity. The strong, even
dominant, presence of Canadian companies in
exploration and development in particular
countries provides an excellent opportunity for
the Canadian government, supported by civil
society, to press these companies to use their
presence to collectively establish new standards
of accountability as well as of practice.
NOTES
1 Canada, Statistics Canada, Canada Year Book 1997, p. 322. This
does not include the value of coal and oil exports.
2
Canada, Natural Resources Canada, Mineral Industry Review,
Summer 1997, p. 63.
11 Environmental
Mining Council of British Columbia, “The Real
Story of Mining in Chile,” June 19, 1996 http://www.sunshine.net.
Date accessed 02/10/98.
Keith J. Brewer and André Lemieux, “Canada’s Global Position in
Mining: Canadian Financing of the International Mining Industry.”
Metals Finance 4th International Conference, Finance for the
Global Metals Industry, Toronto, May 7-9, 1997, p. V.
12 André Lemieux, “Canada’s Global Mining Presence,” in Natural
Resources Canada, Minerals and Metals Sector, 1996 Canadian
Minerals Yearbook: Review and Outlook (Ottawa: Natural Resources
Canada, 1997), p. 8.1. Lemieux uses the MIN-MET CANADA database,
developed and maintained by Robertson Info-Data Inc., Vancouver.
4
13
3
Patrick Whiteway, “Our Annual Survey of Canada’s Top 40 Mining
Companies.” Canadian Mining Journal, 117:4 (1996), p. 8; and
Iain Wallace, “Restructuring the Canadian Mining and Minerals
Processing Industries,” in John N.H. Britton, ed., Canada and the
Global Economy: The Geography of Structural and Technological Change
(Montreal and Kingston: University of Toronto Press, 1996),
pp. 124-125.
5
Someshwar Rao; Marc Legault; and Ashfaq Ahmad (Industry
Canada), “Canadian-Based Multinationals: An Analysis of Activities
and Performance,” in Steven Globerman, ed., Canadian-Based
Multinationals (Calgary: University of Calgary Press, 1994). Table 3
on page 84 lists the top 20 firms by foreign assets. Noranda Inc. has
lumber and wood as well mining interests.
6 Thomas
d’Aquino, President of the Business Council on National
Issues, argues that “Canadian companies are by and large excellent
agents of change wherever they go because they carry with them
sound values rooted in their Canadian experience.” In d’Aquino,
“Globalization, Social Progress, Democratic Development and
Human Rights.” Notes for an address, Academy of International
Business, Banff, September 1996, p. 7.
7
Alan Young, “Public Interest Perspectives on Canadian
Environmental Mining Issues: A Discussion Paper Presented to the
International Development Research Centre Working Group on
Ecosystem Health and Mining in Latin America, Caracas, Venezuela,
July 1997.” Prepared by the Environmental Mining Council of
British Columbia for Friends of the Earth-Canada, pp. 8-9.
8
The International Development Research Centre is supporting a
project in Bolivia, Chile, and Peru to examine alternatives to the
“command and control” approach, such as the use of the tax system to create economic incentives to protect the environment.
See Steve Hunt, “The Costs of Mining in Latin America,”
(http://www.idrc.ca). IDRC Reports, November 22, 1996 (Ottawa:
International Development Research Centre, 1996). Date accessed:
06/03/97
9
Calculated from Canada, Statistics Canada, Canada’s International
Investment Position, 1995, Cat.67-202, Ottawa, 1996, Tables 4 and 4.5.
10
Michael Knuckey, “Noranda Mining & Exploration: A New World,
A New Direction.” Paper presented to the Prospectors and Developers
Association of Canada (PDAC) and the Canadian Institute of Mining
and Metallurgy (CIMM), Toronto Branch, March 13, 1996, p. 2
(http://www.noranda.com). Date accessed: 06/05/97.
Lemieux, p. 8.2.
14
Lemieux, p. 8.1. Lemieux’s information on larger Canadian-based
companies is based on annual editions of Corporate Exploration
Strategies: A Worldwide Analysis, published by the Metals Economic
Group of Halifax, Nova Scotia.
15
Lemieux, p. 8.6.
16
James P. Dorian, “Mining, Changing Picture in Transitional
Economies,” Mining Engineering, 49:1 (1997), 31-36, p. 31.
17 Mining Association of Canada, “Trade Policy Committee,” in
Annual Report 1996-97, Mining Association of Canada
(http://www.mining.ca) Date accessed: 12/97.
18 We
use “senior” to mean larger diversified production companies
and “junior” to designate companies that are focused on
exploration and initial development.
19
Dorian, p. 35.
20 Young,
21
pp. 3-4.
Brewer and Lemieux, 1997.
22
Ibid., p. 35.
23
Ibid., p. v.
24 Ibid., p. v. See also Ontario Fair Tax Commission, Fair Taxation in
a Changing World (Toronto: University of Toronto Press, 1993),
pp. 493-512.
25 This term originated with descriptions of the effect of petroleum
and gas revenues on the economies of Britain and the Netherlands
in the 1980s.
26 World Bank, United Nations Environment Programme (UNEP),
United Nations Conference on Trade and Development (UNCTAD),
and International Council on Metals and the Environment (ICME),
“Enhancing the Contribution of the Mineral Industry to Sustainable
Development: Post Conference Summary.” The International
Conference on Development, Environment and Mining, June 1-3,
1994, p. 4.
27 Orlando Caputo Leiva, “World Overproduction of Copper
Created by Chile: Its Impact on the National Economy,” Centre on
Transnationalization, Economy and Society, ARCI University, Social
Research Centre, 1996. For a summary, see Hugh Mackenzie,
“Chile’s Copper Fever.” Americas Update, 18:6 (1997), pp. 8-9.
28 The Social Investment Organization (ed.) and Jessie Sloan,
Canadian Mining Industry Focus Report (Toronto: The Social
Investment Organization, 1997), p. 41.
89
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N O T E S (continued)
29 Ann Harrison, “The Role of Multinationals in Economic
Development: The Benefits of FDI.” The Columbia Journal of World
Business, 29 (Winter 1994) pp. 7-9.
30
61
Michael Jantzi Research Associates Inc.
62
Associated Press, “Protest Ends At Canadian-Owned Bolivian
Mine,” The Gazette (Montreal), December 24, 1996.
Dennis C. Canterbury, “Consultative Processes in Guyana’s Mineral
Sector: Bauxite and Gold.” Presented at the World Bank Conference
on Mining and the Community, Quito, Ecuador, May 6-8, 1997, p. 13.
63 See an abridged version in Environmental Mining Council of
British Columbia, “Best Practices in Mining: Toward Responsible
Development,” Americas Update, 18:6 (1997), p. 4.
31
Karen Howlett and Madelaine Drohan, “Canadian Miners Living
Dangerously,” The Globe and Mail, July 26, 1997.
64 Catherine Coumans, “Placer Dome in the Philippines: An
Illustration of the Need for Binding International Regulations on
Mining,” in Canadian Mining Industry Focus Report, pp. 63-64.
33
65
The Mining Association of Canada, Environmental Policy, 1995.
66
Lemieux, p. 2.
Dorian, p. 35.
32
Lemieux, pp. 4-5.
34
World Bank, “A Mining Strategy for Latin America and the
Caribbean: Executive Summary.” World Bank Technical Paper No.
345, Industry and Energy Department, 1996, p. 3, World Bank
(http://www.worldbank.org). Date accessed: 06/14/97.
35
Ibid., pp. 1-2.
36
World Bank, UNEP, UNCTAD, and ICME, p. 12.
37
Environmental issues in international mining, but without the
community focus, were already being addressed by the Canadian
government. See Natural Resources Canada, Sustainable Development
of Minerals and Metals. Sustainable Development in Canada
Monograph Series No. 4. (Ottawa: Minister of Public Works and
Government Services, 1997), pp. 11-17.
38
Renate Pratt, In Good Faith: Canadian Churches Against Apartheid
(Waterloo: University of Waterloo Press, 1997).
39
“Indonesia Woos Firms in Calgary.” The Globe and Mail, August
27, 1997.
40
Karen Howlett and Allan Robinson, “Mining Expert Warns
Against Corruption.” The Globe and Mail, March 18, 1997.
41
These countries score in the bottom 27 of 54 countries, with
scores of less than 5 out of 10, in the 1996 Transparency
International Corruption Perceptions Index. (There are several
countries for which scores are not available.)
42
Howlett and Drohan.
43 Alyson Warhurst, “Mining and Community Workshop Report:
Consultative Process.” World Bank Conference on Mining and the
Community, Quito, Ecuador, May 6-8, 1997, p. 1.
44 Canterbury,
pp. 8-11.
45
OECD, Trade, Employment and Labour Standards, A Study of Core Worker
Rights and International Trade, Paris, 1996, p. 43 and Table 3, pp. 57-58.
46 Moises Labrana, “Chileans Paying for Mining Boom,” The Globe
and Mail, July 9, 1996.
47
Steelworkers Humanity Fund, “Bargaining and Borders: The
Chile Connection,” Toronto, 1997.
48
George Miller, “Canadian Mining Firms in Chile Follow the
Highest Standards,” The Financial Post, 90:21 (May 25/27, 1996), p. 19.
49 Canterbury,
p. 13.
50
Michael Jantzi Research Associates Inc., Canadian Social
Investment Database. As part of the research process for information
in the database, each company is asked to respond to a draft profile
regarding its operations. See also Public Interest Research Associates,
“Class Action Lawsuit Filed in Quebec Court,” March 26, 1997.
51 Cambior Inc., Press Release, “Cambior to Vigorously Contest
Class Action Suit,” Montreal, March 26, 1997.
52
Center for Environmental Concerns–Philippines, “An Environmental Mission: The Marcopper-Placer Dome, Inc. Rehabilitation
Strategies for the Boac River System, October 3-7, 1997.”
53
Calancan Bay Villagers Support Coalition, Newsletter, September 1997.
54
James Cooney, “Placer Dome: ‘We Are Responsible’,” The
Catholic Register, April 28, 1997, p. 17.
55
“Ethical Performance Comparison: Tier Two Gold Mining
Companies (Part 2).” The Corporate Ethics Monitor, 9:2 (1997),
pp. 18-23; p. 21.
56
Kathleen Anderson, “Mining and Communities: a Discussion
Paper.” Presented at the World Bank Conference on Mining and the
Community, Quito, Ecuador, May 6-8, 1997.
57 Frank McShane, “‘Soft Skills and Hard Choices? Communities,
Canadian Mining, Policy and Practice,” in SIO (ed.), Canadian
Mining Industry Focus Report (Toronto: The Social Investment
Organization, 1997), p. 81.
58
Michael Jantzi Research Associates Inc.
59
Michael Jantzi Research Associates Inc.
60
Greenstone Resources, “Parameters of Discussion, External
Affairs—Ottawa.” Notes for a presentation, December 1, 1996; and
Anneli Tolvanen, “Canadian Mining Companies in Nicaragua: The
View from the Rocking Chair is Not So Nice,” SHAIR International
Forum, January/February 1997, pp.1, 8-9.
90
67
George Miller, President of the Mining Association of Canada,
quoted in The Social Investment Organization, Canadian Mining
Industry National Roundtable Report (Toronto: The Social Investment
Organization, 1997), p. 17.
68 The estimate was made by comparing the list of “industry leaders” with two databases. The first comparison was with companies
listed by country in Giancola, Canadian Mines Handbook, 1996-97,
“Companies with International Interests,” pp. 451-462. The second
comparison was with the MIN-MET database of exploration and
production properties and owners listed on Canadian stock
exchanges, with calculations based on an estimate that one-third of
the properties are not owned by Canadian-based companies.
69
Whiteway, p. 8.
70
Calculation based on Giancola, Canadian Mines Handbook, 1996-97.
71 Stelios Loizides and George Khoury, Corporate Responsibility in
Developing Countries: Key Success Factors (Ottawa: The Conference Board
of Canada. 1996); Michael Jantzi Research Associates Inc., Canadian
Social Investment Database; annual and other company reports.
72
Ian Thomson and Susan A. Joyce, “Mineral Exploration and the
Challenge of Community Relations,” PDAC Communiqué, 1997, p. 2.
73
Thomson and Joyce, pp. 7-8.
74
Canterbury, pp. 7-10.
75
Ian G. Austin, “Challenges for Mine Development in the Coming
Decade.” Presentation to the Mining Finance Forum, Singapore,
May 14, 1997, p. 5 (http://www.placerdome.com). Date accessed:
05/25/97.
76 John Willson, “New Frontiers for Placer Dome and the Mining
Industry.” Presentation to the CIM 99th Annual General Meeting,
Vancouver, April 28, 1997, p. 3.
77
Willson, p. 4.
78
Greenstone Resources, p. 6.
79
Interview with Judith Marshall. See also Judith Marshall, “Players
on a World Scale: Worker Exchanges between Chilean and
Canadian Miners,” Americas Update, 18:6 (1997), pp. 6 - 7.
80 Don Kossick, “Way Down in the Mine: Activists Establish a
Continental Mining Network,” Briarpatch, 25 :7 (1996), p. 11.
81
Marshall, p. 6.
82
Figures provided by CIDA in May 1997 show that, since 1978,
the Industrial Cooperation Division has provided financing to 195
Canadian companies in the mining sector. Support is also provided
through other CIDA programs.
83
Calculation based on surveys of codes in Craig Forcese, Commerce
With Conscience? Human Rights and Corporate Codes of Conduct
(Montreal: International Centre for Human Rights and Democratic
Development, 1997), Table 5, p. 48; “Ethical Performance
Comparison: Major Gold Mining Companies,” The Corporate Ethics
Monitor, 9:1(1997), pp. 2-7; “Ethical Performance Comparison:
Selected Integrated Mining and Metals Companies,” The Corporate
Ethics Monitor, 9:4 (1997), pp. 50-55; “Ethical Performance
Comparison: Tier Two Gold Mining Companies (Part 2),” The
Corporate Ethics Monitor, 9:2 (1997), pp. 18-23.
84 James Cooney, “Corporate Codes of Conduct: Are There
Limitations?” Presentation to the Human Rights and Trade Forum,
Amnesty International, Toronto Organization, November 26, 1996,
p. 5, (http://www.placerdome.com). Date accessed: 05/25/97.
85
TCCR, Annual Report, 1987-88, pp. 41-42.
86
Minority shareholder proposals seldom win a majority vote, but
have sometimes influenced management policy nonetheless.
87 Moira Hutchinson, “The Promotion of Active Shareholdership
for Corporate Social Responsibility in Canada.” Submitted to the
Canadian Friends Service Committee (Toronto: Michael Jantzi
Research Associates Inc., 1996), p. 12.
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H A P T E R
F
I V E
P URSUING
S USTAINABLE
D EVELOPMENT
INFRASTRUCTURE
AND
ENGINEERING
Gail Whiteman and Susan Brandum
G
A I L
N
O R T H
A N D
W
H I T E M A N
- S
O U T H
S O C I A L
W R I T E R
,
I
I S
A
R E S E A R C H E R
N S T I T U T E
E Q U I T Y
,
I S S U E S
.
E N V I R O N M E N T A L I S T
E C O N O M I C
D E V E L O P E R
A T
T H E
S P E C I A L I Z I N G
S
,
U S A N
A N D
B
I N
M A R K E T S
R A N D U M
I S
A
C O M M U N I T Y
.
91
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N G I N E E R I N G
P URSUING S USTAINABLE
D EVELOPMENT
N
THE 1994 WORLD
DEVELOPMENT REPORT
DEFINITION OF
INFRASTRUCTURE
INCLUDES ECONOMIC
SERVICES FROM PUBLIC
UTILITIES
—POWER,
T E L E C O M M U N I C AT I O N S
,
P I P E D WAT E R S U P P LY,
SANITATION AND
SEWERAGE
,
SOLID
WASTE COLLECTION AND
DISPOSAL
GAS
;
,
AND PIPED
PUBLIC WORKS
ROADS
,
DAMS
,
—
AND
CANALS FOR IRRIGATION
AND DRAINAGE
;
AND
OTHER TRANSPORTATION
SECTORS
— R A I LWAY S ,
U R B A N T R A N S P O R T,
P O R T S A N D WAT E R WAY S ,
AND AIRPORTS
.
WORLD BANK, WDR 1994,
INFRASTRUCTURE FOR
DEVELOPMENT, 1994, P. 2.
o longer the sole domain of government
monopolies, infrastructure sectors across
the world have opened up to competition and
private sector involvement. Developing countries, in particular, are increasingly turning to
the private sector as a means of tapping into a
large source of capital, and of introducing
efficiency into infrastructure.
According to the World Bank, “infrastructure
represents, if not the engine, then the wheels,
of economic activity.”1 Countries need roads,
railways, ports, and airports. They need dams
and canals for flood control and irrigation.
They need energy. They need clean water and
sanitation. They need reliable telecommunications and access to the global information
system.2
Unfortunately, much of the developing world
has limited access to these services. One billion
people in the South still do not have access to
clean water and almost 2 billion lack proper
sanitation facilities.3 Millions have no access to
a reliable energy source.4 And most of the developing world does not have access to information and communication technologies—a
prerequisite for competing in the global marketplace.5 Currently, 1 million people are officially
waiting for telephone hook-up6—in many areas,
they may wait for 10 or more years.7
The need for infrastructure in developing countries is increasing: population growth creates a
constant demand for basic services;8 economic
progress spurs demands for additional services;
industrial and export growth can modify the
type of infrastructure required. Liberalization
has opened infrastructure markets and the
increasing export focus of many developing
countries has led to an expansion of exportfacilitating infrastructure, such as roads, ports,
and communications. Finally, many developing
countries are actively searching for ways to join
the global information network.9
What’s more, many developing countries are
struggling to maintain what little infrastructure
already exists. The road network in sub-Saharan
Africa is a prime example: because of poor maintenance, nearly one-third of all roads built over
the last 20 years (valued at US$13 billion) are
92
unusable. According to the World Bank, the lack
of proper maintenance is a problem throughout
the developing world and publicly operated
projects are plagued with waste and lost opportunities. Ineffective public sector management
is at the root of many of these problems.10 The
problem is compounded by funding agencies’
preference for new construction over
maintenance projects.
The solution for many countries has been to
expand the role of the private sector—privatize
and/or commercialize wasteful, unproductive
operations.11 Developing countries in particular
are increasingly turning to the private sector
which offers large pools of global capital, as well
as the management skills often lacking in publicly managed infrastructure projects.12 In the
Brazilian state of São Paulo alone, for example,
US$750 million per year (about three-quarters of
the total state annual forecast) has been earmarked for privatized projects in environmental
infrastructure over the next three years.13
Indeed, “greater private participation in infrastructure in at least 80 countries has resulted in
nearly 1,200 projects in telecommunications,
energy, water, and transport.”14
In its 1994 report, Infrastructure for Development,
the World Bank strongly encouraged the participation of private companies in both the operation and ongoing management of infrastructure
projects, and encouraged the public sector to
adopt “commercial” approaches to management. It recommended that developing
countries:
• Manage infrastructure like a business, not a
bureaucracy;
• Introduce competition—directly if feasible,
indirectly if not;
• Give users and other stakeholders a strong
voice and real responsibility.15
Within the global infrastructure market, many
new opportunities present themselves to corporations, particularly as alternative financing and
management plans become more widely available: BOT (build-operate-transfer); BOOT (buildown-operate-transfer); and BOO (build-ownoperate).16 Through service and management
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By sector, investments in energy and transportation dominate the infrastructure agendas
of Asia and Latin America and the Caribbean,
while the provision of clean water and proper
sanitation remain a pressing concern in Africa
and the Middle East.3
ANNUAL REQUIRED INFRASTRUCTURE
INVESTMENT BY REGION, 1994-2000
Africa and
Latin Asia Total
Middle America and
East the Caribbean
Energy
Telecommunications
Transportation
Water & Sanitation
Total
6
3
6
10
25
24 52 82
10 25 38
14 52 72
12 14 36
60 143 228
Source: CIDA, Infrastructure Services Policy: Background Discussion
Paper, Sept. 13, 1996, p. 8.
THE BENEFITS
TO
N
T
R
E
P
O
R
T
1
9
9
8
INFRASTRUCTURE DEVELOPMENT
The developing world invests some US$200
billion a year in new infrastructure, approximately 20 percent of their total investment.1
Estimates show that this trend will continue:
World Bank client countries, for instance, are
expected to spend US$200-250 billion on
infrastructure projects in the next decade.2
(US$BILLIONS)
E
DEVELOPING COUNTRIES
Infrastructure investment offers many social
and environmental benefits. The 1994 World
Development Report notes that access to safe
water and a reliable source of power alleviates
the workloads of women and children who
are often responsible for securing water and
fuel. Reliable power also reduces the production costs of many manufacturing and services industries. In addition, safe and reliable
transportation allows women and girls greater
access to educational programs.4 And while
infrastructure by its very nature has an impact
contracts, lease contracts, and concessions, corporations now participate in infrastructure projects that remain publicly owned. Power, transit,
and rail projects are particularly suited to shared
ownership between public and private sectors.17
Perhaps most spectacularly, the global market
for information and communication technologies (ICTs) is rapidly expanding in developing
countries, fueled primarily by transnational
corporations.18
But increased private sector involvement is not
a panacea—the social and environmental costs
incurred under public sector management can
also occur under the private sector. Nevertheless, increased private sector participation in
on the natural environment, this can be beneficial, particularly with respect to water treatment, sewage, and waste disposal. More
efficient energy sources can also reduce pressure on scarce or delicate biomass resources.
Solid infrastructure appears intrinsically linked
to solid economic development. Without
roads, airports, telecommunications, or a
reliable energy source, countries cannot
efficiently operate in the global marketplace.
The private sector also requires infrastructure
for economic activities and expansion.
The exact relationship between infrastructure
and a booming economy remains unclear. As
the World Bank suggests, “many studies on the
topic have concluded that the role of infrastructure in growth is substantial, significant, and
frequently greater than that of investment in
other forms of capital.”5 But it is inconclusive
whether the relationship between infrastructure
and economic growth is correlative or causal.
While infrastructure intuitively appears to reduce
production costs and increase productivity—
largely because the available workforce spends
less time on obtaining basics such as water and
fuel—there is no conclusive answer.6 Other
studies have also shown that causality actually
runs in both directions: infrastructure investment
creates economic growth which also fuels future
infrastructure investment.
NOTES
1
World Bank, World Development Report 1994, p. 1.
2
World Bank, Annual Report, 1997.
3
These CIDA forecasts reflect the minimum amount of financing
required in developing countries to maintain the status quo; these
figures do not reflect an increase in infrastructure services, nor do
they include infrastructure investments that are needed to close
the gap between the developed and the developing world.
4
World Development Report 1994, p. 1
5
Ibid., p. 15.
6
Ibid., pp. 124-26.
infrastructure may reduce inefficiencies, introduce more effective management practices, and
improve fiscal accountability. It will not necessarily address the hidden or external costs of
such projects, however, as infrastructure projects
can still have social and environmental sideeffects—and in cases like China’s Three Gorges
Dam, the cost-benefit analysis may be
controversial.
In this chapter we explore Canadian participation and expertise in this sector in developing
countries, focusing on companies committed to
sustainable infrastructure development, and on
Canadian engineering consultants.
93
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BOX 2 THE WORLD BANK
F
AND THE
I V E
I
N F R A S T R U C T U R E
A N D
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N G I N E E R I N G
PRIVATE SECTOR
In its 1997 Annual Report, the World Bank presents a plan for strategic
retooling, with four networks at the heart of a “new knowledge-based
Bank.” The third of such networks, titled Finance, Private Sector, and
Infrastructure, illustrates the strategic coupling of the private sector and
infrastructure development. Following its recommendations for increased
commercialization of developing-country infrastructure, the World Bank
now specifically evaluates the potential for private sector participation
within its International Bank for Reconstruction and Development (IBRD)
and International Development Association (IDA) lending programs.
IBRD AND IDA LENDING TO SECTORS WITH POTENTIAL
FOR PRIVATE SECTOR INVOLVEMENT, FISCAL YEAR 1997
(US$MILLIONS)
TRANSPORTATION
28 PROJECTS
$3,691
OIL AND GAS
4 PROJECTS
$136
ELECTRIC POWER
AND OTHER ENERGY
17 PROJECTS
$1,889
INDUSTRY
AND MINING
7 PROJECTS
$517
WATER SUPPLY
AND SANITATION
13 PROJECTS
$683
FINANCIAL SECTOR
15 PROJECTS
$1,195
URBAN DEVELOPMENT
13 PROJECTS
$808
Source: World Bank, Annual Report 1997, p 30.
Consistent with this strategic vision, World Bank private participation in
infrastructure (PPI) operations significantly increased in 1997.
WORLD BANK PPI OPERATIONS, FISCAL YEARS 1988-97
Instrument
Adjustment: single sector
Adjustment: multisector
Technical Assistance
Investment Lending
Guarantees
Total
of which: increase in FY97
Africa
4
1
6
37
0
48
(7)
East South Europe
Latin
Middle Total
Asia Asia
and America East and
and
Central
and the
North
Pacific
Asia Caribbean
Africa
0
0
1
24
4
29
(6)
0
0
1
18
2
21
(3)
1
1
1
16
0
19
(3)
1
7
13
26
1
48
(14)
1
1
0
8
1
11
(5)
7
10
22
129
8
176
(38)
Source: World Bank, Annual Report 1997, Table 2-3, p. 32
PURSUING SUSTAINABLE
DEVELOPMENT
Developing sustainable infrastructure relies on
the broad principles and practices of sustainable
development. As defined in Our Common Future,
the 1987 report of the World Commission on
Environment and Development, sustainable
development is “development that meets the
needs of the present without compromising the
ability of future generations to meet their own
needs,” with the caveat that sustainable development requires more rapid economic growth
94
in both industrial and developing countries.19
To be sustainable, development must include
concern for society and the economy as well as
the environment.
For developing countries, a crucial first step
toward sustainability is to improve the efficiency
of existing infrastructure, or sources of supply
(see Box 3). According to the 1994 World
Development Report, “maintenance problems that
cause water or power losses are even more common and costly...[than] costs due to poor debt
management (which are) excessive in about onethird of World Bank supported infrastructure projects. [...] Unaccounted for water is typically two
to three times higher in developing country
systems than in countries that achieve the industry standards. In 1987, one-quarter of the power
utilities in developing countries had losses of
electricity in the transmission and distribution
network that were twice those in efficiently operated systems. In some African countries, spending US$1 million to reduce line losses could save
US$12 million in generation capacity.”20
The search for efficiencies must go beyond existing infrastructure, however, which is predominantly geared to supply. A second step is to find
more efficient ways of meeting escalating
demand. Studies of expected demands for infrastructure services show considerable opportunities
for Canadian companies in a number of areas.
IN ENERGY
According to the 1997 United Nations
Development Programme (UNDP) report, Energy
After Rio, “current patterns of the production,
distribution and use of energy are not sustainable.”21 The UNDP recommends three options:
redirect the development of the world energy
system away from supply to a more efficient use
of energy, especially at the point of end-use;
increase the use of modern, renewable sources
of energy; and maximize use of the next generation of technologies that use fossil fuels.
The UNDP believes that improvements in enduse efficiency “will provide the greatest and
most cost-effective opportunities for sustainable
energy development in LDCs.” It argues that
“by shifting to high-quality energy carriers and
by exploiting cost-effective, efficient end-use
devices, it would be possible to improve living
standards without significantly increasing per
capita energy use above the present level. For
instance, the energy requirements for the West
European standard of living in the mid-1970s
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SUSTAINABILITY
David Orr, Dean of Environmental Studies at
Oberlin College in Ohio, differentiates
between technological and ecological sustainability. Technological sustainability is a
belief that society can become more sustainable within the modern paradigm through
better technologies and more accurate
prices. Orr defines ecological sustainability as
“the task of finding alternatives to the practices that got us in trouble in the first place.”
Orr argues that the two approaches can be
successive: “... these are not necessarily
mutually exclusive. To the contrary, I consider both to be necessary parts of a sustainable world. To use a medical analogy, the
vital signs of the heart attack victim must be
stabilized first or all else is moot. Afterwards
comes the longer-term process of dealing
with the causes of the trauma which have to
do with diet and lifestyle. If these are not
corrected, however, the patient’s long-term
prospects are bleak.”1
NOTES
1 David W. Orr, Ecological Literacy, Education and the Transition
to a Postmodern World (Albany: State University of New York
Press, 1992), p. 24.
could be as low as 1 kW/capita, only 2 percent
higher than the 1986 level in developing countries, if state-of-the-art energy-efficient
technologies are used.”22
The UNDP also clearly believes that the benefits
of demand management have yet to be thoroughly exploited and that they are potentially
greater than others suggest: the World Bank
noted in its 1992 World Development Report that,
even with a 25 percent level of savings from
energy efficiency—equal to the whole of the
world’s energy consumption today—world
energy demands are likely to double in the next
30 years, then treble to 20 billion tons of oil
equivalent energy (TOE) in the next 40 years.
Therefore, say World Bank advisors Dennis
Anderson and Kulsum Ahmed, global climate
change and other atmospheric problems associated with burning fossil fuels make it critical that
renewable and cleaner forms of energy be developed and used. They also point out that “a world
energy market of 20 billion TOE translates into a
market of over US$4.5 trillion per year, more
than half of which will be in the developing
countries and the economic gains from new,
lower cost energy resources would be considerable.” 23 What is the economic case for business
to be involved in renewables? “The technologies
will eventually compete with fossil and nuclear
E
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P
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1
9
9
8
fuels—and also with hydroelectricity,” they say.
“Indeed, they are already competitive for smallerscale applications and markets are growing.”
Even without major incentives to renewable
power, wind energy, for example, will supply an
additional 1,400 to 2,850 MW of power in the
major developing countries between 1994 and
2000, according to a 1994 report by Arthur
D. Little. The same study estimated a US$2 to $3
billion market by 2000. Windpower costs are
expected to drop to a standard $0.04/kWh by
2000. The Indian Ministry of Nonconventional
Energy currently estimates the capital costs of
new wind energy plants to be about the same as
for new thermal power plants.24
The opportunities for Canadian companies
experienced in demand management and in
renewable energy technologies are considerable.
As the Canadian Global Change Program25
(CGCP) and the Canadian Climate Program
Board26 (CCPB) noted in their 1996 submission
to Canada’s environment and energy ministers,
the energy efficiency and fuel switching needed
to reduce greenhouse gas emissions require
technologies that are essential to the information economy. They need advanced design and
management of energy demand and supply, and
relatively small technologies that are applied at
the point of use rather than through large
networks, thus reducing infrastructure and
distribution costs.
The CGCP and CCPB concluded that these
could create niche trade opportunities for
Canada in the rapidly industrializing countries
of Asia and Latin America. Providing clean
water and adequate housing to their growing
populations—while avoiding atmospheric pollution—will require the kind of environmentally
friendly, energy-efficient, “green” technologies
that Canadian companies may be able to offer.27
IN WATER SUPPLY AND WASTE WATER
MANAGEMENT
“Review of current trends indicates that we
are approaching a water crisis in several regions
of the world, most notably in the Middle East
and North Africa,” reports the Canadian
International Development Agency (CIDA).28
“Wars of the next century will be over water,
warned the World Bank at the 1995 Stockholm
Water Conference [....] Tensions over water competition where ‘water, not oil, will be the dominant resource,’ threaten a military response.
Currently 26 countries of about 300 million
95
PROJECTED
ADDITIONS
TO WIND ENERGY
C A P A C I T Y,
1994-2000
(CUMULATIVE)
COUNTRY
INDIA
CHINA
MEXICO
CHILE
ARGENTINA
CAPACITY MW
700-1,200
350-1,000
150-300
100-200
100-150
Source: Arthur D. Little, [1994,
reproduced] in IEEE Spectrum,
November 1995.
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inhabitants suffer from water shortages due to
drought, overpopulation, and pollution of
sources. By the year 2050, water shortages will
likely affect 66 countries of 7.7 billion inhabitants representing 65 percent of projected world
population in developing countries,” says CIDA.
The World Bank is equally pessimistic:
“Worldwide, roughly 1 billion people lack access
to clean water and more than 1.7 billion do not
have adequate sanitation. Diarrheal disease,
often caused by contaminated water, represents
one-sixth of the world’s burden of disease. The
most widespread contaminant of water is
disease-bearing human waste.”29
And according to CIDA, “at the end of the
[1980s], the state of water infrastructure in
developing countries was virtually unchanged
from that of a decade before.”30 Such water
shortages create opportunities for Canadian
companies with experience in reducing demand
and in establishing less costly water treatment
systems.
IN TELECOMMUNICATIONS
It is impossible to predict the full impact of the
information revolution on sustainability.
“However,” says CIDA President Hugette
Labelle, “knowledge and information now rival
natural resources and the availability of cheap
labour as key factors of production.[...]
Telecommunications has become much more
than a means of transmitting and receiving signals. It is the agent and to a large extent the
empowering and determining factor in national
development, making possible the evolution of
competitive, knowledge-based societies [...].”31
According to Labelle, telecommunications are
vital to environmental, economic, social, political, and cultural sustainability. They can also
provide early warnings of environmental degradation; reduce wastage and therefore costs in
transportation and communication; improve
access to health care and education; foster
democratic development and the growth of civil
society; and strengthen cultural identities.
And, says CIDA’s Gerard Kenney, where
developed countries “have large installations
sunk in outdated technology, many countries
with relatively undeveloped information
infrastructures are in a favourable position to
catch up with or even leapfrog over more
developed countries.”32
96
RECOGNIZING THE OPPORTUNITIES
What are Canadian companies doing to help
provide this infrastructure?
The focus of most large Canadian companies is
making technology more efficient and thereby
reducing waste while, if possible, improving the
use of resources. For example, some public
Canadian electricity utilities, such as Manitoba
Hydro, Ontario Hydro, and Hydro-Québec, undertake consultancies, often aimed at improving efficiencies in existing or new power supply and
transmission projects. Domestically, these utilities
have begun to learn about renewable energy supply, but have not transferred these lessons to their
work in developing countries. While most have
experience with demand management programs,
these have not yet become major components of
their contracting work in developing countries.
In general, most large Canadian companies
have not recognized or pursued opportunities in
sustainable technologies. Smaller companies,
however, have risen to the challenge (see Box 4).
Some, often with the assistance and encouragement of agencies such as CIDA, have begun to
address demand management in consultations
and planning with developing-country clients.
Others are offering their renewable energy technologies. Probyn & Company, a specialist in
financing energy and environmentally sensitive
infrastructure projects, is supporting a windpower project in St Lucia, for example. Conserval
Engineering has built Solarwall crop dryers in
Malaysia and Indonesia, after bidding on projects
defined by CIDA and the Association of
Southeast Asian Nations (ASEAN). Partnered with
CIDA’s Industrial Cooperation Program, it is
building another solar dryer in India. Conserval’s
simple, highly efficient technology can displace
external supplies of energy, including oil and
wood. On a sunny day, each square metre of
Solarwall can displace a half-litre of oil.33
According to the UNDP’s 1990 Human
Development Report, these technologies are not
only environmentally better, but they are also
more cost-effective. “The recent rekindling of
interest in cost-effective technology has been
triggered not only by the financial crisis of the
1980s, but also by the finding that low-cost
technology in many instances is not only
cheaper but better. There are examples of such
technologies in all sectors: oral rehydration
technology and breastfeeding in health,
improved wood-saving stoves in energy, or
rain-harvesting techniques in agriculture.”34
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BOX 4 CANADIAN INNOVATORS: EXAMPLES
E
N
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FROM
R
E
P
ECUADOR
O
AND
R
T
1
9
9
8
PERU
ENVIRONMENTALLY SENSITIVE WATER TREATMENT
Facing shrinking markets here in Canada and increased demand in developing countries, it is
natural that Canadian engineering companies like Proctor & Redfern International Ltd are
investing time and energy in exporting their expertise.
Proctor & Redfern first went to Ecuador in 1985 on a CIDA-funded project. In 1992, the
company decided to focus its marketing plan on Latin America and the Caribbean, choosing
Ecuador as its base of operations. However, it took several attempts to land the first contract,
says Latin America manager, Ricardo Toledo.
The company has now won a major contract from the Government of Ecuador to plan and design
the water supply and sewerage systems for Puerto Ayora, the main city of the Galapagos. The
project is funded by the Inter-American Development Bank.
The Galapagos Islands continue to be a site of intensive international scientific research and an
important area for ecological conservation. The project therefore had to be compatible with
ecological concerns while enhancing living conditions in the city. The keys to Proctor & Redfern’s
success, says Toledo, was that the company demonstrated its understanding of the issues and
proposed an appropriate technology.
Working with local consultants, including computer applications experts, an architect, and an
economist who undertook the socioeconomic survey and the feasibility report, Proctor & Redfern
proposed a sewerage system that uses the Solar AquaticsTM System, developed by ecological
pioneer Dr John Todd, formerly of Hamilton, Ontario and Ecological Engineering Associates of the
US. Four systems are in operation in Canada, in addition to plants in the US and Mexico.
Described as an ecologically engineered process, the system uses plant, animal, and microbial life
to digest organic waste, replicating, under controlled conditions, the water purifying process that
occurs in nature. The process produces a clean effluent that can be safely discharged into the
environment. The Solar AquaticsTM System is also competitively priced.
DEVELOPMENT THROUGH COMMUNICATIONS
In 1997, SR Telecom Inc. of Montreal received a Canadian Award for International Development, in
recognition of its work bringing telephone communications to rural Peruvians. The company designs,
manufactures, and markets wireless microwave products for rural and remote areas. The company
says it “is representative of the type of advanced technology manufacturer upon which Canada relies
increasingly for sustained economic growth, job creation, and prosperity at home.”1 A three-time
winner of the prestigious Canada Export Award, SR Telecom exports 97 percent of its production
outside North America and has systems operating in 80 countries.
SR Telecom first went to Peru in 1987, under a CIDA-funded Development Line of Credit facility.
Its initial sale of $5 million has since turned into $23 million. Using wireless communications,
SR Telecom has connected 1.1 million Peruvians in isolated communities scattered over 250,000
square kilometres to Peru’s telephone system. It delivered the wireless communications systems to
Telefónica del Peru, the former state-owned telephone company privatized in 1994. In documents
supporting its award application, the company notes, “the strategic targeting of ODA can foster
long-term commercial linkages and leverage downstream business for Canada.”2
Mark Lusignan, SR Telecom’s Government Relations Officer, says that “business didn’t go to areas
where infrastructure didn’t exist, now new business has enabling infrastructure.”3 He points to
numerous other examples in developing countries where telephones have reached into rural areas:
in Mexico, for example, 23,000 villages with a population of more than 500 now have a telephone. According to Lusignan, the social, economic, and environmental benefits mount with telephone access. Businesses are able to improve scheduling, there is less wastage of time and of
produce, and authorities can respond to emergencies more quickly.
CIDA considers that, in addition to making communities less isolated, this particular project had a
strong impact on economic development. The Government of Peru felt that the advent of
reliable communications technology supported good governance by facilitating more effective
delivery and administration of government services and programs. Agricultural sales, marketing,
and transportation were transformed, resulting in better scheduling, significant waste reduction,
and less consumption of fuels and natural resources.
The telephones also allowed people to reach family and friends. Contact with the outside world is
especially crucial in times of medical emergencies or natural disasters.
NOTES
1
SR Telecom, Application Form to CIDA 1997 Canadian Awards for International Development.
2
SR Telecom Application to CIDA 1997 Canadian Awards.
3
Personal interview, September 1997.
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THE
BOTTOM LINE IS
THAT SUSTAINABLE
BUSINESS IS
,
QUITE
S I M P LY, G O O D
BUSINESS
.
KEN MCCREADY, FORMER
CEO, TRANSALTA CORP.,
ADDRESS TO INTERFACE
CONFERENCE, KINGSTON
ONTARIO, OCTOBER 8, 1997
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Renewable energy also better addresses all
aspects of sustainability, including social and
economic considerations: “renewable energy is
two to four times more labour-intensive than
nonrenewable,”35 says Paul Hawken, author of
The Ecology of Commerce and a pre-eminent
writer on the relationship between the economy
and the environment.
Canadian companies offer many examples of
innovative technologies, locally built to a
human scale. Here are a few examples:
• Zenon Environmental Inc. provides membrane products for water and wastewater
treatment in areas of the world desperately
short of water, including Egypt and the
United Arab Emirates. Less costly to build
and operate than conventional systems, they
also require fewer chemicals and less energy.
Membrane technology, which can often
remove and isolate contaminants that conventional water treatment systems cannot—
including nuclear, biological, and chemical
warfare agents—is able to convert brackish
water and seawater into potable water. In
1994, for instance, the company’s system at a
Rwandan refugee camp purified 40,000 litres
of polluted, cholera-laden water a day.36
• The engineering consulting firm of Proctor &
Redfern International Ltd is using an innovative waste water treatment system called “a living machine” to treat sewage in the ecologically
sensitive Galapagos Islands. The system closely
mimics nature, reducing resource throughput,
and is inexpensive to operate (see Box 4).
• In telecommunications, SR Telecom Inc.’s
Peru project (see Box 4) demonstrates how an
“enabling” rural communications network
can serve social, political, developmental,
and economic needs.
SERVING TOMORROW’S CITIES
CIDA’s 1997 Sustainable Development Strategy
notes that:
A different kind of challenge is posed by
rapid urbanization of the developing
world. Urban growth rates of 6 percent are
not unusual. By the year 2015, urban
dwellers will outnumber rural for the first
time in history. This trend brings mixed
blessings for the developing world. Cities
are the motor of economic growth and can
offer increased economic activity, greater
employment, and growing trade. However,
the poor are disproportionately threatened
in large cities by environmental hazards
and health risks caused by pollution of
air, ground, and water, as well as by
inadequate housing, poor sanitation,
and lack of other basic services.38
• Trojan Technologies Inc. provides ultraviolet
water disinfection systems that destroy
microbial and toxic pollutants in South and
Central America and throughout Southeast
Asia. Its process also boasts low chemical,
capital, and operating costs.37
TABLE 1 Canadian Firms in the Top 200 International Design Firms (1996)
R ANKING a
1996 B I L L I N G S M A R K E T S (% B I L L I N G S )
1997 1996 Company
3
4
Firm
Typeb
E
SNC-Lavalin International Inc.,
Montreal, PQ
21 14 AGRA Inc., Oakville, ON
EC
30 32 Simons International Corp.
EC
Vancouver, BC
77 63 Sandwell Inc., Vancouver, BC
E
85 81 Hatch Associates Ltd.,
E
Mississauga, ON
93 77 Tecsult Inc., Montreal, PQ
E
108 102 Acres International Ltd.,
E
Toronto, ON
109 117 Stanley Technology Group Inc.,
E
Edmonton, Alberta
147 141 Cansult Group Ltd., Markham, ON E
TOTAL CDN INT’L BILLINGS (TOP 9)
Int’l % of General Manufac- Power Water Sewer/ Industrial/ Transpor- Hazardous
($mn) total Building
turing
Supply Waste Petroleum tation
Waste
567.00 57
5
1
6
12
3
38
28
1
215.30
144.90
47
60
10
0
20
28
15
0
2
0
1
0
30
72
4
0
6
0
37.80
33.40
54
33
0
0
1
1
5
0
0
0
0
1
74
83
19
10
0
0
28.60
20.30
43
57
5
1
0
1
20
64
10
3
5
1
5
17
20
8
0
2
20.00
26
0
0
0
20
20
0
15
0
9.50
89
35
5
0
5
20
0
35
0
$1,076.80
Notes: Some markets may not add up to 100% due to omission of “other” miscellaneous market category.
a Ranking based on billings for design services performed outside of Canada.
b E= Engineer EC=Engineer-Contractor
Source: ENR, July 21, 1997.
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According to Jay Jayadev, a renewable energy
consultant:
When these villagers move to city areas,
as they often do, the urban infrastructure is
strained in many ways, not the least in its
ability to meet the demand for electricity.
The International Energy Agency predicts that
if city populations in developing countries
double in the next 15 years, energy demand
will increase 45 percent even if national
income levels and population remain constant. But social and economic problems are
caused by such urbanization, which might be
prevented by more rural development.39
The decentralized and appropriate-scale of the
new technologies could alleviate these problems
by helping reduce rural-urban migration. It is
argued that, if commerce and industry no longer
depend on large power, water, and wastewater
grids, they could locate in smaller centres or rural
areas. Established as stand-alone systems, renewable energy sources could provide power for isolated villages, where approximately 2 billion of
the world’s population lives, says Jayadev. And
because a major grid is not needed, the benefits
relative to costs of renewables soar.40 SR Telecom’s
microwave relay towers in Peru require energy, for
example, but this is provided by solar panels, thus
enabling a telephone system to be established
without a companion electrical grid.
Decentralized, renewable energy sources, powering high efficiency end-use energy devices for
residential and productive uses, would also contribute to job creation, says the UNDP.41 It suggests that “decentralized rural electrification is a
proven competitor to grid extension.
Decentralized generation and distribution of
electricity creates more employment in rural
areas than central generation. Furthermore,
biomass production could be a major source of
jobs and revenues for rural populations.”42
Great opportunities exist for Canadian business
in sustainable infrastructure. But it remains to
be seen if they take advantage of domestic
innovation and see the potential in the “next
industrial revolution.”
A ROLE FOR ENGINEERING
INFRASTRUCTURE
AND
Engineering permeates every sector of infrastructure, and Canadian firms are globally competitive.43 Canada is the fourth largest exporter
of engineering services in the world,44 and in
1996 supplied 7.4 percent of the global exports
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of consulting services.45 As Table 1 indicates,
nine Canadian companies are in the Top 200
international design firms: most of them
actively participate in international projects.
SNC-Lavalin International Inc., for instance,
ranks third in the world in international
billings, has permanent offices in close to 30
countries, and active projects in 86 countries.46
While many Canadian companies enjoy a strong
presence in the US, they are also active in the
developing world. In fact, the activities of the
top Canadian engineering companies are more
concentrated in Asia than in the US (see Table 2).
As Waine McQuinn, manager of International
Programs at the Association of Consulting
Engineers of Canada (ACEC), explains: “Asia is
the largest source of revenues for Canadian consulting engineers, even though we only rank
fifth in that market.”47 Canadian firms also have
a strong presence in Africa and Latin America,
ranking second in each in terms of market share.
Engineering consultants tend to export expertise developed at home,48 competing effectively
in resource extraction, energy, telecommunications, transportation, and basic infrastructure.49
Canadian engineers are involved globally in
designing buildings, manufacturing plants,
power plants, water supply systems, sewage/
waste treatment facilities, industrial/petroleum
projects, transportation, and to a lesser extent,
in hazardous waste disposal (see Table 1 for
sector breakdowns by company).
THE IMPACT OF CANADIAN ENGINEERING
Engineering firms can help provide two key
benefits to developing countries—an improved
quality of life, and increased human capabilities
through technology transfer. But engineering
projects can also carry particular economic and
environmental costs.
TABLE 2 Geographic Concentration of Top Canadian
Engineering Design Firms
Geographic region
Middle East
Asia
Africa
Europe
US
Latin America
TOTAL
Cdn Firmsa
Int’l Billings ($US mn)
64.7
288.5
182.5
115.5
283.7
141.9
1,076.8
% Market
Share by Region
5.0
6.0
15.6
2.6
18.1
12.9
7.4
Ranking Geographic Concentration
by Region (% of Cdn Billings by Region/Total Cdn Billings)
3
6.0
5
26.8
2
17.0
6
10.7
3
26.3
2
13.2
4
100.0
Notes: a Based on nine Canadian firms in the “Top 200 International Design Firms” (1996).
Source: ENR, July 21, 1997.
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IMPROVING QUALITY OF LIFE
Canadian engineering consultants are reputed for
their expertise in infrastructure design.50 Welldesigned infrastructure can tangibly improve the
quality of life, everywhere. As the Canadian
Council of Professional Engineers’ vision statement puts it: “Ultimately, the engineering profession contributes to the betterment of the human
condition, fosters prosperity and makes the world
a better place in which to live.”51
Many Canadian companies support these goals
and engineers have made significant social and
environmental contributions. Two examples
can be found at Acres International Ltd and
SNC-Lavalin. “We do a lot of training, management reviews, a lot of nonengineering type of
work—institution building really,” says Martin
ter Woort, Manager, Development Planning, at
Acres.52 Corporate giant SNC-Lavalin also
undertakes institution-building: most recently
SNC-Lavalin Environment spearheaded a CIDAfunded project in Vietnam aimed at strengthening national and local capabilities to undertake
environmental monitoring, assessment, and
planning.53
Determining whether or not the larger goal
of “improving quality of life” is achieved,
however, depends on whose perspective is
used and what criteria are included in the
evaluation. In the past, engineering projects—
like many business activities—were evaluated
solely according to economic and technical
criteria: “quality of life”—defined as standard of
living—improved if the economics demonstrated that it did. Today more sustainable
indices and measurements54 recognize that
economics are only one component of “wellbeing” whose measurement must include social
and environmental considerations.
Yet, for some Canadian engineers it is still business as usual: one company executive interviewed, for example, felt that it was naive to
expect engineering companies to be concerned
with anything other than economics or technical design. There are indications, however, that
Canadian engineering associations are beginning
to recognize the technical and social aspects of
their activities. For instance, the Environmental
Code of Conduct developed by the Association
of Consulting Engineers of Canada acknowledges that: “These [technical] advancements
have greatly enhanced the quality of human life
and contributed to the increased global population. They have also, at times, impacted nega-
100
tively on the earth’s natural system.”55 “Clearly,”
says Gary Wacker, Chair of the Board of the
Canadian Council of Professional Engineers
(CCPE), “engineering has become a societal
process as well as a technical activity.”56
Canadian companies are sometimes asked by
clients to provide an objective, broad-based
perspective on sustainable alternatives, or what
Acres calls a “master plan.” Master plans aim to
objectively examine sustainable alternatives
alongside traditional options. “We’ve done power
sector master plans which would quite openly
take in alternatives,” says Bob Witherell,
Executive Vice-President of Acres International,
“but because of more private sector involvement,
these master plan studies are getting fewer.”
Witherell believes that engineering consultants
have less influence on the type of project
designed because “the decision is made by the
[host] government about what exactly is to be
studied.”57
In general, the best design for an individual project does not necessarily translate into the best
system-wide solution from a social or environmental perspective. Traditionally, social and
environmental impacts have not been adequately addressed in engineering feasibility
studies, nor in the design process itself. This has
also been true in the planning and design of
large-scale hydroelectric projects where social
and environmental issues have only relatively
recently been introduced (see Table 3).
The most controversial example may be China’s
Three Gorges Dam project in which a number of
Canada’s top engineering companies—SNCLavalin, Agra Monenco Inc., Stanley Technology
Group Inc. (through partially owned Teshmont
Consultants Inc.), and Acres International Ltd—
have been involved. While most of their
involvement ended at the feasibility stage, these
companies were strongly criticized because the
studies provided the foundation for project
financing and supported the final decision to
proceed. Companies such as Agra Monenco,
Teshmont, and General Electric Co. have also
been involved in later stages, even after agencies
such as the US Export-Import Bank refused to
provide financial assistance.
China’s Three Gorges Project is the largest
hydroelectric project in the world. A multipurpose water project, it will deliver 18,200
megawatts of power, reduce annual flood risks
to 60 million people, and provide jobs for
35,000.58 Projected benefits also include
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economic development and improved navigation routes. Flood control is the dam’s main
justification, however. According to Scott
Ferguson and Martin ter Woort of Acres, “floods
in 1931, 1935, and 1954 drowned 317,000 people.”59 In 1954, 19 million were also displaced.
“It is estimated that the damages from another
major flood would exceed the $19 billion cost of
the Three Gorges project,” they say.60
BOX 5 SMALLER IS BEAUTIFUL:
THE CHANGING SCOPE OF
INFRASTRUCTURE PROJECTS
In 1994, World Bank research indicated that
much of infrastructure investment is wasted
as a result of inadequate maintenance, misallocation of investment, inefficient operations,
unsatisfied user demand, financial inefficiencies, and fiscal drain.1 This is unfortunate
since “Both quantity and quality improvements are essential to modernize and diversify production, help countries compete
internationally, and accommodate rapid
urbanization.”2
If large infrastructure projects—which were
not always effective—were the rule in the
past, the need for appropriately sized and
configured infrastructure projects is increasingly recognized, particularly those that can
achieve sustainable development objectives.
While not an official policy directive, the
World Bank is now “leaning more toward
smaller infrastructure projects.”3 As James D.
Wolfensohn, President of the World Bank,
notes: “One of the things that has pushed us
more toward small projects is the ownership,
control, and capacity of the local governments to deal with small projects.”4
This may mean that, to obtain financing,
mega-projects will need to demonstrate that
they are “environmentally sensible and [...]
deal sensitively with indigenous populations.”5
For example, the World Bank and the World
Conservation Union recently established an
independent commission that will develop
standards for large energy projects as well as
guidelines for countries and investors, and will
assess alternative approaches.6 However—
despite critics’ requests for a moratorium on
contentious projects—construction will continue on large-scale projects already underway,
at least until the World Commission on Dams
has completed its two-year review.
NOTES
1
World Development Report 1994.
2
Ibid., p. iii.
3
Tom Ichniowski, “World Bank sets sight on small infrastructure projects,” ENR, October 7, 1996, p. 20.
4
Ibid., p. 20.
5
Ibid., p. 20.
6
Kate Dunn, “World Bank joins effort to form dam watchdog,”
The Ottawa Citizen, February 17, 1998, p. A20.
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But the project will also force the permanent
relocation of more than 1.3 million people—
many of whom are resistant to such resettlement 61—and will flood 63,500 hectares of
farmland.62 Environmentalists warn of widespread environmental damage. Much controversy has surrounded the project, particularly
since experts such as Dr Luna B. Leopold, of the
US suggest that sedimentation will seriously
impede the project’s effectiveness.63
Canadian engineering companies have been
involved in Three Gorges since the mid- to late1980s when a consortium of Canadian companies (Acres, SNC-Lavalin, Hydro-Québec, BC
Hydro) carried out a comprehensive feasibility
study financed by CIDA. They recommended a
160-metre reservoir pool level because they did
not feel that resettlement feasibility could be
demonstrated at higher levels. The Chinese
Panel of Experts recommended a level of 175
metres, however, citing flood control and the
concern over navigation at the upper end of the
reservoir. “In effect, the Chinese opted to trade
off higher resettlement costs to provide more
economic benefits to Sichuan Province,” say
Ferguson and ter Woort. 64
Agra Monenco Inc. also received a $35 million
contract to provide a computerized engineering
management system and management training
services to the Three Gorges Development
Corporation (TGDC).65 Although a company
TABLE 3 Historical Evolution of
Transparency and Participation in Large Dams:
Broadening the Constituency of the Design Team
Design Team Members
1
2
3
4
5
6
7
Era (approx)
Engineers
Pre-WWII dams
Engineers + Economists
Post-WWII dams
Engineers + Economists + an Environmental
Late 1970s
Impact Statement (after completion of design)
Engineers + Economists +
Late 1980s
Environmental & Sociologists
Engineers + Economists + Environmental &
Early 1990s
Sociologists + Affected People
Engineers + Economists + Environmental &
Mid 1990s
Sociologists + Affected People + NGOs
Engineers + Economists + Environmental & Sociologists +
Affected People + NGOs + Public ‘Acceptance’ Early 2000s?
Source: Robert Goodland, “Environmental Sustainability in
the Hydro Industry: Disaggregating the Debates, in Tony
Dorcey, ed., Large Dams: Learning from the Past, Looking at the
Future, Workshop Proceedings April 11-12, 1997 (Gland,
Switz.: IUCN-The World Conservation Union & The World
Bank Group).
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spokesperson denies the claim, Probe
International suggests that the system will be
used to develop the resettlement plan. Agra
Monenco defends its involvement by citing
economic benefits and the improved efficiency
of Chinese infrastructure.66 Agra Monenco
received $12.5 million worth of guarantees from
the Export Development Corporation (EDC).
Teshmont has also been involved in engineering
studies for transmission lines leading from
Three Gorges. And GE Canada Inc. will supply
turbines and generators, with a contract estimated at $160 million. The EDC provided an
undisclosed amount in financial guarantees.67
Although Chinese authorities claim that international standards for environmental assessment
and social resettlement are being met and that
social and environmental evaluations were completed, organizations such as Asia Watch disagree. In addition to external criticisms, 25
percent of the members of the national People’s
Congress abstained from voting on Three Gorges
and an additional 10 percent voted against the
project.68 “The Chinese have decided that it’s
worth it because in their view, resettlement is
development,” says Martin ter Woort.69
Some fundamental issues arise from the controversy surrounding Three Gorges. Do Canadian
engineering consultants have a responsibility to
ensure that social and environmental issues are
adequately addressed? “Yes,” says ter Woort. It
can be argued that the engineers’ job is to plan
and make recommendations while it’s up to
their pay masters to implement. But ter Woort
also believes that engineers can make a difference. In the Three Gorges project, “we spent a
great deal of time developing better resettlement
cost estimates and arguing strongly that these
costs were real and should be funded as project
costs,” he says. “The social and environmental
costs of Three Gorges make up one-third of the
total project. That’s unheard of,” says ter Woort.
While financial provisions for environmental
and social impacts are important, a more fundamental question remains: should Canadian engineering consultants ever undertake projects with
such heavy social and environmental costs?
While Canadians may have helped make a bad
situation better, should they have been involved
in the first place? The answer is unclear: while
Canadian corporate participation supports controversial projects like Three Gorges, its participation may open the door to change from the
inside. “If we’re not sitting at the table, we don’t
102
BOX 6 CANADIAN ODA SUPPORT
INFRASTRUCTURE
OF
CIDA identifies four key sectors as infrastructure services: energy; information and
communication technologies (ICTs); transportation; and water, irrigation, and sanitation. From a private sector perspective,
infrastructure can also include engineering
consulting services and environmental
technologies, which span all four sectors.
In Canada in the World, the federal government identified infrastructure services as one
of six priorities for Canadian official development assistance (ODA). The provision of
“environmentally sound infrastructure
services, with an emphasis on poorer groups
and on capacity building” is a key means by
which Canadians are helping developing
countries reduce poverty and enjoy a safe,
and equitable environment.1 Canadian
government investment in developingcountry infrastructure accounted for approximately 9 percent or $184 million annually of
our total bilateral ODA budget from 1990 to
1995.2 Infrastructure disbursements by sector
were as follows:
CIDA BILATERAL INFRASTRUCTURE
DISBURSEMENTS 1990-91 TO 1994-95
NOTES
1 Canada, Canada in the World: A Government Statement (Ottawa:
Canada Communications Group, 1995), p. 42.
2
CIDA, “Infrastructure Services Policy,” September 13, 1996, p. 10.
have a chance to influence,” says ter Woort.
And such mega-projects may go ahead, with or
without Canadian involvement. The issue for
Canadian engineers, therefore, is not only
whether or not they should participate, but how
they can make a difference.
One way to have a beneficial impact is by developing evaluative approaches that incorporate
environmental and social, as well as economic
and technical, criteria. For example, Acres
International recently received an award from the
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ACEC for incorporating social and environmental criteria in its decisionmaking methodology.
Acres sells this approach to its clients as part of
the normal cycle. In its award-winning study,
Acres prepared a detailed screening and ranking
study for medium-sized hydropower projects in
Nepal which included environmental and social
impacts. The project-ranking matrix directly
compared environmental and social scores
against technical and economic scores. The
Acres study also emphasized transparency and
consensus-building through ongoing consultation and the participation of a variety of
stakeholders: local and international
nongovernmental organizations, inter-agency
groups, private sector companies and organizations, individuals, donors, the media, Nepal
Electricity Authority officials, members of
Medium Hydropower Development in Nepal,
and peoples’ representatives. 70
“The key,” says Martin ter Woort, “is to make
sure you get to the right stakeholders, those
who actually represent the people.” Yet in the
Nepal study, a majority of representatives were
private sector companies and organizations, and
government officials: community representation
was significantly lower. Future work in this area
must address broader representation.
These methodologies can undoubtedly be
improved,71 but it is encouraging that some
Canadian companies are taking the initiative.
But not all engineering consultants have the
in-house expertise to carry out social and environmental assessments. Some that don’t, like
SNC-Lavalin, acquire these skills on a contract
basis. However, the advantage of having an
internal capacity is that social and environmental perspectives can percolate throughout the
organization on an ongoing basis.
Surprisingly, despite these private sector
advancements, Canadian funding agencies such
as the Export Development Corporation do not
use criteria other than economic payback to
assess the viability of funding options. In comparison, the US Export-Import Bank uses environmental guidelines and has a human rights
policy, in addition to applying more traditional
criteria of creditworthiness and competitiveness.
72 Yet, loan guarantees and public sector contributions from CIDA and the EDC increase the
chances of Canadian engineering consultants
receiving international contracts, particularly
from developing-country governments.
In the case of Three Gorges, for example, CIDA
provided funding for the feasibility phase—work
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that the Chinese government wanted “to form
as a basis for securing funding from international institutions.”73 And the EDC provided
millions of dollars in loans and guarantees.
Engineering companies openly acknowledge the
importance of the Canadian public sector in
obtaining foreign contracts. “The official support of our governments, whether through
commercial missions or more private conversations, has a beneficial and convincing impact
on our international clients,” says Jacques
Lamarre, President of SNC-Lavalin.74
If economics remain the driving force behind
public sector decisions, it is not surprising that
they remain paramount for many firms. As
David Lapp, Director of Professional Affairs at
CCPE says: “Engineers can’t always propose the
best solution because it’s too expensive. That
could be the basis for winning or losing that
work. We have certain levels of responsibility.
Cost is always going to be a factor. No matter
how ethical you are, the decision can be taken
outside your hands. Engineers should participate in the debate but the debate is not
exclusive to engineers.”75
But it is not sufficient that engineers simply
aspire to ethical and environmentally sustainable practice. Actions speak louder than words.
Indeed, ACEC’s 1995 Environmental Code of
Conduct recommends that an engineer refuse
business which does not “enable him/her to
fulfill his/her professional responsibilities,” as
outlined in the Code76 (see Box 7). But ACEC’s
code has not been widely distributed. One
senior executive frankly admitted, “I’ve never
even heard of it.” However, ACEC’s Waine
McQuinn believes that most member
companies strive to meet local environmental
codes.77
But compliance with standards is often
problematic. The Environmental Appraisal
Committee (EAC) of India’s Ministry of
Environment and Forests, for example, found
that close to 90 percent of the medium to large
dams being built violated the Ministry’s environmental and social guidelines. Most often
ignored were criteria dealing with forced resettlement and compensatory reforestation. In
some cases, the EAC recommended that construction of several dams be stopped. Yet the
Chamera Dam, among others, proceeds as
planned, without addressing EAC’s concerns.
Canada’s SNC-Lavalin was a supplier of
engineering services to this project.78
103
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INFRASTRUCTURE
CAN DELIVER MAJOR
BENEFITS IN ECONOMIC
GROWTH
,
POVERTY
ALLEVIATION
,
AND
E N V I R O N M E N TA L
SUSTAINABILITY
—
BUT ONLY WHEN IT
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In general, it remains to be seen how codes can
be effectively implemented and monitored. As a
US survey of engineering ethics conducted by
Civil Engineering pointed out:
[...] most engineers probably have fundamentally sound ethical value systems, [but]
all could probably benefit from specific
training in ethical decisionmaking
processes and on how to resolve ethical
dilemmas. This is a severe shortcoming of
engineering undergraduate and continuing
education[...]79
PROVIDES SERVICES
THAT RESPOND TO
EFFECTIVE DEMAND
AND DOES SO
E F F I C I E N T L Y.
WDR 1994,
INFRASTRUCTURE FOR
DEVELOPMENT, P. 2
This hits at the heart of the engineering profession: What does it mean to practice as an engineer? To improve the quality of life? From
whose perspective? How is the engineer’s professional vision translated into everyday practice?
What do engineering ethics and ethical decisionmaking comprise? How are they applied?
Ultimately, this is an issue of professional development, and one that needs to be addressed
seriously if Canadian engineers hope—in the
words of their vision statement—to “advance
the quality of life.”
ENHANCING HUMAN CAPABILITIES
A seemingly straightforward benefit of Canadian
engineering services is the transfer of technology
and engineering know-how to developing countries. Such transfers can represent an important
investment in the knowledge base of a developing country. As Jorge Niosi et al suggest: “Most
of the projects involving ECs [engineering
consultants] from developed countries conducting projects in LDCs include some sort of
technology transfer.” Generally, this is practical:
technological knowledge is transferred from the
engineering firm to its clients during the
project’s execution. It includes “... the learning
of the abilities necessary to conduct surveys,
feasibility studies, design, construction supervision and management of the plant.[...] In a few
cases—where engineering firms conduct research
and development (R&D)—there is some proprietary, patented technology transferred from the
EC to its partner in the developing country.”80
A by-product of the consultancy, such transfers
can contribute positively to developing countries’ knowledge banks. The ACEC
Environmental Code of Conduct also recommends that engineers strive to achieve the
“effective transfer of environmental knowledge
and experience.”81
104
Developing countries generally employ external
consultants for complex engineering projects
that they do not yet have the experience to
undertake. As Jacques Lamarre of SNC-Lavalin
states: “There are excellent engineers everywhere
in the world. It is unthinkable today to try and
export general engineering services of a low
technical level. The vast majority of countries
have access to those types of services locally, and
would insist on using them.”82 Theoretically, the
country will learn to “independently conduct
the activity (plant operation, survey, design,
supervision or procurement) that it was supposed to have learned from the transferor.”83
In reality, this is often not the case. In a study
of 36 Canadian consulting engineering firms
operating in developing countries, Niosi and his
colleagues found that “only a few were very able
or perfectly able to independently execute the
activities they were supposedly enabled to
conduct through the transfer.”84 While more
than half the clients gained in knowledge or
capability, lasting technology transfer was not
realized in most cases.
Niosi found that smaller, more specialized
engineering consulting firms with a strong
emphasis on R&D and technical expertise were
most successful at transferring technology.
In addition, joint ventures or other forms of
partnership increased the likelihood of effective
technology transfer.85
HOW CAN ENGINEERS MAKE
DIFFERENCE?
A
By narrowing the divide between economics
and social and environmental well-being,
Canadian engineering consultants can help
increase the quality of life in both developed
and developing worlds. But what specifically
can Canadian engineers do?
First, the CCPE recommends a stronger public
advocacy role for engineering consultants:
engineers need to take a stronger stance on
development issues such as social and
environmental considerations. This raises a
fundamental question about the role of
engineers in the decisionmaking process: “Is it
possible that engineers could play a more active
role in such engineering decisions to the benefit
of the public?” asks Gerry Wacker.86 “To do so
requires us to re-evaluate and change some of
our basic philosophies and means of interacting
with those we serve, [...] a fundamental
adjustment in our role.” Canadian engineers
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BOX 7 AN ENVIRONMENTAL CODE
O
P
FOR
M
E
N
T
R
E
P
O
R
T
1
9
9
8
ENGINEERS
“Observing a code of conduct is fundamental to the practice of consulting engineering,” notes
the Association of Consulting Engineers of Canada in its Environmental Code of Conduct,
approved in November 1995. “The goals of consulting engineers should include a commitment
to achieve sustainable development.”
The code considers that consulting engineers “should combine their traditional skills with broader
applications of (...) other disciplines to participate meaningfully on interdisciplinary teams directed
at achieving acceptable environmental solutions.” They should also, in conjunction with their
clients, “give highest priority to the welfare, health, and safety of the environment, giving
appropriate consideration to local, regional, and global cumulative effects of projects.”
The code sets out the following goals, general actions, and project actions for ACEC members.
G
O A L S
•
•
•
•
careful evaluation of the environmental benefits and adverse impact of proposed projects;
conservation of energy;
reduction in the use of nonrenewable resources and increased reuse of materials;
reduced waste production through improved industrial processes, better transportation and
distribution systems, and recycling of waste products;
• sound agricultural and other land management practices;
• restoration or improvement of damaged land, polluted water supplies, and disturbed
ecosystems; and
• effective transfer of environmental knowledge and experience.
G
E N E R A L
A
C T I O N S
• keeping informed on global environmental trends and issues;
• discussing environmental problems with professionals from other disciplines;
• providing information to clients, the public, and government about environmental
problems and how adverse effects can be mitigated;
• becoming involved in organizational activities, including assistance to governmental authorities,
that promote the protection of the environment;
• encouraging and promoting appropriate environmental laws and regulations;
• actively supporting and participating in all forms of environmental education; and
• promoting research and development relevant to protecting and improving the environment.
P
R O J E C T
A
C T I O N S
Consulting engineers must recognize and advise their clients of the importance of:
• performing appropriate environmental reviews as part of all projects, this will often require
a multidisciplinary approach;
• evaluating both positive and negative environmental impacts of alternate solutions so that the
most appropriate solution which minimizes adverse environmental impacts is recommended;
• the statutory obligations imposed upon the client to prevent or minimize the adverse
environmental effects of the project in all phases;
• the engineer’s professional responsibilities and environmental regulatory obligations to pursue
adequate efforts to evaluate the environmental issues and to mitigate environmental problems.
Where the client is not prepared to retain the engineers so as to enable him/her to fulfill his/her
professional responsibilities, the engineer should decline to act on behalf of the client. Where,
during the course of a project, instructions are given to the engineer which are incompatible with
minimizing any adverse environmental impacts, the engineers should refuse to render services on
behalf of the client.
Source: Association of Consulting Engineers of Canada, Environmental Code of Conduct, November 3, 1995.
need to publicly support and push for greater
social and environmental responsibility.
Second, consulting engineers can actively
incorporate ACEC’s Environmental Code of
Conduct into their corporate mission statements and project plans. By becoming leaders
in environmental management, engineers can
help clients embrace sustainable development
goals. As Daniel Verreault, President of CCPE,
urges: “Engineers must take every opportunity
to publicly articulate their views on the ethical,
moral and technical questions facing modern
society. This goes beyond technical specialization.” 87 Furthermore, as ACEC’s Environmental
Code of Conduct recommends, Canadian consulting engineers should actively “promote
responsible environmental citizenship” and
“provide leadership in achieving sustainable
development, development that will meet the
long term needs of future generations of all
nations without impairing the earth’s
ecosystems.”88
105
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CANADIAN
ENGINEERS
PROVIDE LEADERSHIP TO
A D VA N C E T H E Q U A L I T Y
OF LIFE THROUGH THE
CREATIVE, RESPONSIBLE,
AND PROGRESSIVE
APPLICATION OF
ENGINEERING PRINCIPLES
I N A G L O B A L C O N T E X T.
VISION STATEMENT FOR THE
CANADIAN ENGINEERING
PROFESSION, TORONTO,
MAY 1996
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Third, evaluation methodologies that combine
social, environmental, and economic impacts
must be refined and applied in a wide variety of
contexts. Canadian engineers need to involve a
range of stakeholders and convince their developing-country clients of the benefits of this
approach. A key area for improvement is to
ensure more equitable representation across
stakeholder groups. A commitment to transparency and consultation requires a similar
commitment to institution-building and broad
exchanges across different (and perhaps
opposing) groups.
Fourth, social and environmental corporate
responsibility must also include some form of
concrete sustainable accounting or independent
monitoring system. Broadened accountability
will instill cultural and practical changes in
engineering. “[The] issue has to do with expanding the nature and extent of our accountability
as professionals, individually and collectively.
An expanded accountability would include
educating the public about engineering matters,
providing information on the longer-term
impacts on society and the environment,
working toward sustainability,” says CCPE’s
Wacker.89 It is critical that engineers track
projects beyond the feasibility stage—what are
the actual social and environmental impacts of
a given project and how do these differ from the
feasibility assessment? Why are there discrepancies? How will future decisionmaking be
affected? Independent monitoring can help
ensure that these concerns are addressed.
Infrastructure project funding presents a fifth
opportunity. With increased financial involvement in infrastructure projects—through BOOT
(Build, Own, Operate, Transfer) schemes, for
example—engineering firms may have greater
influence over social and environmental goals.
In the past, most Canadian firms have acted as
service specialists, not undertaking construction
or manufacturing work.90 Consequently, they
have had little impact on the way infrastructure
projects are managed in the long term, above
and beyond design recommendations. This is
changing with increased privatization. With the
arrival of BOOT projects, “we are also asked to
invest in our own projects,” says Lamarre of
SNC-Lavalin.91 By having more control over
funding, the engineer can act more directly as
sustainable change agent.
A sixth area for consideration is the need for
greater professional development and education
that focuses on sustainable development and
106
business ethics—a move which can incorporate
social and environmental ethics into corporate
decisionmaking. By emphasizing sustainable
development in the accreditation process, the
engineering profession can develop a new
generation of practice.
Social and environmental issues must be more
deeply integrated into engineering education
and practice. On an international level this may
already be underway: the World Business
Council for Sustainable Development, for example, is supporting a new initiative focusing on
engineering graduates and students, in the
hopes of improving environmental literacy.92
Canadian engineers also need to forge links
across disciplines, sectors, and regions. An
increased focus on joint partnerships and
in-country linkages is an important way of
ensuring more effective technology transfer.
Engineers can also emphasize the transfer of
social and environmental knowledge through
direct consulting and the continued export of
the Canadian accreditation process. In addition,
Canadian engineers need to have greater interaction with international organizations such as
the World Engineering Partnership for
Sustainable Development (WEPSD) which is
committed to long-term global sustainable
development. 93
Finally, public sector financing of controversial
projects should be reviewed to include more
stringent social and environmental criteria.
Public sector financing should also privilege
smaller, more specialized engineering firms or
those involved in joint partnerships because
they offer the greatest opportunity for
technology transfer.
These challenges are large. Canadian consulting
engineers and public sector funding agencies
must address these issues at collective and
individual levels. The larger societal role of
Canadian engineering companies—and our
engineers as individuals—cannot be ignored.
“As engineers we have been intimately involved
in raising the edifice of technology. As a society,
we have seen that technology can be a two-edged
sword and that has sparked much debate.
Unfortunately, the voices of those who design
and implement the technologies have not made
themselves heard often enough,” says CCPE’s
Verreault.94
By committing themselves to multidisciplinary
thinking, Canadian engineers can utilize their
complex problem-solving skills to meet sustain-
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able goals. But they need to take the lead and
find answers to unresolved questions: How can
their decisionmaking incorporate sustainability
benchmarks? How can their designs be sustainable from economic, environmental, and social
perspectives? How can they remain financially
successful when social and environmental
E
N
T
R
E
P
O
R
T
1
9
9
8
responsibility means declining projects that do
not meet sustainability benchmarks? Canadian
engineers have a solid international reputation.
By consistently promoting consideration of
social and environmental impacts in decisionmaking, they can achieve remarkable results.
NOTES
1
World Bank, World Development Report 1994: Infrastructure for
Development (Washington, D.C.: The Bank, 1994), p. 14.
2
UNDP, Human Development Report (New York: Oxford University
Press, 1997).
3
World Bank, World Development Report 1994.
27
Hugh Morris, “Choosing our path: Canadian business and
global change,” in Michael Keating, ed., Canada and the State of the
Planet (Toronto: Oxford University Press, 1997), p. 21.
28 CIDA, “Infrastructure Services Policy: Background Discussion
Paper,” September 13, 1996, p. 24.
4 CIDA, Infrastructure Services Discussion Paper CIDA
http://www.acdi-cida.gc.ca 1997.
29
World Development Report 1994, p. 82.
30
CIDA, 1996, p. 28.
5
International Telecommunications Union (ITU),
Telecommunication Indicators of the Least Developed Countries
(Geneva: ITU, 1995).
31
Hugette Labelle, “Telecommunications and Sustainable
Development.” Speech to the ITU World Telecommunications
Development Conference, Buenos Aires, March 21-29, 1994.
6
Due to the long waiting period in many developing countries, the
official list may significantly underrepresent demand. That is,
many people who would like telecommunications access do not
even put themselves on the list because the wait is hopelessly long.
32 Gerard Kenney, “The Missing Link—Information,” Speech to the
ITU World Telecommunications Development Conference, Buenos
Aires, March 21-29, 1994.
7
ITU, 1995.
34
8
See World Development Report 1994.
9
Thanks to comments by John Kozij, CIDA.
10
World Development Report 1994.
11 Private sector participation encompasses a broad spectrum of
management approaches, with full privatization at one end and a
variety of contractual arrangements at the other.
12
Thanks to John Kozij for these insights.
13
Mary Powers Buckner, “This siren is singing a samba,” ENR,
September 2, 1996, p. 8.
14
15
World Bank, World Bank Annual Report, Washington, DC, 1997, p. 32.
World Development Report 1994, p. 2.
16 While privatization offers corporations many opportunities
under BOT, BOO, and BOOT schemes, there are definite risks: inadequate returns, inflexibility in user fees, depreciation of currency,
cultural barriers, lack of full operational rights, lack of regulatory
frameworks, nonstandard business practices, and political conflicts
in developing countries. All contribute to a challenging business
environment. See Donald D. Liou, “Barricades on the roads,” Civil
Engineering, April 1997.
17
Ibid., p. 64.
18
ITU, 1995.
19
World Commision on Environment and Development, Our Common
Future (Oxford, New York: Oxford University Press, 1987), p.43.
20
World Development Report 1994, p. 48.
21 Amulya K.N. Reddy; Robert H. Williams; and Thomas B.
Johansson, Energy After Rio. Prospects and Challenges, Executive
Summary. UNDP, in collaboration with International Energy
Intiative and Energy 21, Stockholm Environment Institute, and in
consultation with the Secretariat of the UN Commission for
Sustainable Development (New York, NY: UNDP, 1997), p. 7.
22
Ibid., p. 20.
23
Dennis Anderson and Kulsum Ahmed, “Where We Stand With
Renewable Energy,” Finance & Development, June 1993, pp. 40-43.
24
Jay Jayadev, “Harnessing the Wind,” IEEE Spectrum, November
1995, pp. 78-83.
25
The Canadian Global Change Program is a program of the Royal
Society of Canada. Founded in 1985, it brings together research
partners from various institutes and universities and is supported
by the Canadian government and a number of private companies
including TransAlta and Hydro-Québec.
26
The Canadian Climate Program Board is responsible for the
Canadian Climate Program which is an independent body, formed
in 1979 and comprised of experts from senior levels of the federal
and provincial governments, the private sector, and nongovernmental organizations. It advises policymakers and decisionmakers
about the impacts of climate change on economic and social
concerns, and on natural ecosystems and resources.
33
Interviews with Conserval officers and company documents, June 1997.
UNDP, Human Development Report (New York: Oxford University
Press, 1990), p. 82.
35 Paul Hawken, “Natural Capitalism: The Next Industrial
Revolution.” Speech to the National Round Table on the
Environment and the Economy, Ottawa, March 21, 1995.
36 Personal interviews; Zenon company documents; Michael Jantzi
Research Associates Inc. (MJRA), Canadian Social Investment
Database, 1996.
37 Personal interviews; Trojan company documents; MJRA,
Canadian Social Investment Database, 1996.
38
CIDA website http://www.acdi-cida.gc.ca
39
Jayadev, p. 80.
40
Ibid., pp. 78-83.
41
Reddy et al, Energy After Rio.
42
Ibid., pp. 29-30.
43
See “Consulting Engineers: Canadian Position, Main Challenges,
Strategic Direction, Contacts,” by Strategis: International Business
Information Network, March 20, 1997. Also see “Consulting
Engineers,” by Strategis, June 1, 1996.
44 See the Canadian Council of Professional Engineers website at
http://www.ccpe.ca
45 See Peter Reina and Gary J. Tulacz, “The Top 200 International
Design Firms: Big Year, Big Plans,” ENR, July 21, 1997, pp. 39-75.
46 Jacques Lamarre, “The demands of the new world context: A
time for choices.” Speech delivered to the Board of Trade of
Metropolitan Montreal, October 15, 1997, SNC-Lavalin website
http://www.snc-lavalin.com
47
In correspondence to author Whiteman, October 7, 1997.
48
Jorge, Niosi; Petr Hanel; and Liette Fiset, “Technology Transfer to
Developing Countries Through Engineering Firms: The Canadian
Experience,” World Development, vol. 23 (10) 1995, pp. 1,815-1,825.
49
See Strategis, 1996, 1997.
50
Ibid.
51
CCPE website at http://www.ccpe.ca
52
Personal interview, November 1997.
53
See SNC-Lavalin website http://www.snc-lavalin.com
54
See, for example, UNDP, Human Development Index, 1994.
55
ACEC, “Environmental Code of Conduct,” 1995 , p. 1.
56
See CCPE website at http://www.ccpe.ca
57
Personal interview, November, 1997.
58
Scott Ferguson and Martin ter Woort, “Draft: China’s Three Gorges
Water Resources Project—An Overview,” Acres International Ltd,
company document, 1995.
59
Ibid., p. 2.
60
Ibid., p. 2.
107
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N O T E S (continued)
61 Lawrence R. Sullivan, “Upheaval on the Yangzi: Population relocation & the controversy over the Three Gorges Dam,” China Rights
Forum, Summer, 1996 http://www.hrichina.org
73 CIDA and CIPM Yangtze Joint Venture. “Three Gorges Water
Control Project Feasibility Study, Vol 1: Feasibility Report,”
August, 1988, pp.1-4.
62
74
Lamarre, 1997.
International Rivers Network, “Eminent US dam expert criticizes
Three Gorges,” Press Release, April 22, 1996.
75
Interview, November 1997.
76
ACEC, 1995, p. 5.
64
77
Telephone conversation, November 1997.
78
MJRA, Canadian Social Investment Database, 1996.
Ferguson and ter Woort, 1995.
63
Ferguson and ter Woort, 1995, p. 16.
65
Laura Eggertson, “Ottawa backs Chinese dam,” The Globe and
Mail, Report on Business, September 1, 1997, pp. B1, B6.
79 Stanley
H. Goldstein and Robert A. Rubin, “Engineering Ethics,”
Civil Engineering, October 1996, pp. 41-44.
66
MJRA, Canadian Social Investment Database, 1996.
67
Eggertson, 1997, pp. B1, B6.
80
Niosi et al, p. 1,816.
68
Ferguson and ter Woort, 1995.
81
ACEC, 1995.
69
Personal interview, November 1997.
82
Lamarre, 1997.
83
Niosi et al, p. 1,817.
84
Ibid., p. 1,821.
70
L.J.M. Haas, “Medium Hydropower Development in Nepal:
Results of the Screening and Ranking Study Conducted under The
Medium Hydropower Study Project.” Acres International Ltd,
company document, 1997.
71
The assumptions behind cost-assessments for social and environmental impacts can also be critiqued. In particular, the notion that
we are able to estimate and aggregate the effects of environmental
degradation is seen by some academics as both arrogant and misleading. Costing requires a cut-and-dried abstraction away from the
complex holistic interaction of the ecosystem. This approach also
assumes that these costs can be weighed appropriately against benefits in a linear fashion which ignores complex issues of scale and
dynamic interaction (although assessments of a cascade of
hydropower projects may study cumulative effects).
72
The US Export-Import Bank‘s (Ex-Im) human rights policy states
that: “Ex-Im Bank can deny its financing for human rights reasons
only if the President, through authority delegated to the Secretary of
State, determines that such a denial would be in the national interest.
A specific human rights review is conducted by the State Department
for every transaction over $10 million to determine if it may give rise
to significant human rights concerns. This review examines both the
general status of human rights and the effect of the export on human
rights in the importing country.” See the Bank’s website at:
http://www.exim.gov
108
85
Niosi et al also found that the social and economic environment
of the developing country affects the degree of technology transfer.
Specifically, only a “few African projects were successful, while
most Latin American or Asian projects of Canadian firms achieved
their goals in terms of technology transfer. The transmission of
knowledge is also easier, according to the Canadian ECs, when governments in developing countries put fewer restrictions and regulations on inward technology transfer,” pp. 1,822-823.
86
CCPE website at http://www.ccpe.ca
87
Ibid, pp. 1-2.
88
ACEC, 1995, pp. 1-2.
89
CCPE website at http://www.ccpe.ca
90
Niosi et al, 1995.
91
Lamarre, 1997.
92
Bjorn Stigson, “How business can play a major role in education,” Earth Times News Service, 1998. http://www.earthtimes.org
93 For information about WEPSD, see the American Association of
Engineering Societies website at http://sol.asee.org
94
CCPE website at http://www.ccpe.ca
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I X
T HE
B USINESS OF
D EVELOPMENT ?
MANAGEMENT CONSULTING
Marlene Benmergui
M
A R L E N E
W R I T E R
I S S U E S
/
B
E N M E R G U I
B R O A D C A S T E R
I S
A
J O U R N A L I S T
S P E C I A L I Z I N G
,
I N
P R O D U C E R
P U B L I C
,
A N D
P O L I C Y
.
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O N S U LT I N G
T HE B USINESS OF
D EVELOPMENT ?
I
f the 20th century was noted for the global
trade in goods, the next will be dominated by
the trade in “invisibles,” those exports we don’t
see but which are a burgeoning and increasingly
lucrative sector of global commerce: business
services and rights for which fees and royalties
are paid.1
According to the World Bank, average annual
growth in trade in services from 1980 to 1993
was 7.7 percent, compared with 4.9 percent for
merchandise trade (in nominal terms). Now
valued at more than US$1,200 billion a year, it
accounts for 20 percent of world trade and continues to exhibit strong growth. In 1995, the
value of world trade in services increased by 14
percent.2 It will receive a further boost in coming years as the General Agreement on Trade in
Services (GATS) opens up prospects of new markets through liberalization and brings the trade
under a rules-based multilateral system.3
Statistics Canada reports that Canadians set new
records in 1996 for the value of services bought
and sold in international markets.4 Exporters
TABLE 1 Canada’s International Transactions in Services, 1992-96
($MILLIONS)
Category
Receipts
1992 1993
Travel
Transportation
Commercial Services
Government Services
Total
1994
1995
1996
Payments
1992 1993
1994
1995
1996
7,898 8,611 9,703 11,026 12,092 14,255 14,359 13,679 13,970 15,122
5,232 5,959 6,616 7,234 7,900 7,989 9,833 10,530 10,936 11,027
11,080 13,065 15,275 16,713 17,971 14,050 16,799 19,461 20,687 21,882
912
868
994
936
923
951
877
735
730
747
25,122 28,503 32,587 35,909 38,886 37,245 41868 44,406 46,323 48,778
Source: Statistics Canada, Canada’s International Transactions in Services 1961-1996, (Catalogue 67-203XPB) (Ottawa: Minister of Industry, 1997), Table 1, p. 73.
TABLE 2 Canadian Exports of Services by Region and Category, 1996
($MILLIONS)
Category
Travel
Transportation
Commercial Services
Government Services
Total
US
6,506
4,237
11,232
203
22,178
UK
Other Of which
Other EU
679 4,907
547 3,116
1,244 5,496
15
704
2,485 14,223
Japan Other OECD All other countries
1,554 719
1,003 580
1,314 309
76
26
3,947 1,635
454
230
764
35
1,482
2,180
1,303
3,108
567
7,159
Source: Statistics Canada, Canada’s International Transactions in Services 1961-1996 (Catalogue 67-203XPB) (Ottawa: Minister of Industry, 1997), Tables 10 to 16, pp. 142-58.
110
increased overall sales of services in 1996 by
8 percent to $38.9 billion. Purchases by Canadian
importers advanced at a slightly lower 5 percent
to reach $48.8 billion (see Table 1). As shown in
Table 2, the United States continued to be
Canada’s major trading partner for services.
Do service companies have a particular responsibility in developing markets? It can be argued
that, by the very nature of the services they provide, these companies have important capacity
building roles: in building capital, in the case of
financial services; in building physical capacity in
the case of infrastructure and engineering services; and in building human capability in the
case of commercial and management services. But
have Canadian management and other consultants set this as a goal, or is it a case of ”what’s
good for the company is often good for the people,” as Jean-Louis Bourbeau, Chairman of
William Mercer Ltd in Canada, opines?5 There are
many in the services sector who share his view.
THE CANADIAN INDUSTRY
If Canadian service companies cannot be considered major players in the developing world,
their contribution is growing. The growth leader
is commercial services,6 which grew an average
of 13 percent a year betwen 1990 and 1995. A
number of export markets—many of them
developing—outpaced the 13 percent annual
rate: Brazil; Sweden; Republic of Korea; and
Indonesia, Malaysia, Philippines, Singapore, and
Thailand as a group (see Table 3). Management
consulting has been growing by 10 percent a
year overall: for the big players, that figure can
reach 30 percent.7
According to Statistics Canada, the international
management consulting business in Canada
consists of a relatively few large companies—
some of which may be better known for their
accounting services—and a myriad of smaller
firms, and covers everything from strategic
planning and organizational renewal to forest
management. It also includes internal management consulting divisions of corporations
working for third parties and nongovernmental
organizations (NGOs) that provide advice to
developing countries using project funding
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from the Canadian International Development
Agency (CIDA) or the international development
banks.8
A survey by the Canadian Institute of Certified
Management Consultants, concludes that “foreign markets as a source of revenue tend to
increase with firm size.”9 Globally in 1996, for
example, KPMG earned $242 million; Andersen
BOX 1 TOWARD FREER TRADE
SERVICES
IN
Produced as part of the final act of the
Uruguay Round of the GATT negotiations,
the General Agreement on Trade in
Services (GATS) lays the groundwork for
the movement of capital, technology, and
labour across borders, necessary to the
expedient provision of services. According
to services analyst Bimal Ghosh, this
enhances prospects for the establishment
of new markets in developing countries.
The Agreement—of which Canada is a signatory—extends multilateral rules and disciplines to services. It covers four modes of
delivery of services: cross-border supply of
data and transport services; foreign direct
investment or representative offices and
branches; tourism; and the movement of
personnel, that is, consultants. GATS is a significant achievement for the sector in many
respects, not least of which is the fact that a
framework is now in place which is bound to
open the door to further liberalization.
Some of the GATS basic principles and
obligations include:
Most favoured nation treatment: Under
this general obligation any trade concession
offered to one member country for the supply of a service must be extended to all other
member countries; exemptions are allowed,
however, subject to certain procedures.
National treatment: Treatment for foreign
services and service suppliers should be no
less favourable than that accorded to its
services and service suppliers.
Transparency: Relevant policies and
measures, including those presenting
barriers to market access and discriminatory
restrictions, must be published.
Domestic regulation: Measures to authorize supply of services (technical standards,
leasing requirements) are to be based on
objective and transparent criteria and should
not be burdensome in ensuring quality.
The GATS also includes principles concerning recognition requirements (for example,
educational background and experience)
for the purpose of authorization, licensing
and/or certification in the services area.
Source: Bimal Ghosh, Gains from Global Linkages (New York,
NY: St Martin’s Press, 1997).
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Consulting, $224 million; and Coopers and
Lybrand, an estimated $171 million. But as
Statistics Canada notes, many large firms are
arms of multinationals, linked to global partners. It can be difficult to determine how much
consulting is carried out abroad since these
firms mainly serve a Canadian market and pass
international contracts to their affiliates in other
countries. As Table 4 demonstrates, Canadian
firms are estimated to export $215 million of
management consulting services, with imports
of slightly more than $125 million.10
KPMG may be unique among management consulting firms in that it has an ethics and
integrity practice. Part of this work involves
assisting governments and corporations develop
a more ethical business environment, essential
to attract trade and promote economic development. For example, the firm was invited to participate in a United Nations Task Force
investigating organized crime and corruption in
a country of the Middle East, to identify causes
and formulate recommendations for dealing
with the issues locally.11
THE
CUSTOMER IS KING.
BUT KING
CUSTOMER IS
SHOWING SIGNS OF
BEING BORED WITH THE
CONSULTANCIES
’
SECRECY AND PUT OFF
BY THE GAUDIER
PRACTITIONERS.
IN
..
ORDER TO REGAIN
THE TRUST OF AN
INCREASINGLY
SKEPTICAL PUBLIC
,
[MANAGEMENT
CONSULTING
TABLE 3 Growth in Canada’s Exports
of Commercial Services by
Geographic Area 1990-95
Leading Export
1990
1995 Average
Market for
($millions) ($millions) annual
Commercial
change
Servicesa
%
Brazil
11
Sweden
31
Republic of Korea
26
Indonesia, Malaysia,
68
Philippines, Singapore,
Thailand
Ireland
54
Middle East
50
South America
89
(except Brazil)
Switzerland
127
India
17
Mexico
33
Taiwan
5
Norway
16
Germany
183
United Kingdom
545
Total of above
1,255
Total commercial
9,061
services
88
202
161
294
51.6
45.5
44.0
34.0
174
173
247
30.5
28.2
22.7
314
42
76
11
33
348
1,019
3,182
16,713
19.9
19.8
18.2
17.1
15.6
13.7
13.3
20.5
13.0
Notes: a Countries and areas exceeding the average annual
growth for all commercial services, 1990-95.
Source: Statistics Canada, Canada’s International Transactions
in Services, 1961-1996, Table 2, p. 15.
111
]
NEEDS
TO BECOME MORE
ETHICAL
—JUST
LIKE
OTHER PROFESSIONS
.
TOM PETER QUOTED IN
“MANAGEMENT CONSULTING:
THE ADVICE BUSINESS.”
THE ECONOMIST,
MARCH 22, 1997
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CHAPTER SIX
M A N A G E M E N T C O N S U LT I N G : D E V E L O P I N G B U S I N E S S
But according to KPMG partner Norman Inkster,
former Commissionner of the Royal Canadian
Mounted Police, little of the ethics practice
involves developing country clients. KPMG has,
however, been called on to help both Canadian
and developing-country corporations investigate
fraud and establish standards and regulations to
prevent its occurrence. And it is now working with
a large Canadian firm to set up child labour standards comparable to those of the International
Labour Organization, and develop tools to monitor developing country suppliers’ adherence to
those standards. “The aim,” says Inkster, “is to
bring about evolutionary rather than revolutionary change. They are taking a very responsible
approach to the issue.” Inkster believes this is the
first corporation in Canada to take a “rather
aggressive” approach to the problem of child
labour. Other initiatives on this front by Canadian
firms, he says, have been in response to pressure
from a US parent company (see Chapter 3).
For many international management consultants, developing-country public sector restructuring and legislative and regulatory reform are
generating impressive revenue. “Public sector
organizations around the world are responding
to pressures from deficits and public debt,
changes in the workforce, citizens’ demands for
improved services, and industry demands for a
business friendly environment that enhances
their competitiveness in a global marketplace,”
explains the ARA Consulting Group Inc. “Many
governments are now seeking smaller, more
flexible, streamlined bureaucracies; alternatives
for providing services directly; ways to implement new information technology; and organizational and legislative or regulatory reforms
that allow for their vision of an efficient and
effective public service.”12
Much of this work is funded by international
development agencies, including CIDA, the
World Bank, the regional development banks,
and various UN agencies. At the end of 1997, for
example, CIDA listed 76 service contracts worth
over $263 million in the category of “institutional support and management.”13
For Toronto-based ARA, specializing in public
and the not-for-profit sector reform has paid off:
the consultancy’s gross revenues are in excess of
$20 million annually. The firm has been active
in over 50 countries of the Caribbean, East and
West Africa, Asia, and the Pacific: this international practice accounts for half of ARA’s annual
revenues. Canadian models and structures serve
ARA well in their developing-country practice.14
112
OR THE
BUSINESS
OF
DEVELOPMENT?
TABLE 4 Canadian International
Management Services,a 1990-96
Year
Exports
($ millions)
Imports
Balance
1990
1991
1992
1993
1994
1995
1996
91
116
138
152
170
187
215
62
79
65
94
83
128
127
+29
+37
+73
+58
+87
+59
+88
Notes: a These refer to the types of management services
that are exported from Canada, rather than everything the
industry produces and sells abroad.
Source: Statistics Canada, Canada’s International Transactions
in Services, 1961-1996, p. 36.
If you ask Murray Glow, partner in charge of
ARA’s Public Sector Reform Practice, what he and
his 17 partners actually do, he replies: “We’re
human capital builders.” To assist them to do so,
they work with local partners. CIDA obviously
agrees with their approach. In 1997, ARA
received a Canadian Award for International
Development for managing the 10-year Canada
Training Awards Project (CTAP) which increased
the managerial capacity and technical skills of
15,000 people working in agriculture, tourism,
and education in nine eastern Caribbean countries. 15 The award recognized ARA’s efforts in
incorporating women into the project—
78 percent of the training officers involved were
women, as were more than half the recipients.
“In addition,” says CIDA, “CTAP encouraged
women to participate in nontraditional trades,
such as construction work, and delivered training activities that overcame the obstacles to
women’s participation.” It further notes that
“the project also helped to strengthen local
training and educational resources and contributed to the creation of a rich network of
training resources among the islands.”16
CIDA is also an important source of contracts
for Coopers and Lybrand Consulting whose
Ottawa practice is currently working on $110
million worth of CIDA-funded accounting and
management projects. “Even though what
Canada offers is small compared to the World
Bank, the Canadian way of doing things is well
accepted in developing countries,” says Ottawabased partner Ken Parent.17 Coopers and
Lybrand was among 13 finalists for the 1997
Canadian Awards for International Development
for its management of two projects promoting
the transfer of Canadian technology through
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BOX 2 CORPORATE RESPONSIBILITY:
KEYS TO SUCCESS
What factors contribute to increasing a
company’s competitiveness while contributing to sustainable development in a
host country? An analysis of approaches to
corporate responsibility adopted by five
forward-thinking Canadian companies in
developing countries,1 carried out by the
Conference Board of Canada in 1996,
found they had one thing in common:
they understood that to be successful, the
company had to become an integral part
of the community in which it operates.
“They view their corporate responsibility
initiatives as long-term strategic investments that promote their business objectives and enhance their image as
responsible corporate citizens with key
stakeholders,” say Stelios Loizides and
George Khoury.2
Among the factors they identified that
contribute to success:
• A strong public and community relations effort at the earliest stage of a
company’s business development plan.
• A local partner with a reputation for
being a responsible corporate citizen.
• Cross-cultural sensitivity.
• Hiring local staff, up to highest levels,
wherever possible.
• Human resource development, benefits,
health and safety standards comparable
to those used by the company in
Canada.
• Maintaining a relationship with unions
based on frankness, mutual respect, and
good faith.
• Positive communications with key stakeholders to explain the benefits of the
company’s operations; and early conflict
resolution.
• An internationally recognized environmental management policy.
• The establishment of a mechanism to
address long-term needs associated with
infrastructure, education, and health, as
well as support of community economic
development projects.
NOTES
1
Alcan Jamaica Company, Jamaica (Alcan Aluminum
Limited); Babcock & Wilcox Gama, Turkey (Babcock &
Wilcox); Falconbridge Dominica, Dominican Republic
(Falconbridge Limited); PT International Nickel Indonesia;
Indonesia (Inco Limited); Scotia Enterprises, Guyana
(Scotiabank).
2 Stelios Loizides and George Khoury, Corporate Responsibility
in Developing Countries: Key Success Factors, Report 165-96
(Ottawa: The Conference Board of Canada, 1996).
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joint ventures in Thailand and Malaysia. Parent
reasons that being involved in this type of project enables Coopers and Lybrand to meet its
corporate goals and contribute socially.
For William Mercer Ltd, pension design and
administration is its vehicle for exercising its
social responsibility, says Jean-Louis Bourbeau.
Mercer developed Chile’s privatized pension
system in the 1980s. Many argue that pension
reform anchored the country’s economic success,
especially the spectacular rise in the national
savings rate from 8.2 percent of GDP in 1981 to
27.6 percent in 1995. As well, its stock market
capitalization of more than 100 percent of GDP
has boosted the long-term bond market. Those
were not the goals, however: “We didn’t go to
Chile and Argentina to do good deeds, we went
there to do business. But by doing business there
is a benefit to society at large, “ says Bourbeau.18
But not everyone agrees. Some have alleged
that private pension plans only serve the
employed and do nothing to bolster those on
social security rolls or help the unemployed.
Bourbeau counters by saying that the allocation
of the money saved is up to the country itself.
Mercer can save them money, what they do
with it is a national concern.
Certified management consultants are professionally bound to adhere to a “uniform code of
professional conduct,” developed by the Institute
of Certified Management Consultants.19 While
this code addresses all areas of professional
practice—disclosure, conflict of interest, and
practical working ethics, for instance—it does not
cover the complexities of international business.
Nor do standards outlined in the Vision project
developed by the Canadian Institute of Chartered
Accountants, says Jim Goodfellow, FCA, National
Director, at Deloitte and Touche Chartered
Accountants and one of the project’s managers.
Although it “has been active in international
standard-setting activities, the primary focus,
priorities, and member support mechanisms
of the institute remain focused on domestic
issues, in isolation from any international
considerations.” 20
But Dorothy Riddle, a Vancouver-based service
sector specialist, considers that, for professionals, the matter of corporate social responsibility
should be covered in a company’s code of
conduct. Difficulties arise when associations
only monitor or care about what they do in the
domestic market and have not even thought
about their ethical behaviour in foreign
113
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CHAPTER SIX
EVERYONE
HAS A
PARTICULAR MINDSET
AND COMES FROM A
PARTICULAR PARADIGM
THAT INFLUENCES
PATTERNS OF MEANING
AND UNDERSTANDING
[...] THE
.
MEANING OF
RIGHT AND WRONG CAN
BE HIGHLY CULTURE
D E P E N D E N T.
CHONG JU CHOI AND
MIHAELA KELEMEN
IN
CULTURAL COMPETENCES:
MANAGING CO-OPERATIVELY
ACROSS CULTURES
(BROOKFIELD, VT:
DARTMOUTH PUBLISHING,
1995)
M A N A G E M E N T C O N S U LT I N G : D E V E L O P I N G B U S I N E S S
developing markets.21 James Hunter, VicePresident of KPMG Investigation and Security
Inc. in Toronto, concurs: “A critical area for
many Canadian companies expanding overseas
will be their policies on ethics in countries
where standards are different from ours,” he
says.22 And as the Conference Board of Canada
(CBC) notes, these “policies will need to reflect,
not only local laws, but also local customs.”23
Also an issue for management companies
abroad is the choice and use of local partners,
which can determine their understanding of
needs and conditions, and ultimately their
success. Indeed, “selecting an established local
partner can be one of the most effective ways of
establishing a presence in a foreign country,”
says the CBC.24 While multinational firms such
as KPMG and Coopers and Lybrand can draw on
their national affiliates, smaller companies must
seek out firms and individuals that will enable
them to make the local connection on a contract-by-contract basis. “Getting a local partner
is more or less a requirement, but we also believe
in the strategy as a company,” says Bob Simpson,
partner in Development Partnerships Ltd. “Our
underlying purpose is to ensure a transfer of
skills.” Admittedly, since local consultants are
often paid at local rates, the strategy also helps
keep costs lower, he adds.25
THE PROFESSIONALS:
BEYOND BUSINESS
Procedure-driven professions like law are also
taking their services globally. Statistics Canada
reports that trade in legal services is an evolving,
dynamic aspect of the new global economy.26
In 1996, exports of legal services totaled $263
million. About two-thirds of the total business
was with the United States; most of the remainder
was with Britain and Hong Kong.
Trade in this sector is expected to grow. Global
trading agreements such as the North American
Free Trade Agreement (NAFTA) have not only
facilitated trade in legal services, but legal services themselves have become part of formal
international agreements: both the GATS and
NAFTA have recognized the role of foreign legal
consultants and allowed them to provide advice
regarding the law of the country in which the
lawyer is authorized to practice.
Most international legal business is in commercial law, supporting Canadian clients in their
overseas operations as well as foreign interests
in respect of operations in Canada. Some also
114
OR THE
BUSINESS
OF
DEVELOPMENT?
advise foreign governments and international
organizations in the areas of privatization and
project finance. But as Bob Rae, a partner at the
Toronto firm of Goodman, Phillips & Vineberg
and former Premier of Ontario, points out,
“there’s been an interesting shift for ourselves,
as well as other Canadian law firms, as we are
getting into issues of civil society, public policy,
and governance. Canada’s traditions of both
common and civil law make it well poised to
make a contribution,” he says, ”particularly in
large regions like Latin America where the civil
law system is used.”27 The firm of McCarthy
Tétrault, for example, was engaged by the
International Monetary Fund to rewrite the
financial legislation and Central Bank Acts of
Zambia and Ghana, and has advised the
Government of Mexico on the drafting of a
comprehensive new telecommunications regulation. It has also participated in the negotiation
and drafting of the United Nations Convention
on International Bills of Exchange and
Promissory Notes and the Model Law for
International Credit Transfers.28
Individual Canadian lawyers are also working
to increase skills and strengthen the legal system
in developing countries. A committee of the
Canadian Bar Association, for example, is helping
to train lawyers in emerging democracies.
Launched in 1989 as a means of assisting fledgling democracies in Eastern and Central Europe,
it has expanded with CIDA support to include
South Africa, Cambodia, Vietnam, and China.
Lawyers from these regions spend several weeks
in Canada studying the legal and parliamentary
system, and train with Canadian lawyers. Dozens
of lawyers also travel abroad, donating their time
to work closely with counterparts on simple
commercial issues as well as on complex constitutional matters. Payment, says committee chair
Jim Klotz, is “a sense of satisfaction from helping
lawyers who truly need and crave the help.”
And as Halifax labour lawyer Ronald Pink told
The Globe and Mail: “I just think it’s one of the
best things that the Canadian bar can do:
transport its knowledge base and its love of a
good legal system.” 29
ASSESSING
THE
BENEFITS
As laudable as these efforts are, are they sufficient? Is doing no wrong and offering advantages such as sporadic training opportunities
enough or do service providers have larger social
responsibilities toward the communities in
which they operate?
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Most Canadian service companies continue to
see social issues and business objectives as separate—their principal focus is business viability.
As Coopers and Lybrand’s Ken Parent puts it:
a company is in developing countries “as
business agent and not human rights liberator.”30 It is a reflection of what Dorothy Riddle
describes as “the secondary attention relegated
to corporate responsibility abroad by most
companies.”31
For management consultants, however, the issue
may not be that they are doing “business as
usual” in developing countries, but that much of
“the business” serves development goals. In fact,
this type of external technical assistance can
help address some of the constraints that developing countries face in strengthening their
services sector and increasing their own
participation in trade-in-services.32
As they increasingly work outside Canada, however, management consultants need to develop
clear codes of conduct and ethics training programs for both Canadian and local employees—
tools with which they can make ethical
decisions that conform with the companies’
policies and goals. Moreover, these codes need
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1
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9
8
to go beyond issues such as bribery and corruption to take a developmental focus. Monitoring
mechanisms must also be built into codes of
ethics or of social responsibility, and the results
made available to the public. Progress has been
made on some of these fronts. In Canada, a
group of Canadian firms launched an
“International Code of Ethics for Canadian
Business” in late 1997 (see Chapter 1, p. 16).
And the Organisation for Economic Co-operation and Development has adopted an international code to monitor corrupt business
practices and policies (Chapter 1, p. 15).
For the title of “human capital builders” to resonate, Canadian service companies need to take
a more deliberate, less circumstantial approach
to training and professional development for
local counterparts and employees. They should
encourage local business partnerships and,
through them, internship opportunities. They
should also help developing-country counterparts set up accreditation programs. In regions
where low wage scales provide Canadian
companies with a comparative advantage, they
should consider providing additional alternate
forms of compensation, such as better benefits.
NOTES
1
Bruce Little, “The noticeable export gains of invisibles,” The Globe
and Mail, August 11,1997, p. A6.
16 CIDA, “Thirteen Finalists for the Canadian Awards 1997 for
International Development” website: http://www.acdi-cida.gc.ca
2
World Trade Organization, “Overview of World Trade in 1995
and Outlook for 1996,” Press/44, March 1996.
17
Personal interview, September 1997.
18
Personal interview, June 1997.
3
19
Bimal Ghosh, Gains from Global Linkages (New York, NY: St.
Martin’s Press, 1997), p. 2.
4
Canada, Statistics Canada, Canada’s International Transactions in
Services 1961 to 1996 (Ottawa: Minister of Industry, June 1997), p. 7.
Institute of Certified Management Consultants of Canada,
“Uniform Code of Professional Conduct” website:
http://www.cmc-consult.org
20
Personal interview, June 1997.
5
Personal interview, June 1997.
21
Personal interview, May 1997.
6
Little, 1997.
22
7
Consultants News, March 1997.
8
Statistics Canada, 1997, pp. 32-36
9
Ibid, p. 33.
10
Statistics Canada, 1997.
11
Telephone interview, March 11, 1998.
12
The ARA Consulting Group Inc., “The Public Sector Reform
Practice” website: http://www.aragroup.com
13
Canada, CIDA, Service Contracts and Lines of Credit, 1997
http://www.acdi-cida.gc.ca
James Hunter, “Good Ethics Mean Good Business,” Canadian
Business Review, Spring 1996, pp. 14-17.
23 Stelios Loizides and George Khoury, Corporate Responsibility in
Developing Countries: Key Success Factors, Report 165-96 (Ottawa:
The Conference Board of Canada, 1996), p. 4.
24
Ibid.
25
Personal interview, September 1997.
26
Statistics Canada, 1997, p. 26
27
Personal interview, September 1997.
28
14
McCarthy Tétrault, “International Assignments” website:
http://www.mccarthy.ca
15
29 Sean Fine, “Lawyers sign on to train counterparts abroad,
”The Globe and Mail, August 12, 1997, p. B28.
ARA website at http://www.aragroup.com and personal interview with Murray Glow, September 1997.
CIDA, “Minister Boudria Presents Canadian Awards for
International Development,” News Release (97-59), Ottawa, May
26, 1997.
30
Personal interview, September 1997.
31
Personal interview, May 1997.
32
Ghosh, p. 116.
115
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H A P T E R
S
E V E N
S ELLING
C ANADIAN
VALUES
E N C O U R A G I N G P R I VAT E S E C T O R
ACTIVITY
IN THE
SOUTH
Ted Paterson
T
E D
S
P E C I A L
P
I
N S T I T U T E
A T E R S O N
P
I S
R O J E C T S
D
I R E C T O R
A T
T H E
N
O F
F
O R T H
I N A N C E
- S
A N D
O U T H
.
117
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H A P T E R
S
E V E N
E
N C O U R A G I N G
P
R I VAT E
S
E C T O R
A
C T I V I T Y
I N
T H E
S
O U T H
S ELLING
C ANADIAN VALUES
THE
ACTIONS OF
CORPORATIONS FLYING
THE
CANADIAN
HELP DEFINE
FLAG
C A N A D A’ S
REPUTATION ABROAD
,
JUST AS THE ACTIONS OF
G O V E R N M E N T S E S TA B L I S H
T H E P O L I C Y, L E G A L
,
A N D R E G U L AT O RY F R A M E WORK WITHIN WHICH
C O R P O R AT I O N S A C T.
I
n late January 1998, the first steps were taken
toward the creation of a global university for
Indigenous peoples. More significant than the
agreements signed between the Saskatchewan
Indian Federated College and two universities in
Mexico, was that it occurred during the Team
Canada mission to Latin America.
Saskatchewan Premier Roy Romanow said this
type of arrangement is somewhat of a landmark
for Team Canada because it shows a real concern for social as well as economic issues. “The
shift from the original Team Canada purpose,
which is straight business to business, is something I would encourage and promote with
respect to future trade missions and international trade agreements that are being
negotiated,” he said.1
JOE CLARK, “THE BUSINESS OF
HUMAN RIGHTS,” BEHIND THE
HEADLINES, OCTOBER 1996
Past Team Canada missions have accorded little
attention to guaranteeing “that those on the
bottom rung of the economic scale benefit from
the annual trade mission.”2 The thrust has
unabashedly been on business dealmaking. A
quick tour of statistics shows why. Each billion
dollars in exports creates 11,000 jobs,3 and
Canada’s exports more than doubled over the
past decade, reaching $260 billion in 1996. The
ratio of exports to gross domestic product (GDP)
rose from 25 percent in 1990 to 37 percent in
1995, a year when net exports accounted for
almost 60 percent of Canada’s overall economic
growth4 and was the only cylinder firing in the
government’s “Jobs, Jobs, Jobs” engine. Along
with deficit reduction, export performance is
the Canadian success story of the 1990s.
Team Canada missions to the emerging markets
of Asia and Latin America have directed the
spotlight to the role of the Canadian private
sector in developing countries. Government
policies and programs designed to stimulate
activity in developing countries by Canada’s
private sector can be split into two broad
groups: international commercial programs as
these relate to developing countries, and international development programs which involve
the Canadian private sector. The
commercial programs affect many more
Canadian firms than the aid program.
118
The full gamut of Canadian international
commercial activity includes exports from
Canada; imports into Canada; foreign investments made by Canadians; and investments
into Canada by foreigners. Canadian governments at all levels focus their attention on the
first—promoting exports—plus attracting
inward investment by foreign firms. To developing countries, however, Canada’s import
policies are far more significant, and the
economic damage suffered by developing
countries because of trade restrictions against
agricultural products, textiles, and other lowtech manufactured goods likely outweighs by a
large margin the aid Canada provides.
The promotion of Canadian prosperity is
clearly the principal objective of most
Canadian policies and programs. But how do
such efforts relate to Canada’s other foreign
policy goals, including our desire to assist
developing nations, and the objectives of
Canada’s international aid program? What
steps might make Canada’s commercial policies
and programs more consistent with this
broader set of objectives, and more beneficial
to countries in the South?
In focusing on existing government policies and
programs, this chapter only skirts the important
debates between free trade purists and their
detractors. Whatever the theoretical merits of
the free trade position, few countries actually
follow its precepts. As conceded by one prominent trade economist: “Anyone who has tried to
make sense of international trade negotiations
eventually realizes that they can only be understood by realizing that they are a game scored
according to mercantilist rules, in which an
increase in exports—no matter how expensive
to produce in terms of other opportunities foregone—is a victory, and an increase in imports—
no matter how many resources it releases for
other uses—is a defeat.”5
F I R S T, A G R E E
ON THE
RULES
National governments have the authority to
restrict the movement of goods and people
across their boundaries. They have used this
authority to tax imports, encourage “infant”
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BOX 1 RECENT TRADE AGREEMENTS
INVOLVING CANADA
Year
Name
1989
1994
Free Trade Agreement with the US (FTA)
North American Free Trade Agreement (NAFTA)
Conclusion of the Uruguay Round of GATT
Commitment to Free Trade in the Pacific Rim
Commitment to Free Trade in the Americas
Establishment of the World Trade Organization
Free Trade Agreement with Israel
Free Trade Agreement with Chile
“Exchange of Documents” with Mercosur
Telecommunications Services
Information Technology
1995
1997
Scope
Bilateral
Regional
Multilateral
Regional
Regional
Multilateral
Bilateral
Bilateral
Regional
Multilateral
Multilateral
industries, withhold the latest technology from
competitors, and promote “nation-building.”6
One of the basic challenges of trade policy,
therefore, is simply securing access for your
country’s firms and their products in other
nation’s markets. This is done principally
through trade negotiations.7
Since the late 1940s, the rules for market access
had been negotiated through the General
Agreement on Tariffs and Trade (GATT), where
via multilateral agreements, each country agrees
to exchange “trade concessions” with the other
signatories. But, as Box 1 indicates, there has
been an explosion of new trade agreements in
the past decade, many of which have been
bilateral or regional rather than multilateral.
In addition, recent negotiations have moved
beyond the export of goods to cover service
exports (the General Agreement on Trade in
Services or GATS), and intellectual property
rights. The Canadian government also
intervenes on behalf of individual firms to
protect their access to foreign markets.8
NOW HOW CAN WE CHEAT?
Before market access rules are negotiated,
however, most governments have taken steps to
boost the chances of their exporters, through
trade promotion programs. These programs
could be divided into three broad categories:
subsidies to exporting firms (or their customers),
services to improve information about foreign
markets, and direct marketing activities.
SUBSIDIZING EXPORTS
Within the first, direct export subsidies (that is,
“bribing” customers to buy your products) are
to trade what steroids are to athletics. As such,
GATT/World Trade Organization (WTO) agree-
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9
9
8
ments ban their use by industrialized countries,
which leads governments to find ever more
innovative methods to funnel tax money to
exporters. Rich country governments use official
development assistance (ODA) to subsidize their
own firms (see Box 2). They can subsidize the
firms that export rather than the exports themselves, including support for research and development to develop products that are mainly
exported, such as new aircraft. Governments
can provide such support directly, or through
special tax treatment.9 Finally, governments can
subsidize exporters by providing a variety of
services, such as those described below, at
give-away prices.
PROVIDING MARKET INFORMATION
There are respectable economic reasons for a
government to provide services to overcome
information constraints faced by its exporters.
Companies do business in markets they know,
and may overlook customers in far-flung or
culturally distinct markets. Market information,
provided it is timely, may benefit both the firm
and its potential customers, who might otherwise be unable to obtain a suitable product for
as good a price. Governments already have
foreign embassies and, arguably, can collect
some commercial information at less cost than
can industry associations and individual firms.10
Many governments also organize participation
by their nation’s firms in international trade
fairs and trade missions to help these firms learn
about new markets.
Governments can help reduce commercial
uncertainty stemming from information
constraints in two other important ways: they
can help finance exports to countries the commercial banks don’t serve because they don’t
know that market (or, sometimes, because they
do). They can also insure their firms’ foreign
sales and investments against certain types of
risks, such as payment defaults or expropriation
resulting from sovereign or “political risk.”11
As noted, many countries provide such information and insurance services at below market
cost, thereby subsidizing exporters. In general,
Canada’s subsidization of export finance and
insurance appears modest by international standards,12 but it is more generous than other
industrial countries in providing market information or support from its trade commissioners
at no cost (see Box 4).
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AID
Most people think that foreign aid is, or at
least should be, directed primarily to those in
need: poor countries and, ideally, the poorest people in those countries. In fact, much
aid is designed to promote businesses in the
donor country. Perversely, because the
primary purpose of official development assistance is supposedly development rather than
trade promotion, it is generally exempt from
WTO rules. This exemption is broad enough
to drive a truck through and, indeed,
Canada and other donors have required aid
recipients to purchase many such trucks, as
well as road graders, railway cars, and
airplanes. Significant aid is also tied to the
employment of “development experts” from
the donor country.1 Such tied aid is thought
to reduce benefits by 10-20 percent because
the recipient country could have purchased
better, cheaper, or more appropriate goods
on the international or local market.
The cost of tied aid increases when donors
use it to subsidize uncompetitive products
and firms, which they frequently do.2 The
Development Assistance Committee (DAC)
of the OECD—the main donors’ club—has
tried over the years to reduce the percentage of tied aid by publishing figures and
admonishing members to increase the
untied proportion.3 But donors have
cooked up some particularly unpalatable
variants of tied aid in recent years.
One souped-up version is the provision of
aid on the condition that the recipient country purchase some entirely different products
from the donor. An infamous example was
Britain’s promise to build the £234 million
Pergau Dam in Malaysia—”a very bad buy”
according to its own assessment—on the
condition that Malaysia agree to a
£1.3 billion deal for British fighter planes.4
loans to subsidize aid recipients if they purchase products from the donor country.
Reviews show such schemes tend to shift
aid from poorer to middle-income countries,
increase the import content of projects,
encourage capital-intensive approaches,
exclude local suppliers and financial institutions, and reduce the money available for
projects designed to benefit the poor.
Evidence is also clear that product prices
increase when financed by mixed credits,
which means much of the subsidy is captured by the donor-country suppliers rather
than the recipient country. Finally, the proliferation of mixed credit schemes has resulted
in “spoiled markets” (i.e., countries where no
firm can make a sale unless its government
kicks in a financial sweetener). It should come
as no surprise that there is a good deal of
overlap between the list of “spoiled markets,”
such as China and Indonesia, created by
donors, and the list of countries criticized by
donors for high levels of corruption.
Other flavours of associated finance are used
by donors to help their firms win big capital
projects financed by the international financial institutions (IFIs), such as the World Bank
Group and the regional development banks.6
Many donors establish “consultant trust
funds” at the IFIs, which are used by those
institutions to hire consultants from the
donor country to design capital projects.7
The donor country hopes this will give their
firms a “market intelligence” advantage
when the project is put out to tender. Other
donors eschew intelligence for direct bribery,
by providing co-financing (paying part of the
cost of the IFI project) or parallel financing
(paying for a different, but closely related
project), in the hope their firms will win the
bid for the IFI project itself.8
dollar value of procurement won by its
firms, although it is sixth in terms of total
contributions to the Bank. However, these
same studies indicate that Canadian firms
win over 40 percent of the contracts on
which they bid: the major problem may be
simply that not many Canadian firms bid,
whether for lack of interest or because they
don’t supply the goods and services needed
in such development projects.9 For example, the graph below indicates that Canada
does not export much machinery and
transportation equipment except to the US
as part of the integrated auto industry.
The past couple of years have seen some
efforts by the principal aid donors to curtail
their use of associated financing10 and to
increase penalties against firms promoting
corruption.11 These steps have reduced the
problem of spoiled markets and the most
egregious diversions of aid funds to
promote commercial objectives.
GRAPH 1 CANADIAN EXPORTS OF
MACHINERY AND TRANSPORTATION EQUIPMENT, 1994
Imports from Canada as % age of total
Pages a-138 (152)
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
US
EU
JAPAN
ALL OTHER
Destination
Countries also try to “leverage” their ODA
by combining it with other funds through a
bewildering number of associated finance
schemes.5 One recipe is mixed credits, in
which ODA is blended with commercial
Some argue that Canada doesn’t divert sufficient aid money to associated finance to
allow us to win our “fair share” of IFIfunded procurement. For the World Bank, in
1995 Canada ranked 15th in terms of the
All Imports from Canada as % age of Total
Machinery and Transportation Equipment
Source: WTO, International Trade: Trends and Statistics,
Geneva 1995, Tables A.7, A.8, A.9, A.10, A.14.
Trade data is for 1994.
NOTES
1
For many years, every West African university receiving French aid had to employ a French chef for its cafeteria.
2
Cranford Pratt, Canadian International Development Assistance/Policies: An Appraisal (Montreal: McGill-Queen’s University Press, 1994).
3
Canada ties a higher percentage of its aid (26.7%) than does the average donor (22.1%).
4
“Thoroughly modern mercantilists,” The Economist, February 1, 1997, p. 24.
5
Some donors (e.g., France) use this tactic aggressively, while others, including Canada, claim their associated financing schemes are purely “defensive” and used to match the financing
packages put forward by competitors. DAC describes Canada’s use of associated finance—at $57 million or 2% of ODA in 1992—as “modest.” However, a study of Canadian associated
financing for IFI projects alone showed $166.4 million spent in 1993-94. (Canada, “Interdepartmental Task Force on IFI Procurement: Final Report,” Ottawa, 1995, p. 18).
6 Big-ticket capital projects are hotly contested. Ron Brown, the late US Commerce Secretary, established the Commerce Department’s Advocacy Centre or a “war room” to track the 100
biggest capital projects overseas and coordinate government support to the large American engineering firms competing for these contracts. Canada has recently established a Capital
Projects Action Team (CPAT) to coordinate Canadian government efforts to secure such projects.
7
Donors also use consultant trust funds to encourage IFIs to give more attention to specific development issues, such as the environment or gender.
8
Canadian studies indicate that bribes beat intelligence. Canada, “Interdepartmental Task Force on IFI Procurement: Final Report,” Ottawa, 1995.
9
Seventy-eight percent of World Bank procurement is for equipment (Canada supplies very little of this), 10% is for civil works (Canada does reasonably well) and 9% is consulting services (Canada does very well). Office of Liaison with International Financial Institutions (OLIFI), “Annual Report 1995: Canadian Procurement at the World Bank and the InterAmerican Development Bank” (Washington, D.C.: Embassy of Canada, 1996).
10
See ACTIONAID, The Reality of Aid: An Independent Review of International Aid (London: Earthscan,1997), p. 251 and the OECD website on aid and commercial interests:
http://www.oecd.org
11
On December 17, 1997, 29 OECD countries signed the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
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1
9
9
8
EXPORT CREDIT PREMIUM RATES
After 19 years, the Export Credit Arrangement Group within the OECD has reached an agreement to
eliminate the most egregious subsidies of export credits.1 The new rules (the “Knaepen Package”)
are built on the simple proposition that, if a state export insurance agency loses millions of dollars
every year, its premiums for country and sovereign risk insurance are not high enough to cover its
long-term insurance claims plus operating costs. Such low premiums constitute a trade-distorting
subsidy to the country’s exporters, and are incompatible with WTO obligations. But note:
• the agreement will not take effect for two years to “…enable participating governments to
manage their exporters’ expectations…” (i.e., come to grips with the startling proposition
they will not be subsidized by taxpayers); and
• the new arrangement will be a “soft law” (i.e., a nonbinding, voluntary agreement).
NOTES
1
OECD, News Release, “New Rules for Export Credit Premium Rates,” Paris, June 26, 1997.
DIRECT MARKETING ASSISTANCE
THE NEW GAME PLAN
Canada’s direct marketing efforts on behalf of
firms working internationally used to be modest, such as having trade commissioners shepherd business people around trade fairs. A
recent article in The Economist noted that, until
recently, it was thought unseemly for a highprofile politician to flog merchandise, and that
“…de Gaulle of France once refused to meet a
Japanese prime minister, dismissing him as a
‘transistor salesman’.”13 Now the leaders of
many governments, including Canada’s, place
trade missions at the top of their agendas.
During the 1993 federal election, the Liberals
attacked the cozy relations with the United
States developed under Prime Minister Brian
Mulroney’s government, and promised voters
an independent foreign policy. This commitment, plus the priority placed on job creation
and deficit reduction, resulted in the following
broad changes:17
In many respects, the new hard sell tactics have
been an outstanding success. Team Canada missions raise our profile in the countries visited,
especially among local politicians and their
bureaucrats. The onslaught of the 11 most
senior politicians in a country must impress
even hard-nosed private sector dealmakers in farflung markets. And the government has claimed
deals aplenty: the running total before the 1998
mission exceeded $22 billion, with more than
96 percent of these deals still “in effect.”14
And now with a tally of 306 signings worth
$1.78 billion, Team Canada 1998 inked the
most deals signed on any trade mission.15
• Trade diversification. To lessen our dependence on, and vulnerability to, the US
market, the government seeks to diversify
exports. Accordingly, it has pushed ahead
with new trade pacts (WTO, Chile, Israel),
and is emphasizing non-US markets in its
trade promotion programs.
• Multilateralism. While it ratified the North
American Free Trade Agreement (NAFTA)
early in its first term, the Liberal government
soon switched emphasis to multilateral
agreements covering both trade and foreign
investment. Such agreements give middlepower countries such as Canada the option
to take trade disputes to an international
forum so they need not confront such
economic powers as the US on their own.
However, the best proof that Team Canada is
good for Canadian business is that the many hundreds of business people who participate pay their
own way.16 In addition to having senior politicians open foreign markets for them, participants
in a Team Canada mission have tremendous
opportunities for doing business among themselves—or perhaps to have a sit down with a
premier to see what kind of incentives are on offer
if they move a factory to, say, New Brunswick.
• Better coordination. With shrinking resources,
and under pressure from the private sector to
reduce confusion caused by duplication,
federal departments have agreed to better
coordinate among themselves and with the
provincial export promotion units. This,
confusingly, is also called the Team Canada
approach.18 There is, however, one overall
strategy, called Canada’s International
Business Strategy (CIBS), plus a series of 27
more detailed sector strategies.
Rising exports, and the public and private sectors and 11 Canadian politicians working happily together: What are we doing right?
• Greater focus. Given shrinking resources and
the mandate for trade diversification, CIBS
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BOX 4 CANADIAN POLICY INITIATIVES AND PROGRAMS
INTERNATIONAL TRADE AND INVESTMENT
P
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E C T O R
FOR
Securing Market Access
Trade negotiations (multilateral, plurilateral, regional, bilateral) ................................................DFAIT
“Fronting” private sector companies in deals with foreign governments .....................................CCC
that wish to deal on a government-to-government basis
Interventions for specific sectors or markets ..............................................................................DFAIT
Coordinating Government Policies
Canada’s International Business Strategy (CIBS) ...................................................................DFAIT, IC
Coordination with other national policies...............................................................................Cabinet
Subsidies to Exporters (or their overseas customers)
Direct export subsidies (loans and insurance).........................EDC1 (Canada Account) ($135 million)
Program for Export Market Development (PEMD) ..............................................DFAIT2 ($11 million)
Program for International Business Development (PIBD).....................................DFAIT3 ($26 million)
CIDA INC.............................................................................................................CIDA4 ($65 million)
Private sector development projects................................................................CIDA5 (total unknown)
Other tied aid .................................................................................................CIDA6 (total unknown)
Consultant trust funds .........................................................................................CIDA ($13 million)7
Other subsidies and subsidized services
DFAIT (information & training services in Canada & abroad) ................................$213+ million2
Industry Canada (information & training services in Canada)....................................$69 million2
Agriculture & Agri-Firm Canada ......................................................................................$27 million2
(export credits for agri-food, plus Information & training services in Canada & abroad)
Other federal government departments ..................................................................$29+ million2
Provincial governments (information & training services in Canada & abroad) .......$260 million8
Appropriations to CCC ..............................................................................................$11 million9
CSIS (market intelligence; industrial espionage)........................................................................na
Other Subsidies to Firms (not necessarily exporters)
R & D co-investment in pre-commercial innovation ....................................................TPC ($varies)10
R & D for small and medium-sized enterprises.................................................................NRC–IRAP11
Special tax treatment
R & D tax credits ........................................................................................................$1 billion12
Employment income earned abroad (federal & nine provinces) ...............................................na
Employment income earned abroad on CIDA projects (Québec)..............................................na
Other Services to Exporters (Mainly on commercial terms, with little or no subsidy)
Loans to buyers of Canadian products ..............................................................EDC $3,678 million13
Export insurance .............................................................................................EDC $18,352 million14
Export finance ........................................................................Business Development Bank of Canada
Export finance....................................................................................Various provincial governments
Coordination of support for large international capital projects .....................................DFAIT (CPAT)
Services to Canadian Firms Investing Abroad
Foreign investment insurance ............................................................................EDC ($928 million)14
Private investments in developing countries....................................................CIDA INC4 (see above)
Joint ventures with local firms .......................................................................CIDA (various projects)5
KEY:
CCC:.............................Canadian Commercial Corporation
CIDA: ...........Canadian International Development Agency
CIDA INC:...............CIDA, Industrial Cooperation Program
CPAT:.......................................Capital Projects Action Team
DFAIT: ......Department of Foreign Affairs and International Trade
EDC: ...............................Export Development Corporation
IC:...............................................................Industry Canada
IRAP:.......................Industrial Research Assistance Program
NRC:...........................................National Research Council
TPC: ...................................Technology Partnership Canada
NOTES
1 The Export Development Corporation provides a range of finance and insurance products to Canadian exporters and
investors, but on commercial terms and according to prudent insurance practices. However, the federal government
uses the EDC as a vehicle “…to support Canadian export transactions which, on the basis of prudent risk management…cannot be supported by the Corporation.” Canada, Report on the Canada Account Study (Ottawa: External
Affairs, 1992), p.1. This is called the Canada Account, and the figure shown is for concessional loan disbursements and
loan provisioning for 1996-97.
2 Canada, OAG, Report of the Auditor General of Canada to the House of Commons: Chapter 25—Canada’s Export Promotion
Activities (Ottawa: Public Works & Government Services, 1996). Figures are for 1995-96. Some grants may be repaid if
the firm is successful.
3 Ibid.
4 Ibid. Note that a significant proportion of CIDA INC funds are to assist Canadian firms invest in, rather than export
to, developing countries.
5 See CIDA website, http://www.acdi-cida.gc.ca and IFInet.
6 The last DAC review of Canadian development assistance reported that 40% of Canadian bilateral aid is “tied” to the
purchase of Canadian goods and services, and another 20% is “partially untied” (i.e., goods and services can be purchased from developing countries, but not from competitors in industrialized countries), leaving 40% untied, far lower
than the DAC average of 59%. Other studies indicate 70 cents of every Canadian aid dollar are spent purchasing
Canadian goods and services. ACTIONAID, The Reality of Aid: An Independent Review of International Aid (London:
Earthscan Publications, 1997), p. 45.
7 About $40 million is available via the vaious Canadian trust funds over a three-year cycle. See also the IFInet web site.
8 Canada, DFAIT, “Review of Financial Assistance for International Business Development,” Ottawa, 1995, p. 1.
9 Canada, 1997-98 Estimates: Part II The Main Estimates. Figure shown for 1996-97.
10 Liberal Party of Canada, Securing Our Future Together: Preparing Canada for the 21st Century, Ottawa, 1997. Monies
invested by Technical Partnerships Canada may be re-couped from royalties.
11 Ibid. The Liberal plan promises an increase of $34 million per year, bringing the total to $130 million.
12 The Conference Board of Canada, “Canada a Leader in R & D Tax Incentives,” The Inside Edge, vol. 1, no. 2, p. 5.
13 EDC, Annual Report 1997. Figure shown is for total value of loans issued.
13 Ibid. Figure shown is for total value of export insurance issued.
14. Ibid. Figure shown is balance of foreign investment insurance outstanding as of 31 December 1996.
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stresses the need to focus on a limited
number of fast growing, “emerging” markets,
and niches in which Canadian businesses are
internationally competitive. Individual
departments also are trying to assess their
comparative advantage vis-à-vis other
government bodies to reduce duplication,
and to put more of their declining resources
into those specific services.19
• Increased cooperation with the private sector.
The overall thrust of the government’s policy
and program changes is in keeping with the
recommendations of a private sector task
force—the Wilson Report (headed by
Red Wilson of BCE Inc.)—commissioned to
review Canada’s international business
development strategy. In addition, the Team
Canada sector strategies are developed in
conjunction with representatives from the
private sector, academics and, occasionally,
union representatives who sit on National
Sector Teams, supported by an International
Trade Advisory Committee (ITAC)20 and 27
Sectoral Advisory Groups on International
Trade (SAGITs).21
• Promotion of small and medium-sized enterprises.
Given shrinking resources and the pressure
to create jobs, a higher percentage of public
sector resources available through the standard trade promotion programs are reserved
for small and medium-sized enterprises
(SMEs), which are believed to create the bulk
of new jobs.22 The target is to double the
number of SMEs which export by the year
2000. Virtually all departments and agencies
involved have developed new “SME-friendly”
products and services.
• Performance measurement. Prodded in part by
the Auditor General, all agencies involved in
the International Business Strategy are working on new systems to determine whether
their services are delivering value for money.
There also is increased emphasis on getting
repaid when public subsidies assist firms in
making sales in a new market,23 and even
talk of charging companies for at least some
of the services traditionally provided free by
the government.
• Use of information technology. To cope with
all this coordination, consultation, and
networking, government agencies have
invested heavily in information technology.
Companies can register with WINexport, a
database that allows trade commissioners to
check on which Canadian companies sell
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which product, and alert them of a possible
sale elsewhere. They also can log onto
Strategis (the Industry Canada website), and
from there connect to ExportSource (the
Department of Foreign Affairs and
International Trade website), Statistics
Canada, the Alliance of Manufacturers and
Exporters Canada, and any number of related
sites. They can surf the IFInet to study the
World Bank’s project pipeline, then check
what’s on offer from the Canadian
International Develoment Agency (CIDA).
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Graph 2 Some 1996 Canadian Export
Comparisons: Selected States
& Regions of the World
MICHIGAN
COMPETITION
ALL NON-US COUNTRIES
NEW YORK
IS
BECOMING INCREAS
-
ALL DEVELOPING COUNTRIES
INGLY FIERCE IN THE
CALIFORNIA
MARKETPLACE AND SO
ALL ASIA (except Japan)
It appears Canada is on a winning streak, with a
steady string of positive annual trade balances,
and is now strategically re-deploying its forces
to win the battle for emerging markets.
YOU HAVE TO DIFFEREN
WISCONSIN
TIATE YOURSELF FROM
ALL AMERICAS
MARYLAND
YOUR COMPETITORS
ALL AFRICA
ARE WE WINNING YET?
$0
$10,000
IF
$20,000
$30,000
$40,000
$50,000
.
YOU ARE WORKING TO
$60,000
MAKE A DIFFERENCE IN
C$Millions
A closer look at trade statistics paints a different,
more confusing, picture. What about those high
profile Team Canada missions to the fast growing Asian markets? In fact, Canada’s trade with
the fastest growing markets has been declining
as a share both of our total exports, and of their
total imports.24 Overall, Canada is at the bottom
of the list of G-7 countries with respect to trade
with developing countries. Meanwhile, our
trade dependence on the US market continues
to increase, with the share of our exports going
to the US rising from 62 percent in 1980 to 80
percent in 1997. A full 35 percent of these
exports are accounted for by intra-firm trade
between US-controlled firms and their Canadian
subsidiaries.25 As Graph 2 depicts, our exports to
Michigan now exceed Canadian exports to all
non-US countries, while exports to Maryland
exceed total exports to all of Africa.26
-
Source: Industry Canada, "Strategis. Trade Data Online"
http://strategis.ic.gc.ca
THE COMMUNITY IN
WHICH YOU ARE SELLING
best known. The budget for this has been cut
from $19 million to $11.5 million over the past
two years.29 This is, quite frankly, small change
compared with subsidies to the huge high-tech
firms, such as Bombardier Inc., Pratt & Whitney
Canada Inc., and Atomic Energy of Canada
Limited (AECL).30 And in spite of new products
tailored to the needs of SME exporters, the vast
bulk of financing and insurance provided by the
EDC flows to huge firms such as Northern
Telecom Ltd (Nortel), Bombardier Inc., and
SNC-Lavalin International Inc.31
What then of our strategy to focus on small and
medium-sized enterprises? The fact remains that
while “Canada is a trading nation, we are not a
nation of traders.” An estimated 70 percent of
our firms do not export at all, while 70 percent
of our total exports are supplied by fewer than
100 enterprises27 and 95 percent by about 5,000
firms—perhaps one-half of 1 percent of
Canada’s registered enterprises. Fewer than
3,000 firms make use of Export Development
Corporation (EDC) services, and only 17 percent
of EDC’s business volume is accounted for by
firms with annual sales of $25 million or less.28
Further shuffling of the data reveals other tough
questions. Has our share of exports to the US
climbed so significantly? One official interviewed mentioned that $1 billion in grain
exports to Asia didn’t show up in our export
figures to Asia in 1995. Given Canadian
transportation bottlenecks, it seems likely these
shipments were routed through the US, perhaps
without all the correct paperwork, and then
recorded as exports to the US. No one is sure
how much trade is wrongly classified, but it
seems reasonable to assume it could total a few
billion dollars.32 As well, many of the bona fide
Canadian exports to the US are components for
final products, which are ultimately destined for
export outside the US.
Of course, SMEs go to the head of the subsidy
queue primarily for the government’s standard
trade promotion programs, of which the Program
for Export Market Development (PEMD) is the
Another complication is raised when one questions the “nationality” of a Canadian export. If,
for example, a seat frame is manufactured in
Mexico, then shipped to Tennessee for uphol123
YOUR PRODUCTS AND
SERVICES
H E L P.
,
IT DOES
GOOD
ETHICAL
PRACTICES DIFFEREN
-
TIATE YOU AND ADD
VA L U E T O Y O U R
PRODUCTS AND
SERVICES
.
COLIN LATHAM,
PRESIDENT & CEO
MARITIME TEL. & TEL., IN
SIO, “THE BEST OF THE TSE
300,” THE FINANCIAL POST
500 MAGAZINE,
MAY, 1997,
P.
30
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C
AND
WHEREVER
G O V E R N M E N T S , D O N O T,
CANNOT OR SHOULD NOT
A C T, T H E B U R D E N S H I F T S
TO THE MANAGERS OF
I N T E R N AT I O N A L
C O M PA N I E S T O E X E R C I S E
THEIR RESPONSIBILITY AS
MORAL INDIVIDUALS.
JAMES HUNTER,
THE 1997 BUSINESS
ETHICS SURVEY REPORT,
KPMG INVESTIGATION
AND
SECURITY INC.,
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stering before being sent to Canada in a German
truck so it can be fitted into a car designed in
Japan, with engines from Taiwan that were
shipped on a Norwegian boat registered in
Panama, should Canadians take credit of the
entire value of the car as an export? Of course we
do, if only because it would be impractical to try
to keep track of all the transactions. There are,
however, various methods used to estimate the
average “local value-added” in exports of certain
products or from certain sectors. A recent set of
estimates33 indicates that Canada’s much
vaunted trade surplus with the US is much
smaller if calculated on a value-added basis. As
well, much of Canada’s high-tech industry, coveted and cosseted precisely because its products
are high value-added, appears so dependent on
imported components that little of the value is
actually added in Canada. It may be that Canada
does better on average with our traditional
exports of semi-processed raw materials.
TORONTO, 1997
WHAT’S
THE
GAME AGAIN?
During the 1996 meeting of world trade ministers in Singapore, Prime Minister Mahathir of
Malaysia said that he had heard quite enough
about “level playing fields.” He wanted to know
what game we were meant to play on these
fields, and if it was American football, he
wanted no part of it. A good throw-away line
indeed, but it also shows there are some fundamental questions concerning Canada’s
International Business Strategy in today’s world.
Take, for example, the apparently straightforward question: What is a Canadian company?
For the vast majority of firms, the answer is perfectly clear. But the vast majority of Canadian
firms don’t export. A few dozen enterprises,
many foreign-owned, account for the bulk of
Canadian trade, much of which is simply sales
between two plants, owned by the same firm,
located in different countries. Such transnationals loom large in the modern global economy.
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really worry about what specific borders their
products cross to get to the final buyer, or do
they simply care whether they make that sale
and record a profit with as little fuss as possible?
Canadian politicians may be opening doors to
emerging markets, and the Canadian government may be picking up the tab for research
and development, but it should be clear that the
game these transnationals are playing has little
to do with the size of Canada’s trade surplus.
For such firms, the goal is not to sell exports, but
rather to “contest” markets. Making products in
Canada and shipping them to some other country may be a winning strategy for contesting that
country’s market at one point in time, but it
might be a complete loser some years later. Some
industries are dominated by giant transnationals
competing against one another across the globe.
Because the cost of developing new products—
such as commercial jets or nuclear reactors—
then equipping plants to manufacture them, is
so enormous, the world market will support only
a small number of firms, each of which needs a
reasonable share of the global market to survive.
Such firms must “go global,” but are forced to
devise suitable strategies to contest market-bymarket. A firm might start in an emerging market by exporting, but then move to licensing its
technology to a local producer, or forging a joint
venture with a state enterprise, or building its
own plant to manufacture the product locally.35
Or it may form a “strategic alliance” with
erstwhile competitors to contest the emerging
market against other strategic alliances.
Foreign policy analysts in other industrial countries are asking similar questions. As one
recently asked: “...does Northern Telecom, a
Canadian firm with substantial manufacturing
operations throughout the United States,
deserve the same support from the American
government as, say, Bell Atlantic?”34
The switch in emphasis from trade balances to
contesting markets is also apparent in the
expanded scope of “trade” negotiations during
the present Liberal government’s first term.
NAFTA includes side-agreements on labour and
the environment, plus a number of provisions
on investments. Canadian negotiators now are
busy working on “mutual recognition agreements” on industrial and safety standards,
harmonization of customs procedures,
“nonbinding principles” for government procurement practices, and developing “a common
understanding on competition policy.”36
Finally, the world’s industrialized countries are
negotiating rules governing the treatment of
foreign investors: the Multilateral Agreement on
Investment (see Chapter 3, p. 58).35
The next question is: What are these transnationals trying to do? Do they care about their
contribution to Canada’s trade balance? Given
that they operate in many countries, do they
It should be clear that the obsession with growing exports and the balance of trade is largely
that—an obsession. As noted by economist Sylvia
Ostry, Distinguished Research Fellow at the
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Centre for International Studies at the University
of Toronto, “the present phase of accelerating
world integration is dominated less by increasing
trade linkages than by growing investment and
technology linkages facilitated by the exploding
financial linkage of the 1980s.”38 The principal
links—financial, investment, trade, and technology—are increasingly situated between and
within transnational corporations that are
contesting markets across the globe.
Given the complications and connections of the
modern global economy, it is impossible to
assess the real impact of Team Canada missions.
While these missions certainly boost the
approval ratings of the participating politicians
and benefit some firms, claims concerning
“deals” made during these missions would
politely be described as hyperbole39 (see Graph
3). Perhaps the greatest benefit to Canada is
much the same as that achieved by the original
Team Canada, when Paul Henderson scored his
famous goal in Moscow a quarter of a century
ago: these missions demonstrate to Canadians
that they can compete with the best on some of
the toughest playing surfaces in the world.
Graph 3 Team Canada Success
Claims
DEALS CLAIMED BY
TEAM CANADA
$22,000
EXPORTS TO
ALL TEAM CANADA
COUNTRIES $7,891
$0
$5,000
$10,000
$15,000
$20,000
$25,000
C$Millions
Notes: Covers Team Canada missions of 1994, 1996, 1997.
Sources: Industry Canada, "Strategis.Trade Data Online."
http://strategis.ic.gc.ca; Government of Canada; and author's
calculations.
AND WHAT
COST?
DO THE
TICKETS
It also is difficult to get a true reckoning of the costs
associated with Canada’s International Business
Strategy, except to say these have been greatly
understated. Look, for instance, at the three pillars
of the Liberal government’s foreign policy:
• The promotion of prosperity and employment;
• The protection of our security, within a stable
global framework; and
• The projection of Canadian values and culture.
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The government policy statement went on to
summarize the key Canadian values as “respect
for human rights, democracy, the rule of law,
and the environment.”40
Consider how well Team Canada projected
Canadian values in its first mission to China
in 1994. During their private meeting with
Chinese Premier Li Peng, then Premier of Nova
Scotia John Savage couldn’t recall whether
Prime Minister Jean Chrétien even raised
China’s notorious human rights record.41 Our
chief salesman refused to meet local human
rights activists to avoid anything that would
“publicly embarrass his hosts.”42 Since that
mission, Canada has also reversed its longstanding policy of co-sponsoring the motion
censuring China at the annual meeting of the
UN Human Rights Commission,43 and, unlike
the UK or US, sent a minister to attend the
handover ceremonies in Hong Kong, at which
time the elected legislature was disbanded and
many laws restricting freedoms came into effect.44
Team Canada members also failed to project the
value Canadians place on the environment, signing deals with China to participate in the notorious Three Gorges Dam and preparing the
groundwork for the subsequent sale of CANDU
reactors—exempted, from environmental impact
assessments required by Canadian law.45 This
exemption was granted in a Cabinet meeting on
November 6, 1996 and was passed into law the
following day, although it was not gazetted until
November 27, the day after the CANDU deal was
signed.46 Even if such action is held to be legal,
how does it project Canadian values such as
democracy and the rule of law?
Indeed, it seems that the Team Canada mission
to China racked up quite a bill in exchange for
some trade and investment deals, trading on
Canada’s integrity and credibility, the hopes of
human rights campaigners in China, and,
perhaps, global security based on nuclear nonproliferation and environmentally sound
development.47 This could readily have been
foreseen. Consider the negotiating position of
Canada’s prime minister once he agrees to lead
such a mission. Desperate to deliver on his
promise of jobs, anxious to diversify exports
away from the US, surrounded by hundreds of
influential business leaders hungry for deals,
and by Canadian journalists anxious for stories,
Mr Chrétien is under tremendous pressure to
sign agreements. His interlocutors are under no
pressure to please their citizens, have every
incentive to stand up to Western pressure so
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they are not seen to be weak, and are perfectly
happy to walk away from the table because they
have offers of similar technology, at firesale
prices, from other countries.
Observers have noted how perilous it is to deal
with countries such as China. “China did what
America would not. It made human rights a
tough part of its policy—but the communist way
[...] if Western companies said a critical word, or
failed to urge appeasement on their governments, they would lose trade and contracts.”48
Another interesting question is what the
Canadian government requires from the firms
it assists, and what actions it takes to prepare
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them, not only as exporters of goods and
services, but also as promoters of Canadian
values and global security. A recent study on
international business and human rights clearly
documents that Canada does little to require or
even encourage Canadian businesses to promote
respect for human rights overseas, lagging
significantly behind the US in this regard.49 It
does not reward Canadian firms for establishing
corporate codes of conduct governing their
international operations,50 nor promote
independent monitoring of Canadian business
activities abroad. Since the international campaign against the apartheid regime in South
Africa, the Canadian government has not
BOX 5 ONE COUNTRY—TWO VIEWS
In February 1997, the federal Department of
Foreign Affairs and International Trade
(DFAIT) issued a report on Colombia called A
Guide for Canadian Exporters and Investors. In
October 1997, the Inter-Church Committee
on Human Rights in Latin America (ICCHRLA)
issued a report on Colombia called One Step
Forward...Three Steps Back, Human Rights in
Colombia Under the Samper Government.
Two reports on one country. But if the
country name in each report was blacked
out, the casual reader—say a potential
exporter or investor—would never know they
were about the same place.
In the ICCHRLA report, the reader would
learn that in 1996 the democratically elected
Liberal government of Ernest Samper Pizano
had declared a state of emergency, and that,
while it was in force, the government had
proposed a series of reforms which would
have “maintain(ed) the country under a
permanent state of emergency.” While the
country’s Constitutional Tribunal eventually
struck down the state of emergency, “the
very fact that these reforms were presented
and defended by significant sectors within
the government, military and business
community is indicative of the erosion of a
democratic commitment and the growing
tendency to seek an authoritarian solution to
the country’s problems.”
And the reader would have learned that
“Colombian human rights monitors have
continued to register an average of approximately 10 people killed every day as a result
of political violence, human rights abuses and
attacks against marginal sectors of society.”
Could this be a country in which Canadian
companies would want to invest, to establish
businesses, to export into? Well, according
to the DFAIT guide, which doesn’t even whisper a mention of human rights abuses or
institutional instability, but does provide
advice on clothing options for particular
126
weather conditions, “Colombia’s economy is
one of the most stable and dynamic in Latin
America.”
DFAIT notes that “the on-going decertification of Colombia by the United States, which
has frozen export credits from the US
Export-Import Bank, has opened opportunities for Canadian financial entities such as the
EDC (Export Development Corporation) and
Canada’s private banks, as well as for US
companies that no longer have access to
Export-Import Bank credits.” Later it states,
“EDC views this policy measure (US decertification) as providing a window of opportunity
for new EDC lending in support of Canadian
export programs in Colombia.” As a consequence, “Colombia is the largest market for
EDC’s Foreign Investment Insurance policies
with over $300 million in exposure, particularly in the oil and gas and telecom sectors.
These policies cover the exporter against the
political risks of war/insurrection,
transfer/convertibility and expropriation.”
So which Canadian companies have taken
advantage of opportunities in this country
that, says DFAIT, has such “excellent credit
risk conditions,” “investment grade credits of
BBB- from Standard and Poors,” and “stable
economic conditions,” but which, says
ICCHRLA, is the worst country in Latin
America for overall human rights violations
and which, says the International
Confederation of Free Trade Unions, is the
worst in the world for trade union violations?
They include Canadian Occidental Petroleum
Ltd, TransCanada PipeLines Ltd,
Interprovincial Pipe Line Ltd, Bell Canada
International, Northern Telecom, Bell
Helicopters, Bombardier, John Labatt Limited,
and McCain Foods Ltd, according to DFAIT.
Stephen Law at ICCHRLA reports that the
federal government has said it will review its
documents and presentation of Colombia.
- SUSAN BRANDUM
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developed guidelines for Canadian firms
operating in countries in which human rights
violations are prevalent. It does not vet the
human rights records of companies participating in Team Canada missions or receiving
services from our trade commissioners, and
does not brief companies on local human
rights issues as a matter of routine (see Box 5).
It provides subsidies to firms operating in
countries with repressive governments and does
not even require that the firms receiving these
government subsidies adopt or adhere to a
corporate code of conduct.51
P L AY I N G
TO
WIN-WIN
Economic integration tends to produce distinct
winners and losers. Advocates expect big gains
as increased competition leads to more rapid
innovation, in addition to greater choice and
lower prices for consumers. But people do more
than simply consume: they also work, pay taxes,
own homes, raise families. If transnationals relocate manufacturing to a developing country,
demand for less-skilled workers declines in
industrialized countries. This tends to reduce
real wages to, or employment of, less-skilled
workers, resulting in increased poverty unless
governments implement compensating measures—better training programs, or reduced payroll taxes. But such measures are expensive, and
increasing globalization is forcing governments
to shift the tax burden from “footloose factors
of production, such as profits and savings,
toward consumption and labour […] especially
unskilled workers who are least mobile.”52
Conversely, globalization implies that the
better-trained can expect good jobs, better and
cheaper consumer products, and lower taxes on
their salaries and investments.
There are similar implications for developing
countries. Globalization has seen a surge in
private sector investment flows to developing
countries from $25 billion in 1990 to $129
billion in 1996, but this is highly concentrated
in the bigger markets and the wealthier market
segments. Countries which, through savvy or
serendipity, were “linkage-intensive” at the start
of the 1990s have become the new “growth
poles,” awash in private investment.53
Assuming proponents of globalization are
correct that closer economic integration will
increase world growth rates, the total economic
benefits of integration will exceed the total
costs. In theory this means the winners could
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compensate the losers, and there still would
be a net economic benefit. What can be done
to ensure the losers from globalization are
compensated, and that the majority of the
world benefits from this growth?
Perhaps the most important step is to ensure
that market access is not denied to developing
countries for those products they can produce
competitively, such as textiles; many agricultural products, such as sugar; and low-tech
industrial products. The next step would be to
reverse the decline in aid budgets, increasing
them until the long promised target of 0.7 percent of GNP is reached. The third important
change is for industrialized nations to stop
using developing countries as a battlefield in the
modern trade wars. Perversely, however, because
GATT/WTO rules have been broadened and
been given more teeth while most aid remains
exempt from these rules, the incentive for mercantilists to use aid funds as ammunition in the
trade wars has increased in recent years.
Consider aid programs in Canada. The private
sector task force commissioned by the Liberals
to review trade programs—the Wilson Report—
came up with the following, quite remarkable
recommendations:
Given decreasing demands for concessional financing, we recommend that the
Government of Canada trade off $60 million annually of Canada Account concessional funds for an increase in the Canada
Account nonconcessional facility, where
demand is increasing. We further recommend that Canada align itself with its
major competitors and use a portion of its
official development assistance budget to
fund concessional financing. This would
make available up to $120 million to
reduce the deficit.54
What does this reveal, other than an interesting
approach to arithmetic?55 There is a claim that
demand for concessional finance through the
Canada Account at EDC has decreased, and a
recommendation that Canada should use ODA
to fund concessional financing. The reason is
that there are tighter international rules governing trade-distorting subsidies, but these rules do
not adequately cover aid.56
Such commercial motivations strongly distort the
aid program, biasing it toward markets—larger
and relatively richer countries,57 and the betteroff in every country—rather than toward the
poor. But vastly increased flows of private sector
127
. . .CANADA
CAN
,
I N D E E D M U S T, A C C O M
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MODATE THE PROMOTION
OF BOTH EXPORTS AND
HUMAN RIGHTS
S I M U L T A N E O U S L Y.
JOE CLARK, “THE BUSINESS
OF
HUMAN RIGHTS,”
BEHIND THE HEADLINES,
OCTOBER, 1996
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BOX 6 THE PRIVATE SECTOR
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DEVELOPMENT: THE GOOD,
There are persuasive arguments for
involving Canada’s private sector in our
development program. First, it is
important to recognize that private
sector firms from the North have
extensive experience in supplying the
goods and services required—they
already transfer far more technology
and financial resources to the South
than do governments. But these are
provided through standard commercial
arrangements such as direct investments, supplier credits, licensing
agreements, and training given by
suppliers to their customers. Successful
private sector initiatives are then “sustainable” in the financial sense because
they generate profits needed for
continued operations.
Second, private firms often are better
equipped than governments or nongovernmental organizations (NGOs) to
provide certain types of services1 that
are provided through the official aid
program, ranging from the management of construction projects, through
management consulting, software
development, and training in many
technical areas. Third, like NGOs, private firms often have the flexibility and
incentive to be more innovative than
government agencies, and there are
many examples of excellent projects
which, simultaneously, have promoted
development and Canadian commercial
interests.2 As well, the fate of Canada’s
aid program ultimately depends on the
support of the Canadian public, including those working or investing in
private firms.
Finally, many donors, including
Canada, now include private sector
development as one of the explicit
objectives of their aid program. While
not universally accepted, many development experts in both the North and
South agree that a healthy private sector is necessary for development, and
THE
S
E C T O R
BAD,
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AND THE
support the use of aid to help poor
nations establish a “propitious environment” for growth of the private sector.3
However, there are very important differences between:
• recognizing that a good deal of
“development” is the result of
commercial activity, and suggesting
that commercial activities should be
subsidized as part of the development
program;
• recognizing the contribution of private firms as suppliers or contractors
to the development program, and
suggesting private firms should dictate
what goods and services are provided
through the development program;
• improving the environment for private sector growth in a developing
country, and subsidizing specific
business ventures by specific firms
in a donor country.
Official development assistance programs are most effective when the
intended beneficiaries can determine
their priorities and then obtain the right
goods and services to address those
requirements: such programs are
“demand driven.” Tied aid typically
increases the costs of these aid programs
by restricting the choice of available
goods and services, and may even make
specific projects ineffectual because the
donor country does not supply the
appropriate goods.4 But trying to promote commercial interests through the
aid program can do even greater damage: it can create a “supply driven” program in which we no longer ask what
developing countries need, but rather
look first to what we have on offer.
For example, the CIDA INC (Industrial
Cooperation Division) program provides
money ($65 million in 1995-96) to
Canadian firms for feasibility studies,
investment support, and professional ser-
I N
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vices (usually, to design capital projects
with the hope of winning the bid to
implement if it should go ahead). A
1992 evaluation of CIDA INC was generally positive, but noted that “…because
the program is driven by Canadian firms,
project formulation tends to focus first on
potential results for the Canadian firm
and secondarily on what development
goals may be attained.”5 It recommended that CIDA clarify the development goals for the program to ensure aid
funds are used to promote development,
as well as business, objectives.6
CIDA INC has taken steps to improve the
program since 1992, most critically by
giving more support to projects featuring
real investments in developing countries
as opposed to subsidizing Canadian firms
looking for contracts on capital projects.
However, a recent survey found that
“In the minds of most [firms receiving
CIDA INC grants], developmental activities are clearly peripheral, not integral, to
the advancement of business interests
even in developing countries.”7 A more
thorough evaluation is now underway
which may document what might be
done to ensure CIDA INC projects give
priority to developmental, rather than
commercial objectives. At the same
time, however, CIDA has recently
announced that Canadian private firms
could propose projects for funding by
the bilateral program, in addition to the
$65 million available via CIDA INC.8
There are other “aid” projects which
are clearly designed to promote
Canadian exports. One example is the
Programme fonds de développement
du secteur privé (PFDSP) that seeks to
“respond to the needs of Morocco’s private sector entrepreneurs by providing
access to Canadian know-how and
technology” by providing 25 percent to
30 percent subsidies for Canadian technology and “shared-cost interventions”
for training and consultancy services.9
NOTES
1
Most of the development budget is spent on goods, such as transportation equipment, pumps, or wheat, rather than on services. Obviously, private firms supply the bulk of
these goods.
2
Each year CIDA grants a number of “CIDA Awards” to private firms for projects that promote certain development objectives, such as environmental protection or gender
equity. As well, many Canadian firms have first proven themselves in a new market by successfully managing a CIDA-funded project, and then gone on to win other contracts in that country, whether financed by the IFIs, the host government, or the local private sector.
3 The work of Douglass C. North, the Nobel Prize-winning economic historian, has been particularly influential in demonstrating the fundamental importance of institutions
to development. See North, Institutions, Institutional Change, and Economic Performance (Cambridge, UK: Cambridge University Press, 1990).
4 For example, in the 1970s and 1980s, thousands of Canadian handpumps were installed in West Africa. Designed for single-family farms or cottages, these pumps were
installed on what was often the only well servicing a village, and quickly broke down when used hours each day.
5 One could wonder what the business community would do in a similar situation. For example, what if a program designed to, say, increase the supply of software engineers
couldn’t show how many people were adequately trained but defended itself by documenting that a dozen classrooms were equipped with computers?
6
Consulting and Audit Canada, “Audit and Evaluation Summary Report: Industrial Cooperation Program/Division—CIDA,” Ottawa, 1992.
7
“Canadian International Development Agency, Industrial Cooperation Program (INC) Survey,” Ottawa, Toronto, COMPAS Inc., June 1997, p. iii.
8
This type of “responsive” mechanism has long been available to NGOs, some of which have undoubtedly proposed projects first because they were good for the organization and second because they addressed the priority needs of the poor in a developing country. Still, workers in the not-for-profit sector face very different incentives from
those in private firms. As well, it is illegal for charities to make donations to political parties or candidates, while private firms are not so restricted. While private firms
undoubtedly will propose some excellent development projects, the danger of political patronage and corruption is greatly increased.
9
“PFDSP in Morocco” on the CIDA website http://www.acdi-cida.gc.ca
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investment are already flowing to the larger and
the richer. These are market opportunities that
are being addressed by market mechanisms.
It would be wrong, however, to conclude that
aid should not support private sector development, or that the Canadian private sector
should be excluded from our aid program (see
Box 6). However, after years of aid budget cuts,
it is crucial that Canada’s aid program reasserts
the priority of developmental, rather than
commercial, objectives. Scarce aid dollars should
be increasingly targeted to basic education,
health, and social services which benefit the
poor but are not commercially viable, to the
poorest countries which are overlooked by
private investors, and to rural areas far from
new growth poles.
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Graph 4 Canadian 1996 Export
Comparisons: Selected US
States and Countries
MISSOURI
CHINA
NORTH DAKOTA
TAIWAN
SOUTH CAROLINA
BRAZIL
ARKANSAS
INDONESIA
OKLAHOMA
THAILAND
DELAWARE
POST GAME HIGHLIGHTS
Officially, Canada’s foreign policy has three
objectives: prosperity, security, and the projection of Canadian values. In its first term, the
present government’s actions were clearly biased
toward the first, with trade considerations
dominating the policy agenda.
In turn, trade policy has been predicated on two
principal objectives: increasing benefits accruing
to Canadian firms from the existing process of
globalization, and slowing down the rate of
economic integration with the United States.
As such, the government has pressed ahead with
trade negotiations at both the multilateral level
and with blocs of emerging markets in Asia and
Latin America. It also has refocused its assistance toward the bigger emerging markets. But
the total amount of financial assistance has
been cut and the sums available, however well
targeted, seem inadequate to significantly influence the aggregate export and investment plans
of the Canadian corporate sector and measurably
decrease our dependence on the US market.
In place of money, Canadian politicians have
substituted their prestige to directly promote
Canadian products and firms via Team Canada
missions. In spite of the seemingly impressive
figures for “deals” signed during those missions,
it remains far from clear that this approach will
have a significant and sustained impact on the
pattern of Canada’s international commercial
activity. At the same time, the pressure to make
the Team Canada missions appear successful
seems to have led to the sacrifice of other policy
objectives, including environmental security,
the promotion of human rights and democracy
ALGERIA
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
C$Millions
Source: Industry Canada, "Strategis. Trade Data Online"
http://strategis.ic.gc.ca
and—in some eyes at least—respect for the rule
of law. Canada’s politicians have ample opportunities to promote Canadian exports without
providing succour to repressive regimes.
Budget cuts to trade promotion programs
and tighter rules relating to trade-distorting
subsidies also increase the pressure from those
who wish to use the aid budget to promote
Canada’s commercial interests. This diverts
funds available to the poorest countries and
peoples, whose interests have already been
damaged by massive cuts to Canada’s aid program. These same people and countries are also
the least likely to benefit from the increased
trade and investment flows brought about by
globalization.
SOME MODEST PROPOSALS
A recent international poll found that Canada
is seen as a country of natural beauty, where
people enjoy personal freedom, good health
care, and a peaceful, albeit frigid, environment.
Canadians are seen as honest, friendly, and
polite. Canadian businesses have a solid reputation for reliability and honesty, although
opinions vary widely whether our products are
technologically advanced or competitively
priced.58 Solid and stolid.
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Such perceptions offer a significant competitive
advantage. Canadian CEOs confirm that we are
well regarded overseas, and that our main
shortfall is “lack of aggressiveness.”59 A review
of Canadian procurement through IFIs found
Canadian consulting firms were well accepted in
developing countries, and that Canadian political support and financial assistance were held in
high esteem.60 Almost all International Trade
and CIDA officers interviewed mentioned that
BOX 7 RECOGNIZING SUCCESS
“Active and successful in the developing world?” asks a brochure from
the Canadian International Development Agency and the Alliance of
Manufacturers and Exporters Canada. “Be recognized for your achievement—apply for an International Development Award.”
Launched in 1992, the annual national awards recognize “the important
contribution that Canadian businesses make to international development,” says Don Boudria, former Minister for International Cooperation.
“Their activities promote the transfer of skills and technology to developing countries. This is beneficial for their economies and strengthens our
commercial ties with them.”1
To date, 23 companies have been recognized. Each award is sponsored by
a Canadian corporation and recognizes achievements in particular categories—improving physical or social infrastructure, for example, the development of an industrial base, the promotion of gender equity, natural
resource conservation, and so forth. And while firms may apply on their
own, most anyone can nominate a company. The winners are selected by
a panel representing government, industry, and the NGO community.
WINNERS
IN
1997
Company
Sector
Country
AGRA Earth &
Environmental Ltd
ARA Consulting
Group
CPCS Transcom Ltd
Improvement of social infrastructure
and environmental protection
Inclusion of women in development
Russia
SR Telecom Inc.
Thiessen Equipment
PREVIOUS
Sponsor
Babcock
& Wilcox
Caribbean
Bank of
Montreal
Growth of industrial sector
Kenya
General Motors
of Canada
(Diesel Division)
Improvement of physical infrastructure Peru
SNC-Lavalin
Advancement of technical capability
Chile
Nortel
WINNERS2
1996: Agrodev Canada Inc.; Cowater International Inc.; Dessau International Ltd;
Ocelot Energy Inc. & TransCanada Pipelines Ltd; Southern Alberta Institute of
Technology.
1995: Associated Engineering International Limited; John Van Nostrand Associates Limited;
Canadian Fishery Consultants Limited; Engine Control Systems Limited; Deloitte & Touche
Management Consultants; Vitronov Inc.
1994: Agrodev Canada Inc.; N.D. Lea International Ltd; Roche International;
The Bank of Nova Scotia.
1993: Champion Road Machinery Limited; MacDonald Dettwiler & Associates Ltd;
Mitel Corporation; Sundel Laboratories.
1992: Canac International Inc.; Cartier Group Limited; Coopers & Lybrand; Novaport;
Reid Crowther International Ltd.
NOTES
1
CIDA, News Release (97-59), “Minister Boudria Presents Canadian Awards for International
Development,” Ottawa, May 26, 1997.
2
CIDA and AMEC, Canadian Awards for International Development 1997.
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Canadian businesses have a significant advantage in many developing countries and within
multilateral organizations because of Canada’s
international reputation, and because our firms
have a reputation for honest dealings.
How to capitalize on this potential competitive
advantage? The answer cannot be for Canada’s
current government to undermine the country’s
favourable reputation, built-up over decades.
Just as a government subsidy to one company
results in higher taxes for the rest of us, pandering to repressive regimes to promote the
interests of a few firms imposes costs on other
Canadians who must live and travel in a less
secure world. Other Canadian firms competing
in international markets may also have to
overcome the negative publicity that inevitably
accompanies a story in which a leader of a
democratic country provides tacit support to
repressive regimes. Finally, even the short-term
commercial victories may prove pyrrhic if a
corrupt regime is overthrown and the new
government decides to favour companies and
countries that did not aid and abet its
predecessor.
Canada should, at all costs, maintain its reputation of an international stance of enlightened
self-interest. To achieve this, the government
should simply follow through on its stated foreign
policy objectives. Some modest proposals follow:
1 FOR THE DEPARTMENT OF FOREIGN AFFAIRS
AND INTERNATIONAL TRADE
• Our department of foreign affairs prepares
human rights evaluations, but does not
release these, in spite of the Liberal promise
while in opposition, to publish annual report
cards on the human rights performance of
foreign governments. These should be published, along with the criteria used in grading
human rights performance.61
2 FOR TEAM CANADA
• That the Prime Minister no longer lead trade
missions to countries whose policies are
inconsistent with fundamental Canadian
values, as documented in the annual human
rights evaluation.
• That the government compile a report on
local human rights and environmental concerns for all countries to be visited on Team
Canada missions, and distribute this in
advance to all participants.
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3 FOR OTHER TRADE AND INVESTMENT
PROMOTION PROGRAMS
• That direct government finance62 should not
be used in any way to support commercial
activities in countries whose policies are inconsistent with fundamental Canadian values, as
documented in the annual human rights evaluation, or for projects that do not meet minimum Canadian standards legislated for
environmental impact assessment.
• That firms receiving public subsidies63 in support of international activities be required to
sign codes of conduct specifying corporate
responsibilities with respect to basic human
rights and the environment.64
• That the government work with human
rights organizations, labour groups, and businesses to develop country-specific guidelines
indicating how businesses should operate to
avoid contributing to human rights abuses or
unnecessary environmental degradation.65
• That the government compile information on
local human rights abuses and include this in
the information provided to Canadian companies investigating business opportunities in
foreign markets.
4 FOR THE AID PROGRAM
In addition, adoption of the following proposals
would ensure that Canada’s development
assistance program, which has done so much to
enhance Canada’s reputation, is not subverted
by short-term commercial interests.
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• That cuts to the international aid program be
reversed and the government make a credible
commitment to reaching the long-standing
target of allocating 0.7 percent of Canada’s
GNP to aid.
• That Canada allocate at least 50 percent of
any future increases in its aid budget to programs addressing poverty and basic needs in
developing countries.64
• That CIDA support for “private sector development” focus on measures to promote a propitious environment for the private sector in
developing countries rather than specific
commercial projects.
THREE STAR SELECTION
A final suggestion—the government sponsors
many awards that recognize significant achievements of the many Canadian firms promoting
prosperity in the international arena. Why not
recognize three stars, giving recognition as well
to those firms that best “protect our security
within a stable global framework” and “project
Canadian values” encompassing respect for
human rights, democracy, the rule of law, and
the environment? Three awards might remind
us all that Canadian foreign policy has three
goals—prosperity, security, and values—and that
Team Canada can only be truly successful if it
maintains a modicum of balance among these.
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NOTES
1
David Vienneau, “Indigenous peoples university planned,”
The Toronto Star, January 21,1998, p. A7
2
Ibid.
3
James McCormack, “The Impact of Exports: An Input-Output
Analysis of Canadian Trade.” Policy Staff Paper No. 94/24 (Ottawa:
Department of Foreign Affairs and International Trade, 1994).
4 Canada, Office of the Auditor General (OAG), Report of the
Auditor General to the House of Commons: Chapter 25—Canada’s
Export Promotion Activities (Ottawa: Public Works & Government
Services, 1996).
5
Paul Krugman, Development, Geography, and Economic Theory
(Cambridge, Mass: The MIT Press, 1995), p. 114.
6 From the “National Policy” of John A. MacDonald, to Pierre
Trudeau’s “Third Option,” Canadian governments have used trade
policy to keep the country from becoming integrated into the
United States. Such policies were heartily endorsed by our manufacturing sector, the main beneficiary of protection from US competition, until the mid-1980s when many of the larger firms decided
our domestic markets were too small and they needed to protect
their access to the US market through a free trade agreement.
7
Governments also work to develop internationally accepted standards
to secure access to foreign markets. Most of these are through the
International Standards Organization (ISO), but some are bilateral (e.g.,
in January 1998 Canada and the European Union signed the
“Agreement on International Humane Trapping Standards” which will
allow Canada to continue exporting furs to Europe, which purchases
75 percent of Canadian furs. Susan Smith, “Trapping accord ensures EU
market for Canadian furs,” The Globe and Mail, January 7, 1998, p. B12.
8
See, for example, Laura Eggertson, “Chrétien seeks probe in
Mexico,” The Globe and Mail, September 29, 1997, pp. B1, B5.
9 The major tax “incentives” are provided to corporations for capital investment and R & D purposes, but there are dozens of other
schemes. For example, the Government of Canada and, by extension, the nine provinces for which the federal government collects
personal income taxes, waive income tax on salaries paid by
Canadian firms to their Canadian employees working overseas on
development projects financed by multilateral agencies. This allows
firms to pay lower salaries and undercut foreign competitors.
Quebec matches this, and gives the same treatment to Quebec residents working on CIDA projects. This allows Quebec firms to
undercut salaries paid by other Canadian firms by perhaps 10-15
percent for CIDA-funded projects. See Revenue Canada,
“Interpretation Bulletin IT-497R: Overseas Employment Tax Credit,”
Ottawa, 1985 and Ministère du Revenu du Québec, “Guide to the
Statement of Employment Income Earned Outside Canada,” 1990.
10 Many governments also have spy networks left over from the
Cold War, giving them another comparative advantage over private market intelligence providers. As well, at least some governments enlist state enterprises in the effort to obtain market
intelligence—for example, in the early 1990s, Air France reportedly
bugged first-class seats and employed state intelligence officers as
attendants in the first-class section. Jonathan Calof, “What’s Your
Competitive Intelligence Quotient (CIQ)?” Working Paper: 96-48
(Ottawa: University of Ottawa, 1996), p. 11.
11 Of course, private insurers could also do this. But governments
may have a comparative advantage in insuring political risk as
they are in direct dialogue with foreign officials and may be better
able to assess and monitor risks relating to currency restrictions,
expropriation, and selective tax measures, and are better at
enforcing contract compliance by foreign governments.
12 Toni Haniotis and S. Schich, “Should Governments Subsidize
Exports through Export Credit Insurance Agencies?” UNCTAD
Discussion Papers, No. 103 (Geneva: UNCTAD, 1995).
13 “Thoroughly modern mercantilists,” The Economist, February 1,
1997, p. 23.
14 A cautionary note: international trade boffins employ a somewhat cavalier use of the word “deal,” and many of these agreements will never culminate in large sales or investments.
15 Vincent Chetcuti, “Small is Big News in Exporting!”
Government of Canada Information Supplement inserted in
MacLean’s, March 23, 1998.
16
The sum was $13,000 for the 1998 mission to Mexico, Brazil,
Argentina, and Chile. Heather Scoffield, “Trade mission to sail
again,” The Globe and Mail, January 8, 1998, pp. B1, B8.
17 See also Claire T. Sjolander, “International Trade as Foreign
Policy: Anything for a Buck,” in Gene Swimmer, ed., How Ottawa
Spends 1997-98—Seeing Red: A Liberal Report Card (Ottawa:
Carleton University Press, 1997).
132
18 In reality, the Team Canada approach is one strategy (we’re all
one team) with two components. Domestically, the public sector
agencies (federal, provincial, and municipal) try to coordinate better among themselves and with the private sector. Internationally,
federal and provincial political leaders agree to work together first
to “sell Canada” as a prelude to selling Canadian products.
19
For example, the Department of Foreign Affairs and International
Trade has determined that its niche is on-the-ground support in foreign markets. Accordingly, it is deploying more trade commissioners overseas, cutting back services in Canada which can be done by
Industry Canada, the Business Development Bank, provincial and
municipal governments, or trade associations.
20 In October 1997, the ITAC was replaced by a “Team Canada Inc.
Advisory Board,” chaired by Red Wilson. Apparently the ITAC,
which included representatives from labour, was considered too
large and unwieldy (i.e., too many interests were represented).
21 There are some revealing omissions in the coverage of these. For
example, there is no SAGIT for the banking sector because (in the
words of one trade official) “Canadian banks have never lacked
channels for policy input.”
22 It is not clear that this belief is correct. See for example, G. Picot;
J. Baldwin; and R. Dupuy, “Small Firms and Job Creation—A
Reassessment,” Canadian Economic Observer, January 1995, pp. 3.13.18.
23 Budget estimates for the Department of Trade target a 50 percent
increase, to $5.55 million, from such repayments. CIDA INC. has
just begun to collect significant repayments from its successful
clients; one such repayment totalled $700,000 for two projects.
24 The share of Canada’s total exports destined for Pacific Rim
countries fell from 13 percent in 1988 to 9 percent in 1996;
Canada supplied only 1.7 percent of China’s 1996 imports, down
from 5.5 percent in 1981. “Canada’s share of exports to Asia falls,”
The Globe and Mail, June 17, 1997, p. B5. It should be noted that
the decision to provide enhanced attention to the emerging markets in Asia is recent, and extra staff are only now being deployed
to those countries. It will take some years before an assessment can
be made whether this new strategy is meeting its objectives.
25
OAG, 1996.
26
Trade within Canada is even more important to our country’s
prosperity: “...the provinces carry out 14 times as much trade with
each other as they do with US states of comparable size and distance.” John McCallum, “The Role of the Nation-State,” Tradewinds,
1997 http://www.tradewinds-tv.com
27 Andrew Griffith, “From A Trading Nation to a Nation of Traders:
Toward a Second Century of Canadian Trade Development,” Policy
Planning Staff Paper, No. 92/5 (Ottawa: DFAIT, 1995).
28
Export Development Corporation, Annual Report, 1996.
29
The budget for the Program for International Business
Development, which covers activities such as trade shows initiated
by DFAIT, and which may include SMEs on a cost-shared basis, has
similarly been cut from $34 million to $16 million. Total DFAIT
expenditures have been cut by about 70 percent over the past
decade.
30
Bombardier Inc. received $144 million in 1996 to defray development costs for new models of planes, with a primary view to the
export market, and may have received $1.2 billion from the
Canadian government over the past 15 years. The Economist,
“Subway to the sky,” August 23, 1997, p. 52. In 1997, Pratt &
Whitney received $147 million for R & D on an engine to go into a
Bombardier plane. “Pratt & Whitney gets federal handout,” The
Globe and Mail, January 10, 1997, p. A1. These handouts, which are
repayable if the products are successful in the market, came from
the Technology Partnerships Canada program administered by
Industry Canada. Canada also provided a subsidy to AECL of $172
million for 1996-97 alone, and by some estimates had provided a
total of $13 billion in subsidies over the life of the corporation. In
addition, in 1996 it funnelled a $1.5 billion loan via EDC to the
China National Nuclear Corporation to purchase two CANDU reactors. David Martin, Exporting Disaster: The Cost of Selling CANDU
Reactors (Ottawa: Campaign for Nuclear Phaseout, 1996).
31 For example, Nortel and Bell Canada International, both subsidiaries of BCE Inc., received between them 49.8 percent of the
$643 million in loans disbursed in fiscal years 1988-89 and 198990 under the Canada Account administered by the EDC. Canada,
Report on the Canada Account Study (Ottawa: Department of
External Affairs and International Trade, 1992). As well, financing
airplane sales has taken so much of EDC’s money that it has established a joint venture subsidiary with Bombardier, called CRJ
Capital Corporation, to handle this business.
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32 Most countries, including the US, keep statistics on “re-exports,”
or goods that enter their country but are then shipped to a third
country with little value-added. In principle therefore, Statistics
Canada could obtain such figures from their counterparts in the US.
conduct. See for example the remarks of Thomas d’Aquino,
President of the Business Council on National Issues, in “Summary
Report—Globalization, Trade and Human Rights: The Canadian
Business Perspective” (Montreal: ICHRDD, February 22).
33 James McCormack, “The Impact of Exports: An Input-Output
Analysis of Canadian Trade,” Policy Staff Paper, No. 94/24 (Ottawa:
DFAIT, 1994).
51 Unlike Canada’s EDC, the US Overseas Private Investment
Corporation (OPIC) is required by law “...to withold investment
insurance to projects in countries that fail to take steps to adopt
laws that extend internationally recognized worker rights to its
employment force.” Forcese, 1997, p. 83.
34 Jeffrey Garten, “Business and Foreign Policy,” Foreign Affairs,
May/June 1997, p. 71.
35 See John H. Dunning, Multinational Enterprises and the Global
Economy (Wokingham; Addison Wesley, 1993), on “the eclectic
paradigm” of international production, which seeks to explain
transnational business operations in terms of Ownership,
Locational, and Internalization advantages (OLI).
36 Quotes taken from “Canada’s International Market Access
Priorities” found on the DFAIT website.
37 The MAI will entail two core obligations: “national treatment”
or the obligation to provide equal treatment between foreign and
domestic investors; and “most-favoured nation treatment” or the
obligation to treat all foreign investors and investors the same way.
The government advertises MAI both as a means to protect the
interests of Canadians investing abroad, and as a way of making
Canada more attractive to foreign investors. Opponents bill the
MAI as “NAFTA on steroids.”
38 Quoted in Alan Alexandroff, “Global Economic Change:
Fashioning Our Own Way,” in Maureen Molot and H. von
Riekhoff, eds, Canada Among Nations: A Part of the Peace (Ottawa:
Carleton University Press, 1994), p. 39.
39 As of June 1996, only $3 billion (35 percent) of the $8.6 billion
in deals from the 1994 Team Canada mission to China had materialized. As of June 1997, the comparable figures for the 1996 mission are $2.45 billion (28 percent) of the claimed total of $8.72
billion. See Scoffield, “Trade Mission to Sail Again.” Analysis of the
1997 mission to South Korea, the Philippines, and Thailand has
not been completed, but the financial crisis in those countries does
not bode well.
40 Canada, Canada in the World: Government Statement (Ottawa:
Canada Communication Group, 1995).
41
The Amnesty International 1997 summary for China:
“Hundreds, possibly thousands, of suspected opponents of the
government were arrested during the year, while thousands of
political prisoners detained in previous years remained imprisoned.
Some were sentenced after unfair trials. Others were administratively detained without charge or trial. Torture and ill-treatment
continued to be widespread...” Amnesty International, Annual
Report 1997, p. 118.
42
Sjolander, 1997.
43 Germany and France also refused to co-sponsor, making a common EU position impossible. “A suitable target for foreign policy?”
The Economist, April 12, 1997, p. 15. The German Chancellor has
also led trade missions to China.
44
See David Cozac and Melanie Gruer. Don’t Shoot the Messenger: A
Guide for Canadian Journalists on Promoting Press Freedom. (Ottawa:
The North-South Institute, 1997).
45 The Sierra Club has launched a suit against four government
ministers on this issue.
46 Stephen Dale, “Canada Shanghais its own law,” Canadian Forum,
March 1997, p. 18.
47 Of course, similar observations could be made about missions to
Indonesia.
48
A.M. Rosenthal, “Laughing in Beijing,” The Globe and Mail,
July 7, 1997.
49 Craig Forcese, Putting Conscience into Commerce: Strategies for
Making Human Rights Business as Usual (Montreal: International
Centre for Human Rights and Democratic Development, 1997).
50 An earlier study indicated only 14 percent of large Canadian
businesses operating abroad have codes of conduct covering minimal human rights standards (Forcese, 1997, p. 8). Recently however, business leaders have been vocal in their support for codes of
52
“Disappearing Taxes,” The Economist, May 31, 1997, p. 23.
53
OECD, DAC, Development Co-operation Annual Report, 1997. See
especially section II-7, “Development cooperation investments to
support linkage intensive development.” Of course, the recent
financial meltdown in a number of Asian countries shows that private foreign capital can exit even faster than it enters, devastating
economies dependent on these funds.
54
Canada, International Business Development Review Report, “The
Wilson Report,” September 30, 1994, p. ii.
55 “Concessional” financing is money provided at below-market
rates of interest. The difference between the market-rate of interest
and the interest-rate specified in the financing deal is a subsidy,
the cost of which is borne by taxpayers and which must therefore
be shown as a “budgetary” item by the government. A “trade off”
of $60 million concessional for an equal amount of nonconcessional funds would reduce the reported budget deficit by $60 million as the government must show the concessional finance on its
consolidated budget while nonconcessional finance is “nonbudgetary.” How this then adds up to $120 million remains unclear.
56 There is a “nonbinding” agreement to limit the most egregious
abuses called the “Helsinki disciplines.”
57 The proportion of CIDA funding going to relatively richer countries
of special interest to Canadian businesses has increased from 10 percent in 1975, to 20 percent in 1978, and 25 percent a decade later.
Cranford Pratt, “Canadian Development Assistance: A Profile,” in
Pratt, ed., Canadian International Development Assistance Policies: An
Appraisal (Montreal and Kingston: McGill-Queen’s University Press,
1994), p. 18.
58
All from Angus Reid Group: 1997.
59
Susan Bourette, “Corporate Canada lacks aggression, new study
finds,” The Globe and Mail, July 15,1997, p. B2.
60 R. D. Gladu, “Strategic Review: Consultant Trust Funds at the
World Bank” (Ottawa: CIDA, 1994).
61 Jeff Sallot, “Election agenda: a foreign policy for the 1990s,”
The Globe and Mail, April 26, 1997, pp. D1, D9.
62 This would include any funds supplied via the Canada Account
of EDC.
63 This would include concessional financing via the Canada
Account, PEMD, and CIDA INC.
64 While Foreign Affairs Minister Lloyd Axworthy came out in
vocal support of the International Code of Ethics for Canadian
Business (see Chapter 1), the EDC has declined to become a signatory of that code as “...it needs to in time adapt to allow more
commercial enterprises to subscribe to that as well.” Quote from
evidence given by A. Ian Gillespie President of EDC, to the
Standing Committee on Foreign Affairs and International Trade,
November 6, 1997.
65 General codes of conduct may not give sufficient guidance for
specific firms working in specific countries, and country-specific
codes may be more useful. See for example James Cooney,
“International Ethical Business Conduct: The Issue of SelfRegulation.” Presentation to the Conference on International
Business Ethical Conduct, University of Ottawa, Human Rights
Research and Education Centre, February 27, 1997.
66 As recently as February 1995, Canada committed itself to allocate 25 percent of its ODA to basic human needs—a target it has
not yet achieved. Alison Van Rooy, A Partial Promise? Canadian
Support to Social Development in the South (Ottawa: The North-South
Institute, 1995). This commitment, until it is reached, should take
clear priority over other interests served by Canada’s aid program.
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A number of organizations in Canada and abroad carry out research and advocacy on issues of
corporate social and environmental responsibility. For more information, contact:
IN CANADA
Caledon Institute of Social Policy
1600 Scott Street, Suite 620
Ottawa, Ontario K1Y 4N7
Tel: (613) 729-8778
Fax: (613) 729-3896
E-mail: partners@cyberplus.ca
Website: www.cyberplus.ca/~caledon
The Canadian Centre for Business in the Community
The Conference Board of Canada
255 Smyth Road
Ottawa, Ontario K1H 8M7
Tel: (613) 526-3280
Fax: (613) 526-4857
Website: www.conferenceboard.ca
Canadian Centre for Ethics and Corporate Policy
50 Baldwin Street
Toronto, Ontario M5T 1L4
Tel: (416) 348-8691
Fax: (416) 348-8689
E-mail: ethicctr@interlog.com
Website: www.ethicscentr.com
The Clarkson Centre for Business Ethics
Faculty of Management
University of Toronto
105 St George Street
Toronto, Ontario M5S 3E6
Tel: (416) 978-4930
Fax: (416) 978-4629
E-mail: stake@fmgmt.mgmt.utoronto.ca
Website: www.mgmt.utoronto.ca/~stake
EthicScan Canada Ltd
Lawrence Plaza Postal Station
PO Box 54034
Toronto, Ontario M6A 3B7
Tel : (416) 783-6776
Fax: (416) 783-7386
E-mail: ethic@concentric.net
Website: www.interactive.yorku.ca/ethicscan
Human Rights Research and Education Centre
University of Ottawa
57 Louis Pasteur
Ottawa, Ontario K1N 6N5
Tel: (613) 562-5775
Fax: (613) 562-5125
E-mail: hrrec@human-rights.cdp.uottawa.ca
Website: www.uottawa.ca/~hrrec
Institute for Research on Environment and Economy
University of Ottawa
5 Calixa Lavallée Street
PO Box 450, Station A
Ottawa, Ontario K1N 6N5
Tel: (613) 562-5895
Fax: (613) 562-5873
E-mail: irreeuo@aix1.uottawa.ca
Website: www.web.net/iree
136
International Centre for Human Rights and Democratic
Development
63, rue de Brésoles
Montreal, Quebec H2Y 1V7
Tel: (514) 283-6073
Fax: (514) 283-3792
E-mail: ichrdd@web.net
Website: www.ichrdd.ca
KPMG Ethics and Integrity Services
PO Box 31
Commerce Court Postal Station
Toronto, Ontario M5L 1V2
Tel: (416) 777-8500
Fax: (416) 777-8818
E-mail: mdeck@kpmg.ca
Website: www.kpmg.ca
Michael Jantzi Research Associates Inc.
372 Bay Street, Suite 1906
Toronto, Ontario M5H 2W9
Tel: (416) 861-0403
Fax: (416) 861-0183
E-mail: mjra@web.net
The National Round Table on the Environment and the
Economy
344 Slater Street, Suite 200
Ottawa, Ontario K1R 7Y3
Tel: (613) 992-7189
Fax: (613) 992-7385
E-mail: admin@nrtee-trnee.ca
Website: www.nrtee-trnee.ca
Public Information Advocacy Centre
1 Nicholas Street, Suite 1204
Ottawa, Ontario K1N 7B7
Tel: (613) 562-4002
Fax: (613) 562-0007
E-mail: piac@web.net
Website: www.web.net/piac
Social Investment Organization
366 Adelaide Street East, Suite 443
Toronto, Ontario M5A 3X9
Tel: (416) 360-6047
Fax: (416) 360-6380
E-mail: sio@webapc.org
Taskforce on the Churches and Corporate Responsibility
129 St Clair Avenue West, Suite 21
Toronto, Ontario M4V 1N5
Tel: (416) 923-1758
Fax: (416) 927-7554
Website: tccr@web.net
Transparency International
Business Ethics
200F Schulich School of Business
York University
4700 Keele Street
North York, Ontario M3J 1P3
Tel: (416) 736-5809
Fax: (416) 736-5762
E-mail: ti-can@bus.yorku.ca
Website: www.transparency.de
Pages a-138 (152)
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9
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OUTSIDE CANADA
Business for Social Responsibility
609 Mission Street, 2nd floor
San Francisco, California 94105-3506
USA
Tel: (415) 537-0888
Fax: (415) 537-08889
E-mail: dhudson@bsr.org
Website: www.bsr.org
Centre for Social and Environmental Accounting
Research
University of Dundee
Dundee DD1 4HN
Scotland
Tel: 44 (0) 138 234-4789
Fax: 44 (0) 138 222-4419
E-mail: csear@acc.dundee.ac.uk
Website: www.dundee.ac.uk/accountancy/csear
Coalition for Environmentally Responsible Economies
711 Atlantic Avenue
Boston, Massachusetts 02111
USA
Tel: (617) 451-0927
Fax: (617) 482-2028
E-mail: ceres@igc.apc.org
Website: www.ceres.org
Corporate Watch
Website only: www.corpwatch.org
Council for Ethics in Economics
125 East Broad Street
Columbus, Ohio 43215-3605
USA
Tel: (614) 221-8661
Fax: (614) 221-8707
E-mail: ethics@infinet.com
Website: www.businessethics.org
Council on Economic Priorities
30 Irving Place
NY, New York 10003
USA
Tel: (212) 420-1133
Fax: (212) 420-0988
E-mail: info@cepaa.org
Website: http://www.-2.realaudio.com
Global Futures Foundation
801 Crocker Road
Sacramento, California 95864
USA
Tel: (916) 486-5999
Fax: (916) 486-5990
E-mail: info@globalff.org
Website: www.globalff.org
Institute for Global Ethics
PO Box 563
Camden, Maine 04843
USA
Tel: (800) 729-2615
Fax: (207) 236-4014
E-mail: wethics@globalethics.org
Website: www.globalethics.org
Institute for Social and Ethical Accountability
112-116 Whitechapel Road
London, E1 1JE
England
Tel: 44 (0) 171 377-5866
Fax: 44 (0) 171 377-5720
E-mail: secretariat@accountability.org.uk
Website: www.accountability.org.uk
Interfaith Center on Corporate Responsibility
475 Riverside Drive, Room 550
New York, New York 10115
USA
Tel: (212) 870-2296
E-mail: info@iccr.org
The Multinational Monitor
PO Box 19405
Washington, DC 20036
USA
Tel: (202) 387-8030
Fax: (202) 927-4178
E-mail: monitor@essential.org
Website: www.essential.org/monitor
The Prince of Wales Business Leaders Forum
15-16 Cornwall Terrace
Regents Park, London NW1 4QP
England
E-mail: info@pwblf.org.uk
Website: www.oneworld.org/pwblf
The Rocky Mountain Institute
1739 Snowmass Creek Road
Snowmass, Colorado 81654-9199
USA
Tel: (970) 927-3851
Fax: (970) 927-4178
E-mail: outreach@rmi.org
Website: www.rmi.org
Social Venture Network
PO Box 29221
San Francisco, California 94129-0221
USA
Tel: (415) 561-6501
Fax: (415) 561-6435
E-mail: svn@well.com
Website: www.svn.org
Stockholm Environment Institute
Lilla Nygatan 1
Box 2142, S-103 14
Stockholm, Sweden
Tel: 46 (8) 412-1400
Fax: 46 (8) 713-0248
E-mail: postmaster@sei.se
Website: www.sei.se
UN Research Institute for Social Development
Palais des Nations
CH - 1211
Geneva 10, Switzerland
Tel: 41(22) 798-8400
Fax: 41(22) 740-0791
E-mail: info@unrisd.org
Website: www.unrisd.org
World Business Council for Sustainable Development
Strandveien 37
PO Box 301
1324 Lysaker
Oslo, Norway
Tel: 47 (6) 758-1800
Fax: 47 (6) 758-1875
E-mail: foundation@wbcsd.ch
Website: www.wbcsd.ch/foundation
137
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Page 138
S TATISTICAL
A NNEX
Andrew Clark and Lawrence Latim
with Kerry Max
T
H E
A TA
I N
C
A N A D I A N
D
D
A
N A LY Z E D
B Y
F R O M
R
T
H E
N
E S E A R C H E R
T H I S
S
TA T I S T I C A L
E V E L O P M E N T
A
T
O R T H
A
E A M
-S
O F
O U T H
N D R E W
C
R
R
I
A
E P O R T
N N E X
WA S
F O R
A
E S E A R C H E R S
N S T I T U T E
L A R K
.
, L
T H E
1998
S S E M B L E D
A N D
E D
A
B Y
A N D
S S O C I A T E S
S
E N I O R
140
TABLE
OF
C ONTENTS
TABLE 1
CANADA AND OTHER HIGH HUMAN DEVELOPMENT
ECONOMIES: SELECTED INDICATORS
142
TABLE 2
THE DEVELOPING COUNTRIES: SELECTED INDICATORS
144
TABLE 3
CANADIAN OFFICIAL DEVELOPMENT ASSISTANCE:
BASIC DATA (1995-96)
148
TABLE 4
CANADIAN BILATERAL ODA BY CHANNEL AND BY COUNTRY
(1995-96)
152
TABLE 5
CANADIAN MULTILATERAL ODA BY AGENCY AND BY
COUNTRY (1995-96)
156
TABLE 6
CANADIAN BALANCE OF TRADE WITH DEVELOPING
COUNTRIES (1996)
160
TABLE 7
TRADE: TOP EXPORTS AND IMPORTS WITH DEVELOPING
COUNTRIES (1996)
164
TABLE 8
CANADIAN FINANCIAL RELATIONS WITH DEVELOPING
COUNTRIES (1996)
168
TABLE 9
MOVEMENT OF PEOPLES
172
TABLE 10
HUMAN LINKAGES BETWEEN CANADA AND THE
DEVELOPING WORLD
176
TABLE 11
CANADA-DEVELOPING COUNTRY LINKAGE INDICES
180
TECHNICAL NOTES
184
141
TA
B L E
1
C ANADA AND O THER H IGH H UMAN D EVELOPMENT
E CONOMIES : S ELECTED I NDICATORS
T
his first table puts into context some
of Canada’s relations with developing countries which are covered in later
tables. It does so by comparing Canada
with other high human development
countries, that is, those countries with a
human development index (HDI) of
0.890 or greater in 1994. Developed by
the United Nations Development
Programme (UNDP), the HDI measures
countries’ level of development by taking health and education indicators into
account, as well as per capita income.
As column 1 shows, Canada achieved
the highest ranking in the world with a
HDI index of 0.960 out of a theoretical
maximum of 1.000. Significantly, this
table also includes countries, such as
Barbados, Cyprus, and Greece, whose
achievements in health and education
have earned them a high HDI despite
relatively low per capita incomes.
Column 2 shows that Canada ranks
sixteenth on the GNP per capita scale:
at US$19,380 in 1995, Canada’s GNP
per capita was significantly lower than
the high human development country
average of US$25,100. However, if one
took cost of living into account, Canada
would again rank near the top in terms
of standard of living.
The following seven columns (3 to 9)
present some of the main features of
each country’s aid program, the most
important policy tool that governments
target toward developing countries.
Column 3 shows that a total US$55.1
billion in official development assistance (ODA) was disbursed in 1996, a
drop of US$3.9 billion over the past
year. Japan remained the largest donor
in absolute volume with US$9.4 billion,
a drop of US$5 billion since 1995. The
United States rose from fourth to second
place, followed by Germany and France
in third and fourth place, respectively.
Comparing Canada to other well established donor country members of the
OECD in terms of ODA as a percentage
of GNP (column 5) gives cause for con-
142
ratios of 0.8 or better, the most generous continued to be the Scandinavian
countries and the Netherlands. Least
generous was the United States, at 0.12,
followed by Italy and Japan.
ODA as a percentage of
the GNP of Members of the
Development Assistance
Committee (1996)
Denmark
1.04
Norway
Netherlands
0.85
Sweden
0.82
France
Luxembourg
0.48
Belgium
Finland
0.35
Switzerland
0.34
Germany
Canada
0.32
Ireland
0.30
Australia
Austria
United Kingdom
Spain
New Zealand
0.29
Portugal
Italy
Japan
0.21
United States
South Korea
Taiwan
0.12
0.83
0.41
0.34
0.31
0.28
0.27
0.22
0.21
0.20
0.20
0.03
0.03
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
cern. In 1996, Canada’s aid program
recorded a precipitous decline in real
terms of 15 percent over the previous
year: only in Portugal and Japan did aid
levels fall more sharply. This fall was
sufficient to move Canada from sixth to
eleventh most generous donor, placing
it in the bottom half of the OECD’s 21
donor countries for the first time since
the 1960s. Canada’s ODA/GNP ratio of
0.31—the lowest since 1969—was the
result of repeated cuts in the aid budget
since 1992. Another sobering comparison: Canada, with a population of 30
million, had an aid program in absolute
dollar terms only US$9 million larger
than Denmark’s whose population
numbers 5 million. Moreover, the
decline in Canada’s ODA/GNP ratio will
continue for at least another two years
if announced cuts are implemented.
In general, aid declined across the board
by 4.2 percent in real terms during
1996, and the overall weighted average
ODA/GNP ratio fell to 0.25—the lowest
level ever recorded. This overall decline
masked considerable differences in individual donors’ aid budgets: 10 donors
increased their contributions while 11
registered decreases. With ODA/GNP
Other aspects of aid help indicate its
effectiveness. As a general rule, the
higher the share of aid going through
multilateral channels, the less it is tied
to domestic procurement. In 1995
exactly one-third of Canada’s aid was
delivered through multilateral channels
such as the United Nations and the
multilateral banks, a figure slightly
lower than in the past but still above
the OECD average of 31.1 percent
(column 7). While most European
Union (EU) countries had a significantly
higher multilateral share, much of this
was channeled through EU aid
programs which, being restricted to EU
donors, are only partially multilateral.
Australia, New Zealand, the US, and
France delivered the largest part of their
aid through bilateral channels.
Most countries delivered their aid as
grants rather than as subsidized or “soft”
loans: the most important exceptions
were Japan, Spain, Germany, France,
and Austria. Significantly, the percentage of Canadian aid provided as grants
fell from 100 to 94 percent in 1995,
largely because a significant amount of
Export Development Corporation soft
loans were recorded as aid.
The share of aid going to the poorest
countries is another indicator of aid
programs’ effectiveness. While more
than half of Canadian aid still went to
middle-income countries in 1994-95,
recent cuts in ODA in Canada, as in
other OECD countries, have tended to
increase the concentration of aid
among the poorest countries. The OECD
average in 1994-95 was 52.1 percent
(column 9); Canada was slightly below
average at 46.5 percent.
In terms of its share of trade with developing countries (columns 10 and 11), in
1995 as in 1994, Canada had the lowest
C
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1
9
share of its exports (8.1 percent) directed
to these markets. This was slightly higher
than the previous year’s 6.9 percent,
and reflects the high concentration of
Canadian trade with other industrialized
countries, particularly the US. A slightly
higher share (13.8 percent) of Canada’s
imports came from developing countries, placing Canada sixth lowest and
well below the average of 30.8 percent.
Belgium and Sweden, from) developing
countries through fast-growing foreign
direct investment, portfolio capital
investment, and private transfers
through NGOs.1 In 1995, this amounted
to almost US$98 billion, or 56 percent
more than net aid flows. Canada, with
net long-term private flows of some
US$2.4 billion, ranked seventh among
high human development countries.
Column 12 shows the net amount of private capital flowing to (or, in the cases of
Column 13 gives Eurodad’s estimate of
the debt owed in 1994 by developing
9
8
countries to industrial-country
governments and their agencies,
such as export/import banks or bilateral
development banks. Canada again
ranked seventh among creditors, with
US$10.6 billion in official debts.
1
The figures on net long-term private financial flows
to developing countries shown in this table, taken
from the OECD, are substantially lower than figures on
financial flows recently released by the World Bank.
This is partly because both organizations measure
different things and use different sources. It also
reflects a considerable statistical discrepancy among
international agencies on the magnitude of these flows.
Excel Table
TABLE 1 C ANADA AND O THER H IGH H UMAN D EVELOPMENT E CONOMIES :
S ELECTED I NDICATORS OF R ELATIONS WITH D EVELOPING C OUNTRIES
Total Net
% Change
Official
Over
Development
Previous
Assistance
Year
(US$ millions) (real terms)
1996 1996/95
Multilateral
Share
as % of
Net ODA
1995
Grant
Share
of Total
ODA
1995
Share of
Net ODA
to Low
Income
Countries
1994-95
Share
of Total
Exports to
Developing
Countries
1995
6
7
8
9
10
11
0.29
0.28
na
na
0.35
0.31
na
1.04
0.34
0.48
0.32
~
~
0.30
na
0.20
0.20
0.41
0.83
0.21
0.85
0.21
na
0.03
0.22
0.82
0.34
0.03
0.27
0.12
13
14
na
na
7
11
na
1
8
5
10
na
na
12
na
19
19
6
3
17
2
17
na
na
16
4
8
na
15
21
22.4
27.0
na
na
50.3
33.0
na
44.9
43.3
23.9
36.0
~
~
42.5
na
50.3
28.1
33.8
30.4
21.1
27.1
33.9
na
~
39.5
30.2
28.0
~
47.1
23.8
100.0
80.0
na
na
98.0
94.3
na
100.0
98.7
82.0
79.5
~
~
100.0
na
91.6
46.8
100.0
99.7
100.0
99.2
100.0
na
~
71.5
100.0
100.0
~
97.1
97.5
48.8
50.1
na
na
49.6
46.5
na
59.2
58.5
37.9
58.4
~
~
69.2
na
58.6
61.5
52.4
48.1
34.1
58.2
81.8
na
~
38.9
50.1
53.3
~
59.8
45.5
47.8
25.7
15.1
41.0
17.7
8.1
54.0
19.3
26.5
22.8
25.0
36.3
5.9
10.3
22.3
27.1
52.2
~
14.7
34.3
9.0
9.5
57.1
46.4
18.9
18.4
22.8
~
21.4
42.5
29.0
15.3
31.7
15.9
14.3
13.8
22.2
13.3
19.4
18.2
25.3
21.0
11.7
16.7
11.5
25.9
52.8
~
22.1
20.9
13.7
16.9
46.9
29.4
21.2
11.6
9.8
~
18.5
44.4
1,341
1,228
59
7,401
~
~
~
~
(1,493)
4,043
2,360 10,635
~
~
26
1,874
57
707
4,417 42,804
12,835 53,917
~
~
~
~
94
~
~
~
145 14,508
22,262 121,028
6
~
3,478
7,920
44
~
273
1,040
35
645
~
~
~
~
623
8,757
465
2,799
(160)
3,173
~
~
12,119 10,862
38,991 41,773
0.25
na
31.1
77.1
52.1
27.2
30.8
97,977 335,114
UNDP
Human
Development
Index
1994
GNP
Per Capita
(US$)
1995
1
2
3
4
5
Australia
Austria
Bahamas
Barbados
Belgiuma
Canada
Cyprus
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Israel
Italy
Japan
Luxembourga
Netherlands
New Zealand
Norway
Portugal
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
United Kingdom
United States
0.931
0.932
0.894
0.907
0.932
0.960
0.907
0.927
0.940
0.946
0.924
0.923
0.942
0.929
0.913
0.921
0.940
0.899
0.940
0.937
0.943
0.890
0.900
0.890
0.934
0.936
0.930
~
0.931
0.942
18,720
26,890
11,940
6,560
24,710
19,380
~
29,890
20,580
24,990
27,510
8,210
24,950
14,710
15,920
19,020
39,640
41,210
24,000
14,340
31,250
9,740
26,730
9,700
13,580
23,750
40,630
12,780
18,700
26,980
1,093
640
0
0
937
1,782
0
1,773
409
7,430
7,515
~
~
177
0
2,397
9,437
77
3,303
122
1,311
221
0
116
1,258
1,968
1,021
92
3,185
9,058
-15.1
-14.0
na
na
-6.4
-15.4
na
10.5
9.3
-11.3
3.8
~
~
14.5
na
33.9
-24.7
21.6
6.2
-7.3
3.1
-15.6
na
~
-8.6
7.6
-1.6
~
-0.8
20.6
Total
0.934
25,100 55,114
-4.2
Country
Net Private
Official
Share
Financial
Bilateral
of Total
Flows to Debt Stocks
Imports Developing
Owed by
from
Countries Developing
Developing (long-term) Countries to
Countries (US$ millions) (US$ millions)
1995
1995
1994
ODA/GNP
Rank Among
ODA/GNP
DAC
Ratio
Countries
1996
1995
12
13
Notes: a Called Belgium-Luxembourg in the Direction of Trade Statistics.
Sources: OECD, Development Assistance Committee (DAC), Press Release, June 1997; DAC, Annual Report 1997; World Bank, WDR 1997; UNDP, Human Development Report 1997;
IMF, Direction of Trade Statistics Yearbook 1997; Eurodad, World Credit Tables 1996.
143
TA
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2
T HE D EVELOPING C OUNTRIES : S ELECTED I NDICATORS
T
his table offers a context for Canadadeveloping country relations by
providing a quick statistical snapshot of
developing countries themselves. It
includes such basic information as
population, GNP per capita, economic
growth rates, adult literacy rates, and
under-5 mortality rates.
The first two columns provide two versions of the UNDP’s human development
index (as explained in Table 1): the basic
human development index (HDI) and
one adjusted to take into account the
situation of women—the gender-related
development index (GHDI). In 1994, the
GHDI was lower than the unadjusted
index in every country, indicating that
men are better off than women throughout the world. As column 1 shows, the
disparity between women and men was
greatest in Asia and the least marked in
Africa, although Asian women were
“better off” in absolute terms than their
African counterparts. Saudi Arabia
showed the greatest gender disparity as
measured by the difference between the
basic HDI and the GHDI.
Column 3 shows that, in 1995, the GNP
per capita varied much more widely
between countries than did the HDI.
Incomes per person ranged from a low of
US$80 to more than US$17,000 in some
oil-exporting developing countries of the
Middle East. On a regional basis, the
Americas had the highest income per
person at US$3,320, followed by Eastern
Europe at US$2,260; Asia and Africa were
well behind at US$710 and US$490,
respectively. Interestingly, Eastern
Europe’s level of development, as
measured by the HDI, was slightly
higher than that of the Americas, largely
because of higher attainments in health
and education.
The income disparity between high
human development economies and
developing countries is stark: on average,
the high HDI economies had incomes
per capita some 23 times larger than
developing countries. Column 4 shows
144
Key Economic Indices 1995
90
80
70
60
50
40
30
20
10
0
AFRICA
AMERICAS
ASIA
ADULT LITERACY RATE
EXTERNAL DEBT/GNP
AID/GNP
this gap is narrowing, however: between
1985 and 1995, developing countries’
GNP per capita grew at an average rate of
2.9 percent annually, compared to an
average growth of 2.0 percent in high
human development countries. There is
little cause for great optimism since this
growth was concentrated in a few countries. Three of the top five performers
were in Asia: Thailand (8.4 %), China
(8.3 %), and Indonesia (6.0 %).
Botswana and Chile tied at 6.1 percent.
On a continent-wide basis, the disparities
in per capita income growth were quite
marked. During the past decade, Eastern
European economies collapsed at a rate
of 4.6 percent annually. This trend is
tentatively starting to reverse as countries
complete the difficult transition from
centrally planned to market economies.
The situation is more distressing in Africa
where incomes continued to fall from
already very low levels, although more
recent positive per capita growth provides
reason for cautious optimism. Asia continued to grow at 4.7 percent per capita
annually, although some economies,
notably in the Middle East and Central
Asia, encountered negative growth. The
Americas’ annual per capita growth rate
was barely positive at 0.3 percent.
In terms of dependence on external loans
and foreign aid (columns 9, 10, and 11),
Africa was by far the most dependent. At
82 percent, the continent’s 1995 debt
load in relation to its GNP was double
that of any other region. Nine countries
had long-term debts in excess of 200
percent of their GNP, and in 1993-94,
19 African countries spent more—sometimes three and four times more—on
servicing their debt than on education.
While Asia’s debt load was quite low at
32 percent, Syria and Laos had debts in
excess of 100 percent of their GNP, and
Indonesia, Pakistan, the Philippines, and
Jordan spent more than twice as much
on debt service as on education. And
while the Americas’ debt as a share of
GNP was low, most countries spent more
on debt service than on education.
Guyana and Nicaragua had the dubious
honour of having two of the world’s
most unsustainable debt/GNP ratios:
well in excess of 300 percent.
Africa’s aid/GNP ratio was almost 10 percent, compared to 2 percent in the
Americas and 1 percent in Asia. In Asia,
Cambodia, Laos, and Mongolia were
highly aid-dependent. Nicaragua and
Haiti also were heavily dependent with
aid/GNP ratios of more than 36 percent.
Column 12 highlights an increasingly
important North-South issue: per capita
emissions of CO2—the world’s most
important greenhouse gas. The UN
Framework Convention for Climate
Change calls for limits and eventual
reductions in the world’s CO2 emissions.
At 11.9 tons per capita, the heavily industrialized high HDI countries emitted
almost five times as much CO2 per capita
as developing countries. Africa’s emissions
were the lowest at 0.9 tons. Emissions in
developing countries are increasing
rapidly, however. The challenge will be to
adopt a much cleaner growth path than
did the already “developed” countries.
Eastern Europe’s relatively high per capita
emissions are expected to decline as less
efficient, dirty industries are cleaned up.
Only a few oil-exporting developing
countries had per capita emissions higher
than industrialized countries’. Canada
was among the top five emitters of CO2
per capita in the world.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
T
R
E
P
O
R
T
1
9
9
8
Excel Table
TABLE 2 T HE D EVELOPING C OUNTRIES : S ELECTED I NDICATORS
Country
UNDP
GenderUNDP
Related
Human
Development Development
Index
Index
1994
1994
A FRICA
GNP
Per Capita
1995
(US$)
GNP/Capita
Growth
Average
Per Year
(1985-95)
(%)
GDP
1995
(US$ millions))
Population
(millions)
mid-1995
Adult
Literacy
Rate
1994
(%)
Under-5
Mortality
Rate
1995
(per 1,000
live births)
External
Debt/GNP
1995
(%)
Aid/GNP
1995
(%)
Debt
Service Paid
CO
as % of
Emissions
Expenditure
Per Capita
on Education (metric tons)
1993-94
1992
2
1
2
3
4
5
6
7
8
9
10
11
12
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa (Zaire)
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
0.614
~
0.349
0.652
0.206
0.233
0.444
0.523
0.338
0.270
0.402
~
~
0.341
~
0.555
0.441
~
0.233
0.546
0.263
0.459
0.250
0.276
0.458
0.446
~
0.655
~
0.310
0.218
0.341
0.752
0.515
0.262
~
0.193
0.372
~
~
0.309
~
0.155
~
0.681
0.306
0.563
0.352
0.342
0.668
0.318
0.362
0.503
0.737
0.335
0.368
0.673
0.221
0.247
0.468
0.547
0.355
0.288
0.412
0.500
0.381
0.368
0.319
0.614
0.462
0.269
0.244
0.562
0.281
0.468
0.271
0.291
0.463
0.457
~
0.801
0.350
0.320
0.229
0.355
0.831
0.566
0.281
0.570
0.206
0.393
0.187
0.534
0.326
0.845
0.176
~
0.716
0.333
0.582
0.357
0.365
0.748
0.328
0.369
0.513
1,600
410
370
3,020
230
160
650
960
340
180
470
680
120
660
~
790
380
~
100
3,490
320
390
550
250
280
770
~
~
230
170
250
460
3,380
1,110
80
2,000
220
260
180
350
600
6,620
180
~
3,160
~
1,170
120
310
1,820
240
400
540
-2.4
-6.1
-0.3
6.1
-0.2
-1.3
-6.6
~
-2.4
0.6
-1.4
-3.2
~
~
~
1.1
~
~
-0.3
-8.2
~
1.4
1.4
2.0
0.1
1.2
~
~
-2.2
-0.7
0.8
0.5
5.4
0.9
3.6
2.9
~
1.2
-5.4
-2.1
~
~
-3.6
~
-1.1
~
-1.4
1.0
-2.7
1.9
2.7
-0.8
-0.6
41,435
3,722
1,522
4,318
2,325
1,062
7,931
365
1,128
1,138
235
2,163
~
10,069
~
47,349
152
~
5,287
4,691
384
6,315
3,686
257
9,095
1,029
~
~
3,198
1,465
2,431
1,068
3,919
32,412
1,469
3,033
1,860
26,817
1,128
45
4,867
490
824
~
136,035
~
1,053
3,602
981
18,035
5,655
4,073
6,522
28.0
10.8
5.5
1.5
10.4
6.3
13.3
0.4
3.3
6.4
0.5
2.6
43.9
14.0
0.6
57.8
0.4
3.6
56.4
1.1
1.1
17.1
6.6
1.1
26.7
2.0
2.7
5.4
13.7
9.8
9.8
2.3
1.1
26.6
16.2
1.5
9.0
111.3
6.4
0.1
8.5
0.1
4.2
9.5
41.5
26.7
0.9
29.6
4.1
9.0
19.2
9.0
11.0
59.4
42.5
35.5
68.7
18.7
34.6
62.1
69.9
57.2
47.0
56.7
73.9
76.4
39.4
45.0
50.5
77.8
25.0
34.5
62.6
37.2
63.4
34.8
53.9
77.0
70.5
~
75.0
45.8
55.8
29.3
36.9
82.4
42.1
39.5
40.0
13.1
55.6
59.2
67.0
32.1
88.0
30.3
~
81.4
44.8
75.2
66.8
50.4
65.2
61.1
76.6
84.7
61
292
142
52
164
176
106
73
165
152
124
108
185
150
158
51
175
195
195
148
110
130
219
227
90
154
216
63
164
219
210
195
23
75
275
78
320
191
139
81
110
20
284
211
67
115
107
160
128
37
185
203
74
83.1
274.9
81.8
16.3
55.0
110.1
124.4
56.4
~
81.4
89.2
365.8
255.2
251.7
~
73.3
195.5
~
99.9
121.6
~
95.1
91.2
353.7
97.7
44.6
~
~
141.7
166.8
131.9
243.3
45.9
71.0
443.6
~
91.2
140.5
89.1
693.2
82.3
34.3
159.7
~
~
~
24.0
207.4
121.2
57.3
63.7
191.3
78.9
0.8
10.2
14.0
2.2
21.1
27.4
5.9
~
~
21.4
17.9
7.6
~
16.1
~
4.3
22.5
21.8
17.0
3.9
~
10.6
11.7
46.9
9.7
7.8
~
~
10.0
33.8
23.4
22.8
~
1.6
84.8
6.2
15.1
0.9
62.9
~
~
2.7
26.9
~
0.3
~
5.3
~
15.5
0.4
14.8
56.8
8.0
287.2
~
~
27.7
49.1
105.6
161.0
43.2
56.2
77.2
~
230.0
~
~
52.5
109.0
68.3
~
~
-185.7
312.8
176.2
~
~
190.5
135.9
~
~
123.5
~
133.2
~
~
224.1
~
~
138.0
458.4
~
~
~
53.3
~
~
~
~
38.9
118.6
39.5
265.3
228.6
435.3
137.6
3.00
0.44
0.11
1.65
0.07
0.04
0.18
~
0.07
0.04
~
1.69
0.11
0.48
~
1.54
0.33
~
0.04
4.51
0.22
0.22
0.18
0.22
0.22
~
0.11
8.10
0.07
0.07
0.04
1.36
1.25
1.03
0.07
9.90
0.15
0.84
0.07
~
0.37
~
0.11
0
7.29
0.15
0.33
0.07
0.18
1.61
0.04
0.29
1.76
Total Africaa
0.374
0.380
490
-1.1
416,639
710.6
55.9
175
81.3
9.6
~
0.90
➤
145
TA
B L E
2 (
C O N T I N U E D
Country
A MERICAS
)
UNDP
GenderUNDP
Related
Human
Development Development
Index
Index
1994
1994
GNP
Per Capita
1995
(US$)
GNP/Capita
Growth
Average
Per Year
(1985-95)
(%)
GDP
1995
(US$ millions))
Population
(millions)
mid-1995
Adult
Literacy
Rate
1994
(%)
Under-5
Mortality
Rate
1995
(per 1,000
live births)
External
Debt/GNP
1995
(%)
Aid/GNP
1995
(%)
Debt
Service Paid
CO
as % of
Emissions
Expenditure
Per Capita
on Education (metric tons)
1993-94
1992
2
1
2
3
4
5
6
7
8
9
10
11
12
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
~
0.777
~
0.557
0.728
0.785
0.811
0.825
0.699
~
0.658
0.675
0.563
~
0.510
0.615
0.332
0.544
0.726
0.770
0.515
0.802
0.649
0.656
~
~
~
~
0.841
0.842
0.792
0.892
0.884
0.806
0.589
0.783
0.891
0.848
0.889
0.723
0.873
0.718
0.775
0.592
0.843
0.572
0.649
0.338
0.575
0.736
0.853
0.530
0.864
0.706
0.717
0.853
0.838
0.836
0.792
0.880
0.883
0.861
~
8,030
2,630
800
3,640
4,160
1,910
2,610
~
2,990
1,460
1,390
1,610
2,980
1,340
590
250
600
1,510
3,320
380
2,750
1,690
2,310
5,170
3,370
2,280
880
3,770
5,170
3,020
~
1.8
3.9
1.8
-0.8
6.1
2.6
2.8
~
4.1
2.1
0.8
2.8
~
0.3
0.6
-5.2
0.1
3.6
0.1
-5.4
-0.4
1.2
-1.6
4.8
3.9
3.8
3.5
-1.7
3.1
0.5
~
281,060
568
6,131
688,085
67,297
76,112
9,233
~
218
11,277
17,939
9,471
271
14,489
493
2,043
3,937
4,406
250,038
1,911
7,413
7,743
57,424
212
532
253
~
5,327
17,847
75,016
0.1
34.7
0.2
7.4
159.2
14.2
36.8
3.4
11.0
0.1
7.8
11.5
5.6
0.1
10.6
0.8
7.2
5.9
2.5
91.8
4.4
2.6
4.8
23.8
0
0.2
0.1
0.4
1.3
3.2
21.7
96.0
96.0
70.0
82.5
82.7
95.0
91.1
94.7
95.4
94.0
81.5
89.6
70.9
98.0
55.7
97.9
44.1
72.0
84.4
89.2
65.3
90.5
91.9
88.3
90.0
82.0
82.0
92.7
97.9
97.1
91.0
22
27
40
105
60
15
36
16
10
21
44
40
40
33
67
59
124
38
13
32
60
20
34
55
40
22
23
32
18
21
24
~
33.1
46.9
90.6
24.0
43.3
28.2
42.5
~
42.7
36.5
84.1
27.0
42.2
22.3
377.2
39.8
124.6
134.9
69.9
589.7
101.4
29.4
54.1
27.0
24.4
83.5
~
53.6
32.4
49.0
~
0.1
2.9
11.9
0.1
0.3
0.3
0.3
~
11.0
1.1
1.4
3.2
3.8
1.5
15.8
36.1
11.2
3.4
0.2
42.0
0.7
1.9
0.8
1.9
9.0
19.2
21.7
0.5
0.5
0.1
~
65.4
82.2
120.3
176.8
211.1
156.7
146.1
~
~
226.3
220.4
263.1
~
151.0
451.1
14.2
310.4
307.8
110.5
302.3
100.3
126.6
~
~
~
54.1
~
296.0
156.8
130.6
~
3.52
1.32
0.88
1.39
2.56
1.83
1.21
2.64
~
1.36
1.72
0.66
~
0.59
1.03
0.11
0.55
3.26
3.77
0.62
1.69
0.59
0.99
~
~
~
4.58
16.30
1.61
5.75
Total Americas
0.722
0.761
3,320
0.3 1,553,737
473.4
86.2
47
41.0
1.7
~
2.30
1
2
3
4
6
7
8
9
10
11
12
~
0.647
0.628
0.742
0.339
~
0.469
~
0.617
0.630
0.419
0.642
~
0.433
~
0.698
0.769
0.628
0.444
0.708
~
0.651
0.636
0.870
0.368
0.338
0.457
0.348
0.626
0.637
0.446
0.668
0.780
0.531
0.730
0.709
0.844
0.635
0.459
0.794
~
730
480
7,840
240
420
~
270
620
440
340
980
~
~
1,510
1,330
17,390
700
350
2,660
~
-15.1
-16.3
0.2
2.1
4.9
~
~
8.3
-17.0
3.2
6.0
-1.5
~
-4.5
-8.6
1.1
-6.9
2.7
~
~
23.5
2,058
3.8
3,475
7.5
4,524
0.6
29,110
119.8
292
0.7
~
45.1
2,771
10.0
697,647 1,200.2
2,325
5.4
324,082
929.4
198,079
193.3
63,716
64.1
~
20.1
6,105
4.2
21,413
16.6
26,650
1.7
3,028
4.5
1,760
4.9
11,143
4.0
~
98.8
96.3
84.4
37.3
41.1
82.7
35.0
80.9
94.9
51.2
83.2
68.6
56.8
85.5
97.5
77.8
97.0
55.8
92.0
257
31
50
20
115
189
150
174
47
26
115
75
40
71
25
47
14
54
134
40
~
17.6
9.2
~
56.3
29.3
~
73.5
17.2
51.6
28.2
56.9
~
~
126.2
23.5
~
20.2
124.9
25.5
~
10.3
3.1
1.1
4.4
24.8
~
20.5
0.5
9.1
0.5
0.7
~
~
8.5
0.4
0
9.3
18.0
1.6
~
~
0.1
~
102.0
~
~
~
84.4
19.5
88.3
680.0
~
~
282.8
3.2
~
3.8
74.3
92.3
0.07
1.21
8.76
~
0.15
0.07
0.11
0.04
2.27
2.53
0.88
0.95
3.81
3.33
2.64
17.48
8.10
3.41
0.07
3.88
➤
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
146
5
C
A
N
A
D
I
A
Country
A SIA (continued)
N
D
E
V
E
L
UNDP
GenderUNDP
Related
Human
Development Development
Index
Index
1994
1994
O
P
M
E
N
T
R
E
GNP
Per Capita
1995
(US$)
GNP/Capita
Growth
Average
Per Year
(1985-95)
(%)
GDP
1995
(US$ millions))
P
O
R
T
1
9
9
8
Population
(millions)
mid-1995
Adult
Literacy
Rate
1994
(%)
Under-5
Mortality
Rate
1995
(per 1,000
live births)
External
Debt/GNP
1995
(%)
Aid/GNP
1995
(%)
Debt
Service Paid
CO
as % of
Emissions
Expenditure
Per Capita
on Education (metric tons)
1993-94
1992
2
1
2
3
4
5
6
7
8
9
10
11
12
Malaysia
Maldives
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
0.782
0.600
0.650
0.321
~
~
0.392
0.508
0.650
0.713
0.581
0.694
0.646
0.575
0.812
0.737
0.712
0.727
0.655
0.552
~
~
~
0.832
0.611
0.661
0.347
0.765
0.718
0.445
0.525
0.672
0.840
0.960
0.711
0.755
0.580
0.833
0.772
0.723
0.866
0.662
0.557
~
0.361
0.663
3,890
990
310
200
~
4,820
460
1,160
1,050
11,600
7,040
700
1,120
340
2,740
2,780
920
17,400
970
240
~
260
1,370
5.7
5.9
-3.8
2.4
~
0.3
1.2
2.3
1.5
-4.2
-1.9
2.6
0.9
~
8.4
2.2
~
-2.8
-3.9
~
~
~
0.7
85,311
250
861
4,232
~
12,102
60,649
4,901
74,180
7,447
125,501
12,915
16,783
2,009
167,056
164,789
5,156
39,107
21,590
20,351
~
4,790
2,608
20.1
0.3
2.5
21.5
23.9
2.2
129.9
4.3
68.6
0.6
19.0
18.1
14.1
5.8
58.2
61.1
4.5
2.5
22.8
73.5
2.0
15.3
1.7
83.0
93.0
82.2
27.0
95.0
35.0
37.1
71.2
94.4
78.9
61.8
90.1
69.8
96.7
93.5
81.6
97.7
78.6
97.2
93.0
~
41.1
78.8
13
77
74
114
30
25
137
95
53
23
34
19
36
79
32
50
85
19
62
45
~
110
46
42.6
61.6
61.5
53.3
~
29.5
49.5
53.3
51.5
~
~
64.4
134.8
35.0
34.9
44.1
10.0
~
7.5
130.2
~
155.2
~
0.1
22.3
24.9
~
~
0.6
1.3
8.2
1.2
0
0
4.3
2.2
3.4
0.5
0.2
0.7
0
0.4
~
~
4.4
~
159.5
52.8
87.5
66.4
~
135.7
208.1
~
328.3
~
~
113.0
~
0.3
147.7
183.5
2.3
~
3.3
~
~
~
~
3.74
~
4.03
0.07
11.21
6.12
0.59
0.55
0.77
~
13.85
0.29
3.19
0.70
2.02
2.49
10.96
42.28
5.75
0.29
~
0.81
~
Total Asia
0.530
0.644
710
4.8 2,230,766 3,231.9
64.8
82
31.9
0.9
~
1.85
1
2
3
4
5
6
7
8
9
10
11
12
0.643
0.792
~
0.772
0.741
0.859
0.764
0.837
0.702
0.750
0.726
0.608
0.818
0.733
0.778
0.859
0.866
0.681
~
0.655
0.806
~
0.780
0.760
0.882
0.776
0.857
0.711
0.762
0.748
0.612
0.834
0.748
0.792
0.873
0.886
0.689
~
670
2,070
~
1,330
3,250
3,870
2,860
4,120
2,270
1,900
860
920
2,790
1,480
2,240
2,950
8,200
1,630
~
~
-5.2
~
-2.6
~
-1.8
-4.3
-1.0
-6.6
-11.7
~
~
1.2
-3.8
-5.1
-2.8
~
-9.2
~
2,192
20,561
~
12,366
18,081
44,772
4,007
43,712
6,034
7,089
1,975
3,518
117,663
35,533
344,711
17,414
18,550
80,127
~
3.3
10.3
4.4
8.4
4.8
10.3
1.5
10.2
2.5
3.7
2.1
4.3
38.6
22.7
148.2
5.4
2.0
51.6
10.5
85.0
97.9
~
93.0
97.0
99.0
99.0
99.0
99.0
98.4
94.0
98.9
99.0
96.9
98.7
99.0
96.0
98.8
~
40
20
17
19
14
10
22
14
26
19
~
34
16
29
30
15
8
24
23
31.6
7.9
~
92.3
~
37.0
6.7
72.8
7.6
10.1
~
17.8
36.1
19.5
37.6
33.5
~
10.7
~
8.1
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
na
na
~
12.9
4.4
~
107.9
~
98.5
10.3
194.3
4.9
11.1
87.7
3.5
49.6
55.8
19.3
114.4
51.5
2.8
~
1.21
9.89
3.37
6.08
3.33
13.04
13.19
5.72
5.53
5.86
1.98
3.26
8.90
5.24
14.11
7.00
2.75
11.72
3.63
Total Eastern Europe
~
0.775
2,260
-4.6
778,305
344.8
98.3
25
32.3
~
~
10.71
Total Developing Countries
0.555
0.576
1,090
3.1 4,979,448 4,760.7
69.7
99
40.0
2.4
~
2.40
Total High Human
Development Countries
0.902
0.934 25,100
2.0 22,506,618
98.6
8
na
0
na
11.91
E ASTERN E UROPE
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
878.0
Notes: a Most totals for Africa are for sub-Saharan Africa only.
Sources: World Bank, World Development Report 1997, Global Development Finance 1997; UNDP, Human Development Report 1997; UNICEF, State of the World’s Children 1997;
World Resources Institute, World Resources 1996-97: OECD, Geographical Distribution of Financial Flows to Aid Recipients, 1991/95.
147
TA
B L E
3
C ANADIAN O FFICIAL D EVELOPMENT A SSISTANCE :
B ASIC D ATA (1995-96)
I
n 1995-96—the latest year for which
data is available—Canadian ODA
totaled $2.68 billion, an unprecedented
13 percent drop from the previous year,
reflecting the impact of budget cuts to
the aid program. Indeed, Canadian aid
as a proportion of the country’s GNP
was 0.36 percent, the first time it has
fallen below 0.40 percent since 1970.1
Of that amount, one-third, or $900 million, was delivered through multilateral
channels, such as the international
financial institutions (IFIs) and the UN
system. The remaining two-thirds were
delivered through Canadian institutions
or bilateral channels.
The top three recipients of Canadian aid
in 1995-96 were China ($139 million),
Zambia ($128 million), and Bangladesh
($112 million). The top 10 recipient
countries absorbed almost 43 percent of
the allocated aid in 1995-96. Half of the
top 50 beneficiaries of Canadian aid
were in Africa, 15 were in Asia, nine in
the Americas, and one in Eastern
Europe.2 The geographical distribution
of aid was as follows: Africa, 48 percent;
Asia, 34 percent; the Americas, 16 percent;
and Eastern Europe, 2 percent.
Cuts to Canada’s foreign aid budget
during the past decade have meant that
only a few countries saw the real value
of bilateral aid increase. In Africa these
included Côte d’Ivoire, Egypt, Ghana,
Malawi, Mozambique, and South Africa;
in the Americas, Bolivia and Nicaragua;
and in Asia, China, the Philippines, and
Vietnam. Several former major recipient countries saw Canadian aid fall
abruptly, whether for political reasons
such as Congo-Kinshasa (Zaire) and
Niger, or for budgetary reasons such as
Kenya, Tanzania, Sri Lanka, and
Jamaica.
148
Distribution of Bilateral Aid
by Sector 1995-96
HEALTH & POPULATION 16%
AGRICULTURE 9%
TRANSPORTATION/COMMUNICATIONS 6%
INDUSTRY 6%
ENERGY/MINING 5%
ECONOMIC & FINANCIAL SUPPORT 27%
HUMAN RESOURCE DEVELOPMENT 31%
Canada’s ranking among other bilateral
donors (column 4) gives a sense of
Canada’s potential leverage in a given
country—the likelihood that our aid, or
other influence, will engender change.
Our most important presence was in the
Caribbean, although Canada was the top
donor in only one country, St Lucia.
And while Canada was the world’s
seventh largest donor in 1995, in only
16 of 129 aid-eligible developing countries did we rank among the top five
donors. Canadian aid was widely
dispersed for many reasons: we were
present in a large number of countries; a
large—and increasing—percentage of aid
was allocated on a regional rather than
on a country basis, particularly in Africa
and Asia; and because a large part, also
increasing, was not allocable by country,
as in the case of refugee support, scholarships, and other foreign student costs.
In some cases, the recipient country was
not specified.
Although the allocation by continent
of multilateral and bilateral aid was
approximately the same, the imputed
value of Canadian contributions to
multilateral aid agencies sometimes
exceeded Canada’s bilateral presence in
that country. While that is often the
case in a number of small countries, in
1995-96 it was also true in some larger
economies such as Zambia, Kenya,
Uganda, Colombia, Honduras, and
Vietnam.
This allocation of Canada’s bilateral aid
by sector was remarkably stable over
the past decade, with one exception:
support to the energy sector declined in
favour of health and population, which
in 1995-96 received 16 percent of
Canada’s bilateral aid. As the chart
illustrates, almost one-third of Canada’s
bilateral aid was allocated to human
resource development—education and
institutional support—although a too
high percentage went to tertiary
(university and college level) rather
than primary and basic education. More
than 25 percent was allocated in the
form of economic and financial support
or nonproject aid (including monetized
food aid) designed to assist countries
restructure their economies. Of the
remaining, 9 percent went to agriculture
(including forestry and fisheries);
6 percent each to transportation/communications and industry; and
5 percent to the energy/mining sector.
1
This figure differs from the ODA/GNP ratio given
for Canada in Table 1 because it corresponds to the
1995-96 fiscal year. The Table 1 figure corresponds to
the 1996 calendar year.
2
Most Eastern European countries, apart from Albania
and countries of the former Yugoslavia, are not eligible
to receive aid. This is indicated in the table as “na” for
“not applicable.” Assistance to these countries in
transition is tracked separately.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
T
1
9
9
8
Excel Table
TABLE 3 C ANADIAN O FFICIAL D EVELOPMENT A SSISTANCE : B ASIC D ATA (1995-96)
(IN
MILLIONS OF
CANADIAN
DOLLARS)
Total
Bilateral
(all sources)
1995-96
Total
Bilateral
(all sources)
1985-86
Percent
Change
Per Year
1986-96
Rank of Canada
Among Bilateral
Donors in Recipient
Country (1995)
Total
Multilateral
(all agencies)
1995-96
Total
Canadian Aid
(all sources)
1995-96
Rank of Recipient
Country for Total
Canadian Aid
(including multilateral)
(if in top 50) 1995-96
1
2
3
4
5
6
7
3.89
4.07
15.52
1.94
11.68
5.57
20.45
0.59
1.30
0.72
0
0.19
0.99
31.72
0.18
89.24
0.14
5.23
18.47
3.26
0.72
30.91
5.98
0.73
7.71
0.97
2.06
0
1.51
13.51
19.88
1.05
0.33
9.15
19.16
1.38
4.93
2.23
17.47
0.21
19.62
0.64
0.64
1.63
16.43
4.67
0.85
11.98
0.94
0.02
2.23
11.35
16.68
54.66
6.00
1.40
0.59
4.65
16.82
1.50
16.27
0.31
0.17
1.45
0.31
1.05
17.22
14.35
0.05
10.51
0.14
na
56.70
3.11
0.87
17.17
8.15
0.52
31.90
4.16
0.27
~
0.70
2.78
19.07
5.62
0.43
3.16
3.26
0.09
26.74
1.20
12.19
0
22.90
0.20
0.66
1.08
2.19
29.62
3.29
26.81
10.88
-1.55
1.86
18.56
17.29
24.92
-4.2
11.3
38.7
-8.4
-3.6
14.0
2.3
6.6
22.6
-6.8
-100.0
-15.7
-24.8
8.3
13.7
23.8
0
na
-10.6
0.5
-1.9
6.1
-3.0
3.5
-13.2
-13.5
22.5
~
8.0
17.1
0.4
-15.4
-2.6
11.2
19.4
31.4
-15.6
6.4
3.7
~
-1.5
12.3
-0.3
4.2
22.3
-16.9
-12.7
-7.7
-21.7
~
1.8
-4.8
-0.4
8.2
9
11
7
8
7
9
3
13
8
8
5
7
13
5
7
5
4
13
14
6
10
7
7
11
10
13
6
~
9
6
6
6
8
6
16
14
5
10
6
7
6
5
11
11
9
8
7
8
10
7
16
9
10
na
0.25
6.45
2.89
1.17
8.45
2.80
9.67
0.87
2.95
5.53
1.15
4.77
1.66
35.77
0.38
3.96
0.26
0.53
11.06
0.50
0.88
12.52
7.23
1.33
9.59
0.93
3.24
0
3.37
7.39
9.71
6.14
0.81
0.89
13.20
0.42
3.68
3.87
3.32
0.46
13.04
0.99
4.34
1.02
0.26
2.25
0.74
10.90
4.89
7.56
12.27
116.22
10.01
8.96
4.14
10.51
18.41
3.10
20.13
8.37
30.12
1.46
4.25
6.25
1.15
4.96
2.65
67.49
0.56
93.20
0.40
5.76
29.53
3.76
1.60
43.43
13.21
2.07
17.29
1.90
5.30
0
4.88
20.90
29.59
7.19
1.14
10.05
32.36
1.80
8.62
6.09
20.78
0.67
32.65
1.62
4.98
2.65
16.69
6.92
1.60
22.88
5.84
7.58
14.50
127.57
26.69
63.62
497.39
449.59
1.0
11
383.51
880.89a
B
Country
A FRICA
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa (Zaire)
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Regional Africa
Total Africa
I
L
A
T
E
R
A
L
40
26
25
46
12
6
5
14
7
35
28
23
13
50
42
11
44
24
10
30
22
49
34
2
18
➤
149
TA
B L E
3 (
C O N T I N U E D
)
Total
Bilateral
(all sources)
1995-96
Total
Bilateral
(all sources)
1985-86
Percent
Change
Per Year
1986-96
Rank of Canada
Among Bilateral
Donors in Recipient
Country (1995)
Total
Multilateral
(all agencies)
1995-96
Total
Canadian Aid
(all sources)
1995-96
Rank of Recipient
Country for Total
Canadian Aid
(including multilateral)
(if in top 50) 1995-96
1
2
3
4
5
6
7
0.03
2.14
0.35
19.85
5.80
2.16
4.97
3.89
1.88
1.19
0.44
3.65
2.45
0.06
4.40
3.69
30.80
7.20
7.54
4.96
18.32
0.72
0.34
25.82
0.04
5.30
0
0.10
1.60
1.85
1.26
17.12
17.80
0.28
0.39
2.06
4.74
2.93
6.35
4.33
8.07
8.70
0.14
7.62
2.22
1.56
1.80
6.85
1.99
0.89
7.67
4.35
34.07
4.52
8.24
0.64
0.23
18.84
0.85
1.00
2.82
0.05
-0.43
0.84
0.06
23.82
2.96
4.23
-22.6
0.4
-22.9
21.1
-0.9
-6.7
-4.7
-7.7
29.7
-16.9
-14.9
8.9
3.1
-37.7
8.3
15.3
14.9
5.2
-14.0
0.9
8.3
1.2
4.0
3.2
-26.3
18.1
-100.0
7.2
~
8.2
35.6
-3.2
19.7
-23.8
~
7
7
10
9
11
9
7
7
3
14
10
13
6
11
3
4
9
4
7
12
8
11
6
4
1
5
6
2
7
5
na
na
~
0.34
3.71
1.18
13.34
6.05
0.48
9.83
0.83
0.20
1.29
2.20
3.22
3.15
0.79
1.31
3.99
4.98
8.00
2.02
1.59
7.33
1.10
1.86
3.21
0.84
1.31
0.87
0.01
0.46
0.63
0.29
0.02
4.96
1.60
0.38
5.84
1.53
33.18
11.85
2.64
14.81
4.71
2.07
2.47
2.64
6.87
5.60
0.85
5.70
7.69
35.77
15.20
9.57
6.55
25.65
1.81
2.20
29.04
0.88
6.61
0.87
0.11
2.06
2.48
1.55
17.14
22.76
1.88
197.97
175.40
1.2
9
92.97
290.95
1
2
3
4
5
6
7
6.14
0
0.05
0
74.22
0.34
0.18
3.52
70.86
0.06
51.74
22.31
0
2.10
12.94
1.12
0
0.06
1.34
4.16
~
na
na
~
103.53
0.22
3.03
~
21.80
na
52.45
77.49
~
~
0.65
na
~
na
~
1.48
~
na
na
0
-3.3
4.4
-24.6
~
12.5
na
-0.1
-11.7
~
~
34.9
na
~
na
~
10.9
5
9
11
~
7
10
11
11
7
15
10
9
9
9
7
6
~
13
13
8
4.30
0.34
0.15
0
38.00
0.47
1.01
9.57
68.51
0.17
48.30
1.63
0.46
0.96
2.88
0.09
0.14
5.61
4.53
1.69
10.45
0.34
0.19
0
112.23
0.81
1.19
13.09
139.38
0.23
100.04
23.93
0.46
3.06
15.82
1.21
0.14
5.67
5.87
5.84
41
B
Country
A MERICAS
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
Regional Caribbean
Regional Latin America
Other Americas
Total Americas
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
I
L
A
T
E
R
A
L
9
38
33
48
8
32
43
19
15
3
36
1
4
21
31
➤
150
C
A
N
A
D
I
A
D
N
E
V
E
L
O
P
M
A
T
E
N
R
T
E
P
O
R
T
1
9
9
8
Total
Bilateral
(all sources)
1995-96
Total
Bilateral
(all sources)
1985-86
Percent
Change
Per Year
1986-96
Rank of Canada
Among Bilateral
Donors in Recipient
Country (1995)
Total
Multilateral
(all agencies)
1995-96
Total
Canadian Aid
(all sources)
1995-96
Rank of Recipient
Country for Total
Canadian Aid
(including multilateral)
(if in top 50) 1995-96
1
2
3
4
5
6
7
4.52
0.03
0.04
6.09
0.10
0
-0.06
0.08
22.84
0
0
7.74
0
0.03
16.43
4.93
0.02
0
0.02
12.39
2.00
0.72
4.13
36.09
1.83
3.19
0.02
~
8.87
~
~
73.19
0.56
8.06
~
~
27.99
0.20
na
15.55
-1.73
na
~
na
0
0.38
0.52
1.62
9.17
1.48
3.5
4.1
~
-3.7
~
~
~
-17.7
11.0
0
0
-12.1
-100.0
na
0.6
~
na
~
na
~
18.1
3.3
9.8
14.7
2.1
5
8
~
10
~
~
12
13
7
~
~
9
10
7
7
9
~
~
~
11
na
10
9
na
~
0.80
0.43
1.29
4.84
0.17
0
17.39
0.51
1.40
0
0.24
4.52
1.17
0.06
0.65
0.32
0
0
0.13
15.30
6.48
2.27
3.57
6.74
0.68
5.31
0.46
1.33
10.93
0.27
0
17.33
0.59
24.24
0
0.24
12.26
1.17
0.09
17.08
5.25
0.02
0
0.15
27.68
8.48
2.99
7.70
42.83
2.51
371.11
409.72
-1.0
9
257.76
628.85
1
2
3
4
5
6
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
Other Europe
0.13
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
19.46
-0.02
~
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
~
0
~
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
~
~
16
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
11
~
2.69
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
8.90
0.58
2.82
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
28.36
0.56
Total Eastern Europe
19.57
0
~
~
12.17
31.74
Total
1,086.04
Countries not Specified 262.93
Unallocable by Country 430.42
1,034.71
159.32
115.34
0.5
5.1
14.1
746.41
158.51
0
1,832.43
421.45
430.42
Total Developing Countries 1,779.39
1,309.37
3.1
904.92
2,684.31
B
Country
A SIA
(continued)
Malaysia
Maldives
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
Asia Regional
Other Asia
Total Asia
E ASTERN E UROPE
I
L
E
R
A
L
7
a
Notes: Due to rounding, column totals may not match row totals.
Sources: CIDA, Statistical Report 1995-96; CIDA, Annual Report 1985-86; OECD, Geographic Distribution of Financial Flows to Developing Countries 1991/95.
151
39
27
20
37
29
17
45
47
7
16
TA
B L E
4
C ANADIAN B ILATERAL ODA
BY C OUNTRY (1995-96)
I
f debt forgiveness is excluded, Canada
devoted 28 percent of its governmentto-government assistance to the
following five countries: Bangladesh at
$73 million, China at $62.2 million,
India at $43.9 million, Ghana at
$29.7 million, and Haiti at $25.5
million. The next five—Peru, Bolivia,
the Philippines, Cameroon, and Mali—
comprised another 12 percent. These
contributions best reflect the intended
focus of Canadian assistance because
government-to-government is the
channel over which the Canadian
government has the greatest control.
In the top 10 recipients, seven are
among the poorest developing countries and three (Bolivia, Peru, and the
Philippines) are middle-income countries. This concentration of aid on the
poorest countries has increased as
Canada’s aid budgets have been reduced.
The cuts have also resulted in reductions
in government-to-government aid: in
1995-96 only six countries have government-to-government aid programs in
excess of $20 million, compared to
19 countries only five years before.
Canada is a large contributor of food
aid (column 3), composed mainly of
wheat. Also in the basket are vegetable
oils, pulses, and fish products. In
1995-96, Canada’s contributions,
including food aid delivered through
the World Food Programme (WFP),
totaled $260 million, or close to
10 percent of total Canadian aid. This
year, however, the amount of food aid
delivered through bilateral channels
exceeded that channeled through the
152
BY
C HANNEL
Distribution of Bilateral ODA
by Channel 1995-96
BILATERAL FOOD AID 8%
AND
Development Corporation as the
government guaranteed their loans.
Canada still holds approximately
$1 billion of bilateral debt with the
world’s poorest countries.
OFFICIAL BILATERAL DEBT RELIEF 5%
PARTNERSHIP BRANCH 16%
IHA 3%
IDRC 5%
REFUGEE COSTS IN CANADA 8%
ADMINISTRATIVE
COSTS 9%
OTHER 7%
GOVERNMENT-TO-GOVERNMENT AID 39%
(excluding Bilateral Food Aid)
WFP (see Table 5), largely because the
world experienced fewer emergency
food shortages. In 1995-96, the main
recipients of humanitarian assistance
were the former Yugoslavia, Rwanda,
Burundi, Sudan, and Haiti, all countries
in political conflict.
Worth noting is the amount of ODA that
took the form of debt forgiveness in
Africa, almost all to Egypt ($71.5 million)
and Côte d’Ivoire ($18.8 million). In
1995-96, 5.1 percent of total bilateral aid
was debt forgiveness, largely in the form
of cash paid out to the Canadian Wheat
Board (CWB) and the Export
In 1995-96, CIDA’s Partnership Branch
delivered 16 percent of Canada’s bilateral
aid: more than 75 percent was disbursed
through the not-for-profit sector—universities and colleges, nongovernmental
organizations (NGOs), and churches.
The remainder was channeled through
the private sector by CIDA’s Industrial
Cooperation Program (CIDA INC).
Although most of the funding to the
not-for profit sector is not countryspecific, a study carried out by the
Canadian Council for International
Co-operation and CIDA’s Policy Branch
has shown that 45 percent of this aid
went to Africa, 33 percent to the
Americas, and 23 percent to Asia. Aid
channeled through CIDA INC has
tended to go to middle-income or fastgrowing economies such as China or
Indonesia.
Finally, note that part of the large
amount of bilateral aid not allocable by
country is spent in Canada rather than
in developing countries. In 1995-96 this
amounted to $430.4 million. Some
$153 million or 8 percent of total bilateral
aid was spent on the resettlement of
refugees from developing countries in
Canada and another 4 percent
($69 million) was spent on the direct
and indirect costs of supporting students
from developing countries in Canada.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
1
T
9
9
8
Excel Table
TABLE 4 C ANADIAN B ILATERAL O FFICIAL D EVELOPMENT A SSISTANCE
BY C HANNEL AND BY C OUNTRY (1995-96)
(IN
MILLIONS OF
CANADIAN
DOLLARS)
P A R T N E R S H I P
Country
Bilateral
Food Aid
Official
Bilateral
Debt
Relief
1
2
3
4
5
6
7
8
9
10
11
2.78
0.05
0
0
0
0
0
0
0
0
0
0
0
0
0
0.04
0
3.13
12.90
0
0
3.97
0
0
0
0
1.08
0
1.69
2.33
0
0
0
0
11.23
0.03
0
0
0.21
0
0
0
0
0
0
0.06
0
0
0
0
0
0.54
1.81
6.00
0
0
0.04
0
0
0
0
0
0
0
0
0
0
18.80
0
71.46
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.14
0
0
0
0
0
0
0
0
0
0
0
0
0
0.02
0
0.22
0
0.20
0
0.33
0
0
0
0
0
0
0.03
0
0.06
0
0
0.02
0
0.19
0.35
0.15
0
0.39
0
0
0
0
0.05
0.03
0
0.07
0.27
0.26
0.21
0
0.44
0
0
0.08
0
0.21
0
1.02
0
0
0.12
0
0.04
0.27
0.01
0.13
0.32
0
0.06
0
0
0.06
0
0
0
0
0
0
0
0.01
0
0
0.16
0
0
0.02
0
0.13
0.01
0
0
0.11
0.21
0
0
0.01
0.36
0.04
0
0
0
0
0
0
0
0
0
0
0
0
0
0.32
0
0
0.01
0
0
0.18
0.02
0.06
0.95
0.26
0
0.84
0.08
0.02
0.20
0.44
0.04
0.05
0.12
0
0
0
0.45
0
4.32
0
0.08
0.77
0.03
0
0.34
0.15
0.05
0.35
0
0
0
0.28
0.15
0.12
0
0.11
1.65
0.08
0.04
0
0.04
0
0
0.44
0
0
0
1.50
0.29
0
0.33
0.06
0.53
0.14
0
0.64
0.70
0
3.65
0.05
0
0
4.72
0
0
0
0
0
0
0.60
0
0
0
0
0.40
0.40
0
0
0
0
0
0
0
0.98
0
0
0
0.50
0
0
0
0
0
0
0.05
7.78
0
0
0
0.25
1.50
0.75
3.85
0
0
0
0
0
1.00
0.32
0.45
0
0
0.55
0.09
0.84
0.03
0.40
0
0
0
0
0.04
0.02
0.21
0
1.08
0
0
1.06
0
0
0.48
0
0.01
1.06
0
0
0
0.06
0.20
0.33
0
0
0.48
0.15
0
0
0.75
0.25
0
1.94
0
0
0.01
2.06
0
0.01
0.71
0.05
0.30
0.62
0.56
0.74
2.58
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.11
0
0
0
0
0
0
0.02
0
0
0
0
0
0
0
0
0
0
0
0
0.01
0.17
0
0
0
0
0
0
0
0
0.07
0.05
0
0
0
0
0.22
3.89
4.07
15.52
1.94
11.68
5.57
20.45
0.59
1.30
0.72
0
0.19
0.99
31.72
0.18
89.24
0.14
5.23
18.47
3.26
0.72
30.91
5.98
0.73
7.71
0.97
2.06
0
1.51
13.51
19.88
1.05
0.33
9.15
19.16
1.38
4.93
2.23
17.47
0.21
19.62
0.64
0.64
1.63
16.43
4.67
0.85
11.98
0.94
0.02
2.23
11.35
16.68
54.66
47.85
90.44
5.52
2.71
15.69
27.25
17.67
0.63
497.38a
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa (Zaire)
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Regional Africa
3.60
0.36
13.82
1.77
10.56
0.62
19.27
0.56
1.25
0.60
0
0.14
0.37
12.24
0.18
12.17
0.14
4.65
16.21
3.23
0.40
29.73
5.67
0.67
5.77
0.75
1.08
0
1.16
12.75
18.86
1.05
0.14
6.75
18.67
1.13
4.93
0.94
9.27
0.21
17.01
0.64
0.18
0.11
10.79
0.52
0.85
10.75
0.78
-0.86
1.03
9.76
14.79
49.44
337.46
18
25
9
20
21
15
4
19
10
30
11
27
14
23
24
26
16
Industrial
Institutional Nongovernmental Cooperation
Cooperation
Organizations
Program
(ICDS)
(NGOs) (CIDA INC)
International
Humanitarian
Assistance
(IHA)
International
Int’l Centre
Development Human Rights
Research and Democratic
Centre Development
(IDRC)
(ICHRDD)
Rank
of Recipient
Country
(if in top 30)
A FRICA
Total Africa
B R A N C H
Government-toGovernment Aid
(including bilateral
food aid)
Total
➤
153
TA
B L E
4 (
C O N T I N U E D
)
P A R T N E R S H I P
Country
Bilateral
Food Aid
Official
Bilateral
Debt
Relief
1
2
3
4
5
6
7
8
9
10
11
0
0
0
2.34
0
0
0
0
0
0
0
0
0
0
0
0
5.07
0
0
0
0
0
0
5.91
0
0
0
0
0
0
0
0
0
0
13.32
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.05
0
0.55
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.60
0
0.14
0.03
0.01
1.33
0.30
0.01
0.40
0.05
0.05
0.04
0.13
0.05
0
0.01
0
0.02
0.29
0.55
0.47
0.12
0
0
0.35
0
0.30
0
0
0.31
0
0.01
0.06
0.10
0
5.14
0
0
0.01
0.05
0.40
0
0.07
0.03
0.36
0
0.23
0.04
0.19
0.02
0.28
0
0.90
0.09
0.05
0.01
0.16
0.03
0
0.01
0
0
0
0
0
0
0
0.06
0.09
0
3.10
0
1.14
0
0.35
1.03
1.25
1.53
0.39
0.70
0.01
0
0.85
0.44
0.03
0.87
0.16
0.94
0.54
0.08
3.42
0.06
0.44
0
1.19
0
0.09
0
0
0.18
0.88
0.65
0.43
1.70
0.16
19.48
0
0
0
0
0
0
0.35
0
0
0
0
0
0
0
0
0
3.05
0
0
0.10
0
0
0
0
0
0
0
0
0
0
0
0.26
0.60
0
4.36
0
0.60
0.01
0.13
1.14
0.57
1.01
1.19
0.40
0
0.19
0.36
0
0
0.21
0.10
0
0.17
0.14
0.45
0.22
0
0.18
1.61
0
0.01
0
0
0.01
0.64
0.28
0.03
1.52
0.04
11.23
0
0
0
0
0
0
0
0
0
0
0
0
0.06
0
0.07
0
0.08
0
0
0.14
0
0
0
0.10
0
0
0
0
0
0
0
0
0.36
0
0.81
0.03
2.14
0.35
19.85
5.80
2.16
4.97
3.89
1.88
1.19
0.44
3.65
2.45
0.06
4.40
3.69
30.80
7.20
7.54
4.96
18.32
0.72
0.34
25.82
0.04
5.30
0
0.10
1.60
1.85
1.26
17.12
17.80
0.28
197.97
3
4
5
6
7
8
9
10
11
0
0
0
0
19.98
0
0
0
0
0
32.49
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.21
0.02
0
0.27
1.05
0
0.16
0.26
0
0
0.13
0
0
0
0
0
0.03
0
0
0
0
0
0
0
0
0
0.01
0
2.19
0
0
0
0.02
0
0
0
0.02
0.04
0
0
0
0
0
0
0.52
0
0
0.34
6.09
0
3.12
4.21
0
0
0.59
0
0
0
0.56
0.21
0.94
0
5.50
0
0
0
0
0
0
0
0.10
0
0.50
0.35
0
2.10
0
0
0
0
0
1.13
0
0
0
0
0
0
0.46
0.07
0
0.74
1.39
0
1.88
0.33
0
0
0.31
0
0
0
0.53
0.22
0.15
0
0
0
0
0
0
0
0.18
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6.14
0
0.05
0
74.22
0.34
0.18
3.52
70.86
0.06
51.74
22.31
0
2.10
12.94
1.12
0
0.06
1.34
4.16
4.52
0.03
0.03
0.25
0.30
19.30
1.90
0.04
2.00
1.88
0.36
1.12
-0.02
2.27
1.71
0
2.96
3.38
25.81
5.57
6.72
0.37
17.76
0.24
0.16
22.57
0.04
4.91
0
0.10
1.10
0.32
0.32
16.29
13.45
0.10
153.26
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
Malaysia
Maldives
1
0.64
0
0.05
0
73.03
0.25
0
2.17
62.22
0.06
43.88
17.16
0
0
11.90
1.12
0
0.06
0.22
2.55
3.40
0.03
7
5
12
6
2
1
2
3
13
22
Industrial
Institutional Nongovernmental Cooperation
Cooperation
Organizations
Program
(ICDS)
(NGOs) (CIDA INC)
International
Humanitarian
Assistance
(IHA)
International
Int’l Centre
Development Human Rights
Research and Democratic
Centre Development
(IDRC)
(ICHRDD)
Rank
of Recipient
Country
(if in top 30)
A MERICAS
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
Regional Caribbean
Regional Latin America
Other Americas
Total Americas
B R A N C H
Government-toGovernment Aid
(including bilateral
food aid)
Total
➤
154
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
1
T
P A R T N E R S H I P
Country
8
B R A N C H
Bilateral
Food Aid
Official
Bilateral
Debt
Relief
1
2
3
4
5
6
7
8
9
10
11
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2.00
0
54.47
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.19
0
0
0.01
0
0.08
0
0
0.22
0
0
0.15
0
0
0
0
1.18
0.13
0
0.20
0.43
1.00
5.72
0
0.23
0
0
0.04
0
0.14
0
0
0
0
0
0.07
0
0
0
0
0.08
0.08
0
0.02
0.35
0
3.26
0
0.16
0
0
0.63
0.08
2.23
0
0
0.81
0
0
0.88
1.97
0
0
0
2.78
0.15
0.48
0
0
0
26.75
0
0
0.10
0
0
0
0.08
0
0
1.92
0
0
0.08
0
0
0
0
0
1.20
0
0
0.07
0
13.13
0.04
0.57
0
0
0.25
0
1.04
0
0
0.20
0
0
0.41
0.09
0
0
0
0.51
0.44
0.10
0
1.13
0.50
11.36
0
0.01
0
0
0.06
0
0.01
0
0
0
0
0
0.07
0
0
0
0
0
0
0
0
0.10
0
0.43
0.04
6.09
0.10
0
-0.06
0.08
22.84
0
0
7.74
0
0.03
16.43
4.93
0.02
0
0.02
12.39
2.00
0.72
4.13
36.09
1.83
371.09
3
4
5
6
7
8
9
10
11
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0.01
0.01
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
12.52
0
12.52
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
0
0
0
0.13
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
19.46
-0.02
19.58
18.41
0
75.07
115.02
1.74
1.76
47.44
3.51
262.93
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
153.02
8.90
68.66
157.68
42.18
430.42
134.05
91.04
91.45
124.11
63.66
59.02
87.69
E ASTERN E UROPE
0
4.93
0
0
-1.04
0
19.27
0
0
4.58
0
0.03
14.76
2.87
0.02
0
0.02
7.84
0
0.15
3.91
34.02
0.33
310.43
1
0.13
na
~
na
~
na
na
na
na
na
~
na
na
na
na
na
~
na
6.94
-0.03
7.04
8
17
28
2
29
18.41
Refugee Costs in Canada
na
Scholarships
na
Imputed Foreign Student Costs na
Administrative Costs
na
Other (See Technical Notes)
na
Total not Allocable by Country
Total Developing Countries 826.60
na
na
na
na
na
Industrial
Institutional Nongovernmental Cooperation
Cooperation
Organizations
Program
(ICDS)
(NGOs) (CIDA INC)
International
Humanitarian
Assistance
(IHA)
International
Int’l Centre
Development Human Rights
Research and Democratic
Centre Development
(IDRC)
(ICHRDD)
Rank
of Recipient
Country
(if in top 30)
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
Asia Regional
Other Asia
Total Asia
Country not Specified
9
Government-toGovernment Aid
(including bilateral
food aid)
A SIA (continued)
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
Other Europe
Total Europe
9
Notes: a Due to rounding, column totals may not match row totals.
Source: CIDA, Statistical Report 1995-96.
155
Total
5.38 1,779.39
TA
B L E
5
C ANADIAN M ULTILATERAL ODA
BY C OUNTRY (1995-96)
W
ith the exception of Canada’s
contribution to the World Food
Programme (WFP),1 multilateral aid is
completely untied to donor-country
goods, and international competitive
bidding practices usually allow for an
efficient administration of aid. There is
a further benefit in that multilateral aid
goes to many countries where Canada
does not have a substantial bilateral
program, for instance in Central Africa
and Oceania.
Table 5 imputes Canada’s contributions
to specific countries by allocating
Canada’s portion for 1995-96 according
to individual agencies’ overall spending.
For example, the World Bank (column 2)
allocated 1 percent of its concessional
resources to Madagascar and Nigeria, and
Canada’s contribution was computed
proportionately. As a major multilateral
donor, Canada sits on the governing
councils and executive boards of these
agencies, and has a say in the allocation
of funds.
Where did Canada’s multilateral contributions go in 1995-96? More than
60 percent went to the international
financial institutions (IFIs): the World
Bank , the International Monetary Fund
(IMF), and the Regional Development
Banks (one each for Africa, Asia, the
Americas, and the Caribbean). Canada’s
World Bank and IMF contributions—
administered by the Department of
Finance—were the first and second
largest channels for Canadian multilateral aid, respectively. The IMF, which
156
BY
A GENCY
Distribution of Canadian
Multilateral ODA by
Organization 1995-96
WORLD BANK 31%
INTERNATIONAL MONETARY FUND 20%
REGIONAL DEVELOPMENT BANKS 4%
UNSPECIFIED IFIs 7%
WFP 14%
UNDP 5%
OTHER UN AGENCIES 9%
OTHER MULTILATERAL 10%
until recently only lent funds at market
rates of interest, has become, through its
concessional lending window, ESAF (the
Enhanced Structural Adjustment Facility), a major provider of development
assistance. The Regional Development
Banks continue to be an important
source of aid funds, but as column 4
shows, Canada made no new commitments to the soft-window funds of the
African or Asian Banks as replenishments
to these funds were under negotiation.
Negotiations have since been completed,
so funding will resume to these channels, if at a much reduced level.
AND
Less than 30 percent of our multilateral
contributions, or 10 percent of all
Canadian aid, was allocated to United
Nations agencies, with slightly less than
half going to the Rome-based WFP. And
although the UNDP, with field offices in
virtually every developing country,
received the second highest allocation
at $43 million, this was $10 million less
than the previous year. Funding
increased, however, to the UN’s specialized agencies, such as the Food and
Agriculture Organization, the World
Health Organization, and the
International Labour Organization.
These agencies were spared from the
cuts which were effected in other sectors
of ODA because they rely on membership assessments rather than voluntary
contributions.
Other multilateral channels were also
able to avoid cuts in 1995-96 and
accounted for 10 percent of multilateral
aid disbursed. Comprised mainly of
Commonwealth and La Francophonie
agencies such as the Commonwealth
Fund for Technical Cooperation and
l’Agence de coopération culturelle et
technique, these channels help give
Canada standing among these
organizations’ member countries, an
important political consideration.
1
Most of the aid contributed by Canada to the WFP is
in the form of Canadian food products and is therefore
directly tied to Canadian procurement.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
1
T
9
9
8
Excel Table
TABLE 5 C ANADIAN M ULTILATERAL O FFICIAL D EVELOPMENT A SSISTANCE
BY A GENCY AND BY C OUNTRY (1995-96)
(ESTIMATED
Country
IN MILLIONS OF
CANADIAN
DOLLARS)
Total
International
Financial
Institutions
World
Bank
IMF
(ESAF)
Regional
Development
Bank
Total
UN
Agencies
WFP
UNDP
1
2
3
4
5
6
7
8
A FRICA
O F
W H I C H
O F
Other
Multilateral
Channels
Total
9
10
11
W H I C H
Other UN
UNICEF Agencies
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Regional Africa
0
1.52
2.44
0
5.75
1.27
8.15
0.22
1.82
2.75
0.33
4.59
0.06
35.09
0.06
2.27
0.11
0
7.51
0
0.41
11.46
5.37
0.69
4.39
0.28
0
0
2.71
3.62
7.89
3.35
0
0
7.99
0
1.99
2.71
0.53
0.30
9.22
0
3.35
0
0
0.33
0
8.29
3.98
4.57
10.06
112.02
8.73
0
0
0
1.52
0
1.30
1.14
0
0
3.56
2.19
1.27
0
8.15
0
0.22
0
1.82
0
1.71
1.03
0.33
0
4.59
0
0.06
0
20.28
14.80
0.06
0
2.27
0
0.11
0
0
0
7.51
0
0
0
0.41
0
8.04
3.42
2.85
2.53
0.50
0.20
4.39
0
0.28
0
0
0
0
0
2.71
0
2.68
0.94
4.23
3.66
1.58
1.78
0
0
0
0
7.99
0
0
0
1.99
0
2.71
0
0.53
0
0.30
0
2.43
6.79
0
0
1.71
1.64
0
0
0
0
0.33
0
0
0
8.29
0
1.27
2.70
0
4.57
10.06
0
8.43 103.59
4.59
4.15
0
0
0.0000
0.0000
-0.0004
0.0000
-0.0003
-0.0002
0.0000
-0.0001
0.0000
-0.0002
0.0000
0.0000
0.0000
0.0000
-0.0001
-0.0002
0.0000
0.0000
-0.0014
0.0000
-0.0001
-0.0004
-0.0002
-0.0001
-0.0007
-0.0002
0.0000
0.0000
0.0000
-0.0003
-0.0008
-0.0001
0.0000
0.0000
-0.0007
-0.0001
0.0000
-0.0003
-0.0004
-0.0001
-0.0001
0.0000
-0.0005
0.0000
0.0000
-0.0005
-0.0001
-0.0004
-0.0001
0.0000
-0.0004
-0.0003
0.0000
-0.0002
0.23
4.23
0.36
0.28
1.28
1.11
0.21
0.47
0.26
1.75
0.17
0.10
1.22
0.31
0.12
1.56
0.12
0.53
3.16
0.07
0.24
0.58
1.31
0.35
4.67
0.21
3.22
0
0.55
3.58
0.54
2.55
0.08
0.55
5.02
0.32
0.68
0.87
2.08
0.13
1.55
0.03
0.46
0.96
0.26
1.61
0.40
1.58
0.17
2.60
1.36
3.32
0.68
5.51
0
3.60
0
0
0.66
0.03
0
0.25
0
1.32
0
0
0
0
0
0.57
0
0
1.28
0
0
0
0.79
0
3.00
0
2.94
0
0
2.72
0
2.19
0
0
2.09
0
0
0
0.16
0.06
0.68
0
0
0
0
0
0.29
0
0
2.41
0.06
2.75
0
0
0.02
0.07
0.17
0.16
0.34
0.10
0.06
0.04
0.10
0.26
0.11
0.03
0.26
0.07
0.05
0.41
0.05
0.14
0.46
0.03
0.12
0.17
0.16
0.25
0.38
0.10
0.06
0
0.25
0.42
0.26
0.14
0.02
0.11
1.72
0.13
0.24
0.26
0.13
0.03
0.28
0.01
0.24
0.44
0
0.35
0.04
0.27
0.08
0.04
0.41
0.15
0.17
0.35
0.01
0.33
0.05
0.02
0.08
0.09
0.03
0.03
0.03
0.05
0.01
0.02
0.14
0.04
0.02
0.10
0.02
0.12
0.37
0.01
0.02
0.08
0.06
0.03
0.30
0.03
0.11
0
0.14
0.08
0.13
0.04
0.01
0.03
0.35
0.07
0.08
0.26
0.58
0.01
0.14
0
0.06
0.32
0.04
0.72
0.02
0.21
0.02
0.02
0.29
0.13
0.09
0.01
0.20
0.24
0.14
0.11
0.20
0.90
0.11
0.16
0.14
0.11
0.04
0.06
0.83
0.19
0.06
0.48
0.05
0.27
1.05
0.03
0.10
0.33
0.30
0.07
0.99
0.09
0.11
0
0.16
0.37
0.15
0.19
0.05
0.40
0.85
0.12
0.36
0.35
1.22
0.03
0.46
0.02
0.16
0.20
0.22
0.54
0.05
1.10
0.07
0.13
0.59
0.30
0.42
5.14
0.02
0.70
0.09
0.88
1.42
0.42
1.31
0.18
0.86
1.04
0.65
0.09
0.38
0.38
0.20
0.13
0.03
0
0.39
0.43
0.22
0.48
0.55
0.29
0.53
0.44
0.02
0
0.11
0.19
1.29
0.23
0.73
0.34
0.20
0.10
1.01
0.29
0.71
0.02
2.27
0.96
0.53
0.07
0
0.31
0.34
1.02
0.74
0.39
0.86
0.88
0.59
3.46
0.25
6.45
2.89
1.17
8.45
2.80
9.67
0.87
2.95
5.53
1.15
4.77
1.66
35.77
0.38
3.96
0.26
0.53
11.06
0.50
0.88
12.52
7.23
1.33
9.59
0.93
3.24
0
3.37
7.39
9.71
6.14
0.81
0.89
13.20
0.42
3.68
3.87
3.32
0.46
13.04
0.99
4.34
1.02
0.26
2.25
0.74
10.90
4.89
7.56
12.27
116.22
10.01
8.96
Total Africa
288.18 133.05 155.12
-0.01
65.54
27.83
10.68
6.04
20.99
29.81
383.51
➤
157
TA
B L E
5 (
C O N T I N U E D
Country
A MERICAS
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
Regional Caribbean
Regional Latin America
Other Americas
Total Americas
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
)
Total
International
Financial
Institutions
World
Bank
IMF
(ESAF)
Regional
Development
Bank
Total
UN
Agencies
WFP
UNDP
1
2
3
4
5
6
7
8
0.01
0.77
0.76
8.10
2.42
0
0.46
0
0
0.27
1.53
2.63
1.34
0.36
0.78
2.75
3.32
7.40
1.03
0
6.41
0.23
1.31
0
0.68
1.10
0.57
0
0.22
0.03
0
0
0.55
0.90
0
0
0
3.59
0
0
0
0
0
0.01
0
0
0
0
0
0.55
0
2.87
0
0
2.35
0
0
0
0.01
0.01
0
0
0
0
0
0
0
0
0
0
0
2.08
0
0
0
0
0
0
0
0
0
0
0
1.12
0
2.52
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.0059
0.7694
0.7579
2.4232
2.4207
0.0000
0.4647
0.0000
0.0000
0.2675
1.5314
2.6305
1.3415
0.3634
0.7819
1.0805
3.3175
2.0110
1.0260
0.0000
4.0644
0.2323
1.3090
0.0000
0.6738
1.0925
0.5680
0.0012
0.2244
0.0300
0.0000
0.0000
0.5527
0.9000
0.01
2.89
0.10
5.17
3.51
0.45
9.35
0.74
0.20
0.04
0.65
0.57
1.79
0.01
0.48
0.22
1.06
0.55
0.28
1.53
0.83
0.84
0.55
3.08
0.02
0.02
0.02
0.01
0.04
0.58
0.27
0.02
3.16
0.06
0
0
0
3.97
0
0
7.10
0.30
0
0
0.16
0
1.09
0
0
0.06
0.67
0.08
0
0.73
0
0.45
0.13
0
0
0
0
0
0
0
0
0
0
0
0
2.78
0.03
0.45
2.96
0.34
1.97
0.13
0.09
0.01
0.32
0.23
0.54
0
0.30
0.11
0.08
0.20
0.19
0.24
0.42
0.33
0.32
2.61
0.02
0.01
0.01
0
0.02
0.45
0.17
0.02
0.82
0.03
45.95
9.38
5.72
30.84
39.08
14.74
1
2
3
4
5
0
0.25
0
0
19.67
0.07
0.30
5.39
30.82
0.06
43.73
0.24
0
0
0
0.02
0
5.51
2.90
0
0.25
0
0
18.65
0.06
0.30
1.74
30.76
0.06
43.72
0
0
0
0
0
0
1.60
1.22
0
0
0
0
0
0
0
3.48
0
0
0
0
0
0
0
0
0
3.77
1.46
0.0000
0.0000
0.0000
0.0000
1.0224
0.0148
0.0000
0.1644
0.0630
0.0000
0.0176
0.2357
0.0000
0.0000
0.0000
0.0218
0.0000
0.1445
0.2297
4.08
0.09
0.15
0
18.21
0.36
0.64
4.19
37.42
0.12
3.56
1.26
0.46
0.96
2.83
0.07
0.14
0.10
1.55
158
O F
W H I C H
Other
Multilateral
Channels
Total
9
10
11
0
0.04
0.01
0.12
0.22
0.02
0.02
0.01
0.03
0
0.02
0.06
0.03
0
0.03
0.01
0.09
0.02
0.04
0.06
0.06
0.01
0.03
0.12
0
0
0
0
0
0.02
0.02
0
0.15
0
0
0.08
0.05
0.64
0.33
0.10
0.25
0.29
0.08
0.04
0.15
0.28
0.13
0.01
0.15
0.03
0.23
0.26
0.05
0.49
0.34
0.05
0.07
0.35
0
0.01
0.01
0.01
0.02
0.11
0.08
0
2.19
0.03
0.33
0.04
0.32
0.07
0.11
0.02
0.02
0.09
0
0.97
0.02
0.02
0.02
0.41
0.04
1.02
0.60
0.04
0.71
0.07
0.09
0.02
0
0.13
0.14
0.19
0.28
0
0.20
0.02
0.02
0
1.24
0.64
0.34
3.71
1.18
13.34
6.05
0.48
9.83
0.83
0.20
1.29
2.20
3.22
3.15
0.79
1.31
3.99
4.98
8.00
2.02
1.59
7.33
1.10
1.86
3.21
0.84
1.31
0.87
0.01
0.46
0.63
0.29
0.02
4.96
1.60
16.21
1.23
6.90
7.94
92.97
6
7
8
9
10
11
2.99
0
0
0
15.46
0
0
1.99
34.68
0
0
0
0
0
0.18
0
0
0
1.00
0.61
0
0
0
0.82
0.21
0.38
1.05
1.35
0
0.97
0.53
0.07
0.03
0.08
0
0.14
0.04
0.24
0.15
0.04
0.03
0
0.66
0.04
0.12
0.19
0.40
0.03
1.21
0.21
0.02
0.52
0.02
0.02
0
0.02
0.07
0.33
0.05
0.11
0
1.27
0.11
0.14
0.95
1.00
0.08
1.38
0.52
0.36
0.40
2.55
0.05
0
0.03
0.25
0.22
0
0
0
0.12
0.04
0.07
0
0.27
0
1.00
0.13
0
0
0.04
0
0
0
0.07
4.30
0.34
0.15
0
38.00
0.47
1.01
9.57
68.51
0.17
48.30
1.63
0.46
0.96
2.88
0.09
0.14
5.61
4.53
➤
O F
W H I C H
Other UN
UNICEF Agencies
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
1
T
9
9
8
Total
International
Financial
Institutions
World
Bank
IMF
(ESAF)
Regional
Development
Bank
Total
UN
Agencies
WFP
UNDP
(continued)
1
2
3
4
5
6
7
8
Lebanon
Malaysia
Maldives
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
Asia Regional
Other Asia
0
0.01
0.27
0.98
3.65
0
0
15.88
0.06
0.40
0
0
3.84
0
0
0.01
0
0
0
0
13.41
0
1.66
0.18
0.07
0.15
0
0
0.25
0.77
3.43
0
0
14.62
0
0.19
0
0
3.51
0
0
0
0
0
0
0
5.69
0
1.66
0.14
0
0.08
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7.50
0
0
0
0
0
0.0000
0.0069
0.0204
0.2019
0.2223
0.0000
0.0000
1.2668
0.0597
0.2056
0.0000
0.0000
0.3297
0.0000
0.0000
0.0148
0.0000
0.0000
0.0000
0.0000
0.2144
0.0000
0.0000
0.0389
0.0718
0.0632
1.65
0.20
0.09
0.31
1.06
0.15
0
1.37
0.23
0.89
0
0.22
0.47
1.14
0.06
0.52
0.27
0
0
0.13
1.70
6.48
0.45
0.19
4.67
0.48
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.11
0.12
0.05
0.10
0.34
0.10
0
0.44
0.16
0.14
0
0.20
0.22
0.08
0
0.11
0.06
0
0
0.03
0.53
0.73
0.15
0.08
0.36
0.25
149.52 128.69
16.21
4.63
98.92
56.30
Country
A SIA
Total Asia
E ASTERN E UROPE
O F
W H I C H
Other
Multilateral
Channels
Total
9
10
11
0.04
0.01
0.02
0.02
0.17
0.01
0
0.28
0.02
0.16
0
0
0.06
0.02
0.04
0.06
0.03
0
0
0.03
0.27
0.05
0.07
0
0.05
0.03
1.49
0.07
0.02
0.19
0.54
0.04
0
0.65
0.05
0.59
0
0.02
0.20
1.05
0.02
0.34
0.18
0
0
0.08
0.91
5.70
0.23
0.11
4.27
0.20
0.04
0.59
0.07
0
0.13
0.02
0
0.13
0.22
0.11
0
0.02
0.21
0.02
0
0.11
0.04
0
0
0
0.19
0
0.16
3.20
1.99
0.06
1.69
0.80
0.43
1.29
4.84
0.17
0
17.39
0.51
1.40
0
0.24
4.52
1.17
0.06
0.65
0.32
0
0
0.13
15.30
6.48
2.27
3.57
6.74
0.68
10.92
5.17
26.53
9.32
257.76
O F
W H I C H
Other UN
UNICEF Agencies
1
2
3
4
5
6
7
8
9
10
11
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
Other Europe
2.46
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
3.62
0
1.58
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
3.62
0
0.89
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0
0
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0.23
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
5.28
0.19
0
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0
0
0.05
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0.03
0.02
0.02
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0.37
0
0.16
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
4.88
0.17
0
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
0
0.39
2.69
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
na
8.90
0.58
Total Eastern Europe
6.08
5.20
0.89
0
5.70
0
0.10
0.39
5.21
0.39
12.17
Country not Specified
64.43
0.01
0
0
51.59
27.47
5.36
1.36
17.39
42.49
158.51
Total Developing Countries 553.96 276.33 177.94
35.26
260.83
126.34
43.27
14.19
77.03
89.94
904.92
Source: CIDA, Statistical Report 1995-96.
159
TA
B L E
6
C ANADIAN B ALANCE
C OUNTRIES (1996)
I
n 1996, Canada’s trade with developing countries totaled $39.5 billion in
imports and exports, almost 15 times
Canada’s aid disbursements of
$2.3 billion.1 This represented 31 percent of Canada’s trade with countries
other than the United States. Our top
five developing-country trading partners were China ($7.8 billion), Mexico
($7.2 billion), Brazil ($2.5 billion),
Malaysia ($2.1 billion), and Thailand
($1.6 billion). Next in importance were
Indonesia, Saudi Arabia, Venezuela,
Algeria, and India.
Canada’s trade with developing countries has evolved significantly over the
past 10 years. Developing countries’
share of Canadian total trade has grown
from 6.5 to 8.0 percent, largely at the
expense of non-US developed countries.
While Canadian exports to and imports
from developing countries have both
grown in real terms, imports have
grown at a rate of 13 percent per year,
or twice as quickly as exports, which
grew at an annual rate of 6.5 percent.
The net result is that Canada has moved
from a trade surplus with developing
countries of $1.2 billion in 1986 to a
deficit of $9.3 billion in 1996. However,
Canadian exports to industrialized
countries grew more than 20 percent
faster than exports to developing
countries over the past decade.
Broken down by continent, this trade
was dominated by Asia (47 percent of
total trade), followed by the Americas at
39 percent, Africa at 9 percent, and
Eastern Europe at 5 percent (see chart).
As in the previous year, growth in
Canadian export markets reflected the
relative economic dynamism of these
regions: exports to Asia increased by
10 percent a year and to the Americas
by 7 percent, while exports to Africa
160
OF
T RADE
WITH
Total Canadian Trade with
Developing Countries by
Continent 1996
EASTERN EUROPE 5%
AFRICA 9%
AMERICAS 39%
ASIA 47%
stagnated, increasing by 4 percent only.
Exports to Eastern Europe collapsed,
declining at a rate of almost 6 percent a
year since the end of the Cold War.
More recently, however, Canadian
exports and imports to both Africa and
Eastern Europe have begun to increase
as these regions’ economies show signs
of renewed growth.
Columns 9 and 10 show tariff revenue
collected on developing country
imports in 1996. In column 10, this
revenue is expressed as a percentage of
total imports to arrive at the average
tariff rate these countries faced. In general, the 3.4 percent tariff rate faced by
all developing countries’ imports was
three times the rate faced by developed
countries—although this latter figure is
distorted by the large share of duty-free
imports from the United States. This
compares favourably with last year’s figures which indicated a rate almost four
times higher for developing countries.
D EVELOPING
Countries exporting commodities to
Canada faced low tariff rates—the average tariff for imports from Africa was
only 0.7 percent. However, tariffs on
imports from 26 developing countries—
in most cases dominated by clothing,
textiles, and footwear (see Table 7)—
averaged more than 10 percent. Developing countries have a comparative
advantage principally in these areas,
and it is in those very categories that
Canada and other industrialized countries continue to maintain their protectionist walls. Revenue Canada collected
$360 million in duties on imports from
China, and almost $70 million on
imports from Mexico. These tariffs—
if we assume that half are borne by
developing country producers—place a
heavy burden on poorer countries, particularly those in South Asia where it
might have reached $53 million. Even
these numbers understate the problem
since they say nothing about the nontariff barriers faced by these countries.
Because detailed figures on trade in
services are not available, the figures in
this table represent only trade in goods
with developing countries. Canada’s
two-way trade in services with developing countries was approximately
$5.5 billion in 1996, or roughly
14 percent of its trade in goods: its
exports, such as engineering consulting
and insurance services, totaled approximately $3.1 billion in 1996, largely to
the Americas. Canada enjoyed a small
surplus in its trade in services with
developing countries while running a
fairly large deficit in trade in services
with industrialized countries.
1
It should be noted that South Korea and Singapore,
both major Canadian trading partners, are no longer
classified as developing countries.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
TABLE 6 C ANADIAN B ALANCE
(IN
THOUSANDS OF
CANADIAN
Country
A FRICA
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa (Zaire )
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Other Africa
Total Africa
E
OF
N
T
R
T RADE
E
P
O
WITH
R
T
1
9
9
8
Excel Table
D EVELOPING C OUNTRIES (1996)
DOLLARS)
% Change % Change Total Tariff
Per Year
Per Year
Revenue
Exports
Imports Collected
1986-96
1986-96
1996
Average
Tariff
Rate
1996
Total
Exports
1996
Total
Imports
1996
Balance
of Trade
1996
Total
Exports
1986
Total
Imports
1986
Balance
of Trade
1986
1
2
3
4
5
6
7
8
9
10
418,206
7,398
3,073
23,779
2,720
2,641
11,672
294
332
56
14
567
11,283
12,838
1,064
125,886
36
0
21,379
5,344
425
74,595
10,116
47
33,170
355
3,440
137,298
567
6,484
11,710
242
3,583
199,206
17,595
1,204
11,871
41,964
4,550
49
19,479
228
1,007
207
224,750
8,530
97
18,306
906
40,898
11,970
5,794
8,905
na
738,067
165,626
28
1,005
4
114
1,077
30
896
61
11
127
20,984
35,221
1
19,282
224
0
6,754
319
195
2,661
25,474
19
18,540
5,751
106
0
5,616
2,105
2,935
251
18,863
82,145
718
49,972
14,849
311,094
100
0
1,670
436
14,875
105
439,574
91
1,188
1,402
44,132
3,716
12,588
5,310
13,231
na
(319,860)
(158,227)
3,045
22,774
2,716
2,527
10,595
264
(564)
(5)
3
440
(9,700)
(22,383)
1,063
106,604
(189)
0
14,625
5,025
231
71,934
(15,358)
28
14,630
(5,396)
3,334
137,297
(5,049)
4,379
8,775
(9)
(15,280)
117,060
16,877
(48,769)
(2,978)
(269,130)
4,450
49
17,809
(208)
(13,869)
102
(214,824)
8,439
(1,091)
16,904
(43,226)
37,181
(618)
484
(4,326)
na
193,531
1,248
2,388
~
~
~
12,771
~
~
~
~
~
16,614
7,310
~
133,107
~
na
31,549
12,630
61
28,778
2,766
~
49,255
~
2,459
74,123
1,398
847
~
268
987
154,590
6,531
na
~
18,943
~
~
15,167
~
156
1,817
151,529
23,112
~
25,108
4,798
75,550
1,311
12,532
7,558
211,793
11,502
42,428
12
~
~
~
304
~
~
~
~
~
33,945
15,760
~
5,118
~
na
2,156
5,770
84
65
15,169
~
20,868
~
1,260
22,727
7,848
1,560
~
24
13,474
19,358
110
na
~
368,210
~
~
58
~
8,211
78
373,241
27
~
3,062
3,182
9,359
2,360
84
6,737
46,180
182,029
(41,180)
2,376
~
~
~
12,467
~
~
~
~
~
(17,331)
(8,450)
~
127,989
~
na
29,393
6,860
(23)
28,713
(12,403)
~
28,387
~
1,199
51,396
(6,450)
(713)
~
244
(12,487)
135,232
6,421
na
~
(349,267)
~
~
15,109
~
(8,055)
1,739
(221,712)
23,085
~
22,046
1,616
66,191
(1,049)
12,448
821
165,613
8.0
19.5
2.6
~
~
~
-0.9
~
~
~
~
~
-3.8
5.8
~
-0.6
~
na
-3.8
-8.2
21.4
10.0
13.8
~
-3.9
~
3.4
6.4
-8.6
22.6
~
-1.0
13.8
2.6
10.4
na
~
8.3
~
~
2.5
~
20.5
-19.5
4.0
-9.5
~
-3.1
-15.4
-6.0
24.8
-7.4
1.7
na
51.6
14.6
8.9
~
~
~
13.5
~
~
~
~
~
-4.7
8.4
~
14.2
~
na
12.1
-25.1
8.8
44.9
5.3
~
-1.2
~
-21.9
~
-3.3
3.0
~
26.5
3.4
15.6
20.6
na
~
-1.7
~
~
39.9
~
6.1
3.0
1.6
13.0
~
-7.5
30.1
-8.8
18.2
51.4
7.0
na
46
0
0
176
0
0
6
0
6
0
0
1
5
2
0
2,117
0
0
3
11
0
16
5
0
271
1,219
5
0
111
36
15
36
3,516
1,199
0
1
54
23
2
0
5
4
142
0
4,996
0
37
1
1
350
4
4
274
na
0.01
0
0.48
17.49
7.04
0.10
0.55
0.55
0.72
0.40
3.06
0.69
0.02
0.01
0
10.98
0
~
0.05
3.34
0.22
0.59
0.02
0
1.46
21.20
4.79
~
1.98
1.72
0.50
14.43
18.64
1.46
0.01
0
0.36
0.01
1.98
5.22
0.32
0.86
0.96
0.37
1.14
0.26
3.14
0.06
0
9.43
0.03
0.07
2.07
na
1,548,130 2,069,546 (521,416) 1,070,792
994,151
76,641
3.8
7.6
14,704
0.71
➤
161
TA
B L E
6 (
C O N T I N U E D
Country
)
% Change % Change Total Tariff
Per Year
Per Year
Revenue
Exports
Imports Collected
1986-96
1986-96
1996
Average
Tariff
Rate
1996
Total
Exports
1996
Total
Imports
1996
Balance
of Trade
1996
Total
Exports
1986
Total
Imports
1986
Balance
of Trade
1986
1
2
3
4
5
6
7
8
9
10
~
~
60,015
87,269
3,973
1,211
8,926
9,591
656,046
821,500
90,550
127,480
160,692
124,153
26,402
56,557
364,549
71,310
~
~
52,980
36,049
78,718
92,227
11,261
64,188
~
~
15,065
40,362
4,517
27,161
20,788
12,245
13,971
20,678
70,026
149,903
397,438 1,176,504
22,683
34,111
40,624
27,965
2,386
7,243
110,918
65,668
~
~
~
~
~
~
1,308
1,665
85,984
53,736
12,653
14,862
323,186
523,936
A MERICAS
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
27,668
1,858
25,810
189,600
186,434
3,166
2,840
7,954
(5,113)
26,118
17,613
8,504
1,335,890 1,133,560
202,330
398,902
342,231
56,671
459,182
296,960
162,223
49,624
146,678
(97,054)
260,473
401,164 (140,691)
2,161
1,181
981
76,267
91,910
(15,642)
71,691
128,736
(57,045)
10,869
27,766
(16,897)
4,249
559
3,690
67,010
103,239
(36,229)
11,137
204,033 (192,897)
29,763
2,948
26,815
16,295
51,049
(34,755)
85,335
239,099 (153,763)
1,211,489 6,033,751 (4,822,261)
16,379
9,764
6,615
45,292
23,827
21,464
5,842
2,917
2,925
172,460
126,359
46,101
2,616
2,959
(343)
5,389
1,602
3,786
3,204
139
3,066
4,988
26,181
(21,193)
79,606
46,575
33,031
23,987
33,550
(9,563)
461,314
725,884 (264,570)
~
(27,254)
2,762
(665)
(165,454)
(36,930)
36,539
(30,155)
293,239
~
16,931
(13,509)
(52,927)
~
(25,297)
(22,644)
8,543
(6,707)
(79,877)
(779,066)
(11,428)
12,659
(4,857)
45,250
~
~
~
(357)
32,248
(2,209)
(200,750)
~
12.2
-3.3
11.3
7.4
16.0
11.1
6.5
-3.3
~
3.7
-0.9
-0.4
~
16.1
9.4
3.7
1.6
2.0
11.8
-3.2
1.1
9.4
4.5
~
~
~
14.3
-0.8
6.6
3.6
~
7.9
20.7
6.3
3.3
10.4
9.1
10.0
18.9
~
9.8
3.4
-8.0
~
9.8
22.3
-13.3
9.5
4.8
17.8
-11.8
-1.6
-8.7
6.8
~
~
~
31.7
-1.4
8.5
3.3
15
5,579
23
39
30,717
2,644
5,422
4,267
4,492
60
4,761
1,197
1,999
33
2,267
1,421
369
3,367
4,537
69,690
571
135
22
1,690
120
22
7
35
640
712
1,600
0.83
2.99
0.29
0.22
2.71
0.77
1.83
2.91
1.12
5.07
5.18
0.93
7.20
5.89
2.20
0.70
12.51
6.59
1.90
1.16
5.84
0.56
0.75
1.34
4.04
1.37
5.21
0.13
1.37
2.12
0.22
Total Americas
5,157,640 10,418,479 (5,260,839) 2,635,659 3,647,574 (1,011,915)
6.9
11.1
148,449
1.42
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
Malaysia
1
4
5
6
7
8
9
10
448
224
224
132
416
37
379
na
381
58
323
na
14,815
1,479
13,336
7,604
62,065
87,659
(25,593)
101,296
392
5
387
~
1,755
14,587
(12,832)
319
1,664
1,337
327
28
2,827,843 4,925,856 (2,098,013) 1,118,969
747
437
310
na
346,382
603,968 (257,586)
352,359
900,938
625,838
275,100
251,953
560,876
237,855
323,021
35,683
771
0
771
105,435
34,424
1,438
32,986
6,857
12,980
4,988
7,992
na
74,830
208
74,623
24,366
27,235
351
26,883
na
19
1,107
(1,088)
~
56,445
5,612
50,833
17,623
510,239 1,580,086 (1,069,847)
104,397
45
na
na
3,594
18,492
~
1,556
35
566,083
na
165,405
114,189
236,062
815
1,633
na
293
na
~
1,060
150,204
87
na
na
4,010
82,804
~
(1,237)
(7)
552,886
na
186,954
137,764
(200,379)
104,620
5,224
na
24,073
na
~
16,563
(45,807)
13.0
na
na
6.9
-4.8
~
18.6
50.4
9.7
na
-0.2
13.6
31.7
-38.9
17.5
na
11.9
na
~
12.3
17.2
17.4
na
na
-8.5
16.8
~
25.1
43.9
24.2
na
13.8
18.5
0.1
-65.4
-1.3
na
-3.4
na
~
18.1
26.5
13
0
0
235
14,810
0
1,809
258
360,281
16
56,642
48,271
578
0
188
2
32
73
242
314
37,262
5.87
0.91
0.29
15.87
16.90
0.55
12.40
19.29
7.31
3.63
9.38
7.71
0.24
0
13.08
0.03
15.18
20.72
21.81
5.59
2.36
➤
162
2
3
C
A
N
A
D
I
A
D
N
V
E
L
O
P
M
E
N
T
R
E
P
O
R
T
1
9
9
8
% Change % Change Total Tariff
Per Year
Per Year
Revenue
Exports
Imports Collected
1986-96
1986-96
1996
Average
Tariff
Rate
1996
Total
Exports
1996
Total
Imports
1996
Balance
of Trade
1996
Total
Exports
1986
Total
Imports
1986
Balance
of Trade
1986
1
2
3
4
5
6
7
8
9
10
19,647
185
~
~
3,041
4,354
454
86
11,011
599
84,099
165,283
6,369
733
285,377
552,636
17,429
371
627,719
650,736
51,830
71,466
21,251
29,155
24
0
514,608 1,043,309
259,057
151,778
439
12
160,271
14,660
8,125
18,323
44,219
97,783
na
na
5,721
11,179
5,858
10,486
19,462
~
(1,314)
368
10,412
(81,184)
5,637
(267,259)
17,058
(23,017)
(19,636)
(7,904)
24
(528,701)
107,279
427
145,611
(10,198)
(53,564)
na
(5,458)
(4,628)
~
~
1,175
1,273
5,906
65,053
11,762
49,477
7,642
211,985
30,447
12,307
na
107,290
201,848
na
24,278
na
2,845
na
15,653
~
~
~
813
614
4,380
146,858
563
109,411
594
186,894
35,824
48
na
150,267
56,753
na
2,100
na
6,671
na
77
~
~
~
362
659
1,526
(81,805)
11,199
(59,934)
7,048
25,091
(5,377)
12,259
na
(42,977)
145,095
na
22,178
na
(3,826)
na
15,576
~
~
~
10.0
-9.8
6.4
2.6
-5.9
19.2
8.6
11.5
5.5
5.6
na
17.0
2.5
na
20.8
na
31.6
na
-9.6
~
~
~
18.3
-17.9
-18.0
1.2
2.7
17.6
-4.6
13.3
7.2
89.8
na
21.4
10.3
na
21.4
na
30.8
na
64.5
~
33
103
579
29
209
23,519
1
27,094
80
203
9,159
188
0
47,704
9,173
2
0
25
10,957
na
1
337
18.05
~
13.31
33.18
34.97
14.23
0.15
4.90
21.46
0.03
12.82
0.65
0
4.57
6.04
18.77
0
0.14
11.21
na
0.01
3.21
7,562,213 10,916,263 (3,354,049) 2,875,962 1,961,333
914,629
10.2
18.7
633,803
5.81
6
7
8
9
10
Country
A SIA (continued)
Maldives
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
Total Asia
E
E ASTERN E UROPE
1
2
3
4
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
1,923
3,281
2,781
11,202
18,191
67,577
14,397
41,685
7,577
8,678
2,720
644
160,655
96,830
313,410
15,684
27,487
33,366
5,712
138
5,393
153
49,740
12,562
95,686
7,188
47,742
6,240
14,033
4,009
4,629
144,300
50,378
449,163
20,024
55,062
16,394
2,727
1,785
49
(2,112)
na
2,629
na
(38,539)
53,987
5,629
na
(28,110)
13,265
7,209
na
(6,057)
11,094
1,337
na
(5,354)
na
(1,290)
na
(3,985)
na
16,355
19,487
46,452
130,443
(135,754) 1,215,585
(4,340)
na
(27,575)
na
16,971
na
2,986
40,872
39
10
na
na
na
na
9,318
44,669
na
na
62,438
(49,173)
na
na
42,053
(30,959)
na
na
na
na
na
na
na
na
67,931
(48,444)
56,118
74,325
25,448 1,190,137
na
na
na
na
na
na
45,443
(4,571)
44.3
na
na
-14.6
na
17.7
na
14.2
na
na
na
na
23.5
-2.9
-12.7
na
na
na
-17.9
13.5
na
na
18.2
na
4.4
na
1.3
na
na
na
na
7.8
-1.1
33.3
na
na
na
-24.5
14
11
8
2,833
1,096
4,306
251
2,590
27
154
553
620
6,410
5,314
7,681
1,686
1,550
1,231
305
10.32
0.20
5.41
5.70
8.73
4.50
3.49
5.42
0.43
1.10
13.80
13.39
4.44
10.55
1.71
8.42
2.82
7.51
11.19
Total Eastern Europe
833,799
985,563 (151,763) 1,484,782
308,788 1,175,994
-5.6
12.3
36,021
3.65
13.4
832,977
3.42
8,067,195
5
Total Developing Countries
15,101,783 24,389,850 (9,288,067)
6,911,846
1,155,349
6.5
Total Other Countries
244,311,078 208,723,870 35,587,209 108,666,190 105,599,599
3,066,591
8.4
7.1 2,269,351
1.09
World
259,412,862 233,113,720 26,299,141 116,733,385 112,511,445
4,221,940
8.3
7.6 3,102,328
1.33
Sources: Statistics Canada; Department of Finance; Canada, Public Accounts of Canada.
163
TA
B L E
7
T RADE : T OP E XPORTS
C OUNTRIES (1996)
T
his table reveals the nature of
Canada’s trade in 1996 by listing
the top three exports to and imports
from each developing country, by value.
Items in mauve account for 75 percent
or more of total bilateral trade with that
country. The magnitude and nature of
direct Canadian military exports is also
shown.1
Canada’s exports to developing countries are generally quite predictable and
reflect our traditional natural wealth: in
1996, agricultural and fisheries products
were among the top three exports to 58
of 129 developing countries. Wheat
dominated these exports to 20 developing-country markets and ranked in the
top three exports to seven others.
Developing countries took a disproportionately large share—more than 75
percent—of Canada’s total exports of
wheat. Milk and dairy products, on the
other hand, were among the top
exports to only five countries: interestingly, Canada imported milk powder
from Lithuania. Also important were
exports of newsprint and paper products, ranking as the top export to 16
countries and among the top three
exports to 30 countries. In 1996,
Canada also had significant exports of
telecommunications equipment to 17
developing countries.
In 1996, Canadian imports were dominated by agricultural commodities,
clothing and textiles, and mineral ores
and oil. As many as 66 developing
countries, mainly in Africa and the
Americas, exported agricultural goods to
Canada: coffee, tea, cocoa, cotton, and
tropical fruits and nuts. Most of the 44
countries which supplied us with clothing and textiles were in Asia. Paradoxically, used clothing from Canada
ranked as one of the top three exports
to 18 countries in Africa, as well as to
164
AND
I MPORTS
WITH
Canadian Military Exports
to Non-US Markets
1996 total: $459 million
D EVELOPING
to this trend—Mexico, Brazil, China,
the Philippines, and Malaysia—are all
countries which rank among our most
important developing-country trading
partners.
THAILAND 1.0%
TURKEY 1.3%
MALAYSIA 4.0%
BOTSWANA 4.6%
OTHER DEVELOPING COUNTRIES 4.0%
SAUDI ARABIA 42.5%
REMAINING NON-US MARKETS 42.6%
Cambodia. Mineral ores from 41 countries included uranium, bauxite, tin,
gold, diamonds, and oil. The diversity
of trade is reflected in some of the less
conventional goods that found their
way into Canada, including musical
instruments from Burkina Faso, baking
equipment from Lebanon, antiques
from Ubzbekistan, and waste paper
from the Ukraine. On the Canadian
side, unusual exports included camera
parts to the Gambia, casks and barrels
to St Vincent and the Grenadines, keyboard instruments to Paraguay, and
peat to Bosnia Herzegovina.
Surprisingly, considering the publicity
given to inexpensive manufactured and
high-tech goods from developing
countries, these products were among
the top three imports from relatively
few developing countries. It should be
noted that most of the major exceptions
The last two columns show that Canada
registered direct military sales to 53
developing countries, worth $264 million
in 1996 according to figures supplied by
the Department of Foreign Affairs and
International Trade (DFAIT). While the
value of military exports to non-US
markets dropped by 1 percent in 1996,
exports to Africa more than doubled—
a 224 percent increase—while sales to
the Americas and Asia increased by
35 percent and 14 percent, respectively.2
Sales to all developing countries
accounted for close to 60 percent of
total Canadian military exports to
countries other than the United States.
By far Canada’s largest military market,
the United States imported an estimated
$500 million worth of Canadian military goods. (Indirect sales of military
equipment and firearms through third
countries, such as the US are not
included.) The sale to Saudi Arabia of
light armoured vehicles and parts, aircraft parts, targets, and radios accounted
for 74 percent of the value of all military exports to developing countries.
Other important buyers included
Botswana, Malaysia, Turkey, and
Thailand. In 1995, Canada was the
world’s tenth largest arms supplier to
the developing world, accounting for
almost 1 percent of total arms exports.3
1
These figures, particularly for smaller developing
countries, may not be as accurate and complete as
similar figures for developed countries because a large
part of Canadian trade with developing countries,
particularly exports, is channeled through the United
States. It is thus sometimes included in exports to
the US.
2
Comparisons are based on DFAIT’s revised figures for
1995 military exports.
3
Project Ploughshares, Armed Conflicts Report 1997.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
TABLE 7 T RADE : T OP E XPORTS
E
N
AND
T
R
E
P
I MPORTS
O
R
1
T
WITH
9
9
8
Excel Table
D EVELOPING C OUNTRIES (1996)
Top Three Domestic Exports from Canada, 1996
Top Three Imports into Canada, 1996
3
Total Military
Exports 1996
(Cdn dollars)
Top Military
Exports from
Canada
Country
1
2
3
1
2
A FRICA
1
2
3
4
5
6
7
8
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo - Brazzaville
Congo - Kinshasa (Zaire)
Côte d’Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
São Tomé and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
wheat
used clothing
cigarettes
aircraft
transmitters
prefabricated buildings
canola oil
iron/steel articles
machine parts
used clothing
data processing machines
rolled iron products
used clothing
medicine
lentils
bituminous coal
bulldozer blades
~
wheat
tractors
insulating glass
locomotives
transmitters
sauce preparations
wheat
medicine
peas
durum wheat
aircraft parts
books, printed matter
wheat
parts of data processors
telephone sets
wheat
wheat
medical equipment
scientific instruments
polyethylene
used clothing
bovine meat
sulphur
agricultural equipment
soya bean oils
contractor’s equipment
sulphur
disc harrows
magnesium
wheat
used clothing
sulphur
used clothing
used clothing
parts for turbo-jets
milk powder
asbestos
used clothing
medicine
books, printed matter
used clothing
paper
spectrometers
boring machinery
pipe/iron fittings
tires
data processing machines
canola oil
paper
used clothing
newsprint
telephone parts
~
turbo propellers
prefabricated structures
plastic articles
used clothing
coal or rock cutters
machine parts
used clothing
scientific instruments
canola oil
milk & creams
parts for turbo-jets
used clothing
transmitters
printing machinery
lentils
sulphur
used clothing
machine parts
telephone parts
electrical switches
lentils
beans
aircraft
electrical switches
asphalt
used clothing
chemical wood pulp
machine parts
~
used clothing
paper
construction machinery
potato seeds
tractors for semi-trailers
construction machines parts
lentils
canola oil
books, printed matter
machine parts
mining equipment
lentils
fertilizers
beans
telephone parts
printed matter
~
taps, cocks, valves
lentils
potassium chloride
food preparations
lumber
~
~
parts for turbo-jets
chicken cuts
camera parts
fuses
mechanical appliances
telephone parts
helicopters
stamps, cheques, certificates
used clothing
other wheat & meslin
metal rolling mills
maize
mining equipment
used clothing
telephone parts
butter
milk powder
mechanical appliances
cobalt
wheat
contractors’ equipment
telephone parts
paper
parts of data processors
used clothing
medicine
wheat
mechanical appliances
~
tobacco
agricultural machinery
wheat
heterocyclic compounds
shovel loaders
rock drilling tools
crude petroleum
crude petroleum
returned goods
men’s shirts
low value imports
coffee
other natural rubber
ploughs
fruits, vegetable juice
rubber processors
sweet potatoes
nonindustrial diamonds
unwrought cobalt
cocoa beans
electric pressure appliances
iron or nonalloy bars
cocoa butter, fat & oil
~
coffee
flowers & flower buds
aircraft parts
cocoa beans
aluminum ores
coffee
salmonide
women’s trousers
silk products
low value imports
vanilla beans
black tea
cotton
t-shirts, singlets & vests
women’s blouses
mandarins
cashew nuts
natural uranium
natural uranium
crude petroleum
black tea
low value imports
storage units
aircraft parts
aluminum oxide
parts of data processors
platinum
coffee
fresh/dried oranges
coffee
phosphates
spectacles, goggles, etc.
coffee
unwrought cobalt
tobacco
petroleum products
low value imports
low value imports
nonindustrial diamonds
statuettes
returned goods
tech. specified natural rubber
electric trains equipment
cashew nuts
pineapples
jewellery
low value imports
cobalt ores
cocoa butter, fat & oil
low value imports
t-shirts, singlets & vests
tuna
~
aircraft undercarriages
mechanical appliances
parts of calculators
industrial diamonds
tech. specified natural rubber
low value imports
dried fish
men’s trousers
women’s trousers
~
resinoids
nuts & seeds
dates
45,442
~
0
~
0
men’s trousers
20,952,471
musical instruments
28,059
low value imports
0
cotton
0
static electric converter
0
punched juices
1,805
engines & motors
0
essential oils
0
stuffed toys
0
industrial diamonds
0
veneer
0
~
0
women’s trousers
785,161
bananas
0
~
0
oil seeds
40,786
paper & pulp
534
metal moulds
0
sweet potatoes
0
other natural rubber
0
~
0
cuttings & slips
82,848
other garments
0
gold powder
0
~
0
pullovers, cardigans
200
men’s shirts
0
cathode ray tubes:bipolar metal cathode ray tubes: metal
0
preserved olives
women’s trousers
0
women’s trousers
men’s shirts
0
fluorspar
petroleum products
232,400
live animals
low value imports
0
chemical plants
other aircraft parts
3,248
needles
organic derivatives
0
cocoa beans
noncrude petroleum
0
soya sauce
vegetables
0
~
~
0
fresh or chilled fish data processing machines
0
input or output units cinnamon
0
parts of data processors crystal lead glassware
0
grapes, fresh
input or output units
0
oranges
other ferro-chromium 180,123
iron/steel pipe
arrowroot, tubers
0
fresh/dried grapefruit signal generators
0
black tea
green tea
4,040
frozen shrimp, prawns live animals
0
dates
pullovers, cardigans
0
air heaters
activated carbon
0
ash & ash residues tobacco
3,057
granite
refined sugar
641,525
simulator parts
Total Africa
aircraft
firearms, ammunition
firearms
aircraft & ammunition parts
aircraft parts
firearm parts, ammunition
aircraft parts
firearms
simulator parts
firearms & parts
firearms, rockets & parts
ammunition, firearms
firearms
aircraft, firearms
23,001,699
➤
165
TA
B L E
7 (
C O N T I N U E D
)
Top Three Domestic Exports from Canada, 1996
Top Three Imports into Canada, 1996
3
Total Military
Exports 1996
(Cdn dollars)
Top Military
Exports from
Canada
Country
1
2
3
1
2
A MERICAS
1
2
3
4
5
6
7
8
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
aircraft
newsprint
lubricants
wheat
wheat
wheat
wheat
paper
peas
lumber
newsprint
wheat
newsprint
whisky
wheat
ammonium sulphate
transmitters
newsprint
newsprint
rape or colza seeds
urea
petroleum oils
low value exports
telephone parts
fish
groceries
casks, barrels
bovine meat
newsprint
newsprint
other wheat & meslin
prefabricated buildings
telephone parts
meat, meat offals
transmitters
newsprint
telephone parts
copper wires/bars
newsprint
maize
low value exports
smoked herring
newsprint
potassium chloride
low value exports
newsprint
carpets
smoked herring
office furniture
telephone parts
wheat
polyethylene
malt
graders & levelers
durum wheat
low value exports
printed matter
sacks & bags
meat, meat offals
wheat or meslin flour
paper
durum wheat
aircraft parts
electric conductors
malt
taps, cocks, valves
potassium chloride
bituminous coal
newsprint
malt
chicken cuts
tires
fish
barley
films & sheets
lumber
potassium chloride
dielectric transformers
beans
potassium chloride
low value exports
motor vehicle parts
newsprint
lentils
keyboard instruments
other wheat & meslin
juice
medicine
low value exports
yeast
potatoes
potato seeds
newsprint
cotton
bovine & equine leather
raw sugar
unalloyed/unwrought tin
frozen orange juice
copper ores
coffee
bananas
nickel oxide sinters
coffee
gold
bananas
coffee
nutmeg
coffee
nonmonetary gold
sacks & bags
coffee
aluminum oxide
automobiles
gold
gold
hybrid integrated circuits
lead ores & concentrates
electrical switches
paper & paper articles
men’s shirts
nonmonetary gold
petroleum products
bovine & equine leather
crude petroleum
groundnuts
groundnuts
lobsters, crawfish
silver ores
motor veh. radio receiver
fresh grapes
bananas
coffee
raw sugar cane
ceramic ware
coffee
frozen shrimp, prawns
pullovers, cardigans
mace
raw sugar cane
aluminum ores
copper waste
bananas
rum & tafia
ignition wiring sets
men’s trousers
coffee
cathode ray tubes: metal
flour, meal, fish pellets
low value imports
tin articles
preserved fruits & nuts
frozen fish
iron or nonalloy bars
woven fabrics (heavy)
petroleum products
bovine & equine leather
0
grape juice
9,598
sea bass
0
lead ores & concentrates 79,908
footwear
1,437,591
grape wines
753,870
flowers
0
brassieres
19,961
lobsters, crawfish
0
cathode ray tubes
0
men’s shirts
0
flowers & flower buds
0
electrical capacitors
0
low value imports
0
sesame seeds
0
rum & tafia
2,625
sisal binders
0
fresh melons
0
t-shirts, singlets & vests
0
engines, spark-ignition 304,818
shrimp & prawns
0
shrimp & prawns
0
integrated circuits: bipolar metal oxide semiconductors 360,678
coffee
9,979
circuit breakers
0
picture frames
0
low value imports
850
furniture parts
0
urea
0
woven fabrics (light )
0
iron/nonalloy steel
723,686
Total Americas
firearms & parts
aircraft parts
aircraft & helicopter parts
aircraft parts, aerial targets, firearms
firearms & parts
firearms
ammunition, gas-mask parts
body-armour, helmets
body-armour
firearms
aircraft parts, body-armour
3,703,564
A SIA
1
2
3
4
5
6
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
Malaysia
paper
ethyl alcohol
contractors’ equipment
newsprint
mustard seeds
bulldozer blades
pumps
low value exports
wheat
tobacco
newsprint
wheat
wheat & meslin
low value exports
aircraft
machine parts
automobiles
machine parts
vaccines
aluminum
newsprint
canola oil
whisky
telephone parts
chemical wood pulp
poles
~
low value exports
used clothing
chemical wood pulp
lumber
asbestos
ethylene glycol
durum wheat
~
automobiles
laboratory equipment
paper
coal or rock cutters
telephone parts
machine parts
potassium chloride
flat rolled iron products
paper
taps, cocks, valves
paper
newsprint
~
equipment to be re-exported
medical instruments
telephone parts
furskin
peas
wood pulp
barley
~
logs, poles
mechanical appliances
taps, cocks, valves
drilling machines
~
milk & creams
aircraft
carpets
knotted carpets
returned goods
men’s shirts
men’s anoraks
voltage instruments
shrimp & prawns
men’s anoraks
toys
parts of work trucks
t-shirts, singlets & vests
tech. specified natural rubber
crude petroleum
low value imports
men’s shirts
natural uranium
women’s garments
women’s dresses & pyjamas
men’s shirts (man-made fibers)
nuts & seeds
cathode ray tubes
antiques
not knotted carpets
semiconductor devices
women’s trousers
men’s shirts (cotton)
oil seeds
t-shirts, singlets & vests
men’s swimwear
footwear
metal carbide plates
men’s shirts
other natural rubber
carpets
~
aircraft parts
ferro chromium
men’s shirts
plain woven cotton fabrics
men’s shirts (cotton)
virgin olive oil
integrated circuits
hand-woven rugs
0
pears & quinces: fresh
0
aircraft parts
0
aluminum alloy
25,928
men’s shirts (man-made) 81,810
articles of silver
0
men’s shirts
0
men’s shirts
0
parts of data processors 149,941
parts of paper machines
0
women’s blouses
2,440,177
sportswear
1,658,426
pistachios
0
~
0
turbo propellers
1,160,184
flat rolled iron/nonalloy
0
pullovers, cardigans
542,325
returned goods
0
men’s anoraks
0
bakery machinery
1,177
sound reproducing apparatus 18,231,512
7
8
aircraft & radar parts
sonar parts & firearms
radar parts
ship for scrap, sonars, bomb-disposal suits
aviation-related equipment, aircraft parts
aircraft software & parts
radios, aircraft parts, ammunition
aircraft parts
aircraft parts, simulators, rockets
➤
166
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
T
R
E
P
O
R
1
T
9
9
8
Top Three Domestic Exports from Canada, 1996
Top Three Imports into Canada, 1996
3
Total Military
Exports 1996
(Cdn dollars)
Top Military
Exports from
Canada
Country
1
2
3
1
2
A SIA (continued)
1
2
3
4
5
6
7
8
Maldives
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
Yemen
aircraft
~
aircraft parts
fish
automobiles
bituminous coal
taps, cocks, valves
wheat
helicopters
armoured vehicles
wheat
aluminum
paper
wheat
railway coaches
pressing/punching tools
helicopters
telephone answering machines
artificial filament tow
paper
contractors’ equipment
~
cartridges
shrimp & prawns
contractors’ equipment
peas
parts of electric motors
copper ores
automobiles
barley
asbestos
poles
~
asbestos
tobacco
motor vehicle parts
aluminum
transmitters
wood pulp
printed matter
aircraft parts
~
transmitters
bovine tongues, edible offal
machine parts
machine parts
graders & levelers
zinc
carpets
aircraft
printed matter
impregnated fabrics
~
chemical wood pulp
bituminous coal
mechanical appliances
automobiles
electrical parts (for telephones)
potassium chloride
furniture
t-shirts, singlets & vests
~
men’s shirts
ceramic ware
women’s trousers
cotton yarn
coffee
other integrated circuits
men’s shirts (cotton)
crude petroleum
tires, tire treads & tire flaps
crude petroleum
low value imports
frozen shrimp, prawns
small worsted fabrics
printed woven fabrics
buoys, beacons
natural uranium
coffee
petroleum products
men’s shirts
~
carpets
plastic ware.
men’s shirts
toilet & kitchen linen
parts for turbo-jets
cathode ray tubes: metal
women’s garments
acyclic ethers
men’s anoraks
petroleum products
~
storage units
dried grapes
cathode ray tubes
stainless steel bars
cotton
shrimp & prawns
coffee
low value imports
0
~
0
pullovers, cardigans
0
paper (rolls or sheets)
0
men’s anoraks
896,488
men’s shirts
2,569,082
other aircraft parts
0
storage units
2,940,826
men’s garments (synthetic)
0
crude granite
195,303,965
footwear
31,500
t-shirts, singlets & vests
0
~
0
tuna, skipjack & bonito 4,814,385
worsted fabrics
5,989,711
low value imports
0
jewellery
24,504
antiques
0
plastic containers
18,850
biscuits, waffles, wafers
0
Total Asia
aviation-related parts, ammunition
radios, fire-control systems
propellants, aircraft parts, ammunition parts
LAV’s & parts, aircraft parts, targets, radios
bomb-disposal suits
rockets & parts, firearms, APC & tank parts
navigation systems, aircraft parts
firearms, ammunition
radios, firearm parts
236,880,791
E ASTERN E UROPE
1
2
3
4
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak republic
Slovenia
Ukraine
Ex-Yugoslavia
stamps, cheque, certificates
ethyl alcohol (<80% vol.)
diesel trucks
zinc ores
refined sugar
impregnated fabrics
dump trucks
medicine
transmitters
maize
transmission apparatus
fuel pumps
wheat
aircraft
swine cuts
gas supply meters
low value exports
low value exports
low value exports
machine parts
vaccines
peat
static converters
scientific appliances
pet food
copper ores
swine cuts
ethyl alcohol
laboratory equipment
impregnated fabrics
centrifugal pumps
purifying machinery
bituminous coal
tobacco
purifying machinery
lumber
other structures & parts
articles of peat
printed matter
ethyl alcohol (>80% of vol.)
doors, windows
parts of signaling apparatus
asphalt
asphalt
mink furskins
cinematographic projectors
prefabricated structures
veneer
chicken, capon cuts, offal
tents
ham cuts
sawing machines
low value exports
remote control
asbestos
prefabricated buildings
electrical switches
women’s blouses
flight simulators
perfumes & toilet water
copper ores
ferro-chromium
boring machine
shrimp & prawns
5
essential oils
milk powder
orange juice
grape wines
soups & broth
wheeled tractors
ophthalmic instruments
parts of electric filaments, lamps grape wines
frozen shrimp, prawns crude petroleum
frozen shrimp, prawns frozen fish
footwear, outer sole bedroom furniture
apple juice
men’s shirts
mechanical appliances parts for turbo-jets
other footwear
footwear (covering ankles)
natural uranium
frozen cod
lathes
heterocyclic compounds
heterocyclic compounds swine leather
low value imports
paintings, drawings
raspberries, mulberries men’s trousers & shirts
6
7
statuettes
casein
bolts/screws
women’s jackets/blazers
footwear, outer sole
tubes, pipe & hollow profiles
products of benzoic acid
storage units
plywood
milk powder
ferro-silicon
women’s blouses & shirts
bars, rods (copper-zinc)
taps, cocks, valves
petroleum products
petroleum products
furniture parts
waste paper
women’s anoraks
Total Eastern Europe
0
0
0
190
0
70,905
5,350
19,365
0
0
0
0
8,684
2,810
12,490
43,445
3,347
8,085
0
174,671
Total Developing Countries
263,760,725
Total Other Countries (Other than US)
195,652,839
Total World (Other than US)
459,413,564
Notes: Items in mauve contributed to at least 75 percent or more of total bilateral trade with Canada.
Source: Statistics Canada, International Trade Division.
167
8
firearms
bomb-disoposal suits, firearms, aircraft parts
firearms
body-armour, firearms
bomb-disposal suits, firearms
firearms
body-armour, firearms
bomb-disposal suits, firearms
firearms
firearms
TA
B L E
8
C ANADIAN F INANCIAL R ELATIONS
C OUNTRIES (1996)
T
his table offers a glimpse of Canada’s
financial relations with the developing world. Despite the importance of
these linkages, figures for private or
commercial debt are difficult to obtain,
as reflected by the number of gaps in the
table. Similarly, statistics on yearly flows
can at best be estimated, and then only
for the largest developing countries.
In 1996, total claims by Canadian public
agencies and Canadian banks on developing country institutions and individuals were estimated to have reached
$43.5 billion, an increase of $10 billion
over the previous year. Information
supplied by the Bank of Canada to the
Bank for International Settlements indicates that Canadian banks alone held
56 percent of these debts, representing
claims of $24.5 billion on residents of
developing countries (both private sector and sovereign lending). Much of
this lending—75 percent—was to the
Americas with most of the remainder to
Asia. Most indebted to Canada were
Mexico, Brazil, China, and Argentina.
Individual Canadian banks had only
limited exposure to “problem” developing-country debtors as designated by
the Office of the Superintendent of
Financial Institutions. The Bank of
Nova Scotia was most exposed, with
much of its $1.5 billion in loans
considered not to be fully collectible.
At approximately $19 billion in 1996, the
debt owed by developing countries to the
Canadian government or its agencies
was substantial, though marginally
higher than in 1995. (It should be noted,
however, that 1996 figures are based on
more complete information than those
in 1995 and hence comparisons should
be made with caution.) Of this total,
only 10 percent—1.9 billion—was debt
owed directly to the government of
Canada, mostly in the form of concessional debt owed to CIDA. As CIDA no
longer provides bilateral loans, the outstanding debt will decrease year by year:
nonetheless, in fiscal year 1995-96, debt
servicing to the Canadian government
cost developing countries more than
168
WITH
Official Debt Owed to
Canada by Agency
1996 total: $16.9 billion
D EVELOPING
of 2 percent from last year. While the
Wheat Board does not release detailed
country figures, Russia, Algeria, and
Brazil most likely accounted for the
lion’s share of the outstanding debt.
CANADIAN GOVERNMENT (CIDA) 10%
UNKNOWN 11 %
CANADIAN WHEAT BOARD 34%
EXPORT DEVELOPMENT CORPORATION 45%
$65 million. Because most of the debt
owed by the poorest countries had
already been forgiven, the remaining debt
was concentrated in Asia—notably in
India, Pakistan, Indonesia, and Sri Lanka.
The rest of Canada’s official debt with
developing countries was held by two
crown corporations: the Export Development Corporation (EDC) and the
Canadian Wheat Board (CWB) which,
for reasons of commercial confidentiality,
are not required to release detailed
information on their lending practices.
In 1996, the EDC held approximately
$8.5 billion in outstanding loans from
developing countries, mainly on its
nonconcessional corporate account. The
EDC’s gross exposure through the corporate account was significantly lower than
a year earlier, especially in Africa as a
result of debt forgiveness through the
Paris Club and debt write-downs. Loans
outstanding under the EDC’s “Canada
Account” (some of it concessional and
guaranteed by the Canadian government) were up slightly, mainly because
of a $93 million loan to China.1
Column 11 provides a rough breakdown
of Canada’s foreign direct investment
(FDI) stock—direct investment or ownership in companies—in developing countries. FDI is held in another country’s
physical assets as opposed to financial
assets, such as stocks or bonds. Canada
held approximately $16.1 billion in FDI
in developing countries. Fully 63 percent
of this was located in the Americas:
Chile, Brazil, and Mexico were in the top
four developing-country recipients of
Canadian FDI. (The Caribbean nations
of the Bahamas and Barbados, both high
human development countries, accounted for another large share of Canadian
FDI.) Next in importance was Asia,
particularly Indonesia, followed distantly
by Thailand and China. Developing
country companies, in turn, had some
$1.4 billion invested in Canada. In
percentage terms, some 10 percent of
Canada’s total FDI stock was invested in
developing countries while developing
countries accounted for less than
1 percent of FDI in Canada.
Although of growing importance, little
information is available about Canadian
portfolio investment in developingcountry stocks and bonds. The popularity of mutual funds, large pools of
pension savings, and low interest rates
have contributed to a rapid increase in
this form of investment: Canadian
portfolio investment in non-OECD
countries was some $10 billion in 1996,
a four-fold increase since 1990. While
much of this was probably invested in
emerging markets such as Singapore,
South Korea, Hong Kong, and Taiwan,
an increasing amount undoubtedly
reached developing countries.
1
The Canadian Wheat Board held $6.5
billion in outstanding credit grain sales
to 13 developing countries, a reduction
The Canada Accounts are loans by the EDC authorized
by the Government of Canada to foreign customers
where the liability is for a term, or in an amount in
excess of that normally assumed by the EDC. Financed
directly by the Canadian government, these loans are
administered by the EDC on the government’s behalf.
C
A
N
A
D
I
A
D
N
E
V
E
L
O
P
M
E
N
T
R
E
P
TABLE 8 C ANADIAN F INANCIAL R ELATIONS
(IN
MILLIONS OF
Country
A FRICA
CANADIAN
Government
of Canada
(CIDA)
31-Mar-96
PUBLIC OR OFFICIAL DEBT
Export Development Export Development
Export
Corporation
Corporation Development
Canada Account
Canada Account Corporation
Section 23
Section 23
Corporate
Nonconcessional
Concessional
Account
31-Mar-96
31-Mar-96
31-Dec-96
2
Algeria
49.52
Angola
0
Benin
0
Botswana
0
Burkina Faso
0
Burundi
0
Cameroon
0
Cape Verde
0
Central African Republic
0
Chad
0
Comoros
0
Congo - Brazzaville
0
Congo - Kinshasa (Zaire) 0
Côte d’Ivoire
0
Djibouti
0
Egypt
54.54
Equatorial Guinea
0
Eritrea
0
Ethiopia
0
Gabon
0
Gambia
0
Ghana
0
Guinea
0
Guinea-Bissau
0
Kenya
0
Lesotho
0
Liberia
0
Libya
0
Madagascar
0
Malawi
0
Mali
0
Mauritania
0
Mauritius
0
Morocco
14.69
Mozambique
0
Namibia
0
Niger
0
Nigeria
0
Rwanda
0
São Tomé and Principe
0
Senegal
0
Seychelles
0
Sierra Leone
0
Somalia
0
South Africa
0
Sudan
0
Swaziland
0
Tanzania
0
Togo
0
Tunisia
92.98
Uganda
0
Zambia
0
Zimbabwe
0
Total Africa
211.73
16.50
0
0
0
0
0
14.75
0
0
0
0
0.40
0
0
0
4.08
0
0
0
22.66
0
0
0
0
13.37
0
0
0
0
0
0
0
0
151.05
0
0
0
0
6.12
0
0
0
0
0
0
8.96
0
0
0
0
0
0
0
237.89
I t e m s :
Africa unspecified
0
R
WITH
1
T
9
9
8
Excel Table
D EVELOPING C OUNTRIES (1996)
DOLLARS)
1
M e m o r a n d u m
O
0
3
4
12.90
435.00
0
~
0
~
0
~
0
~
0
~
21.85
~
0
~
0
~
0
~
0
~
3.51
~
0
~
0
>zero
0
~
19.01
>zero
0
~
0
~
0
~
12.36
~
0
~
0
~
0
~
0
~
10.36
~
0
~
0
~
0
~
24.42
~
0
~
0
~
0
~
0
~
139.96
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
37.29
~
0
~
0
~
0
~
8.06
~
0
~
289.73 1,249.59
0
814.59
PRIVATE
Canadian
Wheat
Board
31-Jul-96
5
COMMERCIAL DEBT
Total
Bank of
Total
Official Royal Bank Nova Scotia
Total Canadian
Debt
Gross Exposure
Canadian Debt Claims
(Estimate)
(Designated LDCs only) Bank Claims (Estimate)
1996 31-Oct-96 31-Oct-96 30-Sept-96
1996
6
7
> zero 747.00
0
6.80
0
1.00
0
1.10
0
0
0
0
0 403.60
0
0
0
0
0
0
0
0
0
61.20
0
36.00
0 251.00
0
0
> zero 468.80
0
0
0
0
> zero
1.80
0 112.40
0
0
0
0
0
0
0
0
0 120.60
0
~
0
4.10
0
0
0
42.60
0
0
0
0
0
0
0
0
0 397.60
0
0
0
0
0
0
0
0
0
6.30
0
0
0
8.80
0
0
0
0
0
0
0
50.60
0
13.00
0
0
0
87.00
0
0
0 114.20
0
0
> zero
86.40
0
0
> zero 3,021.90
0
OR
814.59
8
9
TOTAL FDI
Stock of Stock of
Foreign Foreign
Direct
Direct
Investment Investment
Abroad in Canada
1996
1996
10
11
12
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0
~
~
~
~
~
0 468.80
~
~
~
~
~
~
~
~
~
~
0 112.40
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0 397.60
~
~
~
~
~
~
~
~
~
~
0
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
22 480.86 3,502.76
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
154
~
~
~
~
~
~
~
20
684
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
197
~
~
~
~
~
~
~
~
197
~
22
510
~
➤
480.86
169
~
TA
B L E
8 (
C O N T I N U E D
Country
A MERICAS
)
Government
of Canada
(CIDA)
31-Mar-96
PUBLIC OR OFFICIAL DEBT
Export Development Export Development
Export
Corporation
Corporation Development
Canada Account
Canada Account Corporation
Section 23
Section 23
Corporate
Nonconcessional
Concessional
Account
31-Mar-96
31-Mar-96
31-Dec-96
1
2
Antigua and Barbuda
0
Argentina
0.40
Belize
0
Bolivia
0
Brazil
7.46
Chile
2.63
Colombia
18.65
Costa Rica
20.44
Cuba
9.55
Dominica
0
Dominican Republic
1.50
Ecuador
7.85
El Salvador
2.62
Grenada
0
Guatemala
3.09
Guyana
0
Haiti
0
Honduras
24.76
Jamaica
22.82
Mexico
0.06
Nicaragua
16.02
Panama
0
Paraguay
0
Peru
0.08
St Kitts and Nevis
0
St Lucia
0
St Vincent/Grenadines
0
Suriname
0
Trinidad and Tobago
0
Uruguay
0
Venezuela
0
Total Americas
137.94
0
147.50
0
0
11.30
0
0
0
23.76
0
0
7.35
0
0
0
0
0
0
10.25
5.95
0
0
0
1.04
0
0
0
0
0
0
0
207.14
M e m o r a n d u m
3
4
0
~
21.58
~
0
~
0
~
0
499.00
1.15
~
0
408.00
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
9.98
~
21.85
528.00
0
~
0
~
0
~
0
574.00
0
~
0
~
0
~
0
~
0
~
0
~
0
333.00
54.55 2,418.74
PRIVATE
Canadian
Wheat
Board
31-Jul-96
5
OR
COMMERCIAL DEBT
Total
Bank of
Total
Official Royal Bank Nova Scotia
Total Canadian
Debt
Gross Exposure
Canadian Debt Claims
(Estimate)
(Designated LDCs only) Bank Claims (Estimate)
1996 31-Oct-96 31-Oct-96 30-Sept-96
1996
6
7
8
9
10
11
12
0
29.90
0 612.20
0
0
0
0
> zero 658.60
0 116.40
0 426.65
0
28.10
0
33.90
0
0.30
0
1.50
0
44.20
0
4.10
0
1.00
0
21.30
0
7.40
> zero
8.00
0
60.90
> zero
85.60
0 578.00
0
16.90
0
3.70
0
0
> zero 617.60
0
0
0
0
0
0
0
0
0
60.10
0
0
0 338.70
> zero 3,755.05
~
183
~
~
576
~
~
~
~
~
0
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0
759
~
293
~
~
577
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
269
1,396
~
1,627.83
~
0
3,167.12
790.08
0
~
0
~
~
0
~
~
~
~
~
~
0
4,111.12
~
543.52
~
164.83
~
~
~
~
~
0
746.49
18,461.90
~
2,240.03
~
0
3,825.72
906.48
426.65
28.10
33.90
~
1.50
44.20
4.10
~
21.30
~
~
60.90
85.60
4,689.12
16.90
547.22
0
782.43
~
~
~
~
~
~
1,085.19
22,216.95
~
1,260
~
67
2,747
2,757
391
50
99
~
111
43
~
~
~
~
~
~
261
1,266
~
96
~
217
~
~
~
~
~
~
362
10,217
~
~
~
~
240
~
~
~
~
~
~
~
~
~
~
~
~
~
~
239
~
91
~
~
~
~
~
~
~
~
~
570
41
~
~
216
~
~
~ 7,310.93 7,387.67
~
~
490
~
~
~
10
11
12
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
820.04 2,662.94
~
~
504.01 1,468.61
0 706.53
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
368
~
196
1,410
~
~
~
234
~
~
~
~
~
~
~
~
~
~
242
~
9
~
~
~
~
~
~
~
➤
I t e m s :
Caribbean Unspecified
0
Latin America Unspecified 0
Americas Unspecified
0
0
0
0
0
0
0
~
~
76.74
0
0
0
~
0
~
~
~
~
A SIA
1
2
3
4
5
6
7
8
0
0
0
0
0
0
8.31
0
49.43
0
567.29
234.56
0
0
0
0
0
0
0
0
0
0
0
0
0
0
93.50
0
0
0
0
0
0
15.36
0
0
0
0
0
0
0
0
0
0
0
1.50
0
0
0
8.31
0
0
0 1,842.90
0
0
0 964.60
0 706.53
> zero 319.20
> zero 525.50
0
22.80
0
17.80
0
26.40
0
0
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0
~
~
~
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
TOTAL FDI
Stock of Stock of
Foreign Foreign
Direct
Direct
Investment Investment
Abroad in Canada
1996
1996
170
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
537.61 1,113.00
0
~
69.19
~
43.97
428.00
0
115.00
0
~
0
~
0
~
0
~
0
~
9
C
A
N
A
D
I
D
N
Government
of Canada
(CIDA)
31-Mar-96
Country
A SIA
A
(continued)
E
V
E
L
P
M
E
N
T
R
PUBLIC OR OFFICIAL DEBT
Export Development Export Development
Export
Corporation
Corporation Development
Canada Account
Canada Account Corporation
Section 23
Section 23
Corporate
Nonconcessional
Concessional
Account
31-Mar-96
31-Mar-96
31-Dec-96
1
2
Laos
0
Lebanon
0
Malaysia
6.76
Maldives
0
Mongolia
0
Nepal
0
North Korea
0
Oman
0
Pakistan
479.62
Papua New Guinea
0
Philippines
3.15
Qatar
0
Saudi Arabia
0
Sri Lanka
136.00
Syria
0
Tajikistan
0
Thailand
28.80
Turkey
11.40
Turkmenistan
0
United Arab Emirates
0
Uzbekistan
0
Vietnam
0
West Bank and Gaza
0
Yemen
0
Oceania
0
Total Asia
1,525.33
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
108.86
M e m o r a n d u m
O
3
4
0
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
10.27
~
0
~
0
~
0
~
0
~
0
~
0
~
0
~
30.24
~
141.61
174.00
0
~
0
~
0
~
0
~
0
~
0
~
0
~
832.89 2,049.07
E
P
O
R
1
T
9
9
PRIVATE
Canadian
Wheat
Board
31-Jul-96
5
8
OR
COMMERCIAL DEBT
Total
Bank of
Total
Official Royal Bank Nova Scotia
Total Canadian
Debt
Gross Exposure
Canadian Debt Claims
(Estimate)
(Designated LDCs only) Bank Claims (Estimate)
1996 31-Oct-96 31-Oct-96 30-Sept-96
1996
9
TOTAL FDI
Stock of Stock of
Foreign Foreign
Direct
Direct
Investment Investment
Abroad in Canada
1996
1996
6
7
8
10
11
12
0
0
0
0
0
7.50
0
0
0
0
0
0
0
0
0
0
> zero 592.60
0
0
0
80.00
0
0
0
0
0 140.20
0
0
0
0
0 341.10
0 327.01
0
0
0
0
0
0
0
0
0
~
0
0
0
~
> zero 5,923.95
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~ 700.17 707.67
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~ 521.72 601.72
~
~
~
~
~
~
~
~
~
~
0
~
~
~
~
~ 1,191.93 1,533.03
~
0 327.01
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0 4,555.20 10,479.15
~
~
123
~
~
~
~
~
~
213
349
~
~
~
~
~
556
~
~
~
~
~
~
~
~
4,697
~
~
41
~
~
~
~
~
~
~
~
~
40
~
~
~
~
~
~
~
~
~
~
~
~
332
1,248
~
I t e m s :
Asia Unspecified
0
0
0
219.07
0
~
~
~
E ASTERN E UROPE
1
2
3
4
5
6
7
8
9
10
11
12
Albania
0
Belarus
0
Bulgaria
0
Czech Republic
0
Estonia
0
Hungary
0
Latvia
0
Lithuania
0
Moldova
0
Poland
0
Romania
0
Russian Federation
0
Slovak Republic
0
Ukraine
0
Ex-Yugoslavia
0
Total Eastern Europe 0.70
0
0
0
0
0
0
0
6.78
0
0
316.56
82.05
0
4.00
0
409.39
0
0
0
0
0
0
0
0
0
42.41
0
0
0
0
0
42.41
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
566.80
0
0
0
0
0
51.10
0
28.70
0
0
0
11.30
0
0
0
6.78
0
0
> zero 3,600.20
0 319.80
> zero 2,098.40
0
3.70
0
22.40
0 128.10
> zero 6,270.48
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
123
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
408
~
~
~
475
~
~
~
~
~
~
~
~
~
~
~
12
~
~
~
12
0.70
0
0
566.80
~
~
123
~
~
67
~
Total Developing Countries 1,875.69
963.28
1,219.58 6,284.20 6,521.86 18,971.38
794
1,541 24,529.14 43,500.52
16,073
1,446
0
335
M e m o r a n d u m
I t e m s :
Europe Unspecified
M e m o r a n d u m
817.32 1,036.39
0
I t e m s :
Developing Country Unspecified
0
0
0
0 6,521.86
~
35
0
1,031.19 7,553.05
Notes: Amounts listed under Memorandum Items are contained in regional totals but not attributed to individual countries.
Sources: Canada, Public Accounts of Canada 1995-96; Export Development Corporation, Canadian Wheat Board, Royal Bank, and Bank of Nova Scotia 1996 Annual Reports;
Statistics Canada, Balance of Payments Division; EDC, Government Relations and Corporate Policy Division; Department of Finance, International Finance and Economic
Analysis Division; and World Bank, Financial Flows and the Developing Countries May 1997.
171
TA
B L E
9
M OVEMENT
OF
P EOPLES
T
o smooth out what can be fairly
large year-to-year fluctuations, the
figures in Table 9 present averages for
1994-96, the last three years for which
data is available. During this period,
approximately two-thirds of immigrants
to Canada came from developing countries, roughly the same proportion as 10
years before. Total immigration
increased an average of 8 percent a year,
from its historically low levels of a
decade ago. Developing countries in
Asia, Africa, and Eastern Europe
accounted for the largest part of the
increase—an average of 10 percent
annually—while immigration from the
Americas remained fairly constant.
By region, Asia provided the most immigrants—60 percent—but proportionately
fewer than its share of the developing
world population (68 percent). The top
three sending countries in 1994-96 were
India (18,201), the Philippines (15,707),
and China (14,067). Next in importance
were Sri Lanka, Bosnia Herzegovina,
Pakistan, Vietnam, Iran, Jamaica, and
Romania. The Americas and Eastern
Europe were overrepresented in terms of
their percentage of developing-world
population, each accounting for 15 percent of developing country immigration
to Canada. Africa was underrepresented:
with 15 percent of developing country
population, it accounted for just 10 percent of Canadian immigration, a ratio
which has risen slightly over the past
decade. Significant drops in immigration
were noted from only a few areas:
Indo-China and Central America because
of declines in refugee flows, and some of
the wealthier countries of Eastern
Europe, notably the Czech Republic,
Poland, and Hungary.
There are four broad classes of immigrants—independent, refugee, business,
and family class (that is, sponsored by a
relative who arrived earlier). Family
class arrivals made up 53 percent of all
immigrants from developing countries
in 1994-96: India and the Philippines
172
Developing Country
Immigration by Class 1994-96
FAMILY CLASS 53%
BUSINESS 3%
REFUGEE 18%
INDEPENDENT 25%
again had the most family class members accepted, followed by Vietnam.
Independents made up 25 percent of
new immigrants from developing countries to Canada while refugees accounted for 18 percent. More than 95 percent
of refugees to Canada came from developing countries in 1994-96, mainly
from Bosnia Herzegovina, Sri Lanka,
and Iraq—all countries torn by conflict.
Surprisingly, Africa—home to one-third
of the world’s refugees—accounted for
only 13 percent of refugees to Canada.
Entrepreneurs and investors admitted to
Canada under the business class made
up only 10 percent of all immigrants in
1994-96 and only one-quarter of those
were from developing countries. The
largest number were from the Middle
East, with Saudi Arabia, Kuwait, the
United Arab Emirates, Egypt, Jordan, and
Iran providing 50 percent of developingcountry business class immigrants.
Overall, during 1994-96, women were
slightly better represented than men
among immigrants to Canada, making
up 52 percent of the total. Arrivals from
developing countries were also well
balanced, with women accounting for
51 percent. Within immigration classes
the gender balance tipped slightly:
women made up 55 percent of the family
class but only 45 percent of refugees.
But while men are preponderant in the
refugee class, their spouses sometimes
enter later under the family class. Men
and women were represented almost
equally in the business class, suggesting
that men and women are paired in this
category. Among independent entrants,
women slightly outnumbered men
because of the large numbers of women
who enter Canada as domestic workers:
in 1994-96, the Philippines and China
were the leading developing countries of
origin for independent migrants.
Numbers of Immigrants by Continent of Origin 1986 and 1994-96
(averaged)
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
AFRICA
AMERICAS
1986
ASIA
EASTERN EUROPE
AVERAGE 1994-96
OTHER
C
A
N
A
D
I
A
D
N
E
V
E
L
O
P
M
E
N
R
T
E
P
O
R
1
T
9
9
8
Excel Table
TABLE 9 M OVEMENT OF P EOPLES : I MMIGRATION TO C ANADA
C OUNTRIES BY I MMIGRATION C LASS AND G ENDER
(AVERAGE
O F L A S T T H R E E Y E A R S AVA I L A B L E
A V
FAMILY
Country
A FRICA
D EVELOPING
1994-96)
R
A
G E
1
REFUGEE
9
9
4
-
1 9 9
BUSINESS
Total % Change
6
INDEPENDENT
AVERAGE TOTAL IMMIGRATION Immigration Per Year 1986
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
117
194
1
1
3
6
5
8
4
7
9
13
24
50
16
40
3
4
2
3
2
5
0
1
71
130
3
7
26
48
398
727
~
~
36
49
356
544
3
6
5
10
568 1,019
12
23
1
1
272
496
2
3
3
7
19
34
7
13
3
7
10
24
0
1
49
83
248
449
1
1
2
3
0
3
85
183
10
18
~
~
13
33
6
13
14
22
152
261
375
676
41
59
2
4
97
183
5
14
52
92
17
29
25
52
16
29
188
12
2
4
0
95
14
17
0
1
8
1
204
2
3
48
~
2
235
0
1
94
10
1
78
1
25
22
0
1
7
4
0
4
1
0
1
64
63
~
6
5
9
469
4
200
2
3
11
7
11
5
4
98
5
1
1
0
93
10
10
0
1
2
0
157
1
4
43
~
3
229
0
0
62
4
0
70
1
13
5
0
2
2
3
0
6
1
0
0
35
65
~
5
4
6
440
2
124
3
4
5
6
7
4
3
286
17
3
4
0
188
24
27
0
1
9
2
361
3
7
91
~
5
464
0
2
156
14
1
147
2
39
27
0
4
9
8
0
10
2
0
1
99
128
~
10
9
15
910
7
324
5
7
16
13
18
9
7
9
0
0
0
0
1
9
0
0
1
0
0
4
0
0
190
~
0
2
1
0
1
0
0
15
0
2
5
0
0
0
0
1
13
0
1
2
8
1
~
5
0
1
0
74
5
0
16
0
1
1
3
1
8
0
0
0
0
1
8
0
0
1
0
0
2
0
0
164
~
0
3
1
0
0
0
0
19
0
1
6
0
0
0
0
2
17
1
1
0
7
1
~
5
0
1
0
69
2
0
10
0
0
1
2
1
17
0
0
0
0
2
17
0
0
2
0
0
6
0
0
354
~
0
4
3
0
2
0
0
33
0
2
11
0
0
0
0
3
30
1
1
2
15
1
~
10
0
1
0
143
7
0
26
0
1
2
4
2
297
0
3
9
1
3
31
25
1
1
1
0
11
1
1
816
~
1
17
3
4
71
3
0
56
1
1
52
4
3
5
1
24
178
1
2
3
75
3
~
18
2
6
14
644
22
1
22
5
83
6
36
12
241
538
571
463 1,035
0
1
13
6
19
2
5
8
5
14
8
16
16
13
29
1
2
3
5
9
3
5
103
105
208
20
51
80
62
142
17
42
66
43
109
0
1
2
3
5
0
2
4
4
8
0
1
11
4
15
1
1
3
1
4
9
20
279
239
517
0
1
8
4
12
1
2
26
31
57
555 1,371 1,383 1,159 2,542
~
~
~
~
~
0
1
16
39
54
13
30
441
601 1,042
2
5
7
7
14
1
5
10
6
16
63
135
617
694 1,311
2
5
23
18
41
0
0
1
1
2
59
115
373
419
792
1
2
3
4
7
0
1
32
17
49
36
89
95
66
161
5
9
10
12
22
2
5
9
8
16
3
8
25
15
41
1
1
6
4
10
21
45
59
72
131
153
331
396
424
819
0
1
2
3
5
1
3
4
4
8
2
5
8
3
11
54
129
245
181
426
4
7
75
79
154
~
~
~
~
~
12
30
49
35
84
2
4
15
12
26
4
10
24
25
49
9
23
593
601 1,194
600 1,244 1,024 1,046 2,070
16
39
246
184
429
1
2
6
6
12
23
45
128
134
261
4
8
25
14
39
39
122
131
97
228
5
11
31
30
61
34
70
70
65
135
10
22
30
30
60
87
42
6
4
7
11
14
11
~
8
2
1
77
52
12
510
1
na
989
1
5
235
6
1
359
3
10
28
42
9
2
1
312
403
36
3
1
154
45
1
12
12
14
54
942
55
3
343
8
63
82
39
51
28.09
(7.63)
8.58
21.91
2.16
34.17
26.07
25.78
~
0
22.32
14.87
20.98
(13.88)
16.86
17.43
~
na
0.52
29.89
12.57
18.76
21.19
8.84
8.24
8.84
17.14
19.14
(6.40)
6.14
35.15
26.31
(8.29)
7.35
(18.48)
9.84
27.10
10.71
13.09
~
21.43
8.18
13.27
36.29
8.19
22.81
14.55
(2.68)
17.16
13.73
(2.97)
13.22
1.58
2,500 3,190 5,690 1,951 1,540 3,491
373
330
703 2,577 2,043 4,621 7,402 7,103 14,505 5,169 10.87
➤
Algeria
77
Angola
0
Benin
3
Botswana
3
Burkina Faso
2
Burundi
4
Cameroon
26
Cape Verde
24
Central African Republic 1
Chad
1
Comoros
3
Congo - Brazzaville
1
Congo - Kinshasa (Zaire) 59
Côte d’Ivoire
5
Djibouti
22
Egypt
329
Equatorial Guinea
~
Eritrea
13
Ethiopia
188
Gabon
3
Gambia
5
Ghana
451
Guinea
11
Guinea-Bissau
0
Kenya
224
Lesotho
1
Liberia
4
Libya
15
Madagascar
6
Malawi
4
Mali
14
Mauritania
1
Mauritius
34
Morocco
200
Mozambique
0
Namibia
1
Niger
2
Nigeria
98
Rwanda
8
São Tomé and Principe ~
Senegal
20
Seychelles
7
Sierra Leone
8
Somalia
109
South Africa
301
Sudan
18
Swaziland
2
Tanzania
87
Togo
9
Tunisia
40
Uganda
13
Zambia
27
Zimbabwe
13
Total Africa
E
FROM
173
1986 to 1994-96
TA
B L E
9 (
C O N T I N U E D
)
A V
FAMILY
Country
E
R
A
G E
1
REFUGEE
9
9
4
-
1 9 9
BUSINESS
Total % Change
6
INDEPENDENT
AVERAGE TOTAL IMMIGRATION Immigration Per Year 1986
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Antigua and Barbuda
9
13
22
Argentina
77
101
177
Belize
10
12
22
Bolivia
24
22
46
Brazil
95
150
245
Chile
2,221
117 2,337
Colombia
79
142
221
Costa Rica
26
44
69
Cuba
99
156
254
Dominica
22
24
45
Dominican Republic 153
159
311
Ecuador
135
170
305
El Salvador
212
300
512
Grenada
104
121
225
Guatemala
116
159
274
Guyana
1,504 1,740 3,244
Haiti
756
873 1,629
Honduras
70
97
166
Jamaica
1,523 1,617 3,140
Mexico
242
366
608
Nicaragua
28
45
73
Panama
16
21
36
Paraguay
97
133
230
Peru
71
102
172
St Kitts and Nevis
55
69
124
St Lucia
2
3
5
St Vincent/Grenadines 26
27
53
Suriname
16
19
35
Trinidad and Tobago 895 1,001 1,896
Uruguay
29
31
60
Venezuela
66
106
171
0
36
1
10
2
29
19
4
106
0
3
19
166
2
216
8
133
50
0
19
19
9
123
57
0
0
0
1
6
21
55
0
31
1
8
4
28
16
6
72
0
4
22
148
1
181
9
144
44
3
22
15
7
132
53
1
0
0
2
8
16
54
0
67
3
19
6
57
35
10
178
0
7
41
314
3
397
17
277
94
3
42
34
16
255
110
1
0
0
4
14
37
109
0
47
1
1
30
2
6
1
0
0
0
4
0
0
0
3
2
3
5
20
0
6
7
0
0
1
0
2
18
1
16
1
49
2
1
30
1
9
0
0
0
0
3
0
0
0
5
1
3
4
19
1
4
6
0
0
1
0
1
22
1
17
1
96
3
2
60
3
15
1
0
0
0
7
0
0
0
7
3
6
9
39
1
10
13
0
0
2
0
4
40
3
33
2
74
2
3
140
20
44
12
5
4
6
9
20
20
17
41
32
11
120
120
16
5
33
16
13
0
4
3
192
27
63
1
70
2
3
122
24
53
13
5
11
10
11
16
63
13
109
51
7
273
109
11
3
37
28
41
0
17
4
219
26
58
3
144
5
6
262
44
97
25
9
16
15
20
37
83
31
150
83
18
393
229
27
8
70
45
54
0
21
8
411
53
121
12
234
14
39
267
2,271
148
43
209
26
161
167
398
125
349
1,556
923
133
1,648
401
64
35
260
144
68
4
30
23
1,111
78
199
15
251
18
33
306
170
219
63
232
35
172
207
465
185
353
1,862
1,069
151
1,897
517
71
35
308
183
111
4
44
27
1,250
74
235
27
485
32
72
573
2,441
367
106
441
61
333
374
863
311
702
3,419
1,992
284
3,545
918
135
70
568
328
179
7
74
50
2,361
152
434
57
244
25
80
241
639
262
138
133
48
322
250
3,198
242
1,322
3,925
1,734
105
4,665
592
733
21
70
628
46
95
207
13
942
137
229
(7.32)
7.10
2.50
(1.05)
9.05
14.34
3.44
(2.60)
12.74
2.48
0.35
4.12
(12.28)
2.53
(6.14)
(1.37)
1.40
10.46
(2.71)
4.48
(15.54)
12.74
23.28
(6.30)
14.55
(22.60)
(9.78)
14.34
9.62
1.07
6.59
8,776 7,934 16,710 1,115 1,034 2,149
176
182
358 1,074 1,412 2,486 11,141 10,562 21,703 21,343
0.17
A MERICAS
Total Americas
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
Malaysia
1
2
3
4
5
6
7
8
80
153
234
12
20
32
3
4
7
38
44
82
417
559
976
0
0
0
19
21
40
51
137
188
2,795 4,385 7,180
8
10
18
6,974 7,888 14,862
37
64
101
478
715 1,193
99
171
270
122
176
299
4
9
12
66
67
133
0
2
2
8
20
28
439
804 1,243
119
207
326
588
6
4
2
311
1
52
15
809
5
436
4
759
866
48
17
96
1
5
185
14
532
7
4
1
183
0
26
14
539
5
245
6
554
494
40
20
60
1
3
130
14
1,120
13
8
3
494
1
78
29
1,348
11
681
11
1,313
1,360
88
37
156
2
8
315
28
1
2
0
20
14
0
2
0
227
0
107
40
250
47
191
1
286
0
0
59
13
0
1
0
22
14
0
1
0
223
0
95
42
242
41
162
2
241
0
0
49
13
174
9
10
11
12
13
1986 to 1994-96
14
15
16
17
1
6
4
10
675
689
3
11
9
20
31
37
1
4
3
8
12
12
42
130
114
243
190
181
27
184
129
313
926
885
0
0
0
0
1
0
3
8
10
17
81
57
0
1
2
3
67
153
451 2,621 2,467 5,088 6,453 7,614
1
12
9
21
26
24
202 1,446 1,010 2,456 8,963 9,238
82
14
15
29
96
127
492
577
474 1,050 2,063 1,984
88
62
54
115 1,074
760
353
176
139
315
538
517
2
13
14
28
35
45
527
251
224
474
698
593
0
3
2
5
4
5
0
1
1
1
13
24
109
282
178
461
965 1,162
26
47
50
97
193
285
1,364
68
24
371
1,811
1
139
219
14,067
50
18,201
222
4,047
1,834
1,055
79
1,291
8
37
2,127
478
597
na
na
15
459
~
14
1,751
1,916
na
6,971
142
2,000
243
104
na
228
na
641
2,364
418
8.61
na
na
37.83
14.71
~
25.77
(18.76)
22.06
na
10.07
4.59
7.30
22.40
26.07
na
18.93
na
(24.75)
(1.05)
1.34
➤
C
A
N
A
D
I
A
Country
D
N
E
V
E
L
O
P
A V
FAMILY
E
R
M
A
E
N
R
T
G E
1
REFUGEE
9
E
9
P
4
O
-
R
1
T
1 9 9
BUSINESS
9
9
8
Total % Change
6
INDEPENDENT
AVERAGE TOTAL IMMIGRATION Immigration Per Year 1986
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
Male
Female
Total
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Maldives
0
Mongolia
0
Nepal
6
North Korea
1
Oman
41
Pakistan
1,059
Papua New Guinea
2
Philippines
5,029
Qatar
24
Saudi Arabia
225
Sri Lanka
934
Syria
107
Tajikistan
0
Thailand
42
Turkey
158
Turkmenistan
0
United Arab Emirates 204
Uzbekistan
3
Vietnam
1,253
West Bank and Gaza
na
Yemen
10
Oceania
325
0
0
7
0
40
1,138
4
4,791
21
157
1,880
182
1
104
239
0
183
6
2,432
na
18
385
0
0
0
0
1
0
0
0
13
1
1
1
1
0
0
0
81
2
0
3
2,197
337
230
567
6
0
1
1
9,820
25
20
45
45
7
5
12
382
63
29
92
2,815 2,350 1,816 4,167
289
48
28
77
1
0
1
1
146
44
19
63
397
84
47
130
0
0
0
0
387
16
12
28
9
6
6
12
3,685
279
230
509
na
na
na
na
28
13
11
24
711
12
10
21
0
0
2
0
5
235
2
132
31
277
9
56
0
6
20
0
223
0
0
na
7
4
0
0
3
0
3
198
1
129
31
228
6
46
0
5
18
0
214
0
0
na
6
5
A SIA (continued)
Total Asia
1
0
0
0
1
0
0
1
1
2
1
2
4
28
24
52
36
34
1
0
0
0
1
1
7
75
70
146
123
114
433 1,205
751 1,956 2,837 2,317
3
3
2
5
7
8
261 1,539 4,042 5,581 6,725 8,982
62
80
70
149
142
127
505
776
629 1,405 1,341 1,043
15
123
117
240 3,416 3,820
101
229
157
386
440
413
0
2
1
3
2
3
11
16
35
51
108
163
38
112
81
193
374
385
0
1
1
2
1
1
437
478
433
911
921
842
0
10
10
20
19
22
0
12
13
25 1,545 2,675
na
na
na
na
na
na
14
11
7
18
41
42
10
12
15
27
353
416
1986 to 1994-96
16
17
1
~
~
3
1 11.61
71
12 19.40
2
~
~
237
11 35.92
5,154
647 23.06
15
3 17.20
15,707 4,131 14.29
269
18 31.04
2,384
361 20.78
7,236 1,775 15.09
853
401 7.84
5
na
na
271
86 12.16
758
251 11.69
2
na
na
1,763
233 22.43
41
na
na
4,220 6,804 (4.67)
na
na
na
83
3 39.43
769
367 7.68
21,193 27,045 48,238 7,513 5,346 12,859 2,269 2,041 4,310 10,563 11,366 21,929 41,538 45,798 87,336 32,967 10.23
E ASTERN E UROPE
6
7
8
6
16
22
8
7
15
16
21
37
3
3
6
98
117
215 2,588 2,543 5,131
80
105
185
73
73
145
114
165
279
229
219
448
39
91
129
2
2
4
7
18
25
23
20
43
70
126
196
8
8
17
13
22
35
13
14
27
9
25
33
1
1
2
58
77
135
4
4
8
11
20
31
68
64
132
734 1,375 2,108
25
21
46
317
475
792
145
88
233
163
265
428
106
117
224
22
48
70
1
1
3
6
12
18
6
6
12
208
337
545
74
102
176
364
474
838
305
256
561
0
1
0
4
1
1
1
7
2
3
0
2
6
3
30
1
1
13
11
0
2
0
4
2
1
1
5
3
3
0
1
4
4
24
2
2
12
8
Total Eastern Europe 2,334 3,788 6,122 3,684 3,550 7,234
88
79
167 4,090 3,775 7,865 10,197 11,191 21,388 8,296
9.93
Total Developing Countries 34,803 41,957 76,760 14,264 11,469 25,733
2,906
2,632
5,538 18,304 18,596 36,900 70,277 74,654 144,931 67,775
7.90
Total Other Countries 12,946 18,339 31,285
8,865
8,650 17,516 12,843 12,366 25,209 35,228 39,946 75,174 32,163
8.86
47,749 60,296 108,045 14,837 12,060 26,897 11,772 11,282 23,054 31,147 30,962 62,109 105,505 114,600 220,105 99,938
8.22
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
Total World
1
2
3
4
573
5
591
1,164
9
10
11
12
13
14
1
22
15
37
37
3
46
37
82
66
1
40
37
77 2,726
8
181
158
339
338
3
73
67
140
418
2
42
70
112
84
2
17
16
33
49
11
71
76
147
156
5
39
36
75
67
6
9
13
22
22
0
20
18
38
82
3
14
11
24
95
10
228
197
424
993
7 1,281 1,174 2,455 1,746
54
567
529 1,097
867
4
34
50
84
58
3
9
7
16
23
24
605
572 1,176
899
20
791
694 1,485 1,471
38
63
2,698
340
453
164
55
215
76
42
99
96
1,596
1,741
935
101
26
1,022
1,432
Source: Canada, Department of Citizenship and Immigration.
175
15
16
17
75
4 34.00
128
na
na
5,424
na
na
678
42 32.07
871
na
na
247
840 (11.5)
104
1 59.1
371
706 (6.2)
143
na
na
64
na
na
181
na
na
191
na
na
2,589 5,245 (6.82)
3,487
868 14.92
1,802
107 32.63
160
na
na
49
na
na
1,921
na
na
2,903
483 19.65
TA
B L E
10
H UMAN L INKAGES BETWEEN C ANADA
D EVELOPING W ORLD
T
he linkages that Canada has with
developing countries go beyond
aid, trade, and investment. Perhaps
more meaningful are the numbers of
people in each other’s country, whether
as visitors, students, or workers. This
table gives some indication of how
strong the human links have become.
In 1996, for instance, 76,444 Canadians
were registered with our diplomatic
missions as working or living in developing countries; 14,505 students from
developing countries attended Canadian
universities and colleges; and Canadians
made more than 2 million trips to the
developing world while Canada
received 745,098 visits.
In 1996, the number of Canadians registered with our embassies or high commissions was 17 percent higher than the
previous year. Of the 76,444 Canadians
in developing countries, 5,346 were in
South Africa, which replaced Saudi Arabia
as the country with the largest Canadian
contingent. Mexico, Haiti, and India
also had sizeable Canadian communities.
It is interesting to note that not many
more Canadians were living in Asia than
in Africa (24,756 compared to 20,899),
although Canadian residents in Africa
might have been more likely to register
with a mission. A small caveat: the figures
for Canadian residents living abroad are
unlikely to be completely accurate as
Canadians are not required to register at
a mission. Most who do are working in
that country in private industry or as aid
workers, or are concerned about security.
The figures can also be distorted by visitors
who registered although they stayed
only a few days.
Excluding visits to the United States,
Canadians headed for developing countries 36 percent of the time. The number
of visits by Canadians to developing
countries increased by almost 4 percent
during the past year. The top four destinations were tourist havens close to
home: Mexico, which received more
than twice as many visits as any other
176
developing country, Cuba, the Dominican Republic, and Jamaica. In fifth,
sixth, and seventh place were more distant locales: China, Malaysia, and Thailand, likely business destinations.
Canada, however, welcomed 11 percent
fewer developing-country visits: 745,098
in 1996 compared to 834,627 in 1995.
Our most frequent guests were from
Mexico, China, India, and Brazil, which
together accounted for 37 percent of
developing-country visitors. And with
the notable exception of 14 countries,
including Brazil, Argentina, Kuwait,
Saudi Arabia, India, and Pakistan, more
Canadians visited each country than we
received visitors from there—not surprising given the cost of international travel.
While the number of students from
middle- and high-income countries rose
slightly in 1996, the number from
developing countries declined by 8 percent, a reflection of rising university
and college tuition costs and a slightly
appreciated Canadian dollar. They
nevertheless accounted for almost half
of all foreign students in Canada. As in
1995, the greatest numbers were from
China (1,839), Malaysia (1,171), Iran
(874), and India (808). Some 25 percent
of the students were from member
countries of La Francophonie, roughly
proportionate to the population share
of francophones in Canada. It is also
interesting to note the relatively large
proportion (35 percent) of African
AND THE
students. As in previous years, male
students dominated this enrolment
and the gender gap shows no sign of
narrowing: this year as last, women
students accounted for only 33 percent
of developing-country students.
As shown in column 7, Canada was represented by an in-country embassy or
high commission in only 74 developing
countries. Others were covered by a
mission located in a neighbouring
country. We had diplomatic representation in a further 25 embassies located in
high human development countries.
The 806 Canadian diplomats posted in
developing countries represented 56
percent of all Canadian diplomats
abroad at the end of December 1996.
And while the average Canadian mission
for a developing country consists of a
staff of 11 Canadians, actual numbers
vary—from China with an embassy staff
of 55 to the several countries with only
a single official posted in a Canadian
Development Cooperation Office.
Although 90 developing countries had
missions in Canada with an average
staff of eight, they tended to be smaller.
A notable exception was China which
maintained 88 diplomats in Canada—
the same number as the United States.
Other developing countries with a relatively strong diplomatic presence in
Canada included Mexico (46), Russia
(40), India (23), and Indonesia (23).
Numbers of Foreign Students by Gender and Continent of Origin 1996
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
AFRICA
AMERICAS
MALE
ASIA
EASTERN EUROPE
FEMALE
OTHER
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
TABLE 10 H UMAN L INKAGES
Country
A FRICA
Canadians
Registered Canadian
Abroad in
Visits to
(April 1997)
(1996)
M
E
N
R
T
BETWEEN
Visits to
Canada
from
(1996)
E
P
O
R
C ANADA
T
1
9
9
AND THE
8
Excel Table
D EVELOPING W ORLD
Canadian Number of
Country Number of
Foreign Students
Embassy or High Diplomatic Embassy or High Diplomatic
Enrolled from
Commission
Staff in
Commission
Staff in
(1995-96)
in Country
Country
in Canada
Canada
Male Female
Total
(Dec 1996) (Dec 1996)
(Dec 1996) (Dec 1996)
1
2
3
4
5
6
7
8
9
10
Algeria
280
Angola
132
Benin
101
Botswana
183
Burkina Faso
124
Burundi
115
Cameroon
380
Cape Verde
7
Central African Republic
72
Chad
57
Comoros
9
Congo - Brazzaville
37
Congo - Kinshasa (Zaire ) 311
Côte d’Ivoire
853
Djibouti
34
Egypt
835
Equatorial Guinea
8
Eritrea
105
Ethiopia
402
Gabon
308
Gambia
29
Ghana
683
Guinea
614
Guinea-Bissau
27
Kenya
1,559
Lesotho
290
Liberia
15
Libya
935
Madagascar
102
Malawi
453
Mali
105
Mauritania
8
Mauritius
57
Morocco
943
Mozambique
200
Namibia
20
Niger
117
Nigeria
843
Rwanda
265
São Tomé and Principe
12
Senegal
363
Seychelles
25
Sierra Leone
8
Somalia
6
South Africa
5,346
Sudan
62
Swaziland
292
Tanzania
777
Togo
88
Tunisia
452
Uganda
414
Zambia
753
Zimbabwe
683
Other Africa
na
1,400
~
2,600
5,700
2,000
~
800
600
200
~
~
100
500
3,500
700
18,300
~
~
600
600
~
1,500
800
~
7,500
~
~
700
500
1,900
1,300
~
1,800
22,800
800
2,300
~
3,800
~
~
800
1,400
200
~
24,400
~
900
3,300
900
17,600
1,400
6,000
10,300
1,200
1,235
135
171
286
266
103
469
13
37
55
7
120
739
1,051
102
5,404
21
~
587
508
48
1,163
597
38
3,072
99
101
1,821
243
207
424
53
1,030
6,071
122
203
81
1,723
161
0
971
75
65
123
20,903
152
118
864
163
2,261
522
414
1,329
na
112
6
74
39
44
56
184
0
14
45
6
30
146
193
6
91
0
0
49
135
11
159
73
0
162
9
4
142
25
18
55
18
64
458
5
2
31
110
33
3
202
3
17
51
43
18
3
86
48
329
30
35
59
4
25
1
26
13
41
20
95
0
9
4
7
12
49
90
4
34
0
0
16
67
7
45
36
0
117
5
1
18
19
14
27
5
35
178
0
2
16
34
24
1
112
2
9
27
32
8
5
51
17
111
23
7
58
1
137
7
100
52
85
76
279
0
23
49
13
42
195
283
10
125
0
0
65
202
18
204
109
0
279
14
5
160
44
32
82
23
99
636
5
4
47
144
57
4
314
5
26
78
75
26
8
137
65
440
53
42
117
5
•
11
•
7
•
6
5
2
8
151,700
56,526
3,540
1,560
5,100
Total Africa
20,899
•
2
•
6
•
•
•
Office
•
1
13
•
•
7
6
•
20
•
17
•
•
6
2
Office
•
•
1
3
5
•
•
11
3
•
•
5
8
•
20
•
9
•
•
•
•
3
4
3
3
•
2
•
•
7
1
•
16
Office
•
Office
1
5
2
•
3
•
2
•
8
•
6
•
17
•
6
•
8
•
•
•
•
•
•
•
15
3
5
4
4
9
4
•
•
3
16
•
7
23
171
30
180
➤
177
TA
B L E
10 (
C O N T I N U E D
Country
Canadians
Registered Canadian
Abroad in
Visits to
(April 1997)
(1996)
A MERICAS
Antigua and Barbuda
Argentina
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Cuba
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St Kitts and Nevis
St Lucia
St Vincent/Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
Total Americas
A SIA
Afghanistan
Armenia
Azerbaijan
Bahrain
Bangladesh
Bhutan
Burma
Cambodia
China
Georgia
India
Indonesia
Iran
Iraq
Jordan
Kazakhstan
Kuwait
Kyrghzstan
Laos
Lebanon
Malaysia
Maldives
)
Visits to
Canada
from
(1996)
Canadian Number of
Country Number of
Foreign Students
Embassy or High Diplomatic Embassy or High Diplomatic
Enrolled from
Commission
Staff in
Commission
Staff in
(1995-96)
in Country
Country
in Canada
Canada
Male Female
Total
(Dec 1996) (Dec 1996)
(Dec 1996) (Dec 1996)
1
2
3
4
5
6
97
2,386
892
1,759
2,171
1,224
982
885
141
68
311
278
210
105
924
278
3,061
300
674
3,063
74
0
2
1,059
55
122
120
5
3,376
571
1,115
13,200
14,100
7,900
4,800
18,400
20,500
39,000
46,000
222,800
18,900
124,600
7,600
2,500
26,500
14,100
6,400
29,200
12,300
102,400
541,400
9,200
16,900
700
6,600
6,500
20,100
11,600
300
23,300
1,600
41,100
1,158
27,873
445
733
61,124
11,682
10,651
6,043
2,479
874
2,979
1,924
1,670
1,763
2,107
3,759
5,323
801
20,074
87,932
525
1,637
1,049
4,858
555
1,541
1,720
165
16,588
2,783
11,937
17
52
5
6
172
40
60
17
29
14
5
20
0
4
8
25
56
8
37
209
6
2
3
38
7
26
5
0
106
8
81
14
41
6
0
137
27
50
11
16
11
2
9
2
7
4
16
40
10
50
160
6
2
4
21
8
35
5
1
122
13
82
31
93
11
6
309
67
110
28
45
25
7
29
2
11
12
41
96
18
87
369
12
4
7
59
15
61
10
1
228
21
163
26,308 1,410,500
294,752
1,066
912
7
8
9
10
•
12
25
10
16
8
11
•a
•
Consulate
•
•
•
•
•
•
5
14
1
4
16
9
8
5
13
•
•
•
•
•
Office
•
Consulate
1
2
1
Consulate
•
•
2
7
6
•
•
•
Office
•
•
Office
•
10
4
13
1
15
27
1
2
•
13
•
•
•
•
•
•
•
•
•
•
7
7
7
7
10
46
4
7
2
11
Consulate
1
•
•
•
13
1
13
•
•
•
11
3
11
1,978
21
199
26
224
7
8
9
10
•
3
Consulate
•
2
4
•
5
•
88
•
•
•
•
•
23
23
10
4
3
•
4
•
•
3
13
1
2
3
4
5
6
13
4
4
177
349
43
2
9
762
5
2,716
1,979
580
117
708
24
915
89
17
1,863
1,048
9
~
~
~
100
1,300
~
600
800
89,000
~
40,000
28,600
1,100
1,700
11,100
1,400
1,600
1,500
800
5,200
46,400
2,900
137
216
69
867
1,472
22
245
246
63,562
145
61,835
15,631
4,950
213
1,803
399
3,178
109
80
4,441
27,199
61
4
~
0
18
88
8
7
0
1,238
~
616
244
725
10
60
1
55
0
4
101
667
2
0
~
0
14
33
3
1
0
601
~
192
116
149
5
17
0
14
1
1
30
504
0
4
0
0
32
121
11
8
0
1,839
0
808
360
874
15
77
1
69
1
5
131
1,171
2
•
9
•
•
1
55
•
•
•
49
15
10
•
•
•
11
2
4
•
•
5
11
➤
178
C
A
N
A
D
I
N
D
E
V
E
L
Canadians
Registered Canadian
Abroad in
Visits to
(April 1997)
(1996)
Country
A SIA
A
O
P
M
Visits to
Canada
from
(1996)
E
N
T
R
E
P
O
R
T
1
9
9
Canadian Number of
Country Number of
Foreign Students
Embassy or High Diplomatic Embassy or High Diplomatic
Enrolled from
Commission
Staff in
Commission
Staff in
(1995-96)
in Country
Country
in Canada
Canada
Male Female
Total
(Dec 1996) (Dec 1996)
(Dec 1996) (Dec 1996)
(continued)
1
2
3
4
5
6
Mongolia
Nepal
North Korea
Oman
Pakistan
Papua New Guinea
Philippines
Qatar
Saudi Arabia
Sri Lanka
Syria
Tajikistan
Thailand
Turkey
Turkmenistan
United Arab Emirates
Uzbekistan
Vietnam
West Bank and Gaza
Yemen
Oceania
Other Asia
1
451
0
20
945
203
1,772
5
4,374
330
790
2
1,138
803
0
1,692
4
328
~
316
123
26
1,200
5,200
~
900
7,100
200
34,200
800
4,200
9,200
4,200
~
46,400
32,000
~
11,800
100
15,400
~
~
14,700
na
47
418
54
764
12,241
477
34,364
686
12,233
3,103
1,304
71
27,951
5,135
19
4,280
63
1,954
~
211
2,362
na
~
37
49
5
142
1
45
5
285
99
14
1
62
64
2
6
15
59
1
5
4
8
~
13
23
0
35
1
44
0
32
50
1
1
87
32
2
1
19
35
3
0
5
7
0
50
72
5
177
2
89
5
317
149
15
2
149
96
4
7
34
94
4
5
9
15
24,756
421,700
294,617
4,757
2,072
6,829
20
1
2
3
4
5
6
9
0
29
17
360
302
78
318
95
178
93
5
642
640
790
29
9
333
554
1,700
~
~
2,400
10,500
36,400
5,200
35,900
1,900
2,800
~
~
16,700
7,100
18,000
10,100
9,100
12,100
9,400
115
873
~
1,079
2,613
15,295
1,091
14,696
998
889
~
56
23,776
5,415
14,672
3,746
3,439
5,032
5,418
5
0
1
27
3
9
3
30
3
2
0
0
57
51
91
4
5
25
24
1
0
1
25
3
5
5
22
2
3
0
2
35
41
59
1
7
20
26
6
0
2
52
6
14
8
52
5
5
0
2
92
92
150
5
12
45
50
4,481
179,300
99,203
340
258
Total Developing World 76,444 2,163,200
745,098
Total Other Countries
(excluding US)
US
Total Asia
E ASTERN E UROPE
Albania
Belarus
Bosnia Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Macedonia, FYR
Moldova
Poland
Romania
Russian Federation
Slovak Republic
Slovenia
Ukraine
Ex-Yugoslavia
Total Eastern Europe
Total World
8
7
8
9
10
•
22
•
6
•
27
•
18
•
•
•
16
8
18
•
•
14
5
•
•
17
12
•
•
11
13
•
6
•
9
•
8
•
5
307
21
265
7
8
9
10
•
1
•
•
2
10
•
•
•
3
4
12
•
•
8
2
•
•
•
8
3
2
•
•
•
16
10
50
•
•
11
19
•
•
•
•
•
•
•
28
12
40
5
3
10
4
598
10
129
13
134
9,703
4,802 14,505
74
806
90
803
~ 3,874,700 4,040,204
7,271
6,791 14,062
24
455
26
371
~ 15,301,000 12,909,000
1,437
1,431
2,868
1
175
1
88
~ 21,338,900 17,694,302 18,411 13,024 31,435
99
1,436
117
1,262
a
Notes: Antigua and Barbuda, Dominica, Grenada, St Lucia, St Kitts and Nevis are represented by the Canadian Offices of the Organization of Eastern Caribbean States (OECS).
Source: Statistics Canada; Department of Citizenship and Immigration.
179
TA
B L E
11
C ANADA -D EVELOPING C OUNTRY L INKAGE I NDICES
D
rawing on the previous tables, this
table highlights Canada’s human,
political, and economic linkages with
developing countries through two
indices: columns 1 to 4 rank the importance of each developing country to
Canada; columns 5 to 8 present the
importance of Canada to each country.1
1
2
3
4
5
6
7
8
9
10
Asia
China
India
Philippines
Bangladesh
Indonesia
Malaysia
Sri Lanka
Thailand
Saudi Arabia
Iran
Africa
Egypt
South Africa
Algeria
Ghana
Côte d’Ivoire
Ethiopia
Morocco
Cameroon
Senegal
Mali
Americas
Mexico
Brazil
Haiti
Jamaica
Chile
Venezuela
Peru
Guyana
Colombia
Cuba
Both indices represent a composite of
three separate indices—for immigration,
trade, and aid—each accounting for a
third of the composite index and serving as a statistical representation of
people linkages, economic ties, and
political ties, respectively. The formulation of each index differs, depending on
whether it attempts to measure the
importance of the developing country
to Canada or vice versa.2 (See “Technical
Notes,” p. 184)
It is interesting to note the even distribution of countries across Asia. In addition
to China, four were from Southeast Asia,
two from the Middle East, and three
from the Indian sub-continent. While
most had fairly strong immigration links,
only China, India, and the Philippines
had both strong trade and aid linkages.
The remaining either had strong trade
links— Malaysia, Thailand, Saudi Arabia,
Indonesia, and Iran—or strong aid
links—Sri Lanka and Bangladesh.
THE IMPORTANCE OF DEVELOPING
COUNTRIES TO CANADA
In Africa, the better-off countries of
North Africa and the Republic of South
Africa were clearly the most important
to Canada, largely because of trade linkages. The seven sub-Saharan countries
tended to have strong aid links and relatively weak immigration and trade
links. Also notable is the presence of six
members of La Francophonie.
In 1994-96, China, India, the Philippines,
and Sri Lanka were most important to
Canada in “people” terms, as shown in
column 1 which measures the immigration from each country as a percentage of
total developing-country immigration.
China was equally important to Canada
in terms of trade, as was Mexico: their
trade indices (column 2, which presents
each country’s imports and exports as a
percentage of Canada’s trade with all
developing countries in 1996) were three
times as high as Brazil’s and Malaysia’s, in
third and fourth place, respectively.
China, Egypt, and Bangladesh were
ranked at the top of the aid index (column 3) which measures each country’s
proportion of bilateral aid in 1995-96.
Averaging the three indices shows that
China was by far the most “important”
developing country to Canada: at
0.1196, its composite index was almost
twice as high as the next most important, India. Asia ranked as the most
important continent. On a continent by
continent basis, the most important
countries to Canada were as follows:
180
Trade linkages dominated Canada’s relations with six of the Americas’ top 10:
the large economies of Brazil and
Mexico, as well as Chile, Venezuela,
Colombia, and Cuba. Aid was the most
important linkage with Peru and Haiti,
while immigration was key to Canada’s
ties with Jamaica and Guyana. Notable
was the absence of Central American
countries and of Argentina, the region’s
second largest economy.
THE IMPORTANCE OF CANADA TO
DEVELOPING COUNTRIES
There is little doubt of Canada’s importance to the countries of the Caribbean,
from human, trade, and aid perspectives. Guyana tops the list, followed by
Jamaica and St Lucia. Of 10 countries
for which Canada is most important,
seven are from the Caribbean, one from
Central America, and two from Asia.
The Caribbean islands’ high ranking is
due largely to the relatively high proportion of their citizens who emigrate
to Canada, as shown in the immigration index (column 5). Because this
index measures emigration to Canada
in terms of total population, countries
such as China and India have lower
rankings despite high emigration levels.
In terms of trade (the index measures
imports from and exports to Canada as
a share of that country’s GDP), Guyana
is a clear front runner: its trade with
Canada accounted for 32 percent of
GDP. Caribbean and African countries
also rank highly on the aid index which
measures bilateral aid received from
Canada as a share of total aid.
On a continent by continent basis,
Canada was most important to the
following countries:
1
2
3
4
5
6
7
8
9
10
Asia
Maldives
Malaysia
Bangladesh
Philippines
Oceania
Thailand
China
Jordan
Lebanon
Sri Lanka
Africa
Ghana
Angola
Niger
Benin
Togo
Mali
Egypt
Tanzania
Cameroon
Zimbabwe
Americas
Guyana
Jamaica
St Lucia
Costa Rica
Trinidad and Tobago
St Kitts and Nevis
Dominica
Grenada
Peru
Haiti
Many of the 10 Asian countries for whom
Canada is very important are equally
important to Canada: Bangladesh, the
Philippines, Thailand, China, Malaysia,
and Sri Lanka. Overall, however, the
indices for most Asian countries are
quite low compared to Africa and the
Americas. There is also significant
overlap between the leading African
countries, although Togo and Benin
scored relatively low in the “importance
to Canada” index. Of the Americas’ top
10, eight are in the Caribbean.
1
Of course these indices do not, nor do they intend
to, cover all the many, often subtle and complex, ways
in which countries are linked to Canada. One should
use these indices with caution, not weighting any one
country’s specific ranking too heavily, but rather using
them for what they indicate more generally about
Canada-developing country relations.
2
Countries from the former Soviet Union and Eastern
Europe are not included in the index as information
relating to Canadian official finance to these countries
was not available.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
T
R
E
P
O
R
T
1
9
9
8
Excel Table
TABLE 11 C ANADA -D EVELOPING C OUNTRY L INKAGE I NDICES
I
M P O R T A N C E
D
E V E L O P I N G
Immigration
Index
1
China
0.0971
India
0.1256
Mexico
0.0063
Philippines
0.1084
Egypt
0.0175
Bangladesh
0.0125
Brazil
0.0040
Indonesia
0.0015
Malaysia
0.0033
Sri Lanka
0.0499
Thailand
0.0019
Saudi Arabia
0.0164
Iran
0.0279
South Africa
0.0143
Vietnam
0.0291
Haiti
0.0137
Pakistan
0.0356
Algeria
0.0071
Jamaica
0.0245
Ghana
0.0090
Ex-Yugoslavia
0.0200
Chile
0.0168
Venezuela
0.0030
Peru
0.0023
Guyana
0.0236
Côte d’Ivoire
0.0001
Colombia
0.0025
Ethiopia
0.0072
Cuba
0.0030
Morocco
0.0057
Trinidad and Tobago 0.0163
Turkey
0.0052
Cameroon
0.0010
Jordan
0.0073
Lebanon
0.0147
Bolivia
0.0005
Senegal
0.0006
Mali
0.0003
Nicaragua
0.0009
Mozambique
0.0000
Rwanda
0.0011
United Arab Emirates 0.0122
Zimbabwe
0.0004
Afghanistan
0.0094
Argentina
0.0033
Iraq
0.0127
Benin
0.0001
Nigeria
0.0029
Kenya
0.0055
Tanzania
0.0018
Guatemala
0.0048
Malawi
0.0001
Zambia
0.0009
Ecuador
0.0026
Burkina Faso
0.0001
Kuwait
0.0089
Honduras
0.0020
Somalia
0.0082
Oceania
0.0053
Costa Rica
0.0007
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
O F
C
O U N T R Y
Trade
Index
2
0.1963
0.0241
0.1835
0.0212
0.0037
0.0038
0.0625
0.0387
0.0529
0.0031
0.0394
0.0324
0.0202
0.0168
0.0036
0.0008
0.0063
0.0293
0.0082
0.0020
0.0002
0.0188
0.0301
0.0076
0.0054
0.0012
0.0191
0.0007
0.0168
0.0071
0.0032
0.0104
0.0003
0.0009
0.0016
0.0011
0.0005
0.0004
0.0007
0.0005
0.0001
0.0044
0.0006
0.0000
0.0095
0.0000
0.0001
0.0089
0.0013
0.0005
0.0043
0.0002
0.0003
0.0051
0.0001
0.0019
0.0017
0.0000
0.0004
0.0050
T O
Aid
Index
3
0.0652
0.0476
0.0046
0.0210
0.0822
0.0683
0.0053
0.0205
0.0042
0.0071
0.0151
0.0000
0.0000
0.0151
0.0114
0.0284
-0.0001
0.0036
0.0069
0.0285
0.0179
0.0020
0.0012
0.0238
0.0034
0.0292
0.0046
0.0170
0.0017
0.0084
0.0015
0.0045
0.0188
0.0119
0.0038
0.0183
0.0181
0.0183
0.0169
0.0176
0.0161
0.0000
0.0154
0.0057
0.0020
0.0019
0.0143
0.0021
0.0071
0.0110
0.0041
0.0124
0.0105
0.0034
0.0108
0.0000
0.0066
0.0015
0.0038
0.0036
C
A N A D A
Composite
Linkage
Index
33/33/33
4
0.1196
0.0657
0.0649
0.0502
0.0344
0.0282
0.0240
0.0203
0.0202
0.0200
0.0188
0.0163
0.0161
0.0154
0.0147
0.0143
0.0139
0.0133
0.0132
0.0131
0.0127
0.0125
0.0114
0.0112
0.0108
0.0102
0.0088
0.0083
0.0072
0.0071
0.0070
0.0067
0.0067
0.0067
0.0067
0.0066
0.0064
0.0063
0.0061
0.0060
0.0057
0.0055
0.0054
0.0050
0.0050
0.0049
0.0048
0.0046
0.0046
0.0044
0.0044
0.0043
0.0039
0.0037
0.0036
0.0036
0.0034
0.0032
0.0032
0.0031
I
M P O R T A N C E
C
A N A D A
Immigration
Index
5
Guyana
0.0409
Jamaica
0.0142
St Lucia
0.0005
Costa Rica
0.0003
Trinidad and Tobago 0.0182
St Kitts and Nevis
0.0437
Maldives
0.0000
Malaysia
0.0002
Dominica
0.0084
Grenada
0.0341
Ghana
0.0008
Peru
0.0001
Angola
0.0000
Niger
0.0000
Haiti
0.0028
Benin
0.0000
Togo
0.0001
Mali
0.0000
Egypt
0.0004
Bangladesh
0.0002
Tanzania
0.0001
Philippines
0.0023
Oceania
0.0277
Cameroon
0.0001
Mexico
0.0001
Venezuela
0.0002
Zimbabwe
0.0001
Seychelles
0.0036
Rwanda
0.0002
South Africa
0.0005
Honduras
0.0005
Senegal
0.0001
Guatemala
0.0007
Algeria
0.0004
Thailand
0.0000
China
0.0001
Malawi
0.0000
Nicaragua
0.0003
Côte d’Ivoire
0.0000
Botswana
0.0002
Bolivia
0.0001
Belize
0.0015
Jordan
0.0025
Ecuador
0.0003
Morocco
0.0003
Colombia
0.0001
Chile
0.0017
Lebanon
0.0053
Sri Lanka
0.0040
Burkina Faso
0.0000
Guinea
0.0001
Uruguay
0.0005
Panama
0.0003
Namibia
0.0001
Indonesia
0.0000
St Vincent/Grenadines 0.0067
Sierra Leone
0.0001
Tunisia
0.0003
Nigeria
0.0000
Mozambique
0.0000
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
O F
T O
D
E V E L O P I N G
Trade
Index
6
0.3204
0.0541
0.0096
0.0156
0.0174
0.0193
0.0582
0.0180
0.0113
0.0130
0.0090
0.0038
0.0341
0.0105
0.0118
0.0015
0.0337
0.0044
0.0023
0.0038
0.0040
0.0083
0.0046
0.0012
0.0213
0.0116
0.0025
0.0010
0.0030
0.0036
0.0126
0.0032
0.0086
0.0205
0.0068
0.0082
0.0043
0.0100
0.0035
0.0042
0.0052
0.0140
0.0043
0.0082
0.0064
0.0073
0.0081
0.0041
0.0070
0.0009
0.0071
0.0024
0.0068
0.0124
0.0057
0.0097
0.0141
0.0018
0.0097
0.0092
181
C
Aid
Index
7
0.0396
0.0662
0.1057
0.0748
0.0350
0.0000
0.0000
0.0391
0.0333
0.0000
0.0347
0.0393
0.0090
0.0322
0.0252
0.0362
0.0032
0.0299
0.0313
0.0297
0.0288
0.0220
0.0000
0.0297
0.0095
0.0185
0.0254
0.0231
0.0236
0.0228
0.0136
0.0211
0.0149
0.0032
0.0168
0.0152
0.0191
0.0122
0.0183
0.0174
0.0163
0.0062
0.0148
0.0123
0.0141
0.0130
0.0100
0.0095
0.0072
0.0166
0.0103
0.0145
0.0102
0.0048
0.0113
0.0000
0.0015
0.0126
0.0047
0.0053
O U N T R Y
Composite
Linkage
Index
33/33/33
8
0.1337
0.0448
0.0386
0.0302
0.0235
0.0210
0.0194
0.0191
0.0177
0.0157
0.0148
0.0144
0.0144
0.0143
0.0132
0.0126
0.0123
0.0115
0.0113
0.0112
0.0110
0.0109
0.0108
0.0103
0.0103
0.0101
0.0093
0.0092
0.0090
0.0090
0.0089
0.0081
0.0081
0.0080
0.0079
0.0078
0.0078
0.0075
0.0073
0.0073
0.0072
0.0072
0.0072
0.0069
0.0069
0.0068
0.0066
0.0063
0.0061
0.0058
0.0058
0.0058
0.0058
0.0057
0.0057
0.0055
0.0052
0.0049
0.0048
0.0048
TA
I
B L E
11 (
C O N T I N U E D
M P O R T A N C E
O F
D
)
E V E L O P I N G
Immigration
Index
1
El Salvador
0.0060
Angola
0.0001
Sudan
0.0030
Syria
0.0059
Dominican Republic 0.0023
Guinea
0.0003
Burundi
0.0014
Nepal
0.0005
Congo - Kinshasa (Zaire) 0.0036
Niger
0.0001
Eritrea
0.0004
St Lucia
0.0001
Cambodia
0.0015
Libya
0.0011
Paraguay
0.0039
Uruguay
0.0011
Gabon
0.0001
Uganda
0.0004
Bahrain
0.0026
Panama
0.0005
Tunisia
0.0016
Namibia
0.0001
Botswana
0.0002
Liberia
0.0003
Grenada
0.0021
Qatar
0.0019
Togo
0.0003
Kazakhstan
0.0005
Oman
0.0016
Mauritius
0.0009
Madagascar
0.0001
Yemen
0.0006
Dominica
0.0004
Burma
0.0010
Laos
0.0003
St Kitts and Nevis
0.0012
Sierra Leone
0.0003
Cape Verde
0.0008
Central African Republic 0.0000
Suriname
0.0003
Lesotho
0.0000
Mauritania
0.0001
Uzbekistan
0.0003
Antigua and Barbuda 0.0002
Swaziland
0.0001
Belize
0.0002
Kyrghzstan
0.0001
Gambia
0.0001
Seychelles
0.0002
Chad
0.0001
Guinea-Bissau
0.0000
Albania
0.0005
St Vincent/Grenadines 0.0005
Djibouti
0.0004
Maldives
0.0000
Armenia
0.0005
Georgia
0.0003
Papua New Guinea
0.0001
Bhutan
0.0000
Azerbaijan
0.0002
Congo - Brazzaville
0.0000
North Korea
0.0000
Comoros
0.0001
Country
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
182
C
O U N T R Y
Trade
Index
2
0.0010
0.0044
0.0002
0.0013
0.0043
0.0009
0.0001
0.0002
0.0008
0.0007
0.0000
0.0002
0.0001
0.0035
0.0002
0.0015
0.0001
0.0006
0.0004
0.0018
0.0011
0.0013
0.0006
0.0001
0.0001
0.0005
0.0011
0.0005
0.0003
0.0006
0.0002
0.0004
0.0001
0.0004
0.0000
0.0001
0.0004
0.0000
0.0000
0.0008
0.0002
0.0000
0.0007
0.0007
0.0000
0.0003
0.0007
0.0000
0.0000
0.0000
0.0000
0.0001
0.0001
0.0000
0.0005
0.0000
0.0000
0.0002
0.0000
0.0000
0.0000
0.0000
0.0000
T O
Aid
Index
3
0.0023
0.0037
0.0043
0.0000
0.0004
0.0055
0.0051
0.0056
0.0009
0.0045
0.0048
0.0049
0.0032
0.0000
0.0003
0.0017
0.0030
0.0021
0.0000
0.0007
0.0000
0.0013
0.0018
0.0019
0.0001
0.0000
0.0009
0.0010
0.0000
0.0003
0.0014
0.0007
0.0011
0.0002
0.0012
0.0000
0.0006
0.0005
0.0012
0.0001
0.0009
0.0010
0.0000
0.0000
0.0008
0.0003
0.0001
0.0007
0.0006
0.0007
0.0007
0.0001
0.0000
0.0002
0.0000
0.0000
0.0001
0.0001
0.0003
0.0000
0.0002
0.0001
0.0000
C
A N A D A
Composite
Linkage
Index
33/33/33
4
0.0031
0.0028
0.0025
0.0024
0.0023
0.0022
0.0022
0.0021
0.0018
0.0018
0.0017
0.0017
0.0016
0.0015
0.0015
0.0014
0.0011
0.0010
0.0010
0.0010
0.0009
0.0009
0.0009
0.0008
0.0008
0.0008
0.0008
0.0007
0.0006
0.0006
0.0006
0.0006
0.0005
0.0005
0.0005
0.0005
0.0004
0.0004
0.0004
0.0004
0.0004
0.0003
0.0003
0.0003
0.0003
0.0003
0.0003
0.0003
0.0003
0.0002
0.0002
0.0002
0.0002
0.0002
0.0002
0.0002
0.0001
0.0001
0.0001
0.0001
0.0001
0.0000
0.0000
I
M P O R T A N C E
C
A N A D A
Immigration
Index
5
Mauritius
0.0012
Swaziland
0.0001
Kenya
0.0003
Vietnam
0.0006
Dominican Republic 0.0004
Tajikistan
0.0000
Iran
0.0006
Zambia
0.0002
Brazil
0.0000
United Arab Emirates 0.0071
Nepal
0.0000
India
0.0002
Gambia
0.0001
Kuwait
0.0076
Burundi
0.0003
Ethiopia
0.0002
Bahrain
0.0064
Lesotho
0.0000
Saudi Arabia
0.0013
Cambodia
0.0002
Kazakhstan
0.0000
Pakistan
0.0004
El Salvador
0.0015
Cape Verde
0.0029
Argentina
0.0001
Mauritania
0.0000
Kyrghzstan
0.0000
Gabon
0.0001
Madagascar
0.0000
Qatar
0.0042
Yemen
0.0001
Uganda
0.0000
Bhutan
0.0000
Guinea-Bissau
0.0000
Armenia
0.0002
Paraguay
0.0012
Chad
0.0000
Central African Republic 0.0000
Laos
0.0001
Syria
0.0006
Turkey
0.0001
Comoros
0.0003
Congo - Brazzaville
0.0000
Oman
0.0011
Papua New Guinea
0.0000
Uzbekistan
0.0000
Albania
0.0002
Georgia
0.0001
Azerbaijan
0.0000
Turkmenistan
0.0000
Congo - Kinshasa (Zaire)
~
Djibouti
~
Equatorial Guinea
~
Eritrea
~
Liberia
~
Libya
~
São Tomé and Principe
~
Somalia
~
Sudan
~
Antigua and Barbuda
~
Cuba
~
Suriname
~
Afghanistan
~
Country
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
O F
T O
D
E V E L O P I N G
Trade
Index
6
0.0042
0.0009
0.0042
0.0051
0.0109
0.0000
0.0092
0.0020
0.0026
0.0033
0.0013
0.0022
0.0012
0.0021
0.0019
0.0039
0.0026
0.0044
0.0075
0.0008
0.0006
0.0030
0.0030
0.0007
0.0010
0.0003
0.0067
0.0009
0.0014
0.0018
0.0026
0.0032
0.0010
0.0002
0.0002
0.0008
0.0001
0.0008
0.0005
0.0022
0.0018
0.0001
0.0002
0.0007
0.0011
0.0009
0.0007
0.0004
0.0001
0.0001
~
~
~
~
~
~
~
~
~
~
~
~
~
C
Aid
Index
7
0.0090
0.0126
0.0089
0.0074
0.0016
0.0124
0.0016
0.0092
0.0079
0.0000
0.0087
0.0075
0.0084
0.0000
0.0073
0.0052
0.0000
0.0044
0.0000
0.0074
0.0069
0.0040
0.0026
0.0036
0.0058
0.0065
0.0000
0.0055
0.0049
0.0000
0.0029
0.0019
0.0041
0.0042
0.0032
0.0014
0.0032
0.0024
0.0026
0.0003
0.0010
0.0023
0.0016
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
~
~
~
~
~
~
~
~
~
~
~
~
~
O U N T R Y
Composite
Linkage
Index
33/33/33
8
0.0048
0.0045
0.0045
0.0044
0.0043
0.0041
0.0038
0.0038
0.0035
0.0034
0.0033
0.0033
0.0032
0.0032
0.0032
0.0031
0.0030
0.0029
0.0029
0.0028
0.0025
0.0025
0.0024
0.0024
0.0023
0.0023
0.0022
0.0022
0.0021
0.0020
0.0018
0.0017
0.0017
0.0015
0.0012
0.0011
0.0011
0.0011
0.0010
0.0010
0.0010
0.0009
0.0006
0.0006
0.0004
0.0003
0.0003
0.0002
0.0000
0.0000
~
~
~
~
~
~
~
~
~
~
~
~
~
C
I
A
N
A
D
M P O R T A N C E
A
O F
N
D
D
E
V
E V E L O P I N G
Immigration
Index
1
Tajikistan
0.0000
Turkmenistan
0.0000
Bosnia Herzegovina
0.0374
Russian Federation
0.0124
Romania
0.0241
Poland
0.0179
Ukraine
0.0133
Croatia
0.0060
Bulgaria
0.0047
Czech Republic
0.0017
Hungary
0.0026
Slovenia
0.0003
Slovak Republic
0.0011
Moldova
0.0013
Macedonia, FYR
0.0013
Latvia
0.0010
Estonia
0.0007
Belarus
0.0009
Lithuania
0.0004
São Tomé and Principe
~
Equatorial Guinea
~
Mongolia
0.0000
West Bank and Gaza
~
Country
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
I
E
L
C
O
P
M
O U N T R Y
Trade
Index
2
0.0000
0.0000
0.0001
0.0193
0.0037
0.0077
0.0013
0.0008
0.0015
0.0041
0.0023
0.0021
0.0009
0.0001
0.0002
0.0003
0.0005
0.0002
0.0006
0.0000
0.0000
~
~
E
T O
Aid
Index
3
0.0000
0.0000
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
0.0002
0.0001
0.0000
0.0018
N
C
T
R
A N A D A
Composite
Linkage
Index
33/33/33
4
0.0000
0.0000
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
E
P
I
O
R
T
M P O R T A N C E
1
9
O F
9
C
8
A N A D A
T O
D
Immigration
Index
5
Burma
~
Iraq
~
Mongolia
~
North Korea
~
West Bank and Gaza
~
Belarus
~
Bosnia Herzegovina
~
Bulgaria
~
Croatia
~
Czech Republic
~
Estonia
~
Hungary
~
Latvia
~
Lithuania
~
Macedonia, FYR
~
Moldova
~
Poland
~
Romania
~
Russian Federation
~
Slovak Republic
~
Slovenia
~
Ukraine
~
Ex-Yugoslavia
~
Trade
Index
6
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
Country
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
E V E L O P I N G
183
C
Aid
Index
7
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
O U N T R Y
Composite
Linkage
Index
33/33/33
8
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
C
A N A D I A N
D
E V E L O P M E N T
R
E P O R T
1998
T ECHNICAL N OTES
GENERAL COMMENTS
Virtually all data shown in these tables is available or derived from existing publicly accessible
information put out by the Government of
Canada, the Organisation for Economic
Co-operation and Development (OECD), and
United Nations agencies. The North-South
Institute selected the data presented in this
annex chiefly for its development interest.
However, the availability of data, as well as its
ability to be updated yearly, were also important
factors. It is hoped that future Canadian
Development Reports will contain expanded,
more complete statistical annexes.
population of 1.7 million: Fiji, Kiribati, Nauru,
the Solomon Islands, Tonga, Tuvalu, Vanuatu,
and Western Samoa. The small island states of
the Caribbean were not similarly grouped
because Canada has significant bilateral
relations with them.
YEAR OF COVERAGE
The data given is generally for the latest
calendar year for which a more or less complete
data set exists, normally 1996. However, in
the case of Official Development Assistance
(ODA) numbers in Tables 3, 4, and 5, the data
is forfiscal year 1995-96 (April 1, 1995 to
March 31, 1996).
SELECTION OF DEVELOPING COUNTRIES
Tables 2 through 10 list a common set of developing countries. For this report, countries were
classified as “developing” if their United
Nations Development Programme (UNDP)
human development index (HDI) in 1994 (the
latest year available) was below 0.890. This list
of developing countries therefore includes such
relatively well-off countries as Argentina and
Kuwait, but excludes the Bahamas and Israel.
As well, since last year’s report, three countries—
South Korea, Singapore, and Barbados—have
been removed from the list of developing countries as their HDI now exceeds the cut-off point.
(At time of writing, South Korea was undergoing
severe economic upheaval and was embarking
on an IMF-imposed program of austerity.) The
selection of the HDI cut-off point is arbitrary,
but consideration is given to having a list that is
as inclusive as possible and corresponds with
most people’s perceptions of what constitutes a
developing country. The use of the HDI as a
development indicator was thought preferable
to an indicator based solely on per capita
income, which would have excluded a number
of oil-rich developing countries.
All countries listed are independent and not
overseas territories or administrations of other
countries. However, two countries classified in
these tables and identified in italics—the West
Bank and Gaza, and Oceania—are not, strictly
speaking, “independent.” Oceania comprises
eight Pacific island micro-states with a total
184
SYMBOLS
na =
~ =
0 =
“not applicable”
“not available”
zero
Unless otherwise indicated, figures are in
Canadian dollars.
TABLE 1 CANADA AND OTHER HIGH HUMAN
DEVELOPMENT ECONOMIES: SELECTED
INDICATORS
Countries included in this table had an HDI of
0.890 or greater in 1994. The HDI is taken from
the UNDP’s Human Development Report 1997.
The GNP/capita numbers are from the World
Bank’s World Development Report 1997. Data on
foreign aid and net private financial flows is
taken from the DAC’s Development Cooperation
Review 1996. Numbers on export and import
shares to and from developing countries are
from the International Monetary Fund’s
Direction of Trade Statistics Yearbook 1996; and
the information on Official Bilateral Debt Stocks
comes from Eurodad’s World Credit Tables 1996.
TABLE 2 THE DEVELOPING COUNTRIES:
SELECTED INDICATORS
Figures on the HDI, the Gender-Related Development Index, and the Adult Literacy Rate are
taken from the UNDP’s Human Development
Report 1997. Figures on GNP per Capita, its 10-
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
year growth rate, total GDP, Population, and the
Aid/GNP Ratio are taken or derived from the
World Bank’s World Development Report 1997.
The Under-5 Mortality Rate comes from
UNICEF’s State of the World’s Children 1997.
The External Debt/GNP Ratio comes from Global
Development Finance 1997 (a World Bank publication). Debt Service Paid as a Percentage of
Expenditure on Education was derived by the
North-South Institute from information contained in the Global Development Finance tables
and the UNDP’s Human Development Report.
Finally CO2 Emissions per Capita for 1992 are
taken from World Resources 1996-97, published
by the World Resources Institute. Regional
totals for Africa in this table generally relate to
sub-Saharan Africa only, excluding North Africa.
TABLE 3 CANADIAN OFFICIAL DEVELOPMENT
ASSISTANCE: BASIC DATA (1995-96)
TABLE 4 CANADIAN BILATERAL OFFICIAL
DEVELOPMENT ASSISTANCE BY CHANNEL AND BY
COUNTRY (1995-96)
TABLE 5 CANADIAN MULTILATERAL OFFICIAL
DEVELOPMENT ASSISTANCE BY AGENCY AND BY
COUNTRY (1995-96)
The basic data on Canadian official development
assistance in Tables 3, 4, and 5 is taken directly
from, or derived from, the Canadian International Development Agency’s (CIDA) Statistical
Report on Development Assistance for fiscal year
1995-96. This report is put out by CIDA’s International Development Information Centre.
Specifically, most of the information in the
tables is taken from “Table M. Total Disbursements by Country.” Information on Canada’s
rank among other bilateral donors in recipient
countries is derived from the OECD’s Geographic
Distribution of Financial Flows to Aid Recipients
1991/1995. Under the classification “Other” at
the bottom of Table 4 on Bilateral ODA are
included imputed interest costs, other government department costs and services, provincial
government support to development, and
CIDA’s Public Outreach (Development
Information) Program.
Finally, the imputed shares of Canadian Multilateral Assistance by Agency and Country were
computed from supplementary information to
the Statistical Report provided to the NorthSouth Institute by CIDA. These figures are estimates only of how general Canadian funds to
E
N
T
R
E
P
O
R
T
1
9
9
8
multilateral agencies are allocated to each
country. The figures tend to understate how
much multilateral aid goes to relatively small
developing countries. Please note that, except
for Albania and ex-Yugoslavia, countries in
Eastern Europe are not eligible for ODA and are
considered to be “countries in transition”
rather than developing countries.
TABLE 6 CANADIAN BALANCE OF TRADE WITH
DEVELOPING COUNTRIES (1996)
TABLE 7 TRADE: TOP EXPORTS AND IMPORTS
WITH DEVELOPING COUNTRIES (1996)
The data on exports and imports was obtained
from Statistics Canada Catalogues # 65-003 and
#65-006 for 1996 and 1986. The information
on Tariff Revenue Collected on imports from
developing countries was provided by the
Department of Finance, and the Average Tariff
Rate was calculated by the North-South Institute
by dividing the total tariff revenue collected by
total imports for each country and expressing
this as a percentage. The world total of customs
revenue was taken from the Public Accounts of
Canada 1995-96, prepared by the Receiver
General of Canada. The information on the Top
Three Exports and Imports was obtained using a
Statistics Canada database (TIERS) for 1996 and
sorting imports and exports by value at the sixdigit level of the Harmonized System (HS) of
commodity classification. Some of the category
names have been simplified for presentation
purposes. The data on Military Exports is taken
directly from the Department of Foreign Affairs
and International Trade and its 1996 Annual
Report on “The Export of Military Goods from
Canada.”
TABLE 8 CANADIAN FINANCIAL RELATIONS WITH
DEVELOPING COUNTRIES (1996)
Data on stock of Canadian government debt
and the debt of the “Canada Account” of the
Export Development Corporation (EDC) is
taken directly from the Public Accounts of
Canada 1995-96, Volume 1, Chapter 9, “Loans,
Investments and Advances.” Updated aggregate
information on the stock of Canadian government and agency debt was provided by the
International Finance and Economic Analysis
Division of the Department of Finance. Data on
the Corporate Account of the EDC is derived
from the EDC’s 1996 Annual Report and supplementary information provided by the EDC.
185
T
E C H N I C A L
N
O T E S
Data on the developing country debt stock of
the Canadian Wheat Board is derived from the
Board’s 1996 Annual Report. The information on
the debt stocks of the Royal Bank of Canada
and the Bank of Nova Scotia are from their
annual reports and is for sovereign debt with
“Designated Less Developed Countries” only.
These are countries identified by the
Superintendent of Financial Institutions as
countries where full sovereign debt repayment
is at risk. The column on Total Canadian Bank
Claims is taken from information published in
the World Bank’s Financial Flows and the
Developing Countries, May 1997, which is in turn
derived from data provided to the Bank for
International Settlements. These claims include
both lending to governments and the private
sector in developing countries and bond holdings.
Finally, numbers on Canadian foreign direct
investment in developing countries and foreign
direct investment (FDI) by developing countries
in Canada were provided by Statistics Canada’s
Balance of Payments Division.
TABLE 9 MOVEMENT OF PEOPLES
TABLE 10 HUMAN LINKAGES BETWEEN CANADA
AND THE DEVELOPING WORLD
Information on Immigration to Canada From
Developing Countries by Immigration Class and
Gender was provided by the Department of
Citizenship and Immigration. For presentation
purposes, the North-South Institute simplified
the immigration classes to four: “Family Class”
includes “CR8 dependents” and assisted relatives; “Refugee Class” includes both Convention
refugees and “Designated Class;” “Business
Class” includes both the investor and entrepreneur classes; and “Independent Class” covers all
other classes, including live-in caregivers, selfemployed, and retired. To smooth out yearover-year fluctuations, the North-South Institute
calculated average immigration levels over the
last three years available (1994-96).
Data on Canadian Visits To and Visits to
Canada From, as well as foreign student enrolment, was provided by Statistics Canada. Data
on Canadians Registered Abroad was provided
by the Department of Foreign Affairs and International Trade, as was the information on diplomatic representation in Canada and abroad.
186
TABLE 11 CANADA-DEVELOPING COUNTRY
LINKAGE INDICES
Two composite indices have been designed to
measure the linkages between Canada and
developing countries. The first composite index
measures the “importance” of each developing
country to Canada. The second index measures
the “importance” of Canada to each developing
country. Countries are then ranked according
to each index. Both indices are a simple average
of three sub-indices—trade relations, immigration, and aid relations—which are also indicated
in the table for each developing country.
The sub-indices for the first composite index
measuring the “importance” of a developing
country to Canada are calculated as follows:
• The Immigration Index is the share of the
country’s immigration to Canada as share of
total immigration from developing countries
to Canada for the period 1994-96.
• The Trade Index is the share of a country’s
two-way trade with Canada as a share of total
developing country two-way trade with
Canada in 1996.
• The Aid Index is the share of Canada’s
bilateral aid with that country as a share of
Canada’s total bilateral aid for the fiscal year
1996. All data is taken directly from Tables
1 through 10.
The sub-indices for the second composite index
measuring the “importance” of Canada to a given
developing country are calculated as follows:
• The Immigration Index is the share of the
country’s immigration to Canada 1994-96 as
a share of the country’s total population in
1995. Ideally, the denominator for this index
would be total emigration from this country
to the world, but data is not readily available.
Because the resulting number is so small—
and in order for the immigration index to
have an impact on the composite index
rankings—the immigration index was grossed
up across the board by a factor of 10.
• The Trade Index reflects each country’s total
two-way trade with Canada as a share of that
country’s GDP.
• The Aid Index measures total bilateral aid
from Canada to that country as a share of the
total aid received by that country in 1995.
Data for this aid index was taken from the
OECD publication Geographic Distribution of
Financial Flows to Aid Recipients 1991-95.
C
A
N
A
D
I
A
N
D
E
V
E
L
O
P
M
E
N
T
R
E
P
O
R
T
1
9
9
8
The data sets for both these indices are incomplete. In particular, figures on Canada’s official
finance to countries in transition in Eastern
Europe and the former Soviet Union were not
available. As well, GDP data for several developing countries, required for the second trade
index, was not available. Where such data was
not available, no index was calculated; these
countries were moved to the bottom and listed
as not available (~).
187
CANADIAN DEVELOPMENT REPORT 1998
The private sector now
dominates North-South
relations. But are trade and
investment substitutes for
foreign aid? What should
corporations contribute to
the welfare of the global
community, particularly its
poorest citizens? How
should government trade
promotion programs
support their efforts?
In tackling these questions,
this volume surveys the
activities of Canadian
corporations—in the
financial, manufacturing,
mining, infrastructure/
engineering, and
management consulting
sectors—in developing
country markets, explores
social and environmental
responsibility issues, and
examines the need for
public and private sectors
to work together for
development.
In addition, a 45-page
statistical annex analyzes
the full range of Canada’s
relations with countries in
the South.
ISBN 1-896770-17-7
Printed in Canada
C ANADIAN D EVELOPMENT R EPORT 1998
CANADIAN
CORPORATIONS AND
SOCIAL RESPONSIBILITY
C ANADIAN
C ORPORATIONS
AND S OCIAL
R ESPONSIBILITY