FAIT Committee Meeting

STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 26, 1998

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[English]

The Chairman (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Members, I'd like to call this meeting to order.

We're very pleased to have with us Mr. Culpeper; Betty Plewes, president of the CCIC; Gauri Sreenivasan, policy coordinator of the Canadian Council for International Cooperation; and Libby Davies. Thank you for coming.

Wait a minute. Libby Davies, Daniel Turp, and Jean Augustine have moved from this end to that end of the table.

Ms. Augustine and Mr. Turp, we're glad to have you here as witnesses. We hope Mr. Robinson will pursue you with the gentle ferocity he reserves for ministers.

Mr. Svend J. Robinson (Burnaby—Douglas, NDP): If they answer like ministers, I will.

Some hon. members: Oh, oh.

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The Chairman: Thank you for providing us with this very interesting document. It sounds like you had an extraordinarily interesting trip.

Who is the lead-off? Ms. Plewes.

Ms. Betty Plewes (President and Chief Executive Officer, Canadian Council for International Cooperation): Thank you, Mr. Chair and members of the committee. We're very pleased to be here.

I just want to speak for a few minutes and give you a bit of an overview of the mission. Then Roy will talk a little more specifically about the international economic system and our proposals there. Then each of the MPs will give you some quick impressions of their trip.

As you are probably aware, this tour was part of the IN COMMON campaign of CCIC. It is an effort by our members to put the issue of global poverty on the public and political agenda.

As you know, we went to the region to look at the roots and impact of the financial crisis and to look particularly at what was happening to people, workers, students, women's organizations, to the vendors in the street.

We met with a very wide variety of people and officials. In addition to a financial crisis, we found a developmental and human crisis of staggering proportions. This crisis has brought long-term social and political changes. It is in fact holding back the gains that had been made over poverty over the last 10 to 20 years in both Indonesia and Thailand.

We are looking at the possibility of a hundred million people, half of the population of Indonesia, falling below the poverty line within the next year. Twenty percent of Thailand's population is likely to fall below the poverty line.

Yet the crisis is a time of political flux, and also an opportunity for change. As we heard during Mr. Chan's testimony this morning, there are some opportunities for change. There is an opening now, in which we can push for democratic change.

The crisis is now global in scope. If you have any doubts about that, you can look at the headline this morning in the Globe and Mail. It talks about the impact on Canadian farmers of falling pork demand in Asian countries, as well as in Russia. There is a global impact to this crisis; it is no longer an Asian financial crisis. And it's forcing us to rethink our approach to global economic management.

We went to the region. We went to Thailand and Indonesia in September, yet it feels like a year ago, just such a short time ago. In fact the discourse, the discussion, debate, and dialogue around many of these issues have changed substantially in the last two to three months.

Before we went there was very little discussion about capital controls. Yet we saw that this was an issue of interest and discussion and debate at the annual meeting of the IMF.

There have also been some indications of change on the Canadian foreign policy front. This last week seemed to be the week of Canadian foreign policy in Asia. There were public efforts by the Prime Minister, which represent small but significant changes in the public face of Canadian policy. These were responding to pressures from many critics that there needed to be more balance in Canadian foreign policy, that we needed to see more balance between our trade interests and our respect for and advocacy of human rights in the region.

At the same time that we welcome the small steps, we feel there is a long way to go to translate these changes in discourse into action. You have before you the report, which has the overview and implications of our assessment of the situation. We don't have time to discuss all the findings, but there are several things I'd like to highlight.

First, we learned that the Asian crisis reflects crises at two levels. One is at the level of the national economic model, the so-called tiger model. This has raised issues of governance and management of the economy.

Secondly, there is a crisis of international systems. This reflects concerns about the global financial markets and global economic management.

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We want to try to identify priorities for Canadian bilateral and multilateral action to address both of these dimensions, both the national and the international. We feel quite strongly that it is not a question of getting Indonesia and Thailand back to the point where they were a year ago. This calls for new approaches.

On the multilateral level, there are the issues of capital controls, both at the national and international levels, and looking at ways to make investment longer-term and more productive.

We need to look at the issue of speedy and fair debt workouts. We also need to look at the issue of the reform and reorientation of the international financial institutions.

In that light—and Roy will comment a bit more on this later—we think it's quite important that the reform of these institutions not be left to the G-8. In fact there has to be a democratization of the process. There have to be more actors involved in the discussion of international economic reform and of these two institutions.

So as you prepare your report for government, as we head into the G-8 meetings next year, the challenge will be to recognize the political and social dimensions of the global economic crisis and to look at how these can be incorporated into your recommendations for multilateral action.

At the bilateral level, we'd like to put more emphasis on coherence or coordination of the various policy instruments in Canadian foreign policy, in support of sustainable and democratic development. As we have already noted, there is an expanded democratic space now. We would like to see that human rights, civil society, and governance are supported. This is a time for political change and transition in both countries.

These issues must be addressed at the same time as the economic issues are addressed. It is not a question of waiting for economic recovery and then addressing these issues. They both need to be addressed at the same time.

We also need to look at effective and sufficient development assistance. CIDA has had a very good reputation in Thailand for the support of NGOs in civil society, which is in fact, however, historical. There was a change in CIDA policy in both these countries earlier in this decade, when there was more interest in support to the private sector and support for Canadian investment in these two countries. The support that we had given to civil society development in countries like Thailand was diminished.

In terms of policy coherence, we also need to look at the issues of corporate social responsibility and environmental sustainability. The committee could reconsider the role of policy coherence, looking at how trade, aid, and human rights policies fit together, particularly in light of the region. There's a good deal to be learned from our previous policy there.

I think there is also an opportunity for new approaches. We could, for example, look at how we have used the Team Canada approach in Asia, and how that might be broadened to include environmental, human rights, and labour participation.

We need to look again at Canadian aid to these two countries to see how we can prioritize aid to poverty reduction and support for civil society. We also need to address the issue of corporate social responsibility. There is a very great need for reinvestment in the region for long-term productive investment that takes account of labour rights and environmental sustainability.

I'd like to support the discussion I heard earlier about how Parliament and parliamentarians might collaborate in the lead-up to the elections in Indonesia. There was a recommendation for an all-party delegation of MPs at the time of the election.

Again, since we found the model that we used of parliamentarians and civil society organizations from Canada a very effective way of monitoring the situation, this might be an opportunity to continue that.

We would also like to suggest that there might be opportunities for specific human rights monitoring, perhaps through the human rights subcommittee of this committee, in the areas of East Timor, ethnic Chinese, and corporate social responsibility, especially labour rights.

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We had what we thought was a very productive trip. We enjoyed the collaboration with members of Parliament.

I'd like to ask Roy to say a few words about the international economic system.

Mr. Roy Culpepper (President, North-South Institute; Delegate of the IN COMMON Mission in Southeast Asia): Thanks, Mr. Chairman. I just want to make three general points, stepping back from the Asian crisis, what have we learned and where are we going from here.

The three points are, first of all, that international financial markets are inherently unstable. I think that's perfectly clear at this point in time. Secondly, the current economic policy framework around the world is wrong. Instead of attenuating and mitigating the instability of financial markets, it feeds the instability. The kinds of economic policies we have in Canada, in the United States, and in the G-7 countries actually make instability worse rather than better. The third point I want to make is that when crises break out, our response to them also tends to be wrong. So not only do we have the wrong framework, which makes crises more likely, but when crises happen, the way we intervene is also wrong.

Let me just speak to each of those in turn.

The kind of global financial markets we have today make crises almost inevitable. Memories tend to be short. Before the Asian crisis over the last year, there were crises in Mexico and Latin America and earlier in the decade in Europe. These things seem to happen every two years. It's unknown at present where the next crisis will break out, but I think it's a good bet that there will be another crisis sometime in the next two or three years.

When these crises do break out, they undermine growth and development. Much of the Asian economy is in decline and will be for a few years. In other words, a financial crisis almost becomes an economic crisis. Betty has alluded to the fact that western grain and hog farmers have been side-swiped by the crisis. Of course, there are other factors at play, but the collapse of major markets as a result of the crisis in Asia is certainly a major factor.

There's a certain déja-vu about all of this, and what I am thinking of is the Depression. A lot of these same phenomena occurred during the Depression: collapse of financial sectors; collapse of banks; plummeting grain and commodity prices; and crises among the farm sectors. We've seen it all before, and sadly we're seeing it again.

Secondly, I argue that the current policy framework is wrong and it feeds rather than attenuates financial instability. I can just allude to two manifestations of that. First of all, our policies in the financial sector have emphasized liberalization, freeing up of markets and market actors. This has by and large been rather good news for banks, investors, creditors, and lenders. But when things go awry, it's not the bankers, investors, creditors, and lenders who tend to pay the price; it's the ordinary people who are stuck with lost jobs and incomes, and higher prices of basic commodities, such as rice in Indonesia.

So I'd argue, in terms of the way we govern the financial sector, we're looking at a situation of acute underregulation. Mr. Martin has of course recognized this with his proposals to enhance regulation, particularly in the so-called emerging markets. But ironically, I think it has to be admitted now that the acute underregulation of the financial sector is not a phenomenon just of the emerging markets. With the near collapse of Long Term Capital Management, the huge New York-based hedge fund, it's very evident that the financial sector in our own backyard is acutely underregulated as well and needs urgent attention.

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Another example of this, Mr. Chairman, is the so-called Basel framework for capital adequacy of banks. In 1988 the Basel Committee on Banking Supervision put in place certain capital adequacy standards, which governed by how much capital banks had to backstop their assets. The long and the short of those rules is that banks had to backstop short-term loans with only say 20% capital, but long-term loans with 100% capital. This gave banks an incentive to lend short term. It was the immense volume of short-term lending into Korea, Thailand, and Indonesia that suddenly went awry that precipitated the crisis.

The regulations for the major money centre banks in the north have a lot to do with the way the financial sector in the whole world operates. So that's one example of how the policy framework is wrong.

At a more general level, I would argue our macro-economic policies are also wrong. In October the G-7 finance ministers—and I would say this is G-7, not the G-8 that counts here—agreed to try to ward off the spectre of deflation. And they did this through a somewhat uncoordinated series of interest rate reductions, led by the United States and followed by Canada and the United Kingdom.

I think this was a good first step, but I'd like to point out that we have a situation in which monetary policy and fiscal policy seem to be going in opposite directions. We're reducing interest rates and making monetary conditions easier on the one hand, but on the other hand we're still running up surpluses, taking purchasing power out of the economy. This is true not only in Canada, but also in the United States. And it's going to be increasingly true in other OECD countries because of the dogma that financial markets will be satisfied with no less than balanced budgets or surpluses. But the problem with that is this kind of fiscal restraint only adds to the deflationary forces in the economy.

Again, I think we're repeating some of the mistakes of the Great Depression, when it was said that money was scarce, so we had to safeguard it and spend less. But those kinds of policies only deepened the Depression and made it worse for everyone.

Thirdly and finally, when crises have broken out our response to them has been wrong. We have seen this in Asia. When the IMF first intervened in Thailand, Indonesia, and Korea, they slammed on the brakes by increasing interest rates and urging countries to cut expenditures. Again, this was the wrong medicine at the wrong time. They realized the error of their ways six months later, but by then it was too late; the three crisis countries were already in a tailspin. Millions of people were thrown out of work, and the problem is now going to take years to work out.

And finally, as Betty was saying in her remarks, we have no policy framework to resolve outstanding debt problems. There is now something in the order of $200 billion worth of outstanding debt claims against Korea, Thailand, and Indonesia, and absolutely—

The Chairman: How much?

Mr. Roy Culpeper: $200 billion. And there's no apparent way this is going to be worked out. The official policy is to resolve these debt problems on a case-by-case basis by introducing bankruptcy laws, which are either non-existent or very weak in the countries, and then having creditors and debtors, individually and seriatim, work out their debt problems. Well, if that is going to be the approach, I think what we're going to see is another lost decade, ten years of debt impasse in Asia, just like the ten years that were lost in Latin America during the 1980s.

Just to conclude, I think if we're going to have the right kinds of policy frameworks and the right kinds of crisis response, we're going to have to have much more participatory and inclusive methods of economic policy formation, not only by the IMF and the World Bank, but also by domestic governments.

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We were actually struck by the fact that in Thailand their economic planning process has become quite inclusive and participatory as a part of their long-term political reform. In spite of the fact that this was still being criticized by some people, I was struck by the fact that the Thai government had gone to some lengths to try to involve the people in Thailand in the process of economic planning.

We need to do much more of that, not only in Thailand, but elsewhere, and also in international financial institutions. The IMF is very good at consulting with finance ministries and central banks and bankers, but not very good at consulting with workers, NGOs, citizen groups and everyone else. In fact these aren't my own words, they're the words of Joe Stiglitz, the chief economist of the World Bank, who was here at our invitation not too long ago.

So those are the kinds of things that need urgent attention. I'll just leave it there. Thanks.

The Chairman: Thank you very much.

Mrs. Sreenivasan, would you like to add anything? I don't know how you were planning to proceed.

Ms. Betty Plewes: Jean, Libby, and Daniel can make a few comments.

The Chairman: Okay, we'll go to Jean Augustine.

Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.) (Delegate of the IN COMMON Mission in Southeast Asia): Thank you.

I think I'll leave the analysis, as it was done by Betty and Mr. Culpeper. I'll speak about the things that struck me as an individual walking into the environment that we went to look at: that of the tiger model of economic growth, the question of why it failed, and what lessons are there for us as Canadians.

I want to begin by giving my expression of thanks to CCIC for having me as part of that delegation. For me, it was a real learning experience. Having read so much in the newspaper, it was an experience that gave me the first-hand impression of the lives of people there.

Mr. Chairman, I'll just outline a few things and pass it on.

The issue of the repressive regime strikes you immediately on landing. The issue of rampant corruption is something that was spoken about, or references were made to it by just about everyone with whom we spoke. The issue of poverty just hits you right in the face. There was no way of avoiding it, and no way of not seeing what was there. You see the role of the military and the presence of the military in government.

You also see the fact that people left the land and came into the city because of the economic situation: one would get rich quickly and be part of a whole economy that was moving into all these global markets. There was a bit of a difference in Thailand, in that people have the land to return to. In Indonesia people had no place to go, so we were hearing about the new poor and the traditional poor. The expression “new poor” was something that was almost a new vocabulary for me.

There is the issue of corruption, not only in terms of the banks and monetary and other fiscal matters, but in terms of the middlemen. They are operating in Indonesia and are creating food insecurity, with the rice being sent to Malaysia and having to work its way back at great cost, or at a higher cost. Also, there were the food shortages that were present. On first-hand reports, the children were not going to school simply because there was no food and because there was no money to facilitate that. You had to work approximately one day to earn enough money to buy one kilo of rice.

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On the landlords in the slum areas in Indonesia, we were told that if the landlord knew you had a day's work, he took a day's rent. In other words, for any person who was able to find one day's work, either you had the difference between paying the rent, getting a kilo of rice and being at the same place you were the day before, or even worse.

There was a lack of any kind of civil organization or NGO with the ability to create massive changes in terms of community development in Indonesia. We saw some evidence of it in Thailand, and I think this is part of the saving factor. There were NGOs there that were able to represent, to speak, and to help community organizing.

I sense discouragement and frustration about the future. I also spent some time in Pontianak, which is in west Kalimantan, one of the islands that is supposed to be resource-rich in mining, forestry, fishing, palm oil, plantations, etc. There, we came at the end of the forest fires that I'm sure all of you saw on television. We saw the devastation that occurred as a result of the forest fires—the loss and the displacement in terms of niches, marine life, plants, fresh water and a whole series of environmental factors. We met with community leaders. We met with a priest who was working with people many, many miles away from the city. He came into the city because we were there and he wanted to speak to us. He wanted Canadians and others to understand the environmental disaster that was occurring.

We heard a good deal about the potential for racial, ethnic, and cultural disturbances, and concern around the presence of the military, around the decision-making and around what can happen as a result. We met with one young woman lawyer who was trying to do some civil rights work. We spoke with her about the amount of effort that had to be put in just moving any issue forward. We also saw the conditionality of the IMF—Roy mentioned that—in terms of accelerating the devastation. Three million hectares of land are being put to the growth of palm oil, and we saw what that was creating.

My personal experiences speak to the fact that as Canadians we could not walk away just saying this economy would look after itself. I concur with the report that is before us in terms of the lessons that are there, what we need to do, and the steps that Canada must indeed take in terms of the region.

The Chairman: Thank you very much.

Ms. Jean Augustine: I'm sorry if I took too long.

Ms. Betty Plewes: That's all right.

The two weeks were quite full, and there was a large group of us there. We're all good talkers, and we want to share this with you.

We'd like Daniel and Libby to have time to tell you of their impressions as well.

The Chairman: Well, Mr. Turp is not a good talker, so we'll ask Libby to talk in the meantime.

Ms. Libby Davies (Vancouver East, NDP) (Delegate, IN COMMON Mission in Southeast Asia): Thank you, Chairperson. I'll try to be brief, because I know there are others to speak. Hopefully there will be some questions as well.

First of all, the report has just come out, so I hope you'll have a chance to read it through. It's a really good report that gives a flavour of what we encountered, and it contains some very good recommendations.

Like Jean, I would like to say that the delegation, the organization, covered a huge amount of territory in terms of the people we saw and the issues we covered. It was a well-organized group, and that's thanks to CCIC. It was really good to have parliamentarians, NGOs, labour, church leaders, and an aboriginal leader—Matthew Coon Come—there. It was a very good delegation. We all had very different perspectives, but I think we came away with a real kind of strong, unified sense of what it was we'd witnessed and observed.

I just wanted to focus on a couple of things in terms of personal impressions.

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I remember being in Jakarta. The streets there are just jam-packed and very polluted. As we were travelling around in our little bus, we would see these young men jumping out, literally throwing themselves into the traffic—they have what are sort of divided boulevards down the middle of the lanes—and directing the traffic in and out as you try to turn a corner. We couldn't figure out what was going on, this sort of human direction of traffic. What we learned was that because of the economic devastation, this was one response young people were giving themselves in terms of trying to make a few rupiah. They would literally throw themselves in front of a vehicle, stop it, and then allow it to pass, hoping they would get a few rupiah for doing that. That's how they would survive.

Mr. Daniel Turp (Beauharnois—Salaberry, BQ) (Delegate, IN COMMON Mission in Southeast Asia): They didn't wash the windows. There was no squeegee stuff.

Ms. Libby Davies: No, they didn't. There were no squeegee kids. They would just throw themselves in front of a bus, a vehicle, and hope they could get a little bit from that as a way of getting through the day.

I also vividly remember visiting, with other members of the delegation, the Klong Toey slums in Thailand. They make up a community of 100,000 people next to the port in a city of about 8 million people. Just to see the struggle that people have to go through to get through the day in terms of massive unemployment, poverty, AIDS, the lack of health care resources....

We visited a hospice in that community. What I really came away with was a sense that we've heard so much about Southeast Asia and the economic growth there that I think the crisis that happened has caused us to think about that system. Yes, there are people who got very, very wealthy in a short period of time, but that wealth was never distributed in an equitable way, in a sustainable way, to help build those communities. In those slums of 100,000 people, some of those people may have benefited for a short period of time from the economic prosperity in Thailand. When that was done, those people were still right at the bottom again. Their lives have really not changed very much. That was a very strong impression I came away with.

I really want to encourage this committee to look at the overarching recommendations we've put together. They focus on global economic management, because that's really the issue and the underlying root cause we were looking at when we went to see the impact in terms of poverty. We're looking at the global economic system. There's no getting away from that. It has just completely gone haywire, and it has not really met any of the human needs in that area or globally in terms of the environment, labour standards, pulling people out of poverty, creating sustainable employment, and so on.

The other major observation I came away with, like others, was just really the appalling situation in terms of human rights in Indonesia. In my riding of Vancouver East there has been a tremendous amount of concern, for example, about the targeting of ethnic Chinese in Indonesia and the riots that have taken place. Just to see the pervasiveness of the militarization of that country is awesome. It is everywhere.

Again, I think we want to encourage the committee that Canada needs to do a much stronger job in terms of being outspoken and bold, in terms of saying we have to help that country demilitarize. We have to support the NGO community, which is quite strong and very vocal in their struggle toward democracy. I would echo Svend's and others' questions and the minister's response as they proceed toward elections. People were very aware that they were going into a really volatile situation, but the commitment people had to build democracy and to go into those elections and to make things work was really very inspiring.

So I didn't come away feeling devastated. I came away actually feeling very inspired about what people are doing there to change the political and military environment in Indonesia and in Thailand. Consequently, I really want to encourage the committee to look seriously at the recommendations and follow them up, because we heard everywhere that Canada has a good reputation but that we have to be outspoken. We have to stand in solidarity with those people and the very real struggles they have.

Thank you.

The Chairman: Thank you very much.

Mr. Turp.

[Translation]

Mr. Daniel Turp: The first thing I'd like to say to the organizers of this mission, and it's something I'd like to say for the record, is that I was impressed by the professionalism with which the mission was organized.

NGOs are often reproached with not doing a good job. It's not a reproach that I make but it's often heard in developing countries. This mission was conducted masterfully from the beginning to the end and it isn't over yet. I'm thinking of the organization of the mission in the field and the meetings that took place in Indonesia.

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I had the opportunity to go to Indonesia but not to Thailand. We met Minister Martin, Minister Marleau and Minister Axworthy and conveyed to them our recommendations and our concerns. This presence here today in the Foreign Affairs committee completes the circle, so to speak. It's quite remarkable. When conducting a mission, there is a proper way of doing things and doing them professionally. This is a method that should be used in the future. If we were to recommend, as Mr. Robinson just did, that another mission be organized, I think that this is the formula that should be chosen. We should consider having the Canadian Council for International Cooperation take charge of the organization because of this excellent precedent.

There are three particular experiences that I found very moving on this trip and they are worth mentioning. During our visit of a tobacco plantation in Jogjakarta I was very moved to see that the workers were quite obviously exploited, particularly the women. We saw women demanding equal pay for equal work. When people claim that culture and cultural relativism come into play when it is a matter of fundamental rights or economic and social rights, such as the right to equal pay for equal work, we realize that that is not always true. As a matter of fact, we asked some women whether they thought that they deserved the same wages as the men and their answer was a clear yes. There is no argument that can convince us that this fundamental right should not be upheld even for those who do not belong to a developed western society.

I was also struck by a meeting with a representative of the World Bank, whose name I don't remember, I think it might have been an American called Dennis de Tray. Roy must remember this meeting. He made an aside about the corruption in Indonesia, something he had discussed with President Habibie at a recent meeting. The extent of the corruption was quite unacceptable. It was not sufficiently realized and taken into account by the World Bank and other international financial institutions in the development and implementation of the programs. There were articles about this corruption every day in the newspapers during our visit and it is a subject of news even now because of the Commission of Inquiry that apparently is looking into the involvement of the former president in such corruption.

Another thing that struck me and that I greatly appreciated was a meeting we had with students, also in Jogjakarta. These students had been involved in the May demonstrations leading to the departure of Suharto. They told us they intended to keep up the struggle. They also wanted to bring about the resignation of the Habibie government since they would not be satisfied with a government they could not trust. They said that they wanted to keep up the struggle, even though conditions were difficult. They told us that they were hungry and that food was difficult to come by. They also told us that it was difficult for them to have access to university or high school because their parents could no longer afford to pay for their education. I was quite struck by these meetings.

The fact that struck me the most was the claim that by the end of the year half the population of Indonesia would be living under the poverty threshold. In other words, about 100 million out of 200 million people would be living under the poverty threshold by the end of the year.

During this mission I was interested in human rights and democracy. We had a chance to ask a lot of questions of the people we met.

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As far as human rights are concerned, I suggest you look at the recommendations that are still relevant. The main recommendation which I did emphasize a great deal, also during our meetings with the ministers, is that the Government of Canada make an unequivocal statement on the human rights situation in Indonesia, whether it be with reference to the role of the military, to corruption or the need for a strong civil society to make progress towards democratization.

The wish was expressed that this be done before the people's consultative assembly. I don't think that this was done. I didn't see anything. Minister Axworthy did however promise that he would do something when we went to see him. I haven't read anything or heard anything about it and there were no reports on this in the newspapers I read. I must say that I am disappointed about this because I thought Mr. Axworthy would keep his word when he made this statement to us. It isn't too late because there are elections. Between now and the elections, there is still time to make this unequivocal statement on the human rights situation in Indonesia.

As for democracy, I was unfavourably struck by the role played by the military. I was quite surprised. I was not familiar with the Indonesian constitution. The constitution provides that seats will automatically be given to the military in Parliament without any election; the military have enormous power and an incredible number of them take part in legislative proceedings. I think that is completely unacceptable. That is something that should be called into question. It is not a matter of imposing our view of democracy but there is something unhealthy about this military involvement in the legislative apparatus without any election, without any requirement to obtain support through an election. I think that is something that should be raised.

My last comment relates to Timor. The thing that has long surprised and interested me in the case of East Timor, as a professor of international law, relating to the UN resolutions on the matter and the position adopted by States on self- determination, is that the situation of East Timor is not unique. There were similar movements in Aceh and in Kalimantan. There are other autonomous or sovereignist movements in the country and once again this requires a balanced position. I gather that Canada is always a bit uncomfortable dealing with such matters but at the same time certain things should be said on this issue. I was glad to hear the minister refer to his recognition that the inhabitants to Timor are entitled to self-determination, a statement that should not be any cause for concern to any of the parties in the House.

In conclusion, I'd like to say that I very much enjoyed this experience. I'd like to thank you. I'm glad to have made a modest contribution; as Gauri mentioned, it seems that the pictures I took in Indonesia were reproduced in the report . That will be my modest contribution to this mission.

The Chairman: Thank you. We have only 15 minutes left. I have three names on my list, Mr. Reed, Mrs. Finestone and Mr. Mercier.

Mr. Reed.

[English]

Mr. Julian Reed (Halton, Lib.): Thank you very much, Mr. Chairman.

I'm not sure how to present this briefly, but I'll try. Every time we see things that are going on in the world, where there's separation between the impoverished and the rich—the gap is widening and so on—it always seems to relate in the end to the migration of people to urban areas to seek a better existence. They don't find it, and they live in absolute squalor and are totally at the mercy of whatever forces are around them.

There are some non-governmental organizations in Canada who, in their own small way, are trying to encourage people to stay on the land as self-sufficient farmers and so on. That, in its small way, has been an enormous success so far.

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I'm wondering if there is a problem in areas like Indonesia and so on, where there is no opportunity for land redistribution or for small holdings to stay as small holdings. There was a fire that went through, I know, but fires come and go and they pass. There are palm oil plantations, but we'll probably run out of market for palm oil pretty soon because it's high in cholesterol and it's going to be supplanted by something else.

I'm continuously concerned that we recognize this urban dilemma and we see this happening, but somehow or other our attempt to come to terms with it fails to address the essential facts of life: food and shelter and the ability to provide for oneself.

I must ask if there is any effort in that direction in Indonesia. If there is, it's a very positive one. If there isn't, it would seem to me that as a government we have to encourage those organizations who can do that kind of work to get busy and do it.

That's very convoluted, I realize, and it's very hard to put into two or three words.

I have two other things that I would mention, but I just wondered if you would comment on that. I see self-sufficiency ultimately as one of the great goals for attacking what is a worldwide problem with increasing populations and the centralization of land, etc.

Ms. Betty Plewes: You've put your finger on a number of key issues. It's hard to look at the causal relationship of them.

There are a couple of points. Internal migration is a result of poverty. People are being forced off the land in Indonesia partly because of the economic model that has been chosen in Indonesia, which has gone to large, foreign investment, palm oil plantation development.

Indigenous people who do know how to manage resources, who have over a long period of time sustainably managed their resources, are having their land taken away from them for industrialized agriculture.

Mr. Julian Reed: It's being expropriated?

Ms. Betty Plewes: The Indonesian government was allowed to take land for development purposes. That's what they've done in many cases. They have taken the land from indigenous people. So people who had sustainable livelihoods are now no longer able to support themselves from the land.

The question you're asking is a very complex question, and there is no easy solution to it. But you're quite right that there needs to be government policy, aid policy, and NGO activity that supports people's capacity to stay on the land and practice sustainable agriculture. That's absolutely true. On the other hand, in some ways it's too late. We have these huge urban developments now where people can't go back to the land. In both Thailand and Indonesia, people have tried as a survival strategy to go back to the land, but once you've been in the city for a generation, you don't know how to farm any more; you don't know how to live in the rural area.

You've put your finger on a very interesting issue, I think, which radiates in a number of directions in looking at the roots of why people move.

Mr. Julian Reed: We have an NGO in Canada called SHARE Agriculture Foundation that does precisely that work and aid. It's true, they have to re-teach a lot of agricultural technology, or the skills necessary for self-preservation, if you like. In the areas where they function, it works.

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Mr. Roy Culpeper: I think the other side of this is the fact that developing countries that become urbanized and industrialized really need a better social safety net. This is painfully apparent in all of the countries in the region, both in Thailand and in Indonesia. They don't have unemployment insurance, they don't have welfare—anything like we have. So if you lose your job, you're up a creek, and you're really forced to do the kind of thing that Betty was saying, to go back to your relatives in the countryside or fend off your relatives in the city.

The World Bank is trying to organize programs to give emergency work to people, but it's really a very makeshift thing. I think the whole developing world is now struggling with this. They thought industrialization would be their salvation, but in fact, unless you have the social safety net in place, because of market instabilities and the possibility of widespread crises and job losses, people can really be very vulnerable to these kinds of things.

Going back to Joe Stiglitz again, I think he was making a pitch that we really need to invest a lot more, not only resources but thought into how you create social safety nets in the developing world.

The Chairman: Thank you.

Ms. Jean Augustine: Mr. Chairman, I think we have to do this, because if you look at population trends, they tell us that the world's population is moving into urban areas. The majority of the world's population is moving into urban areas, so we do have to look at....

The Chairman: Just look at Cairo in the last ten years.

Mr. Julian Reed: That is precisely my point of view. Can we reverse this trend? Can we move the envelope ahead and realize, for maybe the first time in the industrialized world, that we can't depend on industrialization and bigger is better all the time? We have to learn to depend on individual initiative and individual capability and be able to bring that message to those people who need it most.

Safety nets are great, and I know there are none in.... I was in Malaysia last spring. There are no safety nets. But safety nets alone don't provide a way out. In the end, they handcuff people. They're fine as a temporary thing—they keep people from starving to death temporarily—but there has to be a way out.

That's all. Thanks, Mr. Chairman.

The Chairman: Thank you, Mr. Reed.

[Translation]

Mr. Mercier.

Mr. Paul Mercier (Terrebonne—Blainville, BQ): Mr. Chairman, I'm glad that circumstances allow me to take part in a debate that is of great interest to me. I'm very interested by the statements made by the members of the mission as well as by their documents.

If I may sum up their observations in four points, I would say that they noted in Indonesia an incredible exploitation by the family of the dictator, dictatorship, racism and another very important point, a drop in the level of education. That is important for the long term because it compromises, but not definitely I hope, the country's chances for access to democracy. Democracy is not feasible below a certain level of literacy.

I am struck by the similarity of what you observed in Indonesia with what can be seen in other third world countries that became independent in the 1960s. I am thinking for example of the country that ironically is known as the Democratic Republic of the Congo that was under the yoke of Mobutu and Kabila who both exploited the country as dictators, developed racism and brought about a decline in the level of education.

The same thing was seen in Uganda with Amin Dada, in the Central African Republic with Bokassa, in Guinea, Ethiopia, Mozambique and Madagascar. I think that all this gives rise to a rather general question. When these countries acceded to independence in the 1960s, they received assistance from the international community specifically to put an end to what was considered exploitation, dictatorship, racism and inadequate education.

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There's something paradoxical in the fact that access to independence by these countries had the opposite effect of what was expected from this change in status.

I'd be interested in hearing your views on that subject.

The Chairman: Mr. Turp.

Mr. Daniel Turp: I find our colleague's remark quite interesting. I think it could give rise to discussion about the meaning of independence. It is of interest to us because there are some people here to wish to preserve it and others who wish to obtain it.

What is the value of independence without a blueprint for society, without democracy, without the respect of human rights? It doesn't seem to be of much use for people suffering from racism, systematic violations of human rights, for those who are suffering because they are unable to express themselves freely and work for the kind of society they would like to see in their newly independent country. This is something we've heard from some witnesses who did not want a country merely for the sake of a country but to improve the quality of their country.

I hope that this will not shock Mrs. Finestone but there's something that was said and that we should keep in mind in our review. People said that they did not appreciate Canada's silence on the matter of human rights in Indonesia. They were expecting more from Canada. I also told Mr. Martin and I repeated it to Mr. Axworthy that if there is a reputation to be protected or to be changed, Canada must take measures and publicly declare that the situation described by Mr. Mercier, one that exists in other countries, must be denounced by a democratic government, an independent country that does have a valid blueprint for society, although there may be disagreement about certain elements on which it is based.

Let me add one last thing. When newly independent States do not grant autonomy to the people who make up this State, when they refuse it and repress the leaders of autonomous movements such as is the case in East Timor, in Aceh and elsewhere, what happens to these countries? Their people wish to come independent. They are not willing to settle for mere autonomy but want independence. People who are refused autonomy normally end up demanding independence. That is a lesson to be drawn from the situation in Indonesia but it can also be applied to other situations.

What strikes me in the case of East Timor is that the inhabitants of Timor wish to avoid closing the door on the idea of sovereignty. They want to have the right to make a free decision to be sovereign or perhaps to remain within Indonesia.

That holds true not only for the Timorese, but also for the Irish in Northern Ireland, for the Sarawis, for colonials and even for non-colonials who want to have the right to decide their own fate. This is the lesson we learned in Indonesia.

The Chairman: Thank you. Mrs. Finestone.

[English]

Mrs. Sheila Finestone (Mount Royal, Lib.): I'm not prepared to compare the lifestyle and the difficulties in Indonesia with a potential Canadian experience, so I would not compare them at all and I would like to really make the following observation.

As we're moving to examine the International Monetary Fund and the World Bank and its impact on the life of emerging states, I think the lesson learned from the presentation made today, at least for me, was the importance of not restraining ourselves to the big bankers and to the moneylenders and to the diplomatic corps, or to any of that nature. We need to hear from the NGOs. We need to hear from people who have gone and visited and have had a sense of what has taken place.

• 1200

I must say I was very impressed with the presentations this morning. I found them most enlightening and very well organized. I think you must have had a fantastic trip. And to be able to come back and express in such an articulate and organized way the experience you had is wonderful.

Also, we all have businesses in our ridings that do business overseas. And the first thing you have when you start to have complaints and you have to go to Revenue Canada and Customs and Excise for your clients and you have to deal with all the paraphernalia of difficulties they face internationally.... I haven't had a company that's in whatever large country in other parts of the world that has not talked about corruption and cronyism and the level of bribery it takes to get a shipload of whatever shipped in or shipped out. In accounting for their price range, they have to account for the enormous amount of bribing they must do. It's a cost of doing business. It's a shame that we have to count the cost of doing business from illegal and unethical approaches to business management, but it is a fact of life right now.

I would hope, Mr. Chairman, we would keep in mind that the model of our examination should be quite broad in examining the World Bank and the International Monetary Fund and the role of business doing business, if we want to see how we can make constructive suggestions for a move forward. That's just an observation.

Secondly, when I heard from you, Daniel, about the 100 million, I can recall my horror in sitting and listening to the amount, the numbers of people who were going to be impacted as a result of the application of restructuring orders to the private sector. The number I had heard from Indonesia was that seven million has been the standard unemployed for quite some time, and now, as a result of the economic downturn or the crisis, or whatever you want to call it, it was at 20 million. They said it could go to an estimated half of the population. You come back and tell us it is.

For a country that has 30 million people, maximum, to hear about 100 million out of work with no safety set and no anything, it's really scary stuff. It's the stuff of revolutions. It's just awful.

Mr. Daniel Turp: I don't know if it's 100 million unemployed; it's 100 million below the poverty level.

What would be the unemployment, Roy?

Mr. Roy Culpeper: I have the right figure: it's 20 million.

Mrs. Sheila Finestone: Those are the figures they gave us for unemployed, which was—

Mr. Daniel Turp: So 20 million unemployed and 100 million under the level of poverty.

Ms. Libby Davies: Which is 50% of the population.

Mrs. Sheila Finestone: Anyway, it's all quite frightening. I'm looking forward to reading the report, Mr. Chairman. I don't have any enlightening questions. I was a great listener.

The Chairman: Thank you for your observations. Maybe I could—

[Translation]

Mr. Daniel Turp: Yesterday, Mary Robinson spoke to the importance of involving the private sector.

Mrs. Sheila Finestone: Absolutely.

Mr. Daniel Turp: At our first meeting here, on Nicholas Street, Roy mentioned that we were a good delegation, but that there was no one from the private sector. Members of Parliament, NGOs and Church groups were represented, but not business. So we should make sure from now on that a business person be included in these delegations. This would make more companies aware of human rights issues, and the fact that it is in their interests to do business in countries where human rights and democracy are respected. I find Mary Robinson made a very important point on that matter yesterday. She was right to insist on it.

[English]

Mrs. Sheila Finestone: I think it's important, Daniel, because you've tried to criticize—and I think quite unjustly, but that's my personal view—Mr. Axworthy. I think the world would be a far less humane place if it weren't for the people like Mr. Axworthy. And there are very few like him in the international world today, speaking to the issues of poverty, business and fair play, fairness and decency, and respect for diversity.

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It would seem to me that we have to speak to how, when Sergio Marchi and Mr. Axworthy go on international trade missions, we can incorporate that dimension into their work. Because of the very nature and structure of our society, Canadian businesses are sensitive to the importance of all the social safety nets we have in place. When they see this, it might have a very important impact on how they would view their role as business people. They have the right to go there and try to do business, but they could do it in a more humane approach.

They might be doing literacy education for their workforce for one hour in the course of a work day. There are all kinds of things we could do that could move things forward that wouldn't be seen as an interference in the state.

Mr. Daniel Turp: Mrs. Finestone, I laud the minister. I respect him very much. I think he's a very good Minister of Foreign Affairs. I have said that before many audiences, and I will continue to say that. But he has disappointed me, and not only me. He said he would make a statement before that assembly was held on the situation of human rights in Indonesia. We all thought it was important. He hasn't done it yet. I hope he does do it before the elections. It's very important that it be done.

The Chairman: Mr. Culpeper wants to add something to that.

Mr. Roy Culpeper: I want to say that the Prime Minister has just been in the region, and I was taken aback by the fact that he seems to have signalled a new turn in terms of giving human rights a greater priority, at least in his own list of priorities.

Mrs. Sheila Finestone: Weren't you encouraged?

Mr. Roy Culpeper: No. I was taken aback by the criticism that came from the business community, from Mr. d'Aquino and others, and Pierre Lortie, who said this was undermining business prospects for Canadians in the region. So I think it is really time for a dialogue with the business community on these issues. Perhaps you should be bringing them to this committee and discussing human rights with the business people, and saying human rights is good for business and we shouldn't continue to think otherwise.

The Chairman: Maybe I could make a short observation. I think we will have a bit of an opportunity in the trade committee when they start looking at the OECD convention on corruption, for example.

We'll have to get the business community engaged, because we looked at the issue when we were doing our study on small and medium-sized businesses, and it's that delicate trade-off. We don't want to kill all possibility of development by saying don't ever go to that country because there's corruption there. That won't help them develop either. So you have to kind of work at this at both ends, and it's a very delicate thing.

Some of the members of our committee felt that we should have a criminal law here that says any Canadian who ever paid a bribe would go to jail. That would cut off Canadian trade with probably—Mr. Culpeper, you would know better than I would—160 of the 180 countries in the world. I don't think that would advance their prosperity or the human rights we all want. These are issues I agree we have to work with.

Let me ask you about two things.

We are going to be doing a study into the WTO, which this committee is going to start early next year. This is going to be a huge undertaking. As you know, in November of next year there will be the meeting of the WTO in the United States. It's estimated that there will be a new round kicked off. It will be another Uruguay Round, or whatever it will be. But these will be the issues, the civil society issues you've been talking to us about today. Civil society is on the table now.

I've just come back from a meeting in Latin America with Latin American politicians, and everybody is saying that at the Santiago declaration, civil society was in there as part of the trade dialogue. I'm just laying this out for you. I think we're going to need your help to come to the committee and tell us how we work this into the institution of the WTO. How do we overcome some of the reticence of some of the partners in there? How do we institutionalize this? We can talk about it all we like, but we have to make it work somehow, and that's a big, complex institution.

I'm not asking a question to be answered today, but I'm telling you the future plan of the committee. This is going to be a work plan in the spring. This is important. We want to get something in there so that we can say here is what Canada's policy should be at the WTO and here's how we think we can advance it. You have a lot of experience in that.

I was very struck when I was at the WTO in Singapore and most of the “progressive ideas” we were advancing were being resisted by the very countries you're talking of having visited. They didn't want to hear about it, because they perceived every one of them as being a form of new trade barrier we were inventing.

We can't persuade the Americans, for example, not to turn the ideas we're talking about here into some sort of new anti-dumping regime where in fact they'll use them to keep third world country goods from getting into their markets and they'll just increase the poverty.

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We can't allow a new system to develop that allows us to use human rights as a trade barrier, like the religious freedoms bill we heard about this morning. You say we don't like what you're doing in that field, so we're going to stop your goods from coming in. You're just cutting off your nose to spite your face, because you kill the very prosperity of the very people you're trying to bring out of the system.

So that would be helpful to us.

The other thing that I think would be very helpful to us, Mr. Culpeper—and I know we've discussed this many times before—is the IMF and the conditionality. Again, at this meeting I was at in Santo Domingo with Latin American politicians, so many of them were saying they need debt relief. There was a very thoughtful person from one of the big international financial houses who said yes, of course, but we have to somehow manage debt relief in a way that will allow lenders the next time around to say yes, we'll come forward for funds; but if the last time around it was a gift, it's not going to be a gift again.

If I'm the bank or I'm asked personally to give, I don't mind giving a gift, but I want to know it's a gift. I don't want to know it's a loan. If you tell me it's a loan and it disappears, if it disappears once, how do you come back? If it's the international financial community that does it, it's still coming out of the taxpayers' pockets, of everybody who represents a constituent in this room. As you and I know, they have a limited tolerance for this.

It seems to me that on the one hand we're talking about that, and on the other hand we're talking about the type of conditionality that we now have to define into the system. I mean, it seems we're talking about a new type of conditionality.

Listening to Ms. Augustine, Ms. Davies, and Mr. Turp, we're saying okay, we're willing to go back to the well, but maybe this time, rather than conditionality of the IMF about some of these structural issues, not just sane economic policies, there have to be human rights attachments and human rights conditionality.

If that's true, and I believe strongly that it has to be, what are the chances of getting that accepted by these countries? I mean, how desperate are they?

We've spent a lot of time talking with China. We know that going to China, sticking out a finger and saying you have to do it this way or otherwise, their answer is always going to be no. How do you go about working your way through it? It seems to me that we've always talked about these things, and it's always the same problem.

In the next year the work program of this committee is going to lead us down these two very important roads, both in the WTO discussions and in the IFI discussions. We have to get our thinking straight on them.

Mr. Roy Culpeper: Let me just take the WTO agenda item under advisement. I will try to respond to the debt and the conditionality issues you raised.

On debt, I think it's important to remember that within domestic jurisdictions—Canada, the United States, and so forth—there's a framework to resolve bankruptcy situations where debtors get into trouble and they can't pay their debts. There are laws, procedures, courts where debtors and their creditors can get together and sort out their differences. Usually those end up with the creditors going away with less.

But the important point is that this is life. You don't always see things turning out the way you hoped they would. Creditors understand that. Debtors know that from experience. The question is do we have a mechanism to sort it out?

The Chairman: Right.

Mr. Roy Culpeper: Well, we do have at the domestic level.

The Chairman: Debtors, however, give up their sovereignty. If you're an individual debtor, if you're a nation, you can't go back to the Newfoundland experience of the British commission running the country for 25 years because it ran up a debt. I mean, nobody is going to accept that either.

Mr. Roy Culpeper: What we're lacking is sort of a bankruptcy mechanism at the international level.

The Chairman: Right, I appreciate that.

Mr. Roy Culpeper: That will involve debtors giving up a little, but creditors also giving up a little—

The Chairman: Yes.

Mr. Roy Culpeper: —and trying to go back to business as usual.

The worst of both worlds is the situation we have now. There are no procedures, no mechanisms, no bankruptcy laws of any kind. So you get into this deadlock where you don't know when it's going to end or how it's going to end.

Mr. Daniel Turp: It's good that there are some.

The Chairman: I agree with you. The business of the IMF going to Korea and saying we'll give you the money, and instead of saying it like a bankruptcy regime, and saying on the condition that you totally throw out your whole system up until now and cause total chaos with it, and at the same time half the money refunnels back to the American banks anyway, so it doesn't really go to alleviating the problem.... So you get this kind of totally opaque system—-

Mr. Roy Culpeper: Well, it is opaque.

• 1215

Daniel mentioned the Paris Club. The Paris Club has been stunning for its lack of ability to resolve these issues very quickly.

The Chairman: What about the HIPCs that we heard about, the highly indebted poor countries?

Mr. Roy Culpeper: The HIPCs is the same thing. It was an initiative launched two years ago that's going to take at least a decade or more to get the first dozen countries out of debt.

The Chairman: Okay. It's going to take a decade to do that, but.... We could talk about this all day. It's sure as hell going to take a decade to get the military out of Indonesian government, too. Society doesn't move like that. All these problems.... We're not going to get Indonesia turned around tomorrow either. It's going to take a long time to edge their military out. It takes time. This is one of the unfortunate things of life.

Mr. Roy Culpeper: On the conditionality issue, though, I think the important first step is more participation and inclusion in the dialogue with the international financial institutions. That's what has been lacking. It lacks pervasively. The IMF, as you may know, comes to Canada for article IV consultations every year. When they do so, who do they speak to? They speak to finance department people. It's a check-up of the economic health of each member country of the IMF. This includes not only the developing countries, but the rich countries too. They make judgments on the economic policy. They say to Canada, your interest rates are too low, you should be increasing them. They say these things. But I only allude to that to point out the fact that when they come to Canada, they don't consult with anyone but the finance community and the Bank of Canada people. It's the same in every other country they interact with.

It's time they begin to interact with a broader spectrum of the public, to speak to unions, workers, and community groups in order to get a better sense of what the real problems are and what the results will be if more restrictive policies were brought in as a result of their recommendations. They're not exposed to this kind of debate or discussion. They operate in a very rarefied atmosphere.

The Chairman: We won't let Mr. D'Aquino get at them.

Mr. Daniel Turp: Let's bring them in front of our committee.

The Chairman: No, I think this is very helpful.

Mr. Roy Culpeper: When you say countries are resisting human rights conditionality, you're talking about the governments of those countries; you're not talking about the people of those countries. Many of the people of those countries would welcome moves in this direction. It's just their governments who have stopped them.

The Chairman: That's how you can help us with the WTO. When we go to the WTO, we talk to the governments. There's no global governance mechanism whereby we can get to those people. We're trying to throw out a thousand years of the notion of the nation state. We're all wrangling with it. The decision on Mr. Pinochet yesterday is an extraordinary step. It's a death blow to the notion of the nation state in a way that's extraordinary, but it's fraught with some very interesting consequences too. Who's going to go to meetings any more?

[Translation]

Mr. Daniel Turp: I think it would be interesting for the committee to pursue this idea of an international bankruptcy system, or whatever it is called. Perhaps Roy can tell us if anything has already been written about it. It's a little ridiculous, come to think of it, that something like that doesn't exist yet.

The Chairman: Mr. Turp, may I suggest that you read the 1995 report this committee put out. We had mentioned the idea then, which was brought up by Mr. Culpepper when he came before the committee. Many people liked the idea. If we are to follow up on the matter of international financial institutions, we must look into this idea more closely. In the 1995 report, we just touched upon the subject without really going into details.

[English]

Ms. Plewes wants the last word, and she has the right. As president of the CCIC, she always gets the last word. That's the rule of this committee.

• 1220

Ms. Betty Plewes: That's right. Thank you.

I wanted to thank the committee and the people who are here for their participation. I really have the sense that you, in your upcoming agenda, have your finger on some of the very key issues that are following us into the next century. The question of democratization of the international financial institutions, the relationship between social and economic issues and the social objectives of these institutions, and the relationship of human rights to trade policy are key issues for which there are a variety of answers at the moment, but providing a process for exploring these from a variety of perspectives is a major contribution of this committee. So thank you.

The Chairman: Thank you.

I hope you can help us figure out the framework within which we can have those discussions, because that's going to be one of our.... We lack all the institutions of global governance to enable us to do this. That's why, again—and I'm scooping the last word—interestingly enough we are told that most of these important discussions will be taking place at the WTO, because the WTO is one of the few institutions in the world that works. We have to try to turn it into something.

Ms. Augustine has another appointment—

Some hon. members: Oh, oh.

The Chairman: —and we're adjourned. She's going back to Indonesia.