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]

Tuesday, April 4, 2000

• 1024

[English]

The Chair (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): Colleagues, we're starting late, and I apologize for that. We have with us this morning, from the department, Jim Wright, Ann Collins, and Robert Brooks; and from CIDA, Mr. Wallace and Monsieur Couturier.

This is the first consideration of our trip to the Caucasus with the assumption that it's going to happen. We've distributed to all of you a nice little white book

[Translation]

in both official languages, with colourful maps. These maps will surely leave members wanting to go on this trip and to be cooperative.

[English]

Thank you very much for coming, Mr. Wright. I know you have to be out of here right at about five minutes to twelve, so maybe if you have to go, you can slither out and leave your colleagues here to take the heat while you're gone.

Voices: Oh, oh!

• 1025

Mr. Jim Wright (Director General, Central, East, and South Europe, Department of Foreign Affairs and International Trade): There's never heat from this committee, absolutely right.

The Chair: This is a departmental overview to hear any observations you have about how you feel the committee could contribute to Canada's foreign policy in the area and your present views of it. Thank you for coming. Would you like to lead off?

Mr. Jim Wright: Thank you very much, Mr. Chairman.

It's a great opportunity to be here today to address the committee as you begin your work examining Canadian interests, opportunities, and policies in one of the most fascinating areas of the world. We've already provided committee staff with an extensive package of briefing material, including country notes and political and economic briefs, and we have worked with the research staff as they've assembled material for your attention.

I do not intend to deal with this in a detailed fashion, but I propose to give you a broad strategic overview of the region and Canada's interests and policies, and then to invite members to put questions to our team.

[Translation]

The eight countries that constitute Central Asia and the Caucasus share much of their history, share many common roots, and share a desire to use their newly won independence as a springboard to the future. Yet, they have many qualities that make each unique, be it Armenia's Christianity, or Kazakhstan's size, or Tajikistan's mountainous terrain.

[English]

This is not a part of the world in which Canada has been extensively engaged. Since the collapse of the Soviet Union, Canada's presence, however, has been changing and evolving, influenced initially by our commercial interest. The vast mineral riches of the Tien Shan mountains and the enormous hydrocarbon bounty of the Caspian Basin have been a magnet for the worldwide mining and petroleum companies, joined by Canada's best.

Having been initially attracted by the promise of mineral wealth, our interests have grown to embrace the breadth of our peace and security interests and our commitment to share Canadian values abroad. Our efforts are limited to some extent by our modest representation in the countries of central Asia and the Caucasus.

We are also constrained by the pace of reform. In the west we are familiar with the rapid and successful transformation of political and economic life in central Europe. The process of transition in central Asia and the Caucasus has been much slower. There's no surprise here. These were the remote outposts of the Soviet Empire, communist command economies totally controlled from Moscow. When the communist system collapsed in 1991, these countries were left on their own. Reluctantly independent in some cases, they were starting from a much lower base. With no tradition of democracy—quite the opposite in fact—and no working market economy, they have had a much tougher row to hoe.

[Translation]

It is a mistake to view Central Asia and the Caucasus as a monolithic whole. While there are similarities, likewise these are many deeply significant differences. We view the region as two distinct entities - Central Asia and the Caucasus. Just to confuse matters however, we need always remain aware of the concept of the Caspian Basin, which brings Russia and Iran into the mix with Azerbaijan, western Kazakhstan and Turkmenistan.

[English]

The rugged mountains of the Caucasus have ensured a complex and convoluted ethnic, linguistic, and religious mixture that lies at the root of the region's problems. National Geographic might have stated it best, and I quote:

A refuge since the last period of Eurasian glaciation, the Caucasus region has been a gateway for travel, trade, and conquest. Yet even as regional and imperial powers have for centuries contested influence, the Caucasus has remained a redoubt of peoples whose identities are tied to the 50-some languages they speak. (...) The persistence of the enduring identities of ethnic groups has been aided by the rugged terrain and by societies whose loyalties are to clan and family as much as nation or region. Past attempts, especially by the former Soviet Union, to assimilate or dominate the Caucasians have been largely futile.

• 1030

[Translation]

We can see that in spades today. Tensions between Armenia and Azerbaijan have been fuelled by the volatile mixture of ethnic rivalries and religious differences. Georgia's difficulties with its break-away region of Abkazia, and the regions of Ajaria and South Ossetia underscore that the continuing ethnic conflict is a constant threat to stability. The ongoing and tragic conflict in Chechnya further complicates life for Georgia.

[English]

Oil has defined the Caucasus since the first visit of Marco Polo. It was the prize that eluded the Germans in World War II. It is the prize that has drawn the seven sisters and their rich cousins to invest billions of dollars. It is the prize upon which hope for regional economic salvation is being built.

Is there a Canadian interest? Narrowly defined, yes. Canadian oil and gas companies, oil field supply firms, and pipeline builders and operators have a well-defined interest in winning contracts and concessions in the play.

More broadly defined, yes again. The potential for riches is significant, but this can only be a good news story if these riches contribute to the improvement of society in these countries on a broad basis, and by extension contribute to regional stability. If the bonanza benefits only a few, we must expect a widening poverty gap, growing discontent, and increasing instability. We must also be cognizant of the need to see wider regional benefit from the bonanza, involving economic spinoffs in have-not states such as Armenia, but extending to the North Caucasus as well.

[Translation]

In the course of your study, you will come face to face with the realities of ethnic conflict in the region. Nagorno Karabakh is perhaps the most difficult, and cannot be resolved without both goodwill and creative solutions. The Armenian Foreign Minister, Vartan Oskanian, was in Ottawa last September and Minister Axworthy visited Yerevan in October for the state funeral of the Armenian Prime Minister and other political figures tragically killed in the National Assembly. Bilaterally through our relations with Armenia and Azerbaijan, and multilaterally through the OSCE, we are trying to build goodwill, but peace remains elusive. The views of the committee would be particularly welcome. Equally, the enduring problems in Georgia have defied resolution through traditional means, and again a fresh view from the committee might generate some ideas for creative solutions.

[English]

Central Asia is a region of more benign history and geography. Flowing from the Kipchak and Chaghatai Khanates of the Mogul Empire, the essentially Turkic peoples of central Asia occupy a broad steppe stretching from the Caspian eastward to the Tien Shan mountains. Semi-arid to true desert, the vast expanse of land gives rise to the nomadic sheep herders of popular imagination. This region of secular Muslims served as the buffer between the Russian Empire, and later the Soviet Union, and the more fundamentalist forces of Islam to the south. Even today central Asia represents a check on the fundamentalism found in Iran and Afghanistan.

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For a variety of reasons, not all positive, the vast store of minerals and hydrocarbons in central Asia lay largely undeveloped. Today this represents the opportunity, but if topography punishes the Caucasus, geography pillories central Asia. A land-locked region separated by vast distances from markets and cost-efficient transportation, the tremendous opportunity offered by the mineral riches has been squeezed by the technical and economic difficulties of moving product to market.

[Translation]

As a result of this, there is a premium on high value, low weight products such as gold and other precious metals, and the world's leading miners can be found here. Canada's gold mining companies have a noticeable presence - Barrick, Placer Dome and Teck Corporation to name three.

Cameco Gold is the most active of all with its stake in the Kumtor mine in the Kyrgyz Republic. At nearly US$350 million, this remains Canada's largest single investment in the former Soviet Union. However, many other mineral opportunities remain undeveloped or underdeveloped.

[English]

Central Asia also represents a major human rights challenge for the international community and for Canada. It remains home to a number of repressive regimes and some of the least reformed economies left over from the collapse of the Soviet Union. Some would argue that Turkmenistan and Uzbekistan are countries where democratic pluralism and human rights have been sacrificed for the sake of self-preserving political stability by a close-knit ruling elite. Much like the Caucasus, clan is paramount. The preservation of clan privilege takes precedence over national interest, and this colours much of the daily machinations of government. Even in the most reformed state, the Kyrgyz Republic, clan privilege is rarely far from the surface.

In terms of common problems and threats in both of these regions, paramount among the internal threats are the environment, human rights, ethnic tension, and the lack of infrastructure. External challenges include drug trafficking, terrorism, Russian attention to the “near abroad”, Turkish and Chinese interests, and of course Islamic fundamentalism. I do not want to dwell too much on these points, but a quick review may provide signposts for committee members in their work.

[Translation]

The environmental degradation wrought by the central planners of the Soviet Union has laid waste to vast reaches of the Caucasus and especially Central Asia. The polluted wetlands and shorelines of Azerbaijan is a vivid reminder of this. The slow, albeit ever- increasing, disappearance of Caspian sturgeon, the desertification of the Aral Sea, the nuclear wasteland of Semipalatinsk add evidence to the legacy wrought on the region. Remediation is beyond the capacity of individual countries in their current economic state.

[English]

Poor human rights plague most of the territory. The exercise of clan privilege, lack of democratic traditions, and perhaps less recognition of self-worth of individuals provide a background that has spawned societies that show little respect for dissent or democratic pluralism. Preservation or accumulation of personal and family privilege can often be the paramount concern for leadership. This is of course somewhat of a generalization, and the reality is closer to varying shades of grey than either black or white. Nevertheless, there is a theme that runs throughout central Asia and the Caucasus that questions the human rights record of these countries.

Clearly, there is international agreement that the track records of Uzbekistan, Turkmenistan and Azerbaijan constitute poor human rights practices. Even those acknowledged as having the best records, Armenia and the Kyrgyz Republic, still have some distance to go before reaching genuinely acceptable levels.

• 1040

Ethnic tension is another theme. I spoke earlier about the conflicts in the Caucasus and the relationship to ethnicity. Central Asia similarly suffers tensions within the complex mix of nationalities and indigenous ethnic groups, as well as having a difficult time accommodating ethnic Russians. This of course is another legacy of the former Soviet Union. Borders of the constituent republics of the U.S.S.R. were set arbitrarily by Stalin and had as a key goal to preserve some semblance of ethnic identity for the republics, balanced by assured ethnic tensions.

As I noted earlier, Nagorno Karabakh is one of the more difficult challenges. Here ethnic tension gave rise to violence and armed rebellion. Efforts to ease this tension, however, ran up against the twin principles of territorial integrity and the right of self-determination, the key principles behind the OSCE. From this distance we can see how Azerbaijan's reliance on territorial integrity to guide its actions and claims runs afoul of the right of self-determination by the Karabakh Armenians. Equally, we can see how Karabakh Armenians claiming self-determination undermines the territorial integrity of Azerbaijan. This does not lend itself to an easy fix.

Crime and corruption are the consequences of an economic system that did not work. The inability of the communist system to provide the basics led ultimately to its self-destruction and left behind a system that breeds corruption. Drug trafficking is the most profitable outward manifestation of this corruption. Transnational crime has become a major international problem and preoccupation. Central Asia, with its vast expanse of geography, provides a path for the movement of illicit drugs from the poppy fields of south Asia to Russia and western Europe. The economic privation of the region ensures a continuing supply of confederates all too willing to take risks.

[Translation]

The loss of empire has been difficult for the Russian people, and they continue to struggle with it. The Russian notion of the "New Abroad" says it best - it represents an important psychological distinction for Russians between the lost republics and longer established independent states. The Commonwealth of Independent States, or CIS, is in fact an institution that tries to compensate in part for Russia's loss. The Russians thus feel a compulsion to be engaged in regional affairs as peacekeepers as in Georgia, or in providing border troops to assist Tajikistan. Regardless, the key is that Russia continues to try to carve out an active role for itself throughout the region, even as economic relationships often evolve in the opposite direction.

[English]

Iran also has a growing role in the region, and one that we may see change over the next few years. Like Russia, Iran shares a portion of the Caspian Sea. Unlike Russia, Iran has no imperial baggage as it seeks to develop greater influence in central Asia in particular, based in large measure on shared religion, with a strong measure of commercial self-interest. As an oil producer and as a littoral state, Iran has significant interest in the development of Caspian Basin oil and gas. Iran, along with Russia, has been championing the view that the Caspian underwater resources are a shared asset among the five littoral states, not a surprising stance for a country with a relatively lesser share of those resources. Iran also sees itself as a potential conduit for Caspian oil and gas, a prospect inhibited by continuing U.S. sanctions. Reform in Iran and a commensurate softening of American restrictions could change the equation.

Iran also represents a face of Islam. The Taliban in Afghanistan represent another, and their fundamentalist fervour presents a challenge to the largely secular Islamic states of central Asia in particular.

• 1045

[Translation]

We would be remiss if we did not mention Turkey, a country that wields important influence as a newly opened gateway to the Caucasus and Central Asia. On the western edge of the region, Turkey with its historical and linguistic links plays a key role as a model of secular development in an Islamic region, and as a market especially for Caspian oil and gas, and supplier of modern goods and services. Turkey also has a stabilizing influence on the regional security stage as a military power and NATO and OSCE member. However, the ever present risk of further destabilizing ethnic conflict within the Caucasus is another potential dark cloud affecting Turkish interests. Moreover, friction with Armenia over Nagorno Karabakh and interpretation of the tragic events during the collapse of the Ottoman empire continues.

[English]

As I stated at the outset, Canadian engagement in the region has been initially influenced by commercial interests, most notably in the mining and petroleum sectors. It's hardly surprising that Cameco Gold of Saskatoon is the largest single Canadian investor in the former Soviet Union and the largest foreign investor in the Kyrgyz Republic. I understand members of the committee will have an opportunity to visit the Kumtor Mine during your tour.

Cameco is not alone, however. Other mining companies have been very active, notably in Kazakhstan, but perhaps without the returns that Cameco has enjoyed.

In the Caucasus, Canadian firms have been successful in Azerbaijan, developing onshore oil fields and providing helicopter services to offshore platforms. In fact, Azerbaijan's passports are printed in Ottawa.

We have new business opportunities in Armenia, for example, through First Dynasty Mines of Vancouver. And the Canadian presence in Georgia is making a significant impact on their petroleum industry.

You, the committee members, will have an opportunity later to hear from some of the companies that have been active in the region, to learn about the problems they face and how we, both the companies and our embassies, have been working to develop solutions.

We need to be mindful that these are difficult markets where patience is an essential corporate asset and where the rules of business are not always transparent. Moreover, government has a direct role in assisting businesses, particularly should they encounter difficulties.

Canadian diplomatic support is an essential part of the formula for success in markets all around the world, but especially in these emerging economies. I know they will be able to share with you their sense of the tremendous opportunities that exist for companies willing to make an investment in time and money to work with regional governments in a responsible manner.

[Translation]

Canada's engagement, however, is much broader than just commercial self-interest and we have been working hard to expand our activities to embrace the full breadth of Canada's foreign policy. The 1997 Ashgabat Conference that Canada actively supported in Turkmenistan was a major stepping stone towards the conclusion of the Ottawa Convention on Anti-personnel Land Mines, and reflects our efforts to promote the human security initiative throughout Central Asia. At the present time, of the eight countries, only Turkmenistan has signed the Ottawa Treaty, meaning that much work remains to be done on this front. We have also provided support and assistance to the Central Asia Peacekeeping battalion, and through the Military Technical Assistance Program (MTAP) and by contributing to NATO's Partnership for Peace, we have been working to build regional stability.

[English]

We work very closely with CIDA to guide the direction and evolution of CIDA's nascent, modest, but growing technical assistance program as a key instrument in supporting Canada's overall foreign policy goals in this region of the world. You'll have an opportunity to be briefed by Stephen Wallace on CIDA's activities in the region.

• 1050

As central European countries are successful in their transition, there is a growing opportunity to devote more attention to central Asia and the Caucasus as more money becomes available. Together with CIDA we have identified the desirability of increasing efforts on human rights in civil society while maintaining programs on conflict resolution, the environment, and governance. There is strong agreement between us on these priorities, and these are sectors where Canada has value-added expertise to contribute.

Canada funds at our embassies are used to support projects at the community level, such as assisting NGOs focused in the human rights area. We have also provided strong support for the activities of the Organization for Security and Cooperation in Europe. This is a key institution that has been very effective in building acceptance of democratic values and institutions throughout Europe. By posting Canadian officers at key missions from time to time, participating in election observer missions such as in Georgia, Kazakhstan, the Kyrgyz Republic, and Armenia and in other activities to support and encourage the development of democracy and stability in the region, Canada has been able to encourage the work of the OSCE and to advance the transformation of the region. We do not hesitate to raise human rights cases in the OSCE council, as the recent case of imprisoned Turkmenistani dissidents relates.

Canada has also been very active in supporting programs to deal with severe environmental problems of the area—

The Chair: Mr. Wright, I don't like to interrupt you, but we also appreciate your support for the OSCE Parliamentary Assembly, which enables discussion of these issues to take place among many of the members around this table.

Mr. Jim Wright: You are absolutely right, Mr. Chair.

The Chair: I don't like to forget the existence of the parliamentary assemblies. We find that governments tend to ignore them as a rule, so I'm just reminding you of that.

Mr. Jim Wright: Not at all. I remember how active the chairman was in Istanbul in fulfilling his responsibilities in this respect. You're absolutely right, Mr. Chairman.

The Chair: That's a helpful plug for both of us. Thank you. We both get our time.

Mr. Jim Wright: With respect to Canadian representation in this region of the world,

[Translation]

Canada maintains only one embassy in the region of Almaty, Kazakhstan. Accredited to the Kyrgyz Republic and Tajikistan, this small mission manned by two Canada based officers was established initially as a trade post. This had evolved into a full service embassy, and this evolution will continue this summer when CIDA assigns a Canada based officer who will be responsible for the growing technical assistance program in Kazakhstan, Tajikistan and the Kyrgyz Republic.

[English]

Coverage of the other countries is shared between the embassies in Ankara and Moscow. Ankara, with its historic and commercial links to the Caucasus, has responsibility for Azerbaijan, Georgia, and Turkmenistan. Our embassy in Moscow covers off Armenia and Uzbekistan. In the longer term, we of course hope to be able to expand our network of embassies and consulates. However, overall resource constraints on the part of the Canadian government generally make this impossible at this juncture.

In sum, Mr. Chairman, central Asia and the Caucasus might well represent the last frontier of the wild east. In the modern version of the great game we are seeing a struggle for control of the vast richness—oil and gas, gold, uranium, and other valuable minerals—but we are also seeing two regions struggle to come to terms with history, culture, religion, newly found independence, democracy, pluralism, and market-based economies. No easy task.

Canada has always maintained an interest in central Asia and the Caucasus, but our engagement has been constrained by the distance, remoteness, and the realities of human resource limitations. Over time, this is changing. We welcome the initiative of the committee to undertake this study and we are looking forward to your findings.

My hope, Mr. Chairman, on the assumption that the committee goes to the region, is that you'll have an opportunity to meet the political and parliamentary leadership in these countries while also being introduced to important non-governmental organizations working in the Caucasus, in central Asia, meeting with international organizations, the OSCE, the World Bank, IMF, and meeting with Canadians who are there, the Canadian business community and others. You'll have an opportunity to assess the political and economic landscape. You'll be able to also assess the extent to which you think these countries meet the agreed standards of international behaviour that they have all undertaken to do. You'll have a chance to look at the extent of Canada's engagement, modest at the present time in the Caucasus and in central Asia, and to offer advice to us in terms of our political, trade, and technical assistance involvement.

• 1055

Mr. Chairman, that concludes my statement. Thank you very much.

The Chair: Thank you very much, Mr. Wright. I take it that your colleagues from the department who are here with you won't be making any statements.

Mr. Jim Wright: Yes.

The Chair: We'll just go straight to Mr. Wallace for the perspective of CIDA.

[Translation]

Mr. Stephen Wallace (Director, Southern Europe, Central Asia and Humanitarian Assistance, Canadian International Development Agency): Thank you very much, Mr. Chairman, members of the committee. I'd like to begin by introducing my colleague Jean Couturier, who is a CIDA manager responsible for the Caucasus and Central Asia.

We welcome the study that you are undertaking. You will be focusing your attention on a large and complex area, one that represents one of the last great frontiers of Canadian cooperation. We wish to thank you for this opportunity to discuss with you at greater length CIDA's role in the region and the lessons learned from working in partnership over the years with over twenty Canadian and multilateral organizations.

[English]

Mr. Chairman, the first thing to say about our program is that poverty is not our main focus as it is elsewhere in the world. In central and eastern Europe and in the former Soviet Union, transition is our key mandate, specifically transition to the market economy and transition to democratic pluralism. As you will see throughout your studies and hopefully your visits to the region, many challenges remain on both these fronts.

Our experience has demonstrated the fit between Canadian capability and the regions' needs. We share similar resources, climate, and landscape. It is why, for example, Kazakhstan has approached Canada and has requested assistance in the preparation of its national agricultural strategy. It's also why Kyrgyzstan has asked us for assistance in developing their environmental management capacity. It's also why western Canada has a particular interest and relevance in that part of the world.

Canada's cooperation program is built on partnership. This partnership has up to now featured mainly an economic and technical training agenda. This was a natural extension of the interest of Canadian resources companies who have also co-financed several of our projects.

A notable exception is the Aga Khan Foundation, with deep roots in Tajikistan, and some highly effective programming to match. Another is Armenia, where strong ties with the Canadian Armenian community have generated high-quality cooperation opportunities.

A key lesson from our economic cooperation experience is that we can often make the most difference when our actions strengthen the general business environment as opposed to the directed business interests of individual companies.

CIDA, therefore, has a particular role to play to ensure that policies, laws, and regulations make sense and are applied fairly and transparently, that basic economic institutions work, and that workers are equipped to meet the demands of the global economy. These, Mr. Chairman, are the basic building blocks of sustainable trade and investment and they are the basis for addressing key aspects of governance and corruption.

A second lesson we have learned is that while regional cooperation is intrinsically valuable from a developmental perspective, it can also have a powerful peace-building impact. It's why most of our initiatives in the Caucasus involve at least two countries.

[Translation]

Such modest-scale actions as working on health issues in cooperation with the Canadian Society for International Health or providing training activities in Central Asia along with the University of Saskatchewan can help to initiate a dialogue and to build peace.

[English]

A third lesson, Mr. Chairman: we need to make creative use of such mechanisms as the Canada Fund and the Peace Building Fund, which can provide timely, high-visibility solutions to local problems and which can play particularly useful roles in areas such as human rights. We look forward very much to the work of the committee in examining these possibilities.

[Translation]

Traditionally, Canada's multilateral involvement in this region has been significant. We must endeavour to join efforts with other stakeholders and use our modest resources as a springboard for action on a larger scale. Undoubtedly you will be reviewing the operations of key agencies such as the OSCE and the programs of the United Nations and World Bank.

[English]

As Mr. Wright has described, it is a region of compelling issues, of emerging challenges and extraordinary opportunities. It is clear that our early focus on economic cooperation and technical training must evolve to address compelling challenges in areas such as peace-building and human rights. We have already taken some steps in this direction.

• 1100

I am pleased to announce that we are also developing a specific program to address climate change issues, given the importance of the region both as a source and a sink for greenhouse gases.

We will also need to take into account the clear differences between the Caucasus and central Asia, as I alluded to earlier.

It needs to be underlined, however, that we are limited in our potential response by relatively modest means, a weak presence on the ground, and few historical ties. As Mr. Wright has also explained, however, we are working on all three. These limits compel the need for careful choices as we consider future directions.

[Translation]

Our programs are unique in that we take an interactive approach. Generally speaking, our Canadian partners take the initiative of developing their projects and then of submitting them to us for funding assistance. Obviously, it's important that we maintain an ongoing dialogue with them on changes taking place in the region and that we be very selective about the projects that we choose to finance.

[English]

Interest in Caucasus and in central Asia by Canadian partners has grown rapidly, Mr. Chairman, far outstripping our annual budget of $4 million. This interest has broadened from the initial private sector resources focus to encompass new initiatives with a decided peace-building dimension. We believe this interest reflects a distinctive Canadian approach, one that values partnership, that cuts across public, private, and NGO sectors, and that recognizes the importance of a strong civil society and the rule of law.

[Translation]

We try to focus our involvement on sectors where, as Canadians, there is some value added. Often this value added feature is the fact that we are perceived as interested stakeholders without any hidden agendas.

[English]

As you can imagine, Mr. Chairman, that is a fairly rare feature in that part of the world.

Canada has the capacity, the experience, and the reputation to tackle many of the emerging issues of the region, be it environmental degradation, ethnic conflict, human rights, corruption, or the widening disparity gap, which has marginalized an increasingly large proportion of the region's population. We have the opportunity to give practical expression to central Canadian tenets of human security, peace-building, and democratic development. This can mean direct action, such as de-mining in Georgia, refugee return in Azerbaijan, conflict resolution among water users in the Ferghana Valley of central Asia, and the reintegration of former combatants in Tajikistan. Canada's cooperation program is already involved in each of these endeavours, but we will need to be much more fully engaged in order to make a significant difference.

[Translation]

Mr. Chairman, the Caucasus and Central Asia present some formidable challenges which extend well beyond the borders of the eight countries in question. We will spare no effort to support the work of the committee and we believe that your study will prove very useful in terms of setting priorities for the future. We will now be happy to answer your questions. Thank you very much, Mr. Chairman.

[English]

Thank you.

The Chair: Thank you very much. That's very helpful, Mr. Wallace. Your statement about the resource issue, for one, from your perspective, is obviously very helpful because that's one we'll be dealing with.

Before we go to colleagues, let me ask a question. It comes out of Mr. Wright's observation that investments in the region require patience. Patience is another word for deep pockets. You don't have patience unless you have huge resources. That's a matter of fact.

Mr. Wallace, from your point of view, you talk about Canadian trade and investment links too. This committee did a report a couple of years ago about small and medium-sized businesses and access to foreign markets. We put an accent on the role that our immigrant population can play in contacts. I've talked to various people from, say, Armenia; there's a large Armenian population here. Have we already any programs in place to facilitate those contacts so that we get a small and medium-sized presence there—which will also help democracy-building and people that are familiar with it—as well as the Camecos and others who can afford to be there because they have the deep pockets?

This is maybe just a reflection I have, but it's a bit of a violon d'Ingres of mine, a bit of a hobby horse, because I bring it up every time. It seems to me that the committee is interested in that issue and that we're always trying to find out where the rubber hits the road, if there are any extra resources being put into it. It seems logical to be doing it, but we never can find out whether we are doing it or not. I wondered whether CIDA was doing any better than anybody else.

• 1105

Mr. Jim Wright: Maybe I can start, and I'll ask Robert Brooks from the department to pitch in if I'm wrong.

What I would say is that by and large your approach and your definition are probably about right. Most of the companies are sizeable companies that are strong enough to be able to look after themselves in the short to medium term. They're not all Camecos. A lot of smaller enterprises are there as well. But I don't think we have seen yet enough of the ethnic community in Canada becoming engaged with their small and medium-sized enterprises and going back to promote trade and commerce, to promote investment, and also to promote some of the political change and social change and reform we are looking for there. You see it a little bit, but by and large the companies in question are fairly self-sustaining, and I'm not sure the extent to which they're connected to the ethnic communities in Canada.

Robert, why don't you pitch in?

Mr. Robert Brooks (Deputy Director, Eastern Europe Division (Belarus, Caucasus, Central Asia, Moldova, Ukraine), Department of Foreign Affairs and International Trade): I'd simply say the only two communities sizeable enough to play a role as you've outlined, Mr. Graham, are the Armenian and Azerbaijani communities. In fact there is a Canada-Azerbaijan Chamber of Commerce in Toronto, and we've worked quite a bit with them in promoting. They have an interest in going beyond the commercial ventures, as does the Armenian community, but they're the only two. The other communities are still very small in Canada.

The Chair: Thank you.

Mr. Wallace.

Mr. Stephen Wallace: Thank you. Perhaps I could just highlight three programs we are operating through CIDA at the present time.

First, committee members may be aware of the activities of the Canadian Executive Service Overseas. It is a group of retired executives who operate all throughout central and eastern Europe. They are present in the Caucasus and central Asia, and very often they act as an entry point for Canadian business relations. We've found that very valuable. I hope you'll have a sense of this when you're over in the region.

Second, we have a business cooperation program called Renaissance Eastern Europe, which has tended to match up medium-sized enterprises in the Caucasus and central Asia. That one is as strong as the relationship between the Canadian business partner and its local partner. Where you have strong relationships, you have good potential. Mr. Brooks has talked about Armenia and the special relationship there involving the Canadian-Armenian community. We've seen lots of activity on the small and medium-sized enterprise side as a result.

We have two other projects in the Caucasus, one with St. Mary's University on small and medium-sized enterprise training, and the other with World Vision on the development of a small and medium-sized enterprise capacity locally. Through these projects, we are starting to branch out, at least in the Caucasus, with the Canadian business community, and we believe there is some good potential there.

So we have a number of small vehicles. They're modest in scope, but they offer some opportunity as entry points for small and medium-sized enterprises.

The Chair: Thank you, Mr. Wallace. Actually I understand you're preparing a list of programs available in the region, and that will be distributed to the members.

So, members, you'll get that. It's not in your books at the moment, but it's coming.

Thanks. That's helpful.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde (Mercier, BQ): Well then! That's my initial reaction to your presentations which have given way to a slew of questions. Mr. Wright, your conclusion caught my attention. You stated the following:

Central Asia and the Caucasus might well represent the last frontier of the "Wild East". In the modern version of the Great Game, we are seeing a struggle for control of the vast richness - oil and gas, gold, uranium, and other valuable minerals.

Through its actions, is Canada striving to participate in this great game which involves a struggle for control?

• 1110

As a sub-question, could you be more specific about the actions in which Canada is involved in this region? In order to understand these actions and Canada's role, we need to have a clear sense of the multilateral efforts underway, in particular a clear understanding of the activities of the World Bank and of all other groups.

[English]

Mr. Jim Wright: I'll start and then turn it over to my colleagues here to pick up the second part of your question.

It's fair to say there are many Canadian companies—I've named but a few here—interested in some of the commercial opportunities out there with respect to the Caucasus and central Asia. But the prospect of controlling these resources is not a realistic one, certainly not as far as Canada is concerned. We'll be a player. We have value-added expertise in numerous areas of resource extraction in the hydrocarbon industry. But for developing especially the oil and gas reserves in the Caspian Basin and elsewhere, you're not talking about millions of dollars of investment; you're talking about billions of dollars of investment.

To the extent that happens—and there's a lot of debate out there in terms of pipeline diplomacy, which companies will be successful, and which routes will be approved—Canada will be a player, but I suspect more on the margins in terms of supplying equipment to the successful bidders. My assumption is that it will not be one company that will have a controlling interest in any of these projects. Simply, the projects are much too vast to control this.

The other comment I would make is that while governments will have strategic interests in the routing of some of these different pipelines, whether it's through Russia, under the Caspian, or through Iran, and in how these hydrocarbons are taken from the Caspian, whether it's through Georgia, Azerbaijan, or Armenia.... There are lots of political questions there, but in the final analysis, I think the judgment of the Canadian government is that it's the marketplace that will determine what routings are approved here, because in the final analysis it's the private sector that will pay for these pipelines, not governments.

Yes, we have a stake. Yes, we have an interest. Stephen talked about common climate and common resources developed here in Canada that are available in the countries of central Asia and the Caucasus. So it's natural that Canadian companies would have an important stake. But do we anticipate that these companies will play a leading role and have a controlling share in the development? No. I think we'll be one of many, many actors on the ground there.

And I think these projects are going to take an awfully long time to come to fruition. That will be guided to a certain extent by developments in the international market in terms of availability of oil and gas, but these resources are an enormous distance from the marketplace. How commercially effectively these can be developed, only time will tell.

Robert or Ann, do you want to add to that?

Mr. Robert Brooks: I'd just say we often use the term “the great game II”. Where the great game was between Britain and Russia for control of central Asia, today it's between the BP Amocos and the Lukoils and the Royal Dutch/Shells of the world as to how the resources are going to be divided up.

It is a geo-strategic game that's being played at an extremely high level, and as Mr. Wright indicated, with a very, very high price tag attached to it. For the Caspian Sea development drilling rigs, we're looking in the range of $9 billion to $10 billion U.S. total. We talk in terms of multiple tens of billions of dollars when we talk about pipeline routings. So it's well beyond the scale of the kinds of companies we've attracted into the marketplace.

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But that said, to reply to another portion of the question, there is a very heavy engagement of the international financial institutions. The World Bank in particular is active. Within central Asia in particular the Asian Development Bank is active. The members of the five central Asian countries, with the exception of Tajikistan, I believe, are all members of the Asian Development Bank, which is a little unusual in our parlance, because we usually talk about the European Bank for Reconstruction and Development, which is active in the Caucasus.

So there is a very active engagement of the world financial community.

The Chair: Thank you.

Mr. Wallace.

[Translation]

Mr. Stephen Wallace: With respect to our multilateral actions, I would just quickly like to say that our involvement is rather special. Since our resources are fairly modest and since we have a limited number of workers on the ground, we need to rely in some cases on multilateral agencies in order to ensure this cooperative effort.

I can give you four or five examples of cooperative relations that have been forged, the first with the UN High Commission for Refugees. Your committee is no doubt aware that Azerbaijan has the highest number of refugees or displaced persons in the world. The United Nations and its High Commission for Refugees play a vital role in the Caucasus and in Central Asia and we support their efforts.

Furthermore, the World Food Program is very active in the Caucasus and in countries like Azerbaijan. This region of the world has been especially hard hit by crises and shortages of agricultural products in recent years.

We already mentioned the special work being done by the OSCE, which is focusing in particular on security and peace-building initiatives. Canada is actively working with these councils and in the case of Azerbaijan, has even offered to finance the administration of their offices.

I'd like to make one final comment, further to Mr. Brooks' remarks about the World Bank and our leverage. We work with the World Bank in part to position Canadian businesses to take advantage of major contracts awarded by these institutions. One example is the energy sector contract awarded to SaskPower in Kazakhstan. Together with the World Bank, we are funding a regional social policy reform project. This partnership between Canada and the World Bank enhances our profile and gives us a certain amount of clout that enables us to genuinely exercise some influence in this area. Thank you.

Mr. Jim Wright: During the course of your visit to the Caucasus and Central Asia, you will have an opportunity to meet with representatives from virtually every one of these organizations.

Ms. Francine Lalonde: Are we to understand from reading your document that we must take into consideration not only development issues, human rights and political solutions to existing problems, but the extent of our presence in the area and the race in which large corporations are involved? Because every time a similar situation unfolds, we tend to see an escalation of human, political and development problems. Yes or no?

The Chairman: Yes or no? I assume you have a reason for asking this question.

[English]

Mr. Jim Wright: I suppose it's little bit of the chicken and the egg. With prosperity, certainly there is an enhanced opportunity for quality of life to improve in these countries. Certainly from the perspective of most if not all of these countries in central Asia and the Caucasus, they are holding out for a much better quality of life for their citizens and much better social services and better work opportunities, to the extent that these commercial opportunities start to take root.

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At the same time, both bilaterally through our programs with CIDA and multilaterally through our efforts with the OSCE, we are trying to encourage the process of political reform, respect for human rights, offering the kind of training and support for the kind of society that we know they want to become. But tradition, history, and culture have made that transition extremely difficult.

I would argue that the two go hand in hand. One complements the other. At least that's what we would like to see.

A voice: That's what we're all trying for.

The Chair: Dr. Patry.

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): Thank you, Mr. Wright.

Mr. Wright, in your presentation you mentioned, on page three, the future of these very fragile democracies. In a certain way it passes through energy development. You mentioned:

The potential for riches is significant, but this can only be a good news story if these riches contribute to the improvement of society in these countries on a broad basis, and by extension contribute to regional stability.

My question is regarding the original competition for the future route of this pipeline. Last November, in the OECD summit in Istanbul, Azerbaijan announced an agreement in principle for the construction of this pipeline passing through Georgia, then Turkey and the Mediterranean Sea to reach the sea there. This is in competition with Georgia, who would like it to pass through Georgia and get to the Black Sea. And on the other side you have Turkmenistan, who would like to build a pipeline under the Caspian Sea and to reach Azerbaijan, but Azerbaijan has already found some new gisements de gaz naturel. And on another side you have this blue corridor, the corridor Russia would like it to pass through.

There are many, many people for this. We all know that the country where this pipeline is going to pass will be favoured economically from the transit fees and by the development over there.

My question is very simple:

[Translation]

what can be done to ensure that the benefits of development in the energy sector are shared equally by countries and also by domestic interests? What is the status of the project announced by Azerbaijan involving the construction of a highway?

[English]

Mr. Jim Wright: You make it sound like such a simple question.

Mr. Bernard Patry: I have no clue about the answer.

Mr. Jim Wright: The answer is much more complex, I'm afraid.

I don't pretend to be an expert on pipeline diplomacy. I am familiar with many of the competing routes you have talked about. I was in Istanbul with Mr. Graham and the Prime Minister and Mr. Axworthy, so I too heard reference to the Baku-Ceyhan pipeline, as it's referred to.

We are operating under the assumption that while Canada and the Canadian commercial sector will play a role in this development, we're not at a level where we're going to be playing a leading role or a highly influential role in terms of the routing that will be finally agreed to. But we are operating under the assumption that we are talking about multiple pipelines. We're not just talking about one pipeline. I think the world requirements in terms of hydrocarbons will be such that we will see two, three, four different routes that will eventually be approved.

One of the reasons why you're going to see that is, first, because market forces will dictate that. And secondly, it will happen because there will be sufficient energy demand in the region that there will be a multiplicity of markets that will come to the fore, not only interested in accruing some of the benefits from the routing of pipelines through their countries, but also recognizing that they too have energy needs, and while they may be met right now, largely from Russia, there's an overdependence for many of these countries on supplies of oil and gas from Russia, a dependence they want to see reduced over time.

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I think our expectation would be that the routings—plural—will be dictated by the marketplace, and that there will be sufficient development and opportunity that you will see some of the benefits spread more regionally. How far that is spread, frankly, will depend largely on the marketplace. We have seen some proposals that go so far as to suggest that additional supplies of gas in particular could go north and through Ukraine into western Europe.

I don't pretend to be an economist and to be able to forecast whether this is commercially feasible or not. Ukraine has a very distinct interest in making this happen to facilitate greater energy independence on the part of Ukraine, but also to take on some of the benefits that will be associated with those countries, the benefits from pipelines going through their countries.

I think the hope and expectation is that there will be multiple pipelines, multiple beneficiaries, and that the region as a whole will look more promising in ten or twenty years' time.

Mr. Bernard Patry: I have a question regarding Armenia.

[Translation]

As you undoubtedly know, Montreal is home to a large Armenian community. Most of its members live in the West Island. Armenia is still struggling to deal with the aftermath of the 1988 earthquake, the conflict with Nagorno Karabakh and the collapse of the Soviet economy since 1991.

Armenia has expressed a desire to join the World Trade Organization. In your opinion, would this present any problems?

[English]

Mr. Robert Brooks: Canadian policy on WTO accession has always been the same: we have strongly encouraged Armenia and other countries in the region to join the WTO because it is an important part of the transition process. We've provided assistance to quite a number of countries, including Armenia.

Quite frankly, of all the countries in the region, Armenia is among the top two or three in terms of how seriously they have dealt with the issue of transition and how hard they've worked. Early accession is something we strongly favour for all of the countries. Armenia in particular has done the right things to move their accession forward.

[Translation]

Mr. Bernard Patry: Thank you.

The Chairman: Thank you, Mr. Patry. Ms. Debien.

Ms. Maud Debien (Laval East, BQ): Good afternoon, ladies and gentlemen. Mr. Wright, I'm inspired by something you said on page 12 of your presentation. Under the heading Canada and Canadian Policy, you state the following:

As I stated at the outset, Canadian engagement in the region has been initially influenced by commercial interests, most notably in the mining and petroleum sectors.

That's quite a statement. Every time a country, Canada included, gets involved in natural resources development, whether in countries under authoritarian rule or in developing nations, it's a safe bet that human rights will always take a hit, if you'll pardon the expression. There is almost a direct connection.

Mr. Wallace, earlier you spoke of refugee populations. As you know, large numbers of people are often displaced by development in the mining and petroleum sectors. In the process, people are often turned into refugees in their own country.

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Ms. Beaumier could have told you about a situation that the Sub-committee on Human Rights and International Development is currently looking into as part of its study of Africa. Very serious problems are affecting the great lakes region, particularly areas in which Canadian companies are involved in mining operations. Just look at the problems of Talisman in the Sudan. My fear is that within the next few years, we will be facing similar problems in the countries that are the focus of this study.

You know as well as I do that Talisman is only the tip of the iceberg. Before we encounter a similar situation here, will the Canadian government adopt a clear and open policy and bring in a mandatory code of conduct for companies? If this doesn't happen, in four or five years' time, this committee will be grappling with the same human rights issues as it is facing today.

I'm anxious for the Canadian government and Foreign Affairs officials to exert their influence on the minister so that the whole human rights issue can finally be addressed, bearing in mind the involvement of Canadian companies in natural resources development in developing countries and those under authoritarian rule.

I'd like to know where you stand on this matter. Are you in favour of the idea of bringing in a mandatory code of conduct?

[English]

Mr. Jim Wright: It's a very timely and very important question. I'd like to start with the specific and then perhaps move to the general.

Of course Canadian interest in terms of central Asia and the Caucasus.... I used the language in the statement carefully when talking about the engagement first of the Canadian commercial community. And it's true. As you well know, our Canadian government reaches far and wide, but our representation traditionally in central Asia and in the Caucasus has been pretty limited.

Since the breakup of the former Soviet Union there has been a greater degree of interest on the part of the Canadian business community. With that degree of business community, the Canadian government started to become more interested, but our interests are much wider than simply trade and investment. I made very specific reference to that in the statement as well.

To the best of my knowledge, I am not aware of Canadian business investment in central Asia or in the Caucasus that has exacerbated a refugee problem in the area. I'm just drawing the parallel to the situation in respect to Africa, where there is a problem.

Having said that, of course, there is growing interest among governments, businesses, and other interested groups that corporations might play a role in safeguarding the health and safety of their workers, in protecting the environment, and in contributing to the advancement of human rights of those in the communities where they do business abroad.

In addition to the work of the Canadian government in international fora—and by that I think I'm referring specifically to the OECD and the International Labour Organisation, the ILO—to develop multilaterally anchored norms in this area, the Canadian government is actively encouraging Canadian businesses to consider how they can contribute to promoting corporate social responsibility in their overseas operations. The approach is to facilitate the development and promotion of business-initiated codes of ethical conduct that reflect Canadian values, including international norms and standards relating to the protection of the environment, labour standards, and human rights.

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The only other point I would make is that engaging the business community in corporate social responsibility and initiatives provides a good opportunity to promote awareness of international norms and standards relating to the protection of the environment, labour standards, and human rights.

So I think the answer to your question is, yes, this is increasingly a concern of the Canadian government and, I'd like to think, of the Canadian business community as well.

Mr. Robert Brooks: There is one other important distinction to keep in mind when we talk about the former Soviet Union. Under the communist system, social services such as health care and kindergarten care for children were the responsibility of the corporation, and so the company town was very much the case. Canadian companies and other international companies, when they're investing in the former Soviet Union, central Asia, the Caucasus, Russia, or Ukraine, are often tasked to take on assuming these corporate responsibilities. So we find Hurricane Hydrocarbons, for example, in Kazakhstan, which runs a community centre and a variety of other activities associated with keeping the community together.

So there is an involvement by Canadian companies and other international companies in the social welfare of the people in the absence of state intervention in many of these countries.

The Chair: Merci.

Mr. Speller.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you, Mr. Chairman.

I welcome the witnesses.

Mr. Wright, I've been listening to your presentation here. You talk about the Caucasus, and you say “oil has defined the Caucasus” and that “the potential for riches is significant”, albeit there's ethnic conflict and the problems with Georgia. Then you get into central Asia, and you talk about “a variety of reasons, not all positive”, that you have a “vast store of minerals and hydrocarbons”. You then say Central Asia also represents a major human rights challenge, a number of repressive regimes, least-reformed economies, clan is paramount, drug trafficking and terrorism, polluted wet lands, desertification of the Aral Sea, nuclear wasteland, exercise of clan privilege, poor human rights practices, ethnic tension, violence and armed rebellion, crime and corruption, and again you mention drug trafficking, and also fundamentalism.

And that's the one I want to go to. It sounds challenging, to say the least. Tell me why a Canadian company would want to go there. Is that potential for riches so much greater? From what I understand, there's no rule of law. What sort of protection do they have? They have a Canadian embassy away off in Moscow to help them out.

So I have a few questions. First of all, can you give me a sense geographically of the size of what we're talking about here and compare it to Canada?

Secondly, how is Canada viewed in the region? Does anybody there know where Canada is? If we go there, will they say “Oh yes, you Americans”? I want to know that for security reasons.

Thirdly, again the rule of law: Why would a Canadian company want to go there? Is the potential so great that they want to get in there?

Lastly, you talked about the oil and gas and you said how the marketplace would rule there. Just looking at this, I would suggest that probably either greed or the power of the United States in the European Union would be the final determiner rather than the marketplace. I don't see any place for a marketplace in that sort of area.

Mr. Jim Wright: First of all, let me say that recognizing that this is a bit of a new frontier and that this is a first certainly for this committee, we wanted to ensure that the presentation we made to you today was as pointed as possible, because it is a challenging environment in which to do business. There was no point in painting a rosy picture when you were going to go there and see that things were going to be quite different. So it's very important that the committee knows exactly what it's getting in for.

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Secondly, in terms of the size of the country in question, I think central Asia is probably about half the size of Canada geographically, at a guess. I'd have to look at a map, but I think that probably approximates what we are looking at here.

Thirdly, why go, and why are we engaged on the ground? I think there are three reasons.

First, as we stated in our opening remarks, Canadian companies are obviously going there to do business. They're going there to make money for Canadians. That's not a bad thing, and if it can be done in a way that benefits that local society, that improves their quality of life, that contributes to these countries becoming more successful and being able to offer a level of service to their own people, that's a very good thing.

I think a key objective for Canada in terms of central Asia and the Caucasus is political stability. We're going to have political stability there only if some of the problems related to quality of life are addressed and if help and creative ideas are introduced by parliamentarians, by foreign governments, to try to solve some of the intractable problems that these countries have been living with, that is part of their history, part of their culture, part of the clan mentality. If there were simple solutions to these problems, they would have been found a long time ago.

So they can't be called upon to answer all of these problems themselves. It will have to involve a concerted effort on the part of the international community and, I think, of Canada, as a member of the UN Security Council, as a member of the OSCE, as a member of the OSCE Parliamentary Assembly, trying to help the reform process—parliamentary reform, government reform. Your visit is further evidence of Canada's commitment. We're trying to give something back to this region. We're not going there simply to strip away natural resources and to make money; I think we're genuinely trying to give something back to that society, and the leadership that your committee is showing here is very important.

How is Canada viewed in central Asia and in the Caucasus? I think quite positively. I think Canada has played and continues to play a unique role, and it's not just because of the investment we have made in this particular country or that particular country. That's a factor, and that's a positive factor. But it's what Mr. Brooks was referring to, about some of the companies giving something back to society there. It's about the programs that Stephen Wallace and CIDA have been contributing and are starting to develop.

This is work in progress. We have to remember that our engagement in central Asia and the Caucasus is not that old. The flexibility that's starting to come our way as countries in central Europe are graduated from our technical assistance programs—those kinds of finances that have been made available by the Government of Canada to CIDA now can be redirected to these economies that are facing a much more difficult transition politically and economically.

So I think there is an important role for Canada to play. I think that role is recognized by the countries in question. In respect to Armenia and Azerbaijan, there is specific acknowledgement for our contribution because of the connection with the diaspora in Canada, which does make it a little bit unique.

So I don't undersell the significance of the mission that the committee is about to undertake. It will make a difference.

Stephen.

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Mr. Stephen Wallace: Thank you.

Mr. Speller, I've spoken briefly about the business environment and the work that needs to be done in supporting that context in central Asia and the Caucasus, and if I had to give a grade on where they are right now, I would say somewhere around C+. But it used to be a D not very long ago, so it's at least going in the right direction.

I think what you will find is a fairly familiar set of laws, of regulations and policies and ways of operating. What you won't find is implementation in a way that is transparent, consistent, and timely. I think that's the major challenge facing that area of the world. But considerable work has been done over the last several years in at least putting the basic framework in place. We now have to sort of shift gears and move more into that side of things.

Ms. Ann Collins (Director, Eastern Europe Division, Department of Foreign Affairs and International Trade): If I could add, Mr. Chairman, following the break-up of the Soviet Union we definitely did see genuine interest on the part of Canadian companies in a number of the new republics in central Asia. As a result, by the companies going there and Canada having commercial interests, we then play an advocacy role and a role in encouraging these governments to put in place investment climates and investment regimes based on the rule of law, transparency, and predictability.

Therefore, whether it be through the work we do in helping them prepare for WTO accession or other projects relating to putting in place domestic legislation that creates a more predictable and transparent investment climate, those types of improvements are part of the transition process, part of the transition to a market economy, and that will also then trickle out into other areas of their legislative framework. So by the companies going in, and in partnership with the work we do, we support that transition process.

Mr. Jim Wright: I would note that this committee has travelled before to much more challenging destinations than central Asia and the Caucasus. I've travelled with many of the members to Bosnia, for example, where the environment at the time of that visit was somewhat more challenging than what is on offer this time around. That is not to diminish the many hurdles that are out there, but I think it's going to be a highly instructive visit for the committee, for Parliament, and, through you, for the Canadian government.

The Chair: You'll recall, Mr. Wright, that in Bosnia we allowed you to get off the bus first. And we stayed behind you and never stepped off the road unless you did.

[Translation]

Ms. Picard.

Ms. Pauline Picard (Drummond, BQ): Mr. Speller, I have a answer to your question as to why Canadian companies decide to set up operations in these regions. It's because they want to promote Canadian values, not to mention that this gives them tremendous visibility.

Mr. Wallace, CIDA would need to have double its current level of resources to meet the demand for funding of short-term projects in areas such as community development, health and so forth. Given the many constraints listed by Mr. Speller, have programs in this area sponsored by the international community and by CIDA had successful outcomes? Have you done any follow ups?

Mr. Stephen Wallace: Thank you for the question, Ms. Picard. At the outset, I pointed out that CIDA's mandate in Central Europe and in the former Soviet Union was not the traditional mandate of trying to alleviate poverty. In the Caucasus and Central Asia, our role is to provide direct support during the democratic transition to a market economy. Aside from providing humanitarian aid to the most disadvantaged and vulnerable people in the region, for example, refugee populations, we are mainly involved in promoting change and new opportunities under the difficult circumstances alluded to by Mr. Speller. We have been working in the region for five years on all levels, that is in terms of policies, laws, institutions and regulations.

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We have developed what we think are very valuable partnerships which have resulted in direct changes in the region. However, this is a long, drawn-out process. As I said, we have made some progress in recent years, but the going is fairly slow. In my view, we need to continue focussing our attention on reforms if we truly want to see some concrete results in the medium and long term.

Ms. Pauline Picard: Can you give me some concrete examples?

Mr. Stephen Wallace: Yes. In the natural resources sector, for example, the Canadian firm of Macleod Dixon has revised all of the country's investment codes. This has resulted in improved transparency and in bringing the codes in line with international standards for foreign investment.

Elsewhere in the Caucasus, in Georgia and Azerbaijan, for example, we support efforts under way to join the World Trade Organization. We offer technical assistance through the Centre for Trade Policy and Law of Carleton and Ottawa universities, to help these countries adopt international standards and meet the commitments that go along with joining the organization.

Through our work with the Organization for Security and Co- operation in Europe, we are also involved in electoral reform efforts. We work with partners in various fields of endeavour.

Certainly, if our presence on the ground was greater and if we had a little more experience and some additional resources, we would be able to do more. However, I do believe that Canada is beginning to make its mark.

Ms. Pauline Picard: Thank you.

The Chairman: Ms. Picard, you indicated that officials from the Centre for Trade Policy and Law would be in Georgia at the same time as us. We will therefore have an opportunity to meet with Canadians working in this field and to get a better understanding of the work that is being done.

Ms. Augustine, followed by Mr. Rocheleau. We have to wrap up at 12 noon sharp, and Mr. Wright has to leave a few minutes before then.

Ms. Augustine.

[English]

Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.): I will be brief because most of the questions that I jotted down were answered.

Mr. Chairman, I'd like to ask who, in a very concrete way, are the partners on the ground with CIDA? How can international efforts be further coordinated? Also, since we hear that the major limitation on development is the geography, the fact that there is no international ocean to move any kinds of goods around, what are the regional trade links among the countries? Are they part of ECO, the Economic Cooperation Organization that was formed in that area? Also, what is happening to encourage small enterprises to develop and to move goods and other kinds of services in some collaborative and cooperative way in the general region? And is CIDA a player in that regard?

Mr. Stephen Wallace: Thank you very much, Madam Augustine.

I think that CIDA partners can be split, really, between Canadian and multilateral partners. In terms of Canadian partners, there is a range that goes from, for example, in Tajikistan, with the Aga Khan Foundation, which is working at very much the grassroots level. You'll see that with CARE Canada. You see that with World Vision in the Caucasus as well.

Then you move along from that kind of grassroots action, including Canadian Feed the Children, for example, on refugee support, through to the institutional and capacity-building area where you find an awful lot of Canadian universities, particularly western Canadian universities and institutions: Olds College, Southern Alberta Institute of Technology, University of Saskatchewan, Alfred College, St. Mary's, and McGill University. There you find an awful lot of attention being put on the kind of training and capacity development that is linked to a market economy and the democratic transition.

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Then you move along the line to the policy regulatory area, where you get specialized legal firms, such as Macleod Dixon, involved in some elements. The Centre for Trade Policy and Law is involved in that.

I'll move to the second part of your question, which is, when you are dealing with real problems of geography and lack of investment over the last 10 years in economic infrastructure, how do you move forward to position that area of the world to play its rightful role? Canada does not have the resources to play a major role. What we can do, with very modest amounts of money, is help position Canadian firms, such as the SNC-Lavalins of this world in Turkmenistan and the SaskPowers in Kazakhstan, to play useful roles on the essential infrastructure side, which can tap into the large-scale resources from international financial institutions. You're trying to mobilize enough effort so that you have minimal levels of investment, but investments as part of a context that makes best use of those investments.

We operate on about four levels on this, but, I must repeat, with fairly modest increments of money. Our average-sized project is only in the range of a few hundred thousand dollars. We're not talking large sums of money here. But they try to target those four elements along the way where Canada can play a useful role.

Mr. Robert Brooks: Just to talk a little bit about your question on trade directions, it's important to remember that all of the countries of central Asia and the Caucasus were part of a Soviet industrial complex. The Soviet industrial complex was based on the principle that all of the constituent activities would benefit the centre in Moscow. So you have within the organization small, discrete units that don't produce anything other than parts for a greater whole, and that greater whole was controlled from Moscow.

The consequence is that you still have the lingering need for enterprises within these countries to continue to do business with their former Soviet partners. The best example is the electronics industry. The parts were made in large plants in Armenia and shipped off to Russia. But it was only the parts. It was never made into anything useful. One of the great challenges is to try to reorient that manufacturing into western standards so that they can sell to the Sonys, the General Motors, or the Motorolas of the world. The other thing is to try to use those to build finished products within the area.

We work quite diligently, and Canadian companies are attracted to these kinds of opportunities. That's a direction we've been taking in working with a lot of the small and medium-sized enterprises.

The Chair: Actually, that's a very interesting observation, because that's what we found as well when we went to the former Yugoslavia. Everything was run from Belgrade and Serbia. So you'd go to a little country like Macedonia, and they'd say “We didn't make anything for ourselves.” Their whole trade patterns have been blown up because they're not allowed to go to Serbia any more, and they can't go anywhere else because they don't have anything. There's no local industry that is functional. When the whole thing falls apart, everything falls apart. The same thing has happened in the former Soviet republics.

I won't get you to answer that.

Mr. Robert Brooks: I was just going to say that my favourite one, though, is the manager of the Kharkiv tractor factory, who was asked to make some more tractors, and he said he needed diesel engines. They said “You've been putting diesel engines in these tractors for the past 25 years.” He said “Yes, but I don't know where they come from. They just show up at the dock.”

The Chair: A command economy problem, exactly.

Monsieur Rocheleau.

[Translation]

Mr. Yves Rocheleau (Trois-Rivières, BQ): Do we have to stop at 12 noon?

The Chairman: I'm sorry, but yes, we do.

[English]

I think you wanted to make the point, Mr. Paradis, that we want a list of the projects CIDA is involved in, and I understand that list will be made available.

[Translation]

Mr. Denis Paradis (Brome—Missisquoi, Lib.): We would like a list of CIDA projects, and perhaps also a list of projects in which CIDA is participating along with the World Bank and other agencies.

[English]

The Chair: We're adjourned until 3.30 p.m., colleagues, when the two ministers and Mr. Otunnu from the United Nations will be appearing.

Thank you very much.