Nay.

The Acting Speaker (Mr. Paproski):

In my opinion the yeas have it.

And more than five members having risen'.

The Acting Speaker (Mr. Paproski):

Call in the Members.

And the division bells having rung:

The Acting Speaker (Mr. Paproski):

Pursuant to Standing Order 13(4)(a), I have been requested by the assistant to the Chief Government Whip to defer the division until a later time.

Accordingly, pursuant to Standing Order 13(5), the division on the question now before the House stands deferred until Monday at 6 p.m., at which time the bells to call in the Members will be sounded for not more than 15 minutes.

that the Bill be concurred in.

Mr. Merrithew (for the Minister of State (Finance)) moved

that the Bill be read the third time and passed.

Mr. Jim Manly (Cowichan-Malahat-The Islands):

Mr. Speaker, I see that I have unlimited time. This is the first and may be the last time I will have that opportunity.

Hear, hear!

Mr. Merrithew:

We are adjourning at ten o'clock.

Mr. Manly:

Well, I can carry on tomorrow and Monday.

Seriously, this is not the routine Bill that its treatment by the House would appear to indicate. It deals with Canada's relationship with the debt-ridden, poverty-stricken nations and peoples of the Third World. The Bill gives the Government authority to provide funds to the International Monetary Fund, through loans and grants, for a trust or any other body established by the IMF. The Government has explained that these moneys are for enhanced structural adjustment facilities, or ESAF. It provides highly concessional terms to the poorest countries faced with the problems of debt repayment and

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structural adjustment. Part of the money coming from Canada will be in the form of a loan and part in the form of a grant.

The purpose of the funds in the form of a grant are to allow very concessional terms to the recipient countries. In other words, the grant funds coming from Canada enable the borrowing countries to borrow the money at very low interest rates. At the same time, the IMF will be paying the regular commercial interest rates to the lending countries such as Canada. The grant portion of the money comes from our official development assistance, ODA.

I am concerned about some of the specifics in the Bill. First, while the Government explained that the purpose of these moneys was for the ESAF, the Bill does not say that. It says "any trust or body established by the IMF". The committee rejected an amendment that would have tightened that up. In the same way, the Bill specifies certain specific sums of money but then goes on to say that any other funds that the Government wants can also be given. In effect, the Bill gives a blank cheque, and again the committee rejected amendments that would have tightened that up.

I am concerned that this Bill has the grant portion of the funds coming from ODA at a time when that assistance as a percentage of our GNP is dropping.

A June 22 Globe and Mail report pointed out that foreign development aid from western countries fell by 2 per cent in real terms last year. According to figures released by the OECD, Canadian overseas aid spending fell as a proportion of Gross National Product from 0.48 per cent in 1986 to 0.46 per cent in 1987. That is a very small percentage drop, but we must compare that with the commitment the Government made when first elected.

At that time the Hon. Secretary of State for External Affairs (Mr. Clark) went to the United Nations and promised that Canada would meet its commitment of reaching 0.7 per cent of its funding for ODA by 1990. Since then we have seen one cut-back after another rather than the fulfilment of that commitment. Now, rather than increasing the percentage of our GNP which goes to development assistance, we are decreasing it. In this connection we are concerned that the grant portion which goes to ESAF is being taken from Official Development Assistance.

Roy Culpeper who studied this matter appeared before the committee and said:

In its recent report, the UN Secretary General's advisory group on financial flows to Africa concluded that $5 billion in additional flows annually would be necessary to secure some economic growth, increased imports, and reduce the debt servicing ratio in sub-Saharan Africa. If the ESAF and other recent initiatives, notably those by the World Bank, are factored in, then the net additional requirement falls to $2 billion annually, still a sizeable amount that we are nowhere close to meeting. However, it is important to realize that the positive effect of the ESAF itself requires additionality; that is, it should mean that new money is flowing into Africa and not simply being taken from existing aid funds.

Unfortunately, Mr. Speaker, that is what is happening. Nevertheless, he and our Party see the ESAF as an advancement on traditional international monetary fund policies. The traditional IMF imposed form of structural adjustment with which we are all familiar involves currency devaluation, cutbacks in social programs, elimination of subsidies on basic food stuffs, cutting back on the public sector, privatization, and forcing Third World nations to spend more and more of their energy in exports and opening up their economies to external investment and control.

Very often this kind of structural adjustment, while being very hard on the poor people in these developing countries, helps local elites to become even more rich because it provides them with a pool of cheap labour, enables them to pick up bargains in terms of privatized parastatals, and so on.

ESAF will continue to impose this kind of conditionality, along the same lines as IMF traditional conditionality, but the funds will go to ease the impact on the poorest of the poor. In other words, there will not be a change in the basic kinds of conditionality that are imposed.

The head of UNICEF pointed out a couple of weeks ago that 40,000 children die every day from hunger and hunger related causes. We do not pay any attention to that because it happens in a quiet way and is far removed from the reality which we in Canada experience. He went on to point out that a good deal of that hunger and those hunger related causes are directly related to the kinds of conditionality that have been imposed upon these nations by forces such as the International Monetary Fund. Canada, as one of the nations which has a significant voice in the IMF, shares some of the guilt and responsibility for the death of those children.

I would like to suggest that there are different kinds of conditionality. In a report entitled "Adjustment with a Human Face", a group of people working with UNICEF suggested that instead of the traditional IMF conditionality we should be working for different kinds of structural adjustment. They make six suggestions.

First, there should be more expansionary macro-economic policies aiming at sustaining levels of output, investment, and human need satisfaction over the adjustment period. In other words, instead of retrenchment and cut-backs there should be expansion.

Second, there should be the use of meso policies to reinforce the more expansionary macro approach and to secure the priority use of resources to fulfil the needs of the vulnerable.

Third, there should be sectoral policies aiming at restructuring within the productive sector to strengthen employment and income generating activities and raise productivity in low-income activities, focusing in particular on small farmers and informal sector producers in industry and services.

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Fourth, there should be improvement in the equity and efficiency of the social sector by restructuring public expenditure both between and within sectors by improving the targeting of interventions and their cost effectiveness.

Fifth, there should be compensatory programs to protect basic health and nutrition during the low-income adjustment. Two major elements of such policies are public works employment schemes and nutrition interventions encompassing targeted food subsidies and direct feeding for the most vulnerable.

Sixth, and perhaps the most important, is monitoring of the human situation, especially of living standards, health, and nutrition of low-income groups during the adjustment process so that needs may be identified and the effectiveness of adjustment programs assessed and modified accordingly. Monitoring of human conditions, especially the health and nutritional status of the population, particularly that of vulnerable groups, should be given as much weight in monitoring adjustment as monetary variables have in the conventional approach.

In other words, when there is need for some kind of international intervention in the economy of one of these struggling nations, instead of imposing the kind of cut-backs and decimation of the local economy that the IMF has done traditionally, there should be a kind of structural adjustment that places the priority on human needs.

There has been a number of suggestions made in the last few weeks and months for debt forgiveness. When I think of debt forgiveness I think of a story which we studied in Grade 10 called The Revolution at Satan's Trap by Norman Duncan. The story was about a small outport in Newfoundland where the local people were indebted to the trader. No matter how many fish they caught they were always indebted to John Woll, the trader. By a combination of circumstances it so happened that they finally had him in a situation where he had to agree to a form of debt forgiveness and had to restore to the people what was rightfully theirs. However the story ended as follows:

And within three years John Woll possessed again all that he had yielded, and the world of Satan's Trap wagged on as in the days before the revolution.

In other words, debt relief without changing the system does not really change anything. Debt relief by itself is not going to help unless something is done about commodity prices.

The IMF, acting as international monetary policemen, has forced low commodity prices on the Third World which keep them in debt. Then it keeps dribbling these nations small amounts of money, sometimes just enough to keep them from defaulting but never enough to enable them to get out of debt. I mentioned earlier that the UN committee which considered this issue said that there was need for $5 billion a year. We are falling far short of the amount which is desperately needed if Africa is ever to get out of the deep pit into which we have

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helped to put it as a result of the ecological destruction it is facing right now.

We must realize the basis of debt. Often democratically elected Governments are now faced with having to repay debts which were contracted by dictators. It is interesting to note that three-quarters of the debt of Nicaragua was contracted by Somoza. Twenty per cent of Third World debt is for the purchase of military goods. A great deal of it ends up financing elite consumption and megaprojects which often have very little developmental impact upon the great mass of the people. Sometimes these debts were contracted and in fact forced upon Third World countries by banks in Europe and North America simply because they wanted to make quick bucks.

In the September 1983 issue of Harpers, a Mr. S. C. Gwynne wrote an article entitled "Adventures in the Loan Trade". He told how as a young loans officer 25 years of age he had visited some 28 different countries in a period of six months, flogging money for a medium-sized bank in the midwestern United States. He described how he knew that when he made those loans they would simply not be repaid adequately, but in order to make them one only needed to get the guarantee of the government or the local national bank. By the time they defaulted on the loans, he and the other people who had been involved in making the loans had passed on to some other job.

The entire loans business that took place in the middle 1970s was simply a way in which the western banks became very greedy. They pushed money without adequate investigation into the ways in which loans would be repaid.

Susan George, in an excellent book entitled A Fate Worse Than Death made an excellent analysis from the perspective of someone concerned with development itself. She pointed to the impossibility of ever having debts, which amounted to over a trillion dollars for the Third World as a whole, paid in full, in hard currency. At the same time she opposed a policy of total debt forgiveness. As she pointed out, this often simply kept local elites and local dictators in place.

Instead, Susan George calls for a new type of restructuring, a new type of approach to the whole debt problem. It was radical in the sense of going to the root of the problem. She tied debt to the whole issue of development and democracy.

The repayment of debt should be tied to the development and democracy issues as well. For example, a country's bilateral debt could be dedicated to a development fund to which each debtor country would make regular interest payments. The development fund would have broadly based management from that country, including people from the rural area, proper representation for women and for different ethnic groups. Susan George said:

The development fund would finance projects and programmes determined by consultation and consensus, focusing primarily on rural areas. Various groups (village councils, associations of young people, women, artisans,

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peasants, etc.) could apply to the fund for seed money to undertake their own self-managed projects.

The fund would also provide money for revolving credit schemes to make modest loans directly to farmers and other small-scale rural entrepreneurs (with priority here given to the landless and to women.)

Each payment made by a government into its own national development fund would trigger a corresponding reduction ... of its external debt in hard currency by the IMF, the multilateral development banks and the official bilateral creditors.

Rigid, IMF-type conditionality would give way to a more flexible system. Whereas adjustment has always meant increasing agricultural exports, no matter how grim the internal food situation, and drastic curtailment of basic services in health, education, staple-food subsidies, creative conditionality would take the form of contracts.

These negotiated contracts would concern equitable, democratic management of national development funds and the terms for matching, in hard currency, each step towards improved performance.

She was suggesting that instead of nations like Canada and others that control the IMF just dribbling out bits of money to these nations to enable them to keep from defaulting, and at the same time imposing a kind of conditionality on them which put them on the rack, we should be developing a new approach. Rather than these countries paying money back to the First World, they should be paying money into their own development funds, which should be tied to genuine democracy and a genuine approach to development.

I urge the Government to consider this kind of radical policy. I urge it to recommend this policy to the IMF and the World Bank. It is a better policy than we practised last fall when there was a lot of criticism of the Government for its forgiveness of debts to Anglophone and Francophone nations in Africa that often had very bad human rights records.

Some of us felt some queasy about that. On the one hand, we did not want to criticize the Government for a generous gesture to the nations of Africa, but on the other hand we looked at some of the nations which did not have good human rights records and we wondered what was the real value of forgiving those debts. Instead, if we worked to establish this kind of internal development fund and insisted that local elites paid into the development fund to help their own people, perhaps we would have been doing a whole lot more for genuine development in our world.

The ESAF is a small step forward. One of my concerns, which is shared by other members of our Party, is that it is under the direction of the International Monetary Fund. We know that the one nation which cracks the whip for the IMF is the United States of America. Yet the United States is not putting any money into ESAF. We are contributing to a fund that will be controlled by the United States, which is not making any contribution to it.

ESAF is a small step forward, and I think we should be taking the much larger step recommended by Susan George. I regret that Bill C-126 does not have the kind of checks and balances that I think parliamentarians should have insisted upon. I would urge the Government to consider a radically new approach to the whole question of Third World debt.

Hon. Herb Gray (Windsor West):

Mr. Speaker, I am pleased to speak in this debate on third reading of Bill C-126. I do so because our very distinguished critic, the Hon. Member for Trinity (Miss Nicholson), is not able to be here this evening. She has done an excellent job in taking part in the study of this Bill and putting forward our points of view.

This Bill will authorize the Minister of Finance (Mr. Wilson) to contribute to the new initiative of the International Monetary Fund known as the Enhanced Structural Adjustment Facility, or ESAF. This fund will assist the poorest developing countries with the provision of balance of payments support. Most of these countries are in sub-Saharan Africa and include: Zambia, Zaire, Uganda, Tanzania, Somalia, Sierra Leone, Senegal, Rwanda, Niger, Mozambique, Malawi, Madagascar, Liberia, Lesotho, Kenya, and Ethiopia. The average per capita income of these countries is 300 Canadian dollars per year. The ESAF is a trust fund that will make resources available to these countries at concessional interest rates so as to minimize the impact on their debt servicing burdens.

The two main features of the program are long-term lending and concessional interest rates. This program is designed to allow these countries to make the economic adjustments required to reach a stage of development which will eventually lead to healthy economic growth, rising living standards, and a sustainable balance of payments position. I will talk more about this key provision in a moment.

This initiative arose at the annual summit of industrialized countries in Venice, Italy, last year. I understand the plan was endorsed at the meeting of the group of 24 developing countries that met in April of this year. The ESAF will operate on the basis of two accounts, a loan account and a subsidy account. This Bill authorizes Canada to lend approximately $550 million to the IMF fund. It also authorizes Canada to provide grants of approximately $250 million to subsidize the interest on these loans. This grant will bring the interest rate on Canada's contribution down to 0.5 per cent and will come out of Canada's aid envelope over a period of 12 years.

In a speech given on May 20, 1988, the Hon. Member for Trinity emphasized that the key component in facilitating conditional aid was effectively to implement change cooperatively and to monitor it closely. I must re-emphasize this evening the need for co-operation and acceptance by the recipient country. Imposing harsh and unwanted conditions on the recipient country will only yield resentment and a lack of co-operation. The Hon. Member for Trinity asked the Minister in committee what assurances we had that Canada would assist in monitoring such things as how the money was spent, the performance requirements, and the timetables for implementation. The Minister responded that the initiative was an experiment.

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Of course, we cannot ask for guarantees. We are not asking for that, but to refer to this initiative as an experiment is not apt. Conditional aid is not new and the failures in implementing this aid are not new. Canada must ensure that these errors are not repeated. Our representatives on the International Monetary Fund should be involved in the monitoring of the program.

As the Hon. Member for Trinity said during her speech at second reading that our Party supported the Bill in principle. The ESAF, as one expert witness told the legislative committee, will provide a window through which richer countries can channel resources to poorer countries. It changes the structure of the IMF from that of a revolving fund. Mr. Michel Camdessus, the new managing director of the IMF, has shown great interest and sensitivity to the concept of adjustment with a human face. I hope this sensitivity will be reflected in the important evaluation, implementation, and monitoring of conditional aid about which the Hon. Member for Trinity spoke previously.

However, while we support this Bill and while the ESAF is necessary, I must point out that it is not a sufficient vehicle for alleviating the debt crisis in the poorest countries. According to a recent United Nation's report, $5 billion in additional flows are required to secure adequately economic growth, to increase imports, and to reduce the debt service ratio in subSaharan Africa. The commitments by Canada and other countries to the ESAF reduces this $5 billion figure to about $2 billion annually, so it is a help. It is also important to note that Canada's contribution to the grant component is not new money but is allocated from our development aid envelope.

Much remains to be done. The poverty in these countries is crushing. Evidence of assistance and aid that address the quality of life, employment needs and social programs in developing countries has been meagre to date. In order to improve the economies of these countries and to set them on the road to economic independence, programs like the ESAF are important. We also need to see evidence of the human face of adjustment that will ensure sensitivity to each country's needs. This means mutual co-operation between assisting and assisted countries when it comes to conditional aid in the future.

I offer these comments as a contribution to the debate on third reading of this Bill. In so doing again I want to pay tribute to the important work of my colleague, the associate critic of finance for the Liberal Party, the Hon. Member for Trinity, for the excellent work she did in studying this Bill and putting forward the point of view of the Liberal Party.

The Acting Speaker (Mr. Paproski):

I will recognize the Hon. Member for Winnipeg North Centre and let the Hon. Parliamentary Secretary be the clean-up batter.

Mr. Cyril Keeper (Winnipeg North Centre):

Mr. Speaker, once again I will assure the House that I will not take too much time this evening, but I have a fundamental point I want

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to make. I will start by indicating that we will not be opposing this legislation.

I understand that the legislation makes some money available at low interest rates to developing countries, and this is not to be sneezed at or condemned, yet important questions have to be faced in this debate with respect to debt and international development.

The simple point I want to make is that this issue is not a question of whether we have done our share or whether we have done a little more. There are fundamental questions of direction involved, of conception about what is the problem, and what it is we are trying to do on the international development arena with regard to debt.

Over the last few days I focused my attention on a headline in the newspaper. A gentleman who was involved in an international development agency had done a study and said uncategorically that international debt owed by developing countries, which were being forced to pay back, was causing the deaths of children. What we are faced with here is a question of life and death. It is a critical question.

When I hear of international debts, what I understand as a lay person is that the big western banks, including Canadian banks, went on a binge in the last couple of decades lending out money to the poorest nations of this world. Now that they are faced with the hangover and now that the western banks themselves are shaking, they are asking these poor countries to pay up. But, at what price? It is at the price of life and death; that is the implication for those communities. These banks, which want to preserve their efficiency as institutions of capital, are doing it at the cost of the lives of people in developing countries.

If that was the only thing that was possible, then I guess we could close our books and our mouths, go home and watch television and forget about it. I saw something else in the newspaper over the last few days. It was an article about a man who lived in Bangladesh. He started a bank with a difference. It was a bank that lent money to the poorest of the poor in the poorest country. When the man went to a conventional bank to help borrow money for a local family, a local entrepreneur but a poor person, he found that poor people could not borrow money. The poor people did not have access to the capital necessary for development. He stood good for that person. He used his own name as a guarantee in order for the loan to go through.

That was the start of this bank with a difference. What was different about it was that it lent money to poor people who had no collateral. Western banks, as we generally know them, demand collateral before one can borrow money. He changed that. What he did was that he got together a dozen people, each of whom needed money. They all stood for each other in terms of their loans. Thus, if one person in the group was not

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to pay back his loan, then that would affect the creditworthiness of the whole group. They all worked together and they paid back their loans. This man found a new way to run a bank. It was very significant. It said to me that there was another approach. He put the highest value on human development, on the development of the human community, and on the rescue of those people who live in poverty, not by doing something for them but by arranging things in a way that capital could be put at their disposal to do the kinds of development they wanted, which was very small-scale development.

The question before us today is about values, about what we think is most important. Do we agree with the large western banks which seem by their behaviour to put the highest value on the dollar? Or, do we agree with this person from Bangladesh who started a bank that could operate in the poorest corners of the globe and who put the highest priority on the human person? That is what I think is essential to the question of international debt today. What is required is a spiritual reawakening in the sense that the human person will be treated as sacred, as the highest value, and that capital be used to serve human development, the development of the community and of shared responsibility.

I want to say that while we do not oppose this legislation since it makes some money available for poorer countries and communities, there is a greater challenge. The challenge is to make some fundamental shifts in direction.

One of the things this gentleman who started the bank in Bangladesh said was that we need a commitment. We need to renew the commitment or make a commitment to eradicate the pollution of poverty from this planet. It is enough of a surprise actually to find a person who is doing something that makes a difference for poor people, someone who can actually change their situation while at the same time allow for their development and give them control over what is happening to them. That is enough. Then this person challenged us to say that poverty on this planet is a pollution. In other words, it is something that threatens our survival.

I think there is a greater challenge than that which has been faced up to in this legislation. While I will not vote against it, it is about time that we in the western world in particular take up the challenge to change the direction of how we approach the use of capital and make a real difference in regard to poverty on this planet.

Mr. Jim Hawkes (Parliamentary Secretary to Deputy Prime Minister and President of the Privy Council):

Mr. Speaker, I will be brief. I would like to begin by thanking members of the Opposition and government Members for the co-operation that we have had since supper hour. I think you will find, Mr. Speaker, a predisposition to vote as soon as I am through my remarks and then we might see the clock as ten o'clock. It is a kind of reward for the co-operation that we have had this evening.

I was lucky enough to be asked by the Government in the fall of 1984 to attend the General Assembly of the United Nations for 11 weeks as the Canadian representative to the Third Committee where we dealt with issues of poverty, health and so on. I came away convinced that what we as western and so-called rich nations could do most effectively is co-operate with other nations, and to be a moral conscience at times, as well as to be a prodder and developer, in order to get international co-operation in place. A great many people live in poverty. A great many people could use and benefit from our help.

If someone reads our Hansard and hears about the Bretton Woods Agreement, they will see that it is not a very descriptive title. It does not say much about what it is we are engaged in as the House of Commons and as a country. This initiative, these few paragraphs, spell out what we are intending to do. At this point we are really carrying out the consequence of the June 1987 Summit where western industrialized nations, and Canada as represented by our Prime Minister (Mr. Mulroney), agreed that the International Monetary Fund should increase its resources significantly, for the specific purpose of helping low-income countries by establishing what is referred to in English as the Enhanced Structural Adjustment Facility, which are very complex words. The essence of it is that western industrialized nations would provide more resources to the International Monetary Fund so that it could make them available to eligible countries once they have a program in place designed to promote structural adjustment and economic growth over the medium term.

I think it is self-evident to nations such as ours that if the structure in place which has produced the poverty is not changed it is not likely to change.

Mr. Speaker, through the Enhanced Structural Adjustment Facility, the IMF will be able to make loans to the poorest debtor countries on very favourable terms, by means of contributions made to two accounts. The loan account will facilitate the transfer of funds that will earn interest at market rates. The subsidy account will allow the IMF to lend loan account funds to eligible developing countries at one-half per cent interest per year.

Mr. Speaker, many countries have reacted favourably by transferring substantial amounts to the facility. Canada will give $550 million in loans and $250 million in grants.

France has pledged some 800 million in special drawing rights in loans. West Germany has committed special drawing rights of 700 million to the loan account and 300 million Deutschmarks to the subsidy account. Italy has contributed special drawing rights of 370 million to the loan account and a corresponding subsidy. In total these western nations I have mentioned pledged special drawing rights of 5.7 billion in loans and special drawing rights of 2.2 billion in subsidies.

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Mr. Manly:

None from the United States?

Mr. Hawkes:

I mentioned that to indicate that it is working. I hear a friend from the NDP, and I say the word "friend" with some mixed feelings. He asks whether or not the United States has contributed anything. On the Third Committee we dealt with refugees, and this Chamber has dealt with refugee legislation. I would like the Hon. Member opposite just to remember that the United States of America provides about 65 per cent of the resources that go to refugees through UN agencies. It is somewhat disturbing when we hear from time to time in the House such a good friend, ally, and generous country to so many people in the world treated with such disdain. I am sure the United States of America more than pulls its weight.

The Central Agencies of the United Nations are dependent upon the United States for approximately one-quarter of their

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income. There are many countries, particularly iron curtain countries, that do not produce a dime for refugees.

In any event I thank Members for their co-operation. I hope there is unanimous consent to pass the Bill and to help get the money where it belongs to start helping those poor nations.