Canada-China Relations Committee on Dec. 11th, 2023

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you.

For the benefit of members of the public who might be watching, can you tell us how much money the Government of Canada has transferred to the AIIB?

[Steven Kuhn]

Yes.

The shareholdings of the AIIB, much like other multilateral development banks, are divided between callable and paid-in capital. We can have that conversation, but just in terms of the amount of money that has been paid into the institution, the Government of Canada has paid in $159.2 million in U.S. currency.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you.

Divided by three, and then times four, it's $200 million or so Canadian, roughly speaking.

Article 7 of the articles of agreement of the bank provides that a member may withdraw from the bank by providing six months' notice in writing. That article further notes that a member shall remain liable for obligations to the bank to which it was subject on the date the withdrawal notice was submitted.

My question is, if Canada were to withdraw from the bank, what would be the extent of Canada's existing financial obligations to the bank?

[Steven Kuhn]

I think there are two important pieces of context that are important to understand.

One is that the withdrawal procedures you see in the articles of agreement of the institution mirror withdrawal procedures from various other multilateral development banks of this type. Those procedures have been used only twice in my knowledge. Cuba withdrew from the World Bank and the IMF in the mid-1960s. I believe France withdrew from the Caribbean Development Bank about 23 years ago.

The reason I provide that context is to say that there is a lot of untested legal ground with respect to the withdrawal of any member from the AIIB or other institutions. With respect to the six-month provision that is in the articles of agreement, it is intended to provide a protection to all shareholders and the institution itself: If the institution were to face financial difficulty, members would not be able to instantly withdraw and therefore forgo their share of those financial difficulties, which are hypothetical.

The AIIB, in this case, is an AAA-rated financial institution, from all three major debt rating agencies. I think the question of that issue of what we would be liable for is a hypothetical question. It is not relevant in the current context.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

It's safe to say that we wouldn't immediately get back all of the $160 million U.S. that we have contributed to the bank.

[Steven Kuhn]

What the articles of agreement do say with respect to the withdrawal procedures is that a member that withdraws would have the institution repurchase the shares that it has purchased in that institution. While those procedures have not been tested, it is our understanding that Canada would receive compensation for the shares that we have purchased to date.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

We know that the PRC has set up this Asian Infrastructure Investment Bank as a rival to the post-World War II world order to try to displace U.S.-led multilateral institutions—the Bretton Woods and post-World War II institutions. This bank was one of their attempts to do that, to offset the World Bank and the IMF.

Recently, there's been a proposal in front of the IMF to increase the quota by 50%. It's a U.S.-led initiative. The PRC is opposed. What is the Government of Canada's position?

[Steven Kuhn]

The question in front of the IMF right now, as you said, is to increase quota, which is the technical term for “vote share”, effectively, at the IMF. That vote is open for governors of the IMF until this coming Friday, and members, including Canada, are continuing to vote through the next couple of days to signal their intent.

I have not seen how other countries are voting on that yet—I think that's an open question—so with respect to how other countries will end up voting on that, it is unclear to me. However, based on conversations that have been had at the board of directors of the institution, it is our understanding that the vote will pass.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

What is Canada's position?

[Steven Kuhn]

Canada has been supportive of an increase of 50% at the institution.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Chong.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Those are all of the questions I have, Mr. Chair.

Thank you.

[The Chair, Liberal, Ken Hardie]

You're just in time, too.

We'll go to Mr. Cormier for six minutes or less.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you, Mr. Chair.

Before my questions about Mr. Pickard's testimony, which outlined the problem, I would like more information about the Asian Infrastructure Investment Bank, or AIIB. Since Canada became a member in 2018, surely there have been some successes, some benefits for Canadian companies.

Can you tell us about some of the projects, for example?

Can you tell us about some of those successes? Have Canadian companies benefited?

[Steven Kuhn]

Thank you very much for the question.

I think there are two important elements to the question. The first is with respect to the benefits the financial institution has had for countries within the region in which it is focused, which is one of the reasons Canada and other members have joined the institution. It is to ensure, as was indicated in Canada's news release at the time of joining the institution, that inclusive economic growth in the region is an objective and that it is something the institution has been focused on.

In the time the institution has existed—and it is a very young institution—it has, so far, provided $35 billion U.S. worth of financing for 178 projects in 31 different countries in that region, including about a third of that, $11.1 billion, to alleviate economic and health pressures from COVID. There is an important story to be told about the success of the institution in that regard.

However, the question was also about benefits for Canadian companies specifically. In that regard, there are a couple of points I would highlight. One is that with respect to contracts earned by Canadian companies, I am aware of four contracts involving Canadian companies for particular projects the institution has financed, nine contracts with five Canadian companies for corporate procurement within the organization itself, as well as 13 individual Canadian consultants who have engaged in various aspects of the work of the AIIB.

The final note I would add in that respect is the important role that the Canadian financial sector also has with respect to engagement in the AIIB, noting for example that 16% of banking transactions conducted by the institution have been handled by Canadian financial institutions. As well, Canadian financial institutions have been participating as underwriters on eight of 10 bond issuances that the institution has engaged in to date.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you for those details.

Getting back to what Mr. Pickard said, his allegations are quite serious.

When did you hear about them and when did you contact Mr. Pickard to discuss all of his concerns regarding the AIIB?

[Steven Kuhn]

Maybe it would be helpful if I run through the timeline for mid-June. Mr. Pickard did that himself, but to elaborate on some of those details, I understand that his resignation occurred on June 12. Representatives of our government were informed by the institution on June 13—late in the evening the following day. It was the day after that, June 14, that we first heard why he had resigned, and those allegations made on social media were brought to our attention.

It is that same day, June 14, that the Deputy Prime Minister announced the halt of Canadian activities at the institution and that the review we are discussing would begin.

With respect to the launch of the review and our conversations with Mr. Pickard, the review did start immediately. June 14 was a Wednesday, and by Friday of that same week, June 16, we had reached out to Mr. Pickard to request a discussion with him. The first discussion with him happened on June 20. That was not an in-person discussion. That was a telephone conference, approximately 30 minutes in length, to start to hear his story and to have a first engagement with him.

The longer in-person conversation that we had with him, which is the one I think he was referencing in his testimony, took place on July 4. That was approximately a 90-minute conversation, providing him with the opportunity to share his story with us.

Subsequent to that, as he noted in his testimony, we have been open and encouraging of him to be able to share information with us. He has subsequently shared something on the order of 30 emails with us, providing additional observations with respect to his experience.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Very well.

As I understand it, Mr. Pickard provided proof of his allegations, specifically information in emails and certain documents relating to the whole situation.

Is that correct?

[Steven Kuhn]

I think he addressed this in his testimony as well. However, to emphasize, the primary contact and engagement we have had with him in respect of our review has been oral, including two conversations of a total of approximately two hours in length, and then subsequent emails he has sent to us elaborating on his observations and emphasizing some of the details of oral testimony he provided to us. But—

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Kuhn. That brings Mr. Cormier's time to a conclusion.

We will now go to Mr. Bergeron for six minutes or less.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you, Mr. Chair.

I would like to continue on this topic.

I do not want to put words into Mr. Pickard's mouth. Moreover, I have not had the opportunity to look over the “blues”, but I believe he said that, when the officials called him in, or rather, invited him to share his experience, those officials seemed uninterested or, at the very least, not very curious. Mr. Pickard expected that he would be asked to provide examples, but he was not asked to do so.

Did you not want to learn more about things that he mentioned in his email?

[Steven Kuhn]

As I indicated in my previous answer, we gave Mr. Pickard as much time as he required to provide his part of the story in oral testimony and invited him to continue to engage with us as he was able to provide more information. He did so with a number of emails, as I previously indicated.

Two more facts are also important.

One is that in the course of that, he was not able to corroborate or substantiate his testimony with written documents. I think he provided that explanation also in his testimony.

With respect to our subsequent steps in the review we have been undertaking, he would not be aware of all of the work we have been doing, including engaging in over 40 of our own interviews with various parties, both within government and outside of government, to try to understand and to try to corroborate the seriousness of the allegations he has been making and to find a way forward as part of our ongoing review.

[Stéphane Bergeron, Bloc, Montarville, QC]

A recent news release announced that Canada has decided to expand its review.

What does “expand its review” mean?

[Steven Kuhn]

The member is referring to the news release issued by the Deputy Prime Minister on Friday of last week. There are three bullets in that news release that describe areas where we believe we need to do more work and where we need more time to understand the nature of the issues we have uncovered in our review to date with respect to the AIIB. In those three bullets, which I'm happy to elaborate on, are our issues with respect to the AIIB where we believe more work is warranted. In our work to date, we have identified some weaknesses and some areas for further engagement with respect to the governance of the institution.