Undermining Foreign Aid

Stephen Brown on the implications of partnerships between Canadian NGOs and mining companies for Canadian foreign aid.
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September 16, 2013

In 2011, the Canadian International Development Agency (CIDA) announced three new development projects in conjunction with Canadian NGOs and mining companies. The total amount of CIDA funding committed was not especially high, nor was it the first time that the CIDA supported such projects. Nonetheless, the partnerships attracted considerable media attention, much of it critical. Claims and counterclaims about whether CIDA was subsidizing mining companies multiplied in the press, on the radio and in the blogosphere, as the various parties involved struggled to establish a clear and consistent narrative on the concrete nature of the partnerships and their underlying rationales.

This chapter argues that the new initiative was emblematic of a new turn in Canadian development assistance, namely the commercialization of aid. The package that the CIDA announced represents a coming out of sorts, a stark public declaration of the Harper government’s intention to reorient official development assistance (ODA) towards the interests of private Canadian companies, particularly those in the extractive sector. It also represents a shift in the “first principles” that underpin foreign aid, openly (re)introducing benefits to Canadians (or rather Canadian shareholders) as a motive for the commercialization of Canadian aid. The government’s use to date of aid funds to support the mining sector is impelled primarily by a top-down desire to rehabilitate the image of the Canadian mining sector and increase its investment opportunities – and hence profits – overseas. Though undoubtedly some benefits will accrue to poor people in developing countries, the emphasis on extractives is an ineffective and potentially illegal use of ODA funds that will benefit profitable mining companies more.

The three “pilot projects”

The CIDA announcement, made by Minister of International Cooperation Bev Oda on September 29, 2011, comprised three “pilot projects” with well-established Canadian NGOs and mining companies (total budget $9.5 million, of which $6.7 million were CIDA funds), presented as a package (CIDA 2011). Of the three projects, the one that received the most attention was a $7.6 million youth training program in Burkina Faso, to which CIDA contributed 75% and the mining company IAMGOLD only 13%, while the implementing NGO, Plan Canada, provided the remaining 12%. The second project, implemented by World University Services of Canada (WUSC) and co-financed by Rio Tinto Alcan, provides assistance to residents of the mining communities of Bibiani-Anhwiaso Bekwai district in Ghana, notably via education and improved access to water (CIDA 2011). CIDA allocated $500,000 to the project, over half of the total cost of $928,000. By the time the project was announced, Rio Tinto Alcan had sold its mine to a Chinese company and no longer operated in Ghana. CIDA also contributed $500,000 (50%) to the third project, implemented by World Vision Canada and co-funded by Canadian giant Barrick Gold. It provides aid to residents of the Quiruvilca district of Peru, where Barrick operates a mine.

The total value of Canadian development assistance to these three pilot projects is $6.7 million, to be provided over a five-and-a-half-year period (CIDA 2011).[1] This represents a very small proportion of Canadian ODA, barely 0.1% of annual disbursements. It was also not the first time CIDA had partnered with NGOs and Canadian mining companies. For instance, CIDA provided almost $500,000 to a reforestation project at or near a Barrick Gold mine site in Peru, run by Quebec-based NGO SOCODEVI, to which the mining company contributed $150,000 (Blackwood and Stewart 2012: 229). However, since the government presented the partnership arrangements as “pilot projects” and otherwise suggested they would be replicated in the future (Mackrael 2012a), they merit closer analysis as indicators of future trends.

The bigger picture

These three projects will surely, as their proponents assert, provide assistance to thousands of people, but that is not the key issue. The World Vision/Barrick Gold project in Peru, the WUSC/Rio Tinto project in Ghana (though not the Plan/IAMGOLD one in Burkina Faso), as well as the $20 million Andean Regional Initiative for Promoting Effective Corporate Social Responsibility, all focus on mining-affected communities. Though poor people in such communities are worthy of assistance, the same can be said about all poor people – certainly not just those living in communities affected by Canadian mining companies specifically.[2] Moreover, such activities use ODA funds to provide public subsidies to private corporations, which is highly problematic and poses reputation risks to the Canadian government and especially NGOs. The partnerships do nothing to actually improve the practices of extractive companies; they merely encourage adding on charitable side projects.[3]

The central question is why resources are being set aside and allocated to these projects, particularly at a time when the Canadian government is reducing its overall aid budget and cutting back on funding to NGO projects that do not include mining company involvement. Explanations based on the mobilization of additional resources or expertise are not convincing, since the amounts the mining companies are contributing are relatively small and the mining companies do not actually have development expertise. As mining industry lobbyist Gratton admitted, “We’re miners, we’re not in the business of social and community development that the NGOs are experts at” (quoted in Mackrael 2012b). Nor do the projects include components that monitor or help improve the practices of the companies themselves. Indeed, the greatest beneficiaries of the projects are the mining companies themselves: public funds enhance their ability to operate in mining-affected communities and their competitiveness on the global scene, while reducing their risks. In short, through at least two of the three “pilot projects”, foreign aid is, in fact, subsidizing the bottom line of Canadian companies, which contradicts the provisions of Canada’s Official Development Assistance Accountability Act (which mandates a central focus on poverty reduction) and may therefore be illegal (Blackwood and Stewart 2012).

The use of foreign aid to bolster the Canadian mining industry constitutes a significant shift in the growing commercialization of Canadian development assistance and the latter’s “first principles”. Though self-interested goals and altruistic objectives can be compatible in some “win-win” situations, the growing emphasis on aid’s benefits to Canada led other Western donors to remind the government that “there should be no confusion between development objectives and the promotion of commercial interests” (OECD 2012: 11). Canada’s concerted efforts to promote its own mining sector as a tool of development abroad also contradicts the principles of the Paris Declaration on Aid Effectiveness, endorsed by Canada, which emphasises the importance of donors aligning their policies with recipient countries’ priorities, rather than selecting their own.

Under the guise of support to corporate social responsibility (CSR) and emphasis on the private sector as the driver of growth, the Canadian government’s aid discourse is increasingly shifting from altruistic humanitarian principles to explicit claims of “mutual benefit” (Fantino 2012; Mackrael 2012a).  Knowingly or not, these claims echo the Chinese government’s justification of its use of aid to promote Chinese commercial and investment interests. For decades, commercial self-interest characterized much Western foreign aid, but this decreased as Canada and most other donors’ progressively eliminated aid tied to procurement in the donor country. However, commercial interests are now resurging under a new form. At least in the Canadian case, aid is promoting Canadian companies’ foreign investment and overseas operations far more than the export of Canadian products. Benefits will therefore accrue to shareholders and not support the job-creating manufacturing industry in Canada. The perks of the commercialization of aid are thus likely to be more concentrated among wealthy Canadians, along with foreign shareholders, than was previously the case.

This is an excerpt from a paper to be presented at the symposium “Rethinking Canadian Aid: Foundations, Contradictions and Possibilities”.


[1] The announcement also included the Andean Regional Initiative for Promoting Effective Corporate Social Responsibility, entirely funded by CIDA, with a budget of $20 million, to cover Colombia, Peru and Bolivia. Very little information about this project is available on the DFATD website. However, in the CIDA project browser one can find three projects each corresponding to one third of the budget in the same three countries, titled in each case “Promoting Effective Partnerships for Local Development”. Oda confirmed in the House of Commons that those were the “main elements” of the Andean Initiative (Parliament of Canada 2012).

[2] That Rio Tinto Alcan ceased operating in Ghana after the project with WUSC was initiated does not obviate the fact that they would have similarly benefited had it stayed.

[3] For a discussion of positive measures the Canadian government and its industry partners could undertake in the extractive sector, see McLeod Group (2012).

References

Blackwood, Elizabeth and Veronika Stewart. 2012. “CIDA and the Mining Sector: Extractive Industries as an Overseas Development Strategy” In Brown, Stephen, ed. Struggling for Effectiveness: CIDA and Canadian Foreign Aid. Montreal and Kingston: McGill-Queen’s University Press, pp. 217-45.

CIDA. 2011. “Minister Oda announces initiatives to increase the benefits of natural resource management for people in Africa and South America”, September 29. Internet, http://www.acdi-cida.gc.ca/acdi-cida/acdi-cida.nsf/eng/CAR-929105317-KGD, last accessed August 20, 2013.

Fantino, Julian. 2012. “Minister Fantino’s keynote address to the Economic Club of Canada titled ‘Reducing Poverty – Building tomorrow’s markets’”, Toronto, November 23. Internet, http://www.acdi-cida.gc.ca/acdi-cida/acdi-cida.nsf/eng/NAT-1123135713-Q8T, last accessed August 22, 2013.

Mackrael, Kim. 2012a. “Fantino defends CIDA’s corporate shift”. Globe and Mail, December 3. Internet, http://www.theglobeandmail.com/news/politics/fantino-defends-cidas-corporate-shift/article5950443/, last accessed August 20, 2013.

Mackrael, Kim. 2012b. “Ottawa signals shift in foreign-aid policy toward private sector”. Globe and Mail, November 23. Internet, http://www.theglobeandmail.com/news/politics/ottawa-signals-radical-shift-in-foreign-aid-policy/article5582948/, last accessed August 22, 2013.

McLeod Group. 2012. “Of Mines and Minefields: Canada, the Extractive Sector and Development”. Ottawa: McLeod Group. Internet, http://www.mcleodgroup.ca/wp-content/uploads/2013/02/Extractives-Paper-July-2012-PDF.pdf, last accessed August 22, 2013.

OECD. 2012. Canada. Development Assistance Committee (DAC) Peer Review 2012. Paris: OECD.

Parliament of Canada. 2012. Edited Hansard. April 23. Ottawa: House of Commons. Internet, http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=5509835&Language=E&Mode=1, last accessed August 20, 2013.