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Canada’s export bank needs an overhaul following private jet corruption scandal

The NDP wants a full review of Export Development Canada after it lent $41 million for a private jet to an Indian family facing corruption charges.

by Kieran Delamont
Mar 8 2018, 9:49pm

Canadian Press

After the public learned that Canada had lent $41 million to a family accused of corruption in South Africa—who used the money to buy a jet that they’ve recently been using to evade arrest—the NDP is calling on the Liberal government to review the trade practices of Export Development Canada (EDC).

In a letter to international trade Minister François-Philippe Champagne obtained by VICE News, three NDP MPs — Charlie Angus, Brian Masse, and Tracey Ramsey — criticize the Liberal government for not doing enough to clamp down on shady deals made by the EDC, and call for a review into the way the crown corporation vets the recipients of loans.

“While these decisions were made before your government was elected, I feel that the government’s response so far, which has consisted of deflecting blame, has not been appropriate,” reads the letter. “You are responsible for EDC, and I insist a thorough review of how it makes investment decisions abroad is warranted.”

The move comes on the heels of the revelation that the Gupta family in South Africa, which accepted a $41 million loan from the EDC to purchase a Bombardier jet, have taken the plane into hiding. Currently three Gupta brothers are all wanted on corruption charges, and their close political ties to South African president Jacob Zuma is one of the main factors that led to his resignation in February.

That the Guptas were able to get a loan from the Canadian crown corporation was surprising, because it’s been no secret for years that the family was wielding immense political influence in South Africa. “Even the most cursory scan of the internet would have revealed that the Gupta brothers had a troubling history of corruption and shady links to President Jacob Zuma,” write the MPs.

The letter also points to the loan given to Turquoise Hill Resources to build a mine in Mongolia, which totalled over $1 billion, while the company had been accused of exploiting loopholes to pay little or no corporate income tax in Canada.

“How is it possible that Canadian officials could have looked on either project as being worthy of taxpayers’ funding?” ask the MPs.

As of Thursday afternoon, the letter had not been shared with the EDC, and spokesperson Phil Taylor said in an email to VICE News that the “EDC is not in a position to comment on something not addressed to the corporation, nor that we’ve had an opportunity to receive through the proper channels.”

"We expect EDC to take the performance of its loans, both financial and Corporate Social Responsibility, very seriously," said Pierre-Olivier Herbert, press secretary for Min. Champagne. "Our government is deeply committed to openness and transparency and will continue to work with EDC and all other Crown Corporations under the purview of Minister Champagne through the established review process and beyond."

Dean Allison, the Tory critic for international trade, was not available for comment.

The EDC has developed a reputation for a lack of scruples when it comes to export development funding, critics say, and the notion that the EDC is a willing creditor to players in the seamy underbelly of global development has gained some traction largely because the EDC hasn’t been transparent enough to disprove it.

“EDC, I think, has a responsibility that the projects its funding, or the companies its funding, to make sure that those companies are behaving appropriately,” Karen Hamilton, a program advisor with Above Ground, an NGO that focuses on corporate responsibility, told VICE News. “We don’t know, from case to case, how they decide , which parts of the policy [referring to the EDC’s Code of Business Ethics] they apply, and how they decide on any given loan.

That lack of transparency is quantitatively significant as well. The EDC, simply put, is massive: it has more than $112 billion in loans and other investments on its balance sheet. In comparison, the EDC’s American counterpart, the Export Import bank, had a balance sheet of only around $5 billion in 2016.

Canadians ought to be concerned, says Hamilton, because of the dividends that the EDC pays out to the Canadian government. “We make money off of the EDCs investments, so we would like to make sure that money we’re making is done so in a way that is ethically correct,” she says.

Parliament reviews the EDC’s mandate every 10 years, and they are scheduled to do so this year.

In the past, those reviews have not resulted in major changes to the EDCs mandate. There have only been two full-scale reviews of the EDC’s mandate in the past, and both focused primarily on the institutions function as a creditor, not as an organization with a responsibility to vet who it lends to. The last time Parliament reviewed the Export Development Act in 2008, it was fairly congratulatory, concluding that “EDC’s value has been reinforced by the actions it has been taking to support the credit and insurance needs of Canada’s most vulnerable businesses and sectors in a changing global environment”—while only noting transparency issues in passing.

Critics of the EDC have long suggested a range of solutions that might make the institution more accountable and prevent gaffes like their loan to the Guptas. Hamilton and Above Ground argue that the export development act (which gives EDC its mandate) should be more prescriptive, and outline who the organization should not be giving money to.

Other changes would be more simple. Bringing the EDC’s deals with the people it lends under the umbrella of access-to-information laws would force a degree of accountability that so far doesn’t exist. While the EDC has technically been covered by ATI laws since 2007, information pertaining to its actual actions are exempt under the Export Development Act. “It’s essential,” said Rob Wright, the former president of the EDC told a parliamentary committee in 2006, that the the EDC “protect commercially confidential client information from release.”

Whether or not the upcoming review will be any different remains to be seen. On Monday, a request for proposals was published regarding the upcoming review — however, an appendix to the RFP outlines that the scope of work will mainly be done in conjunction with the Minister of Finance and the Minister of International trade. “The Contractor’s report will assess how Export Development Canada (EDC) is evolving, and should continue to evolve, to address the competitive dynamics and demands of international trade, and will make recommendations where appropriate including possible changes to legislation,” reads the document.

“The opportunity is here,” Hamilton says. “It’s really about making the most of this review, and not letting it be a standard ‘let’s see how EDC compares to other export credit agencies.’”