STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 4, 2000

• 0938

[English]

The Chair (Mr. Bill Graham (Toronto Centre—Rosedale, Lib.)): I'm sorry to keep our witnesses waiting, but as usual, there's a bit of chaos going on around here.

Madame Lalonde, before I recognize you, I'd like to make a short announcement. There will be a briefing following today's meeting for those who are going on the trip to talk with the DFAIT officials about the trip organization. So for those people, or for anybody else who wants to stay and hear about it, we're going to have sandwiches and you can stay right here.

At the last steering committee meeting, we talked about trying to start issues related to globalization. The Bloc Québécois has been anxious for us to commence this. You'll recall that we had felt we could start by talking with the finance minister about the G20. It looks as if we get him on May 18, so we're going to try to organize May 18 for Mr. Martin. Also, we'll have to have General Henault that same day to complete that Kosovo hearing. So we'll have General Henault for an hour and we'll have Mr. Martin for an hour on May 18. That may well be on our agenda.

The third item, colleagues, is that as June gets closer and closer, we are under tremendous pressure to deal with legislation and other matters. I propose that at least the committee commence hearings on Bill C-19. That's the International Criminal Court issue. We can have a couple of hearings on that while some of us are travelling. The others who are here can come and we can bring in the odd substitute member and get that going. We obviously won't have clause-by-clause on it, but we can actually have some of the hearings on it while some of us have to be away. We can get it going, at least.

• 0940

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde (Mercier, BQ): Before I make my statement, I'd appreciate your clearing something up for me. Did I hear you say that the committee could probably start looking at Bill C-19 next week? Is that what you said?

The Chair: Yes, next week.

Ms. Francine Lalonde: It hasn't even been referred to the committee yet.

The Chair: That's true, but given that we have a lot of work to complete by the middle of June, I thought that while fewer than half of the committee members were traveling, the others could begin consideration of Bill C-19. We could hear from government officials and from a few witnesses and, upon the return of the other members, proceed to the clause-by-clause study phase.

Ms. Francine Lalonde: We would have no objections to that.

You noted that Mr. Martin is scheduled to appear on May 18 to discuss the G-20.

The Chair: That's correct.

Ms. Francine Lalonde: That won't be the only meeting on globalization. It would merely be a launching point for our study.

The Chair: That's right. Without getting too specific, I did say to Mr. Tremblay that we had to begin tackling some of the items on our agenda. Once we've met with Mr. Martin, we can begin. We will have a detailed agenda in place by the fall.

Ms. Francine Lalonde: Will we be hearing only from Mr. Martin this spring?

The Chair: I believe so.

Ms. Francine Lalonde: Really? In that case, we object.

The Chair: He will appear prior to the G-8 summit. It's important that we hear from him before then. It ties in with our study of globalization. We'll see how we can schedule the remaining meetings at the next meeting of the sub-committee on agenda and procedure.

Ms. Francine Lalonde: You're not ruling out the possibility that we might hold several meetings this spring.

The Chair: I'm not ruling anything out, but if you look at our agenda, you will see that we already have quite a bit on our plate.

[English]

On this point, Mr. Grewal, did you have a comment?

Mr. Gurmant Grewal (Surrey Central, Canadian Alliance): Yes. Mr. Chairman, I didn't quite clearly understand what you meant. It looks like your intent is appropriate. Are you saying we should hold a meeting for Bill C-19 when most of the members of the committee are travelling, gone out?

The Chair: No, it's not....

How many members of the committee are travelling?

The Clerk of the Committee: It's eight.

The Chair: There are eighteen members on this committee and eight are travelling, so less than half the members of the committee are able to travel, much to my regret.

We have so much business that we're going to have to move on some of these things. We can't hold everything up for another ten days. We have to get that legislation started. It's just a question of having the informative hearings, not to hold the clause-by-clause, not to hold the meetings where we have to vote and things like that.

Mr. Gurmant Grewal: Do we know how many committee meetings are required for Bill C-19, roughly?

The Chair: That's to be determined. We have to get started anyway. I think your party has a list of some witnesses you want us to call. We'll have to try to get those organized. At least we can have the meeting where we hear from the government officials and things like that, the usual pro forma stuff from them.

Mr. Gurmant Grewal: Mr. Chairman, what I'm saying is that if we have some business to do other than Bill C-19.... It's an important bill. In the absence of the critic and the deputy critic on foreign affairs from our party, it will be more difficult for the smaller party, because they have few people who are monitoring those important issues. If they are travelling, then it will be hard for them. Can we switch it with some other business that we are doing afterwards?

The Chair: Mr. Grewal, I'm just—

Mr. Gurmant Grewal: I want to be cooperative. At the same time—

The Chair: I know. I'm looking at the agenda. I'm telling you that what will happen if we put this off and we don't get it started is that we'll start at the end of May. If the House for any reason decides to rise on June 9, which is possible.... You never know. After all, your party has a convention coming up. There's going to be pressure to get out of here before June 25 as far as you're concerned. If everybody says they want to be out of here, that bill is going to have to go through, and then you're going to be screaming and yelling, “Why are you shoving this down our throats and hurrying it?” You can't have it both ways. Either we get started or—

Mr. Gurmant Grewal: Don't get me wrong, Mr. Chairman. I understand. My idea is that if there is some other business in the following meetings, can we switch it over?

• 0945

The Chair: Our committee priority is legislation. We were obliged to do the legislation first.

Mr. Gurmant Grewal: Sure, I agree. I don't have any problem with that. But my idea is that that means from now onwards, after this meeting, we are travelling, and after that we are discussing only Bill C-19 and nothing else.

The Chair: Probably.

Mr. Gurmant Grewal: If that's the case, I can understand, but if there is something else that is less important, we can switch it over.

The Chair: There are only four meetings. Do you want to kick off Mr. Axworthy, for example?

Mr. Gurmant Grewal: No, I don't mean that.

Mr. Lee Morrison (Cypress Hills—Grasslands, Canadian Alliance): I'll drink to that.

The Chair: You can't have them all. Do you know what I mean? We just can't do everything.

Mr. Gurmant Grewal: I agree.

The Chair: We have to grab the chance. There are 10 members of the committee still here in town.

Mr. Gurmant Grewal: I agree and understand what you mean, but my idea was, if out of the four meetings one thing is less important, can we switch it? That was the only possibility I wanted to explore.

The Chair: Yes, but that's why I thought of Bill C-19, because I know everybody has an interest in it. The important thing would be just to have the briefing session with the government officials, so at least we have that one done. Then we'll have the time in the committee to deal with what I would call the real political issues, which will be the debate amongst ourselves on, say, clause-by-clause and things like that.

So if you could get your witness list in, that would help in the planning too. Obviously we wouldn't do that in your absence; we'll just do the government briefing.

We'll get the blues sent to us while we're travelling too, so you can have a look at them.

Thank you for your help and cooperation.

[Translation]

I believe you had something you wanted to say, Ms. Lalonde.

Ms. Francine Lalonde: Yes. We could hear from the witnesses and I could say what I have to say between the two presentations, or I could proceed to make my statement at this time. I will be brief.

The Chair: Then by all means, go ahead.

Ms. Francine Lalonde: Fine.

Mr. Chairman, regarding the mission to the Caucasus, we the Bloc Québécois delegates here present, despite the complexity of the situation and having initially decided not to cooperate, reversed our position, agreed to go along with the arrangements and cooperate to ensure that this trip goes as smoothly as possible. My colleague Mr. Rocheleau and I are planning to take part in this mission.

On another note, however, as a member of the Canada-Europe Parliamentary Association executive, I was dismayed to learn that yesterday's executive meeting had been canceled, because a report was to have been filed on the delegation's mission to the European Union, a mission in which I participated. It was during this mission that the head of our delegation said some rather nasty things about the deputy head of the European delegation. He refused to withdraw his remarks when called upon to do so. I wanted to bring this matter to the executive's attention, but the meeting was canceled. When I asked when it would be rescheduled, I was informed that the meeting would be held next week.

Mr. Chairman, this is most upsetting. A parliamentarian has a responsibility to put to the executive of a parliamentary association questions of a political nature which seem to contravene the spirit of relations between all parliamentary associations. We're talking here about an extremely important parliamentary association, one that is responsible for working to improve relations between Canadian and European parliamentarians.

Mr. Chairman, I urge you to bring pressure to bear on the President of the Canada-Europe Parliamentary Association so that he postpones consideration of the delegation's report on its mission to the European Union until I return on the seventeenth. I repeat, I was ready to attend yesterday's meeting. This matter is extremely important to us because it's a political matter. If I was prevented in some way from raising this issue on behalf of the Bloc Québécois - since we're not allowed to bring in substitutes - our cooperation would be compromised. Therefore, I'm counting on you, Mr. Chairman.

• 0950

The Chair: Understood. I promise that I'll do what I can. I will ask Warren to phone Denis Robert, the Association clerk, to let him know that you and I are unavailable for this important meeting and would like it to be rescheduled to a later date. I will get in touch directly with Mr. Caccia as well. I don't see why we can't postpone this discussion with the delegates who traveled to Europe. Since I wasn't on this mission, however, I don't have the same problem as you do.

Ms. Francine Lalonde: Fine then.

The Chair: We will now hear from our witnesses.

[English]

We have from the Canadian Society for International Health, Janet Hatcher Roberts, who is the executive director of the Trans Caucasus Health Information Project. You sound like you're really plugged into what we're doing. This is good.

Also, we have Joan Kuyek, from Mines Alert Canada; and Mr. Ladhani, from the Aga Khan Foundation of Canada, who we've had the privilege of hearing before.

We'll take you in the order in which you appear on the list. We appreciate your coming. We're leaving this weekend, so if you have any health advice, get it in this morning. If you keep your presentation to about 10 minutes, we'll then move to questions.

Ms. Janet Hatcher Roberts (Executive Director, Canadian Society for International Health): My name is Jan Hatcher Roberts, and I'm executive director of the Canadian Society for International Health. Chris Rosene, whose name appears in the information, is the director of the project.

The society is composed of over 900 members. We've been active in the south Caucasus since 1996. Building on our work in eastern Europe in the early 1990, we've implemented the Trans Caucasus Health Information Project, which is a two-year, $1-million capacity-building effort funded by CIDA. We are now considering further work in the fields of health information and health and environment, if we receive further funding from CIDA.

We feel that we have much to learn about the region. Nevertheless we've gained enough experience to learn some basic lessons about health and health in the environment in these countries.

Our main concern is that Canada should not rely on trade and economic development alone to solve the serious problems of the south Caucasus. Canada should consider a long-term strategic investment in social development of the region, including the promotion of human health and environmental sustainability.

Many rejoiced when the Soviet domination ended in the Caucasus in the early 1990s, but there have been dramatic declines in health status in these countries, and you'll see that in your travels. Life expectancy for men has fallen in the Caucasus. There's a high maternal mortality and infant mortality rate. Many who once had access to free medical care cannot afford the cost of fee-for-service systems. Nutritional status has fallen.

In addition to these declining health statistics, violent conflicts in Nagorno-Karabakh, South Ossetia, and Abhkazia have caused negative health effects through direct casualties of war, but also through the long-term effects of being displaced for the refugees and internally displaced people. In Azerbaijan, there are an estimated one million refugees and internally displaced people, amounting to 11% of the population, 55% of whom are women and children, who live in deplorable conditions in camps and substandard housing.

Ironically, the infrastructure of the health care system in the Caucasus is very developed, which is a holdover from the Soviet system. This presents a huge challenge to the financially strained ministries of health who have to put these historic resources to more cost-effective, more appropriate uses in the present situation.

All three countries—Armenia, Azerbaijan, and Georgia—are making efforts to improve the health situation. They are now active members of the World Health Organization—the WHO—European region, and are benefiting from those programs.

The advice of the World Bank and other western donors has influenced these countries to opt for some sort of public-private mix in their health care system. Most of the models have examined as options the range from totally privatized American-type systems to the highly publicly funded systems of the Nordic countries. Through the Canadian initiative of the Trans Caucasus Health Information Project, health professionals from these three countries are learning more about the Canadian approach.

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In practice, the three countries are undergoing both formal and informal privatization of health services. For example, there are very modern health technologies and practices available for a fee, but many people are unable now to receive basic medical treatment, and this process seems destined to increase the already growing gap between the rich and the poor.

Health financing is obviously a key factor limiting the pace of reform. There's an extremely low GDP, gross domestic product, and that percentage allocated to health is even lower. It runs between 2% and 4%, and in Canada, as you know, it's about 9%. So this really impacts on their ability to reform the system. But insufficient funding is only half of the governments' problem. The other half involves the management of these resources.

Reliable health information is essential for effective and appropriate decision-making in the health system of any country. It allows better management and better planning. We cannot come up with long-term solutions until we have a better understanding of what the problems are, and this we can only do with better information systems. The current information systems in the south Caucasus are inherited from the Soviet system. Highly centralized, they lack reliability and comparability with the rest of the region.

The CSIH-CIDA health information project started in 1999 with a needs assessment, the formation of a regional steering committee, and the initiation of training activities using Canadian experts from the University of Victoria. Much more work is still necessary to strengthen the health information systems at the local, national, and regional levels, and we hope to continue this work.

I would like to turn now to the issue of health and environment, or environmental health.

During the Soviet period, the south Caucasus was an important source of petrochemical, metallurgical, and chemical products for the Soviet Union. Many of these activities were close to urban areas, with little regard to the negative health effects they were causing. Agriculture in this region was important, and there was high use of fertilizers, pesticides, and herbicides, once again with little regard for human health and protection. Nuclear power plants and military installations were another source of concern for environmental health.

Soil and water contamination and air pollution in the south Caucasus are large problems. Dilapidated water and sewage systems are causing outbreaks of water-borne diseases, dysentery, and other intestinal diseases, all of which are entirely preventable.

Landmines are a continuing risk for the population in these areas as a holdover from the times of conflict.

All three countries have drafted national environmental action plans, but it's a long, hard road to ensure a common commitment to sustainable development involving actors from government, business, and civil society.

Canada has much to offer this region in the fields of environmental protection and promotion of human health, given our expertise. We developed, in Canada, the environmental health impact assessment process, and this serves to highlight the risks to human health from environmental degradation and development projects. Currently CSIH is hoping for support to develop a project in this area with CIDA.

Economic growth may be conducive to better income, social tolerance and welfare, and finally health, but such a positive effect is not automatic. The prerequisites of health can even be adversely affected under economic growth if the appropriate social policies are not in place.

As Canada contemplates growing involvement in this part of the world, we would like you to be reminded of this. If we simply promote trade and industrial development without also promoting effective social policies and concern for environmental sustainability, we run the risk of harming the people rather than helping them. It's important that we ensure human development is deliberately promoted through capacity-building, policy development, public participation, and concern for equity. While official government relations amongst the three countries are tense, health authorities see a ready need to collaborate, and are willing to do so without hesitation. This has been very encouraging for us.

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We are often faced with the practical difficulties of transportation and communication, which we hope you won't be. We've made an effort to take a regional approach to our work, giving equitable attention to the health information needs of each country while attempting to build regional consensus and collaboration.

The Carnegie Commission on Preventing Deadly Conflict has recognized the value of attention to environmental concerns in conflict areas. The commission argues that attention to human health and well-being has a positive effect on peace-building. Development must be equitable to be effective, supporting people's own efforts to improve their situation. “Economic growth by itself will not reduce prospects for violent conflict and could, in fact, be a contributing factor to internal conflicts.”

We believe our country can make a positive contribution to building peace and human security in this region. While supporting diplomatic initiatives for peace, we should also look at development efforts targeted at issues of common concern, such as health and the environment. Our own trade interests must be balanced by support for social policy and sustainability. Special attention should be paid to the politics of oil development in the region. In the end, we cannot evaluate, monitor, or decide what the needs are or how to allocate resources in a cost-effective manner, nor can we know the impact of development and environmental degradation on human health, without viable integrated information systems.

I leave you with four recommendations: first, to consider the long-term strategic investment in social development of the region, including the promotion of human health and environmental sustainability; second, to promote greater awareness of our own impact in this region by bringing Canadian actors from government, the private sector, and non-government organizations; third, to pay attention to the oil and gas sectors, including an analysis of the potential impact of future development on the environment and human health; fourth and finally, to work closely with international organizations active in the region, especially those based in Europe, to promote peace and human security in the region.

Thank you.

The Chair: Thank you very much. That was very helpful.

I have just a quick question. I know you're an expert more on the Caucasus, but would it be safe to assume that most of the conditions you described in the Caucasus would really apply to the other central Asian republics that we're travelling to?

Ms. Janet Hatcher Roberts: Yes. You're going to see the same or worse in many of those other countries in terms of health conditions and probably environmental degradation. If you do want more information, we have pamphlets and what not that you can pick up. But they're in English and Russian, so we couldn't formally hand them out because they're not in French.

The Chair: Our Russian is pretty good. You could give us Russian.

Ms. Janet Hatcher Roberts: Great. Okay, here you go. This will be your test, then.

The Chair: Our Russian is sometimes better than our English around here, believe me.

Okay. We're now going to go to Ms. Kuyek from Mines Alert Canada.

Ms. Joan Kuyek (National Coordinator, Mines Alert Canada): Thank you very much for this opportunity to present to the Standing Committee on Foreign Affairs about mining issues in central Asia.

MiningWatch Canada was established in April 1999 to monitor the social, environmental, and economic impacts of mining in Canada and of Canadian companies operating abroad, and to advocate for responsible mining practices. Our membership is other organizations, other NGOs, including Inter Pares, the Canadian Autoworkers Social Justice Fund, the Canadian Nature Federation, the Canadian Environmental Law Association, the Task Force on the Churches and Corporate Responsibility, and the Innu Nation, amongst others.

In late 1996 there were over 40 Canadian companies with interests in 65 mineral properties in seven countries of the former Soviet Union. Most of this activity has been in Russia, but Canadian mineral investment in central Asia has grown as state-owned mining properties are offered for sale under pressure from the IMF. There is continuing interest in the region from companies like World wide Minerals, Placer Dome, Teck, and other Canadian companies that are engaged in exploration and negotiations.

In the last year alone, The Northern Miner has reported on the following substantive Canadian projects in the region:

In Kazakhstan, there's Cameco, the Inkai mine, where they're intending to mine uranium through an in situ leach project; and Ivanhoe, Bakyrchik, mining gold, on care and maintenance since 1998.

In Kyrgyzstan, there's Cameco, with the Kumtor mine; and Tien-Shan Mining, which mines gold. They're just looking to explore at this point.

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In Tajikistan, there's Nelson Gold, which has the Jilau Mine and Taror Mine; and there's Marshall Minerals, which has both the Bolshoi and East Kanimansur deposits, both gold exploration.

In Armenia, there's First Dynasty Mines, a company that's registered in the Yukon and listed on the TSE. We'll talk about that more later.

In our study, we chose to focus on two mining companies: First Dynasty in Armenia, and Cameco in Kyrgyzstan. First, I'll talk about Armenia.

In February 1998, a joint venture between First Dynasty Mines and the Armenian state mining company, ArmGold, opened a new $12 million gold tailings recovery facility at Ararat. The project involved the development of a tailings recovery operation, which will re-mine tailings using a form of cyanide vat leach. The recovery operation will enable First Dynasty to take the tailings of the old Ararat plant and to open Zod and Megradzor Mines and re-mine their tailings for gold.

The European Bank for Reconstruction and Development refused to extend a $35 million loan to Canada's First Dynasty Mines for the expansion of gold mining in Armenia because they said the high risk involved in the project did not meet the bank's criteria and entailed a combination of risk that far exceeded the risk level acceptable to the EBRD.

The Canadian mining presence in Armenia highlights some very serious concerns. The project will leave behind waste rock and tailings that may further pollute and damage the environment. These are old mine sites, and there have already been studies that showed serious environmental problems. Suspended solids and hydrocarbon contamination of surface waters have been detected at the mine sites, and also arsenic contamination in surface waters at Zod and Ararat. The specific issues that may have an impact on the feasibility of the project include acid rock drainage, surface and ground water pollutants, and the questions of rehabilitation.

The Megradzor Mine is in an earthquake zone, and the ore must be transported a considerable distance on the existing railway infrastructure. The railroad from Megradzor to the Ararat facility is 110 kilometres. All the railroads are to be maintained by the Government of Armenia. The Zod mine is close to a zone that has in the past been the subject of hostilities between Armenia and Azerbaijan. The distance between Zod and the processing facility by railroad is 235 kilometres.

This wouldn't be so troubling if the mine proponent weren't one with a history of irresponsible mining practices. First Dynasty Mines is controlled by Robert Friedland through different companies. The company, as I said, is registered in the Yukon and is listed on the TSE. Friedland is known in mining circles as “Toxic Bob” for his role, through a number of companies, in a series of mining disasters.

Leaking cyanide from the Galactic Resources Mine destroyed the Alamosa River in Colorado between 1987 and 1990. Golden Star Resources was a partner in the Omai disaster in Guyana in 1995. Vengold was driven out of the Bolivar area of Venezuela by local people for destructive exploration projects. And Ivanhoe Mines, which used to be Indochina Goldfields, is in Burma and is running a copper mine that has been said to destroy the environment and is being reputed to use forced labour. Vengold in Lihir in Papua New Guinea, a mine that we think may have changed hands, is dumping 4,600 tonnes of waste rock an hour, 1.5 kilometres off the coast, into an area with some of the highest marine diversity in the world. This is the history of this mine operator.

Some voices in Armenia are concerned about the company's relationship with the Armenian government and the people. In March 1999, SNARK, the Armenian news agency, reported:

Neither government agency or official shall be allowed to require information on the course of works at the Armenian-Canadian gold mining plant Ararat. This provision is included in the agreement between the Armenian Industry and Trade Ministry, the state-owned ArmGold company and Canada's First Dynasty Mines signed on June 24, 1998.

The agreement has also been criticized by Armenian Industry and Trade Minister, Garnik Nangulyan, who said—again, SNARK reported it—that:

he told journalists on the 20th June 1999 that the interests of the Armenian side had not been defended sufficiently in the contract...Armenian experts believe the distribution of profits is the most vexed issue. Under the contract the foreign investor gets 70% of the profits and the rest goes to the Armenian side. Moreover the contract underestimates the percentage of gold, silver and other components in the residue as well as undervaluing the quality of the precious metals.

On top of it, this operation that has such potential for destruction will only last for 11 years.

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To speak briefly about Kyrgyzstan.... By the way, I have a written brief that speaks about all these issues in much more detail, which I believe the members have received.

In 1992, Cameco, which is a Canadian company, entered into an agreement with the Kyrgyz Republic to evaluate the Kumtor gold project. The mine is owned by the Kumtor Gold Company, owned one-third by Cameco and two-thirds by the Kyrgyz State Property Fund. It came into production in 1997 at a cost of $450 million U.S. Cameco is the operator of this mine and has some of the lowest operating costs boasted by any gold project in the world. At $174 per ounce to produce against a world average of $220, that's pretty amazing.

This mine is made possible by cyanide technologies that make extremely low-grade ore viable. Deposits are graded at 3.58 grams of gold per tonne of ore, meaning that miners must sift through a tonne of rock to get half a thimbleful of gold, according to the company president. The rest, of course, is waste.

The mine is on a windswept peak 4,400 metres above sea level. A former sheep trail was converted into a road to the mine, but it required 38 switchbacks to climb the steep mountain. All equipment and supplies must be trucked up the treacherous mountain road. To reach the gold ore, Kumtor has to blast through permafrost and a glacier. Peter Townsend, the senior vice-president said “We're basically taking the top off the mountain.” Amongst other problems, Kumtor keeps 60 security staff among the 1,300 mine workers on its payroll.

The road up the mountain has been exacting its toll. There have been two more reported toxic spills on that road since the much-publicized cyanide spill of May 20, 1998. One was on January 20, 2000, when 1,500 kilograms of ammonium nitrate ended up on the side of the road near Barskoon after a semi-trailer lost the pin mechanism that attached the load to the truck. And on July 22, 1998, 70 litres of nitric acid were spilled on the road.

Despite the mine's low production costs, the president, Len Homeniuk, says it is only making a profit because of hedge contracts. The company is still assessing whether the other sites are worth the financial risk, including the danger of accidents such as cyanide spills. He said that “these things”—that is, cyanide spills—“are a major risk in this part of the world.”

The mine tailings are in a surface tailings basin in a river valley with a synthetic liner and an earth-filled dam. The dam is constructed on permafrost. Stored behind the dam—and this is from the company's annual information returns—are 16 million cubic metres of tailing sands and process water. A series of canals and diversions prevent runoff and natural water courses from entering the tailings basin.

There is reason to be concerned about the environmental impacts of mining through a glacier and the impacts they will have on water drainage from the mountain. Most of the waters from the mine flow into Syr Danya, an international river that later flows from Kyrgyzstan into Uzbekistan, a potentially explosive situation if the river were to become contaminated, according to a source in Kyrgyzstan.

How are environmental and safety agreements enforced in a country as poor as Kyrgyzstan? Since the Kyrgyz government is part owner of the mine, there is little incentive for them to be assertive in enforcing any form of environmental regulation or legislation.

Anantoly Deekikh, professor of geography with the Kyrgyzstan Academy of Sciences, said:

All these problems raise questions about the dangers posed by the project to the fragile economy of the Tien Shan region. There is a need to monitor whether effluents and dust are carried down to the glaciers, which are water sources for most of Kyrgyzstan.

Says Natalia Ablova, director of the Bureau of Human Rights in Bishkek:

When we ask to see the emergency response plan, we are told the information cannot be released to us...the lack of full transparency creates distrust among the local population.

Cameco is enjoying a five-year tax holiday in Kyrgyzstan until the end of 2002, so the Kyrgyz government will not get much return on their investment in the immediate future. Loans and political risk insurance for this mine were provided by EDC, the IFC, and the EBRD for the project. Says Cameco president, Len Homeniuk:

We focused on Kyrgyzstan because it is a much better country to do business in than Uzbekistan. This is a big project in a small country, which gives us a degree of comfort...we are a big fish in a small pond.

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In conclusion, we'd like to say that we are concerned that Canada not contribute to the looting of resources in countries such as Armenia and Kyrgyzstan through mines of short duration with inequitable tax regimes. If Canada is going to contribute to the development of sustainable economies, we would be wise to question gold as that investment. Gold is increasingly under scrutiny as a feasible driver for any economy.

Writes John Young in a recently released report on gold from the Mineral Policy Centre:

Central banks and international financial institutions hold more than 34,000 tonnes of gold. This is more than 13 times the annual production of the world's mines. If sold, these reserves could satisfy gold demand for more than eight years (current demand is approximately 4,000 tonnes per year). Of this demand, 85% is used for jewellery.

Young argues that gold is slowly being converted from a precious metal to a base metal and that it has been steadily losing value for decades. We do have copies of this report that we can make available to members, if you would wish.

Canada cannot afford to be involved in a mine disaster like the Esmeralda spill on the Tisza river. The information available to the Canadian public and the government about these mining operations is selective and limited. It is clear that more information about the operations of Canadian companies operating abroad is essential if Canada is to ensure its reputation.

The Canadian Environmental Assessment Act and its public participation provisions must be applied to investments overseas. In countries where regulation and enforcement of environmental standards are weak or non-existent, Canada needs to hold companies registered in Canada accountable to the highest Canadian standards and to assist host governments, where requested, in developing strong environmental legislation and enforcement.

If the purpose of the standing committee's study on central Asia is indeed to advance Canada's foreign policy interests in the south Caucasus and central Asia, we need to ensure that the environment of these countries is protected and improved for future generations to enjoy and that the mining we do support does not in the long term contribute to poverty and future liability.

Thank you.

The Chair: We appreciate that. Did you say you brought a copy of Mr. Young's report from the Mineral Policy Centre?

Ms. Joan Kuyek: I didn't bring it with me, Mr. Graham, but I can make it available.

The Chair: Okay, but we can get a copy. It's fairly easily accessible, is it? I imagine it is.

Ms. Joan Kuyek: It was very recently released and it can be downloaded from the Mineral Policy Centre website, but it's very long. We do have some print copies at the office that I could make available to you.

The Chair: I'd appreciate that. More airplane reading. Thank you.

Mr. Ladhani.

Mr. Nazeer Aziz Ladhani (Chief Executive Officer, Aga Khan Foundation of Canada): Thank you, Mr. Chairman.

Mr. Chairman, honourable members, I'd like to congratulate the committee for undertaking this important and timely study. As I'll be speaking about the work of the Aga Khan Foundation of Canada and its sister agencies within the Aga Khan Development Network, AKDN, in the region, please let me begin with a brief overview of the history, mandate, and connection to central Asia.

The Aga Khan Development Network is a group of private, non-denominational, social, economic, and cultural development agencies established by His Highness the Aga Khan, the present 49th imam or spiritual leader of Ismaili Muslims. In 25 countries on four continents, the AKDN works to empower disadvantaged communities, especially in Asia and in Africa.

The AKDN functions within a traditional strict political neutrality and its services are open to people of all faiths and origins. The fulcrum of AKDN's activities, however, remains the Ismaili Muslim community, its traditions and ethos of volunteerism, humanitarianism, self-reliance and the leadership of His Highness the Aga Khan.

The Aga Khan Foundation in Canada is a non-profit international development agency established in Canada in 1980. AKFC and its partners in eleven countries support a range of socio-economic development initiatives, many of these in cooperation with the Canadian International Development Agency.

In Canada, AKFC acts as a catalyst for increasing awareness and understanding of critical global issues through research, training, linkages, and youth-focused initiatives. Both its Canadian business activities and its international work benefit from a strong Canadian constituency comprising of 750 corporate supporters, a network of 800 volunteers, and individual support of over 60,000 Canadians from a wide cross-section of the population.

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The Ismaili Imamat has a longstanding historical and cultural link with central Asia. Since the early 1990s, His Highness the Aga Khan has been working personally and through the agencies of the Aga Khan Development Network in the rehabilitation and development of the region. In this effort, His Highness the Aga Khan has sought Canada's assistance in addressing the urgent situation confronting the region's population.

In 1994 and 1995, meetings between His Highness the Aga Khan and the Prime Minister, the Right Honourable Jean Chrétien, explored Canadian involvement in the political, social, and economic rehabilitation of the central Asian republics. Our particular focus was Tajikistan, the poorest of the newly independent central Asian states and one that has now succeeded, with international help, in working its way out of a horrible civil war. As a result of these meetings, a Canadian mission was sent to central Asia to identify the socio-economic needs of the region and see where Canada's unique attributes could be of most value.

Since 1994, the Canadian government, through the Minister of Foreign Affairs and CIDA, has provided generous and highly strategic support. In fact, Canadian support has played a key pioneering and leveraging role in many of the AKDN's activities in central Asia, bringing in a number of other bilateral donors to participate in our work in central Asia.

It is therefore with great pleasure and pride that I can now present to the honourable members what essentially is a culmination of experience of over a decade of active involvement in central Asia.

Why should Canadians care about what happens in central Asia? In a commencement speech to MIT graduates in May 1994, His Highness the Aga Khan noted:

Tajikistan has become the focus of one of the most interesting encounters of the day. It is here, and in other central Asian republics, that the three great cultures encounter one another: the ex-communist world, the Muslim world, and the western world. It is here that those three cultures could forge a success that would contrast starkly with the brutal failure in Bosnia. The result of the encounter in Tajikistan may determine much about the way history unfolds over the coming decades.

If the encounter of the Muslim world, the west, and the ex-communist world takes account of the need for each to draw on its own strengths, to be consistent with its goals, to strive for a sustainable improved outcome and to ensure a human transition, then the encounter will have been as successful as it is important.

Central Asia is home to some 56 million inhabitants. This vast territory, a land mass larger than western and eastern Europe combined, borders such powerful and often volatile states as Russia, Iran, China, Pakistan, and Afghanistan. Throughout history it has been a meeting point of peoples, cultures, and great empires, from Mongols to Russians.

Today, the central Asian republics of Tajikistan, Uzbekistan, and Turkmenistan represent a bulwark against the religious extremism and political instability that have emerged from the Taliban regime in Afghanistan and the spread of this particular brand of Islam to neighbouring countries.

The whole area, and indeed the process of liberalization in Iran, which is now clearly well engaged, could be threatened should the risk posed by Afghanistan to the region not be contained. The Taliban's influence has already been felt in parts of Tajikistan, Uzbekistan, and the Kyrgyz Republic, and often in rather violent manifestations.

Through its foreign minister, Lloyd Axworthy, Canada has taken a leading role internationally in condemning the Taliban's behaviour. Canada's continued contribution to the political, social, and economic stabilization of those front-line states can help them prevent northward propagation of the worst of Taliban's policies and attitudes.

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Canada has a unique position in the world community. It is a democracy built on pluralism and tolerance, and is strengthened by the multi-ethnic character of its society. We, as Canadians, have a timely opportunity to provide central Asia with the benefit of our experience in successful nation-building.

Canada is also a powerful trading nation. To maintain our competitive edge, we need to establish, with a long-term perspective, export markets for Canadian export products, and expertise and investment opportunities.

Let us now turn to the central question: how can Canada advance its foreign policy interests in the region? The Trilateral Commission's report has noted that ethnic diversity of the central Asian republic is a legacy of the Stalin era. The Soviet objective in redefining the frontiers of the central Asian states was to divide ethnic concentration so that each state would contain a multitude of different ethnic groups. This legacy has been blamed for much of the violence and instability that has plagued a number of former Soviet republics.

Today, over 100 ethnic minorities are represented in the region, speaking 28 different languages and countless dialects. Moreover, none of the central Asian states has a single predominating nationality.

What differentiates Canada's ethnic diversity from that in the central Asian states? It is our successful development of what His Highness the Aga Khan has referred to as a multicultural democracy. What does multicultural democracy mean? It means governing responsibly, through openness and tolerance. It means affording opportunities to all citizens, while maintaining their identities, irrespective of their religious or ethnic affiliations, to participate in the social, economic, and political development of their country.

Of all the countries of the industrialized world, the accomplishments of Canada's multicultural democracy are arguably the most envied internationally. Canada is recognized as a learning model for countries undergoing the often turbulent transition to democracy. This is Canada's most important value added, one that it can leverage, and be admired in so doing, to advance its interests in the region.

What then can Canada do to foster this multicultural democracy in the region? A comprehensive approach is required that focuses on five mutually reinforcing intervention points.

The first point is promoting regional cohesion as a core foreign policy interest for the Canadian government that will foster regional stability, one in which the AKDN is also actively involved at various levels. AKDN initiatives include a proposed central Asian regional university, the Aga Khan Humanities Project, a study on the long-term economic potential of the region, and a number of road- and bridge-building projects.

The AKDN is also collaborating with UNDCP, the central Asian governments, and other stakeholders, including Russia, to combat drug trafficking, a manifestation of the spiralling crime and corruption that have plagued countries of the former Soviet empire and skewed their efforts at economic rehabilitation.

The second intervention point is economic development and job creation. Canada's foreign policy interests in central Asia are heavily influenced by the region's commercial, trade, and natural resource potential. There's nothing wrong with that, but what can Canada do to make the central Asian states effective and sustainable trading partners, in a way that promotes a multicultural democracy?

Canadian expertise in private enterprise development could prove critical in assisting the region's economies to make the successful transition to an internationally competitive free-market orientation. Private enterprise remains poorly developed in most parts of the region. This is partly due to culture and ideological traditions and the scarcity of qualified free-market entrepreneurs. But it's mainly the result of the tremendous effort required to restructure an entire society.

The Aga Khan Fund for Economic Development has established the enterprise support facility in Tajikistan to stimulate investments and entrepreneurial activity, and has already created employment for 3,600 people.

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The agricultural reform program was initiated by the Aga Khan Foundation in 1993, with CIDA's help, to enable Gorno-Badakhshan, the poorest and most isolated region in Tajikistan, with very high mountains, to feed itself within a period of eight to ten years. Thereafter, the goal was to expand to the next area of greatest need for agricultural rehabilitation in the country.

Today, with critical Canadian technical assistance made possible through the support of CIDA, Gorno-Badakhshan can meet 90% of its staple food needs, and is expected to reach self-sufficiency by 2001. The program has recently been extended westwards into Gorm, and now covers more than half the land area of Tajikistan.

As it is not clear whether this area of central Asia, even after achieving optimal agricultural productivity, can be economically self-sustaining, the AKDN has recently commissioned a study on the long-term economic potential of the border region. This study can suggest ways in which the international community, including commercial interests, can assist the region and benefit from the intervention.

The third intervention focuses on the reorientation and development of human resources. One of the positive aspects of the Soviet system was the universality and high quality of education that was provided to its citizens, particularly to women. However, this legacy is threatened because of language constraints; that is to say, no English, and only Russian and the national language are spoken, with dwindling financial resources and system inefficiency and irrelevance.

The development of new language and human skills that are appropriate to the environment in which they live and to a new and globalized economy are urgently needed. Otherwise, millions of central Asians, particularly the young, will face unemployment, thereby increasing chances for future social unrest.

Canadians are playing key roles in a number of AKDN education initiatives. These include implementing education reform programs, international scholarships, and improving both continuing education and teaching English as a foreign language at Khorog State University, four other universities in Tajikistan, and one in the Kyrgyz Republic.

The AKDN has brought together a team of international experts to help establish a central Asian regional university. The university will be a self-governing academic centre of excellence. It will focus on interdisciplinary teaching and research in fields that are specifically necessary to high-mountain societies.

It is particularly encouraging, Mr. Chairman, that the presidents of Tajikistan, Kyrgyz Republic, and Kazakhstan have all confirmed their vigorous support for this first initiative in private sector regional higher education. Harnessing Canadian technical and educational capacity to an institution such as this would certainly sow the seeds for much wider collaboration between this region of the world and Canada in the decades ahead.

The fourth point addresses sectoral reform and rehabilitation. Canada is globally renowned for its universal and high-quality health care and education systems. In the long term, Canada's support for the development of core sectors such as health and education will provide solid and enduring foundations for sustainable and internationally competitive economies in which Canadian companies can invest and that are attractive markets for Canadian exports.

Through Aga Khan education services, the AKDN launched a private secondary school in Khorog, the regional capital of Gorno-Badakhshan, in 1998, and will open a second school in the Kyrgyz city of Osh this fall. These schools will serve as a model for standards of best practice and will supply students to the new regional university of high mountain development sciences.

The final component is learning from and promoting the rich cultural heritage of the region. The protection and promotion of indigenous culture has been a crosscutting theme for Canadian's foreign policy, as has Canada's strong interest in learning from other cultures.

In the Soviet Union's drive to—and I would put this in quotes—“modernize” central Asia, traditional societies were deconstructed and selectively remodelled into Soviet-style nations and nationalities. Many local cultures and languages were undermined and, in some cases, destroyed. At the same time, however, an impressive network of cultural facilities, including museums, galleries, and libraries, were built. Thus, today, while the cultural infrastructure exists, the region's memory of its rich history is fragile and under threat of permanent obliteration.

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On the positive side, Islam, which had been suppressed during Soviet times, has emerged as a manifest force offering central Asians a system of values, emphasizing service, charity, and sense of common responsibility. As noted in the Trilateral Commission's report, the growth of civil society in the region will depend greatly on the moderate forces of Islam, forces that countries such as Canada should support and encourage.

The Aga Khan Trust for Culture's Humanities Project for Central Asia is part of a broader endeavour of the AKDN to promote social, cultural, and economic development through higher education in Tajikistan and the Kyrgyz Republic. Central Asia is a product of many civilizations, including ancient Persian, Greek, Buddhist, Zoroastrian, Turkic, Islamic, and Russian. Accordingly, the humanities project employs civilization as an orienting principle to promote and strengthen cultural pluralism and the foundations of civil society.

A related activity is the Silk Road Project, an international effort to promote the region's past and present cultural contributions to the world, primarily in the field of secular and devotional music. Canadian participation in these endeavours would enable them to become new and important pillars of the region's cultural future. Indeed, in today's world only the nearly blind could ignore the striking need for and importance of cultural diplomacy. Helping central Asians understand the strength of their cultural diversity, and anchoring this concept in the national education systems and artistic constituencies, we engender ethnic harmony and contribute to the creation of multicultural democracy.

In conclusion, Canada's active engagement can promote multicultural democracy, the sine qua non for successful development—politically, economically, and socially—of the central Asian republics. This in turn will enhance investment opportunities and benefit Canadian foreign policy interest in the region. Because there is so much to be learned from the Canadian models, key decision-makers in the most important walks of life should be encouraged to share their experience with their central Asian counterparts.

As His Highness the Aga Khan noted:

The West has many strengths, but prominent among them are science and democracy (with their public mechanisms for self-correction) and also private institutions, liberal economies and recognition of fundamental human rights.

Mr. Chairman, honourable members, the five intervention points—namely, promoting regional cohesion, economic development, development of human resources, sectoral reform, and local culture—are the ones in which Canadians and their institutions have excelled internationally. They are also of critical value to the countries of central Asia as they undergo the difficult process of transition.

Thank you.

The Chair: Thank you very much, Mr. Ladhani.

I'd like to thank the witnesses for their presentations. I think we are not going to go to questions, because I'm advised we have a vote in ten minutes.

Can you confirm when the vote is?

A voice: There is no vote.

The Chair: Okay. The vote's been deferred. Well, that's one more crisis out of our lives.

We have not only a multicultural democracy here, Mr. Ladhani, but also a totally confused democracy.

Perhaps we could keep the question time to five minutes, because we have only twenty minutes left to go.

Mr. Morrison, sir.

Mr. Lee Morrison: Thank you, Mr. Chairman.

Thank you to the witnesses for appearing before us.

I'd first like to address my remarks to Ms. Kuyek.

You made some very interesting points, Ms. Kuyek, but frankly I was disappointed that you used the debating trick of lacing together a lot of rather small irrelevant facts. I don't think that is really respectful of the committee.

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For example, you made reference to the fact that some of these mines are in earthquake zones. Well, there are hundreds of mines worldwide in earthquake zones. That's not unusual; that's an operational problem.

You referred to the political instability of the area or, as you referred to it, zones of conflict. Well, there are hundreds of mines around the world in politically unstable areas. There's also a lot of other economic activity in such areas. Would you propose that because there is conflict, the commercial life of a district be essentially shut down until the hostilities are over? Life goes on, and if people are prepared to accept the risk of operating under adverse conditions, why would you suggest that they not do so?

Ms. Joan Kuyek: With due respect, I don't think this was a stringing together of irrelevant facts. I'll leave it to the committee to make that determination. What we tried to do was make clear what the risks are around these mines and the benefits that might possibly accrue from these mines to the people.

Given the political instability in Armenia and Kyrgyzstan and some of the history—they're trying to develop democracies after being governed by the former Soviet Union—there are some very serious questions about whether people are even aware of the risks around mining and opening up these mines.

And that isn't just any old earthquake zone. I'm sure the committee is aware of the very serious earthquake that took place in Armenia, and this mine is near there. It's already causing serious environmental problems, which will impact very strongly on the health and lives of people in Armenia. To reopen it and have it being operated by a mine operator who is notorious for his inattention to community safety seems to us to be something that is important for this committee to know. I don't know whether there is Canadian money invested in this particular mine in Armenia. It's impossible to find out, quite frankly.

I would also be interested in why somebody like Mr. Friedland chooses to register his company in the Yukon when almost all his operations take place in other places unless he's expecting substantial tax benefits in return for doing it. If indeed he is benefiting from Canadian tax law and benefiting perhaps from the good name of Canada in his dealings with the Armenian government, then I think it's extremely important for this committee to be aware of the risks that are attendant upon it, as with any mine.

This is a mine that is recently opened. It's not an old mine that finds itself in an earthquake zone when people didn't even know that was going to happen. The same is true with the Zod mine, which is in striking distance of the border with Azerbaijan. Again, one would question the mine proponents' ability to deal with those issues and to make sure we're not going to end up with one more mine in a serious zone of conflict where Canada's good name is involved.

These facts aren't irrelevant. They were selected from pages and pages of documentation. We tried to find things that had good, reliable sources and that could be presented to you in a way that made it clear what risks were attendant on it. It's important to notice that the EBRD actually agrees with our assessment on the Armenian mine and that they refuse to fund it.

The Kyrgyzstan mine, on the other hand, is a different question. Cameco has a reputation as a responsible mine operator, but so did Esmeralda in Romania. I think it's important to realize that gold mining in those kinds of circumstances is a recipe for disaster and that a mine that's only going to be there for a few years is taking an incredible risk with the water supply and other things in Kyrgyzstan.

I'm sorry if you find it disrespectful to the committee. That wasn't our intention at all. We were trying to put the risks before you in a way that would enable you to make decisions for yourselves about what you see.

Mr. Lee Morrison: I have only a couple of minutes left, Ms. Kuyek. I just want to elaborate a little bit on my comment. I realize it's a harsh comment.

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At the very beginning of your presentation, for example, when you make reference to the risk being unacceptable to the EBRD, anyone looking at that casually would think they were talking there about the physical risks of putting this thing into operation. Actually, they were talking about the political and economic risks, which is their business. Again, if people are willing to expose themselves to this sort of risk.... I don't think I would, but if they want to expose themselves, that's their problem. I don't think it's the business of this committee to be making investment decisions for capitalists.

I have one final example of something I spotted during your presentation that I thought was unfair for you to bring up. You talked about the Kumtor operation and the spilling of a tonne and a half of ammonium nitrate on the side of the road. You referred to that as a toxic spill. Well, we distribute hundreds of thousands of tonnes of that stuff on the green and fertile fields of North America every year; it's fertilizer. It's used at the mine site in the fabrication of explosives, but it's fertilizer; it's not a toxic substance.

You talked about the 70-litre spill of nitric acid. I suppose people who aren't knowledgeable might be really frightened by that. That's a third of a barrel. In Canada, that wouldn't even get onto to the radar screen as a toxic spill. We spill stuff here by the tank car and then we go out and clean it up.

It's the whole tenor of your presentation that bothers me. You actually make a couple of very good points. The question of the mining underneath the glacier I find troubling and I'm looking forward to seeing this for myself. By tying in all these other little things and exaggerating, you weaken your case. I'm sorry.

The Chair: We'll just leave that as a comment because of time. We'll move on to the next questioner, if you don't mind.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde: Your presentations were highly informative. However, as I prepare for this ten-day trip, I'm still somewhat perplexed as to what I stand to gain from this experience.

I have a question that I will put to all three of you: if you were making this trip, what would you like to see and learn?

[English]

Ms. Joan Kuyek: In fact, I was framing this to raise questions. They're about two very specific mines, but you'll be seeing mines in other places. I think the questions become ones around what these companies are doing to ensure safety against earthquakes and the avoidance of the use of security firms in conflicts. Are they using state-of-the-art technology with what they're doing?

I have to say that in terms of the Kumtor mine, there's been a lot of discussion about that one spill in May 1998. I don't think that's something that needs to be followed up. I think the question is much more around what they're doing with the tailings and what their plans for closure are. In Armenia the questions are just around security and the very things we've raised here.

I would also suggest that when you're in Kazakhstan, you should find out what they're planning to do with this in situ leach uranium mining project. In situ leach is a kind of mining that is under tremendous scrutiny by the scientific community and other communities these days. It carries with it enormous dangers of polluting water sources and aquifers, which would be a problem in Kazakhstan.

So I think those would be the questions I'd ask.

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Ms. Francine Lalonde: My neighbour says it's true.

The Chair: Madam Roberts, from a health perspective, what would you look for, apart from trying to avoid the amoebas in the salad and things like that?

Ms. Janet Hatcher Roberts: Yes, don't drink the water, don't eat the salads.

I think I would probably ask of each country what they believe their key health problems are, and what they believe are the causes of those key health problems. Is it issues around access and availability of services that they once had and can't afford? And do they see the connections and interrelationships to environmental degradation? Is there more asthma? Are there more birth defects because of environmental contamination? Are there increases in cancer, like lung cancer, because of smoking? Is alcohol abuse a serious problem? We know these are big issues there, and these are causing big health problems too. Some of them are due to environment, some aren't.

I'd also ask the question about the reform processes and how equitable they are. Are they concerned only with economic realities or are they concerned about equitable approaches? Certainly here in Canada that's what is at the core of our philosophy of a social sector reform and development and maintenance of our systems. That's something we feel in terms of technical assistance we can bring to the table.

I think I would leave it at that because I think you'll start to see the influences of the large donors such as the World Bank putting forward options that cause increasing and inequitable gaps in access and availability to services. You can bring that whole approach in your discourse with these people as you go through the countries.

The Chair: In your list you didn't mention HIV/AIDS, which often comes up in many areas.

Ms. Janet Hatcher Roberts: It's certainly a disease that's new. The actual brief talks about that. Malaria is a re-emerging disease there because of the lack of comprehensive control measures. Mosquitoes don't stop at one border and say, no, we can't go on; they can carry on. The controls are poor now, and the access to services and the cost of medications are prohibitive. The spread of these diseases such as HIV/AIDS is increasing incredibly.

The Chair: Mr. Ladhani.

Mr. Nazeer Aziz Ladhani: Thank you for a very pointed question.

I would recommend that the members focus on understanding the socio-cultural status of the people there, I think at three or four levels. At the first level, I would suggest let's try to understand the richness of the culture and the history and traditions. For that you might have to dig a little deeper, because it's covered through 70 or 80 years of Soviet influence. But there is richness there, and I think it would be very important for us to understand that.

At the second level, I would again probe to find out what is the social background of people you meet. What is the level of education? What family experience have they had? What kind of communities have they come from? That would also give a perspective of understanding the needs and aspirations of those people, and to appreciate the level of education and the intellectual capacity that people of the region possess.

The third level would be to talk about what are the current problems in health, education, livelihoods, jobs.

Fourth is to probe them a little bit more and ask them what kind of future they see for themselves. What are their aspirations? What are they looking for, for themselves and for next generations? There are a few surprises there, and I hope you don't get surprised, but you will be astonished at the energy and the futuristic outlook these people have.

If you come with that understanding, then I think you will be able to formulate your recommendations in a very sound way.

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The Chair: Thank you.

[Translation]

Ms. Francine Lalonde: I want to focus on the question of businesses operating in the region. It's a fundamental question that keeps arising. We all know that there are various companies, mining or otherwise, in Quebec and in Canada that over the years, as a result of legislative measure, pressure tactics or unionization, have been obliged to modify their practices in the area of occupational health and safety and development.

It is my understanding that in the countries we are scheduled to visit, there is much less pressure in this area. This is where large companies are focussing their efforts. I think we're going to take a good hard look at this area in order to advise the minister subsequently on minimum standards to which these companies should adhere. Whether we like it or not, these businesses will be linked with their country of origin and if their operations prove to be unsound from an environmental, labour relations and cost standpoint, they will undermine our efforts to help these countries. At the same time, this is a very important issue because it carries with it the implication of an international effort. I would like to hear your comments on the subject.

[English]

The Chair: You'll have to be very brief, because we're well over the time for that period. So perhaps you could give a quick reaction, and I appreciate that this is a very broad question that Madame Lalonde has asked.

Ms. Joan Kuyek: I would completely agree with what the member has said. It is very important to find out what kinds of controls are available over these corporations. There's been a veritable gold rush in mining, with people going in before countries get their acts together around it. I think the question of having support to develop new legislation and regulation around this and to monitor it is really very important.

Ms. Janet Hatcher Roberts: I would add that you have to remember that here in Canada we have a very strong civil society. When we say “If they're willing to accept the risk, then so be it”, it's because civil society is so strong in North America that we've been able to inform people of risks around environment, health care systems degrading, and all kinds of things. We bring that to the attention of government and we put forces on the government to take action. We're very fortunate in Canada that the government funds people like us to be the thorns in their side. But in other countries they don't have that.

So what is informed choice and consent? It's no small coincidence that farmers in Canada have increased rates of non-Hodgkins lymphoma because they work with fertilizers. It's because those people, civil society, take action and work with people to raise the awareness of those issues that we can make changes and have environmental protection acts and environmental health impact assessment processes.

The Chair: We'll have to move on to Madam Augustine. We're going a few minutes over the 10-minute period. We have the ambassador who's waiting, but I hope you'll give us a few extra minutes with this group and then we'll bring the ambassador up. But then we also have to check to see what the bell is telling us, as to what kind of a vote it is.

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): It's going to be deferred.

The Chair: Everything will be deferred.

Ms. Jean Augustine (Etobicoke—Lakeshore, Lib.): Thank you, Mr. Chairman.

I have three questions that I'd like to put. One is how can we collaborate? Are there other collaborators there in the field of heath? Are there other international organizations? And how can we better collaborate with other players who are on the ground? So that's one to you.

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My second question is really to Ms. Kuyek, and it has to do with how we can hold those registered companies. You indicated that there is a lack of information; there is selective information being passed to the general Canadian public. How can Canada hold registered companies such as the ones you mentioned accountable for providing information for disclosures and other activities that you bring more or less to the attention, I'm sure, of whatever powers?

My third question is to Mr. Ladhani. Could you speak a little bit more about civil society, NGOs, and what is there on the ground? I know the Aga Khan Foundation is doing some work. What is on the ground, and who are some of the organizational players on the ground that you do work with?

The Chair: Ms. Roberts.

Ms. Janet Hatcher Roberts: In terms of collaborators, we are working in the Transcaucasus. We also work in Ukraine and Croatia. So we've had some experience in different parts of that region.

We work very closely with other donor organizations. Although we're not a donor, we feel it's very important to know what the other donors are doing, what is our comparative advantage, and what can Canadians bring in terms of the comparative advantage and the bit of money we bring from CIDA or other organizations. We work with UNICEF. We work with the World Health Organization. In fact, the Trans Caucasus Health Information Project uses the WHO regional or national liaison offices and actually uses that infrastructure. We have an arrangement with WHO in each of those countries and have signed tripartite agreements with the ministers of health in each of those countries.

We also work with UNICEF and the International Medical Corps. It's not medically oriented, but they use that as an umbrella group. We're now looking at how you devolve that out to get it situated within the country so that it's not always Canada coming over and doing.... How do we start building the infrastructure and support and sustainability of these activities and identifying locally engaged people who can stay there and carry on those works? We can give you names and contexts if you want to actually meet those people, but that's how we approach it, and we believe that's the way to make things sustainable.

It's always very important to find out what the other donors are doing so that you have not only a sector-wide understanding but an intersectoral understanding of what donors are doing in environment, development, economic development, and health. That's why we work that way.

The Chair: Colleagues, unfortunately we're over the time now. The ambassador is here. We still have four people who want to ask questions. They could be quite important for the trip. May I just suggest that everybody ask their question and then maybe they can respond in writing, at least, so that we can get the information.

Mr. Grewal, did you have a question? It's more information that we want. I'm going to ask everybody to ask their question, but I'm not going to ask you to give your response, if you don't mind, because that would take about twenty minutes, given the way we usually function, and we don't have twenty minutes. So we'll just go for the questions.

Mr. Gurmant Grewal: Thank you, Mr. Chairman.

Welcome, and thanks to all the members.

I have three quick questions. In improving the human, environment, and health...in the Transcaucasus, Madam Roberts suggested a mixture of privatization and the public health care system. She suggested that the privatization of health services could be a solution in those three countries. When we resist the same solution in Canada, how can we propose that same solution in those three countries? That's the first question.

Ms. Janet Hatcher Roberts: Maybe you might like to read the document over.

Mr. Gurmant Grewal: Page 3 actually is what deals with the privatization of—

The Chair: We're now doing exactly what we're trying to avoid.

Mr. Gurmant Grewal: I would like to know this from Mr. Ladhani. On the 3,600 jobs that were created with the help of CIDA, what was the amount utilized to create those jobs, from CIDA as well as from the private sector?

The third question is this. Mr. Ladhani mentioned the religious extremism in those countries. We know what's happening in Chechnya. In most of the countries, the Muslim population is over 51%. I would like to know, with due respect, what are the threats of extremism from his point of view in these countries. The same scenario as Chechnya is not there, but is there any threat that something like that can happen in some other countries?

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The Chair: Maybe you would be good enough to take those under advisement. You could just drop us a quick note. Would that be all right?

[Translation]

The Chair: Do you have any questions, Ms. Debien? Mr. Rocheleau?

Mr. Yves Rocheleau (Trois-Rivières, BQ): My questions relate to the second document that you tabled with us. You describe a particular incident and I'd like to know how the people of Kyrgystan feel about Cameco, which was introduced to the government by a businessman from the former Soviet Union, where corruption is a big problem. It would seem that this incident led to the government's resignation in 1993. You mentioned a helicopter that apparently crashed, killing 15 people, including nine Canadians. You said that the matter is still tied up in the courts to this day. Where do matters currently stand and what perception do people have of Canada and of Cameco following these incidents?

[English]

The Chair: Dr. Patry, did you want to pose some questions?

Mr. Bernard Patry: Madame Lalonde asked a question, and I'll go in the other direction.

Is there anything that could upset our hosts in visiting them, any taboo subject that we should not ask or talk about?

The Chair: That's helpful. I agree. There are ways to approach them that may be acceptable and other ways to approach them that are not acceptable. That would be helpful, if the witnesses wanted to help us with that. They could drop us a line about that. We'll get it. Don't forget we're leaving Saturday.

Madam Marleau.

Ms. Diane Marleau (Sudbury, Lib.): Some of us are leaving tomorrow; maybe you're not.

The Chair: Oh, okay.

Ms. Jean Augustine: We're leaving tomorrow. There won't be any time.

Ms. Diane Marleau: I have a very pointed, very important question having to do with the mine that I will probably be visiting in Kyrgyzstan. Mr. Homeniuk from Cameco was here, and he assured us that they had an environmental management action plan, that that plan had been approved by all sorts of groups, including NGOs, and that they had NGOs supposedly monitoring this environment management action plan. I want to know, because our researchers have not been able to get this—we were told it was on their website, on a website. We haven't been able to find anything like that. Are you aware of this? Do you know where it is? Can we get it? We've asked for it and we haven't had any answers back on it.

The Chair: Maybe you could provide that to us.

Ms. Joan Kuyek: There are the numbers of two NGOs in the footnotes to the written presentation that I thought might help in trying to identify those people. I'd suggest trying to talk to Natalia Ablova.

The Chair: We've got the notes. Actually, I was given this also, Diane, which you might want to have a look at.

Thank you very much. We really appreciate your coming. We apologize. Sometimes we have to kind of rush people. It was a very thoughtful panel and very helpful to us in formulating our ideas. I regret the fact that we're going to have so little time in such an area that's so rich in experience, where we might be able to be helpful, but that's the parliamentary life. That's all we get. Thank you very much for coming.

You might want to stay and hear the ambassador from Kazakhstan, who has been good enough to join us.

Ambassador, would you care to come up and join us at the table?

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The Chair: Colleagues, we're happy to welcome the ambassador of Kazakhstan, who has been good enough to come up from Washington to join us and to give us some background on his country. Ambassador, we'll have about 40 minutes. Perhaps you could make your presentation, and I know the members will have some questions they'd like to ask you.

Mr. Bolat Nurgaliyev (Ambassador of the Republic of Kazakhstan to Canada and the United States): Thank you, Mr. Chairman.

Distinguished members of the committee, I am indebted to the House of Commons Standing Committee on Foreign Affairs and International Trade for having invited me to share my thoughts on our challenges and successes in nation-building and on our vision of the future.

Judging from what you just heard from the previous panel, I understand that you have studied the region, and you may know the basic facts about Kazakhstan. But still I would like to quote some, because they are illustrative as to the background for the problems and the challenges we have to overcome and the way our future will be shaping.

Kazakhstan is located in central Asia, south of Russia and northwest of China. The total area is approximately three times less than Canada, but we are still number nine in the world, and we are five times the size of France. Independence was gained in December 1991. The population is comparatively small for the size of the territory. It's 15.6 million.

Kazakhstan is an ethnically diverse country with more than 100 nationalities, with Kazakhs composing about 52% of the entire population, Russians 31%, and Ukrainians 4.4%. We have Tatars, Germans, Polish people, Chechens, Koreans, and many others.

There are two major religions, Islam and Christianity, and other religions are also represented and encompass about 9% of population.

The Kazakh language is spoken by over 52% of the population, and it is the official state language. The Russian language, which is spoken by two-thirds of the population, is used in everyday business and enjoys equal status under the Constitution.

About 98% of those age 15 and over can read and write. We have in the region of central Asia the largest number of publications. Last year 1,500 different newspapers and magazines were published in the republic.

In terms of natural resources, Kazakhstan is richly endowed. We have the world's largest reserves of barite, lead, tungsten, and uranium; the second largest reserves in the world of chromite, silver, and zinc; the third largest of manganese; and significant deposits of copper, gold, and iron ore.

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When we are talking about the energy sector, which in the introduction to today's hearing was mentioned as one of the leading factors for the growing interest in the region, we can say that the current oil reserves in Kazakhstan amount to 35 billion barrels, and the projected oil reserves are at about 100 billion barrels, making Kazakhstan potentially in the first ten in the world.

Kazakhstan has the highest net foreign direct investment as a percentage of GDP. Thus we are one of the leaders in terms of per capita FDI in all post-Soviet economies. Kazakhstan has a balanced export composition, which is distributed among natural resources, agricultural products, and other non-commodities.

As I said, Kazakhstan inherited a potentially unstable mix of diverse ethnic groups, but we all have worked hard not to let extremism and intolerance get the upper hand. We are determined to follow a path of peaceful change despite the difficulties we encountered at independence.

Like other former Soviet republics, we inherited a country that was exhausted economically, with our infrastructure in decay and our environment at risk. The cards were stacked against us, and many speculated that our people, faced with increased tension at times of economic crisis, would also be tempted to turn against each other. But it didn't happen.

In the face of severe adversity, Kazakhstan's people have proven that we can do without dividing our citizens along ethnic, racial, or religious lines. Instead, we have built a national unity based on shared values and a common commitment to maintain our nation's independence and to expand individual rights, democratic institutions, and free market institutions.

Building a new democratic state cannot be done quickly or easily. Unlike some states in central Europe, Kazakhstan had no democratic institutions or infrastructure, thus no foundation in place to build upon. We lacked a middle class that embraced a strong business ethnic and an engaged and involved civil society. Instead, we had to take every step for the first time, requiring that we be certain to have our footing sure. Every reform has been constructed from the ground up, necessitating that a firm foundation first be set.

Yet despite these circumstances, in just over eight years we have set the framework for a stable, pluralistic, and modern society.

Undoubtedly our new nation is a work in progress, but measured against any objective historical standard, the pace of our development and the breadth and depth of our transformation has been truly extraordinary. This is especially true if you consider the extreme disabilities we inherited and the severe constraints under which we act.

We live at the centre of a vast and complex region of tremendous geostrategic significance. Around us are forces of extraordinary flux that present our country and our neighbours with constantly shifting strategic challenges.

To our north, we share a 7,000-kilometre border with Russia, a great military and political power coping with economic turmoil and clashes among political interests from across the spectrum.

On our eastern border, we have 1,400 kilometres with China, a giant whose agenda includes a huge number of competing economic and political challenges.

To the south, we watch as the explosive combination of religious fundamentalism and terrorism creates political instability that threatens our fellow central Asian countries. Specifically, I am referring to Afghanistan, where the locus of international terrorism has shifted.

To the west, across the Caspian, ethnic, religious and territorial conflicts remain unresolved in the Caucasus.

In this dangerous and hardly predictable environment, Kazakhstan stands as a bulwark of moderation and stability for this vast region, as a constant force for peace and progress, as a champion of civilized mechanisms to solve disputes and promote confidence.

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Our choices are clear and firm. First of all, we are determined to remain independent and to continue a peaceful, phased transition to a democratic society. We are committed to building on our record of nuclear disarmament, to opposing further proliferation of weapons of mass destruction, and to maintaining strict export controls that will prevent sensitive technologies and materials from slipping into dangerous hands. We are determined to act vigorously against extremism of any kind, whether religious fundamentalism or political terrorism.

We'll continue to work through international and regional institutions, including the United Nations, the OSCE, the Commonwealth of Independent States, the North Atlantic Partnership Council, and the emerging institutions linking central Asia and the Caucasus, which foster the peaceful resolution of disputes, economic integration, and the spread of democratic and pluralistic principles.

We'll develop our potentially vast energy resources carefully and soundly to protect the environment, while supporting multiple energy transit routes that will provide diverse markets with a new secure alternative supply of energy and strategic raw materials.

We have turned away from a centralized economy to a full-fledged free market. We have turned away from total government ownership of all enterprises to across-the-board privatization of all small, medium-sized, and large businesses, with many companies now owned and operated by foreign investors.

We have cut red tape and streamlined the government, undertaken radical tax reform, and created a liberal, incentive-based tax system. We have introduced radical pension reform based on individual savings accounts.

We have worked to maintain strict budgetary discipline, necessitating a series of painful expense cutbacks.

The national currency of Kazakhstan, the tenge, has stabilized at a level that would allow trade to be revived and longer-term growth to proceed.

With liberalization of foreign trade in progress, we now hope to accede soon, and on favourable terms, to the World Trade Organization.

We continue to be guided by two basic principles. First, economic and political liberalization must go forward together. Historical experience demonstrates that neither economic nor political reform alone can truly succeed. We are determined to continue to move ahead simultaneously with a balanced and complementary program to strengthen both democratic and free market institutions. Secondly, the pace of fundamental change must be deliberate but not abrupt. Consistent and measured reforms are most likely to take hold and flourish.

That is the course we will continue to steer, with a carefully designed and carefully implemented program that is customized to the history and culture of Kazakhstan.

For the past two years, we have been gaining tangible and important results in our new political reform program, which includes reforming the electoral system, the growth of political parties, the introduction of central Asia's first system of proportional representation, the strengthening of our civic institutions by improving the laws relating to NGOs to make it easier for them to operate, adoption of new laws on the media to safeguard a free press, ensuring that freedom of religion is guaranteed to all faiths, and mounting an aggressive attack on corruption under tough new anti-corruption legislation. This ambitious program is in progress and will achieve its goals on a realistic schedule. We'll move forward deliberately, at our own pace. But one thing is for sure; our direction will always be forward.

Kazakhstan has every reason to be proud of what we have accomplished in eight and a half years of independence. We have completely eliminated our nuclear arsenal, the fourth largest on the planet, and have closed the world's largest nuclear testing facility.

We have built good relationships with neighbours all around our national borders. We are not in confrontation with any country in the entire world.

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We have reduced inflation from 3,000% to under 4% currently. We maintain excellent relations with the IMF and World Bank, keep budgetary discipline, and are working efficiently to find a natural, realistic market equilibrium.

We are attempting to redress the Soviet legacy of environmental degradation that has all but effaced the Aral Sea, polluted our waters, and injected insidious nuclear contamination into our soil.

We have guaranteed basic individual rights of free speech, freedom of religion, and full political participation and equal citizenship without discrimination based on nationality, gender, or religion.

We are building institutions of democracy that have taken others generations to construct with the early and sound development of political parties, NGOs, and an independent press.

We look down the road at what has been achieved by countries like Canada with highly developed political and economic systems. We ask our friends in the west to stand with us by providing assistance while according us the patience and respect to find our own way.

In the days ahead, we need to continue standing together as we are increasingly doing on issues of common concern—from the development of Caspian energy reserves and energy transportation issues, to the non-proliferation of weapons of mass destruction, to maintaining security and stability in the region.

We are pleased by the growing interest of the west in central Asia and its willingness to assist the nations of the region in moving to establish healthy and productive societies. I am confident that the planned visit of Canadian parliamentarians to Kazakhstan and other countries of the region will be a major impulse for strengthening already dynamic bilateral Kazakhstani-Canadian cooperation in different spheres.

I would like to use this opportunity to wish you an interesting, pleasant, and informative journey.

Thank you, and I invite your questions.

The Chair: Thank you, Your Excellency.

I have Mr. Grewal, Mr. Morrison, and Mr. Lalonde on the list. Is there anybody else? Madam Marleau?

Okay, let's go at it.

Mr. Gurmant Grewal: Thank you, Mr. Chairman. Through you, I welcome the ambassador, who came from Washington, DC.

Mr. Ambassador, we appreciate your presentation, and I'm delighted to hear about all the progress you have made in reforming the electoral system, the growth of political parties, and in particular the radical tax reforms. So if you could dwell on what kinds of radical tax reforms have taken place, that would be one question.

The other is that managing 100 different ethnic communities in the country is really a challenge. How do you achieve integration rather than segregation, and how are people addressing each other? What kind of socio-cultural environment exists in the country?

For example, in Canada we believe in multiculturalism. We have hyphenation—people address each other as Indo-Canadian, French Canadian, Chinese Canadian, and so on.

How do the people address each other and how do they manage to remain integrated in such a diverse state?

I have a third question. You mentioned freedom of the press and the judicial system in the country. Can you give us some idea of what kind of judiciary you have? Is it a fairly independent judiciary?

Mr. Bolat Nurgaliyev: Thank you, sir.

Concerning the tax reforms, the government is very thoroughly monitoring ways to improve the investment climate and looking into the incentives, especially for foreign investors, to be more actively engaged in the economic projects in Kazakhstan. That's one thing.

Another is to see what kinds of problems hinder more active involvement of foreign business in Kazakhstan. For that particular one, a number of institutions were set up, including the Council of Foreign Investors under the president. They have direct access to the president and the prime minister in voicing their suggestions as to what should be done.

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Tax was quoted as maybe the most prominent issue preventing businesses from expanding or new companies coming and settling in. At the outset of independent economic development, there were many tax regimes established. The major task was to streamline and to make the tax regime transparent and understandable. The biggest issue was letting these changes take place in the foreign business community.

The other issue was the implementation. The tax authorities, especially those on the local and provincial levels, would be aware of the new legislation that has been adopted. When we are referring to these drastic tax reforms, I am talking about the main law on tax in Kazakhstan and the clarification provisions that were issued in order to have one set of rules for everybody, which was unfortunately not the case in the past.

Definitely, when we are talking about inter-ethnic relations, the challenge to Kazakhstan may be more complex than others because of the history and how many people came to Kazakhstan. For example, we have a sizeable Chechen community. Those of you who will be visiting the Caucasus will hear a lot about the spillover effects on the situation in the Caucasus republics or the situation in Chechnya.

At end of the Second World War, Stalin deported the entire population of Chechnya to Kazakhstan. The limitations and restrictions on their movements were lifted only in the early 1960s. Still we have maybe half of the entire Chechen population living in Kazakhstan.

This is just one of the examples. These are people who have their roots elsewhere. How will they be feeling themselves, like citizens of Kazakhstan who are treated equally along with the indigenous population or those who are living there through generations? The deliberate policy of the Kazakh government was to make sure there is absolutely no discrimination whatsoever on the basis of nationality, ethnicity, religion, or anything else.

We address each other as.... Well, I mentioned the role of the Kazakh and Russian languages. I think the Russian language will maintain its role as the instrument of inter-ethnic communication for a long time, because the overwhelming majority of people living in Kazakhstan, given the historic background, speak the Russian language. Practically every ethnic Kazakh speaks fluent Russian. We use it in everyday language.

You will see when you visit Kazakhstan that the Russian language is widely used, although there is a deliberate effort also to restore the usage of the Kazakh language, because this is the language of the titular nation. Where else, in any state in the world, could the Kazakh language be encouraged?

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Mr. Gurmant Grewal: Are the government documents translated into both languages?

Mr. Bolat Nurgaliyev: Yes. All the government resolutions are done in two languages, the Kazakh language and the Russian language.

As I said, we do not believe in a mono-ethnic Kazakhstan. We proceed from the understanding that full ethnicity is an asset, not a liability. From this point of view, we encourage people to remain in Kazakhstan, though from the time of the disintegration of the Soviet Union, the population did shrink substantially, maybe to the tune of 2.5 million. There are plenty of reasons for that. I can dwell on them if you are interested, but in general the policy is that of involving people, not estranging them.

There is also the assembly of the People of Kazakhstan, where different ethnic groups have their own organizations, like the society of Poles of Kazakhstan or the society of Koreans of Kazakhstan. They are assembling on a regular basis and voicing their concerns about the social and economic conditions so that the government can hear. They are also promoting specifically the development of their cultural heritage.

In terms of the freedom of the press and judiciary, I mentioned that we have about 1,500 publications, 70% of which are private. There is a new law on mass media, adopted in 1999, which gives the power to close a publication only to the court. No other government institution has the right to interfere with the activities of the press. The judiciary is free. It's an independent branch of the government. The Supreme Court is appointed by the Parliament, the members. They're basing their activities on the respective legislation.

[Translation]

The Chair: Mr. Rocheleau.

Mr. Yves Rocheleau: Good day, Excellency, and thank you for taking the time to come and meet with the committee.

I would like to focus on two of the points you raised in your presentation. The first concerns the struggle that you are waging against all forms of extremism, whether religious fundamentalism or terrorism. I'd like you to elaborate on this point for us.

You also mentioned that you have imposed strict budget discipline that has resulted in painful spending cuts. Could you tell us to what extent these cuts have influenced the position of either the International Monetary Fund or the World Bank?

Witnesses have told us that from a socioeconomic standpoint and in terms of social programs, some ground has in fact been lost since the changeover to a new regime. Are you concerned about the current state of your country's economy? No doubt you are aware that increasingly, capitalism is becoming the focus of world criticism. Witness the recent demonstrations in Washington, Davos and Montreal. How do you feel about this, as a new country that recently adopted a capitalistic system, whether voluntarily and perhaps somewhat reluctantly?

[English]

Mr. Bolat Nurgaliyev: Thank you, sir.

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About extremism, definitely we are concerned about the trend that events in the region are taking, especially after the invasion of Kyrgyzstan, which is a neighbouring republic to Kazakhstan, last year by the Uzbek Islamic insurgents who happened to cross Tajikistan but had their logistic support in Afghanistan.

I mentioned that Afghanistan is the place where the locus of terrorism shifted recently. This is also reflected by the growing awareness of the central Asian republics and other members of the Commonwealth of Independent States that we should fight against this together, because in the absence of a concerted cooperative effort, given the current state of the armed forces of different republics, we can expect that the situation may worsen.

We have conducted several original exercises and we have also arranged several meetings in the region of the heads of the defence establishments and security services to work out the program of the cooperative response to this threat.

Kazakhstan may be a little far from the developments because we don't have a common border with Afghanistan, but definitely the spillover effect is something we are concerned about, and that's why we are actively involved in working out the cooperative approach to this.

About the budgetary discipline, definitely one of the things that were happening in the aftermath of the financial crisis in southeast Asia and in Russia was the contraction of trade and economic relations and a substantial decline of investment from that part of the world. We had to arrange the floating of the national currency, and it was depegged from what was the approach prior to the crisis. One of the immediate measures was to cut the expenses of the government, and unfortunately it did involve a substantial decline in the ability of the government to fund social protection and health programs.

At the same time, I wouldn't claim that the IMF or the World Bank were particularly insisting that this had to be done. Of course they were calling for strict financial discipline and cutting expenses across the board. For example, for defence, although all experts are saying that Kazakhstan needs to maintain defence expenses at least at 1% of GDP, last year it was 0.53%, way below what is prudently required.

The social sector suffered less but still was affected. With the IMF, the biggest problem we have is the ceiling of external borrowing that they are putting on Kazakhstan, and there are good explanations for that, although of course it does limit our ability to have extra resources at the disposal of the government to fund. But with the World Bank, for example, we have a big loan program for the pension reform, which is substantial, and we are expecting the release of the third tranche of this loan by the end of this year. I did mention that we were one of the pioneers of pension reform, although it might have happened at a very unfortunate moment of economic hardship, when the ability of the government to cover the increased expenses was not the way it used to be two or three years ago.

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In general, I would say that in Kazakhstan there is no support for the kinds of sentiments that were voiced during the recent annual meeting of the IMF and the World Bank in terms of saying these are the enemies of society or are hindering social protection programs. On the contrary, I think the role of the World Bank, especially, in assisting Kazakhstan to overcome a major economic, social, and ecological problems is highly appreciated.

Thank you.

The Chair: Mr. Patry.

Mr. Bernard Patry: Thank you, Mr. Chairman. Thank you, Excellency, for your visit here.

In your brief, you stated that Kazakhstan has no democratic institutions or infrastructure, there's no foundation in place to build upon, but that since the independence eight years ago, your country has tried to set up a framework for a stable pluralistic modern society, and your goals are not to divide the ethnic groups but to share values. You're looking at a political reform program that includes an electoral system and the growth of political parties. Knowing that there are more than 100 nationalities in your country, the largest being the Kazakhs and Russians, can you tell me if in the present government many nationalities are represented at the level of minister, high civil servants or deputy minister, or is it just the affair of Kazakhs?

Mr. Bolat Nurgaliyev: No. It definitely is reflecting the composition of the population, if not in absolute terms. We have people of different ethnic groups at the level of deputy prime minister and several ministers. For example, the key ministry of industry, energy and trade is headed by a person of Jewish origin. The chief prosecutor is a Russian. The governors of several provinces are Germans, Russians, Polish. We have this as a policy, and it is not the exclusive domain of Kazakhs. I would say that the basic criterion is of course professionalism. That goes without saying.

Mr. Bernard Patry: Thank you.

The Chair: Ambassador, I appreciate what you're saying about the free courts and the struggle to establish a system where you have clear rules that are enforceable, and that would affect a great deal of foreign direct investment, which you talked about.

But we had a witness before the committee, Mr. Carroll, from World Wide Minerals, and I would say that his story of his company's treatment in Kazakhstan would be somewhat diametrically opposed to the picture you painted for the committee.

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I had someone in my office recently, a Madam Kharitonova, who has imported something like 35 cars into your country. They are still in your country. They were taken. There is a judgment against the government, ordering them to pay, and she has never been able to enforce the judgment. She has never been able to get anybody to help her. Although everybody says they'd like to help, nobody does.

So it seems to me, recognizing that everybody has problems in their system, and we have our problems too—and I'm not being disrespectful in saying this—I do feel it would be difficult to attract foreign direct investment if in fact the foreign community believed that either the rules were not being enforced or when judgments are handed down they're totally unenforceable.

Do you have any comments about either of those two cases? You're probably familiar with them, because I know representations have been made both by World Wide Minerals and by Mrs. Kharitonova, both in Congress and here, about those issues. So they've been brought to the attention of the government. I wonder if you could help us with your perspective on it.

Mr. Bolat Nurgaliyev: Yes, we are aware of the case of World Wide Minerals. Right now it is pending in the district court of Washington, D.C. People who are acting on behalf of World Wide Minerals are pretty active in voicing their criticism about the investment climate in Kazakhstan and in general the treatment that they received.

I would basically say this is a case that has to be decided in the courts, because there are different interpretations. The story of the government is different from what World Wide Minerals management is claiming. They are telling people that they were made to understand, at the time they were entering into this project in Stepnogorsk, that they would be given southern mines and that's why they decided to invest. However, the position of the Kazakh government is that this was never promised.

So this is the clear-cut discrepancy in terms of the basic provision of what the company was expecting. Once World Wide Minerals became frustrated with the lack of progress in obtaining southern uranium mines, it stopped financing the social infrastructure the way it was put in the contractual obligations for the Stepnogorsk city.

So the government had no other option, with the onset of winter, but to take back the contract. As for the claims, I think the government will abide by the decision of the court once it is made.

The case of Mrs. Kharitonova is a combination of several factors. One is poor judgment in setting up a business transaction with an unreliable partner, who happened to live is Kazakhstan but is a citizen of the Russian Federation. He cheated Mrs. Kharitonova into providing these cars, and once they were delivered he didn't pay.

The second set of factors that I, as the representative of Government of Kazakhstan, will acknowledge is that the court system in this case was not performing up to the expected standard. The case was reviewed for too long by too many judges, and each was dragging his feet. That's why, since 1994 until 2000, there was a lack of clear-cut judgment, which resulted in these cars, while they were in the custody of the police authorities, to be disassembled and some spare parts vanished.

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The government is saying she may take these cars, but of course Mrs. Kharitonova is saying “What am I going to do with them?” I would be very sympathetic with her position because of course their commercial value is not what it used to be.

I know this case is being now started at the inter-agency level, with the involvement of the ministry of justice, and the solution will be found based on the existing legislation in Kazakhstan; that is, if a citizen or a commercial entity suffers material injury due to inaction of the government agency—and in this case it was the Kazakh police authorities whose custody these cars were under—then the government has to pay from the state budget. And I anticipate that this will be the outcome.

As for the judges who were guilty of not performing their duties, four of them were disciplined.

The Chair: Thank you very much. It's very helpful.

Mr. Morrison, a quick question, and then I think we'll fold.

Mr. Lee Morrison: Thank you, Mr. Chairman.

Welcome, Mr. Ambassador. It is very kind of you to make that journey to come up just for us few.

I was going to ask you in some detail about the World Wide Mineral situation; however, my chairman has pre-empted me on this. Still, though, I have one question that I find very puzzling. Perhaps there's some misinformation going around. As you know, there have been terrible shock waves in the international mining community over this situation. I mean, this is of great international interest to investors.

It was my understanding, from the press and from various conversations I've had, that the problem with World Wide Minerals was that they were not given permits and could not get permits to export their product, which of course makes it impossible to conduct an operation. You can't mine if you have no income, and you can't have income if you can't export your product. So they were placed in what we refer to as a catch-22 situation. You cannot resolve your problem because you have this force majeure.

Now, is it true that they couldn't get export permits, or is this false information that is being disseminated?

Mr. Bolat Nurgaliyev: Well, as I mentioned, the major claim that World Wide Minerals had was for the southern uranium mines. They were saying that the mines they were getting in the north were coming to depletion, and commercially the product would make sense only if they were able to get access to these southern mines. But the position of the government was that that thing was never promised.

The second part is the confusion about the action of the KazAtom-Prom—that is, the Kazakh nuclear industry association—as to their providing exclusive rights to a German-based company, NUKEM, for the export of uranium concentrate from Kazakhstan. What happened was that at the signing of the contract, World Wide Minerals wasn't made aware that another company had exclusive rights. Then once this dispute started about getting the licence, World Wide Minerals was told that this was the development and they had to negotiate with these people the right to export under their licence.

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So I think this is a combination of several factors. We do not claim that the actions of the KazAtom-Prom were perfect. They should have been open with the contracting party, but also this is an issue of due diligence on the part of World Wide Minerals, attempting to do this without studying properly what the consequences are. So whether they should be blamed for that is beyond my competence. I wouldn't claim to say who is more right or less right. That's why I'm saying, given all the facts, we would abide by the decision of the court.

The Chair: In the end, Ambassador, I think probably what you told us is that all this will end up being sorted out in front of the U.S. district court, and Kazakhstan has accepted the jurisdiction of that. So I guess that will determine the issue.

Mr. Bolat Nurgaliyev: Yes. That's pending one of the parties to this.... World Wide Minerals is accusing me of telling them that there would be a resolution of this case and that's why they lost time, in anticipating that the government was going to act, though I was doing my best to maintain a good relationship with the Canadian company. This indeed was the case, because prior to bringing it to the court, there were different options started by the government as to how to resolve it so that the investment climate and the image of Kazakhstan would not suffer. Then there was also another dispute about the actual size of the investment. World Wide Minerals claims one, and the Government of Kazakhstan, after the calculations, quotes another. So, again, it has to be established.

The Chair: I think we're going to have to stop, because we have only 45 minutes, and then another meeting is taking place here at 1 p.m.

Your Excellency, I want to thank you on behalf of the committee for coming up from Washington. I'm sorry we didn't have a chance to ask you what your view of the American interests are in your region, but since you are in Washington, you're no doubt very familiar with those. We may have an opportunity to have that conversation another time, maybe in Kazakhstan.

Thank you very much. We appreciate your coming and taking the time to see us, and we hope you have a good trip back to Washington.

Mr. Bolat Nurgaliyev: Thanks so much, and bon voyage to everybody travelling to central Asia and the Caucasus.

The Chair: Thank you.

The committee is adjourned, but the members who are travelling are asked to stay to get the briefing as to the trip.