Sales pitch urged for infrastructure plan’s economic benefits

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Canadians need to be sold on the economic benefits of private-sector investment in infrastructure – and the fees and tolls that may come with that, the chair of the federal government's council on growth says.

Dominic Barton, who heads Ottawa's Advisory Council on Economic Growth, said Canada lags far behind many countries in taking advantage of private financing to help fund large-scale projects, adding that infrastructure needs in Canada far exceed the capacity of governments to pay for them alone.

After months of working with Finance Minister Bill Morneau and other officials, Mr. Barton's council issued initial recommendations on Oct. 20 on how to jolt the country's sluggish economy.

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Mr. Morneau responded Tuesday in his fall fiscal update that Ottawa will act on one of the recommendations – creating an infrastructure bank – as soon as next year. He also confirmed the government will accept the council's advice on measures to attract foreign talent and investment, promising to launch an Invest in Canada hub and to fast track processing for high-skilled temporary foreign workers.

"We have to do more on the communication side, because even on this toll thing, in Canada we are just far on the end of the spectrum of not doing this versus other countries," Mr. Barton, global managing director with McKinsey & Co., told The Globe and Mail on Wednesday. "It's not to say that that's necessarily a bad thing. We just should recognize it and say that's why some places, Chile, Australia, even Brazil and the U.K., their infrastructure is better because they're able to get the capital."

Mr. Barton, noted that privatizing assets such as airports is common internationally and Canadian pension funds are already investors in London airports, with little obvious controversy.

The infrastructure bank, to be capitalized with $35-billion in federal funds, would rank major projects and seek private partners like global pension funds in order to leverage public money in a way that gets more projects built more quickly.

Mr. Barton says he is "excited" over the government's response to the council's advice on the bank. However, there is clearly a need to address criticism of the infrastructure bank, he said, given that some of the reaction to the council's recommendation has focused on concerns related to privatization and the potential for more user fees such as tolls.

Mr. Barton appeared last week as a witness via video before the House of Commons finance committee, where he faced some of the political concern generated by his panel's recommendations.

Specifically, the NDP and one Liberal MP expressed strong reservations about privatization and questioned whether a major push toward public/private partnerships in infrastructure is in the best interests of Canadians.

The growth council – which includes institutional investor executives such as Michael Sabia, president and chief executive officer of the Caisse de dépôt et placement du Québec pension fund – argues there is huge global demand for opportunities to invest in major infrastructure projects that are worth at least $100-million.

Council members have indicated that investors are open to a wide range of partnerships, but are particularly interested in established assets that have a clear revenue stream, like toll roads and highways.

Mr. Morneau appeared Wednesday before the committee, where he answered criticism from NDP MP Guy Caron over the infrastructure bank and the potential for more tolls.

"Canadians voted for small deficits to invest in public infrastructure, and right now what they're getting is larger deficits to pay for the privatization of what they have paid for," Mr. Caron.

Mr. Morneau responded by saying that attracting institutional investors will benefit Canada over the long term.

"We recognize that a way to get more done is through working together with partners," he said. "And to the extent that there are pension funds that seek to be involved in infrastructure funding and we can do more because we have access to outside capital – more that will create more Canadian jobs – that will create better long-term infrastructure, that's positive."

In October, the growth council also recommended a 50-per-cent increase in immigration.

The government responded by keeping annual immigration at 300,000 but shifted the focus in favour of economic immigrants.

Mr. Barton said the 2017 immigration target announced Monday is higher than in recent years and praised the shift toward economic immigrants. He said faster processing of foreign skilled workers will "help big time" in boosting innovation.