It may have a new location, but even before the doors are open, the proposed Canadian Infrastructure Bank (CIB) is on shaky ground.
The federal government recently announced Toronto would be the new home for the CIB. However, much is still unknown about the project, and the government has come under fire for the proposed model of the Bank as well as the level of involvement of wealthy private investors.
The government’s decision to base the Bank in Toronto is based on the presence of all of Canada’s major financial institutions’ infrastructure arms, as well as most of the country’s public-private partnership firms.
Conflict of interest concerns raised
The government has faced criticism over the level of access and involvement wealthy private investors, like BlackRock, the world’s largest asset manager, have had over the development of the CIB.
“The Prime Minister has turned to BlackRock for all kinds of advice setting up this bank. That is like the three little pigs hiring the big bad wolf to be their contractor,” said Conservative interim Leader Rona Ambrose. “Everyone can see the conflict of interest here. It is obvious, and thanks to the Prime Minister, the rich just keep getting richer. Who is going to stick up for the taxpayer?”
Giving up ownership of our public assets
The government is also drawing fire for the new ownership model of Canada’s infrastructure proposed with the bank. Under the traditional model, infrastructure typically is owned by the government — simply put, Canadians collectively own it.
This ownership model would change under the CIB. For the first time, private institutions – in some cases, even foreign entities – would be able to own pieces of our infrastructure, allowing them to charge the Canadian public fees for using them.
Under this model, we would own nothing. But Canadians would still end up paying for these assets through tolls and user fees – in fact, privatization could cost us more. This raises the question: why would we sell off our valuable public assets to the private sector?
Publicly-funded infrastructure will save money
An alternative to the proposed model of the CIB is to continue to own our own public infrastructure. The government can borrow money at significantly lower rates than the private sector, saving Canadians big.
“With yields on 30-year Government of Canada bonds currently sitting around 2.2 per cent, the federal government can almost literally get ‘money for nothing’,” note analysts Asfar Ali Khan and Randall Bartlett in a report for Ottawa’s Institute for Fiscal Studies and Democracy.
Khan and Bartlett caution that more careful assessment is needed before Canada starts “shovelling money out the door.”