National Post (National Edition)
Trudeau must back off for Infrastructure Bank to succeed
Prime Minister Justin Trudeau, the daily face of his government's response to the COVID crisis, wasn't going to miss a $10-billion announcement.
So there he was on Thursday, big-footing his infrastructure minister, Catherine McKenna, to lead the press conference on the Canada Infrastructure Bank's new spending plans.
The To - ronto- based Crown corporation is supposed to have little to do with the Prime Minister's Office, but never mind that.
For Trudeau, the appearance came with the added bonus of getting to place himself above the bank's chair, Michael Sabia, a legend of Canadian business who commands something the prime minister and his government lack with the Bay Street crowd: credibility.
If you were Trudeau, you
would have crashed that party, too.
That's politics. Former prime minister Stephen Harper was playing the same game in 2014 when he summoned Stephen Poloz, the new central bank governor, for a photo-op, even though the central bank's only contact with the government is technically supposed to be just the occasional meeting with the finance minister.
Some leaders can't help reminding everyone who's boss.
Trudeau did Sabia no favours by showing up for the announcement of CIB's new “Growth Plan,” which puts major cash on the table for private investors willing to partner with the infrastructure bank on initiatives related to clean energy, retrofitting buildings to make them greener, electric buses and agricultural irrigation.
The star-crossed infrastructure bank, which was seeded with $35 billion in 2017 that it has struggled to spend, will only succeed if investors are confident it operates free of political interference. Thanks to Trudeau, it is now fair to wonder who is calling the shots, which might be why Sabia made a point of stating that the new initiative was his doing, not that of the politicians who joined him in front of the cameras.
“Today's plan was carefully designed, step by step, by the Canadian Infrastructure Bank,” said Sabia, the former head of Caisse de dépôt et placement du Québec. “This plan is the result of meaningful, serious analysis of current and future profit. This plan is the real deal.”
Bloomberg was having none of it, crediting Trudeau with mapping out the initiative. It might have been journalistic shorthand, but it shows that Sabia has some work to do in convincing the public that CIB is a serious institution and not just an off-balance-sheet fund for the Trudeau PMO's pet projects.
Sabia might be able to pull it off. He wasn't looking for a job — he was running the University of Toronto's Munk School of Global Affairs and Public Policy — when he agreed earlier this year to reboot the infrastructure bank after a terrible start that included the abrupt departure of its chief executive officer.
Sabia knows what he's doing: he transformed the Caisse into a world-class institutional investor that oversees more than $300 billion in assets during a decade-long tenure that ended in February. He ranks high on the list of the Canadian establishment's best and brightest, and has earned the benefit of the doubt.
Nevertheless, opposition politicians aren't impressed and still sneered at CIB's latest plan. The Conservatives re-upped their pledge to kill the infrastructure bank if they ever get a chance, even though much of the spending will take place in Western Canada, home to the vast majority of their supporters.
New Democratic critics reiterated their position that Trudeau should simply plow the $35 billion into the economy without delay.
Rounding up the money for infrastructure projects probably isn't the issue.
There is no shortage of wealthy fund managers who are keen to deploy long-term capital for returns greater than 1.5 per cent, which is all you can get on a 30-year U.S. bond these days. The idea that a government could take advantage of a unique moment in history to amplify the impact of public funds remains a good one.
The problem has been execution.
For whatever reason, the infrastructure bank has failed to gain traction.
Trudeau and Sabia admitted as much. “We put forward something extremely innovative and, quite frankly, we then had to figure out how to deliver,” the prime minister said.
One issue could be the public's general distaste for user fees, which makes turning public funds into profitable investments politically difficult, since it's the prospect of a consistent revenue stream that pension funds and other institutional investors are seeking in return for their upfront involvement.
The official Opposition's insistence that it would kill the infrastructure bank probably makes some potential partners nervous, too. And the PMO's tendency to micromanage probably isn't helping, as the newest Crown hasn't had a chance to create distance from the centre.
If Sabia manages to get CIB out of its rut, it's possible to imagine good things. Take his idea to spend $1.5 billion on electric buses. It could lead to a pile of orders for Lion Electric Power Co., the Saint-Jérôme, Que.-based maker of electric buses that has recently secured orders from Canadian National and Amazon.com Inc., assuming Lion wins whatever contracts will come. Smart governments build national champions by giving potential winners a chance to succeed, rather than lathering them with subsidies.
But politicians will have to get out of the way.
Trudeau's many critics would have been surprised to see him douse suggestions that the infrastructure bank could be used for “social infrastructure” such as longterm care homes or to rescue industries like retail and aviation, reminding reporters that the infrastructure bank's mission is to make money for both itself and its partners.
It's a start.
There's a long way to go.