The Honourable James Moore, PC, MP
Minister of Industry
May 28, 2015
Check Against Delivery
Good morning, everyone. Thank you, Mark, for that warm welcome.
And a special thanks to Seaspan Shipyards for hosting this morning’s breakfast.
I’m pleased to be here to talk about how the Government is working to keep the aerospace, defence and security industries competitive.
Canada’s economy is widely recognized as one of the world’s strongest, with more Canadians working today than at any other time in our history.
In fact, since the depths of the recession, our economy has created over 1.2 million net new jobs—one of the best job creation records in the G7.
And Canada’s total government net debt-to-GDP ratio is less than half the G7 average. What’s more, for the past decade, Canada has led the G7 in economic growth—even during the recession and the recovery.
This is not by accident. Our government has budgeted responsibly and kept spending under control—all without raising taxes. In fact, we have lowered taxes in nearly every way in which the federal government can collect taxes.
And I’m pleased to note that our actions have resulted in a favourable environment for investment by businesses in all sectors of the economy.
Indeed, in March, manufacturing sales rose by almost 3 percent to $51 billion, with positive sales growth reported in nearly half of our industries.
Specifically, manufacturing sales in the aerospace products and parts industry increased by over 42 percent in March.
This is positive news across the sector.
Action to Date
We have been actively putting in place the conditions for growth in the aerospace, defence and security industries.
And, as you know, military procurement plays a major role in the Canadian economy.
Our defence sector:
- includes over 650 firms;
- directly and indirectly employs more than 65,000 full-time workers; and
- contributes $9.4 billion to Canada’s economy each year.
As for aerospace, we have responded to the key recommendations in the Emerson report.
For example, we launched the Consortium for Aerospace Research and Innovation in Canada. This research network recently established five regional offices and now has a local presence across the country.
We created the Technology Demonstration Program.
It supports large-scale aerospace, defence, space and security projects led by Canada’s top companies. We will soon have news to deliver on this.
Another important investment is, of course, stable funding of $1 billion for the Strategic Aerospace and Defence Initiative, which you know as SADI.
I’d like to offer congratulations to a recent SADI recipient: L-3 WESCAM, headquartered in Burlington.
With our government’s investment, WESCAM will partner with more than 60 suppliers from across Canada to develop new high-tech air, land and sea surveillance cameras and sensors that are essential to Canada’s defence, security, and search and rescue operations.
This support will also leverage an additional $113 million from L-3 WESCAM for Canada’s economy. This is exactly what SADI is designed to do. And it’s good news across the defence and aerospace sector.
Our most recent budget announced a new Accelerated Capital Cost Allowance for investments in manufacturing and processing machinery and equipment. This new 10-year investment incentive will provide concrete support for your industries over an extended period of time to help plan the investments needed to compete in a global economy.
And specifically for defence, Economic Action Plan 2015 proposed to increase the budget for our country’s military by $11.8 billion over 10 years to help ensure that Canada can continue to field a modern, combat-capable military ready to respond in the defence of Canada both at home and abroad.
This investment will strengthen our government’s Defence Procurement Strategy, which is designed to ensure that we deliver the right equipment and services while generating economic benefits and jobs for Canadians.
As you know, the Defence Procurement Strategy represents a fundamental shift in the Government’s procurement approach.
Under this strategy, my department designed and is now implementing the new Industrial and Technological Benefits Policy.
The need for a new policy approach was made clear by two expert panels over the past year, which were led by David Emerson and Tom Jenkins.
The Value Proposition Guide describes how the Industrial and Regional Benefits (IRB) Policy has been transformed with the introduction of a new feature: the value proposition.
Winning bidders are obligated to undertake business activity in Canada equal to the value of the contract. As competition for those contracts is based on the economic benefits to Canada, we expect higher-quality investments.
Our relationship with industry is at the core of the Defence Procurement Strategy.
In recent months, we asked for your input on adjusting the Industrial and Technological Benefits (ITB) Policy.
We listened and made strategic decisions. I am pleased to announce that we are bringing in changes to the policy that will:
- attract earlier investment in Canada;
- encourage prime contractors to increase partnerships with small and medium-sized companies;
- reduce red tape; and
- increase the accountability and transparency of the ITB Policy.
Our low taxes and open markets make Canada an incredibly attractive place to do business.
But to attract more investment in Canada, we will make changes to the ITB Policy’s banking provision. As you know, our banking provision currently allows companies to undertake business activities in Canada prior to the procurement and to bank these investments for credit against later ITB obligations.
To encourage project leaders to invest in Canada before entering into an ITB agreement, changes to the ITB Policy will:
- allow banking for up to 10 years before the procurement;
- eliminate depreciation of banked activities;
- allow banking on overachievement of contractual obligations; and
- allow credit for your banked activities when these investments are made in Canada.
We are also improving the policy’s pooling provision, which allows companies to get credit against multiple procurement obligations for investments in Canada. To this end, we will decrease the threshold for a pooled activity to $50 million. All prime contractors will be able to pool transactions.
Small businesses are an important driver of Canada’s defence sector. To encourage prime contractors to give more work to smaller firms, our second group of changes involve increasing the cap on investments in SMEs that qualify for multipliers and streamlining the application process.
Reducing Red Tape
Third, to ease the red tape that companies face when reporting to the Government, we are implementing an electronic template for annual reporting that clarifies the information required and streamlines reporting.
We are also putting in place a six-month service standard for verifying transactions and awarding credits.
Increasing Accountability and Transparency
Finally, to increase accountability and transparency, starting this fall, we will report annually on companies’ progress in meeting their IRB and ITB obligations.
In summary, the ITB Policy is a powerful new investment-attraction tool for Canada. These policy and administrative changes will build on the important achievements made under the Defence Procurement Strategy.
They will ease your compliance burden, attract long-term investment and help you form partnerships that grow your businesses. And they will ensure that future procurements are of even greater benefit to Canada.
Defence Analytics Capability
Tom Jenkins’ report recommended that we strengthen Canada’s analytical capacity in order to maximize the economic benefits from defence procurement.
That’s why Economic Action Plan 2015 is providing $2.5 million per year to increase Canada’s defence analytics capacity. This investment will support expert data analysis and research on the key industrial capabilities within Canada’s defence industrial base.
So lots of changes and lots of action in response to what the industry was calling for.
Aerospace Supplier Development Initiative
David Emerson’s report recommended that we create a national aerospace supplier development initiative.
In Economic Action Plan 2015, we committed $6 million to work with the AIAC and other stakeholders to create such an initiative. We will model it on the successful MACH program pioneered by Aéro Montréal.
The new program will improve the performance and competitiveness of firms, many of which are SMEs. It will also benefit large aerospace firms, which require a healthy supply chain to support their global growth.
Canada’s space firms are global leaders in the defence and security industries.
Our government is taking key steps to deliver on the priorities of Canada’s space industry to ensure Canada remains a global leader in the fiercely competitive international market.
I’m pleased to highlight that Budget 2015 includes an important commitment to extend Canada’s participation in the International Space Station to 2024.
It also includes a new $30-million investment in support of our partnership in the European Space Agency’s Advanced Research in Telecommunications System program.
Through this program, Canadian companies in the satellite communications sector will have the opportunity to simulate their technologies in space, an essential part of commercialization.
We are seeing early success stemming from these measures.
For example, Bluedrop Performance Learning in St. John’s has grown from a 20-person company to a firm with more than 130 employees. Bluedrop credits our offset policies for this success.
I would also mention Montréal’s Ultra Electronics TCS’s recent sales successes in international markets as varied as Africa and Europe. This SADI and defence contract recipient is also pursuing U.S. contracts. I understand that its latest radio solution is performing very well so far in trials.
And over on the West Coast, OSI Maritime Systems has recently signed a contract with Lockheed Martin Canada to build, deliver and support the installation of the Integrated Navigation and Bridge Systems for the Royal Canadian Navy’s Arctic/Offshore Patrol Ships.
These examples demonstrate that our support drives economic development in all regions of Canada.
Thanks to our close collaboration with industry—with you—Canada’s aerospace, defence and security industries are strong and growing.
Thank you very much.