In our new monthly series, the OMX Files tells you what you need to know about defence and procurement in Canada and around the world - including federal budget and spending, Canadian strategy and trends, international relations, and in-depth features and analyses.
Federal budget and spending
April 1: $2.3 billion over six years to improve government IT services, infrastructure, and services
Starting in 2018-2019, Budget 2018 commits $2.2 billion over six years (and $350 million per year thereafter) to "improve the management and provision of IT services and infrastructure within the Government of Canada, and to support related cyber security measures." An additional $110 million over six years has been earmarked for migration data to more secure or cloud solutions.
The IDEaS program looks to leverage Canadian innovation from companies, universities, and consultants to solve pressing defence challenges. The program comes with $313 million in funding for various projects over the next five years and a total $1.6 billion over the next 20 years.
The three themes are: people and enhanced human performance, threat anticipation, and adapting to a changing environment.
The first deadline closes on May 24 with the first contracts expected to be awarded in Fall 2018.
April 16: $50 million towards next-gen helicopters
ISED is funding $49.5 million towards making next-generation helicopters that have fully autonomous aerial systems and are more energy and noise efficient and environmentally sustainable. There are18 industry and academic partners led by Bell and include Pratt & Whitney Canada, CMC Electronics, and Esterline Technologies Corporation.
The 2018–19 Main Estimates provide information to support the Government’s request for Parliament to approve $276 billion in spending to deliver programs and services in the fiscal year starting April 1.
The 2018–19 Departmental Plans contain additional information on how government departments plan to spend these funds, including expected outcomes and the actual results achieved.
Federal spending has increased by $5.6 billion (2%) at $276.6 billion. The Department of National Defence (DND) is the third largest department in terms of spending at $20.4 billion.
First announced in Budget 2016, Investing in Canada was expanded upon in Budget 2017 to improve five priority areas:
- Public transit ($28.7 billion in funding)
- Green infrastructure ($26.9 billion in funding)
- Social infrastructure ($25.3 billion in funding)
- Trade and transportation ($10.1 billion in funding)
- Rural and northern communities ($2 billion in funding)
Canada's next generation of ships has been estimated to cost between $55bn and $60bn. Details and contracts for the 15 warships are still being worked out (the winning contractor is expected to be announced this year), but a broad breakdown of the budget has finally been revealed:
- Construction: 50 - 60%
- Integrated logistic support - 20 - 25%
- Infrastructure - 5%
- Project office cost - 5%
- Contingency fund - 10 - 15%
April 27: Federal government runs $2.8 billion surplus in February - but is predicted to have a $18.8 billion deficit for 2017-18
The federal Liberal government reported a $2.8bn surplus in February, which puts them on track to end the 2017-18 fiscal year with a lower deficit than projected.
However, the Parlimentary Budget Office (PBO) released a report last month that estimated the 2017-18 deficit would come in at $18.8-billion, and that the combined deficits for the next two years would be $8 billion larger than projected in the budget. This is likely to increase government debt and limit program spending.
Canadian strategy and trends
As previously reported by OMX, Innovation, Science, and Economic Development (ISED) announced a list of Key Industrial Capabilities (KICs) - areas that the government will be emphasizing investment and offset policies towards.
The five emerging technologies are: advanced materials, artificial intelligence, cyber resilience, remotely piloted systems and autonomous technology, and space systems.
The 11 established technologies are: aerospace, armour, defence systems integration, electro-optical and infrared systems, ground vehicle solutions, in-service support, marine ship-borne mission and platform systems, munitions, shipbuilding, sonar and acoustic systems, and training and simulation.
The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development has launched Canada's new Intellectual Property (IP) Strategy consisting of three primary changes:
- Legislation to remove barriers to innovation and to create an independent body to direct patent and trademark agents
- Education to promote IP literacy among federal employees and Canadians
- Tools to help Canadian businesses pursue their own IP strategies
POLAR is encouraging participation in a Call for Input until May 31, 2018 to provide input that will help to guide POLAR’s future funding, programs and activities from 2020 to 2025.
POLAR is responsible for advancing Canada’s knowledge of the Arctic, strengthening Canadian leadership in polar science and technology, and promoting the development and distribution of knowledge of other circumpolar regions, including Antarctica. POLAR will operate the Canadian High Arctic Research Station (CHARS) campus and conduct world-class cutting edge Arctic research out of this extraordinary facility.
Canada and the world
NATO Secretary General Jens Stoltenberg and Prime Minister Justin Trudeau emphasized the importance of naval capabilities in the High North, leading to speculation that NATO might revive Atlantic Command.
“I very much look forward to working with NATO as Canada has always been a strong NATO ally and will continue to be particularly in the areas where there is a natural fit like protecting our Arctic Oceans," said Trudeau. "I know that there is a new model and a new approach coming down the pipeline and we’ll be part of that.”
Stoltenberg also praised Canada's plan to grow defence spending. The Liberals plans to increase defense spending by 70 percent over the next decade - though analysts note that even with the increase, Canada remains short of NATO's target of two percent of GDP on defense.
Canada's military presence in Mali consisting of two transport helicopters and four armed escorts may change as the UN conducts a major review of its Mali mission.
Previous reviews of missions in South Sudan and the Democratic Republic of Congo did not result in significant changes.
Canadian Prime Minister Trudeau met with his British, Australian, and New Zealand counterparts in London to denounce Russian cyberattacks.
In the Federal government's last budget in February, $507 million was promised over five years to create a federal cybersecurity centre under the Communications Security Establishment (CSE) and to beef up cybersecurity strategy.
There have also been proposals to allow CSE to take launch cyber operations rather than simply react against attacks.
An extension of the tariff deadline was widely expected for Canada and Mexico, who are currently negotiating with the U.S. over NAFTA. Discover the reasoning and response from the major players in North America, Europe, and Asia.
Additional OMX features and analyses
In 2017, global military expenditure reached $1739 billion, marking an increase of 1.1 per cent in real terms on 2016. Find out how global military spending breaks down - and how countries and regions are changing in 2018 and the future.
Key insights include:
- China, Turkey, India Russia, Saudi Arabia, and Australia all had large increases in military spending in the last 10 years (more than 30%)
- South Korea, Brazil, and Canada had moderate increases in military spending in the last 10 years (10 - 30%)
- Germany, France, and Japan had minor increases in military spending in the last years (less than 10%)
- Notably, spending fell by 14% or $95 billion in the U.S. over the last decade
The Aerospace Corporation's Center for Space Policy and Strategy released a new report outlining lessons from the U.S.-Canadian partnership.
Key positive benefits from the North American alliance include:
- Bolstering deterrence
- Increasing resources
- Supplying information
- Providing geographic advantage
- Enhancing international legitimacy.
The total economic opportunity is more than $85 billion over 20 years - so what do Canadians really think about the pipeline, Kinder Morgan, and the protesters? Key findings include:
- More than half of Canadians (56%) are following the TransMountain debate very closely
- Six-in-ten Canadians say that the Kinder Morgan pipeline expansion would help the Canadian economy overall.
- Six-in-ten Canadians say protesters represent a fringe view
- Six in ten Canadians also say that Kinder Morgan must share some of the blame for not earning public support