The Canadian DND’s budget was US$15.22 billion in 2008, which grew at a CAGR of 6.98% during the review period (2008-2012) to reach US$19.94 billion in 2012. The strong growth was due to the CFDS, which details the country’s defense expenditure for a 20-year period, beginning in 2008. The strategy was formed to counteract the impact of the defense budget cuts in 1999, which significantly damaged Canada’s defense capability, leaving equipment obsolete and the armed forces inefficient. Cumulatively, Canada spent US$95.39 billion on defense during the review period and this is expected to increase to US$109.15 billion over the forecast period (2013-2017) (reference graph).
The purpose of the Canadian defense offset program is to provide conditional trade guidelines that demand a certain level of offsetting measures, such as technology transfers, joint ventures, strategic alliances, investments in domestic industry, product or marketing licenses, small business developments, and access to global supply chains when acquiring weapon systems or equipment from foreign companies. The Canadian government also encourages contractors to form public-private consortiums to research new technologies. To encourage participation, an IRB credit multiplier of five is applied on the value contributed by the prime contractor and the amount contributed by the industry.
Investments made by non-Canadian investors in the Canadian defense industry are reviewed by the assigned authorities to analyze the benefits to Canada’s economic growth. This is based on parameters such as the effect on levels of economic activity, employment, resource processing, the utilization of parts and services produced in Canada, exports from Canada, technology, production, competition, product innovation, and Canada’s competency in world markets. The threshold for investments made by members of the World Trade Organization (WTO) stands at US$570 million in enterprise value, and is expected to rise to US$950 million over a four-year period.
Source: ASDReports - Market Research
Date: Sep 3, 2012