Click to Enlarge

CADSI's Tim Page. (Darren Brown, OBJ)

The looming credit crunch is likely to hit the deep pockets of military investment, says Tim Page, president of the Canadian Association of Defence and Security Industries (CADSI).

He recently spoke with OBJ on how Canada's industry can adapt.

OBJ: Pacific Safety Products (an Ottawa body-armour manufacturer) announced this week it will cut some non-production staff. Is this the start of a downsizing trend in the Canadian defence industry?

PAGE: The Canadian government still holds the mission in Afghanistan as an extremely high priority and support to the troops, and the safety and operational effectiveness of the troops is a very high public priority. Therefore, CADSI (the Canadian Association of Defence and Security Industries) expects the federal government to honour its commitment and to continue to revitalize the Canadian military with the products, technologies and services it requires in order to meet the government's national security objectives.

OBJ: How is the current financial climate affecting the industry?

PAGE: Canada's defence and security industry is part of a global industry, so as the global financial markets vacillate, individual governments around the world will be responding differently to those challenges and economic consequences of the weakening financial climate. We believe that Canada is not insulated from that, but that we have a relatively strong economy, and therefore expect the government to continue to pursue its defence investment plan as conceived through the Canada First defence strategy.

The industry community is involved, obviously, in the capital markets, and as capital becomes harder to get, industry's efforts to invest in process improvements in R&D may become pinched. It may become tougher for business to borrow money. So we're hoping that the federal government, as it considers steps required for our economy remains as strong as it can, thinks of how to facilitate the private sector's investments in R&D and in the process and production improvements so that when the global economy comes out the end of the other swamp, Canadian business – including Canada's defence and security community – will be well-positioned to take advantage to that.

OBJ: How are the markets going to affect the companies that are working in Ottawa?

PAGE: Well, in the way that I just described. It's going to be, for any company that is interested in investing in R&D or investing in process improvements, they may well find it tougher to borrow money from their normal financial institutions.

OBJ: What sort of effect will it have on the industry?

PAGE: The good news is that everyone is likely to find themselves, around the world, in the same boat. What we're inviting the federal government to think about is ... how they wish to deal with the economy and the extent that they can think of how they can stimulate or sustain investments in R&D, particularly in technology areas of national security interest to Canada. They will be pre-positioning or helping to pre-position Canadian industry to take advantage of the markets when they start to bounce back.

OBJ: When you were saying that there are areas of technology of national security interest to Canada, what areas are those?

PAGE: Well, that's a question we've been asking of the federal government for a number of months. And they, to their credit, are starting to talk about how to align their national security priorities and the military and security equipment required in order to meet those national security priorities with the capabilities from domestic industry to support those needs.

In effect what it says is there's an important opportunity here – if Canada invests $240 billion in defence spending over the next 20 years in capital and non-personnel related acquisitions – to be linking those investment decisions to leverage an economic advantage for Canada in technology areas of national security interest.

So to repeat your question, what areas are you talking about? We're a northern economy. What capabilities does the government deem to be in our national security interest as a function of being a northern economy?

We're also a maritime nation, so what sort of maritime domain awareness capabilities should Canada be producing from its industrial base that would support our maritime domain requirements?

We're a huge geographic land mass that requires tremendous communication capabilities. What strategic communication capabilities should Canada have as a function of its geography and the need to be able to effectively communicate?

We have a very long and undefended land border with the United States. We have a lot of ports, both seaports and airports. We have a whole whack of critical infrastructure across the country, including our energy systems. What kind of security technologies does Canada need to be in its national security interest to be able to generate from Canadian industry?

We have an urban population. What kind of technologies do we need in Canada in order to protect our way of life and our urban population from the sort of threats that befell London and Madrid, the bombings in those cities? But those are just questions more than direction, the key being how is the government looking to align domestic industrial capabilities with its commitment to revitalize the Canadian military? What role is it looking for Canadian industry to play in support of that redevelopment?

OBJ: Moving locally, what about local defence companies? Are they going to be affected in the same way as other Canadian companies, or is there an insulating effect?

PAGE: (CADSI members) are vital partners in support of Canada's mission in Afghanistan and the Canadian government's efforts to ensure the safety of Canadians and the promotion of our national security interests. We believe that they will continue to do so in the months and years to come.

OBJ: How have the demands of the Iraq and Afghanistan conflicts changed recently?

PAGE: Canada has a long-term reinvestment strategy for its military and it is moving as quickly as it can to achieve those objectives, some of which are directly related to Afghanistan, and Canadian industry is doing its level-headed best to play a meaningful role in the rebuilding of the Canadian Armed Forces. I think the mission in Afghanistan remains an important priority for the Canadian government, and that mission requires products, equipment and services that the government is looking to acquire and Canadian industry, in large part through members of our organization, are helping the government to meet its requirements. The prime minister earlier this year confirmed – and the Parliament reconfirmed – its commitment to a critical role for Canada in Afghanistan through 2011 and so the military is focused on how to do its job to the maximum operational effect in this, and with the least risk to those in uniform.