IT pundits expect upswing from defence-heavy budget

Billions of dollars worth of government spending in the military and the environment announced in Wednesday’s federal budget presents sizeable opportunities for Canadian IT businesses and cross-border trade, according to industry organizations.

Finance Minister Ralph Goodale handed

down the Liberal’s eighth consecutive balanced budget in the House of Commons Wednesday announcing almost $13 billion in new money for Canada’s cash-strapped military over the next five years, marking the largest increase in a five-year period in the last 20 years.

That number includes over $2.5 billion for new medium capacity helicopters, utility aircraft, military trucks and specialized facilities; $3.8 billion for capital and other projects to support new roles for the military identified in the upcoming defence policy review; and $1 billion towards key national security initiatives.

Canadian Advanced Technology Alliance (CATA) president John Reid said the organization fully supports increased spending in defense and national security.

“You have to get that right in order to send the right message to your trading partner, particularly the U.S.,” Reid said in a pre-budget interview. “It’s both a trading advantage and also it’s an opportunity for technology and services to chase that business.”

Reid added any system from border crossing to modernizing a fleet to training personnel now involves a high tech component.

Quoting Nortel Networks Corp.’s president and CEO Bill Owens, Information Technology Association of Canada (ITAC) president and CEO Bernard Courtois said when it comes to military spending, Canada has to focus on its strengths.

“(Owens) said, ‘Canada is not going to do better than other countries by the number of tanks it has. But we could do better than other countries by being innovative in how we help information flow between command posts and military people in the field,’” said Courtois, who heard Owens speak recently in Ottawa.

“The light’s got to turn on when you spend on things like that. Why don’t you look at things where you think you can have a competitive strength,” he added.

The government said it will also deliver on its commitment to expand the Canadian Forces by 5,000 troops and the reserves by 3,000.

Green opportunities for IT

The federal government has allocated more than $5 billion, including $3 billion in new funding, for the environment over the next five years. This includes $1 billion for a Clean Air Fund to help reduce greenhouse gas emissions in Canada; $295 million in tax incentives to foster investment in efficient and renewable energy generation; and $200 million towards the development of a Sustainable Energy Science and Technology Strategy.

Reid said the Kyoto Accord and high-tech go hand in hand.

“Solutions such as emission control for example require more advanced systems and processes,” said Reid. “That’s all driven by R&D and advanced process. That again drives a whole cluster within Canada as something we can point to and be proud of internationally.”

Similarly, Courtois is also pleased with the approach the government is taking in viewing challenges as opportunities in the environmental area.

“We should approach all kinds of challenges and national priorities that way,” said Courtois. “We’ve got a challenge here. Why don’t we look for innovative and technology-backed ways of doing it and we will have industrial benefit flowing from that.”

IT R&D gets a boost

To promote research and new technologies, the government announced it will provide $810 million in strategic investments and ideas and enabling technologies over the next five years.

This includes $375 million to the Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council of Canada.

The government will also increase its funding to universities and research hospitals from $245 to $260 million per year starting in 2005-06. ITAC said this type of investment will help Canada’s economy grow.

“We’re looking for some indication that there are some incentives that will be invested in this budget,” said Courtois.

David Mason, partner at consulting firm Deloitte, said investments of $165 million for Genome Canada and $20 million for Precarn, which specializes in advanced robotics and artificial intelligence bode well for technology companies.

Goodale also announced the corporate surtax, which was originally introduced to help fight the federal deficit, will be eliminated by Jan. 1, 2008. The government also said the the general corporate income tax rate will be reduced by two per cent from 21 per cent to 19 per cent by 2010.

Mason said the elimination of the corporate surtax and corporate income tax rate cut will help Canada stay competitive with the U.S., which has recently dropped its rate.

“Anytime there’s less tax to prepare on the income, you have more to invest in your people or in your equipment or in dividends to your shareholders,” said Mason.

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Jim Love, Chief Content Officer, IT World Canada

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