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Canada Defence and Security Report Q4 2011
Business Monitor International, Oct 2011, Pages: 72
In 2011, BMI expects defence expenditure to rise by only 1.41% in nominal US dollar terms, to US$21bn. In Canadian dollar terms this will be 6.3% growth, but in constant price US dollar terms, a fall of 0.6%. However, Canada's defence industry is helped by the fact that the economy is performing reasonably well despite the economic headwinds.
BMI is forecasting real GDP growth in Canada of 2.9% in 2011 and the same again in 2012. BMI has increased its forecast for 2011 from 2.4% previously, mainly as a result of an improved outlook for exports and business investment, and in spite of a slightly less ebullient outlook for the consumer.
The most important news of the quarter was Canada ending its combat role in Afghanistan after nine years. In total some 157 Canada troops died in the conflict. Canada' 3,000 strong contingent were based in the Southern province of Kandahar, which saw some of the heaviest fighting.
The withdrawal comes as part of a wider plan which will see NATO remove all of its forces from Afghanistan by 2014. Canada has spent a total of CAD11bn on the war, which failed to gain wide-spread popular support on the domestic front.
After arriving in Afghanistan in 2002, Canadian troops moved to Kandahar in 2006. After the troop withdrawal a Canadian training mission involving 950 soldiers will remain. The withdrawal of fighting troops from Afghanistan is expected to have a resultant impact on defence spending, as Canada no longer has to foot the operational bill of the war which came to more than CAD1bn per year.
The withdrawal is also likely to impact imports. In 2009, imports fell sharply from US$427mn the previous year to US$80mn, the reduction being mainly from imported weapons from the US, and consisting mainly of missiles and aircraft. However, in 2010 exports started increasing again, to US$373mn, driven mainly by sales from US companies, but whether this will be sustained in 2011 and beyond is yet to be seen.
Meanwhile, a new report claims that since 2001 some CAD91bn has been spent on national security by Canada, according to the Rideau Institute. This has engendered a debate into whether these funds were wisely spent and whether a similar spend would be needed over the coming decade.
In the current fiscal year Canada is set to spend CAD34bn on national security, around CAD17bn more than it would have spent before 9/11. The Department of national defence takes the lines share of the budget, CAD21bn, making it the largest consumer of national security expenditures.
However, critics are now calling for greater scrutiny of this spend, citing the fact that conditions have changed since 2001. Canada's participation in the Afghanistan conflict has now finished, while Osama Bin Laden has been killed. The Rideau Institute claims that the CAD100bn that may go on security operations could be used in more effective areas such as transit systems, a national childcare programme or prescription drugs
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