Ottawa may spend billions of dollars on defence-related projects and wants a major share of it to go to Canadians, but the problem is that a lot of local companies aren’t ready and need more support, says Bank of Montreal’s chief executive Darryl White.
“If you are going to have 70 per cent of the procurement directed at Canadian companies , a lot of those companies don’t exist yet,” he said at the Toronto Global Forum on Wednesday. “We have a role to play in helping develop those companies from the early stage all the way through the mid-stage. Otherwise, the math doesn’t add up, and I think it can add up.”
He said everyone from those in the banking sector to the government has a role to play in developing these companies, which would be beneficial for everyone because there’s a definite demand.
White said the “stumbling block” in many business plans is whether there’s going to be a customer for all the products being made, but the proponent in this case is the customer as well.
“The confidence level on achieving these goals goes way up and that customer can play a role in off-take certainty, on helping with private partnerships and with the financial ecosystem to create more certainty,” he said. “Let’s not waste (the opportunity). Let’s take advantage.”
Canada aims to spend $500 billion on defence over the next decade, putting it on a path toward meeting the North American Treaty Organization’s defence investment pledge of five per cent of the gross domestic product by 2035.
Interest in Canada’s defence industry from private businesses, governments and other institutions is “rocketing higher,” a BMO report said in early October. Members of the Canadian Association of Defence and Security Industries have risen to more than 1,700 from around 600 members two years ago.
Canada’s biggest banks have also committed to deploy billions of dollars in sectors they deem to be critical for the growth of the economy, including defence.
BMO on Wednesday said it is appointing Michael Bonner, head of the bank’s personal and business banking in Canada, as the enterprise chair of its Canadian Defence Sector segment.
“Bonner will also serve as the bank’s liaison to government agencies and industry associations on defence-related financing, export credit and procurement matters,” BMO said in a statement.”
Despite a series of commitments from the banks and the positive outlook from analysts about Canada’s future as a result of the government’s bid to accelerate key projects, White said he doesn’t want to sugarcoat the current economic situation since the country hasn’t struck a new trade deal with the United States, its most important business partner.
“We should all fasten our seatbelts for an ongoing period of volatility,” he said. “For those who come and say to you, ‘When are we going to get to certainty and when is the volatility going to end?’ It ain’t going to end.”
White said there are ongoing simultaneous events causing compounding shocks in the world right now, which is different than the past when these shocks would come one after the other after a period of time.
The next couple of years are going to be “bumpy,” he said, but the 10-year outlook for Canada looks brighter than before.
Despite the trade war as a result of the levies applied by the U.S., he said a vast majority of BMO’s clients have adjusted well by modifying their supply chains and diversifying.
• Email: nkarim@postmedia.com