Friday, November 23, 2018

The Future of Canada's Space Industry is All About Treating Space Like an Industry

          By Chuck Black

Anyone who wants to understand the future of Canada's space industry as it moves away from being a single issue, science focused monolith almost completely dependent on Canadian Space Agency (CSA) largesse ("Canadarm funding," anyone?) towards a more distributed business environment focused around multiple possible private and public sector customers and various commercial considerations, might want to take a look at the Federal Fall Economic Statement (FES) for 2018.

Finance Minister Morneau receives applause after delivering the fall economic update in the House of Commons, on Wednesday. Photo c/o Adrian Wyld/Canadian Press.

The annual Federal government FES, generally considered to be a mid-term progress report on the spring Federal budget, was released by Federal Finance Minister Bill Morneau on November 22nd, 2018.

As outlined in the November 22nd, 2018 CBC News post, "The economy is running hot. So why is Morneau still stepping on the gas?," the major focus of the FES was a reaction to US President Donald Trump's corporate tax changes introduced last December, which dropped US rates from 35% to 21%, effectively eliminated Canada's corporate tax advantage.

Morneau didn't drop taxes, but he did announce that Canadian businesses will be able to deduct, immediately, the full cost of any investments in new equipment for manufacturing and clean technology.

Tweaking the tax code and dropping the tax rates is the traditional methodology used by governments to encourage innovation, growth and productivity.

It's a methodology suitable even for Canada's space industry, as outlined most recently in the November 1st, 2018 post, "The REAL Path Towards Revitalizing the Canadian Space Industry."

According to the November 21st, 2018 The Logic post, "Breaking down the federal Fall Economic Statement 2018," the key to funding innovative industries like Canada's space industry is the Strategic Innovation Fund (SIF), the federal government’s "main piggy bank for supporting economically-important industries."

The SIF, originally a established in Budget 2017, was established by the Federal Justin Trudeau Liberal government as a $1.26Bln CDN fund that came mostly from combining existing auto and aerospace programs with $100Mln in new Federal funding. It was bolstered in Budget 2018 with an additional $800Mln CDN infusion.

According to The Logic, it's "the single biggest non-tax line item in the FES." It's also a far larger chunk of change than the CSA is able to disburse.

SIF funds have been used recently to invest in a number of space and innovation focused organizations which this blog tracks including:

In essence, Federal funding for space focused and innovative projects no longer needs to be routed through the CSA, the National Research Council (NRC) or other academically focused, traditional funding mechanisms.

New funding is instead being pushed through Federal mechanisms like the SIF and other programs being tracked in the Federal Budget.

These new programs are forcing the space industry to act less like a traditional government subcontractor responding to a request for proposal (RFP) from a single entity and more like an independent business moving forward with a unique plan with the government as a single stakeholder in a much larger consortium.

With so many partners to please, the Federal focus may may even have changed from fulfilling a centralized long term plan of action towards supporting a series of individual plans which may help the country in the aggregate, but which are difficult to quantify as part of a single plan.

Whether or not this is a good thing, will likely be the subject of a future post.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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