EP.4 - Canadian Defence Headlines - Sep 17

Welcome to News From The Forge, a Vimy Forge podcast where we cover a few of the story shaping Canada's defense innovation ecosystem and why they matter from the past few days. This week there's a pretty clear theme running through the news. We're seeing some more capital beginning to move toward Canadian defense companies, Canada building deeper relationships with Ukraine and Poland around defense innovation, Canadian technology finding opportunities inside allied supply chains, and another major step towards closer defense cooperation with our Northern European allies. Let's get into it! For our first story we'll start with capital because access to it has been one of the biggest barriers facing Canadian defense companies for years. BDC has now outlined how it will deploy another billion dollars through its defense platform, including 500 million through investment funds focused on defense and dual use technology. There is one part of that we're going to watch closely. Those investments can flow through Canadian funds but also allied funds. There's value in building allied capital networks but from a Canadian industrial base perspective we also want to see Canadian public investment translate into Canadian companies and capability. The part we're particularly encouraged by is another 200 million dollars going into True North Strong Fund bringing that fund from 300 million to 500 million. True North Strong Fund is already putting capital directly into Canadian defense and dual use companies so this is additional money going into a vehicle that's already having an impact here at home. BDC isn't alone. CIBC has committed 2 billion specifically towards Canadian defense and dual use businesses while TD has identified defense and aerospace as a strategic sector within its much larger Canadian investment commitment. The shift here is important or moving beyond commitments and starting to see actual financial frameworks capable of putting capital to work. And then there's the DSRB. The proposed defense security and resilience bank has been a Canadian led effort to create a multilateral financial institution capable of mobilizing capital into allied defense industries. This week the United Kingdom is back at the table with discussions underway about bringing Canada's proposal together with Britain's own defense financing initiative. If the UK gets behind the DSRB that's a significant boost for the project and could help bring other major NATO countries with it. So what? For SMEs access to capital can be the difference between having great technology and actually being capable of delivering it. Winning a procurement opportunity doesn't solve the problem if you can't finance the people, inventory, equipment or production capacity required to fulfill it. What we're beginning to see is something closer to a real capital stack around Canadian defense. Venture capital, commercial lending, institutional investment and potentially a multinational defense bank. There are still questions about where some of that money ultimately gets deployed, but compared with even a year ago the environment is changing quickly and positive. For our next story, building Canada's defense industrial base doesn't mean we have to do it alone. Canada and Ukraine are deepening their partnership around drones, counter drone technology and defense production, combining Ukraine's battlefield experience with Canadian manufacturing and technology. We're already seeing Ukrainian experience, influence Canadian procurement. Canada's new defense drone initiative or DDI marketplace draws from Ukraine's brave one model and is intended to connect Canadian suppliers more directly with military requirements. But there's another side of the story. Last week, Canada was lead nation at MSPO in Poland bringing our largest ever defense and security trade mission into one of Europe's most important defense markets. And this morning gave us a pretty stark reminder of the environment that countries are operating. As Russia attacked Western Ukraine, Poland scrambled fighter aircraft, activated air defense systems and temporarily suspended operations at two airports near the Ukrainian border. Poland reported no violation of its airspace in this incident, so we shouldn't overstate what happened, but a war in Ukraine came close enough to NATO territory that Poland put fighters in the air. Poland is a NATO ally, so is Canada. As we deepen our relationships with European allies, we share more of the benefits, but their security challenges increasingly become relevant to us as well. So what? There's also a straightforward business reality here. Canadian defense SMEs can't build their entire growth strategy around selling to Canada. We need Global Affairs Canada and the Trade Commissioner Service opening allied markets, introducing Canadian companies to primes and buyers and helping them understand foreign procurement systems. That work isn't separate from building Canada's defense industrial base, and it's becoming an essential part of it. And at MSPO, we saw a great example of what can come from those relationships and the work that Global Affairs Canada and our Trade Commissioners are doing to support business here in Canada. Shifting our story a little bit, but staying in Eastern Europe, Polish Defense Company WB Group signed agreements with four Canadian companies during MSPO, CAE, Westcam, Robotics Center, and Halifax-based Rossboro Boats. The partnerships cover uncrewed systems, sensors, manufacturing, training, and maritime platforms. Westcam technology could be integrated onto Polish reconnaissance and strike systems. Robotics Center could support Canadian production of Polish uncrewed systems. And Rossboro and WB are exploring Canadian built vessels as platforms for WB's uncrewed maritime technology. These are exactly the kinds of relationships we want Canadian companies building. So what? Success in defense doesn't always mean building an entire platform in Canada and selling it directly to D&D. A Canadian company might provide the sensor, software, manufacturing, capability, or vessel underneath somebody else's system. Nothing new there. Getting Canadian technology into Allied supply chains can create markets far larger than anything available domestic. MSPO put Canadian companies in that room. Now we're starting to see some of those introductions turn into industrial partnerships quite quickly. For our next story, Canada and the Joint Expeditionary Force, some of those commercial relationships that we've been building over the last few months are developing alongside deeper military relationships. Canada has formally applied to join the UK-led Joint Expeditionary Force or GEF. Its ten current members are concentrated across Northern Europe, the Baltic and North Atlantic, countries like UK, Norway, Denmark, Finland, Sweden, Iceland, and the Baltic states. Geographically and strategically, Canada has a pretty natural place in that group. We're the world's second largest Arctic country by area, and the Canadian Coast Guard operates the world's second largest ice breaking fleet behind Russia. We've also covered the enormous investment now going into replacing and expanding that fleet on a previous podcast, including the six new program icebreakers being built by Davey and Quebec. Last year, the Coast Guard was also moved into the National Defense Portfolio, while remaining a civilian organization, creating opportunities for closer coordination around maritime and Arctic security. Maybe there's something appropriate about a country whose national anthem literally calls it, "The True North, Strong and Free," becoming more closely integrated with the nation's responsible for protecting the Northern approaches to Europe and the North Atlantic. So what? This fits a pattern that we've been watching. Canada is building closer defense and industrial relationships with Poland and Ukraine, became an observer to GCAP with the UK, Italy, and Japan, and is now looking to join the GEF. Canada already brings useful capabilities to those relationships, Arctic geography and expertise, ice breaking capacity, technology, and growing defense industrial base. The opportunity is to make those relationships work in both directions, strengthening collective security while creating more opportunities for Canadian companies. Our view from the forge, when you put this week's stories together, the common thread is integration. Canada's defense industrial base is becoming more connected to capital, international markets, allied companies, and the countries we expect to stand beside when things get difficult. And there's an important balance here. Sovereign capability doesn't mean Canada needs to build everything ourselves. It means making sure we bring something valuable to the table, strong Canadian companies, technology our allies want, manufacturing capacity, Arctic expertise, incredible military capabilities. For Canadian SMEs, the opportunity is becoming increasingly clear week after week. Build it here, prove it here, but don't think only about selling it here. The market and increasingly the mission is much bigger than Canada. That's it for this week's Canadian Defense Headlines. I'm Kyle from Vimy Forge. Thanks for listening to the news from the forge. We'll be back next week. (upbeat music)