IDEX 2019

Canadian companies vie for global attention

15 March 2019

The annual Canadian Association of Defence and Security Industries (CADSI) tradeshow CANSEC is set for May 29-30 at the EY Centre in Ottawa, and Canadian industry will be hoping for a more amicable business clime than was found at IDEX, one of the world’s largest military trade shows three months earlier.

The International Defence Exhibition and Conference (IDEX) at the National Exhibition Centre in Abu Dhabi, United Arab Emirates, featured more than 1,300 exhibitors from 62 countries showcasing the latest in military equipment, technology and services to more than 124,000 visitors from 170+ countries. Like most major shows of its kind, IDEX is now held biennially, with 2019 being the 14th iteration over 25 years. The event is twinned with the Naval Defence Exhibition (NAVDEX), and took place 17-21 February this year.

A view of one of the 12 connected exhibition halls that comprise IDEX. 

Canada was one of 33 national pavilions at IDEX, featuring a variety of countries’ wares rarely (or never) seen at North American shows – including from Belarus, China, India, Russia, Serbia and Sudan. For those who think CANSEC is impressively large with a wide representation of countries displaying some of their most advanced military product, then IDEX would come as a real shock. At 168,000 square meters, the IDEX exhibition area is 12 times as big as CANSEC’s space. The largest booth at IDEX – the UAE-based International Golden Group company – measures more than 2,000 square metres (this one "booth" is one-seventh the size of CANSEC). For sake of comparison, CANSEC 2017 hosted less than 300 exhibitors and welcomed 11,000 visitors.

Over the five-day IDEX exhibition, the UAE awarded 104 defence contracts, worth 20.35B Dirhams ($7.2B CAN), to local and international companies – split roughly one-third/two-thirds overall – but none to Canadian companies. The largest defence contract at 5.7B Dirhams was awarded to Raytheon for Patriot missile platforms and missiles. Jane's predicts that spending in the Gulf will increase from $103B USD in 2013 to nearly $111B by 2023.

Many nations brought their military finest to IDEX. From this vantage point is seen military wares from Australia, Ukraine, Estonia, Austria, Croatia, Switzerland, Germany and France.

“There is no doubt in our minds that given the tensions between Canada and Saudi Arabia at this time, the positive energy we typically feel directed towards Canada [at such events] was somewhat tempered,” said Christyn Cianfarani, CADSI president, in an exclusive FrontLine Defence interview.  “The lack of Canadian announcements this year we believe was deliberate and, in fact, a strategic move on the part of the UAE. They were able to show alignment with their partners in the region while at the same time continue with the relationship they have with Canada and not inflame either side. From a business perspective, we understood that.”

Despite the outcome, Canadian companies were very pleased with the show, maintains Cianfarani. “IDEX is not simply about booth traffic and winning business opportunities, but building relationships for the future. We were able to bring through some high-level delegations to the Pavilion, and our partnership with the Embassy and Trade Commissioner service not to mention [Canadian Commercial Corporation] all helped us to pursue leads and business in the region.”

PAL Aerospace was the only Canadian company at IDEX to feature a major display booth.

Building a presence, especially in the Middle East, “is a long-game play,” says Cianfarani. “It can take 10 years before you can establish your Canadian business with an appropriate level of UAE partnership be it financing, real estate or political to be able to set up a viable joint venture in-country. There are good business returns but a long investment cycle and a long-term return on investment.”

Proximity, culture and long-standing relationships naturally mean the U.S. is Canada’s largest defence and security export market, but Cianfarani said the Middle East also presents business opportunities in the UAE, Jordan, Kuwait, Oman, and others. That said, after excluding the $15B General Dynamics sale of LAVs to Saudi Arabia, the Middle East represents only about $45M a year of business for Canadian companies, according to CADSI.

Although the Middle East is identified by CADSI as a growing market, Europe remains by far the larger one. The challenge in Europe is the level of nationalist protection – countries like the UK, Germany and France are very protective of their indigenous defence sectors including state-sponsored corporations. The Middle East is also building indigenous capability, and so Canadian companies will have to look for joint projects.

The Saudi presence at IDEX 2019 was substantial, with a large variety of equipment on display. The state-owned Saudi Arabian Military Industries (SAMI), was just established in 2017 but already has made significant inroads toward building a homegrown defence industry for local and export markets. 

Many countries represented at IDEX have rolled out national economic modernization visions including for defence industries, and most are also “looking at how they can pivot from being so focused on natural resources, to technology,” says Cianfarani, and that includes the UAE. "They’ve always had offset policies that encourage or mandate joint ventures,” and going forward, “between Emirati and Canadian businesses, we think this goes beyond just a joint venture, beyond just a make-in-country, but truly into a transfer of technology vision."

At international defence exhibitions, Canadian companies can choose to attend on their own or pay a fee to affiliate with the CADSI-branded ‘Canada Pavilion’, to more directly benefit from the association’s heft at marketing, on-scene support and facilitating meetings with key business and political officials. According to figures provided by Monique Scotti, CADSI’s communications manager, just 15 Canadian businesses participated in IDEX 2013, including four Canadian exhibitors and four non-exhibiting companies (sending a representative for business development purposes, but not having an on-site display) affiliated with CADSI’s Canada Pavilion, their first at this show.

This year, an estimated 51 Canadian companies from all regions of the country were at IDEX, including 16 with CADSI – a dip from IDEX 2017, when 75 Canadian companies exhibited (21 under the CADSI banner). This year, the Canadian delegation is more than 150, said Scotti, with as many as 15 trade commissioners and representatives from the Government of Ontario, National Defence, Global Affairs Canada, and the Canadian Commercial Corporation.

China had a significant presence at IDEX, including demonstrating submarine technology and shipbuilding, as well as highlighting joint China-UAE technology ventures.

Cianfarani says there is important prospective growth for Canadian defence industries in Asia given the region-wide concerns about China and the scale of its military build-up. The defence recapitalization in Asia generally but particularly South Korea and Japan have led CADSI to sponsor a Canada Pavilion at a DSEI-sponsored event in Japan this November, described by organizers as “Japan’s first tri-service defence exhibition and conference.”

Cianfarani is confident that federal Government policy changes regarding Canadian defence industry are having positive effect. “We have the Strong, Secure, Engaged policy which recognizes the industry as one of the five key priorities for national defence, as well as our own domestic foreign investment offset policy. We have innovation funding entirely dedicated to defence innovation in the IDEaS [Innovation for Defence Security and Investment] program. We have a foreign direct investment arm that is putting work into Canadian companies’ hands thru the value proposition. Larger firms are saying they would not have made those kind of investments in small firms and brought them into their global supply chains – which links to exports – had we not had a drastic shift in policy in 2013-14.”

Still, walking the IDEX show floor, one was immediately struck by the obvious investment and effort by some nations to build, showcase and aggressively market their defence industrial outputs, including with the active participation of national military representatives as front-line ‘sales support’. “Canada is still an outlier in the way it behaves towards its domestic defence industry,” says Cianfarani. “Other G-7 nations do this much better than we do. They manage and protect their industry given the national security implications.”

One important take-away from IDEX with strategic consequences for Canada is how aggressively Saudi Arabia and the UAE alone and in partnership, have pursued strategies to substantially expand their respective homegrown defence industries. Vision 2030 sets out Riyadh’s ambition for at least half of the national security and military equipment it needs to be produced locally by 2030, from about 2 per cent now. To help achieve that, the state-owned Saudi Arabian Military Industries (or SAMI) was stood up in May 2017, and was already a major exhibitor at IDEX 2019. Chief Executive Andreas Schwer, in an interview with Reuters at a conference on the margins of IDEX, said SAMI “will generate 30 per cent of its revenues from export markets by 2030” and generate $10B in revenue over the next five years, aiming to create more than 40,000 jobs locally by 2030. Schwer also said since 2018, SAMI had signed 19 joint venture deals with companies [none Canadian] and planned to sign 25 to 30 more in the next five years.

Emirati national leadership is also not shy to dream boldly, to set out long-term development visions, and to aggressively pursue ideas that seem fantastical at the time, be it in fields of tourism, transport or even space. For instance, in 2014 the Dubai International Airport overtook London’s Heathrow to become the world’s busiest for international travellers, with more than 88 million passengers in 2017, up from 16 million in 2002, according to the airport authority. Dubai’s Expo 2020 expects to welcome at least 25 million visitors.

The new Joint Light Tactical Vehicles (JLTV) by Oshkosh proved a popular display item at IDEX 2019. The U.S. Army recently placed a $1.69B U.S. order for more than 6,100 JLTVs to start to replace the 'Humvee'.

The five-decade-long national development vision – Centennial 2071 – has as its ambition nothing less than to make the UAE “the best country in the world”, with a focus on education, economy, government development and community cohesion. The emphasis on higher education and the application of advanced technology is at the heart of many national priorities and projects. The world’s first commercial hyperloop transport system – using electro-magnetic levitation to propel the capsule to speeds in excess of 1,100 km/h, is in production and will eventually link Abu Dhabi, Al Ain and Dubai in a 150-km network at a cost to build of $20-40M US per km, with the first 10 kms expected to be ready this year.

Last October, the UAE’s first locally-made satellite was launched into orbit from Japan, just one offshoot of the National Space Strategy 2030 to turn the country into a major global hub for space-related science and technology. The UAE will send its first astronaut to the International Space Station in 2019 (two are in training now), as well as a probe to Mars in 2020. In 2017, the UAE unveiled a 100-year plan to establish a colony on Mars by 2117 (!) – and are building a simulated prototype Mars colony in the desert: according to the Emirati project manager, the prototype 1.9 million square feet Mars Science City  near the Mohammad Bin Rashid Space Centre, will be 3-D-printed and operational in four years.

So, when leadership including Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, says the country wants to transform its defence industry to realize multiple strategic objectives in short order, we can expect that a national defence industrial strategy currently being developed will have big ambitions and heft behind it.

This muscular approach to a made-in-UAE defence industrial strategy is visible also by the upcoming exhibition schedule in the country. Later this year is the Dubai airshow, and in early 2020, the Unmanned System Exhibition (UMEX) for drones, robotics and unmanned systems – the only one in the Middle East – and the Simulation and Training Exhibition (SimTEX) for defence, civil aviation and healthcare in Abu Dhabi,  expected to draw 12,000 visitors and 120 international exhibitors.

The U.S. display area regularly featured uniformed personnel from the American armed services interacting with visitors at IDEX.

Comparing national efforts at a premium show like IDEX provides a stark visible contrast of different national strategies and approaches to indigenous defence and security industries. “You can see it here at the exhibition and conference,” said one Canadian business representative. “Some nations don’t look to be trying very hard at all, some look to be trying, some are serious, and some are really serious. At the very least, Canada should wish to move from the ‘look to be trying’ to the ‘we are serious’ category.”

AirBoss Canada was one of the very few companies at IDEX that displayed personnel protective equipment against chemical agents.

“What we’ve seen in other nations is the nut we have to crack,” says Cianfarani. “We can keep talking about icing all these little cakes that we have now in Canada, but I do not believe they will make the tremendous impact in little bits and pieces that you get with a $15B [General Dynamics Land Systems] sale. The fact is 80% of the revenues driven by the industry are from less than 10% of the companies.” To make a substantive difference in the industry, she says, “you’d have to pick five to ten major domains or procurements and go after them hard as a nation. You’d have to go after them like the French do, like the Germans do, like the UK does. You’d have to mobilize the politicians, you have to mobilize the military to some extent [attaches] as sales people.”

That is particularly the case in Defence, she explains, since that is a marketplace that by definition is considerably more managed compared to other sectors such as IT. “What we would love to see,” says Cianfarani, “is a contract that gets awarded under the IDEaS program or any other innovation program that’s happening, that actually gets purchased on an active procurement for Canada under the investment plan and then gets supported and promoted by the Trade Commissioners, Canadian Commercial Corporation and Global Affairs as a viable export from our country.”

Much new equipment from the latest manufacturers was on display at the recent IDEX exhibition in Abu Dhabi.

Walking amongst so much military hardware of every sort imaginable at IDEX, one wonders about Canadian defence industry prospects in the face of focused competition from other countries and strained relations (including the spill-over effect of the Saudi Arabia boycott to its neighbours including the UAE, plus the uncertainties for exports stemming from the Liberal Government’s self-declared “values-based foreign policy”). The latter doesn’t faze Cianfarani, however. She says that so long as national leaders are clear about countries they have decided they no longer want to do business with, and why, being in the business of defence exports and having a values-based national foreign policy can co-exist. 

– Brett Boudreau is a retired CAF Colonel, a Fellow with the Canadian Global Affairs Institute, and former Director of Marketing and Communications at CADSI (2013-14).