Canada chemicals manufacturers slam budget

27 February 2008 16:30  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s latest federal budget does little to address the decline in manufacturing, including chemicals and plastics, which is suffering from high raw material costs and the strong Canadian dollar, industry groups said on Wednesday.

 

Canada's manufacturing sector was in great distress, said Richard Paton, president of the Canadian Chemical Producers’ Association (CCPA).

 

Prime Minister Stephen Harper’s Conservative minority government on Tuesday put forward a balanced Canadian dollars (C$) 240bn ($245bn) budget that did not deliver major initiatives to help struggling manufacturers in Ontario and Quebec, industry sources said.

 

Chemicals makers and other manufacturers were particularly disappointed with provisions that extended capital cost allowance for machinery and equipment by only one year, to three years, instead of a five-year period, they said.

 

Three years was too short a period to help win large investments into the chemicals sector, said Paton.

 

"A large-scale project, which typically would bring over C$1bn in new investment into Canada, takes four to five years to build, and the capital cost allowance can't be used until the equipment is purchased and installed - typically in years four and five," he said.

  

“We are concerned that the response from government has not been commensurate to the problem," he added.

 

In 2007, the country's chemical producers saw a 50% drop in sales to Canadian customers, signalling fundamental changes to North American manufacturing with production shifting to offshore locations, primarily Asia, said Ottawa-based CCPA.

 

Jay Myers, president of industry group the Canadian Manufacturers and Exporters, also criticised the three-year period.

 

“This [shorter period] erodes the most effective tax measure the government has to stimulate business investment in new productive technologies,” he added.

 

Canadian manufacturing was at risk, with many productive and competitive operations being shut down because of the strong Canadian dollar, Myers said.

 

“Clearly we cannot rely on this budget to build a competitive advantage for Canada,” he added.

 

Political analysts said Canada’s main opposition party, the Liberals, was unlikely to topple Harper's minority government over the budget, which would trigger a general election.

 

The opposition National Democratic Party and Bloc Quebecois said they would vote against the budget in next month's vote in Parliament but without the Liberals’ support will not have enough votes to bring the government down.

 

($1 = C$0.98)

By: Stefan Baumgarten
+1 713 525 2653

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