March 11, 2017

Mastering Global Value Chains: How Government Procurement Can Spur Canadian Success In The Age of Global Opportunities

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Our goal is to make a meaningful contribution to the development of the federal government’s economic agenda, with a view to stimulating the growth of Canadian-based companies through the strategic development of Global Value Chains.

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Because it is intended to be an ever-green paper, filled with new examples of successful Canadian involvement in Global Value Chains, we would appreciate hearing of any Best Practices, especially from your own organization. We look forward to your comments and guidance on the paper’s overall content and recommendations. Please contact CATA CEO, John Reid at jreid@cata.ca

In presenting this research, CATAAlliance is starting from the position that:

  • The government’s procurement methods are fair across all its members, large and small
  • Member companies can deliver value to the government
  • The Canadian advanced technology industry is stimulated (as much as international trading arrangement allow).

Executive Summary

Download full 46 page research report: http://tinyurl.com/z4qa64b 


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By stimulating the entry of Canadian companies into strategic “Global Value Chains”, Public Sector Procurement can energize our economy by plugging our companies into the hottest economy the world has seen to-date — and do so without an increase in government spending.”

Terence H. Matthews,  National Spokesperson, CATAAlliance

The world is facing the largest stimulus to economic growth in history.

More countries are industrializing and plugging into the global economy than ever before — a development made possible by the information networks that now span the world. The two most populous countries in the world, for example, India and China, are growing at a rate faster than at any time on record. As the new trade opportunities develop in this hyper-active environment, Canadian companies are poised to bring prosperity to our country at a level unprecedented in our history. We need only be prepared to act and think on a global scale.

This means Canadian companies need to become masters of Global Value Chains — today’s fundamental tools for entering the global economy.

The discussion about ways to procure publicly-funded services and goods offers us the opportunity to use Public Sector Procurement in a strategic way, to create favourable conditions for the growth of the Canadian economy.

The current debate in Canada about the most efficient ways to procure publicly-funded services and goods, however, amounts to fiddling with the fringes of this much larger strategic issue. For specific recommendations about Procurement Reform, please see the Appendix of this Paper.

This Paper is concerned with the much larger issue: how Public Sector procurement — as one of the major levers of government policy — should be used to stimulate Canadian growth.

At best, Public Sector procurement could:

  • Increase economic growth within Canada;
  • Simulate key sectors, especially the Small and Medium-sized Enterprises (SMS”s) that drive so much innovation;
  • Add synergy to overall public sector policies, so that procurement harmonizes with the programs of various other Departments; and
  • Contribute to the strengthening of the ability of Canadian firms to enter the world’s Global Value Chains, where today’s economic opportunities are being defined around the world.

Global Value Chains are emerging as the superchargers of business growth in today’s international economy. Global Value Chains (GVCs) are becoming critical because today’s services and products are so intricate and interwoven, and facing so many competitors from all parts of the world, that teams of specialist companies are needed to produce them efficiently. The competitive player today is no longer the single company, it is the team of companies — the necklace instead of the bucket of pearls.

Companies now compulsively ‘shop the world’ to find partners that can contribute the greatest value to their global customers. This compulsion affects companies in both developed and developing economies; Cisco’s multi-billion investment in Indian partners is matched by the search by Indian multinationals like Satyam for partners in the NAFTA block.

Accelerating the rise of Global Chains is the shift from products to services as the driver of economic growth. Services are more easily transferred around a connected world.

The advantages for companies of joining a Global Value Chain are compelling:

  • Being a valuable player in a group of world-class companies
  • Having reliable revenues from global sales and a global sales force
  • Being able to set the Standards for industry operations
  • Competition that is based less on price, than on global value

A strategic procurement investment plan helps smart nations work hard to create efficient Value Chains. Current Canadian procurement policies have one goal; to efficiently obtain required equipment and services. A second goal, equally important, can be added to procurement: ensure that it is used as a lever to achieve a wider objective — the development of Canadian industry. Canada currently spends $18.5-billion on goods and services. Canada can painlessly create the conditions that encourage the “attachment” of companies to the vital Global Value Chains, by:

  1. Aligning national procurement to a strategy that requires bidders on government contracts to show how their bid helps Canadian companies enter Global Value Chains; By aligning its programs like IRAP, IPC, and PEMD, into a strategy that encourages companies to enter Global Value Chains, the Government of Canada can leverage its spending and catalyze a world-beating business sector.
  2. Spearheading the creation of industrial teams to approach global Value Chain opportunities with a Canadian solution. The case of the Joint Strike Fighter program is perhaps the best illustration that Canadian companies can punch above their weight in international competitions.

In a nutshell, CATA’s proposal is to rationalize current Public Sector Procurement purchases to strategically strengthen Canadian-based Value Chains. Based on the way other governments use their purchasing power to develop such Value Chains, CATA urges that the Canadian Government pass appropriate legislation that gives preference in contracts to those companies that can demonstrate the growth and strengthening of Canadian-based Value Chains.

With a slight change in emphasis in public sector procurement, the Canadian Government can stimulate the formation of Canadian Value Chains, and supercharge every element of the Canadian innovation and commercialization process. It can do so without spending any additional funds.

Objectives:

  1. Use the Federal Government’s powers of purchasing, policy enactment and organizational leadership to encourage Canadian companies to get into wider Value Chains and thus build their business.
  1. Coordinate procurement with other levers such as:
    • Putting in place a  tax environment that helps Canadian companies
    • Putting in place regional programs that aim to drive recruitment to Value Chains; and
    • Putting in place innovation-sparking measures such as the promotion of SMEs

cataimage-150x150About CATAAlliance
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http://www.linkedin.com/groups/Canadian-Advanced-Technology-Alliance-CATA-37239/about

The Canadian Advanced Technology Alliance (CATAAlliance) is Canada’s One Voice for Innovation Lobby Group, crowdsourcing ideas and guidance from thousands of opt in members in moderated social networks in Canada and key global markets. (No Tech Firm Left Behind) Contact: John Reid at jreid@cata.ca