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Harper Pledges ‘Major Transformations’ to Canadian Economy

Tourists in front of Canada's Peace Tower in Ottawa on Aug. 9, 2011. Photographer: Brent Lewin/Bloomberg

Canadian Prime Minister Stephen Harper pledged to make “major transformations” to the country’s economy, to help secure growth for decades as Canada copes with an aging population and global economic weakness.

Harper, speaking at the World Economic Forum in Davos, said his government’s priorities will include building capacity to export oil to Asia, negotiating free trade agreements, and making government spending more sustainable. Harper also said some developed countries may have become “complacent” about prosperity.

“The wealth of western economies is no more inevitable than the poverty of emerging ones,” Harper said, according to the prepared text of the speech provided by his office. “Canada will make the transformations necessary to sustain economic growth, job creation and prosperity now and for the next generation.”

Harper, who has overseen one of the developed world’s most robust economies during the global downturn, is running out of drivers to sustain growth as the weak global recovery undermines demand for Canadian exports and growing household debt curbs consumer spending.

Canada’s expansion in 2012, projected at 2 percent, will trail U.S. growth for the first time in seven years, according to 21 economists surveyed by Bloomberg News. In May, economists had forecast 2012 Canadian growth of 2.8 percent. The country’s benchmark S&P/TSX benchmark stock index lagged behind the U.S.’s S&P 500 in 2011 for the first time since 2003.

Pension Reform

The government will also make the country’s fiscal position sustainable “over the next generation,” in part by limiting growth of pension spending, Harper said. While the national Canada Pension Plan is fully funded, Harper said the government will make “the changes necessary to ensure sustainability” of parts of the pension system that aren’t fully funded, “while not affecting current recipients.” He didn’t elaborate.

Canada needs to prepare for the impact of an aging workforce, according to Harper, in part by making sure economic and labor force needs become a “central goal” of immigration policy.

Harper also said the government will act on issues identified by an expert panel studying federal funding on science and technology, which was headed by Open Text chairman Thomas Jenkins.

Encouraging Research

That report recommended Canada create a central funding agency to support corporate research and development, simplify a tax credit that encourages businesses to invest in technology, and increase funding for startup companies.

Canada expects to conclude a free trade agreement with the European Union this year and will work to complete negotiations on an agreement with India in 2013, he said. The governing Conservatives will also take steps to facilitate capacity to ship oil to Asia, according to Harper, by ensuring major energy and mining projects are not subject to unnecessary regulatory delays.

“We will make it a national priority to ensure we have the capacity to export our energy products beyond the United States, and specifically to Asia,” Harper said.

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