Policy for Overall Development of the Canadian Economy - Essay Example

Report On the needed economic reforms Policy for overall development of the Canadian economy For the next 5 years Submitted to The Honorable Laura Mustard, Minister of Finance By Your name, Policy Advisor, Department of Finance Executive Summary To: Laura Mustard, Minister of Finance FROM: Your name, Policy Advisor, Department of Finance SUBJECT: The policy to be followed in a Macro Level regarding development of our Economy in the next 5 year framework. Summary We are at the cross roads where the whole world is taking off on the new globalization process. Many changes are going on in the economies of our neighbors, and wars and conflicts in the East have affected our cost and prices of resources we depend upon, especially Oil and Gas. Added to those Eastern economies, those of the smaller nations have begun attracting investments from all over by creating better infrastructures and free trade zones. As a result foreign investment of nations like the United States has begun to flow there. This is bad news for us. It is time we took steps to develop our infrastructure in such a manner that Canada can host software and technology parks and benefit from that, and attract overseas investments. The thrust therefore will be on these three things: Government Investments, Industry specific developments especially with regard to Information technology, and Education. We also will lay a matrix for upgrading public transport to cover for rising oil costs. Table of Contents Page Executive Summary 3 Methodology 5 Current Economic Arena 6 Indicators to the analysis 7 Recommended policies & Action 8 Conclusion 9 Methodology The statistics and information for this policy presentation have been obtained from various government agencies, and books. The statistical details have been taken from the sites: Consumer price index form about.com About_com http--strategis_ic_gc_ca-engdoc-main.htm On the digital economy http://www.e-com.ic.gc.ca/epic/site/ecic-ceac.nsf/en/Home Further reference have been made to the economies of Dubai and UAE for comparison and these were requested from http://rakftz.com/en/ The statistics as to Canada is sited from http://www.understandmarket.com/index.phpcategoryid=86&p2_articleid=2595 www.fxwords.com/g/gross-domestic-product-quarterly... For GDP Comparison we used http://www.demographia.com/db-ppp-uscan.htm Current Economic Arena This report highlights the current trends in the economy which are detrimental to the Future development in the sense that if the trends are not corrected will lead to a situation where many of the opportunities to develop form the needs of nations like the United States, and Europe will soon erode and be gone to eastern economies for ever. Canadian companies have been making headway in the IT sector and in the home business sector. Consumer and industrial production and investment are on the rise, but costs as shown by the trends and statistics are on the rise too. Thus development is offset by rising cost, low productivity and investments. We apprise you on the three key areas where detailed changes in policy are needed. 1. We have to attract more investment, and for this we need to develop better infrastructure. 2. We need to address the concern of services and development both in manpower and in infrastructure of the Information Industry in which we can become a major player in the next 5 years. 3. We need to, consequently address housing, and transport needs. All this is possible only with government spending and lesser or minimal taxation. Indicators to the analysis While GDP and nominal indicators are a sure way of determining our current position, as we can see below, by itself it is not enough to determine the policies we ought to set forth. Our GDP growth: Our GDP growth has been constant and fluctuates only between 4.8 and 6.3 percent especially as compared to the US. That should give us pleasure that we are truly developing. However the consumption patters, and rise of fuel costs to over 4.9% within the last six months, and the availability of lesser infrastructure to develop is impeding the progress of the economy. While Canada was always investor friendly, we have very few economic free zones, and proper industrial infrastructure. We also lack the primary railroad and transportation that us required for developing any nation. In the current global scenario, our GDP can be increased only by increasing our people's ability, or by raising the efficiency of human capital. There are concerns where we will tend to move, especially if all Europe and the US tend to concentrate on the East, which is progressing rapidly and expanding their infrastructure to attract global investment. We require that we address these concerns. Recommended Policies 1. To attract more investment in the development of the infrastructure, It is recommended that we create tax holiday zones, and charge flat rate for land lease and its use. This can be applied to Information technology parks, which will then attract immigrants from the east, who will come to work as technicians. They are now prohibited from entering the US on account of their immigration policies. As a result of creating such IT parks and inviting major players like Microsoft, and Adobe to participate, thrust in developing their off shore units to East may be mitigated. Secondly it will boost Canadian employment not only in such parks but also in the peripheral sectors, in producing computers, assembly and service. It will also cause trade in consumables, and other Canadian produce. This same methodology can be used to develop our ports and fishing by private participation. 2. We have to subsidize school and college education and make it possible for the youth to be trained in IT enabled disciplines. Some tax on luxuries like entertainment tax can be levied on theaters and the money so gained used in the project. 3. Government spending on infrastructure ought to be increased to provide for more jobs and as a consequence budget allotments ought to be addressed in that direction. From the statistics we find that Canadians spend more for fuel that allows little surplus for savings. Savings is capital and hence we propose that subsidies be given on gas and sell gas at a lesser rate. These subsidies are prevalent in India and the East. We have to adopt such a model. Recommendations 1. It is submitted that a national body be constituted to map out areas in the country that require infrastructural development and chalk out 300 - 800 acres of land for the purpose of creating economic free zones, and allow the investment in the process to private persons and corporations. This will then translate in 5 years into a working free zone that employs people and also brings in economic benefits. Care should be taken to see that a part of the economic zone is made for IT exclusive activities. To suit growth, free visa and stay policy for immigrants to these zones ought to be considered. 2. It is submitted that aid to schools be given to include IT in their curriculum and also aid for purchase of necessary equipment be given. Computer education cost must be brought down to the minimum to create a better workforce from within Canada. 3. That we have to spend more on infrastructure like buildings, railway and increase government spending to create more income and thereby savings. This is in line with the Keynesian concept of growth. Read More