Report: Canada Closes E-Biz Gap with U.S.

Canada experienced a spike in e-commerce activity in2001 and progressed measurably in other e-businessdisciplines as well, according to a report released Monday bythe CanadianE-Business Opportunities Roundtable.

The consortium’s final report — “Fast Forward 3.0:Maintaining the Momentum” — showed Canada leadingNorth America in Internet connectivity.

However, the report suggestedthat improvements remain to be made in such areas ase-business adoption among small and mid-sizedenterprises (SMEs) and venture capital availability.

“It is unusual for a public-private-sector partnershipto work as well as this one did,” roundtablechairperson and iFormation Group CEO DavidPecaut told the E-Commerce Times. “We havedramatically changed the e-business environment inCanada.”

Overall, officials of the public-private-sectorconsortium gave Canada an “A minus” in e-businessadoption.

The Canadian Connection

Despite leading the United States in Internetpenetration in 2001 by a count of 60 percent to 52percent, Canadian consumers continue to purchaseonline much less readily than do Americans, according to thereport.

Just 17 percent of Canadians purchased online lastyear, compared with 27 percent of Americans, research firm IDC said.

But e-commerce in Canada showed tremendousyear-over-year growth, according to IDC, totaling US$26.4billion in 2001 — an increase of 69 percent over the2000 figure of $15.6 billion.

Productivity Gains

The roundtable’s third and final report draws on theactivities of five “e-Teams.”

The teams focused on closingthe venture capital gap with the United States; facilitatinge-business adoption in small and mid-sizedenterprises; attracting and retaining skillede-business talent; accelerating government online; andpromoting Canada’s e-business brand globally.

Participants asserted that technology will drivewealth creation in Canada and that companies mustembrace e-business to bolster productivity.

“Our peer nations in the G8 see e-businesscontributing more to our future productivitygrowth than any other single factor,” said Pierre-PaulAllard, managing director of Cisco Systems Canada.

“By increasing productivity, Canada can pull ahead ofour U.S. neighbors and take a global leadershipposition,” Allard noted.

Tax Breaks

Since its inception in 1999, the consortium hasrecommended tax changes to improve the climate fore-business and innovation in Canada.

As a result, the 2000 federal capital gains inclusionrate dropped from 75 percent to 50 percent, which willhelp make corporate tax rates 5 points lower than U.S.rates by 2005, the report said.

“Canada’s future prosperity depends on our ability toinnovate in all sectors and in allregions of the country,” said Minister Allan Rock.

“E-business is a critical tool to meet our innovationgoals.”

Seeding New Ventures

Roundtable members — including representatives fromSears, IBM and the Canadian Chamber of Commerce –agreed that challenges still loom for Canadian e-business.

“Canada has become a more attractive place to invest,”Pecaut said. “But Canadian pension funds continue tosignificantly under-invest in venture capital.”

In 2000, 11 percent of new venture capital raised inCanada came from pension funds committing capital toCanadian venture funds. But in 2001, that share fell to3 percent, according to the report.

In comparison, pension funds accounted for 40 percentof new venture capital commitments in the United States.

Next Phase

What is more, Canadian small and mid-sizedenterprises still lag behind their U.S. counterpartsin terms of e-business adoption, according to Pecaut.

Going forward, a new body — the Canadian e-BusinessInitiative (CeBI) — will continue the Roundtable’spublic-private-sector promotion of e-businessproductivity, leadership and innovation.

“My goal for the CeBI is to ensure that a criticalmass of SMEs understand the direct benefits to theirbottom line from implementing e-business,” said NancyHughes Anthony, president of the Canadian Chamber ofCommerce and co-chair of the CeBI.