ARCHIVED—Industry Leaders Say E-Business A Key Enabler Of Innovation

Press Release

Canadian E-Business Opportunities Roundtable's final e-report card shows Canada continues to prosper in Internet economy and close gap with U.S., but still room for improvement

OTTAWA, March 25, 2002 — In its final report on the state of e-business in Canada, the Canadian E-Business Opportunities Roundtable concludes that businesses and governments have "moved the needle" in establishing Canada as a globally recognized e-business leader and suggests that e-business continues to be a key enabler in the creation of an innovative economy.

Chaired by David Pecaut, CEO of iFormation Group, the Roundtable was created in mid-1999 to accelerate Canada's leadership in the Internet economy. The Roundtable's final report, Fast Forward 3.0: Maintaining the Momentum, updates Canada's E-Report Card and highlights the achievements of the group's e-teams in championing e-business initiatives and policy changes.

"Overall, this is an "A minus" report card showing that we have continued to make steady gains, but signaling that there is still room for improvement," said Pecaut. "Many of our recommendations have been adopted in successive budgets and announcements by the federal government. As a country, we have made substantial progress both in improving the tax and regulatory environment for e-business and in consumer connectivity. However, Canadian pension funds continue to significantly under-invest in venture capital and our small and medium-sized enterprises still lag behind their U.S. counterparts in e-business adoption."

The Roundtable's final report draws on the activities of the five e-Teams that were formed to advance the Roundtable's initial strategy for e-business leadership, focusing on closing the venture capital gap with the U.S. by successfully pressing for regulatory and tax reforms, facilitating e-business adoption in small and medium sized enterprises, attracting and retaining skilled e-business talent, accelerating government online, and promoting Canada's e-business brand globally. As in former reports, Fast Forward 3.0 provides a snapshot of Canada's 'Net gains', noting successes and future challenges.

While it was formed and led by the business community, the Roundtable has operated in partnership with the public sector. Canada's future prosperity depends on our ability to innovate in all sectors and in all regions of the country. E-business is a critical tool to meet our innovation goals," said Minister Allan Rock. "I would like to commend the E-Business Roundtable for being a model for private and public sector cooperation. It has helped Canada set ambitious targets and acted as a catalyst to ensure we become a leader in the Internet economy."

The Roundtable reviews Canada's progress over the last year and notes that we are moving ahead on many fronts, but that continued efforts are required:

• Canada continues to lead North America in connectivity, with the percentage of Canadians online reaching 60% in 2001. By comparison, only 52% of the U.S. population is online. Despite this lead in connectivity, Canada's consumers continue to purchase online much less readily than their counterparts across the border. According to IDC, only 17% of the Canadian population purchased online, far less than the 27% of the U.S. population that purchased online in 2001.
• E-commerce in Canada continues to grow. According to IDC, Canada had US$26.4 billion worth of e-commerce in 2001 – an increase of 69% from the 2000 figure of US$15.6 billion. But SMEs continue to lag behind their U.S. counterparts in e-business adoption.
• 2001 Canadian venture investment was more robust than in the U.S. According to Macdonald & Associates, U.S. disbursements were down 65%, from US$104 billion in 2000 to US$36.5 billion in 2001.
• Disbursements from foreign investors in Canada actually grew slightly in 2001: Canada saw a slight increase from $1.585 billion in 2000 to $1.602 billion in 2001.
• In 1999, only 5.6% of new venture capital raised in Canada came from pension funds committing capital to Canadian venture funds. In 2000, this share rose to 11% but fell back to 3% in 2001, dramatically below the 40% share of total new capital commitments that pension funds accounted for in the US in 2000.
• Tax changes responsive to Roundtable recommendations introduced in 2000 and 2001 have continued to improve the climate for e-business and innovation in Canada. In 2000, the federal capital gains inclusion rate dropped from 75% to 50%, a reduction in the corporate tax rate that, when combined with announced provincial reductions, will make Canadian rates 5 percentage points lower than the U.S. rates by 2005.
• Awareness of Canada's global e-business brand is rising, but perception still trails performance. Canada moved up three spots to #4 in the high profile e-readiness rankings compiled by the Economist Intelligence Unit and Pyramid Research.

"The Roundtable has enjoyed tremendous support and success," noted David Pecaut. "Technology will continue to drive wealth creation in Canada. We hope that our success in championing e-business initiatives will inspire other organizations to step up their efforts to pursue the innovation agenda."

The work of the Roundtable will be continued by the new Canadian e-Business Initiative (CeBI). Like the Roundtable, CeBI will be a public-private sector partnership that will further the e-business agenda by focusing on productivity, leadership and innovation.

"My goal for the CeBI is to ensure that a critical mass of SMEs understand the direct benefits to their bottom line from implementing e-business," said Nancy Hughes Anthony, President and CEO of the Canadian Chamber of Commerce and co-chair of the CeBI. "E-business is an important tool for Canadian companies to advance their competitive position in the global marketplace."

Pierre-Paul Allard, Managing Director of Cisco Systems Canada Co. and CeBI co-chair, emphasized the need to focus on productivity gains. "Our peer nations in the G8 see e-business contributing more to our future productivity growth than any other single factor - what we call Net Impact. By increasing productivity, Canada can pull ahead of our U.S. neighbours and take a global leadership position," said Mr. Allard.