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The global highs and lows of Canada’s IT competitiveness The Economist Intelligence Unit (EIU) benchmarks IT-sector competitiveness among 66 countries. The September 2009 update ranked Canada fourth in the world overall, but Canada’s performance is great in some of the measures used and poor in others. The EIU reports that most governments now correctly view the IT sector as an important engine of economic growth, and many are actively stimulating IT-sector output. The top 10 countries, in order, were the U.S., Finland, Sweden, Canada, the Netherlands, the U.K., Australia, Denmark, Singapore and Norway. It’s not surprising that four are native English-speaking countries, and with the others, English-language literacy in the business community is top tier. In software circles in particular, English is without doubt the lingua franca of the world. This is a natural advantage for Canada. Six categories were scored, with different weightings, resulting in an overall index score. This is how Canada ranked in the categories.
•Business environment: Canada was second worst in the top 10, and many countries well down the entire list are considered better than Canada in this category, including Ireland, Belgium, New Zealand, Germany and Chile. Canada’s low score here is due to our interprovincial barriers, lumpy regulatory regimes, bureaucracy and tax systems. It's hard to find quick fixes for a lot of these things. •IT infrastructure: Canada is also second worst in the top 10 in this category. A heavyweight indicator here is the ubiquity of broadband-communication capability in each country. Nordic countries lead the pack, and Finland has just become the first country to make a broadband connection a legal right provided for every citizen. The policy will be in force by July 2010, when every Finn will get a one-megabit connection. The final goal? By 2015, everyone will have a 100 Mbps – yes, a hundred megabits per second – available. In comparison, Canada – while showing decent numbers for broadband connections per capita, gets slammed for policies, prices, speeds and 3G mobile penetration. This was also highlighted in a recent study by Harvard’s Berkman Center for Internet and Society. •Human capital: Canada scores a bit better in this measurement, about mid-pack in the top 10, but, again, worse than many others further down the list, including Ireland, Taiwan, South Korea and New Zealand. The methodology here looks at post-secondary education, graduate-level science enrolment, employment number in the tech sector and the country’s education system’s orientation to providing techies with business skills. •R&D environment: Of the five categories, Canada’s posted its strongest score here, elbowing out Finland and Singapore for top spot. The metrics here included government spending on R&D, private-sector spending on R&D, number of new domestic patents registered by residents (Canada is No. 1 in the world in patent applications per capita) and royalty and licensing revenues per capita. The absolute cornerstone of Canada’s performance – and the envy of the world – is Canada’s rich Scientific Research and Experimental Tax Credit (SR&ED) program. Private companies in Canada doing $2 million per year of R&D investment get 35% cashback – which can be “grossed up” to about half of total R&D spending – from Ottawa. This is huge in terms of government R&D support, but also huge in that it leverages matching private investment in these companies. In many cases, private investors would just walk away from small companies with high R&D expenditures, but getting half of the bet covered by Ottawa makes it work for many. The SR&ED program would be even stronger if it applied evenly to Canada’s many small public tech companies as well. I am honestly puzzled by this discrimination in an otherwise top-notch program. •Legal environment: Canada again ranked second to last in the top 10. Metrics were transparency of IP legislation, adherence to treaties, enforcement of IP legislation, use of electronic signatures, data privacy and anti-spam laws and status of national cybercrime laws. Not Canada’s strong suit. •Support for IT industry development: Canada tied for second with the U.S. and was edged out only by oil-rich Norway. Canada scores well for government strategies, government IT spending and even-handed public policies on sector development. However, another measure was access to financing, both domestic and foreign. Canada is superb in taxpayer-funded research and SR&ED tax credits, but very weak in private venture capital capacity in terms of its IT-sector maturity, compared with, say, Israel, which has over 100 venture funds – more than double Canada’s number, but only 20% of Canada’s population. Metro Vancouver is one of Canada’s top IT communities, and these assessments of country IT competitiveness map onto Vancouver’s IT sector in most relevant aspects. In theoretical terms, we should continue to build on our region’s strengths and seek to minimize the erosion of our competitiveness from the known weaknesses. • Harry Jaako (
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
) is chairman of Discovery Capital Corp., a Vancouver-based venture capital firm. His column appears monthly.
This article from Business in Vancouver November 3-9, 2009; issue 1045 |
