Canadian businesses are making small gains on an international competitveness index, but a slew of factors, including lost investment opportunities and a lack of education, are preventing this nation from blossoming, say two experts.
On the Business Competitiveness Index, Canada moved up one spot to 14th from 15th over last year’s results. Canada dropped one spot on the Global Competitive Index to 13th in the same time frame. Both indices are developed by Michael Porter, the Director of the Harvard Business School’s Institute for Strategy and Competitiveness.
The business index draw on data from 11,000 business decision makers in 131 economies around the world. It considers a variety of factors including financial markets and individual organizations’ operations and strategies.
The global index is comprised of three sub-indices: a nation’s “basic requirements,” “efficiency enhancers,” and “innovation factors.”
Canada scored well on basic requirements (moving to 11th from 14th, thanks to good results in health care and basic education. Within “efficiency enhancers,” Canada lost points on financial market sophistication, but did demonstrate a positive change in technological readiness. The third measure, “innovation factors,” looks at business sophistication and innovation. Within that sub-category, Canada slipped one spot in the rankings to 16th.
There a number of factors that hamper Canadian development, said James Milway, executive of the Toronto-based Institute for Competitiveness and Prosperity – many of them out of the hands of Canadian businesses.
Corporate taxes are a limiting factor on growth, he said. The recent changes outlined in the Federal Finance Minister’s mini budget (where corporate taxes fell $1.5 billion) are a step in the right direction, said Milway, but other nations, such as the U.S., are still less financially constricted. New businesses especially should be receiving more tax breaks as an incentive, he said.
Another factor is foreign ownership. Telecommunications and banking are particularly sheltered from foreign influence, said Milway, creating insularity in those industries and preventing an influx of capital and competition.
A third factor identified by Milway is a lack of university education for Canadians who hold managerial roles. According to Milway, a third of managers (those people who make policy, and hold serious decision-making power) don’t have a post-secondary education.
A lack of education is partly what’s keeping Canadian businesses from making more and better investments in the technology they use, said Milway.
“University education isn’t everything, but it does help explain why managers don’t understand ICT as well as they should,” he said.
Warren Shiau, an analyst with the Toronto-based Strategic Counsel of Canada, agrees that Canada isn’t keeping pace with technology investment.
“We have always had a lack in our technology investment, which people have been trying to figure out for years,” he said. “If you asked any major vendors and asked them where we are in an upgrade cycle . . . or the size of their installed base . . . we’re always somewhere from two to four years behind what’s happening in the U.S. No one is exactly sure why that is.”
The recent strength of the Canadian dollar is highlighting the factor that Canadian businesses need to step up their investments and lean more heavily on capital, said Shiau.
“If our dollar is strong . . . you’ve got to utilize capital more than labour. If things stay where they are, there has to be a major shift (towards) capital investment in technology,” he said.
If the Canadian dollar continues its rise against the U.S. dollar “it’ll only get worse,” added Shiau. “If it weren’t so for certain hot sectors (oil, housing), things wouldn’t look so good.”
The top-ranked nations in the Business Competitiveness Index were:
- 4. Sweden
- 5. Denmark
In the Global Competitiveness Index, the top five were:
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