Tech sector to keep fueling Canadian economy: CIBC

The Canadian technology sector will continue to grow, leading most other sectors of the economy through this year to 2001, according to Canadian Imperial Bank of Commerce (CIBC) economists.

In the latest edition of the bank’s periodical, titled Observations, economists predicted that the electronic products industry will expand at an annual rate of 23.5 per cent, and the communications industry will do the same at a rate of 11.7 per cent in 2000 and 2001.

The report is for all industries, not only the technology area, noted Anahid Mamourian, senior economist with CIBC’s economics division in Toronto.

“What we are looking at here is we are forecasting. This is our semi-annual industry outlook that we do across all Canadian industries, and Statistics Canada provides us the GDP at factor cost by industry,” she explained. “We take those numbers and we project them over, I would say in this case as it’s the middle of the year, 18 months. So it’s a two-year forecast

— 2000, 2001.”

According to the report, the communications sector has experienced growth in the first four months of the year. The demand for wireless communication services, as well as an increase in subscription rates to Internet and data services, are the likely factors for this increase, Mamourian said.

“We found that for the telecommunications segment…communications is a broader category, but zeroing in on the telecommunications carriers, after almost a growth of 20 per cent in 1999, the first four months have already shown a growth of close to 18 per cent. Wireless and Internet appear to be the segments that are driving this.”

Some parts of the industry are more mature than others, she pointed out.

“You have your basic telephone communications included in there, and that also includes long distance, which is more of a commodity — so the growth is then coming from value-added features of the telephone.”

The wireless communications segment also seems to be growing. Mamourian said she has data in support of that, provided by the Canadian Wireless Telecommunications Association, which has shown that the number of subscribers in Canada grew by over 30 per cent in 1999 to total 7 million.

The business services sector, including computer services and the Internet, is predicted to reach 7.5 per cent growth annually with the Internet as the main driver — specifically e-commerce-related software and applications, according to the economists’ findings.

“Within business services, the computer services sub-sector is really the strongest-growing. We’ve really seen very strong growth in computer services,” Mamourian said. “In 1999, that segment went up by 23.3 per cent, and in the first four months (of this year) it was up 17.3 per cent, far above the overall business service group. And we had seen a lot of Y2K activity previously. But now, with that out of the way, we’re seeing more and more concentration on e-commerce.”

Business-to-business in particular has demonstrated significant growth, she said, and is expected to grow even faster than business-to-consumer e-commerce because of the cost savings associated with the smooth operation of the supply chain.

“I think on the case of business-to-business e-commerce, with the business model changing, it’s no longer on issue of whether you’d like to be a part of it. It’s becoming such that you have to have a ‘Net presence in order to be able to carry on your business, to be visible and to be part of the supplier relationships,” she related.

Based on the strong demands from the Internet comes the need to have the networks in place in order to provide these services, she said. The electronic products market is benefiting from the growing need for high-speed broadband networks.

“The services are pushing the growth in the equipment, the networks and the fibre-optic wires,” Mamourian explained. “And there we’ve seen, in particular, telecommunications equipment is growing very strongly. In 1999, the growth rate for telecommunications equipment was 35.7 per cent. And in the first four months (of this year) we’ve already seen the jump of 53.8 per cent. So all these networks are being put in place in support of the demand from the Internet and Internet-based applications.”