The EIU's e-business readiness rankings, May 2000

Key points:

• The United States is the world’s most "e-business-ready" country
• High connectivity levels put a Nordic trio--Sweden, Finland and Norway--close behind
• The biggest emerging markets--Russia, India and China--suffer from infrastructure weaknesses

How do the world's countries rate in terms of their preparedness for e-business? The EIU ebusiness forum introduces the EIU's e-business readiness rankings

It's no surprise that the US is the world's most "e-business-ready" country, but a new set of global rankings from the Economist Intelligence Unit (EIU) offers some unexpected placements further down the list. Of the 60 countries covered, Japan comes just 21st, India ranks a discouraging 50th, and China rates a mere 51st. Meanwhile, three compact Nordic economies--Sweden, Finland and Norway--cluster just behind the US at the top of the rankings. The UK ranks a comfortable 6th, but its largest EU partners are relative laggards: Germany at 13th, France at 14th, and Italy at 19th. As this hierarchy suggests, e-business needs more than a large or robust economy to flourish; "connectivity", or the readiness of the communications infrastructure to handle Internet traffic, is also vital.

The e-business-readiness rankings are a guide to the relative preparedness of the world's main markets for the e-business era. Countries at the top of the league stand to reap the benefits from the new networked economy, while those at the bottom will struggle to compete in the digital age. Companies looking to realise the global promise of the Internet and enter far-flung markets can judge from a country's position in the rankings how easy that move is likely to be.

In assessing e-business readiness country by country, the EIU weighs two factors: the general business environment and "connectivity". In evaluating the general business environment in any of 60 countries, the EIU screens 70 different indicators covering criteria such as the strength of the economy, the outlook for political stability, the regulatory climate, taxation policies and openness to trade and investment. The resulting "business environment rankings" measure the expected attractiveness of the general business environment over the next five years. Calculated regularly as part of the EIU's country forecasting activities, these rankings have long offered investors an invaluable comparative index for 60 major economies.

But business and e-business are not one and the same. In the digital age, the state of the communications infrastructure is vitally important. Without adequate Internet access, e-business simply cannot happen. So "connectivity" is factored into the rankings, drawing on a methodology devised by Pyramid Research, the EIU's communications division. Pyramid's assessment takes into account not only the state of the existing telephone network but also other factors that affect Internet access, such as dial-up costs and literacy rates. A country's average score across the two measures yields its e-business-readiness tally.

The resulting rankings offer the best proxy now available to judge a country's relative preparedness for the Internet era. And they suggest some mind-clearing conclusions:

• The Internet is global, but local conditions still matter. It is simplistic to say that the Internet is a borderless network and allows businesses instantly to go global. The EIU e-business-readiness rankings show a huge range between countries in the conditions for e-business. Companies ignore these differences at their peril. Local conditions encompass not only infrastructure and technology, but also culture. English-speaking countries tend to have a head-start in e-business because so much Internet content is in English. Australia and New Zealand, for instance, are already advanced e-commerce players, although they have lower rates of broadband access and less sophisticated mobile networks than do Hong Kong and Singapore.
• Size isn't everything. Some very big countries--China, Indonesia, India, Russia--come far down the e-business-readiness league table. This does not mean that there are no opportunities for doing e-business there. In such large markets, there are almost bound to be pockets of e-promise: take India's software industry, especially around Bangalore, and the hopes for a "Cyberabad" in Andhra Pradesh. Yet India's 50th place in the rankings is a reminder of the backwardness, red tape, power outages and poor telecoms infrastructure in the country as a whole. On the other hand, small countries, such as Singapore and Hong Kong, can be e-business leaders thanks to their sophisticated infrastructure.
• The world is divided in three. The countries that are readiest for e-business to take off--those that combine good connectivity with a favourable business environment--occupy roughly the top third of the places in the rankings. Clearly, even in this group there are distinctions: the US is super-ready, whereas countries like France and particularly Japan still show shortcomings, particularly in competition policy. The next 20 or so countries have the potential to catch up if they put the right policies in place, but there is much work to be done. The bottom third of the rankings risk being left behind, and face major obstacles to e-business growth.
• The US and Western Europe lead the e-business world. Western Europe and North America account for 13 of the top 15 countries. Countries in Africa, the Middle East and Asia dominate the bottom of the table. Reform-minded East European and Latin American countries cluster in the middle.
• Connectivity counts. It's the high rating for connectivity that catapults the Nordic countries up the ratings above, say, the UK (which is in 2nd place in the business environment rankings but comes 6th for e-business readiness). Taiwan, Thailand and the Philippines are other countries where a poor connectivity score harms their e-business-readiness ranking, largely because of the relative backwardness of their infrastructure. This conclusion underlines the urgency of telecoms deregulation and, in many cases, the need for significant sums of foreign investment in countries lower down the rankings list.

The EIU ebusiness forum is developing detailed profiles of the conditions and outlook for e-business in individual countries around the globe. You can find these in the country-specific listings in the "Doing e-business in …" area of ebusinessforum.com. If you have experience doing e-business across borders, we welcome your input. E-mail the editor, Louisa Vinton, at louisavinton@eiu.com or share your thoughts with other executives at our ebusiness forum members' discussion area.

The EIU e-business-readiness rankings Rank Countries Business environment ranking, 2000-04* Connectivity rating+ E-business- readiness ranking# 1 US 8.69 9 8.8 2 Sweden 8.26 9 8.6 3 Finland 8.21 9 8.6 4 Norway 8.00 9 8.5 5 Netherlands 8.84 8 8.4 6 UK 8.80 8 8.4 7 Canada 8.66 8 8.3 8 Singapore 8.55 8 8.3 9 Hong Kong 8.52 8 8.3 10 Switzerland 8.42 8 8.2 11 Ireland 8.42 8 8.2 12 Denmark 8.41 8 8.2 13 Germany 8.32 8 8.2 14 France 8.17 8 8.1 15 Belgium 8.17 8 8.1 16 Australia 8.14 8 8.1 17 New Zealand 8.10 8 8.1 18 Austria 7.96 8 8.0 19 Italy 7.68 8 7.8 20 Israel 7.61 8 7.8 21 Japan 7.43 8 7.7 22 Spain 8.01 7 7.5 23 Chile 7.85 7 7.4 24 South Korea 7.30 7 7.2 25 Portugal 7.59 6 6.8 26 Argentina 7.22 6 6.6 27 Taiwan 8.13 5 6.6 28 Thailand 7.27 5 6.1 29 Poland 7.15 5 6.1 30 Hungary 7.09 5 6.0 31 Czech Republic 7.07 5 6.0 32 Malaysia 6.91 5 6.0 33 Greece 6.90 5 6.0 34 Mexico 6.78 5 5.9 35 Brazil 6.37 5 5.7 36 South Africa 6.25 5 5.6 37 Slovakia 6.19 5 5.6 38 Indonesia 6.16 5 5.6 39 Turkey 6.06 5 5.5 40 Saudi Arabia 6.02 5 5.5 41 Bulgaria 5.61 5 5.3 42 Venezuela 5.51 5 5.3 43 Romania 5.45 5 5.2 44 Russia 5.16 5 5.1 45 Ukraine 4.79 5 4.9 46 Philippines 6.72 3 4.9 47 Peru 6.36 3 4.7 48 Colombia 6.13 3 4.6 49 Egypt 6.10 3 4.6 50 India 5.97 3 4.5 51 China 5.88 3 4.4 52 Sri Lanka 5.87 3 4.4 53 Ecuador 5.32 3 4.2 54 Vietnam 5.30 3 4.2 55 Pakistan 4.94 3 4.0 56 Kazakhstan 5.07 2 3.5 57 Algeria 4.90 2 3.5 58 Iran 3.60 3 3.3 59 Nigeria 4.54 2 3.3 60 Iraq 2.07 2 2.0 * From EIU Country Forecast, score out of 10: more than 8 = very good; 6.5-8 = good; 5.5-6.4 = moderate; 5-5.4 = poor; less than 5 = very poor. + From Pyramid Research, out of 10. # Average of business-environment rating and connectivity rating, out of ten.

Source: The EIU ebusiness forum.