1.2 ICTs and the Transformational Opportunity and Risks

ICTs offer major transformational opportunities. They can contribute to enhanced productivity, competitiveness, growth, wealth creation, poverty reduction and can spur the knowledge-based economy. ICTs provide the means by which knowledge is developed, stored, aggregated, manipulated and diffused.  ICTs also enable participation in the global economy.

In 2006, a report published by the U.S. National Academy of Sciences began by stating: “The New Economy refers to a fundamental transformation in the United States economy as businesses and individuals capitalize on new technologies, new opportunities, and national investments in computing, information, and communications technologies. Use of this term reflects a growing conviction that widespread use of these technologies has made possible a sustained rise in the growth trajectory of the U.S. economy …. While the telecom sector accounts, by various measures, for about one percent of the U.S. economy, it is estimated to be responsible for generating about ten percent of the nation’s economic growth.”[1] The New Economy, the Information Society and associated transformations and opportunities reach out and engage all countries.

These opportunities are well known and are not just a developed country phenomenon.  ICTs, particularly access to broadband Internet, are vital for developing nations as well.  The ITU’s Build on Broadband project is dedicated to promoting equitable, affordable broadband access to the Internet for all people, regardless of where they live or their financial circumstances.[2]  In a speech on July 9, 2009, ITU Secretary-General Dr Hamadoun I. Touré stated: “[I]n the 21st century, affordable broadband access to the Internet is becoming as vital to social and economic development as networks like transport, water and power.  Broadband access – and the next generation broadband network infrastructure which underpins it – is a key enabler for economic and social growth… Broadband changes everything.  It enables not just great new enabling applications, such as VoIP and IPTV, but also the delivery of essential services – from e-health to e-education to e-commerce to e-government.  And broadband is helping us make great progress towards meeting the Millennium Development Goals – and improving the quality of life for countless people around the world.”[3]

A new program focused on bringing ICTs to the developing world was introduced by the World Bank in 2008.  This program, called New Economy Skills for Africa Program-Information and Communication Technologies (NESAP-ICT), supports the growth of Information Technology (IT) and IT Enabled Services (ITES) industry in Sub-Sahara African countries.[4]  The NESAP-ICT program noted that ICTs transform the economy and peoples’ lives and provided various examples, including:

• New jobs: In India, the expansion of the IT-ITES industry over the last 15 years has added more than 10 million direct and indirect jobs. In South Africa, the industry has employed 100,000 workers directly and indirectly by 2009.  In the Philippines, a projected 900,000 people will be employed directly or indirectly by IT-ITES by 2010;

• Economic growth:  In 2009, the Indian IT-ITES industry contributed an estimated US$ 70 billion to the GDP or six percent share of total GDP.  In the Philippines, the industry’s contribution in 2010 is expected to reach US$ 13 billion, or about eight percent of GDP.

• Increased productivity:  The rapid spread of e-applications and digital tools to such diverse areas as manufacturing, transportation, logistics, finance, banking, governance, health, education and even in traditional sectors like agriculture is transforming the economies of developing countries. IT investments have been found to raise worker productivity three to five times that of non-IT capital. U.S. studies have shown that the IT-ITES industry was responsible for two-thirds of total factor productivity growth between 1995 and 2002 and for nearly all of the growth in labor productivity in that period.

Clearly, ICTs can have an impact on everyday lives and on general economic activity, but the opportunities only materialize fully to the extent that the regulatory framework, as implemented, supports and fosters both investment in and widespread diffusion of ICTs. Absent these conditions, the full promise of ICTs is unrealized. ICTs offer the prospects of rapid advancements, but if appropriate conditions are not in place, the outcome can be a rapid slide down the digital divide.  And although the digital divide is narrowing, particularly due to the rise of Internet-enabled mobile phones and applications, a new broadband divide is growing that governments need to address.[5]

There are some stunning successes, particularly with regard to mobile services. In 2002, the total number of mobile subscribers in the world surpassed that of fixed customers. Between 2004 and 2009, mobile phone subscriptions worldwide grew from nearly 1.8 billion to an estimated 4.6 billon, translating into a growth in mobile penetration from less than 28 percent to 67 percent.[6][7]

The Asia-Pacific region is the largest mobile market in the world, and by 2013, Asia is expected to have almost three billion mobile subscribers.  In 2008, China alone had 634 million mobile subscribers, which far exceeded the combined number of mobile subscribers in Japan and the United States at 110 million and 270.5 million subscribers, respectively.[8]  Sub-Saharan Africa had a mobile penetration of rate of 32 subscribers per 100 people in 2008, this translated into over 246 million mobile customers.[9]

Mobile phone handsets are now turning into smart-phones equipped with digital cameras, Internet-enabled video, pre-installed social networking applications such as Facebook and music juke box payment terminals. “Billboard” magazine publishes a list of top 20 ring tones, a market that generates billions of dollars in revenue. These new functionalities are transformational.  For example, as digital cameras, mobile devices provide benefits such as instant news gathering or create harmful effects like facilitating industrial espionage.  Their Internet-enabled video, access to social networks and music capability brings them into the realm of media, copyright and Internet governance. As a component of the banking system, the mobile network can provide services where the financial network is weak, but there is also the risk of banking fraud and identity theft. These widely used electronic consumer devices now straddle several regulatory jurisdictions, raise new legal issues, and present new challenges to existing regulatory frameworks.  From a government standpoint, the challenge becomes how to sustain investment and promote widespread diffusion of technologies, while protecting the legitimate interests of all players, particularly consumers.

ICTs have significantly impacted business operations where a large number of new, non-OECD countries have successfully entered the market. This is particularly the case for software and ITES. Market entry is partly explained by the “death of distance” or the dramatic fall in the costs of international connectivity. The latest manifestation is the proliferation of broadband access networks. Broadband can carry huge quantities of data, at very high speeds. Although postal and courier services can deliver large quantities of data (e.g., a truckload of CDs), they fail the speed test. To transfer the digital information contained in an average two-hour movie downloaded from Apple’s iTunes takes about three days using a 56Kbps dial-up modem; two hours using a 1.5 Mbps connection; two minutes using a 100 Mbps connection; and 15 seconds using a 1000 Mbps (1 Gbps).[10]

In the broadband world, large volumes of data can be moved almost instantaneously to widely dispersed locations at low cost. Through the application of ICTs, many services once considered non-tradable are now tradable, such as back-office functions including the management of employee benefits or dental records. “Out-sourcing” and/or “business process off-shoring” (BPO) have seen massive increases, amounting to a total addressable market estimated at US$ 300 billion, of which US$ 100 billion will be off-shored by 2010.[11]  In the BPO market, India is a tremendous success story.  It has become the dominant player in the BPO market.  Growth in India’s BPO exports were 44.5 percent in 2005 and employment in the sector increased from 42,000 jobs in 2002 to an estimated 470,000 in 2006. The state of Andhra Pradesh increased its ITES exports from US$ 37 million in 2001 to US$ 714 million in 2005.  Other countries like the Philippines, Brazil, Romania and Ireland have also been particularly successful in attracting investment and creating employment from BPO-related activities. But these successes have come about due to a commitment from the government to foster and support these activities by implementing necessary policies and developing the supporting regulatory framework. In the case of India, government policies and reforms, including telecommunications reforms implemented in 1999, established the foundations for these new activities.

The use of ICTs in e-government services is also transforming citizens’ interactions with the public sector by improving efficiency, effectiveness and accountability of governments.  In India, for example, a comparison of manual and e-government services found that computerized services substantially increased cost-savings and access to services.[12] The survey showed that e-services lowered travel costs, made delivery of services more predictable, decreased waiting times, reduced corruption and generally improved overall quality of service.

endnotes

[1] The National Academies Press, Enhancing Productivity Growth in the Information Age: Measuring and Sustaining the New Economy at http://www.nap.edu/catalog.php?record_id=11823.

[2] ITU, Build on Broadband, at http://www.itu.int/en/broadband/Pages/default.aspx.  

[3] ITU, Speech from Dr Hamadoun I. Touré, ITU Secretary-General, Conferencia Magistral “The Importance of ICTs and Broadband as Bital Enablers for Social and Economic Development”, Dominican Republic (9 July 2009) at http://www.itu.int/osg/sg/speeches/2009/jul9.html.

[4] World Bank, New Economy Skills for Africa Program-Information and Communication Technologies at http://go.worldbank.org/XNDHZJTOZ0.

[5] OECD, The ICT4D 2.0 Manifesto: Where Next for ICTs and International Development?, Paper No. 42 at http://www.oecd.org/dataoecd/43/25/43602651.pdf and ITU, Measuring the Information Society: The ICT Development Index (Mar. 2009) at http://www.itu.int/ITU-D/ict/publications/idi/2009/index.html.

[6] ITU, Mobile Telephone Subscribers per 100 Inhabitants (1994-2004) at http://www.itu.int/wsis/tunis/newsroom/stats/charts/ChartA2_300dpi.jpg.

[7] ITU, The World in 2009: ICT Facts and Figures at http://www.itu.int/ITU-D/ict/material/Telecom09_flyer.pdf.

[8] ITU, ICT Statistics Database at http://www.itu.int/ITU-D/icteye/Indicators/Indicators.aspx#.

[9] ITU, ICT Statistics Database at http://www.itu.int/ITU-D/icteye/Indicators/Indicators.aspx#.

[10] See Apple, iTunes FAQ for Purchased Movies at http://support.apple.com/kb/HT1906#faq5 and Arizona State University, Information Technology Instruction Support Group, Download Time Calculator at http://is.asu.edu/r&d/video/dltime.html.

[11] NASSCOM-Mckinsey Report 2005, Extending India’s Leadership in the Global IT and BPO Industries at http://www.nasscom.org/artdisplay.asp?Art_id=4782.

[12] World Bank, IC4D, How Do Manual and E-Government Services Compare? Experiences from India at http://siteresources.worldbank.org/ EXTIC4D/Resources/5870635-1242066347456/IC4D_2009_Chapter5.pdf