ICTs offer major transformational opportunities. They can contribute to enhanced productivity, competitiveness, growth, wealth creation, and 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 US 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. In the context of WSIS, Kofi Annan observed: “Information and communications technologies have considerable potential to promote development and economic growth. They can foster innovation and improve productivity. They can reduce transaction costs and make available, in mere seconds, the rich store of global knowledge. In the hands of developing countries, and especially small-and medium-sized enterprises, the use of ICTs can bring impressive gains in employment, gender equality and standards of living."[2] On 4 April 2005, Ethiopian Prime Minister Meles Zenawi stated: “Now we believe we are too poor not to save everything we can and invest as much as possible in ICT. We recognize that while ICT may be a luxury for the rich, for us the poor countries, it is a vital and essential tool for fighting poverty, for beating poverty that kills and ensuring our survival.”
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 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.
There are some stunning successes. In 2002, the total number of mobile subscribers in the world surpassed that of fixed customers.
The ITU listed 25 countries in 2005 where mobile penetration rates exceeded 100 percent of the population.[3] Asia is the biggest mobile market with 40 percent of all subscribers in the world. The number of mobile subscribers in China far exceeds the combined number of Japan and the United States. (In fact, there are some 84 million more mobile subscribers in China than in the United States and Japan combined.) Even though Africa has only 4 percent of mobile subscribers, this translates into 80 million customers (compared to less than 30 million for fixed lines), growing at around 60 percent annually between 1999 and 2004. These successes indicate that a framework has been in place that supports investment and widespread diffusion.
Mobile phone handsets are now digital cameras, Internet-enabled video, 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. As digital cameras, they facilitate instant news gathering and industrial espionage. Their Internet-enabled video and music capability brings them into the realm of the media, copyright, and Internet governance. As a component of the banking system, the mobile network can provide service where the financial network is weak, but there is also the risk of banking fraud and misdemeanors. This widely used electronic consumer device now straddles several regulatory jurisdictions and brings new challenges to the regulatory framework to sustain investment and promote widespread diffusion, while protecting the legitimate interests of all the players.
ICTs have had a significant impact on business operations where a large number of new, non-OECD countries have successfully entered the market. This is particularly the case for software and Information Technology Enabled Services (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 has two major attributes: it can carry huge quantities of data, and it carries huge volumes at very high speeds. Postal and courier services can also deliver large quantities of data (a truckload of CDs) but they fail the speed test. To transfer the digital information contained in a DVD copy of the film “The Matrix” from New York to California would take 13 days using a 56Kbps dial-up modem; 10 hours by FedEx; and one minute using broadband (1000 Mbps optical fiber).[4]
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 that were considered non-tradable have become tradable, e.g., back-office functions such as the management of employee benefits or dental records. There has been a massive increase in “out-sourcing” and/or “business process off-shoring” (BPO). The total addressable market for off-shoring is estimated at USD $300 billion of which USD $100 billion will be off-shored by 2010.[5] This is another ICT success story. India, the dominant player in this market, experienced growth in BPO exports of 44.5 percent in 2005 and an increase in employment in the sector from 42,000 in 2002 to an estimated 470,000 in 2006. The state of Andhra Pradesh increased its exports of ITES from USD $37 million in 2001 to USD $714 million in 2005. Countries like the Philippines, Brazil, Romania, and Ireland have been particularly successful in attracting investment and creating employment in these occupations. But these successes reflect the underlying supporting regulatory framework. In the case of India, the 1999 telecommunications reforms established the foundations for these new activities.
ENDNOTES
[1] http://www.nap.edu/catalog.php?record_id=11823
[2] http://r0.unctad.org/ecommerce/ecommerce_en/edr04_en.htm
[3] http://www.itu.int/osg/spu/publications/worldinformationsociety/2006/wisr-web.pdf
[4] http://www.hometoys.com/htinews/dec04/articles/caswell/broadband.htm
[5] http://www.nasscom.org/artdisplay.asp?Art_id=4782