ict&e-business branch, unctadpara 166 course, geneva, 23 april 20071 icts and economic...
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ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 1
ICTs and economic performance: implications for developing and
transition economies
Rouben Indjikian, Senior Economist
ICT and E-Business Branch, UNCTAD
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 2
Outline
• Importance of ICT for economic development• ICT Diffusion• ICT Impact:
– Macro-level– Firm-level impact– Industry-level
• Role of government
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 3
ICT for economic development
ICTs increase productivity through: • Better communication and networking at lower
costs• Digitalisation of production and distribution • New trade opportunities through e-commerce• Access to knowledge • Increased competition
The world economy...
... an ICT based economy
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 4
•E-government Increased efficiency, better communication & networking, dimishing red tape, improving transparency, better prices
•Financial servicesProductivity gains from dramatically decreased transaction costs of e-payments, transparency, pricing and disintermediation
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 5
ICT diffusion
Internet users doubled in 5 years
0
200
400
600
800
1000
1200
2001 2002 2003 2004 2005
bill
ion
s
South-East Europe andCIS
Developing Economies
Developed Economies
Source: UNCTAD (2006)
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 6
2005
Developed
countries52%
Developing
countries43%
South-East
Europe and CIS5%
2001
Developed countries
70%Developing countries
28%
South-East Europe and
CIS2%
Source: UNCTAD (2006)
...
28% 43%
Developing and transition countries catching up
in number of Internet users
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 7
... but different penetration rates
Source: UNCTAD (2006)
54.4
8.5
14.6
Developedcountries
Developingcountries
South-East Europeand CIS
Internet penetration (internet users per 100 inhabitants), 2005
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 8
Developing and transition countries overtaking in number of
mobile phone subscribers...
South-East Europe and
CIS2%
Developing economies
40%Developed economies
58%
South-East Europe and
CIS9%
Developing economies
54%
Developed economies
37%
40% 54%
2001
2005
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 9
... and increasing penetration rates of mobile
phone subscribers
2001
200533.6
83.0
22.8
14.1
15.6
58.0
8.0
3.0
6.7 56.8
0 20 40 60 80 100
World
Developed economies
Developing economies
Africa
South-East Europe and CIS
2001
2005
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 10
Digital divide: Internet users worldwide
Developed economies
52%
South-East Europe and
CIS5%
Developing43%
Latin America &
the Caribbean
9%
Africa3%
Asia31%
Oceania0%
2005 Users
(thousandsPenetration
rateWorld 1 020 615 15.6Developed economies 531 290 54.4Developing economies 441 133 8.5South-East Europe and CIS 48 194 14.6
Africa 35 389 3.6
Source: UNCTAD (2006) based on ITU data
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 11
Source: UNCTAD (2006)
Limited broadband penetration
Broadband use and penetration, selected economies (2005)
17.5%14.2%
20.8%16.3%
2.9%
23.6%25.5%
15.4%20.2%
0.6%0.2% 0.8% 0.2% 0.3% 0.2% 0.1%0
10000
20000
30000
40000
50000
60000
0%
5%
10%
15%
20%
25%
30%Total users (thousands)
Broadband penetration
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 12
ICT diffusion: Countries have not invested to the same extent in ICTs
OECD ICT investment as % of non-residential investment
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 13
Why the differences?
• Lack of strategies on public and business levels and other instiutional barriers
• Cost considerations and access to finance
• Risk perceptions and nature of business
• Entry barriers and level of competition
• Lack of skilled labour
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 14
ICT Impact on economic growth
• Multifactor productivity and impact of ICTs on: labour, capital and technical progress
• Increase in productivity in ICTs producing sector.
• Increase in productivity and overall efficiency in ICT using industries due to lower transaction costs, automation of production processes and network effects
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 15
Macroeconomic impact
Positive correlation between GDP & Infodensity Infodensity≃ ICT productive function of an economy (ICT–enhancing capital & labour)
Source: UNCTAD (2006)
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 16
ICT Impact on economic growth1% increase in Infodensity resulted on average in 0.3% increase in per capita GDP
Source: UNCTAD (2006)
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
1996 1997 1998 1999 2000 2001 2002 2003
elas
tici
ty
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 17
ICT Impact on economic growthImpact unequal among countries at different stages of development – critical threshold
Source: UNCTAD (2006)
Elasticities by country group
0.00
0.05
0.10
0.15
0.20
0.25
0.30
1995 1996 1997 1998 1999 2000 2001 2002 2003
ela
stic
ity
high
elevated
intermediate
moderate
low
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 18
ICT Impact on economic growth
The impact of investment in ICT:
0.3-0.9 GDP growth (1995-2002)
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 19
Impact of ICT at the firm level
• Positive impact of ICTs on firm productivity due to making ICTs an integral part of production production process and supply chains, better communication lines and coordination, improved skills, innovation, organizational change, experimentation
• ICTs help efficient firms gain market share• Powerful impact of ICTs in services sector, but
also in manufacturing and primary sector• Impact on labour: skill biased technological
change
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 20
E-business development
Level of
e-b
usi
ness
in
ten
sity
Time, business size, investment
PCsE-mailWeb
Web presence
Extranet
Intranet
E-commerce
HRM, financeSome logistics Data sharing
Product service& support
Integration withsuppliers’ systemInvoicing and payment
E-mailing withcustomers & suppliersWeb info search
Customer RelationshipManagement
Source: UNCTAD E-Commerce and Development Report 2004
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 21
From upgrading factors of production to better performance
ICT Investment Training Organisational Changes Efficiency Gains Higher ProductivityHigher Growth More Wealth
Next Circle of Investment in ICTs, Knowledge and Better Organization
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 22
Sector level impact: e-finance
• Massive decrease in transction cost due to migration of finacial services to electonric communications and particularly Internet
• Emergence of click and mortar banks and brokerages
• Security in e-finance and e-payments• Financial flows to developing countries: e-
remittances• E-finance for SMEs• Microfinance
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 23
E-credit information
• ICTs and information assymetry
• moving out from informal economy
• online credit risk databases
• online scoring and rating of enterprises
• lower transaction costs to assess SMEs credit risks
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 24
e-trade finance
• ICTs and credit risks, payments and short term trade finance in international trade
• bank based e-trade finance platforms
• specialized e-trade finance platforms
• e-trade finance in developing countries
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 25
e-credit insurance
• major credit risk databases of credit insurers
• moving databases online
• insuring from paymnet default risk online
• participation of developing countries in e-credit insurance networks
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 26
Sector-level impact: Oil
Oil: a capital intensive & labour saving industry increasingly becoming an info-intensive one
• Vertically integrated oil companies –ideal structure for ICTs
• ICTs in upstream• ICS in midstream• ICTs in downstream
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 27
ICTs and Oil Markets
• Traditional spot and futures oil markets
• Migration to online trading platforms
• Other use of ICTs in international oil trade
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 28
ICTs as drivers in commodities sector
•ICTs play crucial role in streamlining the commodity supply chain • They link more tightly supply with demand and help to avoid losses in upstream, middlestream and downstream operations •Turning capital intensive and labour saving sectors of extractive industries into more info intensive ones
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 29
Role of governments• Foster a competitive and supportive environment for the
increase in invstment in ICTs…and hence encourage the development of ICT infrastructure
• Open markets and encourage competition for supply of ICT goods & services...through trade, financial and fiscal policies
• Build confidence in use of ICTs ... by developing a supportive legal framework,
• Harness the potential of innovation and technology diffusion… by promoting the development of R&D, venture capital and ICT skills of population at large
• Make national programmes more efficient … by establishing a comprehensive ICT strategy
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 30
Conclusions• ICTs–a powerful driver of productivity growth and accelerated development• Opportunities of new technologies such as mobile • Decreased connection, hardware and software costs • Focus policies on narrowing digital divide • Link between ICT & overall economic policies – need coherent strategy• Measure impact of ICT
ICT&E-Business Branch, UNCTAD Para 166 Course, Geneva, 23 April 2007 31
Thank you!Questions or Comments?
rouben.indjikian@unctad.org
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