icts for economic growth: theory, policy implications, case studies jaroslaw k. ponder strategy and...

ICTs for Economic Growth:ICTs for Economic Growth:Theory, Policy Implications, Theory, Policy Implications, Case StudiesCase Studies

Jaroslaw K. PonderJaroslaw K. PonderStrategy and Policy Unit

International Telecommunication Union

Briefing Session on Economics22 May 2006, UNDP, Geneva, Switzerland

Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU. Jaroslaw K. Ponder can be contacted at Jaroslaw.Ponder@itu.int

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AgendaAgenda

• Trends• Economic meaning of the ICT sector • ICTs versus economic wealth• Theory of economic growth • Policy implications • Global actions • Conclusions

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Trends: Macro LevelTrends: Macro Level

• Changes in economic structure in developed and developing countries

• Progressing internationalization process accelerated via modern communication means

• New challenges coming from globalization process

• Economic meaning of information changes: Migration to the information based economy

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Trends: ICT SectorTrends: ICT Sector

• Progressing regulatory reform: Pro-competitive policy / Universal

service/access… • Expansion of the Internet • High innovation dynamics• Falling prices of the ICTs:

Hardware / Software / Services • New requirements:

Bandwidth Generalized mobility Convergent solutions Open character

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Trends: Broadband AccessTrends: Broadband Access

Evolution in Pricing Strategy

133143

166

0

20

40

60

80

100

120

140

160

180

2004 2005 2006

Num

ber

of c

ount

ries

Data TimeBoth Flat-rate

75%68%

81%

Number of countries with broadband commercially available

81

113

133145

166

0

20

40

60

80

100

120

140

160

180

2002 2003 2004 2005 2006

T

Median price and speed, 2004-6

0

200

400

600

800

1'000

1'200

1'400

1'600

1'800

2004 2005 2006

Sp

ee

d (

kb

ps

)

0

2

4

6

8

10

12

14

16

Pri

ce

(U

SD

pe

r 1

00

kb

ps

)

Median speed

Median Price inUSD/100 kbps

Growth in max. broadband speeds

0

5

10

15

20

25

30

35

40

Speed (kbps)

2003 2005 2006

2005

2003

2006

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Trends: Broadband AccessTrends: Broadband Access

Table 1: Broadband prices for the cheapest fifteen economies.

Speed Price per US$ per Change Economy Company kbit/s month US$ 100 kbit/s 2005-06

Japan Yahoo BB 51'200 14.2 0.07 -12.5%Korea (Rep.) Hanaro 51'200 40.59 0.08 --Netherlands Internet Access Ned. 20'480 27.97 0.14 -81.3%Taiwan, China Chunghwa 12'288 22.67 0.18 --Sweden Bredbandsbolaget 24'576 56.08 0.23 -6.5%Singapore StarHub 30'720 73.17 0.24 -85.0%Italy Libero 12'288 37.23 0.30 -73.8%Finland Elisa 24'576 85.64 0.36 -51.4%France Free 10'240 37.29 0.36 -90.1%United States Comcast 4'096 20.00 0.49 --Germany Freenet.de 6'016 30.95 0.52 --United Kingdom Pipex 8'128 50.89 0.63 -53.6%Hong Kong, China Netvigator 6'144 51.17 0.83 -0.1%Portugal Sapo 8'128 75.82 0.93 -0.8%Canada Bell 4'096 41.26 1.01 -3.93%Average 18'278 44.33 0.43 -45.5%Best practice (top 20%) 40'960 27.59 0.10 -46.9%

Broadband prices for the cheapest fifteen economies

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Trends: ICT SectorTrends: ICT Sector

• Migration to the IP-environment Fixed telecommunications

Incumbents: British Telecom, DT AG, KPN Newcomers: Dialog, Metropolitan Networks

Wireless communications Mobile telecommunications: from 2G to 4G WiFi, WiMax

Cable TV Broadcasting Service and content providers

• Strengthened process of convergence Technology Market Services Institutional

FMC?Regulatory Implications

Mul

ti-fa

cilit

y co

mpe

titio

n

Servicecompet.

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ICT Sector: Economic MeaningICT Sector: Economic Meaning

Size of telecommunication market compared with GDP in CEESize of telecommunication market compared with GDP in CEE

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ICT Sector: Economic MeaningICT Sector: Economic Meaning

IT expenditure as % of GDP in 2004

2.002.40

2.80

2.20 2.302.10

1.40

1.90

0.30

1.60

3.00

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

POLAND

HUNGARY

CZECH REPUBLI

C

SLOVAKIA

ESTONIA

SLOVENIA

LITHUANIA

LATVIA

ROMANIA

BULGARIA

EU (25

coun

tries

)

Source: ITU (2005)

Size of IT market compared with GDP in CEE, 2004Size of IT market compared with GDP in CEE, 2004

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ICT Sector: Economic Meaning ICT Sector: Economic Meaning

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ICT Sector: Economic MeaningICT Sector: Economic Meaning

Economic Wealth

ICT Infrastr.and Services

Economic Wealth

ICT Infrastr. and Services

A B

What is true?

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Investigating particular character Investigating particular character of ICT sector potential in region of ICT sector potential in region

Diffusion Determinants

Economic impact of ICTsInstitutional Approach

Economic Wealth

Infrastructure and Services

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Diffusion of ICTs in CEECsDiffusion of ICTs in CEECs– Muller, Salsas (2003) – Determinants of the Internet

Usage : internet hosts, income per capita, openness, education, political and civil freedoms, state of transition towards a liberalized telecommunications regime, the state of the telecommunications infrastructure, cost of telephone Internet usage costs do not explain cross-

country differences in the number of Internet hosts and users

– Muller, Salsas (2004) – Significant determinants of the Internet usage in enterprises: trade, company size, computer usage, degree of the telecom market liberalization

- Ponder, Markova (2005) – Diffusion of mobile telecommunications

Investigating particular character of Investigating particular character of the ICT sectorthe ICT sector

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Investigating particular character of Investigating particular character of the ICT sectorthe ICT sector

Institutional Approach• Piatkowski (2003) – New Economy Indicator – level of

institutional readiness of transition economies for adoption of the New Economy. Slovenia, Czech Republic, Hungary and Estonia belong to the regional leaders. (NEI Factors: regulation, infrastructure, trade, financial system, R&D, human capital, labour market flexibility, product market flexibility, entrepreneurship, macroeconomic stability)

• Piech (2004) – Knowledge Assessment Methodology of World Bank (KAM Methodology: GDP, HDI, Tariffs, Property rights, Regulation, Researchers in R&D, Manuf. Trade, Adult literacy, …, Telephones, Computers, Internet hosts). Czech Republic and Estonia, the most promising countries of region. The same structure as developed countries.

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Measuring Measuring Opportunities Opportunities

1/3 1/3

1/3

DOIDOI

OpportunityOpportunity UtilizationUtilization

Infrastructure

Institutional Approach -WSIS (2005) - Digital Opportunity Index

WISR 2006WISR 2006New ITU’s SeriesNew ITU’s Series

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Digital Opportunity Digital Opportunity IndexIndex

DOIDOI

percentage of population covered by mobile cellular telephony

percentage of population covered by mobile cellular telephony

internet users per 100 inhabitants

Proportion of households with fixed line telephone

mobile cellular tariffs as a percentage of per capita income

mobile cellular tariffs as a percentage of per capita income

internet access tariffs as a percentage of per capita income

internet access tariffs as a percentage of per capita income

ratio of broadband internet subscribers to

internet subscribers

ratio of broadband mobile subscribers to

mobile internet subscribers

mobile cellular subscribers per 100 inhabitants

proportion of households with Internet access at home

mobile internet subscribers per 100 inhabitants

proportion of households with a computer

Opp

ortu

nity

Opp

ortu

nity

Utilization

Utilization

Infrastru

cture

Infrastru

ctureInfrastructure

Infrastructure

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Digital Opportunity Index in Digital Opportunity Index in developed economies and CEEdeveloped economies and CEE

• DOI Leaders: Korea, Hong

Kong and Japan

CEE: High opportunities but low utilization

• Mobile component and broadband

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Economic growth and the ICTsEconomic growth and the ICTs

• Sources of economic growth Increased use of land, labour, capital and

entrepreneurial resources by using better technology or management techniques

increased productivity of existing resource use through rising labour and capital productivity

Transaction costs Private and business

Death of distance Virtual mobility

• New research challenges Broadband, Mobile Telecommunications Next Generation Networks

Some Concepts•Transaction costs •Neoklasisc Growth Theory•Production function•Innovation dynamics •Trade Opening-up

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Investigating particular character of Investigating particular character of the ICT sector the ICT sector

Economic Growth• Kolasa, Zolkiewski (2004) – Poland: ICT investment

contributes positively to TFP growth• Piatkowski (2003) – CEEC-8: ICT capital contribution to

output growth and labour productivity (extraordinary increase in real ICT investment caused by a) falling prices of ICTs, b) higher-than normal returns on investment)

• Rajasalu, Laur (2003) – Estonia: low contribution of ICT sectors in Estonia´s output. The evidence of direct positive impact of high-tech, medium, high tech and knowledge intensive industries on economic growth is not very convincing. High dependence on subcontracting and transfer pricing makes the contribution of high and medium-high tech industries rather low. Economic growth is influenced more by indirect impact of ICT that made the economy as a whole more competitive and helped to attract investments and create new jobs.

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Investigating particular character of Investigating particular character of the ICT sectorthe ICT sector

Economic GrowthEconomic Growth- ECTA (2006) – Positive and statistically significant

relationship between regulatory effectiveness and investment For every 1% increase in regulatory effectiveness

there will be a 0.47% increase in investment. Investment needed to build an electronic communications sector

• Van Ark (2005) – Old and New Europe: Contribution of ICT investment to productivity growth is positive and significant but differentiates between all CEECs exist. Champions: Czech Republic, Hungary

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Investigating particular character of Investigating particular character of the ICT sectorthe ICT sector

Economic Growth Economic Growth • Perminova (2004) – Russia: ICT contribution to the labor

productivity growth 1996-2000 in: ICT using sector - even 5 times bigger than in Europe and 2

times as big as in USA, non ICT using sector - like in USA, ICT producing sector - very small 1/10 of European or USA

achievements.• Waverman (2005) – Developing Countries

Positive impact of mobile telecommunications on the economic growth in developing countries

Differences in the penetration and diffusion of mobile telephony certainly appear to explain some of the differences in growth rates between developing countries. If gaps in mobile telecoms penetration between countries persist, then our results suggest that this gap will feed into a significant difference in their growth rates in future.

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Conclusions IConclusions I

• Regulatory reform together with pro-competitive public policy fosters digital modernization.

• Digital modernization should be a key word for all economies

• The proves of the economic meaning of ICT sector opens the new perspectives in terms of the economic policies.

• This is in particular important for developing countries and countries in transition as the ICT sector may lead to accelerated catch-up process

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Global Initiative: WSISGlobal Initiative: WSIS

• World Summit on the Information Society Proposed by Tunisia at

ITU Plenipotentiary Conference, 1998

Endorsed as UN Summit in 2001 (UNGA Res 56/183)

• Unique Summit First Summit in two

Phases True Multi-Stakeholder

Process Numerous Parallel

Events

• Outcome Documents Geneva Declaration of

Principles Geneva Plan of Action Tunis Commitment Tunis Agenda for the

Information Society

www.wsis.org

22 May 2006 Jaroslaw.Ponder@itu.int 24www.wsis.org

WSIS Outcome WSIS Outcome

•Geneva Declaration & Tunis Commitment

Shared vision and principles of overcoming the Digital Divide and achieving MDGs

Affirmed a unified approach to Cyber-security

Reiterated Stakeholders Commitment to freedom of expression online

Enabling environment (good governance, transparency and pro-competitive policy)

Encouraged development of localized content and multilingualism

•Geneva Plan of Action & Tunis Agenda Build an inclusive,

development oriented Information Society

Set 11 Action Lines Target of 2015 Set, benchmarks and

evaluation processes Financial Mechanisms Internet Governance Implementation and

Follow-up

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Tunis Tunis CommitmentCommitment

• 12. We emphasize that the adoption of ICTs by enterprises plays a fundamental role in economic growth. The growth and productivity enhancing effects of well-implemented investments in ICTs can lead to increased trade and to more and better employment. For this reason, both enterprise development and labour market policies play a fundamental role in the adoption of ICTs. We invite governments and the private sector to enhance the capacity of Small, Medium and Micro Enterprises (SMMEs), since they furnish the greatest number of jobs in most economies. We shall work together, with all stakeholders, to put in place the necessary policy, legal and regulatory frameworks that foster entrepreneurship, particularly for SMMEs.

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Tunis Tunis AgendaAgenda

• 90. We reaffirm our commitment to providing equitable access to information and knowledge for all, recognizing the role of ICTs for economic growth and development. We are committed to working towards achieving the indicative targets, set out in the Geneva Plan of Action, that serve as global references for improving connectivity and universal, ubiquitous, equitable, non-discriminatory and affordable access to, and use of, ICTs, considering different national circumstances, to be achieved by 2015, and to using ICTs, as a tool to achieve the internationally agreed development goals and objectives, including the Millennium Development Goals…

» (Para 90, Tunis Agenda)

• Selected measures: e-strategies, enabling policies, enabling regulatory environment, ICT capacity, e-content,

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Conclusions IIConclusions II

• ICTs create new opportunities for accelerated socio-economic catch-catch-up processup process

• ICTs will help to achieve Millennium Millennium Development GoalsDevelopment Goals

• International actionsInternational actions play very important role but…

• There is no unified public policy no unified public policy applicable for each country without exception

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Thank you very much Thank you very much for your attention!for your attention!

Jaroslaw K. Ponder International Telecommunication UnionStrategy and Policy Unit E-mail: Jaroslaw.Ponder@itu.int http://www.itu.int/spu Tel: 00 41 22 730 60 65

We all build global We all build global Information Society!Information Society!

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Resources Resources

• Full version of this presentation and others focusing on ICT4D&EG: www.itu.int/osg/spu/presentations/

• ITU Strategy and Policy Unit recourses:www.itu.int/spu

• ITU Publications: www.itu.int/bookstore

• WSIS:www.itu.int/wsis

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International International Telecommunications UnionTelecommunications Union

We all build the global knowledge-We all build the global knowledge-based information society!based information society!

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ITU - International ITU - International Telecommunication UnionTelecommunication Union

• The oldest specialized UN agency with more than 140 years of experience in communication sector

• Headquarters in Geneva, Regional Offices Worldwide

• ITU Staff: more than 750 from more than 80 countries

• 189 member states, more than 700 sector members

• ITU Agenda for Change• Structure of the ITU

ITU-T – Telecom Standardization ITU-R – Radio-communications ITU-D – Development Bureau

22 May 2006 Jaroslaw.Ponder@itu.int 32

ITU – InternationalITU – InternationalTelecommunication UnionTelecommunication Union

22 May 2006 Jaroslaw.Ponder@itu.int 33

ITU’s Strategy and ITU’s Strategy and Policy Unit (SPU)Policy Unit (SPU)

http://www.itu.int/spuhttp://www.itu.int/spu

• New Initiatives Programme Digital Bridges (2005) Ubiquitous Network Societies (2005) Today’s Networks Tomorrow (2005) What Rules for IP-enabled NGNs? (2006) Digital Transformations in the Information

Society (2006) Regulatory Environment for Future Mobile

Multimedia Services (2006) Future of Voice (2007)

• Many other activities…

22 May 2006 Jaroslaw.Ponder@itu.int 34

Internship at the ITUInternship at the ITUwww.itu.int/employment/stages.html www.itu.int/employment/stages.html

• ITU internship programme The Union runs a non-remunerated internship programme for

students who wish to improve their skills and gain experience working in an international environment. This programme is open to all undergraduate and graduate students from ITU's 189 Member States. Candidates are selected in response to specific needs identified within ITU departments.

• Strategy and Policy Unit competition SPU launched its first essay-writing competition under the

"Young Minds in Telecoms" Programme in November 2004. The competition was open to graduate students and recent graduates in economics, political science, law, literature, telecommunications, computer science, information systems and related fields.

Deadline: March 2007

No specific deadline for application