ict&e-business branch, unctadpara 166 course, geneva, 23 april 20071 icts and economic...

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


Outline

• Importance of ICT for economic development• ICT Diffusion• ICT Impact:

– Macro-level– Firm-level impact– Industry-level

• Role of government


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


•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 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)


2005

Developed

countries52%

Developing

countries43%

South-East

Europe and CIS5%

2001

Developed countries

70%Developing countries

28%

South-East Europe and

CIS2%


...

28% 43%

Developing and transition countries catching up

in number of Internet users


... but different penetration rates


54.4

8.5

14.6

Developedcountries

Developingcountries

South-East Europeand CIS

Internet penetration (internet users per 100 inhabitants), 2005


Developing and transition countries overtaking in number of

mobile phone subscribers...


CIS2%

Developing economies

40%Developed economies

58%


CIS9%


54%

Developed economies

37%

40% 54%

2001

2005


... 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


Africa

South-East Europe and CIS

2001

2005


Digital divide: Internet users worldwide

Developed economies

52%


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



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 diffusion: Countries have not invested to the same extent in ICTs

OECD ICT investment as % of non-residential investment


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 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


Macroeconomic impact

Positive correlation between GDP & Infodensity Infodensity≃ ICT productive function of an economy (ICT–enhancing capital & labour)



ICT Impact on economic growth1% increase in Infodensity resulted on average in 0.3% increase in per capita GDP


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 Impact on economic growthImpact unequal among countries at different stages of development – critical threshold


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 Impact on economic growth

The impact of investment in ICT:

0.3-0.9 GDP growth (1995-2002)


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


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


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


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


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


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


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


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


ICTs and Oil Markets

• Traditional spot and futures oil markets

• Migration to online trading platforms

• Other use of ICTs in international oil trade


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


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


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


Thank you!Questions or Comments?

[email protected]

ict&e-business branch, unctadpara 166 course, geneva, 23 april 20071 icts and economic...

Documents

ictebusiness branch

unctad slide

business levels

disintermediation slide

network effects slide

itu data slide

ict diffusion internet

icts oecd ict investment