ICTs for Economic Growth Theory Policy Implications Case

ICTs for Economic Growth: Theory, Policy Implications, Case Studies Jaroslaw K. Ponder Strategy and Policy Unit International Telecommunication Union Briefing Session on Economics 22 May 2006, UNDP, Geneva, Switzerland Note: The views expressed in this presentation are those of the author and do not necessarily reflect K. Ponder can be contacted at Jaroslaw. Ponder@itu. int 22 May 2006 the opinions of the ITU. Jaroslaw. Ponder@itu. int

Agenda • • Trends Economic meaning of the ICT sector ICTs versus economic wealth Theory of economic growth Policy implications Global actions Conclusions 22 May 2006 Jaroslaw. Ponder@itu. int 2

Trends: 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 22 May 2006 Jaroslaw. Ponder@itu. int 3

Trends: 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 22 May 2006 Jaroslaw. Ponder@itu. int 4

Trends: Broadband Access T 22 May 2006 Jaroslaw. Ponder@itu. int 5

Trends: Broadband Access Broadband prices for the cheapest fifteen economies 22 May 2006 Jaroslaw. Ponder@itu. int 6

Trends: ICT Sector • Migration to the IP-environment § Fixed telecommunications Incumbents: British Telecom, DT AG, KPN q Newcomers: Dialog, Metropolitan Networks Multi-facility competition q § Wireless communications Mobile telecommunications: from 2 G to 4 G q Wi. Fi, Wi. Max q § Cable TV § Broadcasting § Service and content providers Service compet. • Strengthened process of convergence § Technology § Market § Services § 22 May Institutional 2006 Regulatory Implications Jaroslaw. Ponder@itu. int FMC? 7

ICT Sector: Economic Meaning Size of telecommunication market compared with GDP in CEE 22 May 2006 Jaroslaw. Ponder@itu. int 8

ICT Sector: Economic Meaning Size of IT market compared with GDP in CEE, 2004 22 May 2006 Jaroslaw. Ponder@itu. int Source: ITU (2005) 9

ICT Sector: Economic Meaning 22 May 2006 Jaroslaw. Ponder@itu. int 10

ICT Sector: Economic Meaning B A ICT Infrastr. and Services Economic Wealth ICT Infrastr. and Services What is true? 22 May 2006 Jaroslaw. Ponder@itu. int 11

Investigating particular character of ICT sector potential in region Diffusion Determinants Institutional Approach 22 May 2006 Infrastructure and Services Economic Wealth Economic impact of ICTs Jaroslaw. Ponder@itu. int 12

Investigating particular character of the ICT sector Diffusion 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 22 May 2006 Jaroslaw. Ponder@itu. int 13

Investigating particular character of the 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. 22 May 2006 Jaroslaw. Ponder@itu. int 14

Measuring Opportunities Institutional Approach - WSIS (2005) - Digital Opportunity Index 1/3 Opportunity WISR 2006 New ITU’s Series Utilization 1/3 DOI Infrastructure 1/3 22 May 2006 Jaroslaw. Ponder@itu. int 15

percentage of population covered by mobile cellular telephony internet users per 100 inhabitants ratio of broadband internet subscribers to internet subscribers mobile cellular tariffs as a percentage of per capita income internet access tariffs as a percentage of per capita income ratio of broadband mobile subscribers to mobile internet subscribers DOI proportion of households with a computer Proportion of households with fixed line telephone mobile cellular subscribers per 100 inhabitants Inf ras tru ctu 22 May 2006 re n tio za ili Ut Op po rtu ni ty Digital Opportunity Index mobile internet subscribers per 100 inhabitants proportion of households with Internet access at home Jaroslaw. Ponder@itu. int e r u ct u tr s ra f n I 16

Digital Opportunity Index in developed economies and CEE • DOI § Leaders: Korea, Hong Kong and Japan § CEE: High opportunities but low utilization • Mobile component and broadband 22 May 2006 Jaroslaw. Ponder@itu. int 17

Economic 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 Some Concepts • Transaction costs § Transaction costs q Private and business § Death of distance q Virtual mobility • Neoklasisc Growth Theory • Production function • Innovation dynamics • Trade Opening-up • New research challenges § Broadband, Mobile Telecommunications § 22 May Next Generation Networks 2006 Jaroslaw. Ponder@itu. int 18

Investigating particular character of 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. 22 May 2006 Jaroslaw. Ponder@itu. int 19

Investigating particular character of the ICT sector Economic 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 22 May 2006 Jaroslaw. Ponder@itu. int 20

Investigating particular character of the ICT sector 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. 22 May 2006 Jaroslaw. Ponder@itu. int 21

Conclusions I • Regulatory reform together with procompetitive 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 22 May 2006 Jaroslaw. Ponder@itu. int 22

Global 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 • Outcome Documents § First Summit in two Phases § True Multi-Stakeholder Process § Numerous Parallel Events 22 May 2006 www. wsis. org § Geneva Declaration of Principles § Geneva Plan of Action § Tunis Commitment § Tunis Agenda for the Information Society Jaroslaw. Ponder@itu. int 23

WSIS Outcome • Geneva Declaration & Tunis Commitment § Shared vision and principles of overcoming • Geneva Plan of Action the Digital Divide and achieving MDGs & Tunis Agenda § Affirmed a unified § Build an inclusive, approach to Cyberdevelopment oriented security Information Society § Reiterated Stakeholders § Set 11 Action Lines Commitment to freedom § Target of 2015 of expression online § Set, benchmarks and § Enabling environment evaluation processes (good governance, § Financial Mechanisms transparency and pro§ Internet Governance competitive policy) § Implementation and Follow § Encouraged development -up of localized content and multilingualism 22 May 2006 www. wsis. org 24 Jaroslaw. Ponder@itu. int

Tunis Commitment • 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. 22 May 2006 Jaroslaw. Ponder@itu. int 25

Tunis Agenda • 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, econtent, 22 May 2006 Jaroslaw. Ponder@itu. int 26

Conclusions II • ICTs create new opportunities for accelerated socio-economic catchup process • ICTs will help to achieve Millennium Development Goals • International actions play very important role but… • There is no unified public policy applicable for each country without exception 22 May 2006 Jaroslaw. Ponder@itu. int 27

Thank you very much for your attention! Jaroslaw K. Ponder International Telecommunication Union Strategy and Policy Unit E-mail: Jaroslaw. Ponder@itu. int http: //www. itu. int/spu Tel: 00 41 22 730 60 65 22 May 2006 We all build global Information Society! Jaroslaw. Ponder@itu. int 28

Resources • Full version of this presentation and others focusing on ICT 4 D&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 22 May 2006 Jaroslaw. Ponder@itu. int 29

International Telecommunications Union We all build the global knowledgebased information society! 22 May 2006 Jaroslaw. Ponder@itu. int 30

ITU - International Telecommunication 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 31

ITU – International Telecommunication Union 22 May 2006 Jaroslaw. Ponder@itu. int 32

ITU’s Strategy and Policy Unit (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 http: // www. itu. int/spu Jaroslaw. Ponder@itu. int 33

Internship at the ITU 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. No specific deadline for application • 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 Jaroslaw. Ponder@itu. int 22 May 2006 34