Call me maybe: the impact of telecommunications on economic growth in the asean region

1. Call me maybe: the impact of telecommunications on economic growth in the asean region MCREY BANDERLIPE II, MSc (CPA) DLSU - SOE

2. Introduction • Communication plays a very important role for everyone. We cannot live without communicating with one another. • The advent of new modes and technologies in communications resulted to real-time transfer of information to make relevant decision. • Economic activities are also affected by the ingress of telecommunications.

3. Introduction • Increased realization of benefits of new technologies in information and communications is one of the targets towards attaining the UN Millennium Development Goals due on 2015. • Increased telendensity of fixed line telephones • Increased teledensity of mobile cellular phone subscriptions • Increased Internet users.

4. Introduction

5. Introduction • We focus our attention on ASEAN region. • Go Chok Tong (2003) iterated the need to redirect the future of ICT • To promote economic recovery • Job creation • Sustained economic growth • Bring more economies closer

6. Statement of the Problem The need to embrace technology would support continuous improvement in terms of productivity, efficiency, competitiveness, and the quality of the lives of people, for these are the true benefits of a connected ASEAN Region. Thus, in this study, we seek to answer this question: Does teledensity/penetration rate of mobile and fixed telecommunications affect economic growth among countries in the ASEAN region?

7. Literature Review • Origin: Solow (1956) paper on neoclassical growth theory, explained through labor, capital, and knowledge (technological progress) • Convergence Theory and the Possible Sources of Growth (Barro and Sala-I-Martin, 1992; Datta and Agarwal, 2004; Chakraborty and Nandi, 2011) • Liberalization of trade and services towards export-led growth, allocative efficiency and technology transfer (Snow, 1989)

8. Literature Review • Landmark Paper: Roller and Waverman (2001) • Micro modelling with Macro Production Function approach • Succeeding studies found association of telecommunications and econ growth. (e.g., Waverman, Meschi, and Fuss (2005), Negash and Patala (2006), Melamed (2007), Shiu and Lam (2008), Sridhar and Sridhar (2009), Lam and Shiu (2010), Biancini (2011), and Grouber and Koutrompis (2011), among others).

9. Literature Review • Development initiatives in the ASEAN region • 1997: ASEAN Vision 2020 • 1998: Hanoi Plan of Action • ASEAN’s thrust • Provision of reliable ICT infrastructure • Literacy and comfort in using ICT services • Harmonize regulations in the telecom industry • Linkages outside the region • Embrace technology for improvement • Protection from intentional harm and degradation

10. Note. Data obtained from the World Bank database (data.worldbank.org)

11. Note. Data obtained from the World Bank database (data.worldbank.org)

12. Framework of the Study • Growth (Solow, 1956) • Knowledge comes in many forms • Knowledge accumulation is understood to contribute to economic growth (Romer, 2006). • Network Externalities and Spillover Effects • Telecommunications create information superhighway • Growth in the number of users increases the derived utility from such use of infrastructure • Low costs of doing business, benefiting businesses, increasing productivity and growth.

13. Framework of the Study • Transaction Costs and Spillover Effects • Reduced transaction costs of acquiring and transmitting information • More efficient production mechanism that supports growth. • Social Overhead Capital • Expenditures on economic and social services. • Establishment of the New Economy with better competition and enhanced production processes.

14. Working Model = ln of real GDP per capita (constant 2000 US$) of country i at year t; = proxy for expenditure (ln of gross national expenditure per capita at constant 2000 US$) for country i at year t; = labor force participation rate of country i at year t; = teledensity or penetration rate for country i at year t, and = a variable that captures the essence of time trend for country i (1 = 1992, 2 = 1993,…, 19 = 2010). Where:

15. Methodology • Balanced Panel Data Analysis of 7 ASEAN Countries • (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam; indexed in order) • Relevant data were obtained from 1992 – 2010. • Data Source • World Bank database (data.worldbank.org) • Teledensity (No. of subscribers for every 100 inhabitants) • Penetration Rate (Teledensity / 100) for fixed line (FLPENR), mobile (CPPENR) and total penetration rate (TPENR)

16. Results • Naïve Model • lnGNEPC and LFPR are identified to be significant at α = 0.001 • High R-squared for all regressions • Failure to account for unobserved heterogeneity makes this model not suitable. • This model failed the tests for plausibility and robustness of econometric models.

18. Results • LSDV - 1 • Used to determine whether differences in country-specific characteristics would affect economic growth. • Only lnGNEPC and t are significant at α = 0.001 • No final interpretations can be made.

20. Results • LSDV - 2 • Used to account for structural change of the model over time for the study period between 1992 and 2010. • Only lnGNEPC and LFPR are significant at α = 0.001. TPENR is significant at α = 0.01. • No final interpretations can be made.

22. Results • LSDV - 3 • Used to account for unobserved heterogeneity and structural change of the model across cross-sectional units and time periods. • All variables of interest are significant at α = 0.001, except for LFPR in all the three models. • Wald’s Test shall be used to determine the suitable model.

23. Results of Wald’s Test Dilemma: LSDV-1 or LSDV-3?

24. Results of BP Poolability Test Decision: Random Effects over Naïve Model

25. Results of Hausman Test (LSDV-1)

26. Results of Hausman Test (LSDV-3) Decision: Fixed Effects over Random Effects, but use LSDV -1

27. Final Regression - CPPENR

28. Final Regression - FLPENR

29. Final Regression - TPENR

30. Significance of FLPENR • Businesses still resort to Fixed Line modes of telecommunications (Sridhar and Sridhar, 2009) • Basic services with lower ceiling costs • Restrictions on the use of landlines to ensure productivity.

31. Non-Significance of CPPENR/TPENR • Other complementary factors (public infrastructure, better business climate, education, training for better use of telecommunications) • Telecommunication facilities as a measure of social status • Developing countries have yet to fully realize the benefits from such investment in these modes. • Need to make telecommunications accessible/ affordable esp. to those in remote areas. • Better statistical scrutiny is needed for future studies.

32. Conclusions and Policy Recommendations • Only Fixed Lines Teledensity and Penetration rates of telecommunications is significantly related to economic growth in the ASEAN Region. • Benefits of telecommunications, in general have yet to be realized over time. • Need to make telecommunication services affordable by tariff and subscription fees reduction. • Liberalization of telecommunications industry. • Continuous tapping of the private sector.

33. Postscript • Potential effects of the ASEAN Integration on Telecommunications • Occurrence of disasters triggering the need to a more integrated mechanism of telecommunications • Telecommunications as mechanism for social responsibility, keeping people closer during these difficult moments • In this regard, I dedicate this presentation to them. • Many thanks to Dr. Cesar Rufino for the guidance.

34. Author Details MCREY BANDERLIPE II PhD in Economics Student School of Economics, De La Salle University PhD Research Apprentice DLSU Jesse M. Robredo Institute of Governance E-mail: mc_banderlipe@dlsu.ph Twitter: @mcreyeconomics

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