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

1. ICTs for Economic Growth:Theory, Policy Implications, Case Studies Jaroslaw K. Ponder Strategy 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

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

3. 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 Jaroslaw.Ponder@itu.int

4. 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 Jaroslaw.Ponder@itu.int

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

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

7. Trends: ICT Sector FMC? • 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 Multi-facility competition Servicecompet. Regulatory Implications Jaroslaw.Ponder@itu.int

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

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

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

11. ICT Sector: Economic Meaning What is true? B A Jaroslaw.Ponder@itu.int

12. Investigating particular character of ICT sector potential in region Jaroslaw.Ponder@itu.int

13. 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 Jaroslaw.Ponder@itu.int

14. 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. Jaroslaw.Ponder@itu.int

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

16. Digital Opportunity Index percentage of population covered by mobilecellular telephony internet usersper 100 inhabitants Utilization Opportunity ratio of broadband internet subscribers to internet subscribers mobile cellular tariffsas a percentage of per capita income DOI ratio of broadband mobile subscribers to mobile internet subscribers internet access tariffs as a percentage of per capita income proportion of households with a computer Proportion of households with fixed line telephone mobile cellular subscribers per 100 inhabitants mobile internet subscribers per 100 inhabitants proportion of households with Internet accessat home Infrastructure Infrastructure Jaroslaw.Ponder@itu.int

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

18. Economic growth and the ICTs • Sources of economic growth • Increased use of land, labour, capital andentrepreneurial resources by using better technology or management techniques • increased productivity of existing resource use through rising labour and capitalproductivity • 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 Jaroslaw.Ponder@itu.int

19. 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. Jaroslaw.Ponder@itu.int

20. 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 Jaroslaw.Ponder@itu.int

21. 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. Jaroslaw.Ponder@itu.int

22. Conclusions 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 Jaroslaw.Ponder@itu.int

23. 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 Global Initiative: WSIS www.wsis.org Jaroslaw.Ponder@itu.int

24. 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 WSIS Outcome www.wsis.org Jaroslaw.Ponder@itu.int

25. 12. We emphasize that the adoption of ICTs by enterprises plays a fundamental role ineconomic growth. The growth and productivityenhancing effects of well-implemented investmentsin ICTs can lead to increased trade and to more and better employment. For this reason, bothenterprise 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 MicroEnterprises (SMMEs), since they furnish the greatest number of jobs in most economies. We shallwork together, with all stakeholders, to put in place the necessary policy, legal and regulatoryframeworks that foster entrepreneurship, particularly for SMMEs. Tunis Commitment Jaroslaw.Ponder@itu.int

26. 90. We reaffirm our commitment to providing equitable access to information andknowledge for all, recognizing the role of ICTs for economic growth and development. Weare committed to working towards achieving the indicative targets, set out in the GenevaPlan of Action, that serve as global references for improving connectivity and universal,ubiquitous, equitable, non-discriminatory andaffordable access to, and use of, ICTs,considering different national circumstances, to be achieved by 2015, and to using ICTs, as atool to achieve the internationally agreed development goals and objectives, including theMillennium Development Goals… (Para 90, Tunis Agenda) Selected measures: e-strategies, enabling policies, enabling regulatory environment, ICT capacity, e-content, Tunis Agenda Jaroslaw.Ponder@itu.int

27. Conclusions II • ICTs create new opportunities for accelerated socio-economic catch-up 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 Jaroslaw.Ponder@itu.int

28. 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 We all build global Information Society! Jaroslaw.Ponder@itu.int

29. 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 Jaroslaw.Ponder@itu.int

30. International Telecommunications Union We all build the global knowledge-based information society! Jaroslaw.Ponder@itu.int

31. 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 Jaroslaw.Ponder@itu.int

32. ITU – InternationalTelecommunication Union Jaroslaw.Ponder@itu.int

33. ITU’s Strategy and Policy Unit (SPU) http://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… Jaroslaw.Ponder@itu.int

34. Internship at the ITUwww.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. No specific deadline for application Deadline: March 2007 Jaroslaw.Ponder@itu.int