ICTs as Development Enablers: Do Developing Countries Respond Differently? Presented by Harpreet Kaur CPRSouth, August , 2015, Taiwan Authored by Prof. Simrit Kaur Professor, Faculty of Management Studies, University of Delhi, Delhi, India & Harpreet Kaur Assistant Professor, Sri Guru Gobind Singh College of Commerce University of Delhi, Delhi, India 1

Structure of the Presentation  Background of the Study  Objectives  ICT Development Index  IDI 2013  Role of ICT as Development Enablers  Methodology  Empirical Results  Major Findings  Policy Implications 2

Background  Lack of empirical research on the differential impact of ICT on developing economies (Jorgenson & Stiroh, 1995; Mansell & Wehn, 1998; Pohjola, 2000, 2001; Haacker & Morsink, 2002; Goldman Sachs, 2000; Daveri, 2000; Bassanini et al., 2000, Indjikain & Siegel, 2005.)  Potential role of ICT as development enablers.  Impact of ICT on dimensions covered in the Millennium Development Goals (MDGs).

Objectives of the Paper:  Analyze the economic impact of ICT penetration across economies.  Study whether there is a differential economic impact of ICT between the developed and developing economies.  Explore the relationship between ICTs and human development using the Millennium Development Goals (MDGs) as the framework for assessment.

5 IDI is a composite index that serves to monitor and compare developments in ICT across countries and gauge the digital divide. ICT Development Index: IDI

IDI 2013: Findings  The average value of IDI for all groups increased over the period 2012 and  The range and measures of disparity in IDI values also decreased the most for the high IDI group. The range is not only the smallest – and widening for the LCC.  The top performers have highly liberalized and competitive ICT markets.  The majority of LCCs are in Africa closely matching the list of LDCs. However, there are also some non- LDCs among the least connected. 6

Methodology  The paper uses the neoclassical economic growth model to capture the ICT effects on GDP. Y = f (GCF, LFPR, IDI, TO, IQ, D) Specifically, the following equation has been estimated: 7

All Countries HICMICLIC (1)(2)(1) (2)(1)(2) LFPR (0.246) *** (0.486) * (0.106) *** (0.411) *** (0.722) (0.190) (0.195) GFCF (0.014) (0.020) (0.045) (0.018) (0.023) (0.026) (0.027) IDI *** (0.025) *** (0.042) * (0.042) *** (0.036) (0.060) *** (0.040) *** (0.041) Trade_Op (0.017) (0.023) * (0.042) (0.024) (0.030) (0.029) (0.030) CPIA TRS (0.041) (0.082) (0.037) 8 Table 1: Economic Impact of ICT Development Index

Table 2: Economic Impact of IDI Decomposed into Access, Use and Skills Sub indices All CountriesHICMICLIC LFPR *** (0.446) (0.130) * (0.296) (0.194) GFCF (0.019) (0.047) (0.026) (0.025) Trade_Op (0.023) (0.047) (0.035) (0.028) CPIA TRS (0.041) (0.060) (0.035) IDI Access (0.038) (0.121) (0.081) * (0.037) IDI Use * (0.012) (0.018) (0.016) *** (0.016) IDI Skills *** (0.284) (.) * (0.147) (0.085) 9

Table A1: Economic Impact of IDI Overall, IDI Access, IDI Use and IDI Skills (with Interaction Terms) Independent VariablesAll Countries LFPR0.417 * (0.233)0.406 * (0.232)0.387 * (0.215) GFCF (0.014) (0.014) (0.015) IDI0.176 *** (0.045)0.183 *** (0.048) IDI*Dummy-Middle (0.057) (0.060) IDI*Dummy-High * (0.061) * (0.062) Trade_Op (0.017) (0.017) IDI Access *** (0.017) IDI Use (0.006) IDI Skills (0.135) IDI Access* Dummy-High ** (0.171) IDI Use* Dummy-High0.034 (0.039) IDI Skills* Dummy-High0.000 (.) IDI Access* Dummy-Middle (0.086) IDI Use* Dummy- Middle0.021 (0.014) IDI Skills* Dummy- Middle0.228 (0.729) 10

Conclusions  ICT development impacts all countries favorably.  LICs and MICs too benefit from ICT development. In fact, the economic impact of ICT is much higher in LICs as compared to MICs and HICs.  Each of the sub-indices of IDI, impacts per capita GDP differently across income groups.  In MICs the economic impact of IDI Skills is positive and significant.  For LICs IDI Use and IDI Access impact GDP significantly. 11

ICTs as Development Enablers- Analysis based on Correlation Coefficients 12 GDP pc All Countries *** *** *** *** High Income Countries *** *** *** Middle Income Countries *** *** *** *** Low Income Countries *** *** * IFM All Countries *** *** *** *** High Income Countries *** *** *** *** Middle Income Countries *** *** *** *** Low Income Countries *** * * *** Life Expectancy at Birth All Countries *** *** *** *** High Income Countries *** *** *** *** Middle Income Countries *** *** *** *** Low Income Countries ** * *** Prevalence of Undernourishment All Countries *** *** *** *** High Income Countries Middle Income Countries *** *** *** *** Low Income Countries ***

ICT Development Index as Enabler of Human Development 13

14 Thus ICT and Social Welfare in general are positively correlated. ICT Development Index as Enabler of Human Development

Policy Implications  Ensure penetration of ICT in both developing and developed countries and that too by all stakeholders including governments, local population and businesses to maximize gains from usage.  Connect rural and remote areas having geographically dispersed and economically weak populations. Promote projects like ‘e-Choupal’. Which help enhance agricultural productivities and address rural-urban migration.  Financial support for targeted populations and encouraging shared access should also be promoted. 15

Policy Implications MICs  MICs should promote policies that encourage skill development.  Language and digital literacy levels in these countries should be improved.  Conventional literacy does not rule out poor ICT literacy and skill levels. Thus policies promoting digital literacy need to be designed such as the ‘Digital India’ project. 16

Policy Implications LICs  LICs should focus more on encouraging ICT intensity and ICT readiness policies.  Government action is necessary to address digital divides especially in countries where there are sharp social, economic and geographic inequalities.  Efforts must also be made to encourage people to participate in the digital economy. 17

Policy Implications: Accessibility and Intensity in LICs 18 ICT Readiness or Access Building a conducive environment that encourages fixed and mobile telephone subscriptions to go up. Improving access to computers by households. Making more households buy internet subscriptions. Investment in infrastructure and access to internet, would create economies of scale. The country’s infrastructure plays a key role in promoting ICTs. Requirements for better networks range from proper buildings, to electricity and power supply, hardware, software and cables. ICT Intensity Encourage usage of internet amongst individuals by developing local content in the form of local news, entertainment and e-commerce sites. Adopting policies that enable greater subscriptions to fixed and wireless broadband subscriptions.

Policy Implication: Affordability  Broadband affordability: Policies promoting affordability of broadband remains paramount, especially for low income populations. 19

Policy Implication: Affordability  Fixed Broadband Affordability:  Inter-Group Comparison: Average monthly fixed broadband prices (in PPP$) in developing countries are 3 times higher than in developed countries.  Intra-Group Comparison: Fixed broadband is more than 20 times more affordable for the richest 20 per cent of the population in developing economies than for the poorest 20 per cent.  Mobile-broadband plans: Handset based and computer-based services are about eight and six times more affordable in developed countries. 20

Policy Implications: Regulation  Effective Regulation: It is required to boost competition and lower prices.  A stable and predictable regulatory environment that protects existing investments while creating room for new ones is among the most important factors promoting ICT intensity. 21

The overarching policy implication is that ICT Development matters, however, one needs to work around the issues of affordability, competition and regulation. Thank You. 22