The Contribution of ICT to the Economy & Economic Growth Phillippa Biggs, Economist, ITU MCIT, Cairo, Egypt 10 March 2009

2 1.Questions & Definitions 2.Contribution to the Economy - ICT Sector Value-Added of Business VA - IT spending as % GDP - Telco revenues as % GDP 3.Contribution to Economic Growth 4.Contribution to Productivity 5.Conclusions Agenda

3 ICT is widely recognized as a strategic sector in its own right. But what does that really mean? Weight of ICT sector in the economy, in terms of value-added & employment; Contribution of ICT sector to GDP growth and labor productivity; Evolution of the sector in turnover and VA; Trade balance of ICT products and services. Key Questions

4 Body of work ongoing since at least 1997 by OECD Working Party on Indicators for the Information Society (WPIIS) June 1997 – meeting to define ICT sector 1998 – An agreed definition 2002 – definition revised, taking into account wholesale ICT products – revision & adoption by UNSD Eurostat – Task Force and Unit F6. Ongoing work on Definitions

5 “The ICT sector can be viewed as the activities that fall into the union of IT & telecom activities. It includes intersections between them & info content [but] excludes information content activities falling outside intersections – i.e. those with no direct ICT association”. Concepts in ICT Sector Definition telecommunications IT Information content transmission networking online offline

6 The ICT sector comprises the manufacturing and distribution of IT and telecommunication goods and production of ICT services. Services: Wholesale of computers, equipment & software Wholesale of electronic & telecom equipment Telecommunications Renting of office machinery & equipment Computer & related activities OECD Definition of ICT Sector (2002, revised)

7 Manufacturing: Office, accounting & computing machinery Insulated wire & cable Electronic valves, tubes & other components TV & radio transmitters & apparatus TV & radio receivers, sound & video recording Instruments & appliances for measuring, checking, testing, navigating & other purposes Industrial process equipment ICT Sector Definition (cont’d)

8 % ICT Value-added in Business VA Source: OECD Information Technology Outlook 2008.

9 Share ICT VA in Total VA,%, 2003 Source: EUROSTAT/EC Directorate of Ec & Regional Statistics

10 % ICT Value-added in GDP, 2004 Source: IPTS/REDICT, based on Eurostat & EU-KLEMS.

11 % IT Spending in GDP, EITO 2007 Source: EITO, 2007.

12 Telco Revenues as % GDP Spain, CMP France, ARCEP

13 What Are We Not Measuring? % Telco Revenues as % GDP over time Source: Deutsche Bank

14 Different sources used – need to harmonize for consistent & coherent data. Data availability, quality and timeliness Confidentiality? Confirm current definition of ICT sector based on NACE Rev 1.1 Review for future definitions of ICT sector (e.g. NACE Rev. 2 CPA 2008). Relation to other international classifications. Problems

15 OECD WPIIS. Eurostat ICT Sector Statistics Project – to establish cooperation with Member States, Commission and IOs. Bring ICT statistics into line with policy work e.g. the Lisbon Strategy, Commission’s 2010 benchmarking in Europe. Ongoing work

16 Dynamic growth accounting problem, attributing causation. BUT large amount of endogeneity or circular causation – is it the growth that results in investment in ICTs, or is it the investment in ICTs that is driving economic growth? Answer – both! ‘Normal’ input or are there additional spillover effects? Contribution of ICTs to Economic Growth

17 Links to Economic Growth An increase of 10 mobile phones per 100 people boosts GDP growth by 0.6% A 1% increase in the number of Internet users increases total exports by 4.3% Countries with better Information Infrastructure have higher GNP per Capita Growth GNP per Capita Growth Rate Less Developed Information Infrastructure More Developed Information Infrastructure 1.9% 2.6% Source: GICT MNA Working Paper (2003)

18 Sources of GDP Growth, Source: Qiang (2008), World Bank IC4D 2009.

19 Sources of GDP Growth, Source: UNCTAD Information Economy Report 2007.

20 & Productivity?

21 Historically, these studies have focused on numbers (PCs, phones, telephone lines) and failed to take account of network effects, which are likely to be sizeable. Structural shifts in 1995 and/or 2001/2002? Is a PC today really comparable with a PC from pre-1999? Critical mass effects – some argue that ICTs have significant impact near to zero/low penetr’n; others that impact of ICTs is more powerful close to universal service – difficult to resolve. Problems

22 Thank you