1. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20071 ICTs and economic performance: implications for developing and transition economies Rouben Indjikian, Senior Economist ICT and E-Business Branch, UNCTAD

2. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20072 Outline Importance of ICT for economic development ICT Diffusion ICT Impact: –Macro-level –Firm-level impact –Industry-level Role of government

3. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20073 ICT for economic development ICTs increase productivity through: Better communication and networking at lower costs Digitalisation of production and distribution New trade opportunities through e-commerce Access to knowledge Increased competition The world economy...... an ICT based economy

4. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20074 E-government Increased efficiency, better communication & networking, dimishing red tape, improving transparency, better prices Financial services Productivity gains from dramatically decreased transaction costs of e- payments, transparency, pricing and disintermediation

5. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20075 ICT diffusion Internet users doubled in 5 years Source: UNCTAD (2006)

6. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20076 Source: UNCTAD (2006)... 28% 43% Developing and transition countries catching up in number of Internet users

7. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20077... but different penetration rates Source: UNCTAD (2006)

8. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20078 Developing and transition countries overtaking in number of mobile phone subscribers... 40% 54% 20012005

9. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 20079... and increasing penetration rates of mobile phone subscribers 20012005

10. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200710 Digital divide: Internet users worldwide Source: UNCTAD (2006) based on ITU data

11. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200711 Source: UNCTAD (2006) Limited broadband penetration

12. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200712 ICT diffusion: Countries have not invested to the same extent in ICTs OECD ICT investment as % of non-residential investment

13. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200713 Why the differences? Lack of strategies on public and business levels and other instiutional barriers Cost considerations and access to finance Risk perceptions and nature of business Entry barriers and level of competition Lack of skilled labour

14. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200714 ICT Impact on economic growth Multifactor productivity and impact of ICTs on: labour, capital and technical progress Increase in productivity in ICTs producing sector. Increase in productivity and overall efficiency in ICT using industries due to lower transaction costs, automation of production processes and network effects

15. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200715 Macroeconomic impact Positive correlation between GDP & Infodensity Infodensity ≃ ICT productive function of an economy (ICT–enhancing capital & labour) Source: UNCTAD (2006)

16. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200716 ICT Impact on economic growth 1% increase in Infodensity resulted on average in 0.3% increase in per capita GDP Source: UNCTAD (2006)

17. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200717 ICT Impact on economic growth Impact unequal among countries at different stages of development – critical threshold Source: UNCTAD (2006)

18. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200718 ICT Impact on economic growth The impact of investment in ICT: 0.3-0.9 GDP growth (1995-2002)

19. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200719 Impact of ICT at the firm level Positive impact of ICTs on firm productivity due to making ICTs an integral part of production production process and supply chains, better communication lines and coordination, improved skills, innovation, organizational change, experimentation ICTs help efficient firms gain market share Powerful impact of ICTs in services sector, but also in manufacturing and primary sector Impact on labour: skill biased technological change

20. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200720 E-business development Level of e-business intensity Time, business size, investment PCs E-mail Web Web presence Extranet Intranet E-commerce HRM, finance Some logistics Data sharing Product service & support Integration with suppliers’ system Invoicing and payment E-mailing with customers & suppliers Web info search Customer Relationship Management Source: UNCTAD E-Commerce and Development Report 2004

21. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200721 From upgrading factors of production to better performance ICT Investment Training Organisational Changes Efficiency GainsHigher Productivity Higher Growth More Wealth Next Circle of Investment in ICTs, Knowledge and Better Organization

22. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200722 Sector level impact: e-finance Massive decrease in transction cost due to migration of finacial services to electonric communications and particularly Internet Emergence of click and mortar banks and brokerages Security in e-finance and e-payments Financial flows to developing countries: e- remittances E-finance for SMEs Microfinance

23. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200723 E-credit information ICTs and information assymetry moving out from informal economy online credit risk databases online scoring and rating of enterprises lower transaction costs to assess SMEs credit risks

24. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200724 e-trade finance ICTs and credit risks, payments and short term trade finance in international trade bank based e-trade finance platforms specialized e-trade finance platforms e-trade finance in developing countries

25. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200725 e-credit insurance major credit risk databases of credit insurers moving databases online insuring from paymnet default risk online participation of developing countries in e- credit insurance networks

26. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200726 Sector-level impact: Oil Oil: a capital intensive & labour saving industry increasingly becoming an info-intensive one Vertically integrated oil companies –ideal structure for ICTs ICTs in upstream ICS in midstream ICTs in downstream

27. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200727 ICTs and Oil Markets Traditional spot and futures oil markets Migration to online trading platforms Other use of ICTs in international oil trade

28. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200728 ICTs as drivers in commodities sector ICTs play crucial role in streamlining the commodity supply chain They link more tightly supply with demand and help to avoid losses in upstream, middlestream and downstream operations Turning capital intensive and labour saving sectors of extractive industries into more info intensive ones

29. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200729 Role of governments Foster a competitive and supportive environment for the increase in invstment in ICTs …and hence encourage the development of ICT infrastructure Open markets and encourage competition for supply of ICT goods & services...through trade, financial and fiscal policies Build confidence in use of ICTs... by developing a supportive legal framework, Harness the potential of innovation and technology diffusion … by promoting the development of R&D, venture capital and ICT skills of population at large Make national programmes more efficient … by establishing a comprehensive ICT strategy

30. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200730 Conclusions ICTs–a powerful driver of productivity growth and accelerated development Opportunities of new technologies such as mobile Decreased connection, hardware and software costs Focus policies on narrowing digital divide Link between ICT & overall economic policies – need coherent strategy Measure impact of ICT

31. ICT&E-Business Branch, UNCTADPara 166 Course, Geneva, 23 April 200731 Thank you! Questions or Comments? rouben.indjikian@unctad.org