1. ICTs for Economic Growth: Theory, Policy Implications, Case Studies Jaroslaw K. Ponder Strategy and Policy Unit International Telecommunication Union Briefing Session on Economics 22 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.intJaroslaw.Ponder@itu.int

2. 22 May 2006Jaroslaw.Ponder@itu.int2Agenda Trends Economic meaning of the ICT sector ICTs versus economic wealth Theory of economic growth Policy implications Global actions Conclusions

3. 22 May 2006Jaroslaw.Ponder@itu.int3 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

4. 22 May 2006Jaroslaw.Ponder@itu.int4 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

5. 22 May 2006Jaroslaw.Ponder@itu.int5 Trends: Broadband Access T

6. 22 May 2006Jaroslaw.Ponder@itu.int6 Trends: Broadband Access Broadband prices for the cheapest fifteen economies

7. 22 May 2006Jaroslaw.Ponder@itu.int7 Trends: ICT Sector 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 FMC? Regulatory Implications Multi-facility competition Service compet.

8. 22 May 2006Jaroslaw.Ponder@itu.int8 ICT Sector: Economic Meaning Size of telecommunication market compared with GDP in CEE

9. 22 May 2006Jaroslaw.Ponder@itu.int9 ICT Sector: Economic Meaning Source: ITU (2005) Size of IT market compared with GDP in CEE, 2004

10. 22 May 2006Jaroslaw.Ponder@itu.int10 ICT Sector: Economic Meaning

11. 22 May 2006Jaroslaw.Ponder@itu.int11 ICT Sector: Economic Meaning Economic Wealth ICT Infrastr. and Services Economic Wealth ICT Infrastr. and Services A B What is true?

12. 22 May 2006Jaroslaw.Ponder@itu.int12 Investigating particular character of ICT sector potential in region Diffusion Determinants Economic impact of ICTs Institutional Approach Economic Wealth Infrastructure and Services

13. 22 May 2006Jaroslaw.Ponder@itu.int13 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 Investigating particular character of the ICT sector

14. 22 May 2006Jaroslaw.Ponder@itu.int14 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.

15. 22 May 2006Jaroslaw.Ponder@itu.int15 Measuring Opportunities 1/3 DOI Opportunity Utilization Infrastructure Institutional Approach - WSIS (2005) - Digital Opportunity Index WISR 2006 New ITU’s Series

16. 22 May 2006Jaroslaw.Ponder@itu.int16 Digital Opportunity Index DOI percentage of population covered by mobile cellular telephony internet users per 100 inhabitants Proportion of households with fixed line telephone mobile cellular tariffs as a percentage of per capita income internet access tariffs as a percentage of per capita income ratio of broadband internet subscribers to internet subscribers ratio of broadband mobile subscribers to mobile internet subscribers mobile cellular subscribers per 100 inhabitants proportion of households with Internet access at home mobile internet subscribers per 100 inhabitants proportion of households with a computer Opportunity Utilization Infrastructure Infrastructure

17. 22 May 2006Jaroslaw.Ponder@itu.int17 Digital Opportunity Index in developed economies and CEE DOI  Leaders: Korea, Hong Kong and Japan  CEE: High opportunities but low utilization Mobile component and broadband

18. 22 May 2006Jaroslaw.Ponder@itu.int18 Economic growth and the ICTs Sources of economic growth  Increased use of land, labour, capital and entrepreneurial resources by using better technology or management techniques  increased productivity of existing resource use through rising labour and capital productivity  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

19. 22 May 2006Jaroslaw.Ponder@itu.int19 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.

20. 22 May 2006Jaroslaw.Ponder@itu.int20 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

21. 22 May 2006Jaroslaw.Ponder@itu.int21 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.

22. 22 May 2006Jaroslaw.Ponder@itu.int22 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

23. 22 May 2006Jaroslaw.Ponder@itu.int23 Global Initiative: WSIS 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 www.wsis.org

24. 22 May 2006Jaroslaw.Ponder@itu.int24 www.wsis.org WSIS Outcome 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

25. 22 May 2006Jaroslaw.Ponder@itu.int25 Tunis Commitment 12. We emphasize that the adoption of ICTs by enterprises plays a fundamental role in economic growth. The growth and productivity enhancing effects of well-implemented investments in ICTs can lead to increased trade and to more and better employment. For this reason, both enterprise 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 Micro Enterprises (SMMEs), since they furnish the greatest number of jobs in most economies. We shall work together, with all stakeholders, to put in place the necessary policy, legal and regulatory frameworks that foster entrepreneurship, particularly for SMMEs.

26. 22 May 2006Jaroslaw.Ponder@itu.int26 Tunis Agenda 90. We reaffirm our commitment to providing equitable access to information and knowledge for all, recognizing the role of ICTs for economic growth and development. We are committed to working towards achieving the indicative targets, set out in the Geneva Plan of Action, that serve as global references for improving connectivity and universal, ubiquitous, equitable, non-discriminatory and affordable access to, and use of, ICTs, considering different national circumstances, to be achieved by 2015, and to using ICTs, as a tool to achieve the internationally agreed development goals and objectives, including the Millennium Development Goals… »(Para 90, Tunis Agenda) Selected measures: e-strategies, enabling policies, enabling regulatory environment, ICT capacity, e- content,

27. 22 May 2006Jaroslaw.Ponder@itu.int27 Conclusions II catch- up processICTs create new opportunities for accelerated socio-economic catch- up process Millennium Development GoalsICTs will help to achieve Millennium Development Goals International actionsInternational actions play very important role but… no unified public policyThere is no unified public policy applicable for each country without exception

28. 22 May 2006Jaroslaw.Ponder@itu.int28 Thank you very much for your attention! Jaroslaw K. Ponder International Telecommunication Union Strategy and Policy Unit E-mail: Jaroslaw.Ponder@itu.intJaroslaw.Ponder@itu.int http://www.itu.int/spu Tel: 00 41 22 730 60 65 We all build global Information Society!

29. 22 May 2006Jaroslaw.Ponder@itu.int29Resources Full version of this presentation and others focusing on ICT4D&EG: www.itu.int/osg/spu/presentations/ www.itu.int/osg/spu/presentations/ ITU Strategy and Policy Unit recourses: www.itu.int/spu www.itu.int/spu ITU Publications: www.itu.int/bookstore www.itu.int/bookstore WSIS: www.itu.int/wsis www.itu.int/wsis

30. 22 May 2006Jaroslaw.Ponder@itu.int30 International Telecommunications Union We all build the global knowledge- based information society!

31. 22 May 2006Jaroslaw.Ponder@itu.int31 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

32. 22 May 2006Jaroslaw.Ponder@itu.int32 ITU – International Telecommunication Union

33. 22 May 2006Jaroslaw.Ponder@itu.int33 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…

34. 22 May 2006Jaroslaw.Ponder@itu.int34 Internship at the ITU www.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. Deadline: March 2007 No specific deadline for application