The Hindu Business Line : Unctad XI: ICT for developing countries

The e-strategies and policies of developing countries need to integrate both production and use of ICT wherein much can be learnt and gained by South-South cooperation. Scope for such cooperation exists because, unlike general-purpose technologies, South has considerable capability in ICT. Hence, any attempt at complementing ongoing bilateral and regional initiatives for IT cooperation with more broad-based cooperation among countries in the South can be instrumental in transforming the digital divide into digital dividend.

THE need for South-South cooperation is obvious, but what is missing is an institutional arrangement for promoting it. In this context, the United Nations Commission for Trade And Development could set the beginning by bringing together the countries in the South under the umbrella of an e-South Agreement aimed at bridging the digital divide through an integrated development of the Information Communication Technology Sector in the developing countries.

A negotiating text prepared by Unctad ahead of its eleventh conference now on at Sao Paolo, underscored the importance of ICT for growth and structural transformation of the developing countries. It states that ICT reduces transaction cost, provide opportunities to increase exports, opens up markets, thus promoting diversification and employment opportunities, increasing management efficiency and enhancing flexibility in production processes. The Unctad work plan envisages assisting developing countries in formulating and implementing ICT policies and strategies, including developing mechanisms for measuring digital economy developments and monitoring ICT use besides providing them a forum to discuss ICT-related policy issues, and exchange experiences and best practices.

The e-strategies and policies of the developing countries, therefore, need to integrate both production and use of ICT wherein much can be learnt and gained by South-South cooperation. Scope for such cooperation exists because, unlike general-purpose technologies, South has considerable capability in ICT.

Hence, any attempt at complementing ongoing bilateral and regional initiatives for IT cooperation with more broad-based cooperation among countries in the South could be instrumental in transforming the digital divide into digital dividend. The leadership position of Japan and South-East Asian countries and, now, China in the manufacture of ICT hardware, and of nations like India in IT software and services needs to be leveraged.

A strategy for ICT production and use

The contribution of ICT towards development can be on account of the growth of the sector and its diffusion/use. The former refers to the contribution in output, employment, export earning, etc., on account of the production of ICT related goods and services. In the US, for example, IT industries accounted for 8.3 per cent of GDP and nearly a third of GDP growth between 1995 and 1999.

IT industry is a major source of economic output, exports and job creation also in countries like Korea, Singapore, and Finland. The latter refers to enhanced productivity, competitiveness, growth and human welfare on account of the use of ICT by the different sectors of the economy and society.

In the general discussion on ICT and development, the focus has been on its use and only few attempts have been made to integrate the policy on ICT production and diffusion. However, studies on technology diffusion have shown that apart from demand side factors, supply side factors are important determinants of diffusion. An implicit argument for giving greater importance to ICT use appears to be that the needed technology, both hardware and software, off international shelves at a falling price. But it is important that developing countries build up technological capability in ICT, and studies show that it is not possible if developing countries remain passive adopters of Western technology. Hence, the neglect of ICT production capabilities has the potential danger of perpetuating technological dependence on the one hand and forgoing opportunities for income and employment generation on the other.

The Unctad text said that the primary producing countries in the South have not benefited from globalisation. Hence, it called for giving a renewed impetus to consideration of the "commodity problematique" and underlines the need for searching for new avenues of income and employment for survival in the less than friendly international trading environment.

Such an inquiry will naturally lead to exploring ways and means to make effective use of the one factor of production the South has in abundance: Labour. While developing countries are known for producing services at a lower cost, they were unable to take advantage of this mainly because most services are embodied in its provider and movement of labour, unlike capital, is subject to various restrictions. However, the advances in ICT have made it possible to "splinter" many of the services from their providers, which in turn led to offshoring of services.

No wonder India, with its large pool of skilled manpower, has emerged as a preferred location for offshoring of services. As of now, it is estimated that the ITES sector generates about 0.245 million jobs with total export earning of about $3.5 billion and it has grown at over 51 per cent the last three years. The current export from India, however, accounts for less than 0.5 per cent of the global market of about $773.6 billion and the world market is expected to grow at 8.6 per cent per annum reach $1,079 billion by 2006.

To put it in perspective, the total primary commodity export from low-income countries in 2001 was $882 billion only. If the low-income countries could manage to have at least 50 per cent of this expanding market in the near future, it could contribute significantly to their growth.

In fact, India is not the only country benefiting from opportunities offered by BPO. China, the Philippines and Costa Rica are also emerging as providers of BPO services to the developed countries.

If such services are perceived as an opportunity for the less-developed countries, it is also important that the nations of the South join together to nip in the bud the restrictive practices being adopted by the developed world such that outsourcing finally does not end as labour has, vis-à-vis cross-boarder movement.

Apart from manpower bottlenecks, IT infrastructure and appropriate policy environment, ICT diffusion in developing countries is constrained by affordability and last-mile connectivity. These issues could be addressed to a great extent by such innovations as CorDECT, Wirless in Local Loop, Simputer and the ongoing open source movement.

These innovations highlight the technological capability of the developing world to address the issues specific to it. However, the cost of these technologies can be brought down significantly with increased scale and capabilities enhanced by further investment in R&D which, in turn, calls for cooperation among countries in the South.

Initiatives in ICT Cooperation

While South-South Cooperation in information technology is yet to evolve, there are a number of regional and bilateral arrangements for harnessing ICT for development. Perhaps, the most notable one is the e-ASEAN Framework Agreement.

The e-ASEAN initiative has to be seen against this background of economic and digital divide between the new and old ASEAN member countries. Unlike the WTO Information Technology Agreement, which is essentially a tariff cutting mechanism, the e-ASEAN Agreement aims also at capacity building.

Besides such regional initiatives, there are a number of bilateral arrangements. For example, India has signed Memorandums of Understanding with a number of countries in the South for cooperation in ICT. Such initiatives have been complemented with efforts at promoting cooperation between the private sector in India and other developing countries.

To the extent that there is the need for achieving economies of scale and scope and to spread the risk as well as cost of innovative efforts there is the need for complementing the ongoing North-South, regional and bilateral initiatives with more broad-based cooperation involving other countries in the South wherein the role of Unctad cannot be overemphasised. That is the way forward.

(The author, a Professor at the Centre for Development Studies, Thiruvananthapuram, is a Visiting Senior Fellow at RIS, New Delhi.)

More Stories on : Foreign Trade | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
G-8 beckons

Can India come of age in comity of nations?

Economic compulsions of coalition

Unctad XI: ICT for developing countries

Strategies to meet oil demand

Intellectual property rights — US, trade sanctions and IPRs

Good, bad and economics

Keyman insurance