Tuesday, December 05, 2006

WSIS Follow-up Session 1- Advancing the information economy

Session one started with the words of Mr. Kwaku Osofu-Adarkwa, Permanent Secretary, Ministry of Communications Ghana, who said that Ghana and Africa acknowledge the value of ICT for improving life standards, and explained that Ghana has developed an ICT for Accelerated Development Policy blueprint, which has been integrated as driver and enabler within the three-pronged Growth and Poverty Reduction Strategy II. He then referred to how Ghana’s policies are succeeding in increasing the extent of telephone lines penetration, which implied a growth of 2121% in the number of mobile phone’s subscription and 147% fixed lines phones within five years. To keep the same rate of growth and to have a modern system, the government had engaged in a process of further privatisation and deregulation of the telecommunications’ sector. Between many actions and many legislative initiatives he mentioned, he made reference to the need to proper intellectual property rights (no further definition about what proper means in this context). Then, Mr Osofu-Adarkwa referred to the need of aid to further develop the required infrastructure, specially due to the OECD and International Institutions funding having dried up. To carry out the construction of the National Communications Fibre Backbone Infrastructure network, Ghana has received money from China in the form of a China Exim Bank concessionary loan ("concessionary loan" means a loan bearing no interest or a rate of interest that is certain agreed percentage points below the average cost of borrowing in the markets). Then, he carry on explaining some rural based projects “including the development of community information centres connected to broadband infrastructure at lower cost [I assume that this refer to lower to market price] to promote ICT application in rural economic activities”. He ended by emphasising the need for harmonisation of ICT measurement and the importance of building cheap computers in developing countries, giving examples of technology parks in Ghana to that effect.
The second speaker was Dr. Bart van Ark, Professor at the University of Groningen, made a presentation about ICT as the Key to Create More Productive Jobs. He started by identifying five main points: 1) the key to accelerate economic growth is the creation of more productive jobs; 2) ICT can be an important medium in supporting productive growth; 3) an analytical and measurement framework is needed to understand how ICT contributes to growth; 4) it is the use of ICT and not the production of or the investment in ICT what generates long term impact on growth; 5) for developing and emerging economies the policy tools are the same but the emphasis may need to be changed during the process of transition. He showed some date to explain how productivity growth delivered the largest contribution to world economic growth, but less so in developing countries and that the key to narrow any given per capita income gap was to raise productivity, so the task was to produce a measurement framework to grasp ICT’s productivity contribution. Professor van Ark went on by stating that ICT impacts growths through three channels: 1st channel, effect of investment in ICT raising output and labour productivity; 2nd channel, technological change in ICT producing industries leading to Total Factor Productivity (TFP) growth; and 3rd channel, TFP growth in industries that make intensive use of ICT. The important issue is that the growth achieved through channels 1 and 2 is a one time thing, while that accomplished through channel 3 are can be permanent and to make them so is the challenge. One of the problems is that comparative growth accounts are still in the early days, but there are some moves towards the creation of world comparative growth accounts. He put forward the argument that US productivity advantage over the EU was mainly due to better use of ICT, and then showed some numbers to explain that in economies in transition the emphasis changes from labour to Total Factor Productivity contribution to GDP growth. Before giving his conclusion, Professor van Ark analysed his previous assertion that policy instruments are not different between developing and advanced countries, by explaining that technology diffusion and innovation are the key to facilitate productivity growth, that investment in R&D and human capital (knowledge and skills) are important to enhance ICT impact on productivity and value creation, and that market reforms allocate resources to their most productive uses. He concluded that ICT is key to the creation of more productive jobs.
The session ended with the presentation by Dr. Michael Jacobides, from London Business School, Advanced Institute for Management Research and Harvard Business School, who started by saying that is not ICT but what you do with ICT is what fuels productivity, and he also mentioned the need to go from countries data to firm level data. He referred to why we care about IT by stating that it changes the structure of sectors (reduce transaction costs, leading to dis-integration), it changes nature of firms (why to keep things in one roof?), it changes the nature of work (e-lance workers and a new frictionless economy), and it produces a productivity surge linked to the ability of IT to drive change. It went on to say that, however, IT alone cannot do it and it requires complementary investments. IT works when there are new practices and HR, but IT does not get adopted by all countries and sectors, so how IT affects firms to be found. He mentioned a study conducted with funding from the Leverhulme Trust, which analysed sectors dis-integration to see what IT did, analysed sectors that failed to dis-integrate despite an early hype, made a comparative analysis of sectors in different countries, and examined how firms used IT to reconfigure their structures. Their study found that, at industry level, IT as weapon not a cause, that re-thinking IT theories would save trouble and waste, and that industry that could be re-structured had dramatic gains (it was about the processes that allow evolvability). At the firm level, the study found that IT helped firms change their boundaries (effective firms gain architectural advantage), that IT-facilitated changes affect the global division of labour (easier to use IT across geographies than firms), and that firms could use IT to re-organize their own architecture. Again, he repeated that IT was not a solution but a tool, an important one. He also mentioned that their study showed that IT by itself does not drive change; it facilitates it, and only in few occasions IT was the “bottleneck”. To tackle the bottlenecks that precluded IT to fulfilling its promised a need of reorganizing firms and industries that matters was found, but the focus should be on e-volvability. Then, he addressed the question of what should be funded to assist development, and answered that it by saying that the funds did not necessarily have to go to IT in general and that there was a need to identify what IT combine with practices to generate value (for example in developing countries the emphasis should probably be on mobile phones instead of on computers). Dr. Jacobides ended by saying that funds should not be exhausted on IT.

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