Mind the Gap: Tech investment--and effective policy--can make poor countries prosperous.
Information technology (IT) is fundamental in driving productivity and economic growth. A McKinsey & Company study found that IT-producing sectors of the U.S. economy generated 36% of productivity growth from 1993 to 2000, in spite of accounting for just 8% of gross domestic product (GDP). A similar study by the United Nations found that 27% of GDP growth in the Group of Seven leading industrial nations from 1995 to 2003 was a function of IT investments. These numbers translate into real economic opportunity and the kind of well-paying jobs greatly needed in all parts of the world.
Some developing nations are already experiencing significant gains. India generates more than US$21 billion a year in revenue from its IT industry--up from $150 million 15 years ago--and over the past two decades employment in India's IT industry has increased from just 6,800 to more than 1 million. China now exports more IT goods than any country. Malaysia, with only 25 million people, has become the 10th-largest trading partner of the United States in part by creating an attractive environment for IT investment.
But for every China, Malaysia and India, there is a Chad, a Paraguay and a Bangladesh, countries where information technology is practically nonexistent. Building domestic IT sectors in countries such as these may seem a daunting task, given the many other day-to-day challenges.
But a number of countries have created templates for how it can be done. In 1991, Singapore set out to transform itself into a high-technology hub and took important steps, such as building a national broadband network and eliminating the 49% cap on non-state ownership of public telecommunications companies. Today, Singapore is a technology center.
Latin America has been making strides in Internet connectivity, according to the World Internet Project 2006 report, with more than a 350% increase from 2000 to 2005. Even so, it remains well behind North America and Asia, at 7.8% of the population connected to the Internet. One regional success story is Chile, where focus on technology has driven penetration to around 36%. Mexico leads the world with its program to put a computer in every classroom--more than 31,000--much of which is already complete.
There are a number of steps developing nations can take that will help to develop an IT sector while generating broader benefits. First, like Mexico, improve access to high-quality education, with a focus on building 21st-century skills.
Second is infrastructure. This means encouraging the development of multiple communications networks. Broadband is instrumental in attracting foreign investment in technology and ultimately Hill be a key driver of growth. Spectrum policies that facilitate wireless broadband Hill allow countries to modernize quickly.
Third, governments need to open their markets to IT products from other countries by creating a market-friendly tax and regulatory environment. This approach attracts new investment and jobs, giving consumers more choice while forcing domestic producers to remain competitive on quality and price. This continues to be a major issue in Brazil and has fostered a powerful gray market there. Dell has battled this issue with its Empresa Legal program, and we have reason for optimism: Research firm IDC showed a decline in the gray market to 61% in the first quarter of 2006, from 74%. Yet, this is still way too high for a market with Brazil's potential.
Businesses have an essential role to play in expanding digital access. They should view it as a two-dimensional opportunity: First, to improve lives by making IT solutions more accessible to more people, whether a budding entrepreneur in Latin America or a doctor in Africa combating a rare disease; second, and just as important, to expand digital access as a vehicle for expanding sales and profitability. The full potential of information technology is far from being realized; as more people get access to modern IT equipment, there will be greater demand for IT-enabled services.
Information technology has helped to build a wealthier world but also a better world, one in which more people can get more of their needs met. But, for hundreds of millions of people, IT is little more than a distant dream. Turning the dream into a reality is a goal everyone in the world of IT should be able to support and be willing to work to achieve.
Dell Chairman Michael Dell was LATIN TRADE Bravo Business Award Technology Leader of the Year in 2002.
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|Date:||Nov 1, 2006|
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