A new UNCTAD report says the open character of the way knowledge is spread over the Internet, and the way electronic communications make distance and national borders much less relevant in carrying out business and related financial transactions, holds promise for economic progress in poor countries. Information and communication technology (ICT) can deliver such vital efficiency gains that it is changing the basic patterns by which businesses operate and economies grow, the Information Economy Report 2007-2008(1) concludes. ICT allows new modes of organization of production and consumption through wireless communication largely independent of distance, resulting in more flexibility, less-expensive transactions, and faster and more accurate communication between economic agents.
The report, known as the Information Economy Report 2007-2008, is intended to contribute to debate at the UNCTAD XII conference to be held from 20-25 April in Accra, Ghana. A sub-theme of the conference is the importance of harnessing knowledge for development.
While innovation is as important as ever, the speed and ease through which knowledge can spread by electronic communication means that new ideas can come from diverse locations and often require less corporate centralization. . . and also that it can be harder to keep knowledge as a closely controlled resource within corporations, the report says. ICT-led innovation emphasizes interconnection, flexibility and decentralization. Common intellectual products created by and improved upon by multiple sources -- the open-source model -- are a new and increasingly influential trend, the report says. While this new pattern raises questions about the choice of intellectual property rights regimes, one apparent outcome is that firms in developing countries have cheaper and much faster access to knowledge that can help them make and sell competitive products.
The report says the "spillover" effects through the use of ICT contribute more to economic growth than do the direct effects of production of ICT. ICT generates numerous innovations, thus increasing productivity through the creation of new products, services, and processes. It has given rise to such innovations as just-in time inventory control, the fragmentation and internationalization of production, and outsourcing of services and various production tasks. For developing countries, it has provided new opportunities for entry into global value chains -- the different phases of production and distribution of goods and services for global markets. Consequently it has helped these countries diversify their manufactures and exports.
The rapid pace of innovation in the ICT sector has contributed to a decline in the cost of access to ICTs, which have opened opportunities for poorer people to use ICTs for income-earning activities and for upgrading their knowledge, the report says. Two obvious examples of such uses by the poor are the establishment of telecentres -- public facilities that provide poor communities with access to ICTs -- and the use of mobile telephones by micro-businesses.
A greater challenge is for developing countries to bring themselves up to speed in using services that rely on electronic communications for business transactions such as e-commerce, e-finance, e-banking and e-insurance. These services have proliferated in industrialized nations. In the area of financial services, the use of ICT has allowed major efficiency gains, significantly reducing costs.
Developing countries frequently need legal and institutional reforms and technological infrastructure to catch up in the fields of e-commerce and e-banking. Internet banking also has created security challenges, such as the need for protection from emerging cyber-crime. Further innovations have been introduced to allow more secure methods of e-finance, but making e-banking and e-payments more affordable for banks and their clients in developing countries is still a major challenge. Giving better access for small- and medium-sized enterprises to simple forms of e-banking and e-payments -- and providing these services to individuals who sometimes have had no interaction with banks at all - - is a task that is still being addressed in many developing countries.
The report says harnessing ICT to spur economic development requires government policies that promote national knowledge systems and support economic competitiveness. Special emphasis should be put on training and education, as the returns for domestic economies from higher education are rising. The particular role of ICT as an enabler of innovation should be encouraged, the report says and this should be supported by the development of IT infrastructure, the creation of a trust environment for ICT use, establishment of a development-friendly intellectual property regime, and implementation of competition policies.
Given the important spillover benefits from ICT, barriers to cross-border flows of knowledge may be very harmful for poorer countries with limited human and capital capacities, the report says. The report suggests that more effective transfer of knowledge and technology to developing countries could be achieved by such measures as improving flexibilities in intellectual property rights, emulating open access models, establishing international partnerships for research and development with participation from developing countries, and increasing aid to build national capacities in science and technology.
- Information Economy Report 2007-2008