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Internet and Communication Tech Investment Needed To Bridge Digital Divide

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by Michael Keller

Policies in some developing countries are creating obstacles to the benefits they could realize from advancing Internet and communications technologies (ICT), a new report finds.

A failure by these governments to implement strategies to foster broadband communication is helping maintain the digital divide between developed and emerging nations, authors of the 2013 Global Information Technology Report say.

The study, released by the World Economic Forum, investigates five measures of ICT in 144 countries: infrastructure; ICT penetration into and use by government, business and individuals; the cost of accessing this infrastructure and the presence of the necessary skills in the population to use it properly; the business innovation environment and regulations governing it; and the technologies’ economic and social impacts.

“The Nordic countries and Asian tigers continue to dominate the digital landscape and they remain in the top 10 of our ranking,” said Beñat Bilbao, associate director and senior economist at WEF’s Center for Global Competitiveness and Performance. There is a “big gap between developed countries on the one hand and the developing countries and emerging countries on the other hand, not only in terms of ICT infrastructure, but in terms of the benefits that ICT can provide to improve their competitiveness and well-being.”

Without deploying plans to create a foundation for modern technologies, countries falling lower on the list will be unable to become competitive with advanced economies, they say.

Benefits await bridge builders

To bridge the gap and reap the potential economic benefits of embracing ICT, the report finds, lower-ranking countries need to take measures to become more business friendly and invest in education.

“Digitization created 6 million jobs and added $193 billion to the global economy in 2011,” said Bahjat El-Darwiche, a partner at Booz & Company, which cosponsored the report. “Although in aggregate positive, the impact of digitization is not uniform across sectors and economies – it creates and destroys jobs. Policymakers wishing to accentuate the positive impact of digitization need to understand these different effects if they wish to act as digital market makers in their economies.”

The economists say that the social and economic benefits that come along with adopting these technologies are now widely recognized by those studying the issue. These tools are “an important source of efficiency gains for companies that will allow them to optimize their production function and liberalize resources toward other productive investments,” they write in the report. “Moreover, ICTs are also increasingly recognized as a key source of innovation that can generate increased economic growth and new sources of high-value-added jobs. This ability to innovate is essential in the current information revolution that is transforming economic and social transactions in our societies.”

Crossing the threshold

Interestingly, researchers found a minimum ICT investment threshold above which benefits start to multiply. “There is a certain minimal investment. Once this threshold has been achieved, we observe that there are increasing marginal returns to those investments,” said WEF’s Bilbao.

Report coeditor Bruno Lanvin said developing and emerging economies should see in the study how matching ICT investments with those in skills and innovation could help them cross that threshold. “Individual countries need to identify what separates them from reaching that threshold if they have not reached it yet in order to fulfill, long-term growth, competitiveness and innovation targets,” he said.

Speaking to the Financial Times, report coeditor Soumitra Dutta said the move by developing countries to circumvent a robust ICT infrastructure by embracing mobile phones as business and information platforms will not fix the problem. ICT must be extended into other important sectors of national economies.

“Mobile telephony alone will not allow developing countries to bridge the digital divide. The same degree of innovation [must] spread to other technologies,” Dutta, the dean of Cornell University’s Johnson School of Management, told the newspaper. “What matters now is how they do in fields like education and health care. Only then can they move to the next level.”

Top Image: Modern communications equipment installed in a large datacenter via Shutterstock.

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