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Global Information Technology Report 2005/2006 Executive Summary

Global Information Technology Report 2005/2006 Executive Summary

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The Global Information Technology Report, first published in 2001, assesses countries' and economies' competitiveness based on their IT readiness.
The Global Information Technology Report, first published in 2001, assesses countries' and economies' competitiveness based on their IT readiness.

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Published by: World Economic Forum on Sep 29, 2008
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This fifth
Global Information Technology Report 2005–2006 
appears at a time when there is broad satisfaction in thebusiness community and among government leaders withthe recent performance of the global economy.However,this is tempered by growing concern about a range of emerging global challenges.The world’s population is pro- jected to exceed 8 billion by 2025,2 billion more than atthe outset of the 21st century.This will have fairly directimplications in a number of key areas,from energy con-sumption,to job creation,to management of the globalenvironment.How countries are able to adapt to the fastpace of change and cope with the challenges that areimplicit in the emergence of an increasingly complexglobal economy will depend heavily on how adept theywill be at formulating intelligent policies,and modernizingthe institutional framework which forms the basis of modern societies.It is becoming evident that the moresuccessful countries are those in which governments,businesses,and civil society have evolved mechanisms thatfacilitate consultation and cooperation,and which lead togiving a high priority to boosting education and training.A central element of this is the ability to harness thepotential of information and communication technologies(ICT) to leverage the development process.Future pros-perity seems increasingly to be as much a function of investment in human capital and the technologies thatwill enhance productivity,as it is of investment in physicalcapital and infrastructure.Against this background of cautious optimism aboutglobal economic prospects and the challenges that growingprosperity brings,we are once again endeavoring to providean overall picture of the state of ICT developments in alarge number of countries around the world,accountingfor the lion’s share of the global economy.This
Report 
builds on the work done in the four previous editions andshould be viewed as part of a long-term commitment byboth the World Economic Forum and INSEAD to thedissemination of business-relevant research on informationtechnology issues,with a strong practical focus.The
Report 
is divided into five parts.The first threecontain essays written by practitioners,scholars,andexperts with relevant knowledge and experience in theICT area.An update on the well-established NetworkedReadiness Index rankings is followed by chapters on issuesof networked readiness,productivity-related topics,andreports on the varied state of ICT developments in Chile,Israel,Korea,Mexico,and Taiwan,highlighting signal suc-cesses and challenges yet to be overcome.The essays,whichare summarized briefly below,are followed in Part 4 byCountry Profiles,which provide valuable backgroundinformation on the components of each country’s net-worked readiness rankings.These profiles,coupled with theData Tables in Part 5,facilitate international comparison.
Networked Readiness and the Benchmarking of ICTCompetitiveness
In this paper,authors Soumitra Dutta and Amit Jain,bothof INSEAD,illustrate the recent strong shifts in the globallandscape of information and communication technologies(ICT).Countries such as India have transformed their economies,largely due to the benefits of the ICT revolu-tion.Others,such as Ireland and Israel,have also benefitedfrom the contribution of ICT,and emerged as centers of software development.Countries such as Singapore,HongKong,and Taiwan,while not major hubs of softwaredevelopment,have incorporated the key ingredients of networked readiness in order to provide an optimal envi-ronment for key stakeholders,in particular,businesses.These facts,and the increasing dependence of the world’sinhabitants on the Internet as a tool for information shar-ing and exchange,testify to the importance of a nation’snetworked readiness.This paper represents the continuingcollaboration of INSEAD with the World EconomicForum for the computation of this fifth
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NetworkedReadiness Index (NRI).The NRI is defined as the degree of preparedness of a nation or community to participate in and benefit fromICT developments.The immediate objective is to helppolicy- and decision makers understand the complex anddiverse factors underlying national ICT development,and,hence,to assist them in working toward their developmentobjectives.This chapter first discusses the structure and frame-work of the NRI,and how it has been used to assess andcompute the relative degree of networked readiness of 115 countries.The results of the research and analysis arepresented in the form of a relative ranking of nations.In
Executive Summary
SOUMITRA DUTTA,
INSEAD
AUGUSTO LOPEZ-CLAROS,
World Economic Forum
IRENE MIA,
World Economic Forum
 
the third section,some key trends in the evolution of ICTdiffusion and usage are presented,based on the analysis of three key ICT indicators:the numbers of telephone main-lines,personal computers,and Internet users.An analysisof global and regional levels is then followed by an exami-nation of the trends in the seven most populous nations of the world.The authors then show how the NRI and itsconstituent indicators can be used to benchmark a country’sICT development with neighboring or comparablecountries,and discuss some of the main challenges inconducting the study.
The Infrastructure Challenge
Authors Scott Beardsley,Luis Enriquez,Mehmet Guvendi,Miguel Lucas,and Andreas Marschner,of McKinsey &Company Inc.,discuss the complex trade-off faced bytoday’s telecommunications industry.While,on the onehand,competition must be encouraged,the industry must,on the other,ensure that operators have sufficient economicincentives to build the next generation of access infra-structure.Major technology-driven trends,in particular the rise of mobile and Internet protocol,are alreadytransforming the revenue model and economics of infrastructure operators.The effects are being felt in fixednetworks,and could eventually spread to mobile.Althoughchange is taking place at different rates in differentcountries,it may not be long before it begins to hitexpected industry returns and hence investment.If industry stakeholders decide that the building of new infrastructure deserves their collective support,current approaches to policy will have to be rethought.Policymakers and regulators must understand thecumulative effect of the various levers they deploy,andshould start to experiment with new approaches.It maybe necessary for agencies involved in the regulation andoversight of the market to redefine their missions.Infrastructure providers must recognize the impact of these trends,adjust their business and revenue modelsaccordingly,and actively shape both the regulatory debateand the evolution of the market.
Innovation and Interactions: Wellspring of CompetitiveAdvantage
Guaranteed Low Prices! Everyday Low Prices! We SellFor Less! Has global business simply become a race to thebottom? Perhaps not,answers Douglas Frosst,of CiscoSystems,Inc.A recent survey of US business leaders indi-cates that their focus for increased competitiveness is onincreasing the pace of innovation.Only 14 percent listedlower wages.This chapter discusses a research project to identifyopportunities and barriers to corporate innovation,carriedout by Innovation and Competitiveness:United States,designed by Cisco Systems,Inc.and the MomentumResearch Group.The research team surveyed more than600 business and information technology executives fromthe United States.Participating executives from organiza-tions of different sizes,industries,and regions respondedwith their attitudes,aspirations,and concerns aboutinnovation.The study sought to identify the level of interest byindustry in specific technology innovations,the impact oninnovation of interactions between various stakeholders,and the opportunities and benefits of innovation in educa-tion and healthcare.Executives were asked to identifyindustry sectors,including their own,which they believedwould substantially benefit from additional technologyinnovation.A short series of questions exploring attitudestoward innovation in healthcare and education were includ-ed in the study design and are discussed in this report.The author argues that as markets and industriesevolve companies look for new sources of productivity,competitive advantage,and growth.In the current globalenvironment,innovation and creativity are seen as a criti-cal aspect of business success.
Information Technology and Productivity, or “It Ain’t What You Do, It’s the Way that You Do I.T.”
At the macro level,productivity growth in the UnitedStates accelerated after 1995,and much of this is account-ed for by sectors which used or produced IT intensively.Authors John Van Reenen and Raffaella Sadun,of theLondon School of Economics,see a contrast between theUnited States and Europe,where,despite the accelerationin productivity in sectors which produce IT (e.g.,semi-conductors,computers),there was no comparable acceler-ation in the sectors that used IT intensively (such as retail,wholesale,and finance).At the micro level,recent statisticalresearch on large samples of firms has shown that informa-tion technology significantly increases productivity,butthat there is wide variation in the size of this effect.Theorganizational structure of some American firms—greater decentralization or better management practices—enablesthem to obtain much higher returns from their IT invest-ments than other firms in the same sectors with similar levels of employment and capital investment.The authorsshow that the higher productivity of US multinationalslocated in Europe—as compared to other multinationals— appears to be linked to their better use of IT.They arguethat this is likely to be due to the superior internal organi-zation of the US firms,such as stronger worker incentives,smarter targets,leaner manufacturing,etc.This effect isparticularly strong in the ICT-using sectors,where theUnited States experienced a productivity burst,whereasEurope did not.This difference in the use of IT may
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explain the absence of US-style productivity accelerationin Europe over the last decade.
An Emerging Opportunity for India: The Productivity ofInteractions
The forces of globalization are reshaping our world.Advancements in ICT are giving rise to a global,networkedeconomy,characterized by the mobility of informationand factor capabilities,and the rise of highly flexibleprocesses and value chains.Author N.R.Narayana Murthy,of Infosys,reminds usof the extent to which ICT presents developing countrieswith unique opportunities for growth,and redefines our approach to economic and social development.ICT isenabling countries such as India to effectively leverage costand factor advantages,and evolve new,dynamic strategiesto drive productivity growth.In addition,ICT has facilitatedthe development of innovative solutions,increased accessto resources and services,helped in the fight againstpoverty,and addressed the income divide across thedeveloping world.ICT-enabled networks have speeded up technologyobsolescence across markets and industries,and are render-ing traditional communication structures inefficient.Thismeans that the failure to integrate effectively into theglobal information economy will widen economic andtechnological disparities between developing and devel-oped countries.Low levels of technology adoption willlimit the role of ICT in facilitating the transformation andenhancing the productivity of industries.To leverage ICT effectively for growth,India mustrecognize the close connection between ICT policies andeconomic and social development,both of which lag far behind in the country.The country must address existingbottlenecks to the expansion of technology access andinvestment in the Indian economy,as part of a broad-basedreform agenda.The role of ICT must be complementedby market reform,the development of strong infrastructuresystems,and effective investment in social and educationalimprovement.Only in this way will India be able to inte-grate ICT in a truly sustainable manner and meet overalldevelopment goals.
Information and Communication Technologies in Chile:Past Efforts, Future Challenges
Chile’s accomplishments in the field of ICT developmenthave captured world attention.A team of authors,CarlosAlvarez Voullième,Constanza Capdevila de la Cerda,Fernando Flores Labra,Alejandro Foxley Rioseco,andAndrés Navarro Haeussler,explain the formula behindChile’s outstanding achievements as the leader in LatinAmerica in the field of ICT.Their paper charts thebackground history of Chile’s transition in the ICT sector in recent decades,and the involvement of progressivegovernment policy intervention in bringing it about,involving joint efforts by both the public and privatesectors.Policymakers,businesses and educators have allrecognized ICT as a major tool in achieving higher pro-ductivity,efficiency and growth,and as the prime mover behind technology adoption.This understanding—and thepolicies which have flowed from it—have succeeded inmaking Chile a reliable front runner for both local andforeign investors,with clear rules and qualified humancapital.What is remarkable is that this stable transition hasoccurred in a region characterized by economic instability,ideological conflict,and social stress.Remaining challenges are clearly outlined,such as theconflict between the proponents of innovation and thosewho cling to more traditional approaches,and the massivetask of providing education and training for the country’slabor force,with the aim of enhancing the country’shuman capital and international competitiveness.
Israel: Factors in the Emergence of an ICT Powerhouse
The Israeli government has set an explicit goal to positionIsrael at the center of the knowledge economy,but theprocess has been neither fully planned nor completelyorganic.In this case study,authors Augusto Lopez-Clarosand Irene Mia,of the World Economic Forum,highlightthe important role of the government in the emergence of Israel as a high-tech power.They describe how it has col-laborated closely with and supported the private sector and encouraged it to compete in international markets.Significant components of government action havetaken the form of heavy investment in education,rein-forced by immigration,effective investment incentivesfavoring foreign investors,maintenance of a ratio of R&Dinvestment to GDP higher than that of any other industri-alized country,and the implementation of incubator andventure capital programs to convert research into cuttingedge businesses.Israel has also made important strides in laying thefoundation for macroeconomic stability,controlling previ-ously run-away inflation,and implementing wide-rangingreforms to reduce the scale of the public sector and supportmodernization of the economy.The authors also analyzethe significance of education,culture,immigration,andsecurity issues in the development of Israel’s ICT sector,and explore in detail the role of investment,support for R&D and innovation,and the relationship between theICT sector and Israel’s overall economy.Israel’s experienceand impressive success in this area—like Taiwan’s—isworthy of study and emulation by countries with similar aspirations,but which are often unfamiliar with the
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