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The Africa Competitiveness Report 2007 Part 6/6

The Africa Competitiveness Report 2007 Part 6/6

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Measures competitiveness of countries and economies in Africa.
Chapter 1.5: Competitiveness and Information and Communication Technologies (ICTs) in Africa.
Measures competitiveness of countries and economies in Africa.
Chapter 1.5: Competitiveness and Information and Communication Technologies (ICTs) in Africa.

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Published by: World Economic Forum on Sep 30, 2008
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CHAPTER 1.5
Competitiveness andInformation andCommunication Technologies(ICTs) in Africa
HAMADOUN I. TOURÉ
, International Telecommunication Union
As African governments seek to liberalize their economies and integrate them more closely into theglobal economy,their industrial performance increasing-ly depends on the competitiveness of the firms servingtheir markets—both local and foreign-owned.Firm-level competitiveness will define the ability of Africaneconomies to grow,create new jobs,and increaseexports.Competitiveness is vital across all sectors of theeconomy:African firms face intensifying competitionboth in their domestic markets and as abroad.
Competitiveness and ICTs
Becoming competitive does not mean cutting wages or environmental standards,avoiding taxation,or seekingsubsidies.All these strategies have been adopted by dif-ferent countries in the past,but the advantages theyconfer are at best transient.Rather,becoming competi-tive means adopting long-term strategies to raise effi-ciency,boost skill and technology levels,and move intohigher-value products.Information and communicationtechnologies (ICTs) are critical for Africa’s growth.Theyenable the fast and efficient communications across dif-ferent countries and different continents that are vitalfor success in today’s global economy.Not only that,butICT products are themselves part of the higher-value,high-tech products that are growing fastest in interna-tional trade and that can sustain faster growth of incomes.ICTs are essential for creating new skills and generatinggrowth and technological change across the wholeeconomy—from agriculture to finance,construction,and modern services.It is this dual role of ICTs—asenablers of competitiveness and as a key sector in their own right—that makes them vital for the overall com-petitiveness of nations.This chapter of the
 Africa Competitiveness Report 2007 
examines the policy and regulatory landscape thatis the foundation for the rapidly improvingICT infra-structure in Africa.Although African governments havealready done much to liberalize telecommunicationsmarkets (as discussed in the next section),encourageinvestment,and promote the technological readinessvital to firms’survival,more remains to be done.Incentives are needed to build local capabilities and helpmake local firms become more competitive.As discussedin the following section,African firms and telecommu-nications operators are not waiting for government,however—they understand the importance of technologyand,in many cases,they are forging ahead and introduc-ing new communication technologies.The chapter goeson to examine the deployment of next-generation tech-nologies in the continent,including third-generation(3G) telephony,broadband Internet,and Voice over Internet Protocol (VoIP).Indeed,far from being isolated in the global econo-my,some African firms are already participating in theforefront of technological developments and investment
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opportunities.One of the striking features of the recentboom in mobile communications is that it is largelyAfrican firms—such as MTN,Orascom,and Celtel— that are capitalizing on the new investment opportuni-ties.The boom is as much homegrown as it is based onforeign investment,and is therefore likely to prove moresustainable than previous rounds of investment in thecontinent.The challenge for Africa is not whether to integrateinto the global economy—that is now a given—buthow to become competitive within an integrationprocess that is already taking place.Competitiveness canbest be achieved through public-private partnershipsbetween firms and government to promote the take-upof new technologies and development of new skills.Thischapter provides some insights into how this could beachieved.Intuitively everyone can appreciate the speed,capa-bilities,and power of computers or instant messaging(even if this power is not always realized!).Historically,however,economists have struggled to prove causationbetween the adoption of ICTs and improved productiv-ity and economic growth.As Robert Solow famouslyremarked,“you can see computers everywhere but inthe productivity statistics.Most studies originating inthe United States on the relationship between ICTs andproductivity have typically used static growth account-ing models to analyze pre- and post-1995 productivitydata relative to the number of computers or mainlines(1995 being an arbitrary cut-off point roughly corre-sponding to more rapid growth of the Internet inOrganisation for Economic Co-operation andDevelopment,or OECD,countries).
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Depending onwhether cross-country regressions or case studies areused,on the variables and time period studied,on thedefinition of the ICT sector,and on the way endogene-ity is treated,results can differ widely.There are at least two reasons why the wealth of research in this field has failed to yield a consistentanswer.Regressions have mainly focused on growth inthe
number 
of computers or fixed telephone lines andhave generally failed to take into account the networkeffects from connecting ICT devices together (whichare likely to be sizeable).Furthermore,due to the mas-sive growth in power and speed of ICTs over the lastdecade,there are likely to be not just one,but several,structural discontinuities in the time series data—that is,data for growth and productivity data for the last decadeare being related to “computers”that are fundamentallydifferent from the computers of the early or even mid1990s.Despite these problems,Fuss and Waverman(2005) note that there is broad consensus that technicaladvances in the Information Computer (IC) andTelecommunications (T) sectors have led to large directand indirect benefits to economic growth and produc-tivity.These advances allow for spillover effects and findsome support for modern,high-capacity telecommuni-cations networks and increased deployment of computershaving a positive impact on productivity.
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In Africa,mobile phones are the most widely usedform of communications technology (see the later sec-tion of this paper on the private sector),so the debatesurrounding the macroeconomic impact of computersin the United States and Europe may be less relevant.Waverman et al.(2005) examined the specific growthimpact of mobile phones for both developed and devel-oping countries and found a significant growth impactof mobiles that is twice as important for developingcountries as it is for developed ones.
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Moreover,theyfound an important “critical mass effect”whereby ICTshave a greater impact on productivity and growth thecloser the economy is to near-universal service.Waverman et al.(2005) suggest that their amplifiedimpact on productivity may be due to synergy and net-work effects.Despite some conflicting results (mainlybecause of the rapidity of technological change),ICTshave been found to improve productivity in severalstudies,and,more specifically,mobile phones have beenfound to have a positive growth impact in some Africancountries.
What role for governments?
Traditionally the role for government in ICTs in Africahas been a very direct one:owner and operator of theincumbent public telecommunications operator.This isnow shifting as African governments seek,instead,topromote competitiveness by establishing a sound policyframework and stable institutions,some of the definingfactors of competitiveness set out in Chapter 1.1.
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Market liberalization
In the increasingly integrated global economy,manyAfrican governments have committed to open up their domestic telecommunications market and introducecompetition.Half of all Africa’s fixed-line markets arenow subject to competition (Figure 1a) and nearly half have private-sector participation in their ownershipstructure (Figure 1b).The first privatizations of Africanincumbents took place in 1995–97,with a second roundin 2000–01.Today 25 African incumbents have beenwholly or partially privatized.Nevertheless,by compari-son with other regions,Africa remains the continentwith the highest number of monopoly service providersand the lowest proportion of privatized incumbentsworldwide.African mobile markets are more competitive thanfixed markets (Figure 2a) with four-fifths subject tocompetition in 2006 (Figure 2b).Over the last 10 years,
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    1 .    5   :    C   o   m   p   e   t    i   t    i   v   e   n   e   s   s   a   n    d    I    C    T   s    i   n    A    f   r    i   c   a
020406080100
Africa49513161455518823961AmericasAsia-PacificEuropeWorld
Figure 1: Slow changes in the fixed-line market: Level of competition by region (2005)
Source: ITU World Telecommunication Regulatory Database.
    P   e   r   c   e   n   t
1a: Basic services (2005)
020406080100
Europe & CIS7774524461AmericasAsia-PacificAfricaWorld
Source: ITU World Telecommunication Regulatory Database.
    P   e   r   c   e   n   t
1b: Privatization of incumbent operators by region (2005)
Monopoly
Competition

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