The role of internet connectivity for the economic development of less developed countries
Is internet connectivity a successful strategy to drive economic growth in less developed countries?
©2003
Masterarbeit
85 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
The current wave of globalisation the trend towards worldwide integration of markets is spurred by the development of ICTs, including the Internet (Miria Pigato, 2001). But there exists founded concern whether this development reaches Less Developed Countries (LDCs).
Technological transformations, such as Information Communication Technology (ICT), open new possibilities in various areas. With a rapid technological development the world faces the challenge to match the pace of technological innovation with national and global policy innovation.
This paper will analyse the following hypotheses:
1. Internet connectivity has potential to promote economic growth and support sustainable development for LDCs.
2. The application of the Internet technology carries risks for LDCs.
3. Successful application of Internet technology requires appropriate sustainable policies and strategies.
The analysis is based upon literature review of economic and development theories, literature about ICT in development with particular focus on the Internet, country and development related information, and statistical data focussing in particular on South Africa and Uganda.
Inhaltsverzeichnis:Table of Contents:
INTRODUCTION6
1.OVERVIEW - LITERATURE REVIEW11
2.THE INTERNET AND E-BUSINESS20
2.1Internet20
2.2E-Business21
2.3Internet Connectivity - Indicators22
3.ECONOMIC BENEFITS27
3.1Global proximity, global business networking27
3.2Communication and information retrieval28
3.3E-business opportunities for on-line trade32
4.RELATION BETWEEN ECONOMIC GROWTH AND INTERNET CONNECTIVITY34
4.1South Africa - Regression analysis35
4.2Uganda - Regression analysis38
4.3Comparison South Africa versus Uganda39
5.RISKS AND CONSTRAINTS FOR LDCS41
5.1The Digital Gap / Divide41
5.2Constraints and the widening gap in LDCs43
5.3Barriers and limitations for E-business51
5.4Policies to overcome constraints, barriers and limitations53
6.CONCLUSIONS58
7.APPENDIX60
7.1Appendix - South Africa Statistical Data60
7.2Appendix - Uganda Statistical Data70
BIBLIOGRAPHY80
The current wave of globalisation the trend towards worldwide integration of markets is spurred by the development of ICTs, including the Internet (Miria Pigato, 2001). But there exists founded concern whether this development reaches Less Developed Countries (LDCs).
Technological transformations, such as Information Communication Technology (ICT), open new possibilities in various areas. With a rapid technological development the world faces the challenge to match the pace of technological innovation with national and global policy innovation.
This paper will analyse the following hypotheses:
1. Internet connectivity has potential to promote economic growth and support sustainable development for LDCs.
2. The application of the Internet technology carries risks for LDCs.
3. Successful application of Internet technology requires appropriate sustainable policies and strategies.
The analysis is based upon literature review of economic and development theories, literature about ICT in development with particular focus on the Internet, country and development related information, and statistical data focussing in particular on South Africa and Uganda.
Inhaltsverzeichnis:Table of Contents:
INTRODUCTION6
1.OVERVIEW - LITERATURE REVIEW11
2.THE INTERNET AND E-BUSINESS20
2.1Internet20
2.2E-Business21
2.3Internet Connectivity - Indicators22
3.ECONOMIC BENEFITS27
3.1Global proximity, global business networking27
3.2Communication and information retrieval28
3.3E-business opportunities for on-line trade32
4.RELATION BETWEEN ECONOMIC GROWTH AND INTERNET CONNECTIVITY34
4.1South Africa - Regression analysis35
4.2Uganda - Regression analysis38
4.3Comparison South Africa versus Uganda39
5.RISKS AND CONSTRAINTS FOR LDCS41
5.1The Digital Gap / Divide41
5.2Constraints and the widening gap in LDCs43
5.3Barriers and limitations for E-business51
5.4Policies to overcome constraints, barriers and limitations53
6.CONCLUSIONS58
7.APPENDIX60
7.1Appendix - South Africa Statistical Data60
7.2Appendix - Uganda Statistical Data70
BIBLIOGRAPHY80
Leseprobe
Inhaltsverzeichnis
ID 7348
Barbara Hatzimichail
The role of internet connectivity for
the economic development of less
developed countries
Is internet connectivity a successful strategy to drive
economic growth in less developed countries?
MA-Thesis / Master
University of Westminster
Abgabe März 2003
ID 7348
Hatzimichail, Barbara: The role of internet connectivity for the economic development of
less developed countries. - Is internet conectivity a successful strategy to drive economic
growth in less developed countries?
Hamburg: Diplomica GmbH, 2003
Zugl.: University of Westminster, Universität, MA-Thesis / Master, 2003
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Printed in Germany
2
INTRODUCTION... 6
1 OVERVIEW LITERATURE REVIEW... 11
2 THE INTERNET AND E-BUSINESS ... 20
2.1
Internet ... 20
2.2
E-Business ... 21
2.3
Internet Connectivity - Indicators ... 22
3 ECONOMIC BENEFITS ... 27
3.1
Global proximity, global business networking ... 27
3.2
Communication and information retrieval ... 28
3.3
E-business opportunities for on-line trade ... 32
4 RELATION BETWEEN ECONOMIC GROWTH AND INTERNET CONNECTIVITY
... 34
4.1
South Africa Regression analysis... 35
4.2
Uganda Regression analysis... 38
4.3
Comparison South Africa versus Uganda ... 39
5 RISKS AND CONSTRAINTS FOR LDCS ... 41
3
5.1
The Digital Gap / Divide ... 41
5.2
Constraints and the widening gap in LDCs... 43
5.3
Barriers and limitations for E-business... 51
5.4
Policies to overcome constraints, barriers and limitations... 53
6 CONCLUSIONS ... 58
7 APPENDIX ... 60
7.1
Appendix South Africa Statistical Data... 60
7.2
Appendix Uganda Statistical Data... 70
BIBLIOGRAPHY... 80
4
ABSTRACT
The current wave of globalisation the trend towards worldwide integration of markets is
spurred by the development of ICTs, including the Internet (Miria Pigato, 2001). But there
exists founded concern whether this development reaches Less Developed Countries (LDCs).
Technological transformations, such as Information Communication Technology (ICT), open
new possibilities in various areas. With a rapid technological development the world faces the
challenge to match the pace of technological innovation with national and global policy
innovation.
This paper will analyse the following hypotheses:
1. Internet connectivity has potential to promote economic growth and support sustainable
development for LDCs.
2. The application of the Internet technology carries risks for LDCs.
3. Successful application of Internet technology requires appropriate sustainable policies and
strategies.
The analysis is based upon literature review of economic and development theories, literature
about ICT in development with particular focus on the Internet, country and development
related information, and statistical data focussing in particular on South Africa and Uganda.
6
INTRODUCTION
"It can be no accident that there is today no wealthy, developed country that is information-
poor and no information-rich country that is poor and underdeveloped" as stated in 1991 by
the prime minister of Malaysia, Dr. Mahathir Mohamad, quoted by R. Harris (2002). R. Harris
(2002) further concludes that "the association between technology and growth is clear".
Technological transformations, such as Information Communication Technology (ICT), open
new possibilities in various areas. With a rapid technological development the world faces the
challenge to match the pace of technological innovation with national and global policy
innovation.
Technological progress requires knowledge creation and capacity building, a process in which
"many countries make huge strides in order to innovate, adapt and regulate technology for
their needs" while "many other countries are failing to keep pace" (Human Development
Report 2001).
According to the Human Development Report 2001 (HDR 2001) one of the ways in
promoting economic development through harnessing information technology is Internet
connectivity.
Internet connectivity, as referred to in this paper, indicates the diffusion of Internet access that
offers to individuals the possibility to use the Internet. Indicators of Internet connectivity are
discussed in detail in chapter 2.
7
Review of literature reveals that Internet connectivity offers new possibilities, as mentioned in
the HDR 2001, in areas that include:
·
Participation
The Internet enables communication and information by opening up possibilities for
people to participate in decisions that affect their lives, such as new ways for citizens to
demand accountability from governments and in the use of public resources.
·
Knowledge
The Internet can provide rapid access to information about almost all areas of human
activities, e.g. distance learning, long-distance medical diagnosis, information of market
prices.
·
Employment
E-business offers a long-term potential as the Internet breaks barriers of geographical
distance and market information thus creating opportunities for income generation and
enabling increased local participation.
The current wave of globalisation the trend towards worldwide integration of markets is
spurred by the development of ICTs, including the Internet (Miria Pigato, 2001). But there
exists founded concern whether this development reaches Less Developed Countries (LDCs)
1
1
Less developed countries (LDCs) are Third World countries. The Third World is "mainly characterised by low
levels of living, high rates of population growth, low income per capita, and general economic and technological
dependence on First World countries", which are "the now economically advanced capitalist countries of
Western Europe, North America, Australia, New Zealand, and Japan" (M. Todaro, 1997).
Less developed countries are characterised by "low or stagnant economic growth, low GNP, high levels of
poverty, low literacy rates, high unemployment, agriculture as the dominant sector, and poor national
infrastructure" (Prashan C. Palvia et al., 2002).
8
since "technology is created in response to market pressures not for the needs of poor
people, who have little purchase power" (HDR 2001).
As Miria Pigato (2001) states, ICTs have a potentially large impact on growth. In order to
overcome constraints of inequalities for the effective use of information communication
technologies, policies of access and diffusion are required.
In this context, the United Nations included the new information and communication
technologies in their "Millenium Development Goals" (United Nations, 2000) targeting to
make the benefits of new technologies available.
Based on the literature review, country case examples and statistical data this paper will
analyse the following hypotheses:
4. Internet connectivity has potential to promote economic growth and support sustainable
development for LDCs.
5. The application of the Internet technology carries risks for LDCs.
6. Successful application of Internet technology requires appropriate sustainable policies and
strategies.
In order to identify the role of Internet connectivity in Africa, this paper will discuss the
question whether Internet connectivity can support economic growth
2
of LDCs. The analysis
is based upon literature review of economic and development theories, literature about ICT in
development with particular focus on the Internet, country and development related
2
GDP per capita or per capita income measured in US dollars (G.M. Meier, 2000).
9
information about Africa focussing in particular on South Africa and Uganda, and statistical
data.
Methodology
The methodology used in this paper is based upon secondary research and analysis of
statistical data. A critical, analytical study of the hypotheses is carried out referring to
literature review, economic and development theories, statistical data and specific country
information. Focus is set on country cases South Africa and Uganda. The country case studies
serve the purpose to reveal whether in the analysed countries economic development is related
to Internet connectivity and, further, to identify factors for success or failure of Internet
connectivity promoting economic development. The country cases will be analysed, as to
whether the hypothesis and theoretical conclusions prove to be valid or rather contradict the
real cases. Analytical data from Uganda, a country with low economic growth but with
significant Internet initiatives, will be compared to South Africa with high GDP per capita
within the continent and the largest telecommunication and Internet infrastructure.
The hypotheses will be set against development and economic theories and further review of
related literature. The purpose is to determine potential economic impacts of Internet
connectivity for LDCs, to detect risks, constraints and limitations of Internet connectivity in
LDCs as well as to suggest success factors that are required to make Internet connectivity
economically beneficial for LDCs. Further, indicators of Internet access and connectivity will
be identified. In order to identify the relationship between Internet connectivity and economic
10
development regression analysis of statistical data from South Africa and Uganda will be
carried out for selected indicators of Internet access.
11
1 OVERVIEW LITERATURE REVIEW
With the advent of information and communications technology, the Internet emerged as
major influencing power promoting economic growth. However, to ensure that the poorer
countries reap the same benefits from this technology as enjoyed by the wealthier countries
around the globe, a development strategy to ensure poor countries' Internet connectivity
presents itself as an essential requisite.
Literature review about the potential economic impact of Internet connectivity reveals the
following aspects supporting the first hypothesis of this paper.
Economic benefits for LDCs that make use of the new Internet technology and the
possibilities Internet connectivity offers can be found in the power to support sustained growth
and sustainable development. The International Telecommunication Union mentions in an
article that "the convergence of mobile communications and the Internet will produce
something big" (ITU, 2002).
Further, the reviewed literature supplies evidence, that economic benefits arising through
Internet connectivity can be found in the creation of global proximity and network creation.
As one of the main drivers of globalisation the Internet propels global markets of industrial,
developed countries. From the point of view that "globalisation is as good for the poor as it is
for everybody else" ("Growth is Good", The Economist, published 27 May 2003) the Internet
can also be the power to force economic growth of LDCs. The HDR 2001 points out that the
new age of globalisation is giving rise to global networks in many areas of activity, which acts
as an important new force in shaping the path and spread of technology and economic
development. Such activities can be found in the increasing collaboration between institutions
12
and countries for scientific research and innovation purposes. Between 1995 and 1997,
scientists in US co-authored articles with scientists from 173 countries, Brazil with 114,
Kenya with 81, Algeria with 59 (HDR 2001).
The HDR 2001 mentions another area, where global networks are being created, is industrial
production. Multinational corporations (MNCs) include many countries in their global value
chain. Often headquartered in North America, Europe or Japan, MNCs outsource production
worldwide, in particular to low-wage countries. Some corporations have their research
facilities in several countries, though there is still a tendency to keep R&D in the home
country (headquarter), due to lack of skills in other countries and, probably more important, in
order to keep control over technological innovations and advantages.
A further area of network creation lies within E-business opportunities. The HDR 2001
projects E-business to rise in LDCs but states that this area is only now emerging, so that it
seems too early to draw conclusions.
Moreover, the global dispersal of mobile technology experts in LDCs, caused by the demand
for information and communications technology personnel, can create diasporas that have the
potential to become valuable networks of finance and business contacts as well as skill
transfer for their home country.
Additionally, economic and development theories supply evidence for the first hypothesis.
The Solow model (Mankiv, 2000) suggests that sustained growth in income must come from
technological progress. Thus, it can be concluded, that Internet technology, regarded as
advanced technological progress, has the potential power to promote sustained economic
growth.
13
Additionally, according to Mankiv (2000)
investment into particular forms of capital such as
human capital, defined as the knowledge and skills that workers acquire through education,
drive technological advance and create technological externalities. Mankiv (2000) states that
investment into skills required for advanced technologies create technological externalities
that are favourable for a country's economy. This describes a so-called `knowledge spill-over'
to the society that is building the capital and, in turn, benefits from the resulting social returns.
Consequently, investments into human capital that is required for the Internet as an advanced
technology would create technological externalities which are beneficial for the investing
society. For example, investments in education of ICT skills will create a potent, skilled work
force that would drive further technological and economical development.
Applying the Product Cycle Model, as defined by Vernon in 1996 (D. Salvatore, 2001),
investment into Internet infrastructure and the required human capital such as technical and
language skills will contribute to the imitating advantage of LDCs that can, as followers of
innovating industrialised countries undersell the latters' markets with , for example, lower
costs due to lower wages.
It can be concluded, that Internet connectivity seems to be a significant part of successful
strategies for sustainable development that is defined by the Brudtland Commission as
ensuring intergenerational equity by "meeting the needs of the present generation without
compromising the needs of further generations" (Soleiman, 1987).
Furthermore, through facilitating information dissemination the Internet can contribute to
factors and indicators of sustainable development such as consumption of non-renewable
resources, pollution of air and water, land contamination, biodiversity, land use, as well as
social indicators like health and education (HDR 2001). The Internet makes collaborative
14
work easier such as increasing collaboration in international research, as mentioned earlier in
this chapter, and thus contributes to innovations that can support sustainable development.
Kuzneth's inverted U-hypothesis (M. Todaro, 1997) can be applied to indicate a long to mid
term effect of adopting Internet technologies in LDCs. With the existing digital gap and the
resulting economic inequality between developed and under-developed countries, economic
growth (growth per capita income) in LDCs can be driven by improved Internet connectivity.
Kuzneth suggests that initially inequality increases with growth per capita income and after a
period when the benefits of development are spread more widely begins to decline.
Review of Internet and E-business related literature reveals disadvantages and constraints of
Internet connectivity and E-business in the developed world such as
·
Breakdown in Human Relationships
As mentioned by Turban et al. (2001) increased usage of the Internet and E-business can
result in the loss of direct human contact. Also Miria Pigato (2001) points out the risk of
loosing the element of trust, confidence and security gained through business networking
and personal contacts.
·
Security issues/risks
The Internet carries security risks in areas such as the reliability of the underlying
technology as well as authorisation and authentication. Internet-based activities strongly
depend on the enabling technology, its reliability and capacity. For example, insufficient
bandwidth can limit the efficient usage of Internet facilities. Further, there is a risk of
unauthorised access which needs to be addressed with appropriate authorisation and
15
authentication procedures, for example in regards to secure transactions and data
transferral such as payment transactions or transferral and storage of crucial data.
·
Privacy issues
The Internet together with mobile technology has made it easier to monitor individuals'
behaviour and actions. On the one hand, this can have a positive effect. For example, "the
use of e-mail, mobile phones and electronic transactions has made it easier, not harder, to
hunt down terrorists" (The Economist, Jan 2003). On the other hand, the individual's right
for privacy can seriously be threatened. For example, corporations monitor private e-mails
of their employees thus obtaining private information about their employees. Another
example for the threat to individual's privacy is, when Internet and e-mail traffic is
monitored by governments for political purposes or by companies for marketing purposes.
·
Unethical or illegal use
The Internet also offers new channels for unethical or illegal purposes such as child
pornography or terror.
In addition to the well-known disadvantages in developing countries, Internet connectivity
might cause the following disadvantage for LDCs. The adoption of Internet and information
communication technologies carries a risk of `brain drain' (HDR 2001). The less-developed
home country investing in creating educational labour force might lose its investment benefits
through the migration of educated people into countries where they find `better' opportunities.
According to Jagdish Baghwati (2003) "countries compete for markets by creating and
attracting technically skilled talent" and "developed countries' appetite for skilled migrants
has grown". Facing this situation, LDCs unfortunately cannot offer the same economic
rewards and social conditions as developed countries to modern skilled professionals. This can
16
results in LDCs loosing their skilled work force to developed nations But there is also the
possibility of brain gain (African Internet Connectivity, 2002). Expatriates, who migrated
abroad due to better job opportunities, might invest or spend the money they earn in their
home country.
The second hypothesis discussed in this paper points out, that Internet connectivity carries risk
for LDCs. Literature review supplies evidence for the second hypothesis based on the
following critical question as stated in the HDR 2001: "Can the Internet and the world-wide-
web (WWW) deliver information to the poor and the rich alike?" Miria Pigato (2001)
critically analysed this question for Sub-Saharan Africa and South Asia. She concluded that
the effective use of new information and communications technologies may be constrained by
inequalities. ITU (2001), for example, emphasises the inequality of online access, stating that
almost a third of the population in developed countries are online, while only two percent of
the population in developing countries is connected to the Internet. This, in turn, indicates a
risk of widening the digital gap through Internet connectivity rather than narrowing the gap as
intended.
In connection with the third hypothesis, policies, strategies and regulations must be
implemented in order to avoid risks of Internet connectivity for LDCs, and to ensure benefits
for all.
As literature review in regards to the third hypothesis reveals, there is a general lack of
policies for ICT development in LDCs domestically and internationally (R. Harris, 2002).
17
Consequently, appropriate policies need to be implemented by regulating bodies such as
national governments and international institutions, in order to exploit the benefits and
manage the risks of Internet connectivity for LDCs.
"The essential component of sustainable growth based on ICTs is the extent to which a nation
is able to use IT effectively" (C. Palvia et al., 2002). In a similar context, the HDR 2001
emphasises the importance of a country's investment into education and skills of its people, in
order to be able to reap the benefits of technological innovations. In an article about IT's key
role in poor country development, Michael Peel (2001) concludes quality infrastructure,
favourable government policies, good education and local relevance as part of the conditions
under which technology could bring development. And in the context of economic
development and sustainable growth, Mankiv (2000) also states that governments need to
invest into public capital, called infrastructure. The World Development Report 1997 points
out the states' vital role in stimulating sustaining development gains, for example by
providing infrastructure, in particular in regards to the Internet.
P. Collier and J.W. Gunning (1999) identified, that African government policies have given
the region a comparative disadvantage, notably poor infrastructure and poor delivery of public
services. For example, little education, especially at the secondary level, resulted in a
markedly lower stock of human capital.
E. Turban et al. (2001) mention missing government regulations and standards as limitations
of Internet and E-business in developed markets. The same and, even more, emphasis is to be
put on the policies of developing countries, which are in many cases lacking enabling policy
regulations and public services such as market liberalisation and infrastructure.
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2003
- ISBN (eBook)
- 9783832473488
- ISBN (Paperback)
- 9783838673486
- DOI
- 10.3239/9783832473488
- Dateigröße
- 633 KB
- Sprache
- Englisch
- Institution / Hochschule
- University of Westminster – unbekannt
- Erscheinungsdatum
- 2003 (Oktober)
- Note
- 1,0
- Schlagworte
- volkswirtschaften transformationsprozess makroökonomik internet information communication technology economic development
