Impact of ICT on growth in developing countries

The impact of ICT on economic growth in the developing countries; the case of Tunisia

INTRODUCTION:

The development of information technology changed the nature of world trade, its explosion, particularly telecommunications and more recently electronic commerce, has changed the nature of competition around the world. Nowadays, technological advancement not only connects the world at lightning speed but also aids in the increased quality of products, information gathering, and R&D (Doh 2009). Without technology, people are expected to hardly survive, the internet has been recently considered as ‘a must’ to live and survive, important and necessary just as food and water. Fifty years ago, internet was like a dream, inaccessible and even if considered maybe realizable, its use used to be considered as limited. Few people could have imagined its real impact on the world. It has transformed the world to flat (Friedman, 2005).

The fact of the matter is that over the long term, the countries that implement globalization will prosper and the countries that do not will get left behind.

To be part of globalization, Information communication technology (ICT) is a necessity, it is the technology required for information processing, i.e. for the creation, manipulation, storage, retrieval and communication of information. It has an immense value in a world in which there is an “information explosion”, and where knowledge is complex, ever-changing and cross-disciplinary in nature. (Kotabe, 2010)

The macroeconomic effects of ICT, in particular on productivity and growth rates, have generated much debate in economics over the past decade, economists say on the basis of findings made ​​in the U.S. and some OECD countries (Australia, New Zealand, Canada), that ICT plays a major role in accelerating the economic growth (Boudson, 2002; Jorgensen and Stiroh, 2001; Jorgensen, 2001; Colecchia and Schyerer, 2001, Gordon, 2002; Petit, 2003 etc..). Others affirm that it is the first and main source of growth in U.S. productivity in the 1990s (Jorgenson 2001, Oliner and Sichel 2000) which may make some developing countries think that the major way to catch up, in an accelerated pace, the industrialized countries is a widespread adoption of the Information and Communications Technologies (ICT). They would change their pace of economic growth and permit a better integration in the international division of labor. Indeed, the emergence of new technologies may allow the opening of “windows” of re-specialization for developing countries. New opportunities can be seized as evidenced by the breakthrough of China’s computer industry and the software industry in India. Thus, some countries have undertaken significant reforms to facilitate the diffusion of ICT in their economies and accelerate their national performances. Multilateral institutions responsible for development seem to strongly support these policies. (Doh, 2009)

The emergence of ICT in the developing countries offers businesses a wide range of technologies, enabling better use of information and explicit knowledge, offering opportunities to reduce transaction costs and coordination opportunities in regard of exploitation of new markets and opportunities for enrichment content products and services.

However, from an international perspective, the question of differences across countries arises: if ICTs constitute an important driver of output and productivity growth, why has an extended growth been observed in some countries – in particular the United States – and not in others? It seems necessary to verify and analyze the trustiness and the effectiveness of these policies as the gains in productivity and growth achieved in some countries like the USA and OECD countries may not be generalizable to developing and emerging countries. (Gordon, 2002)

Nevertheless, some economists consider India one of the countries that have been positively influenced by the ICT effects; it has been the beneficiary of significant foreign investment in Information Technology which made it able to easily adopt these technologies and has been described as the follower of China’s footsteps in income and wealth. The software industry in India was almost inexistent in the early 1980s and it employs now more than 250.000 employees participating then in the growth of revenues and employment (Ashish Arora and Alfonso Gambardella, 2005). Evidence from India as well suggests that internet kiosks that provide wholesale price information and alternative market channels to soybean farmers has led to an increase in the monthly market price by 1-5 percent. Moreover, the area under soybean production has also increased significantly (Goyal 2008). However, in long term view, India is maybe facing challenges greater than the country’s capacity to respond to them (Hamm, 2007). This incapacity may be due to the lack of education within the companies, bureaucracy, physical infrastructure problems and the cultural and social norms. High-quality information and communication technology (ICT) infrastructure is essential for developing countries to achieve rapid economic growth and maintain it, international institutions have always tried to convince developed countries to go into a deregulation and invest in ICT to accelerate the economic growth and tend to forget that there are too many other factors that must be considered such as the economic factors, human capital, geography, and civil infrastructure factors (Ojelanki Ngwenyama; Olga Morawczynski, 2009). Yet, large inequalities remain in ICT access. Some commentators hold much more skeptical views of the benefits of ICT for development. They argue that access to ICT depends directly on education, income, and wealth and the so called digital divide is only a part of a much broader development divide. Limited education, inappropriate language skills, or lack of resources could prevent developing countries from accessing ICT, ultimately exacerbating information gaps and increasing income inequality between and within countries (Von Braun, 2005).

We can’t argue about the fact that modern technologies are more highly used in the developed countries; the information revolution started in todays developed countries so it makes sense if they overpass developing countries in term of innovation (Rodriguez and Wilson, 2000). But during the phase of global diffusion, corresponding to the end of last century, extremely decisive, “the thesis of the new economy foreshadowed, not only concerning new growth trends in developed countries, but also expectations of a rapid catch-up by developing countries ” (Boyer, 2002 ). With the access to ICTs being more and more facilitated for some countries. The rapid development and diffusion of the information and communications technology (ICT) is the major driving force of the New Economy, the transition from an industrial/manufacturing-based economy. But we can notice that even in developing countries, the impacts of ICT can’t be always generalized as ICT access depend on the development of the country, Tunisia and India, for example, are both qualified as being part of developing countries but due to the differences in the size, infrastructure, culture, the political support and other factors, the impacts of ICT on them can be different.

In this paper, we will take the example of Tunisia, a developing country that I am from, starting with a study of the impact of ICT on developing countries in general and on Tunisia specifically showing the relationship between growth, productivity and ICT.

LITERATURE REVIEW:

The complexity and diversity of the impacts of ICT are important reasons for the interest accorded to the phenomenon of ICT. However, these characteristics also may explain why the extent of the impact of ICT is not a simple task. Another major argument explaining the reason making the impacts of ICT difficult to measure is that any impact of one factor over another is difficult to identify as a positive correlation is not easily attributable to the relation cause/effect. (Von Braun, 2005)

The development of a new generation of information technology and communication (ICT) in the early 1990s has been associated with various assumptions such as the emergence of a new economy: the digital economy that can’t be measured only by the weight of the ICT sector but also by the impact of ICT on overall economic activity. During the decisive phase of global diffusion, corresponding to the end of last century, “the thesis of the new economy foreshadowed, not only new growth trends in industrialized countries, but also expectations of rapid catch-up by developing countries” (Boyer, 2002, p234)

In fact, ICT are indeed generic technologies, which means that they are used by all other activities; the role of supporting economic growth played by ICT is a necessary condition, but they are not enough. (stewards, 2002; Pohjola, 2002)

On the one hand, more recent theoretical and empirical studies in the literature discussed the positive impacts of ICT and mainly IT on productivity (Hitt and Brynjolfsson, 1996); Brynjolfsson and Yang, 1996), growth and development (Jorgenson and Stiroh, 1995; Mansell and When, 1998; Pohjola, 2000; and Pohjola, 2001), work place organization (Bresnahan, Brynjolfsson and Hitt, 1999), human capital development and skill upgrading Acemoglu, 1998; and Hwang, 2000). On the other hand, some recent studies in the literature show the potential negative impacts of ICT on some dimensions of economic development. The majority of the recent studies that focused on this side were mainly related to the debate that technical change is creative destruction, although it has some positive impacts to enhance economic development. However, on the other hand, it has also some negative impacts on some dimensions of economic development. For instance, some studies, discuss the negative impacts of ICT on employment and the labor market (. Aghion and Howitt, 1998; Freeman and Soete, 1985; Freeman and Soete, 1994; and Freeman and Soete, 1997). Part of this literatures states that ICT or IT is similar to various kinds of technical change in imposing the so called labour saving or skilled biased effect, through the displacement of some unskilled labour due to either reduction or elimination of some unskilled jobs.