ICTlogy

Ricard Ruiz de Querol — always worth reading him — has an interesting reflection around the alternatives for an ICT sector (in Spanish). Based on the Financial Times article , the issue is whether and how it is possible to foster a national ICT sector so that it becomes a driver, and a locomotive, of development, in substitution of other traditional (obsolete) industries like oil, mining or raw materials.

Ricard highlights to trends to keep in mind:

• Developing an ICT industry to foster competitiveness of other established industries
• Protecting the local market from foreign competitors, trying to nationally replicate foreign technology and services

Recent history has provided good examples — Ireland, Finland… even Bangalore or Bangladesh — of strategies focused on the creation of a strong ICT sector, but I personally growingly doubt it can be generalized on a one-solution-fits-all basis. Four reasons:

1. In many cases, developing and ICT sector was not a solution but the only remaining choice, so the relative success of the initiative changes dramatically if the rest of the economy is doing (more or less) well. I am not saying those examples were not successful (they where, and quite a lot), but one should be careful to take ultimate chances, well backed up and supported by most agents of the economy, as perfectly planned from scratch strategies that became magic solutions. I don’t think there is nothing like a blueprint for ICT sector based development.
2. The successful examples benefited from well set socio-economic frameworks: the language (i.e. English), the quality of the educational system, a strong welfare state/economy that perfectly leveraged all other efforts. As the iceberg, we just saw the visible part of the whole system.
3. (As the article also states) Even if it is said that the road of ICT development can be leaped so that leapfrogging is possible, it is nonetheless true that the firms that have been able to establish themselves strongly in the market, have achieved quasi-monopolies or, to say the least, have made things very difficult for late comers.
4. In addition to the first point — and somehow a consequence of the other two — we (I) still have to find strong evidence of ICT sector based strategies and policies that have proven effective and brought a deep impact at the macroeconomic level. Most impact on the GDP of the ICT sector is due to expenditure, investment and revenue of the sector, but not (which is what we’d call a locomotive effect) because of a positive impact on other industries from the supply point of view. If the railroad had an impact on the iron and steel industry, the energy industry, etc., I find it difficult to find what have been — from a supply point of view — the satellite industries that are being developed around the ICT sector at the national level.

That said, I agree with (a) fostering competitiveness of other established industries but not in (b) protecting the local market from foreign competitors and trying to nationally replicate foreign technology and services: the goal should not be developing a national ICT sector, which, in my opinion, can be a desired side effect, but not a primary outcome.

I am more and more convinced that the focus has not to be on the supply, but on the demand.

• Stimulate demand so that ICTs are incorporated in everyday’s life, most especially in industrial and business processes so that they enhance their productivity
• Stimulate demand so that the level of technology absorption comes naturally, thus upgrading the digital capacity of human resources and firms, and benefit even more from everyday’s life ICT use
• Stimulate demand so that it requires the corresponding supply growth, that will come from abroad but will equally generate business opportunities in the national ICT sector, based on the real economy
• Stimulate demand so that ICT use is based on real needs, the only formula for long-term sustainability

Summing up, it is my opinion that, despite the evidence on the benefits of a powerful ICT sector, these benefits (while important) are limited to the direct impact and have a small multiplier effect on the rest of the economy. Thus, we should focus on the adoption of technology, which has proven to have huge and much broader effects at all levels, and let the development of the ICT sector be a second derivative of economic development — and not the other way round.

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