New Information and Communication Technologies ...

NEW INFORMATION AND COMMUNICATION TECHNOLOGIES AND POVER TY

Some evidence from developing Asia M. G. Quibria, Ted Tschang and Mari-Len Reyes-Macasaquit

Abstract The paper addresses the question of how the new information and communication technologies (ICTs) can potentially help reduce poverty in developing countries. Starting with the de nition and types of ICTs, the paper discusses a number of instances where various ICTs have been fruitfully applied to improve the welfare of rural people in a number of developing economies. The paper also reviews how ICTs can be an indirect instrument of poverty reduction through their impact on growth. Finally the paper discusses the various factors that in uence the adoption of new ICTs and the policies developing countries can adopt to take advantage of the new ICT revolution. Keywords Information and communication technology, poverty, education, employment, Asia. JEL classi cations

I31, L86, O32.

I think that information technology can make unprecedented contributions in removing poverty, if we can use it for the bene t of poor people. This would be in terms of creating jobs and creating income situations so that they can sell directly through the Internet, just like everybody else is doing now, and get market information through the Internet and so on. (Professor Muhammad Yunus, Asia Society 2001) 1. INTRODUCTION The new millennium unfolded a sad economic paradox. On the one hand, the global economy seemed to be on the cusp of a new technological revolution that is poised to usher in a new era of economic prosperity for the inhabitants of the advanced countries. On the other hand, many of the poor Journal of the Asia Pacic Economy 7(3) 2002: 285–309 © 2002 Taylor & Francis Ltd ISSN 1354–7860 print/ISSN 1469–9648 online DOI: 10.1080/1354786022000007852

M. G. QUIB RIA ET A L.

countries of the world found themselves scourged by massive poverty that was stubbornly resistant to change. According to the most commonly employed international de nition of poverty – that is, subsistence on an income of less than a dollar a day, measured in purchasing power parity terms – about 1.2 billion people of the developing world would be considered poor (World Bank 2000). If a higher and perhaps more realistic de nition of poverty – say two dollars a day – is adopted, almost 3 billion people of the developing world would be classi ed as poor. A broader concept of poverty that includes other aspects of human deprivation – such as illiteracy, malnutrition, bad health, poor access to water and sanitation, and vulnerability to economic shocks – would render the picture far more frightful. Against this backdrop of massive poverty and deprivation that engulfs the developing world, the new information technologies (ITs) – or, more broadly, new information and communications technologies (ICTs) – have inculcated new optimism in the development circle. These technologies have delivered unprecedented economic prosperity to the US – and promise to be the main engine of growth for the developed world in the coming decades. Given the universal applicability of these technologies, one wonders whether the enormous potentialities of ICTs can be exploited to enhance the development prospects of the poor countries. In particular, whether ICTs can help poor countries leapfrog the intermediate stages of technological development to the advanced stage, achieve accelerated growth and nd a solution to the pervasive problem of poverty in developing countries. The organization of the paper runs as follows. Section 2 deals with the de nition and types of ICTs. Section 3 discusses how ICTs can potentially affect poverty both directly and indirectly. The direct bene t accrues from immediate application of ICTs to improve the welfare of the rural and economically disadvantaged population of the society. The section draws heavily on the ‘case stories’1 culled together from the experiences of the developing countries, particularly from Asia. The emphasis on Asia throughout the analysis in the paper stems from the fact that the authors are more familiar with the situation in Asia as well as from the predominance of experiments in Asia in this regard. It is hoped that these experiences will have wider relevance beyond Asia. However, many of the qualitative ndings regarding a number of ICT projects reported in the paper need to be examined in light of their replicability, their full economic bene t–cost ratios as well as their overall success in reaching the poor. Section 3 also examines how ICTs can be an indirect instrument of poverty reduction through their impact on growth. This can occur in two ways: either the ICT sector emerging as the leading sector of growth and innovation for the economy,2 or ICTs contributing enormously toward productivity growth through their across-the-board adoption in the economy – which is analytically equivalent to leap-frogging. Finally, section 4 offers some concluding remarks. 286

COM MUNICATIO N TECH NOLOGIES AND PO VER TY

2. DEFINITION AND TYPES OF ICTs Roughly, the new information and communication technologies can be divided into three broad categories: (1) computing; (2) communications; and (3) Internet-enabled communications and computing. (a) Computing With the invention of computers, which represent the most signi cant technological breakthrough of the last half of the twentieth centur y, the cost of computing has declined exponentially over the years – and the use of personal computers (PCs) has increased by leaps and bounds. At the most general level, computers augment and improve thinking capabilities of individuals and organizations and enhance ef ciency. One important example relates to the business management system, known as ‘enterprise resource planning’ (ERP) where new software enables rms to ef ciently integrate all facets of business, including planning, manufacturing, sales and marketing. Another example of an important use of computing is computer-aided manufacturing and computer-aided design (CAD/CAM) in the product design for the manufacturing process. This process has radically improved product lifecycles (particularly, reduced the time lag between conceptualization of the product and its entr y into the market) as well as the quality and complexity of product design.3 (b) Communications Communication, which is one of the most important aspects of modern human life, has two broad categories: one-way and two-way communications. The most common form of communication is one-way communication, which includes broadcasting media like radio and television. Two-way communication devices, such as telephones, telegraphs and pagers, have improved signi cantly over the last two decades or so. The Internet’s growth is largely a function of two-way communications links (telephone lines) and PCs. However, in most developing countries, mobile telephones are easier to get than traditional xed landline telephones. Therefore, the movement of the Internet and Internet applications onto mobile phone systems will have tremendous technological implications for these countries. (c) Internet-enabled communications and computing The Internet, including the World Wide Web, is one of the most important technologies to affect both communication and computation. The Internet provides, on the one hand, a new communication medium that 287


allows activities like e-mail or chat lists for group communication and, on the other, multiple modes of communication by fostering new interfaces between new and old all forms of communications. For example, one can now communicate via voice to others through Internet telephony, or use mobile phones to access the Web. The World Wide Web allows people to search for and obtain information in the Internet. It is now common for people to post messages, create home pages and communicate with many others. The Internet also provides communities with a whole new means of communication (i.e., many-to-many point communication such as chat lists and discussion forums), and collaborative platforms. The Internet not only provides individuals with access to more information but also facilitates new ways of representing information (multimedia), structuring information (through hyperlinks) and creating information (through collaborative and distance work). Unlike many other media that treat users as passive, the Internet is an active medium that demands a greater degree of sophisticated thinking and logical skills than others. Finally, the Internet is also evolving. It is going beyond PCs and into palmtops, mobile phones and appliances. Already, Bluetooth technological standards and devices allow any device to ‘talk’ (electronically) to any device through wireless systems, including the wireless Web, cell phones and laptops. The Internet has revolutionized not only communication, but also commerce and computing in all elds, including scienti c computing and business automation. With the advent of ICTs, e-commerce has burgeoned (along with trade in information products). In business, the simple automation of business processes like accounting and payroll, and the subsequent integration of these functions via ERP software, are being gradually replaced by Web-based inter-enterprise or intra-enterprise ERP (with the outsourcing of most non-essential business functions), supply-chain management, auctions for procuring supplies, and the like. 3. HOW CAN ICTs HELP REDU CE PO VER TY? ICTs can potentially enhance the welfare of the poor in two ways: directly and indirectly. Direct bene ts of ICTs include those applications of ICTs that directly contribute to the welfare of the poor. ICTs can also enhance the welfare of the poor indirectly, albeit often more effectively, through rapid growth – and the associated trickle-down effect in terms of enhanced income and employment that ICTs can generate in the economy. (a) Direct impacts of ICTs As noted above, ICTs have the potential to improve the welfare of the poor directly in a number of different ways. New applications of ICTs can help 288


improve the availability of market information, create new economic opportunities, facilitate access to health and education facilities, and promote a more ef cient and fairer system of governance.4 (i) ICTs to provide market and other information for improving livelihoods ICTs can be an important source of market information. They can provide consumers with information on the lowest prices of products, the rms’ information on the lowest and different sources of supply, help reduce transactions costs and barriers to entr y, and improve market ef ciency. Following the lead of advanced countries, but understandably to a considerably much lesser degree, ICTs are being used in various states of India as well as in other developing countries to help improve the availability of market information to consumers and producers. This helps improve the ef ciency of the markets in which the poor participate and thereby improve their economic prospects. The following paragraphs brie y discuss a few examples. Information centers A number of such information systems exist in India. First, the M. S. Swaminathan Research Foundation (MSSRF) in Chennai has established village information centers to provide rural farmers information about agricultural practices. These were set up with support of the Canadian International Development Research Center (IDRC) and other aid agencies, to provide poor villagers with various types of information through the Internet in order to enhance their economic well-being. This information includes the cost and availability of farming inputs (from distant suppliers), grain and seed prices, health and life insurance, welfare opportunities, and other aspects of their work and daily lives. Second, another such project is the Warana Wired Village in Maharashtra which has set up information kiosks in seventy villages to allow villagers access over the Internet to agricultural as well as medical and educational information (Bhatnagar 2000). Third, on a much larger scale, states like Andra Pradesh and Karnataka are undertaking efforts to equip, with private sector investment, thousands of villages with information kiosks that can access government and other information. Electronic marketplaces In India, the Internet is being used to market the products of the poor communities. Two such examples are notable. First, a US-based non-governmental organization (NGO) PEOPLink, has linked producers of commodities in poor communities in Tamil Nadu to potential markets through the Internet (PEOPLink 2000). One village in Tamil Nadu, Kizhur, which excels at making traditional cotton saris and other cotton garments, sells its produce through PEOPLink’s website to consumers all over the world. These types of innovations have the potential of 289


substantially reducing transaction costs by eliminating the layer of intermediaries who often absorb a large chunk of the pro t. Second, similar functions are performed by the Foundation of Occupational Development (FOOD), an Indian NGO, which promotes the sale of rural women cooperatives’ products through the Internet. Other local artisans and merchants, organized into community-based producer groups, in a number of developing countries in Asia have joined the innovative marketing strategy offered by PEOPLink. These include women artisans from Nepal, handicraft makers from Bangladesh, Sri Lanka, the Philippines, Thailand, and even Tibet (PEOPLink 2001). In the Philippines, a virtual marketplace for agricultural products was recently launched by the Land Bank of the Philippines in partnership with a private e-commerce company called ‘b2bprice now.’ This Internet-based initiative was intended to provide a marketing alternative to farmers’ cooperatives and small entrepreneurs and enable them to engage in direct selling. Registered cooperatives are provided with free access to the Internet through government facilities like that of the Department of Agriculture or NGOs and parish churches (The Philippine Star, 2001). However, success in such efforts is not likely to be easy or immediate as there are insurmountable barriers to Internet commerce, such as trust (between buyers and sellers), payments, security and distribution. Milk cooperatives One successful application of the ICTs has been the use of technology to enhance milk collection in Gujarat milk cooperatives, India (Bhatnagar 2000). The electronic technology measures and transmits the quality and quantity of milk that farmers are delivering to the system. This system makes the collection and evaluation process faster and more ef cient, and reduces the scope for fraud practices by middlemen. Farmers’ task managers In some parts of Jammu and Kashmir in India, farmers sitting at home can monitor the soil on their elds. ICTs can be used for managing the farmer’s timetable, crop scheduling, insect and rodent control, marketing and even water management. There are some websites set up to exclusively serve farmers, giving information, ranging from crop patterns and weather forecasts to the latest government policies on agriculture. Similarly, in Rajasthan, software called ‘SimTanka’ was written to help villagers calculate the amount of rainwater they could expect in their tanks and ponds based on simulations and past records of the area. This illustrates how ICTs can help people overcome the barriers to accessing various types of information, including both local information and global knowledge. As the examples illustrate, there are many different types of information lacuna that the ICTs can help with. One of the main efforts in this regard has been the establishment of information centers that provide the rural 290


population with access to a variety of information services. However, for information centers to be successful, a number of issues are salient. The rst and foremost issue is of course the relevance of the center – whether the information content catered by the center is relevant to the needs of the clients. Other issues of similar import relate to the availability of adequate nancial and human capital and physical infrastructure; to the mode of operation of the information center – whether it or some other node in the network has information-gathering and other capabilities; and to the cost effectiveness and the degrees to which appropriate technologies are used. Needless to say that one does not have to rely on the Internet only for the purpose of disseminating market information to the rural areas or to sell produce of the poor. ICT tools such as xed-line telephones and mobile phones can be as effective at improving business opportunities and transaction ef ciency as the Internet. As such facilities permeate into the rural areas, it is expected, as is obvious from the present trend, that they will be increasingly used for such commercial purposes. For instance, the SelfEmployed Women’s Association (SEWA) in Gujarat helps women in remote villages to support themselves by trading, buying and selling goods using telephones (InfoDev 1999). Some of the projects pro led above are innovative and apparently bene cial to the farmers and other poor villagers, but many of them, especially the pilot projects, are still nancially supported by external donors. What are not clear are the full costs involved, the bene ts, the sustainability of the projects and, on larger scales, the amounts of human capital and other support required to make the best use of these types of facilities. 5 (ii) ICTs for creating new employment opportunities The need for business information as well as the inexorable trend toward globalization that even touches the lives of remote villagers in such countries as Bangladesh (in the form of migrant workers) has led to new business opportunities in the ICT sector. One example is the demand for cellphone services in rural Bangladesh. The Grameen Phone program is a remarkably innovative initiative that makes use of ICTs to generate incomes for poor households in rural areas. The program is an additional lending window for Grameen Bank members who would like to earn supplemental income by operating a mobile phone service in the village. A study by the Canadian International Development Agency (CIDA) concludes that the program contains many rural development ‘ rsts’: It is the rst rural development micro-credit facility in a developing countr y to target the creation of micro-enterprises based on ICT services. It is the rst rural development micro-credit facility in a 291


developing country to assist in the creation of village telephone service business using digital, wireless telephony. It is the rst private sector rural telecom initiative that speci cally targets poor village women for establishing micro-enterprise. Finally, it is the rst private sector telecom initiative with the explicit purpose of rural poverty reduction (Richardson et al. 2000). The impact of the program on improving household incomes of those who own such mobile phones has been tangible since the revenue stream from the telephone business is substantial. In addition, this activity is largely supplemental – the owner of the mobile phone does not have to give up her existing business or household chores while operating the telephone services. This has also enhanced the status of the women (since most village phone (VP) operators are female): it has greatly improved her authority in regards to decision-making in the household (especially when the telephone is under control of the women rather than their husbands!). The social status of telephone owners in the village has signi cantly increased because her house becomes a hub of rural activity with people waiting to make phone calls, including the better-off villagers. The success of the Grameen Phone program in Bangladesh has spurred similar programs in other parts of South Asia. These programs allow people to rent out mobile phone services to others in their villages. Such programs can be cost effective in terms of handset cost recover y (although cost-recover y calculations often do not factor in the cost of base stations and other infrastructure). Also, one needs to recognize the inherent limitations of such programs as an instrument of employment creation: however successful these projects are at creating opportunities for some people, they are not likely to be expandable to many. That is, not ever yone in a village will be able to make a living by offering mobile phone services. However, other types of employment opportunities may arise from other applications of ICTs. In India, the proliferation of the so-called STD booths, small streetside shops offering access to long-distance phone services, has resulted in the employment of thousands of people, presently estimated at 600,000 in 300,000 booths. This also paved the way for the creation of Internet kiosks where a user can get access to networked PCs for a fee. Like the STD booths, these kiosks create low-cost employment (Ramani 2000). It is also possible for ICTs to create employment opportunities for the rural poor directly in the IT industries. One possibility is to transfer lowerend computer work from urban to rural areas, so-called ICT-enabled services. Many of these activities, such as data entry, website design and some back-of ce processing (e.g. call center operation), are low wage, labor-intensive and can be potentially transferred to rural areas. The prevalence of such employment opportunities could help deter rural to urban migration and could even result in reverse migration of urban IT workers relocating to new rural back-of ce sites. However, all these are contingent 292


upon the existence of adequate infrastructure. Moreover, this could ver y well need scal incentives to persuade businesses to shift their operations to rural areas with telecommunications links. Without such incentives, the work is most likely to remain in urban areas with existing business ties. It has also been suggested that ICT-enabled services could create exciting income and employment opportunities for traditionally disadvantaged groups such as women and the disabled (Gothoskar 2000; Mitter 2000). However, the potential is largely in relation to home-based teleworking, allowing a woman to earn a living while managing her home, but requiring immediate or constant access to computer equipment, something that poor women and the disabled could not afford. While these ideas of using ICTs to create employment for the rural and urban poor are interesting and ambitious, there are reasons to be skeptical of them as an important vehicle of poverty reduction. It is not clear how many illiterate farmers or shermen in the developing world will be able to cope with the demands of sophisticated ICTs and telematics tools.6 The most basic educational requirement for using ICTs is some degree of literacy.7 In addition, further capabilities like interpreting information and creating knowledge will require more domain expertise and some basic IT skills (the latter of which can perhaps be learnt in informal ways). (iii) ICTs for educational and learning opportunities An important distinguishing characteristic of the poor is that they have few assets, including human capital. Most of them have little or no education. One way for the poor to escape poverty is to improve their human capital by way of education. Education can be formal or informal. Formal learning requires the support of traditional institutions. There are many variants of formal distance education. For adults, informal education can be more relevant and can be designed to cater to their speci c needs. In this connection, along with the conventional literacy programs provided by the private and public organizations, distance education can be a powerful supplementar y instrument to educate the poor. Distance education through radios has historically been quite an effective mechanism in many countries, and many new ICT programs are being designed around these. Distance education can also offer valuable credential opportunities for commercial employment for workers seeking work in the more modern sector. Depending on the type of technology and the degree of change in educational practice, the potential impacts of ICTs on education differ. Educational technologies can be broadly classi ed into three different modes: First, distance education via satellite and other traditional means – this involves traditional content (e.g. lectures) in synchronous learning (i.e. all students learning at the same time). Owing to the larger scale and 293


synchronous nature, this may be more suited to traditional or formal forms of distance education. Second, web-augmented learning – this involves use of the Web for improving content or educational deliver y of standard content, e.g. lectures. Often, this may be done asynchronously (i.e. each student learning at his own pace). Third, more advanced ICT-enabled learning environments – this involves the creation of new learning environments, in which both pedagogy and content take on such new forms as computer tutors, deliver y of asynchronously ‘chunked’ Web-based lectures (i.e. lectures that can be accessed in parts in non-linear sequences) (Brusilovsky and Miller 2000). These online educational systems may be supplemented or supported by access to Web resources, e-mail and other communication, and collaborative environments. The second and third modes are suited to both formal and informal learning. Many, if not most, distance education systems are an amalgam between the rst and second modes. Even the more technologically rich systems for students in higher education institutions are mainly offering variants in content or pedagogy. The World Bank’s African Virtual University (AVU) is an exemplar of this: it connects African institutions of higher education with universities in the West via synchronous satellite broadcasts of lectures. There may have been some improvements by delivering better quality content (e.g. lectures from the best teachers), but the satellite delivery method is second generation at best, being less interactive or asynchronous than the best Web-based methods. Nevertheless, as a recent evaluation suggests, the AVU can be economically viable, and the content and pedagogy has been appreciated by students ( Juma 2000). This model relies on ‘foreign’ institutional cooperation, and there is a need to ensure that local institutions can be equally successful when foreign cooperation ceases. Some countries like India and China have well-developed distance education systems and are moving to the second and possibly even to the third mode. Larger, more established, distance education institutions are making the transition to Web-based delivery systems, which should improve both pedagogy and content. For instance, the Indira Gandhi National Open University now carries a substantial amount of the content of their distance education systems via the Web. Similarly, the University of the Philippines Open University has started offering courses online through the Integrated Virtual Learning Environment, a courseware management system that was designed and developed by the Center for Instructional Technology of the National University of Singapore (UPOU 2001). Another case is the Indonesian vocational system, which allows students and teachers to communicate via the Internet.8 Other institutions, such as the new breeds of schools in Thailand, and similar Smart schools in many countries like Malaysia, India and Pakistan, are putting in Internet connections and computers to ensure that their students can have access to new content and learning opportunities (Szczypula et al. 2000). It may be noted that the above 294


projects are mostly being carried out in established educational institutions for formal learning in urban areas. It is also important to recognize that learning with ICTs and trends in distance education are also inextricably associated with the existing demands of current society for lifelong learning and individual perceptions on ‘learn how to learn.’ For the poorest, however, things are changing more slowly and in bits and pieces. A few pilot projects and software development efforts are under way for rural areas. Of these, a notable example is Andra Pradesh, where villagers can now gain literacy from computer-based software learning systems. Another example is the World Bank’s program to train low-income women in computer skills in India. The Grameen Bank is collaborating with Nippon Electric Company (NEC) of Japan in developing an online educational system that would provide ‘knowledge on demand’ for whole families. People would decide what, how much and the pace at which they would want to learn. Meanwhile, the Science Education Institute of the Philippines came up with its ver y own mobile IT classroom loaded with computer equipment, educational software, and other instructional tools and materials. This moving classroom is envisioned to expose teachers and students to the state-of-the-art technology for an alternative method of learning and instruction. Particularly targeted are schools in rural areas that do not have access to computers (National Computer Center 1999a). To facilitate the educational needs of illiterate villagers, the Grameen Bank is working with media experts at the Massachusetts Institute of Technology to develop a voice-operated system. This speech technology would allow a person to speak in Bangla and the computer would re ect the interpreted text instantaneously on the screen. This text can be interpreted back into voice and read out aloud by the computer. With this technology, an illiterate woman can talk to the computer and start learning how to read and write (Asia Society 2000). As laudable as these experiments are, it is not clear how replicable these projects are. Experience suggests that many potentially good technologies or practices could not be replicated beyond the demonstration phase. In addition, perhaps the more economically viable way to reach these poor communities may still be the traditional means, such as radio, television and print, which are essentially outpost classrooms. Village information shops and kiosks may also provide some learning opportunities, but they are not, in most developing countries, in a position to supplant those traditional means. While ICTs open up new learning opportunities, most developing countries simply do not possess the nancial wherewithal to take full advantage of these opportunities. Many of these countries still lack such basic educational infrastructures including trained teachers and adequate physical facilities (consequently, many students in rural areas still go without desks, writing boards or proper school buildings). Given the paucity of traditional 295


facilities, it is highly unlikely that these countries would be able to sustain a well-developed physical infrastructure that new ICTs demand. It is therefore not clear whether and to what extent ICTs can be an effective complement, or let alone a substitute, for traditional educational tools. (iv) ICTs for healthcare The poor in developing countries suffer from many serious disadvantages, one of the most serious being the lack of access to adequate healthcare services. One suggestion to overcome the inadequacy has been to link up with the better medical facilities at home and abroad. To this end, some effort has been made to link up with the developed countries. For example, hospitals across India – in particular in Mumbai – and other developing regions are making use of systems such as WebMD’s Internet system to link healthcare workers around the world, and to provide access to medical information from other countries about illnesses and treatments (United Nations Foundation 2000). There are also efforts to widen the coverage of healthcare information and health service delivery through IT networking at the national level. The University of the Philippines–Philippine General Hospital has recently ventured into medical informatics and has helped establish the National Telehealth Center in 1998 to facilitate integration of IT to healthcare deliver y and promote interaction among health professionals and the public all over the country as well as update medical know-how through the use of telemedicine (National Computer Center 1999b). Meanwhile, the Grameen Bank and Hewlett-Packard have been working together in a joint venture to bring health services to rural villages through e-Health Care System. It will operate in a way that is self-supporting. The system will hopefully be operational by the end of 2000. These specialized public databases and communities illustrate the potential value of the Internet, but again, as with other ICT applications, it is far from proven whether investments in such systems are more ef cient, or even as ef cient, as traditional investments in better equipment, more doctors or hospital wards. It is also unclear as to what extent these Internetbased services can be accessed by the urban poor, let alone the rural poor. In rural areas, without the assistance of third parties, more often than not, the required expertise would not be there to interpret and use some of the information from sophisticated domain-speci c elds like health services. Again, as with other ICT applications, it will be necessar y for the policy-makers to establish at what point in the stage of the healthcare system’s development that such ICT-based systems should be added on to complement the traditional system.

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(v) ICTs for good governance The proponents of the notion of e-government argue that it will ensure greater ef ciency, transparency and accountability of government. In particular, the citizens will not have to waste time for paper work in either running around to nd the right agencies or waiting in the queue or waiting a long time for the papers to be processed. Most things will be done online from replacing lost identi cation cards (IDs) to registering vehicles. In addition to ef cient services, an e-government can also be expected to create opportunities for citizens to participate in the decision-making process as well as to check on the arbitrariness and unfairness of government operations associated with the traditional system. Many developed countries are making many of their services available on the Web. Some countries such as Singapore and Austria have set up onestop shops for satisfying the citizens’ needs. Some developing countries – such as India, China and the Philippines – are tr ying to imitate these examples. China has begun using ICTs to revamp its government services. The ‘Government Online Program’ calls for the proportions of government services to be online to be 30 per cent, 60 per cent and 80 per cent by 1998, 1999 and 2000 respectively. This also relates to several ‘Golden Projects’ being carried out by the government. These include the ‘Golden Tax’ project, which uses ICTs for tax ling; the ‘Golden Bridge’ project for connecting citizens to a nation-wide nancial network; the ‘Gold Card’ project which uses smart cards for facilitating nancial transactions and payments to the government; and the ‘Golden Customs’ project for tariff collection (Wu and Yuan 2000). Similar efforts are under way in a number of Asian developing countries. In the Philippines, the government, by virtue of an Executive Order issued in year 2000, adopted the Government Information Systems Plan. Dubbed ‘Philippine Government Online,’ the plan serves as a framework and guide for the government-wide computerization of key frontline and common services and operations of government (Of ce of the President 2000). In fact, a number of IT-enabled projects are under way including the Electronic Procurement System, which is an Internet-based procurement facility that would simplify the procurement process and hasten supplier registration and payment, and the e- ling of taxes and payment system or the Automated Data Capture System of the Bureau of Internal Revenue (Yap 2001). These projects, as well as similar recent undertakings, are expected to improve productivity, heighten transparency and reduce red tape in government transactions as well as improve the relationship between the business sector and the government through the so-called B2G (business-to-government) transactions. Another successful early effort in the area of e-governance is the Indian government’s computerized ticketing system for its railways which has 297


improved ef ciency and reduced corruption amongst ticketing of cials (Heeks 2000). The latest and most ambitious projects in e-government are the Gyandoot project in Madhya Pradesh and Vision 2020 of the Chief Minister Chandrababu Naidu in Andhra Pradesh. These projects seek to provide a broad range of government services with ICTs, including access to government departments’ information, issuance of smart cards and electronic billing and tax processing.9 Critics argue that e-government is just another fancy idea, which has little relevance for citizens of developing countries where basic economic needs still remain largely unful lled. Moreover, even if it is a good idea, the successful implementation of such an idea is virtually impossible in most developing countries for bureaucratic and political reasons. For instance, in India, earlier attempts to computerize government operations have failed due to bureaucratic apathy as well as the lack of implementation capability of the government (Heeks 2000). It can also be recalled that the plans for the modernization (including automation) of elections in the Philippines have encountered some rough sailing and delay due to in ghting in the Commission on Elections. Finally, it may be noted that while e-governance can be a source of ef ciency for the government, it has its own downside. In the absence of a vibrant participator y political system, e-governance may take Orwellian turns, as comprehensive computerization of individual data can make government omniscient and omnipotent. In addition, in such a state, if all decisions are taken mechanically based on a computer’s interpretation or assessment of the data, citizens are likely to lose their voice. However, computers are not necessarily good or bad; much depends on what use we make of them. (vi) ICTs for empowerment The experience from India suggests that the introduction of ICTs into the government’s operation has partly contributed to the empowerment of poor villagers by enabling them to improve control over their lives. These technologies have made their voices heard, increased their access to local resources, as well as their participation in de ning public services to serve their own needs. Thanks to ICTs, villagers can fairly easily reach higher-level of cials, through electronic mail, video conference or live television programs, to express their needs or report the wrongdoings of government of cers, especially those at middle and low level.10 The practice of the government of Madhya Pradesh in consulting regularly with local citizens to select services provided, design and test the network system has not only contributed to the success of the project but also opened opportunities to the villagers to take part in the decision-making process. 298


From the case studies discussed above, it appears that there are potentially important direct impacts of ICTs that can be bene cial to the society, if not necessarily to the poorest segment of the society. Developing countries should creatively use the traditional means, in conjunction with ICTs, to alleviate the various facets of poverty. However, the role of ICTs is likely to var y from country to countr y, depending on the stage of development. In societies, where basic literacy and numeracy are missing and infrastructure is primitive, traditional tools to foster basic education are likely to be more effective. Similarly, basic services like healthcare, doctors and hospitals have to pre-exist before ICTs can be utilized to improve the deliver y. For more developed societies, ICTs can play a more effective role in improving the economic status of the poor and disadvantaged segment of the society. Finally, given the paucity of hard data, more micro-level research is needed to assess the impacts of ICTs on the poor: their employment opportunities, their education and skills formation and their overall empowerment within the society. The raw data for these studies may come from the many ICT programs that are now being implemented in many poorer countries. These studies would also guide future implementation of such programs, by avoiding the pitfalls of faulty conceptualization and poor implementation and by building on their strong points. (b) Indirect impact of ICTs Empirical evidence suggests that economic growth is found to be the most effective means to alleviate poverty (see, for example, Pernia and Quibria 2000 and Srinivasan 2001). ICTs can potentially alleviate poverty in signi cant ways if they lead to rapid growth in income and employment. This income growth can occur either through some sectoral production boom (with little or no economy-wide ef ciency spillovers) or through an economy-wide ef ciency gain.11 A sectoral production boom may result from the success in the export of a particular ICT product (for example, software) and may be bereft of any ef ciency effect on the traditional sectors of the economy. On the other hand, a successful across-the-board adoption of ICTs may lead to economy-wide ef ciency gains akin to those in the advanced countries. With respect to the rst possibility, some developing countries have found a niche in the ICT domain for promoting their export and economic growth. One such ICT product is software for India, which has been a signi cant stimulus of economic growth for the economy. The total software exports in India reached US$4 billion in 1999. The Indian IT industr y has grown at a compounded annual growth rate of 40.5 per cent between 1994 and 1999 and constitutes about 1.5 per cent of the economy (NASSCOM–McKinsey 1999). A widely cited recent study by NASSCOM 299


and McKinsey suggests that if India can continue this momentum of growth, the countr y can expect to earn about US$87 billion from export of software by 2008, and employ 2.2 million more workers (above the 280,000 workers in 1999).12 But if these economic projections are realized, software exports may turn out to be the main engine of growth for the economy and hold the key to the future transformation and modernization of the countr y. Such growth is likely to have a salutar y impact on poverty reduction through its various linkage effects in production and consumption. Another area where developing countries are likely to excel because of their putative comparative advantage is IT-enabled services or teletrade. These types of activities cover a broad range of services such as data entr y; transcription or digitalization; correspondence of different types like insurance claim processing; preparation and collation of research materials (i.e. legal or medical); marketing functions using direct mail and e-mail; design and maintenance of websites; publication activities such as compilation of abstracts and typesetting; handling of large volumes of telephone communications with existing or potential customers (call centers); and technical support centers (Ramani 2000; The Asia Foundation 2001). Data processing work is extremely labor-intensive and requires modest education (not much more than the secondary level) and familiarity with English. Many multinational companies have been using offshore services from such diverse countries as India, the Philippines, Sri Lanka, China and the Caribbean. In 1999, such services in India employed about 46,000 people and contributed about half a billion dollars to export earnings. They are expected to contribute about US$17 billion in export earnings in 2008 and generate more than 1 million more jobs. During the 1998–99 period, the majority of this workforce was employed in back-of ce operations (including revenue accounting, data entr y and data conversion). This situation is expected to change in the future as it is projected that the bulk of employment will be generated by activities related to content development (NASSCOM–McKinsey 1999). A few examples of companies involved in teleworking are wholly owned subsidiaries or networked companies of multinational corporations such as CSI Software and ALLTELL India, both located in Mumbai. Subsidiaries of airline companies undertaking backof ce functions can be found at the Santa Cruz Export Processing Zone in Mumbai (Mitter 2000). The Philippines is considered one of the largest producers of IT services, second only to India. Exports of this industr y increased from only US$60 million in 1993 to US$250 million in 1997. In fact, the growth in the exports of IT services during the period was much higher than the growth of the country’s exports of IT products (Austria 2000). Aside from multinational corporations, other organizations like the National Library in Paris had taken advantage of the country’s pool of computer-literate workforce (Ng 1998). 300


There are also a few back-of ce occupations demanding relatively advanced knowledge and skills such as the activities contracted by the Chemical Abstracts journal said to be involving around fty Ph.D. quali ed personnel in Mumbai as well as the typesetting arrangements contracted in India by the publishing houses Macmillan and McGraw-Hill (Ramani 2000). Some minimal skill-enhancement training is likewise required in teleworking, including oral and written communication, customer care, familiarity with accents (in terms of transcription work), and interpretation of legal or medical terminologies, among others. It is expected that with further integration of the global economy and the improvement of the telecommunications infrastructure in developing countries, a large chunk of the business-related data-processing services would move to developing countries. These IT-enabled services, which are growing at a ver y rapid pace, can potentially play a role for the poorer countries in their economic transformation in the post-industrialization era similar to what labor-intensive manufacturing such as textile, garments and footwear did in the earlier round of industrialization in East Asia. The potential could be fully realized if the appropriate regulatory framework is put in place alongside the expansion of infrastructure. There should exist clearly de ned rules covering intellectual property rights, security, privacy and data protection, and regulations on content, which are regarded to be critical for facilitating teletrade within and between countries. Countries in the region such as the Philippines, Thailand and Malaysia were said to have made efforts at addressing these issues (Mitter 2000). Finally, another potential route to enhance growth in developing countries – and thereby reduce poverty – is through a comprehensive adoption of the new ICTs throughout the economy, a strategy of economic leapfrogging. No doubt, the comprehensive adoption of ICTs will help modernize their economies and help accelerate growth if successfully implemented. The US and a number of other advanced economies have apparently succeeded with the help of ICTs in overcoming the ‘speed limits’ set by the historical growth rates trend. While the contribution of ICTs to the growth of these economies is now universally acknowledged, the precise extent and nature of this contribution has been subjected to some contention. In particular, the contribution of ICTs to an economy-wide productivity in the US has been the subject of a good deal of recent empirical studies.13 These productivity studies are fraught with many conceptual and data dif culties. Keeping this caveat in mind, the important empirical nding that emerges from these studies is that the rapid pace of the US economy in the second half of the 1990s was made possible through the rise in labor productivity induced by ICTs.14 In particular, several of these studies note that, for the US economy, IT contributed between 44 and 73 per cent of the acceleration in labor productivity, which is estimated at between 0.7 and 1.5 per cent, in the second half of the 1990s. For the whole economy, total factor 301


productivity (TFP) due to production of new technologies is estimated to have contributed between 0.2 and 0.3 per cent to the increase in productivity growth. These studies nd some spillover TFP effect outside the IT sector with the notable exception of Gordon (2000) (see Table 1 for various productivity estimates for the US economy). While many other advanced economies experienced similar measures of productivity growth, acceleration in labor productivity growth has been most pronounced in the US. However, this growth in the US and elsewhere was made possible through signi cant changes in the skill composition of the labor force, managerial practices as well as the organizational structure of the rms. These changes were able to accommodate the advantageous features in the new technology.15 However, the changes involved a signi cant time lag between the introduction of the new technology and the yields in productivity. It is suggested that developing countries would also experience a similar, even a greater, shift in productivity if they incorporate ICTs across the board in their production structure. How realistic is such an idea? As data on ICT diffusion indicate, the diffusion rates in most poor developing economies remain abysmally low to make such a transition to the newtechnology regime feasible in the immediate future (Quibria and Tschang Table 1 United States: sources of the acceleration in labor-productivity growth, 1974–99 (per cent) Study 1 Jorgenson and Stiroh (2000) 1990–95/ 1995–98 Acceleration in 0.90 labor productivity Of which: Capital deepening 0.30 IT sector 0.20 Other sectors 0.10 Labor quality –0.10 Total factor 0.70 productivity IT sector 0.20 Other sectors 0.50 All other factors ... Memorandum % of acceleration 44 in labor productivity related to IT

Study 2 Oliner and Sichel (2000) 1990–95/ 1995–99

Study 3 Whelan (2000) 1974–95/ 1996–98

Study 4 Council of Economic Advisors (2000) 1973–95/ 1995–99

Study 5 Gordon (2000) 1972–95/ 1995–99

1.00

1.00

1.50

0.70

0.50 0.50 0.00 –0.10 0.70

... 0.50 ... ... ...

0.50 ... ... 0.10 0.90

0.30 ... ... 0.10 0.30

0.20 0.50 ...

0.30 ... 0.30

0.20 0.70 ...

0.30 0.00 0.00

...

...

64

73

Source: IMF (2000).

302


2001). Diffusion would require substantial investments in related physical infrastructures as well as human capital, much beyond the present capacities of many developing countries. Even if such resources were available, the impact would be far from immediate. These economies would need a considerable amount of time to assimilate the technology, reorganize their production structures, recon gure the organizational structure and adjust management practices in line with the new technologies. In the transition period, there are likely to be substantial adjustment costs in terms of production disruptions and labor unemployment. In short, the idea of technological leapfrogging, though tantalizing, would require a radical development strategy that is embedded on the widespread use of ICTs in the economy. However, such a strategy may not be feasible or desirable for all developing countries at various stages of development. 16 It may not be feasible because it may entail changes in skills and organizational structures of these economies much beyond their present capacities. It may not be desirable because many of these activities entail substitution of one medium from another with different implications for labor demand. Many of these substitutions would reduce the demand for unskilled labor that may not be desirable for a country struggling with a large unemployment problem. This is not to denigrate the important role ICTs are likely to play in the future economic transformation and modernization of the poor economies. The process needs to be carefully sequenced with due consideration of their various social, economic and other constraints. 4. C ONC LUDING REMARKS The foregoing discussion suggests that ICTs can be potentially an important instrument of poverty reduction in poor countries. ICTs can directly help improve the welfare of the poor through its many innovative applications in the areas of health, education, dissemination of market information and creation of new employment opportunities. ICTs constitute the new genre of general-purpose technology and can potentially contribute toward improving productivity and economic growth, which will have a bearing on the welfare of the poor. In this regard, two important features of ICTs are worth emphasizing. First, unlike many previous technological innovations, the ICT technology has a ‘leapfrogging’ property. It can enable countries to skip technological stages (Negroponte 1998). Second, ICTs are likely to broaden the geographical scope of national labor markets and contribute toward a more ef cient integration of these markets into a global labor market. While the forces of globalization are rapidly breaking down trade and investment barriers, ICTs are facilitating relocation of service and manufacturing industries more in line with comparative advantage across the world through rapid dissemination of market information 303


as well as the ef cient deliver y of services. This process will gradually bring about a more seamless integration of the global labor markets – including those for unskilled workers – and elimination of absolute poverty. However, the bene ts of the ICT revolution may not be uniform nor automatic across the countries. For the developing countries, success in ICTs depends on their social and physical infrastructure as well as the existing legal and regulatory framework. The countries that have the favorable social and physical infrastructure as well as the legal and regulatory framework – or, the countries that are willing to undertake the necessar y investments as well as the reforms – will bene t more from it. Those that will be reluctant or unable to take the necessar y measures will fall behind. Addressing the above constraints is fundamental not only for the ICT revolution but also for the process of economic development. Unless these constraints are adequately addressed, only investments in computerization and Internet access may be counterproductive. Indeed, these investments may turn out to be a recipe for nancial disasters, given the better use of scarce investible resources elsewhere in the economy.17 It is therefore extremely critical that rather than swayed by the rhetoric and glamour of ICTs, developing countries approach the new technology adoption in a careful, sequenced manner. Asian Development Bank Singapore Management University Philippine Institute for Development Studies ACKNOW LEDGEMENTS An earlier version of this paper was presented at the High Level Symposium on Alternative Development Paradigms and Poverty Reduction at the ADB Institute, Tokyo, in December 2000, as well as at a number of other seminars in the region. It has bene ted immensely from the comments of participants of these seminars. In particular, we would like to acknowledge, without implicating, the helpful comments and suggestions of Anne Krueger, Kirit Parikh and Muzzammel Huq. Also acknowledged with gratitude are helpful discussions with Ramesh Adhikari, Liu Li-Gang, Heather Montgomer y, Terry Morrison, Sang-Woo Nam, Arvind Panagariya, Steven Parker and Meredith Woo-Cummings. However, we are most grateful to T. N. Srinivasan and M. Yoshitomi for their help in conceptualizing the paper as well as valuable comments, and to Muhammad Yunus for his encouragement. The research assistance of M. Arif Al-Mahmood, Mathurot Chuladul and Thuy Thu Lee is gratefully acknowledged. 304


NOTES 1 The case studies are discussed in Quibria and Tschang (2001). 2 The term ‘leading sector’ owes to Schumpeter (1939). Leading sectors experience rapid productivity growth that leads to concomitant shifts in production and consumption, but such effects are often limited to a small segment of the economy. Examples of such leading sectors include railroads in the 1870s, organic chemicals in the 1890s, automobiles in the 1920s, televisions in the 1950s and airplanes in the 1960s. 3 An important advantage of CAD/CAM over conventional designs is its ability to transfer information regarding designs easily, rapidly and accurately across organizational and national boundaries without distortions, something that is not feasible in conventional designs. The use of CAD/CAM has become so pervasive that the workforces in small and medium enterprises in Singapore had to be retrained in three-dimensional CAD design technology so as to remain relevant to the needs of multinational enterprises. 4 The literature exploring the interlinkages between ICTs and poverty is a sparse one. The previous efforts in this regard include Mansell and Wehn (1998), Talero and Gaudette (1995) and World Bank (1998). However, none of the above provides a systematic analysis of how ICTs can provide information services that affect the poor at the project level nor do they explore their macroeconomic implications. 5 The full economic bene ts of such innovative projects need to be systematically evaluated. However, such an exercise is not simple as many of the bene ts are not easily quanti ed. These include aspects of social bene ts that accrue from the learning of various analytical and other skills, improved access to information that enhances the quality of life for people (e.g. the access to information about crops or training programs), and the development of an ‘IT culture.’ 6 However, experience suggests that even uneducated persons can be induced to learn the use of modern tools if they nd suf cient bene ts in them. The rapid spread of electronic pocket calculators among uneducated shopkeepers in many developing countries and the rising demand of cellphones among the illiterate women in Bangladesh are cases in point. 7 It is presumed that where illiteracy predominates, literate users would serve as bridges to the rest of the user group. This is indeed the underlying assumption behind the Development of Women and Children in Rural Area (DWCRA) programs in Andhra Pradesh. Some projects such as the MSSRF Pondicherry use secondary school-educated volunteer staff to assist users in their information centers. However, to undertake more sophisticated higher ‘value-added’ employment, greater educational preparation becomes necessar y. Thus, for positions in IT coding and software development occupations, vocational and university-level certi cations become essential. 8 This Internet-based information system, which connects vocational institutions dispersed over many thousand islands of the country, facilitates exchange of information on curriculum and website development as well as helps transmit academic concerns government administrators. 9 In Andhra Pradesh, how these efforts at e-government will affect the poor will depend on the quality of the information provided by the system as well as the success with which the government can eliminate red tape and corruption in the system. In addition, the effectiveness of electronic governance (as well as any other applications) will improve signi cantly if the poor had adequate educational attainments.

305


10 A recent survey in Andhra Pradesh, which compiled the perceived level of corruption in various government agencies, found the electricity board the worst. Incidentally, this was also the rst agency whose data were computerized. The information was supplied by the of ce of the Special Secretar y for IT, Andhra Pradesh. 11 ICTs have been classi ed as ‘general purpose technologies (GPTs).’ These GPTs are a form of drastic technological innovations that are used in a wide range of sectors that dramatically change their existing modes of operations (Helpman 1998). 12 These projections are predicated on a number of optimistic assumptions such as unconstrained availability of skilled labor (requiring massive reforms of the educational system from the basic to the highest research university level) existence of corporate capabilities for imaginative yet risky projects and a strong domestic user base. In addition, the traditional conditions for growth, such as good infrastructure, social and political stability, should satisfy. 13 These productivity studies were largely spurred by Nobel Laureate Robert Solow, who in a 1987 book review, famously stated: ‘You can see the computer age everywhere but in the productivity statistics.’ The failure of massive investment in information technology to boost productivity growth has now come to be known as the productivity paradox. 14 The recent work by Paul David (1999) shows that productivity growth did not accelerate until forty years after the introduction of electric power in the early 1880s. It was not until 1920 that the adoption rate for electricity reached half of the US industrial machinery. Industries required time to reorganize their factories around electric power to reap the ef ciency gains. By contrast, half of the population in the US already uses a personal computer, fty years after the invention of computers and only thirty years after the invention of the microprocessor. The Internet recently achieved a 50 per cent diffusion rate in the US, only thirty years after it was invented and seven years after it was launched commercially in 1993. 15 There is a lively debate in the US whether the ‘new economy,’ embodied in the ICT innovations, measures up to a second industrial revolution that encompasses electricity, automobile and air transport, radios, motion pictures and indoor plumbing. On the one side of the spectrum are economists like Gordon (2000) who thinks that these ICT innovations ‘fail the hurdle test as a Great Invention.’ He goes on to argue: Internet sur ng may be fun, but it represents a far smaller increment in the standard of living than achieved by the extension of day into night achieved by electric light, the revolution in factor y ef ciency achieved by the electric motor, the exibility and freedom achieved by the automobile, the saving of time and shrinking of the globe achieved by the airplane, the new materials achieved by the chemical industry, the rst sense of live twoway communication achieved by the telephone, the arrival of live news and entertainment into the family parlor achieved by radio and then television, and the enormous improvements in life expectancy, health, and comfort achieved by urban sanitation and indoor plumbing. On the other side are such economists as Cohen et al. (2000: 66) who posit: modern information technologies . . . magnify and focus our brain power in a way analogous to the way the tools of the Industrial Revolution magni ed and focused muscle power. . . . Information technology is the most powerful tool-set yet: in addition to enabling wholly new things (e.g.,

306


bio-technology, wireless communication), information technology signi cantly enhances the power and nesse of all previous tools. 16 In India, anecdotal evidence suggests that the operations of certain industries, such as nancial services, automobile manufacturing and textiles, have experienced productivity gains due to the application of ICTs. Yet labor productivity continues to remain low in a large majority of rms in traditional manufacturing where the use of new technology is virtually non-existent. 17 A recent study by Pohjola (2000) investigated the relationship between IT investments and growth in thirty-nine countries over the period 1980–95. It found that, whereas such investments boosted growth in developed economies, they were not so bene cial in developing countries that lacked complementary policies.

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