‘Internet gap stifles economic growth in developing countries’

Internetstat-CopyLIMITED access to broadband Internet is crippling the spread of information and communication technologies (ICTs) in the developing world and widening the already significant digital divide, a report has warned.

Besides, the report discovered that this Internet gap deprives developing country businesses of economic development opportunities such as call centres and offshore offices.

Indeed, a study of small and medium enterprises (SMEs) around the world found that one of the main reasons they underperform – especially in poorer countries – is that they make too little use of the Internet.

For instance, the report discovered that SMEs in Brazil are three times less productive than big firms there, while those in India are 10 times less productive.

The report published by the International Trade Centre (ITC), a joint venture of the World Trade Organisation and the United Nations, aimed to find out why.

It examined 38 indicators to gauge the national and business environment and firms’ capacity to “compete, connect and change”. They included such measures as managerial experience, level of training, and existence of bank accounts and audited financial statements.

In Indonesia, only 9.4 per cent of small firms were using e-mail, and only 4.2 per cent had their own Web site. In Bangladesh, the figures were 12 per cent and six per cent respectively.

According to ITC’s chief economist, Marion Jansen, “Indonesia is surprising; it’s one of the few countries where even large firms underperform in the use of e-mail.

“Bangladesh was trying to establish an export position in the IT business, but its small firms were far behind in the use of Web sites and e-mails ask itself whether it’s sustainable to have an export position where the domestic market doesn’t seem to be well developed.

“As well as a lack of connectivity, many small firms in the poorest countries were held back by their access to finance, and in south Asia and Africa, they scored poorly on international quality certification as well as on low use of e-mail.”

The report noted that SMEs account for nearly 70 per cent of employment. They employ disproportionate numbers of women and young people and at lower wages than their larger rivals, so improving their productivity is seen as a route to economic development.

According to the study, Latin America emerged as the most entrepreneurial region, with more than 10 per cent of young people starting up their own businesses in many countries, but weak national business environments hampered their ambitions.

ITC Executive Director, Arancha Gonzalez, said the study – which will be published yearly – was intended as practical tool for governments and companies to improve their performance.

“The analysis suggests there is considerable potential for SMEs to catch up,” the report said.

Nonetheless, a Mckinsey report noted that the Internet is changing the way people work, socialize, create and share information, and organize the flow of people, ideas, and things around the globe. Yet the magnitude of this transformation is still underappreciated.

The report disclosed that the Internet accounted for 21 per cent of the GDP growth in mature economies over the past five years. In that time, it went from a few thousand students accessing Facebook to more than 800 million users around the world, including many leading firms, who regularly update their pages and share content.

While large enterprises and national economies have reaped major benefits from this technological revolution, individual consumers and small, upstart entrepreneurs need to the among the greatest beneficiaries from the Internet’s empowering influence.

“If Internet were a sector, it would have a greater weight in GDP than agriculture or utilities”, it observed.

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