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15 November 2006

Information Economy Report 2006 says cell phone use still growing rapidly in developing world, but business use of Internet remains scarce, putting firms at a competitive disadvantage with businesses in industrialized countries

The contents of this press release and the related Report must not be quoted or
summarized in the print, broadcast or electronic
media before 16 November 2006, 17:00 GMT

Broadband is becoming so vital for businesses and offers such competitive advantages that it is being compared to utilities such as water and electricity, the Information Economy Report 2006 (1) contends -- and that is disturbing news for developing countries, where broadband access is scarce and the basics needed to provide it at reasonable cost are often lacking.

The report, or Information Economy Report, says there are large differences between developed countries, where broadband is growing rapidly, and developing countries, where dial-up Internet connections are still prevalent. when there are any connections at all. In rich countries, broadband subscribers increased by almost 15% in the last half of 2005, reaching 158 million. Business broadband connectivity grew most significantly -- in the European Union, for example, from 53% of enterprises in 2004 to 63% in 2005. Broadband enables companies to engage in more sophisticated e-business processes and to deliver a greater range of products and services through the Internet, thus maximizing the benefits of information and communication technology (ICT). The use of broadband directly increases competitiveness and productivity, the report says -- and that, in turn, has an impact on macroeconomic growth. It is estimated that broadband can contribute hundreds of billions of dollars a year to the Gross Domestic Products (GDPs) of developed countries over the next few years.

The growth of broadband is largely due to competition and declining prices, but it also depends on available infrastructure -- and the report notes that many developing countries, because of the lack of economies of scale, have low incentive to expand broadband infrastructure outside urban areas. Wireless technology and satellites can help circumvent the cost of infrastructure for sparsely populated, remote or rural areas. Governments have an important role to play in improving access to broadband through infrastructure and policy, the report says -- policy can either encourage or be a disincentive to competition, and thus have an impact on availability and prices.

Availability of broadband in developing countries is difficult to estimate; only 71 of 151 nations submitted data on the subject. But 48 of those 71 said broadband penetration rates were under 1%. Of that group, more than half of broadband subscribers were in mainland China, and even China´s broadband penetration rate was only 2.9%. The highest penetration rates among developing countries providing data were in Asia, led by the Republic of Korea at 25.5%.

Although there is virtually no data on the value of online sales in the developing world, it is apparent that e-commerce accounts for a very small percentage of the overall sales of domestic firms there, and other e-business activities such as extranet usage, e-government, e-learning and remote work, are almost non-existent. Still, some developing countries show a high rate of use of e-banking, such as Brazil (75% of enterprises, excluding micro-enterprises used the Internet for banking in 2005) and Morocco (34.9%).

E-commerce continues to grow rapidly in developed countries. In 2004, the highest proportion was in business-to-business trade (93% of all e-commerce in the U.S., for example). Growth rates have averaged 6-10% in recent years (manufacturing and wholesale, respectively).

Mobile phones continue to be a technology that "fits" poor countries, and such phones are the only form of ICT in which developing countries have surpassed developed countries in the number of users (1.2 billion versus 800 million). Nonetheless penetration rates remain lower in developing economies. In some industrialized nations, the penetration rate is over 100%, while in several dozen developing countries it is under 10%. Schemes to make mobile telephony more affordable account for much of the growth in developing countries, the report notes. For example, in 2004 almost 88% of mobile subscribers in Africa used prepaid services that were tailored to low-income markets.

Among other trends identified in the Information Economy Report, ICT sector value-added and employment grew in developed countries in 2003, and the report contends that this increasing demand and supply in the industrialized world opens up new prospects for business partners in developing nations. It recommends that industrial and trade policies there support the creation of business opportunities in ICT-related industries. The report adds that enterprises, wherever they are located, that fail to adapt to the structural changes associated with globalization and intensified ICT use may be marginalized as they lose out to the competitive advantages offered by technology and the economies of scale that are associated with larger markets.

Computer and information exports have become the most dynamic ICT-enabled service sector, particularly in the developing economies. The report notes that between 1995 and 2004, computer and information services exports grew six times faster than total services exports. The share of developing countries in this export sector increased from 4 per cent in 1995 to 20 per cent in 2003, with the highest growth occurring after 2000.

In general, ICT access and use can contribute to productivity growth in both developed and developing countries, the report says, although countries that already have reached a certain threshold level of ICT uptake and education seem to benefit most from new technologies. Most research on the impact of ICTs at the firm level reveal positive results in performance and increased market share, especially if complemented by organizational changes, the upgrading of skills, and innovation.

In addition to reviewing trends in ICT worldwide, the Information Economy Report 2006 explores such topics as the effect of ICT on the oil business (see UNCTAD/PRESS/PR/2006/041) and the use of ICT for poverty reduction in developing countries.

Downloads [PDF]:
Full Report [PDF, 346pp., 12576KB]
Overview [PDF, 13pp., 276KB] Also available in:  Arabic  Chinese  French  Russian  Spanish
Preface, Acknowledgements & Overview [PDF, 32pp., 382KB]
Chapter 1 part a [PDF, 27pp., 1332KB]
Chapter 1 part b [PDF, 21pp., 2755KB]
Chapter 1 part c [PDF, 89pp., 1009KB]
Chapter 2 [PDF, 37pp., 1466KB]
Chapter 3 [PDF, 37pp., 3316KB]
Chapter 4 [PDF, 27pp., 1240KB]
Chapter 5 [PDF, 21pp., 1153KB]
Chapter 6 [PDF, 25pp., 391KB]
Chapter 7 [PDF, 25pp., 1380KB]
Chapter 8 [PDF, 17pp., 302KB]


1. The Information Economy Report 2006 (Sales No. E.06.II.D.8, ISBN 92-1-112700-9) may be obtained from UN sales offices at the addresses below or from UN sales agents in many countries. Price US$ 50.00, and at a special price of US$ 18.00 in developing countries, South-East Europe and CIS countries. Please send orders or enquiries for Europe, Africa and Western Asia to United Nations Publication/Sales Section, Palais des Nations, CH-1211 Geneva 10, Switzerland, fax: +41 22 917 0027, e-mail: unpubli@un.org ; and for the Americas and Eastern Asia, to United Nations Publications, Two UN Plaza, DC2-853, New York, NY 10017, USA, tel: +1 212 963 8302 or +1 800 253 9646, fax: +1 212 963 3489, e-mail: publications@un.org . Internet: http://www.un.org/publications

For more information, please contact:
UNCTAD Press Office
T: +41 22 917 5828
E: unctadpress@unctad.org
Web: www.unctad.org/press


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