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Global Information Technology Report Reinforces the Link between ICT and Competitiveness

Related Website World Economic Forum

March 9, 2005

By Jason Deign, News@Cisco

A new report adds further weight to the belief that information and communications technology (ICT) adoption and use is linked to national competitiveness and productivity.

The Global Information and Technology Report 2004-2005, sponsored by Cisco Systems® and written by the World Economic Forum (WEF) and the INSEAD business school, has found a tight correlation between country indices for 'Networked Readiness' and global competitiveness.

The report states that a country's Networked Readiness Index (NRI), defined as "the degree of preparation of a nation or community to participate in and benefit from ICT developments", "is inextricably tied up with the Global Competitiveness of a nation."

Furthermore, since a country's Global Competitiveness Index (GCI) stage is "tightly wrapped around the income per capita of a nation, one would be led to conclude that the NRI is also strongly related to GDP (gross domestic product) per capita."

Specifically, the study finds that: "The impact of GDP seems to be very high at low GDP values, and the NRI score increases rapidly with small increases in GDP.

"Around a GDP per capita of US$6,000 to US$8,000 the curve tapers off and other factors become relevant."

"There is a strong correlation between ICT spending and productivity, which is demonstrated in this research as a strong correlation between the rankings and global competitiveness," says John Chambers, President and CEO of Cisco Systems.

"While ICT usage is a measure of the present, ICT readiness is perhaps a measure of the future. Proactive policies and investments by all levels of government such as encouraging broadband network infrastructures, the education and literacy of citizens and ongoing skills training are all components of the readiness measurement and play an important role in building the foundations of a country's productivity," he adds.

The Global Information and Technology Report is now in its fourth year and currently ranks 104 countries across the world in terms of NRI, which is based on a framework covering each nation's environment for and readiness and usage of ICT, broken down by a number of sub-indices.

The 2004-2005 analysis shows the US, previously the highest-ranking country in the world, being edged out of the top slot by Singapore and also overtaken by no less than three Nordic countries: Iceland, Finland and Denmark.

These results are not surprising given recent trends. Singapore was already among the top 10 NRI-ranking countries in the first Global Information and Technology Report, in 2002. It rose to number three in 2003 and to second place in 2004.

"Singapore is an excellent example of a country that has been able to make in a relatively short period of time enormous progress in putting ICT at the service of improved living standards," says report co-editor Augusto Lopez-Claros, director of the WEF's Global Competitiveness Programme.

The Nordic countries have also regularly occupied top-10 positions in the ranking since the study began. All five nations that make up the region are among this year's top 15, with Sweden right behind the US at number six.

Hong Kong, Japan, Switzerland and Canada complete this year's top 10, with the first two as entries from higher up the ranking in previous years. Results further down the table, however, throw up some interesting candidates for the ICT and productivity leaders of tomorrow.

Estonia, for example, leads a number of well-placed eastern and central European states at number 25, followed closely by Malta at 28 and Slovenia at 32.

These are all ahead of Russia (at 62, up one from last year) and all the countries of Africa (led by South Africa at 34) and South America (headed by Chile at 35).

In Asia, India (39) and China (41) both lag behind Taiwan (15), Malaysia (27) and Thailand (36), but have improved their ranking positions by six and 10 places respectively over the previous year.

While these results might be helpful in predicting winners and losers in the global ICT and productivity stakes, of perhaps greater value is the link between GCI and different components of NRI - and what this means for individual countries.

Douglas Frosst, senior manager of Executive Thought Leadership at Cisco, says: "Based on GCI and NRI correlations, the top three items a country should work on to improve its competitiveness are business usage of ICT, market environment, and political and regulatory environment."

Countries that rank highest in one or more of these areas have emerged as ICT and competitive leaders.

Thus, Japan, Germany and Sweden all rank highest in business usage. Finland, the US and Singapore have the most propitious market environment for ICT. And Denmark, the UK and Singapore offer the best political and regulatory environments.

Similarly Chile, South America's NRI leader, has business usage, market environment and political/regulatory environment ratings that are well above the index average.

The Czech Republic, in contrast, has relatively low ratings for environmental characteristics, implying that an improvement in the market and political/regulatory environment could have a profound impact on the competitiveness of the country.

Other components of NRI, such as infrastructure, business readiness and government and individual readiness and usage of ICT, can similarly be used to predict where investment could have the greatest impact on a country's competitiveness.

Hence in Tunisia, environmental scores are consistent with the country's overall rank; government and individual readiness are remarkable; but technology usage, particularly amongst individuals, is low, meaning an improvement in this area could have the biggest impact.

Jason Deign is a freelance journalist located in Barcelona, Spain.

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