ICT Development Strategies [1 ed.] 9783954896790, 9783954896795

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Thi Luc Hoa Pham

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ICT Development Strategies

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Pham, Thi Luc Hoa: ICT Development Strategies. Hamburg, Anchor Academic Publishing 2016 Buch-ISBN: 978-3-95489-179-5 PDF-eBook-ISBN: 978-3-95489-679-0 Druck/Herstellung: Anchor Academic Publishing, Hamburg, 2016 Bibliografische Information der Deutschen Nationalbibliothek: Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. Bibliographical Information of the German National Library: The German National Library lists this publication in the German National Bibliography. Detailed bibliographic data can be found at: http://dnb.d-nb.de

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CONTENTS 1

Introduction ..................................................................................................................... 13

2

The Networked World .................................................................................................... 15

3

2.1

ICT Development ..................................................................................................... 15

2.2

Benefits of The ICT ................................................................................................. 18

ICT Development in South Korea, China and Vietnam ............................................. 22 3.1

3.1.1

National Background of Vietnam ...................................................................... 22

3.1.2

ICT Development in Vietnam ............................................................................ 23

3.1.3

SWOT Analysis for Vietnam ............................................................................. 28

3.2

National Background of China ........................................................................... 31

3.2.2

ICT Development in China ................................................................................ 32

3.2.3

Drivers of Development and Market Challenges ............................................... 37

Economic Dynamic and ICT Development in South Korea ................................ 42

3.3.1

Economic Dynamic of South Korea................................................................... 42

3.3.2

ICT Infrastructure of South Korea ..................................................................... 43

3.3.3

ICT Industry of South Korea .............................................................................. 44

3.3.4

Policies in ICT development of South Korea..................................................... 47

3.4

Comparison Between South Korea, China and Vietnam ................................... 55

ICT Performance Measurement Indexes...................................................................... 58 4.1

Digital Economy Rankings ..................................................................................... 58

4.1.1

Introduction to Digital Economy Rankings ....................................................... 58

4.1.2

Calculation Method ............................................................................................ 59

4.1.3

Digital Economy Index 2010 ............................................................................. 61

4.1.4

Critical Evaluation.............................................................................................. 61

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Economic Dynamics and ICT Development in China .......................................... 31

3.2.1

3.3

4

Economic Dynamics and ICT Development in Vietnam ..................................... 22

Networked Readiness Index ................................................................................... 62

4.2.1

Introduction to Networked Readiness Index ...................................................... 62

4.2.2

Networked Readiness Index 2010-2011 ............................................................ 63

4.2.3

Critical Evaluation.............................................................................................. 64

4.3

ICT Development Index .......................................................................................... 65

4.3.1

Introduction to ICT Development Index ............................................................ 65

4.3.2

ICT Development Index 2010 ............................................................................ 66

4.3.3 5

ICT Development in Selected Asia Countries .............................................................. 68 5.1

7

Cluster Building ....................................................................................................... 69

5.1.1

Countries Classification According to Southeast Asia Competitive Initiative .. 69

5.1.2

Countries Classification According to the World Bank ..................................... 70

5.1.3

Countries Classification According to Author Based on ICT Development ..... 72

5.2 6

Critical evaluation .............................................................................................. 68

Correlation Analysis ................................................................................................ 81

Political Options .............................................................................................................. 84 6.1

Steps for Accelerating E-economy ......................................................................... 85

6.2

General Lessons for Developing Countries ........................................................... 88

6.2.1

Computer and Internet User Penetration Discrepancy ....................................... 89

6.2.2

Networking of ASEAN ...................................................................................... 89

6.2.3

Learning from Successful Countries .................................................................. 90

6.3

Policy Recommendations for Vietnam .................................................................. 91

6.4

Policy Recommendations for China ....................................................................... 93

Conclusion ....................................................................................................................... 95

References ............................................................................................................................... 97 Appendix 1. Vietnam............................................................................................................ 105 Appendix 2. China ................................................................................................................ 106 Appendix 3. South Korea..................................................................................................... 107 Appendix 4. ICT data of 12 countries ................................................................................ 109

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LIST OF ACRONYMS 3G:

Third-generation

APEC:

Asian Pacific Economic Cooperation

ASEAN:

Association of Southeast Asian Nations

BCN:

Broadband Convergence Network

CAGR:

Compound Annual Growth Rate

CCP:

Chinese Communist Party

CID:

Center for International Development

CNIC:

China Network Information Center

CRM:

Customer Relationship Management

DER:

Digital Economy Rankings

EBS:

Educational Broadcast System

EIU:

European Information Union

ERI:

E-Readiness Index

ERP:

Enterprise Resource Planning

FDI:

Foreign direct investment

FWB:

Fixed (wired) broadband

FWBS:

Fixed (wired) broadband subscription

GAPP:

General Administration of Press and Publication

GDP:

Gross Domestic Product

GNI:

Gross National Income

ICT:

Information and Communication Technology

IDI:

ICT Development Index

IETF:

Internet Engineering Task Force

IPR:

Intellectual Property Right

ISPs:

Internet Service Providers

ITIO:

Information Technology and Innovation Foundation

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ITU:

International Telecommunication Union

KADO:

South Korea Agency for Digital Opportunity

KII:

Korean Information Infrastructure Initiative

KISA:

Korea Information Security Agency

KONEPS:

Korea Online E-Procurement System

KOREAN:

Korea Advances Research Network

KOSEF:

Korea Science & Engineering Foundation

KRF:

Korea Research Foundation

M2M:

Machine to Machine

MB:

Mobile broadband

MBS:

Mobile broadband subscription

MEST:

Ministry of Education, Science and Technology

MIIT:

Ministry of Industry and Information Technology

MKE:

Ministry of Knowledge Economy

MNC:

Multinational Corporation

NDRC:

National Development and Reform Commission

NGHCN:

Next Generation high Credibility Network

NIA:

National Information Society Agency

NIDA:

National Internet Development Agency

NRI:

Networked Readiness Index

NSTC:

National S&T Council

PCT:

Patent Cooperation Treaty

PPP:

Purchasing Power Parity

S&T:

Science and Technology

SACI:

Southeast Asia Competitive Initiative

SCM:

Supply Chain Management

SK:

South Korea

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UNDESA:

United Nations Department of Economic and Social Affairs

USAID:

U.S. Agency for International Development

VNCI:

Vietnam Competitiveness Initiative

WCIT:

World Congress Information Technology

WIPO:

World Intellectual Property Organization

WTO:

World Trade Organization

LIST OF TABLES

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Table 1: Global adoption trend forecast ................................................................................... 16 Table 2: International Internet Bandwidth (bit/s per user), by region, 2005-2010 ................. 17 Table 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011.................. 23 Table 4: Vietnam´s IT Industry revenue .................................................................................. 24 Table 5: Vietnam´s Education Information .............................................................................. 27 Table 6: Total score: Global Service Locations - comparing Asia .......................................... 28 Table 7: Comparing Asia: People Skills and Availability Scores 2009 ................................... 29 Table 8: China's ICT market 2010 ........................................................................................... 32 Table 9: China´s ICT software industry structure .................................................................... 33 Table 10: China´s the regional software market performance in 2009 .................................... 34 Table 11: Ease of doing business rankings ............................................................................. 40 Table 12: South Korea´s ICT performance ............................................................................. 43 Table 13: South Korea´s ICT export ....................................................................................... 45 Table 14: South Korea´s Information Technology Sector ...................................................... 45 Table 15: South Korea´s Informatization Master Plan 1996-2015 ......................................... 47 Table 16: Trend of R&D expenditure and R&D percentage of GDP (100 million won, %) ... 53 Table 17: Mobile broadband penetration 1998-2009 in % ..................................................... 53 Table 18: Vietnam, China and South Korea at glance ............................................................. 55 Table 19: An example of calculation E-readiness 2003 .......................................................... 60 Table 20: ICI changes, 2008-2010 ........................................................................................... 66 Table 21: Most dynamic countries (top 5)-changes between IDI 2010 and 2008 ................... 67 Table 22: Top economies with the greastes change 2008-2010 in the “Access sub-index” .... 67 Table 23: ICT in ASIA Cluster building of Southeast Asia Competitive Initiative (SACI) ... 70 Table 24: ICT Indexes of 12 countries ..................................................................................... 73 Table 25: Penetration range of 3 clusters ................................................................................ 78 Table 26: Correlation between ICT indexes, ICT indicators and GNI per capita ................... 81 Table 27: Correlation ICT indices and GDP growth rate......................................................... 83 Table 28: DigiWorld markets by region ................................................................................. 90

LIST OF FIGURES

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Figure 1: Global ICT Developments, 2001-2011..................................................................... 15 Figure 2: Trends of Top 10 ICT firm´s revenues globally, 2000-2009 (Index 2000=100)...... 18 Figure 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011 ................ 21 Figure 4: Vietnam´s ICT Human Resource (2007) .................................................................. 27 Figure 5: SWOT analysis ........................................................................................................ 42 Figure 6: Development of the mobile broadband market in South Korea .............................. 53 Figure 7: Vietnam, China, South Korea in Comparison .......................................................... 57 Figure 8: NRI Construction ..................................................................................................... 63 Figure 9: ICT Development Index´s construction ................................................................... 65 Figure 10: IDI and GNI per capita, PPP, 2009......................................................................... 71 Figure 11: Comparison some ICT indicators of 12 countries 2010-2011 ................................ 74 Figure 12: Internet users and fixed broadband internet subscription rate of 12 countries .......... 2000-2009 ............................................................................................................. 75 Figure 13: Affordability: Sub-basket /GNI per capita of 12 countries in comparison ............. 76 Figure 14: Relative change % in 2010-2011 of fixed telephone sub-basket/GNI per ca ......... 77 Figure 15: Broadband speed of 12 countries in comparison ................................................... 80 Figure 16: ICT indexes and GNI per capita in Cluster analysis............................................... 82 Figure 17: GNI per capita, active mobile-broadband subscriptions per 100 inhabitants (2010) ................................................................................................................................................. 83

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Introduction With the growing speed of internet, wide spread of smart phones, the gaining importance of wireless data transfer, all life areas and all industries are affected gravely by information and technology. Not just in economy, but also in other basic areas such as government and education, the using of computers, internet is no longer strange. The ICT development will not stop at where it is right now. Instead, it is improving faster than we have forecasted in the last decade. Considering the movement of the ICT industry particularly, we can observe a lot of milestones achieved in the computer science, broadband speed and wireless telephony. However, the developed countries are better and earlier equipped with technology than the developing countries or new-industrialized countries. Since the internet was first invented in USA, Canada and Europe followed and joined the growing process. After a decade, internet now reaches the Asian region as well as African countries intensively while USA, Canada and Europe are focusing newer inventions. Within the Asian region it exists considerably another technological gap among countries. The countries with higher income such as Japan, Singapore, South Korea has succeeded in implementing ICT in all social and economic areas. The rest of the countries, including China, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Cambodia, are far behind in information technology. Nevertheless, it´s necessary for all nations, weather developed or developing, to keep on nurturing ICT development to be a part of connected world. The question is how a nation can successfully adopt ICT and benefit from all advantages at best. Unfortunately, there is no common guideline for all countries. Without identifying specific factors of each country and a lot of effort made by government, no country can achieve high ICT performance in the long run. The purpose of this paper is three-fold: To identify the characteristics and political options of a country, that would affect the success of its ICT adoption. To identify clusters of nations upon the international ICT indices and GNI per capita

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To provide an overall guideline that incorporates these nations toward developing higher ICT indices. This paper shows income level and social background can play very important roles in country´s ICT development. Within Asian region, South Korea represents the developed group, China and Vietnam characterize the developing group. China and Vietnam have similar political structure but the first is much bigger than the latter. Therefore, ICT implementation is different between these 2 countries. This paper is organized as follow, first, short overviews of ICT development as well as the advantages of ICT. Second, 3 countries (South Korea, China and Vietnam) are described in details in both national characteristics and ICT performance. In this section, the ICT industry and development of each country are analyzed in terms of what they have done to adopt ICT as well as how much progress has been made. In section 4, the information about popular ICT ranking indices are given. The three chosen indices are Networked Readiness Index, Digital Economy Ranking and ICT Development

13

Index. The empirical research of cluster building for 12 selected countries is presented in Section 5. In the final section, the guidelines for better ICT adoption are presented. In particularly, Vietnam and China are discussed in more details and their political recommendation is drawn.

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The data used in this paper are mostly from World Bank, Information Technology Union. The indicators and indexes provided are for 2010 or 2011. Because the crisis from 2007-2009 could affect negatively in the world economy and ICT particularly, GNI per capita and GDP growth rate of 2010 present relatively better research result.

14

The Neetworked World W The papper begins with w global iinformationn of ICT devvelopment iin different aspects succh as history of internet, actual statuus of broadbband penetraation and innternet userss. In the nex xt part, the advaantages andd importancee of ICT in social, econnomy and cculture will bbe described. The developpment of devveloping annd developeed countries will be gennerally comppared. 1.1

I ICT Develoopment

Per 100 inhabitants

The devvelopment of o informattion and coommunicatioon technoloogy began just j over 10 00 years ago in the t 19th cenntury. The fi first digital electronic e ccomputer apppeared in 1946. In com mparison with raddio and TV V, computerr technologgy was inveented later. The inventtion of high h performance computer c leeads to the productionn of softwarre for its opperations annd hardwarre for its basic sttructure. Laater, databaase systemss and serviices came. These fouur sections together created an ICT inddustry. Celluular mobile and the Inteernet were tthe biggest revolution in 1990s 3 years. and alsoo the most influential technologiees in ICT eeven with a short histoory of just 30 Startingg with a few w subscribeers in the western w couuntries in 1985, 1 the tootal numberr of cell phone subscribers s w worldwide by 2011 haad reached 885.7 per 1000 inhabitantts. The Inteernet was originatted in the U.S. U for defeense purposse. Now this technologgy is used for fo civilian purposes p 1 and it ggrows very fast. Figuure 1 depictts the actuaal developm ment of ICT T in the wo orld with rapidly increasing numbers n off mobile celllular subscrriptions andd internet users. 100 90 80 70 60 50 40 30 20 10 0

Mobile--cellular telepho one subscriiptions Individu uals using th he Internet Fixed-te elephone subscriiptions

2001 2002 200 03 2004 2005 2006 2007 2008 20 009 2010 2011

Active mobilem broadband subscriiptions

Source: IT TU World Teleccommunicationn/ ICT Indicatorrs database

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Figure 1: Global IC CT Developpments, 20001-2011 m lar subscripptions reachhed almost 6 billion byy end 2011, correspond ding to a Total mobile-cellul 2 global penetration p of 86%. T The growth was w driven bby developiing countriees, which acccounted for morre than 80% % of the 6660 million new n mobilee cellular suubscriptionss added in 2011. 2 In mobile broadband (MB), by end 2011, there weree more thann 1 billionn mobile brroadband S) worldwidde and 2.3 billion b peopple were onlline. MB haas become the t most subscripption (MBS dynamicc ICT serviice, with 400% growth rate in 20111. By end 2011, therre were 590 0 million fixed (w wired) broaadband subbscriptions (FWBS) w worldwide. The FWB BS grew sllower in developped countriees, with 5% % increase,, than in ddeveloping ccountries, with w 18% in i 2011. While 70% 7 of the total t househholds in the developed countries hhad internet access, the rate was 1 2

Zhu G. (2005) ITU (20012)

15

only 20% of in the developing countries, with some exceptions such as Malaysia (61%) and Lebanon (62%).3 The increasingly powerful ICTs have fundamentally changed the nature of global relationships, sources of competitive advantages and opportunities for economic and social development.4 Technologies such as the Internet, personal computer and wireless telephony have turned the globe into an interconnected network of individuals, organizations, institutions, firms. Communicating and interacting with each other can be done through a variety of channels, which have never existed before. It resulted in a world of virtual network, and every developed or developing country has the potential to join in this network. To fully understand the adoption trends of ICT, it is important to assess two main factors that significantly impact the penetration rates of all the services. They are: -the growing number of users -the increasing number of devices and machine-to-machine (M2M) 5 According to the Cisco forecasts for Service adoption over the period of 2011-2016, the total number of global devices and connections (12.9% CAGR) will grow faster than the global population (1.1% CAGR), with CARG is the Compound Annual Growth Rate. 6 Table 1 shows the current views of global network users and their devices and connections. 2011 (in billion people)

2016 (in billion people)

CAGR (in %)

Population

7.1

7.5

1.1

Residential internet users with fixed internet access Mobile consumers

1.7

2.3

5.4

3.7

4.5

4.3

Business internet users

1.6

2.3

8.4

Business mobile users

0.483

0.569

3.3

Source: Cisco “Cisco VNI Service Adoption Forecast, 2011-2016”

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Table 1: Global adoption trend forecast The focus of ICT debate and discussion is no longer just on the mobile cellular and the internet revolution, but is moving to the need for broadband internet access. Policy makers are trying to make it widely available, affordable and especially as high-speed as possible. Nowadays the discussion is focused on an Internet connection that provides the user a minimum downstream speed of 256 Kbit/s. While second-generation (2G) mobile-cellular services have been identified as a major development enabler, the potential of broadband Internet (defined as a 265 Kbit/s connection to the Internet) could go further and achieve the Millennium Development Goals (MDG).7 A high quality network is essential to the usage 3

ITU (2012) Dutta S. , Benat B. (2012) 5 Cisco (2012) b 6 Cisco (2012) b 7 Dutta S. , Benat B. (2012) 4

16

efficiency of the applications. The faster and more reliable the network, the more devices and services can be adopted by users. The trend nowadays is moving towards “the Internet of Things”, i.e. a wholly connected environment where cars, energy grids or home appliances are connected.8 This is starting to happen, with some 12.5 billion connected devices worldwide 2010, and a prediction of 25 billion by 2015. With the world population in 2010 of 6.8 billion, it means more connected devices than people.9 However, in fact it remains a gap of speed and network quality among the users due to the differences in the available national and international backbone infrastructures. Not only among the regions does the broadband speed differ, but also the bandwidth varies within the regions.10 2005

2010

Africa

208

937

CIS

607

23947

Arab states

817

11310

Asia &Pacific

1652

10742

Americas

5655

27244

Europe

10935

78678

World

5464

28772

Source: ITU World Telecommunication/ICT Indicators database

Table 2: International Internet Bandwidth (bit/s per user), by region, 2005-2010 11 Europe leads the world in International Internet Bandwidth with an average of ca. 80,000 bit/s per user. The Asia region grows rapidly, nevertheless still under the world average until 2010. The broadband connection differs in terms of technology, speed, capacity, price and quality of service. In many developing countries, fixed-broadband services are limited to urban areas; unlimited and high-speed Internet access remains expensive. In developed countries, mostly mobile-broadband services are provided; in the case of highly intensive use data access limited or lower speeds are used.12

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The facts and figures about broadband speed, the growth rate of internet users and mobile telephones indicate the fast changes in the last decade of ICT development. The following section details the ICT industry particularly and the advantages of ICT for a country as a whole.

8

Evans D. (2011); van Kranenburg R.; Erin A.; Alessandro B.; Dan C.; Dodson S. (2011) Evans D. (2011); Cisco (2012) b 10 Dutta S. , Mia I. (2011) 11 ITU (2011) a 12 ITU (2011) a 9

17

1.2

Benefits of The ICT

Based on the facts and changes made due to cellular mobile phones and the Internet as mentioned above, it is clear that ICT increasingly plays an important role in different areas: politics, culture and the economy. The fundamental issue of politics is democratization. In the past, prior to ICT, it was hard to achieve the right to participate or the right to speak. Now with mass media, including web media, this problem is solved. The development of ICT serves the purpose of making the general public aware of what is happening. ICT opens the door for the public to be able to have their own voice.13 For example with the social network, electronic news or online platforms, that everyone can access from everywhere at any time, it is becoming difficult to control the information flows as well as the active bloggers. There are two levels of meaning for ICT in the economy: 1.the development of the ICT industry itself and 2.the industrialization and the economic development at a new stage based on ICT. The ICT industry became more considerable in the first half of the 20th century, which includes two aspects: the ICT manufacturing industry and the ICT service industry. The manufacturing industry includes the manufacturing of communication and broadcasting equipment, computers and related equipment, consumer products and components. It is divided further into the software and hardware sectors. Now while the hardware is declining in significance, the software is becoming more important, and increasingly complicated due to its various performances of computer systems. 14 The service industry includes communication industry, networking industry, broadcast and TV industry. Nowadays people are getting online to obtain content, so all sectors from finance to communication industry must provide content online to fulfill the growing demands. Within this industry the chain is divided into the transportation provider, the content provider and the access provider.15

-

-

200

ICT services CAGR 7.0%

180

Total ICT CAGR 5.7%

160 140

ICT manufacturing CAGR 4.8%

120 100 80 60

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2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: OECD Information Technology Outlook 2010, www.oecd.org/sti/ito

Figure 2: Trends of Top 10 ICT firm´s revenues globally, 2000-2009 (Index 2000=100)16

13

Zhu G. (2005) Zhu G. (2005) 15 Zhu G. (2005) 16 OECD (2012) b 14

18

On the other side, ICT influences the general economics in all areas from administration, manufacturing, and customer services to research and development. Especially in terms of electronic commerce (E-commerce), the Internet created new markets. With E-commerce, resources are better utilized, business processes more efficient, which translates into higher productivity. The Information Technology and Innovation Foundation (ITIO) estimated that E-commerce delivers 15% savings over other forms of commerce. The networked effects increase marketplace diversity as well as market size and lead to greater economic benefits through increasing the variety that meets the diverse demands of the customer.17 The Ecommerce is potentially transforming the business activities into an integrated marketplace for domestic as well as international trade actions. In Business-to-Business (B2B) alone, almost 80% of the transactions are undertaken in this new technology. In 2010, the U.S. B2B e-commerce revenue was closer to US$150 billion; this represents an explosion in revenue compared to that of US$43 billion in 1998. The U.S. accounts for about three-quarters of ecommerce activity worldwide, however the share is falling as Internet diffusion continues in Europe and Asia, followed by Latin America and Africa.18

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Mobile commerce particularly shows great potential. Mobile commerce ranks as the secondfastest-growing consumer mobile service with a 42.7% CAGR globally from 2011 to 2016. This impressive growth figure points to an increasing acceptance by consumers of the functionality of mobile commerce services. Indeed, a variety of services, ranging from mobile shopping and payments in banking to event ticketing, provide end users advantages by mobile commerce activities. 19 The networked effect of ICT makes it possible for large companies around the world to become integrated and connected. For example in terms of the production value chain, the iPhone is produced in many countries, each are responsible for a part of the iPhone.20 Many different enterprises can connect with each other in the most efficient way through online meetings, voice conferencing and other data transfer for urgent problems or decisions. Information technologies for business activities such as ERP, SCM and CRM are used to harmonize the international production system and delivery processes. Modern logistics is also highly involved in information systems to guide material flow. For the financial sector ICT becomes a growing driver too, because modern financing is finance in terms of business operation and is an information process. In the management aspect, many management tasks including the management of people, materials and money require modern information technologies.21 In short, ICT changes the pattern of trade in the value chain. The nature of the production process (comprising both manufacturing and services) is becoming more and more an information process in which the ICT is an enabler.

17

Dada D. (2006) Kirkman G.S., Cornelius P.K., Sachs J.D., Schwab K. (2002) 19 Cisco (2012) b 20 Simon J. P. (2011), P.99 21 Zhu G. (2005) 18

19

According to observations in the McKinsey Report, the Internet in advanced economies over the past five years was contributing up to 21% to the growth in GDP. 22 According to the World Economic Forum, ICT will change societies and economies around the world, and thus enhance the quality of life. This applies not only to already developed economies, but also and especially to low-income and developing countries. ICT could be the basic principle of an information society, and therefore, policy makers in developing countries need to create and maintain social and environmental conditions aimed at adopting the ICT. Otherwise, they would miss the opportunities to join into this networked world. From the cultural aspect, the Internet has created a new online world. The cellular mobile technology has changed the entire world into a new era of communication. Both internet and mobile phone revolutions invent the new kind of culture, a virtual cultural version. For example, people send and receive lots of mails and messages by cellphone each day. People hear music online, play games online, watch movies online, read online-newspapers and exchange documents by computer. The web-enabled applications can be seen in every area of life from fashion to entertain, and the social network platform.

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Every user can benefit differently from the global information network. Students can learn more about the world and quickly acquire new knowledge. Business people can find new market opportunities. Governments can more effectively provide public services and improve better relationship with other states. Individuals can communicate at lower cost and become more informed in the network.23 Nevertheless, there are differences in the level of ICT development throughout the world. In the more developed nations, the ICT is more widespread and supported by better infrastructure and better education system. The developing world suffers from serious deficits of know-how and obstacles in government support. Therefore the ICT adoption in developing countries is not always comparable to that in the highly-developed countries.24 Data shows that fixed-broadband subscriptions have more than doubled over the past 5 years. While fixed-broadband penetration in developed countries had climbed to almost 24% with slower growth rate by the end of 2010 suggesting that a saturation level is being reached. The developing countries share is increasing rapidly but attains only 4.2%. The proportion of households with access to the Internet is growing steadily. Especially in the developing countries, where around 16% of households had access to the Internet in the end of 2010, is against 66% in developed countries.25 Wireless-broadband internet access remains the strongest growth sector. In developing countries, internet users are progressively shifting from fixed to wireless connections and devices. The potential of mobile-broadband and dynamic ICT developments make policy makers aware of the need to facilitate this process. This is why the Broadband Commission for Digital Development was launched in 2010, with the

22

Rundfunk und Telekom Regulierungs-GmbH (2011) Dutta S. D., Mia I. (2011) 24 IBM, Information Technologies Group Center for International Development at Harvard University 25 ITU (2011) a 23

20

missionn to promotte the adopption of bro oadband-enabling policies, especially in dev veloping 26 countriees. 60 50 40 30 20 10 0

Deve eloped World Deve eloping

2007

2008

2009

2010

2011

Source: ITU World Telecommunicat T tion /ICT Indicaators database

Figuree 3: Active mobile-broa m adband subsscriptions pper 100 inhaabitants, 200 07-2011 ICT hass been conssidered as a driver forr economic growth forr decades, not just to the first movers such as thee United Staates, but alsso to late-coomers. Desppite this stro ong will, in nfrastrucve made intternet-driven n gains slow wly to materrialize in deeveloping co ountries. ture connstraints hav Rooted in USA, In nternet alsoo grew quickly in Euroope. Asia, which w was late in catcching the Internett wave, has struggled too capitalizee on the cappabilities of the Internet. It is now improving its performance p e and increaasing its glo obal compettitive advanntage. The developing d c countries have alw ways used a wait-and--see attitudee as new teechnologies arrived on the scene, learning from thee mistakes of o the early y adopters in n Western C Countries. But B in the caase of this teechnology, the strategy seeems not to work w as well as it usedd to be, becaause the late adopters will w face an accelleration of the t revolutiion itself an nd the comppetitors will become inccreasingly powerful p 27 to explo oit the primee developm ment.

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Econom mies have different pollicy environ nments, pattterns of dom mestic prod duction and international engagement attitude. Siince each country focuuses on specified indusstries, their abilities h up with the t ICT ado option proccess varies. A key queestion is: How H can th he policy to catch environ nment help their t countriies to gain more m from tthe networkked world an nd the technnologies, to reach h higher liviing standard d at the end of this taskk? This papper proceed ds with a sho ort overview w of the situuation of the Internet, mobile m tech hnologies and othher ICT indiicators for selected s couuntries in A Asia. It inclu udes ICT policies p don ne by the governm ments. For a better com mparison am mong countrries, the meaasurements in term of different kinds of o indexes will w be exp plained. This review ffocuses on ICT Indexes, which are a used mostly in i the evalu uation of thee ICT statuss of countriies in recentt years. Thee cluster building of indices and the corrrelation an nalysis with GNI per caapita and GDP G growth h rate show whether untries reflect the samee developm ment in ICT T rankings. This paperr then consiiders the the cou perspective of each h individuall country. S Specific exaamples from m three Asian countriees (South w show how h these eeconomies are a improviing their IC CT transKorea, China, and Vietnam) will on process. formatio

26 27

ITU (2011) a Kirkmaan G.S., Cornelius P.K., Saachs J.D., Schw wab K. (2002))

21

ICT Development in South Korea, China and Vietnam This chapter presents an analysis of Vietnam, China and South Korea´s macroeconomic indicators and the ICT indicators, which will be put together for an overviewed comparison among countries. Vietnam is a developing country in which the ICT is still not so strong exploited like in China and Korea. China is the biggest economy in the world, however because of its giant size the ICT adoption is constrained in some aspect. In other side, Korea has achieved an impressive ICT quality not only in Asia Region but also global perspective. 1.3

Economic Dynamics and ICT Development in Vietnam

This section starts with the general national background of Vietnam such as history, trade, economic growth and then describes the ICT development in this country with different indicators, ICT industry and political actions. 1.3.1 National Background of Vietnam Vietnam is a Southeast Asian country with the population of 87.8 million inhabitants in 2011. It makes Vietnam one of the world´s most populous countries (13th). Vietnam suffered war before 1975. In early 1986, the government initiated a series of economic and political reforms. Since 2000 Vietnam had re-established diplomatic relations with most nations and joined the world economy. The joining of the World Trade Organization (WTO) in 2007 indicated the country has successfully achieved economic reforms. However, Vietnam still has some problems such as relatively high levels of income inequality, high corruption rate and lack of democracy.28

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The socialist Republic of Vietnam is a single-party state, named the Communist Party of Vietnam. Under the Communist Party of Vietnam, all aspects of government, politics and society are strictly controlled.29 But in foreign relationships, the government has an open policy and has established international relations of different kinds: bilateral, multi-lateral relationships with 172 countries (2007), including the U.S., Western Europe, China, Japan, Australia and the ASEAN countries.30 With this open status Vietnam´s imports and exports were jointly valued at around 160% of GDP in 2006, more than twice the contemporary ratio of China and over four times the ration of India.31 Most of Vietnam´s provinces are dominated by agriculture in late 1980s. The Doi Moi reform (1986) brought changes in market as well as new private ownership in industries and commerce. GDP growth rate of Vietnam is around 8% annually since the reform until 2005. That makes Vietnam one of the world´s fastest growing economies. The global recession hurt Vietnam's export-oriented economy, with GDP in 2009-12 growing less than the 7% per

28

Central Intelligence Agency (CIA) (2012) a U.S. Department of State (2011) 30 Vietnamese Ministry of Foreign Affairs (2010) 31 Clay C.; Sheridan P. (2006) 29

22

annum average achieved during the previous decade. 32 However Vietnam´s year-on-year inflation rate is very high and reached 11.8% in December 2010. The nominal GDP reached US$135.411 billion in 2012 and a nominal GDP per capita of $1.498 in 2012. According to the International Fund, Vietnam belongs to the “lower middle income group”. However in 2012, HSBC predicted that Vietnam´s total GDP would surpass that of Norway, Singapore or Portugal by 2050, because exports increased by more than 12%, year-on-year.33 From these overall information about Vietnam, next part will continue with further details of Vietnam´s ICT development. 1.3.2 ICT Development in Vietnam This section presents an analysis of the current situation of ICT in Vietnam and the position of Vietnam in the global ICT and software services industry. Vietnam’s entry in this increasingly competitive sector is built on investments from government and multilateral organizations. With its strength in a cost effective workforce, improving infrastructure, linkages with key markets and an ambitious national vision, the country has attracted investments from international investors. The local presence of industry leaders shows their interest in Vietnam´s market.34 Multinational firms initiated the ICT outsourcing trend in the early 1990s and since then it has grown steadily. More and more firms particularly in ICT intensive sectors such as financial services in developed economies are searching for the pools of talent in developing countries (e.g. India, Philippines). Vietnam, a socialist country with “China-like” aspirations, plays a follower-position as a newer entrant in the global ICT business.35 2006

2007

2008

2009

2010

8.567.520

11.165.617

14.767.629

17.427.365

14.374.438

Fixed telephone subscribers per 100 inhabitants

10,16

13,11

17,13

20,12

16,45

Households with a fixed telephone line per 100 households

28,5

51,4

61,35

45,8

37,77

18.892.480

45.024.048

74.872.310

98.223.980

111.570.201

22,41

52,86

86,85

113,4

127,68

5,19

5,63

6,08

19,35

13,55

14,76

Number of fixed telephone subscribers

Number of mobile phone subscribers Mobile phone subscribers per 100 inhabitants Personal computers per 100 inhabitants Households with computers per 100 households

7,73

Source: Vietnam Ministry of Information and Communications “Vietnam Information and Communication Technology. White Book 2011”

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Table 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011

32

Central Intelligence Agency (CIA) (2012) a Central Intelligence Agency (CIA) (2012) a 34 Nguyen A.T. (2008) 35 Chidamber S.R. (2003) 33

23

ICT industry Within IT industry, the field software development and services in period 2006-2010 have achieved significant growth in both revenue and market and become the most promising economic sector of the country. IT industry ´s revenue grew at the average rate of over 30% a year and reached over 1 billion USD in 2010 (up four times as compared to 2005) with the export revenue account for about 35% (up five times as compared to 2005). 36 Vietnam is in the top 10 of the most attractive destinations for global outsourcing exports. In “The A.T. Kearney Global Services Location Index”, Vietnam was ranked the 8th place with 6.69 point in 2011.37 Digital content industry is the new emerging sector but rapidly grows by over 40% yearly. In 2010 the revenue of the digital content industry reached US$934 million, increasing 9 times compared to that in 2005.38 In 2010, the revenue of hardware industry reached US$5.6 billion, increased 5 times as that in 2005. This industry is one of the five highest export revenue industries, with export turnover about US$3.5 billion in 2010, mostly from computer related products, electronics and components. Many MNCs on ICT are planning to expand their investments and operations in Vietnam, such as Intel, Samsung Electronics, HP, Nokia, etc.39 In Million USD

2008

2009

2010

Growth rate of 2010 %

Total revenue of IT

5220

6167

7629

23,71

Hardware industry revenue

4100

4627

5631

21,69

Software industry revenue

680

850

1064

25,17

Digital content industry revenue

440

690

834

39,71

Source: Vietnam Ministry of Information and Communications

Table 4: Vietnam´s IT Industry revenue

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The number of enterprises in software and IT services also increased rapidly, reaching over 1’000 firms in 2010. An increase of 2.5 times that of 2005, which was mainly located in big cities. IT reached over 70,000 workers in 2010. Average labor productivity in software and IT services reached 14,800-30,000 USD, per employee, per year (More information in Appendix 3.1). Currently there are seven IT parks being operated around the country, which are quite successful and well known. These include Quang Trung Software Park, Da Nang Software Park, and the IT Park of the National University in Ho Chi Minh City. Vietnam´s Hardware and Electronic industry has developed rapidly in scale with the strong contribution of direct investments from Multinational Corporations (MNC) in this sector.

36

Vietnamese Ministry of Information and Communications (MIC) (2011) Kearney A.T. (2011) 38 Vietnamese Ministry of Information and Communications (MIC) (2011) 39 Vietnamese Ministry of Information and Communications (MIC) (2011) 37

24

Governmental Policy in ICT It is generally perceived that Vietnam´s media sector is controlled by the government. Since 1997, Vietnam has extensively regulated public Internet access, using both legal and technical means. The resulting lockdown is widely referred to as the “Bamboo Firewall”. This is the reason why the “Reporters without Borders” considers Vietnam to be one of 15 global internet enemies.40 Nevertheless in the global trend of ICT adoption and outsourcing with the potential shift from western countries to less labor cost countries, Vietnam must change its attitude to benefit from the advantages. Some important national programs and ICT related strategies can be pointed out such as:41 -

In 2004: Program on IT human resource development to 2010 In 2005: ICT strategy 2010 and vision 2020 Æ general ICT development In 2006: Plan of Telecom and Internet Development to 2010 Æ Internet development In 2007: o The Development Program for Vietnam´s Software Industry to 2010 o The Development Program for Vietnam´s Digital Content Industry to 2010 o The Master Plan for Vietnam´s Electronics Industry to 2010 and vision to 2020

In terms of legal frameworks and policies for the IT industry development, many documents were issued: -

in 2005: Electric Transaction Law in 2006: Information Technology Law in 2006: Intellectual Property Law in 2006: High Technology Law

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These documents created the basic legal framework to regulate and promote the IT industry and IT applications and enhance the informatization of the country. The Informatization is referred to a transformation of an economy and society through the effective deployment of information and communications technologies in business, social and public functions.42 However the piracy rate in Vietnam is still very high and the transaction-through-electronic system is unsecured for e-commerce or e-banking.43 The International Telecommunication Union (ITU) has prepared a World Telecommunications Regulatory Database presenting the Level of Competition in telecommunication services for jurisdictions in the Asia-Pacific region. The review shows that the most developed countries, including Japan, Singapore and Korea, have full competition across the entire range of services. Mid-level developing countries, including Thailand, Indonesia, tend to have opened many services to competition, except basic facilities. Two examples of mid-level 40

Reporters without Borders (2004) Vietnamese Ministry of Information and Communications (MIC) (2011) 42 IOS Press (2009) b 43 International Intellectual Property Alliance (IIPA) (2012) 41

25

developing countries that have opened to full competition are Vietnam and Pakistan. Vietnam is committed to liberalize most basic telecom services and some new services.44 Vietnam is more liberalized than China and other countries in ASEAN (except for Singapore). Vietnam will allow foreign investors to take part in Telecom Network infrastructure establishment on the condition that Vietnam´s enterprises hold the major capital and control. The foreign investors are, however, allowed to hold major capital and controls in some non-facilities based services. This openness brings more opportunities for Vietnam´s telecom enterprises: opportunities to approach a broader market, foreign experts and foreign companies’ acquirement, advanced training and education for domestic laborers and students.45 Human resources and ICT education According to an assessment by the International Telecommunication Alliance, in recent years Vietnam has one of the world’s highest national growth rates in telecommunications. Up to May 2008, there were about 6 million subscribers in the country. 19.5 million people can access the Internet, which accounts for 23% of the total population. However, internet use is unevenly distributed in Vietnam. Most users are concentrated in urban areas like Hanoi, Ho Chi Minh City, Da Nang and Can Tho. The rural and remote areas have a low quality or no access to the Internet, or the users do not know how to use it. In the worst cases these communities have not been aware of library and Internet services available to them.46

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Vietnam has a wide network of public libraries. Some libraries have provided internet access services for patrons (22 out of 65 public libraries have this service). Most users have used the Internet for emails, to chat, or for reading e-newspapers, and have not explored the research functions of the Internet for information useful to their daily lives and work. The Vietnamese librarians have weak skills in PC use and search engines. Therefore, they are unable to provide support and guidance for users. Library patrons have also changed their demands for e-information due to ICT development. Increasingly, users read e-books and documents online instead of reading printed books. However, the e-book databases as well as the interlibrary networks are insufficient for the rising demands of students and researchers. So it is easy to forecast that one of the greatest challenges of Vietnam is: how to prepare the Vietnamese education system for e-learning. 47 Vietnam has a state-controlled network of schools, colleges and universities, and a growing number of private institutions. The literacy rate stood at 90.3% in 2008. Universities and colleges which offered ICT courses grew from 192 in 2006 to 277 in 2010. Schools with ICT training increased from o in 2006 to 82 in 2010. There is an increasing number of schools that provided international ICT training programs, such as Aptech, Arena, NIIT, Kerox (India) , Raffes (Singapore) , Kent (Australia). Labor working in the IT sectors nearly doubled from 150,000 to 260,000 over 5 years with an annual growth rate of 13%-18%. In Vietnam, IT remains one of the hottest educational subjects and offers top entry salaries for jobs. Average 44

IOS Press (2003) Nguyen A.T. (2008) 46 The Asia Foundation (2009) 47 The Asia Foundation (2009); Rozinah Jamaludinm Mohammad Ranmanesh (2011) 45

26

tuition fee was low. Tuition fees for four years of a full-time undergraduate was about $1000, less than six months of a graduate´s average starting salary.48 Education

2006

2008

2010

Percentage of literate population aged 15 and above

93,5

93,4

93,7

Ratio of tertiary students over pop. In tertiary education Age

21,54

23,64

19

192

271

277

Quota of ICT-related students enrolment

30350

50050

60332

Ratio of ICT-related students enrolment quota over total students enrolment quota

10,77

11,15

12,26

Number of universities and colleges offering ICT training

Source: Vietnam Ministry of Information and Communications

Table 5: Vietnam´s Education Information Human resources in ICT sectors are divided unevenly among sub-sectors. Because Vietnam begun its ICT industry with outsourcing in hardware electronics from western countries (USA and Europe), the hardware industry takes the most part of ICT human resources, according to the Ministry of Information and Communication in 2007. However the software industry and digital content are growing fast in recent years, which create a hard competition for human resources.

digital content 12% hardware 39% telecom 31% software 18%

Source: Vietnam Ministry of Information and Communications

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Figure 4: Vietnam´s ICT Human Resource (2007)

48

Vietnamese Ministry of Information and Communications (MIC) (2011)

27

1.3.3 SWOT Analysis for Vietnam The SWOT analysis provides an initial indicator of the most obvious issues and problems the country faces, as well as the key opportunities. -

Strength:

Vietnam was found to enjoy the key advantages of strong geopolitical stability, since assessment by WTO and was reinforced by national government commitment to ICT growth.49 The education system is successful in producing technically well-prepared and talented graduates in software development and other ICT areas.50 The labor market offers exceptional labor price advantages (averaging 30-50 % relatively to established offshore software exporting competitors. 51 -

Weaknesses:

Human resources: Vietnamese ICT graduates and professionals have relatively poor skills in English and other major international languages, in comparison with established outsourcing competitors e.g. India, Malaysia, Singapore, Indonesia. Training fails to offer “hands on” study or internship opportunities, in comparison with China where it is believed that success is based on the strategy of “improvement by doing”.52 ICT professionals also lack of project management, presentation, entrepreneurial and other business skills. With the average software engineer having only 13-15 years experience, it is difficult to compete in the global market where most engineers have at least 20 years experience. Limited human resources further hinder competitiveness as the average firm has only 30 employees. 53 8

6,91

7

6,29

5,98

5,77

Malaysia

Thailand

6

5,69

5,6

5,47

5 4 3 2 1 0 India

China

Indonesia Philippines

Vietnam

Source: The 2009 A.T. Kearney Global Services Location Index (www.atkearney.com) 54

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Table 6: Total score: Global Service Locations - comparing Asia Regarding marketing, Vietnamese software products fail to establish an image or brand in regional or international markets. The industry is weakened by the lack of certificated firms or

49

IOS Press (2003) Nguyen A. T. (2008) 51 Vietnam Competitiveness Initiative (VNCI) (2003) 52 IOS NL Agency, Ministry of Foreign Affairs (2011) 53 IOS Press (2003) 54 Kearney A.T. (2011) 50

28

international famous brands. For example Korea is famous with Samsung and LG, China is also known with Huawei in the mobile phone sector. Total Score

Relevant experience

Education

Language capabilitites

Attrition risk

3,91

Size and availability of labor force 2,00

India

8,26

1,30

1,05

>,20

China Singapore

7,76

3,58

2,00

1,20

0,98

>,20

5,17

2,20

>,20

1,36

1,25

0,32

Indonesia

4,89

0,63

1,46

0,98

0,98

0,85

Thailand

4,35

1,13

0,58

1,05

0,90

0,70

Malaysia

4,15

1,58

>,20

1,11

1,08

>,20

Philippines

3,90

1,14

0,71

0,83

1,10

>,20

Vietnam

3,41

0,48

0,56

0,98

0,88

0,51

Source: The 2009 A.T. Kearney Global Services Location Index (www.atkearney.com)

Table 7: Comparing Asia: People Skills and Availability Scores 2009 Security: The electronic payment mechanism has been not secured totally, which limits use of credit cards and other online purchasing options. The constraint of security in electronic payment harms the potential growth of domestic e-commerce particularly and the international trade generally. SK established use of the electronic signature in 2003, which made its ecommerce expand faster than other regional countries. In SK, E-commerce is not only developed in traditional online market places such as electronics or travelling, but also has reached to the retail consumption like grocery online markets.55

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Another important problem is Intellectual Property Right. Vietnam is the world leader in software piracy, an estimated 97-99% (2003) of software and online content is illegal in Vietnam.56 For example Vietnamese online music or online movies allow people to download or watch online film infringing copyright. However the government does not have concrete regulatory methods to control these expanding trends. Vietnamese companies are not likely to invest time and human resources in writing new computer software, in stead of that, they steal the software or buy pirated software. It makes reputation of the software industry as well as the brand name of a company undermined in the long-run. Moreover, writers, music producers or innovative software developers find no incentive for further development. 57 Additionally, the infrastructure is inconvenient for the ICT sector growth. Vietnam pays exceptionally high prices for bandwidth services, averaging from 15-100 times prices those found elsewhere. In capitalization, Vietnam suffers from a lack of private venture capital funding sources. Many companies are undercapitalized, have unstable manpower to conquer larger and more sophisticated software projects. Only 8.8% (2003) of capitalization comes from foreign investment and only 5.1% (2003) from the state.58 Government project tendering procedures limit the opportunities for small companies to participate in public sector projects. Therefore competition is kept between the state-owned companies or multinational enterprises. Bureaucratic delays and uncertainties over incentive 55

Korea Communications Commission (2011) Vietnam Competitiveness Initiative VNCI (2003) 57 Embassy of the United States in Hanoi Vietnam 58 Vietnam Competitiveness Initiative VNCI (2003) 56

29

applications, visas for travel to overseas markets, poor coordination with Vietnamese commercial attaches overseas and lack of confidence in the legal system are further constraints in ICT sector growth. 59 -

Opportunities:

For Vietnam and other emerging economies, the forces that are changing the global ICT market context and, the openness, create visible and possible opportunities to a potential competitor. Political uncertainty in many of the industry´s traditional low-cost producers, such as India and China, provide opportunities for Vietnam to attract foreign companies in a sustainable and long-term growth plan. 60 Technological advances in online education offer opportunities to gain knowledge as fast as possible in ICT and new skills like management, business, and presentation or language skills can be achieved rapidly through these mechanisms. Additional, many hot-housed environments, such as centers of excellence and software parks are nurtured and on the way to operate successfully. The government shows commitment to supporting these areas and stimulating innovation in the future. -

Threats: expansion of the ICT sector in Vietnam must be mindful of potential threats.

The particular conditions existing currently that make it favorable for Vietnam to make an entrance to the global ICT market may not persist for much longer; accordingly, delays in capitalizing on these opportunities risk losing these opportunities quickly. The industry must be mindful of vendors attempting to create “lock-in” arrangements with clients, forcing clients into long-term dependency. 61 For example the outsourcing potential of European firms could create the long-term low-technology industry position, which constraints Vietnam from further innovative or development in high-technology.

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In short, the benchmarking analysis indicated that Vietnam possesses strengths of affordable, high-quality labor, a low geopolitical risk to investment, and proximity to the growth economies of China and India. However, beside these strengths are the weaknesses of comparatively expensive high bandwidth links, poor English language and poor general business skills. Further the legislative environment comprises of low levels of commitment at a national level to e-government and weak Intellectual Property Safeguards. Weak international marketing and promotion was also perceived as a problem.62

59

Vietnam Competitiveness Initiative VNCI (2003) IOS Press (2003) 61 Vietnam Competitiveness Initiative VNCI (2003) 62 IOS Press (2003) 60

30

1.4

Economic Dynamics and ICT Development in China

As in previous section, in this section of China, the national background will be described first followed by the ICT development. 1.4.1 National Background of China China is the world´s most populous country with over 1.3 billion people (2010).63 The Chinese government is under the single-party government named the Communist Party of China. The Communist Party of China heavily restricts many activities, most notably the Internet, the press, freedom of assembly and reproductive rights.64 In recent decades, China has played an increasing role in trade with other Asia-Pacific countries and in the world trade market. Since 1978, China has become the world´s fastest growing major economy. According to IMF, China´s annual average GDP growth between 2001 and 2010 was 10.5% and in 2010-11, China faced high inflation resulting largely from its credit-fueled stimulus program. Some tightening measures appear to have controlled inflation, but GDP growth consequently slowed to under 8% for 2012.65 One of the reasons is the crisis in Europe, one of its export destinations. As of 2012, China has the world´s second largest economy in terms of nominal GDP, totaling approximately US$7.298 trillion according to the IMF, just behind the United States. However, China´s 2011 nominal GDP per capita of US$5,184 puts it behind 90 countries (out of 183 countries on the IMF list). In terms of PPP GDP China reached US$11.299 trillion in 2011, second place to the U.S., corresponding to US$8,382 per capita. 66

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Since 1976, the Chinese leadership began to reform the economy and move towards a more market-oriented mixed economy, but under a one-party-rule. The restructuring of the economy has contributed to more than a tenfold increase in GDP since 1978.67 With a total international trade value of US$3.64 trillion 2011, China is the world´s largest exporter and secondlargest importer of goods. Its foreign exchange reserve is the world´s largest. China receives the inward foreign direct investment FDI in third place in the world with US$115 billion in 2011 alone. On the other hand China increasingly invests abroad, with a total outward FDI of US$68 billion in 2010. However, the world already knows that China maintains a grossly under-valued exchange rate. From mid 2005 to late 2008 cumulative appreciation of the Renminbi against the US dollar was more than 20%.68

63

European External Action Service (2007) Freedom House (2011) 65 Central Intelligence Agency (CIA) (2012) c 66 International Monetary Fund (2011) 67 Central Intelligence Agency (CIA) (2012) c 68 Central Intelligence Agency (CIA) (2012) c; Scarfe B. (2011) 64

31

1.4.2 ICT Development in China China currently has the largest number of active cell-phones in the world, with over 1 billion users as of May 2012. China has the most internet users in the world, around 457 million by December 2010 which is double the number in the USA. Moreover, the number of mobile users in China is two times more than the total number in USA and Russia. However, according to the China Network Information Center (CNIC), China´s average internet connection speed in 2011 was 100.9 Kbit/s which was less than half of the global average of 212.5 Kbit/s.69 In the USA, 33% of the population use wireless data services for personal activities at least one hour a day, and 88% own smartphone. In China, 25% use mobile data services for personal activities at least one hour a day. 56% of 18-24 year-olds live chat daily, 34% use social networking daily, and 33% micro-blog every day. 61% are reported to own a smartphone, 78% have a prepaid service. 70 ICT subsectors: Compared to the EU ICT market, whose value was at EUR 704 billion (US$ 1.02 trillion) by 2010 according to European Information Technology Observation (EITO), the value of Chinese ICT market in 2010 was reported to be at CNY 10.7 trillion (US$1.6 trillion) by the Ministry of Industry and Information Technology (MIIT), up 18% as in 2009. It means China´s ICT market alone is almost US$0.6 trillion bigger than the whole EU ICT market. The hardware and telecommunications sectors take up the main share of the ICT market, however, software and IT services show the greatest growth potential.71 Total Revenue in USD

1,6 trillion

Exchange rate used

USD1:RMB6,6

Hardware

50%

Telecome

35%

Software

8%

IT services

4%

Source: MIIT, EU SME Centre

Table 8: China's ICT market 2010

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ICT software industry: Since the financial crisis of 2008-2009, China´s economy has maintained a strong growth, which has been supported by the increasing demands in the Chinese economy. With the support of government incentive programs, China´s software industry has been expanding steadily. Its revenues reached CNY 1,336.4 billion (US$203 billion) in 2010 and a 31.3% year-on-year growth. 72 This growth means an over ten times increase as compared to 2001. The average annual growth rate of software industry was over 38% over the past ten years.73 69

Popkin J.(2006) Cisco (2012) a 71 EUSME Centre (2011) 72 NL Agency, Ministry of Foreign Affairs (2011) 73 APCP Worldwide (2010) 70

32

By 2008, there were over 16,000 registered software companies in China, according to MIIT. The top 100 software companies had a combined revenue of CNY 244 billion (US$ 37 billion) in 2009 and made up 24.6% of total industry revenue.74 Being a later-comer, which results in the lack of experience and professional skills, Chinese domestic companies are currently catching up with global software companies. Especially in the enterprise software market, China is expected to be the world´s fastest growing market over the next 3 years with estimated CAGR of 14.6% from 2008 to 2013. The enterprises software market is dominated by domestic companies which have 77.5% market share (2009). In the low-end market, Chinese companies dominate with over 90% market share due to their ability to compete effectively on prices, the low labor cost and, the support of government. In the middle-end market, Chinese companies dominate with 83.9% market share in 2009. Since foreign companies have been unable to provide the large number of staff in China. In the high-end market, foreign companies controlled 50.8% of the market in 2009. Most foreign software companies generate business from multinational operations in China. In many cases, they must forge partnerships with local vendors in the forms of technology cooperations or joint ventures in order to gain access to the market and secure the contracts from state-owned enterprises.75

High-end market

Foreign companies 50,8

Domestic companies 49,2

Middle-end market

16,1

83,9

Low-end market

10

90

Source: APCP Worldwide

Table 9: China´s ICT software industry structure

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China´s software market has expanded quickly over the past few years, with particularly strong growth in Beijing, Dalian, Guangdong and Jiangsu provinces. Especially the Enterprise Resource Planning (ERP), Accounting and Supply Chain Management (SCM) software are the biggest market sectors. There are about 2 million employees working in this industry nationwide by 2010 starting from merely 300,000 in 2001. 76 Particularly in the ICT outsourcing sector, China has become the second largest ICT outsourcing market globally after India. In 2009, this sector achieved sales of over US$2.16 billion with the main three partners: U.S., Japan and the EU. Although China is ranked as the second, the gap between China and India is obvious in areas of total volume, technical expertise, English skills, and the size of the main players in this sector. For example, Chinese ICT outsourcing accounts for a share of 11% in the global market in 2009, compared to 54% for India. 77 In the software sector, the most concentrated markets are Beijing, Jiangsu, Guangdong and Dalian where the most revenues are reached and the software parks are on the way to be established to attract foreign investments as well as ICT workforce. 74

EUSME Centre (2011) APCP Worldwide (2010) 76 EUSME Centre (2011) 77 NL Agency, Ministry of Foreign Affairs (2011) 75

33

City Beijing

Income of software industry (USD billion) 28,3

Growth rate (%) 17,40

Income of software products (USD billion) 10

No. of software companies 2661

Jiangsu

24,1

24

5,8

2432

Guangdong

29,7

27,2

10,2

2864

Dalian

3,9

30

0,88

383

Source: China Electric Information Industry Statistics Yearbook

Table 10: China´s the regional software market performance in 2009 ICT Hardware industry China is the world´s largest exporter of IT hardware such as laptop computers, mobile phone, DVDs, TV sets and digital cameras. The hardware market in China is mature and concentrated. For example, Lenovo held 32% share of the PC computer market by the end of 2010, following Toshiba and NEC from Japan. 78 IT services In China, there are almost no IT service inputs or imports from foreign countries, an indication that the majority of service providers already presented in China. Both domestic and foreign demands for IT services have been rising rapidly. IT consulting and management services in 2010 grew 37.2% year-on-year and value-added-services (VAS) grew 44.6%.79 Telecommunication All broadcast media are owned by, or affiliated to, the Communist Party of China or a government agency. There is no privately-owned TV or radio station. 80 The telecommunications industry is dominated by four state-run telecom carriers including China, Mobile, China Telecom, China Unicom and China DBSAT (Satellite Related Services). China Telecom and China Unicom are the country´s two largest broadband providers, together accounting for 20% of global broadband subscribers. China Telecom alone serves 55 million broadband subscribers, while China Unicom has more than 40 millions.81

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E-commerce: E-Commerce is undergoing rapid development. Online retailing is expanding quickly, and its market is being gradually regulated. According to a survey, more than 50% of big enterprises have e-commerce systems, over 30% of small and medium-sized companies find their product suppliers through the Internet, and there are over 100 million online buyers in China.82 In 2009, the trade volume of e-commerce in China surpassed CNY 3.6 trillion. The supporting systems such as digital authentication, e-payment and logistics are gradually being formed. 83

78

EUSME Centre (2011) EUSME Centre (2011) 80 Central Intelligence Agency (CIA) (2012) c 81 EUSME Centre (2011) 82 The Information Office of the State Council (2010) 83 The Information Office of the State Council (2010) 79

34

Governmental Policies in ICT Software is classified as an “encouraged” industry for foreign investment which can enjoy preferential policies such as tax incentives. China has issued a number of development plans and policies that promote the software industry in the long term. The most important decisions are: -

-

-

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-

Document 18: the most important government software policy document, which provides preferential measures for software enterprises. Document 18 has played a positive role in promoting the software industry and helped software companies grow larger and more powerful. Document 4, also known as the “New Document 18” is a policy document in which hard penalties for piracy are prescribed, including fines of 5-10 times the value of the pirated software, prison sentences and equipment confiscation for manufactures.84 In December2010, China´s state council launched a six-month national campaign to combat software piracy. The result from this was positive because the rate of software piracy in China decreased from 90% in 2004 to 80% in 2008, according to the business software alliance.85 12th Five-year-plan: this is the blueprint for China´s development in the period 20112015. The importance of the ICT industry has been stressed in the central government´s 10th and 11th 5-year-plan during 2001-2010. Aimed at achieving quality and sustainable growth, the 12th Five-year-Plan highlighted 7 major strategic industries in which “New generation information technology” and “high-end equipment manufacturing” are included. 86 Indigenous Innovation Catalogue: a catalogue of products that will receive preference for government procurement, software is one of the six highlighted sectors.87 Software Parks: a key mechanism for the government to support the software industry is by providing financial and policy benefits to companies in these parks (see Appendix).The Chinese government has intensified its direct support of the software industry by setting up software parks and industry bases to encourage investment and R&D in major Chinese cities. Not only does the government expend significant resources on infrastructure to support software companies that establish operations in these parks, but companies receive extensive financial and policy benefits such as tax incentives. Efforts to build infrastructure for software production have been focused on communication networks, R&D infrastructure, testing facilities, and shared databases, supplemented with facilities for training software engineers and technicians.88

84

http://www.chinaipmagazine.com/en/journal-show.asp?id=711 APCP Worldwide (2010) 86 EUSME Centre (2011); APCO Worldwide (2010) 87 EUSME Centre (2011) 88 APCP Worldwide (2010) 85

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Urban and Rural distance problem: In the 11th five-year-plan (2006-2010), there was State Informatization Development Strategy for 2006-2010 which has raised the importance of ICT development national wide. The result is that over 700 million previously unserved rural consumers can now access public services and information. With the increased priority according to informatization by the Chinese government, numerous initiatives by the government and telecom providers have resulted in a steady increase in the coverage of information infrastructure. For example, the MIIT has encouraged the spread of fixed line telephony coverage to every village. The result is that in 2010, 99.5% of administrative villages have fixed line coverage, provided by 6 main telecommunications providers.89 In mobile telephony, China Mobile has invested RMB 350 million (US$51 million) by 2007 in rural information network and RMB 450 million (US$66 million) by 2009 in optimizing the functions of the network. The result is that 800 million farmers across the country have better mobile telephony networks and services. 90 Internet: China´s internet market is migrating from narrowband to broadband access. China Telecom and China Netcom, the two main fixed-line operators, have plans for extending broadband access, under an initiative to reach every household, with fiber optics and have started to replace copper cables. China Netcom invested RMB 15 billion (US$ 2 billion) in the new network, which was launched in 2008 and expected to be completed in 3-5 years. 91 Investment policy China has invested enormous sums of money into Internet infrastructure construction. From 1997-2009, China invested 4.3 trillion RMB to build a nationwide optical communication network with a total length of 8.257 million km. With these long-distance optical cables, Chinese telecommunications companies had 136 million broadband Internet access ports and international bandwidth of 866,367 Mbps, which allows Internet access to 99.3% of towns and 91.5% of villages. The Chinese government first launched the R&D in Internet in the late 1990s with the “Next-Generation High Credibility Network” (NGHCN). In 2001, the first NGHCN was completed in Beijing. With significant effort, China has raised technical proposals regarding domain names internationalization, which was accepted by the Internet Engineering Task Force (IETF) and incorporated into the Internet international standards and protocols. 92

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Research & Development Investment oversea China has long been regarded as the latecomer in the international technology competition. China sped up its technological innovations and caught up in the international value chain through innovation. This aspiration is outlined in the National Medium and Long-term Science and Technology Development Plan (2006-2010). The key of China´s innovationoriented strategy is to enhance innovative capability, especially in producing Intellectual 89

IOS Press (2009) b IOS Press (2009) b 91 IOS Press (2009) b 92 The Information Office of the State Council (2010) 90

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Property Rights IPRs for key advances technologies and selected strategic industries. It led to China´s 30% surge in international patent applications in 2009. 93 According to the data released by World Intellectual Property Organization (WIPO), China has become the world´s fourth largest patent applications at the end of 2010. WIPO indicated that China´s international patent applications have reached 12,339 patents in 2010 as compared to 7,900 patents in 2009, an increase of 56.2%.A Thomson Reuters report said published patent applications from China were expected to total nearly 500,000 in 2015, following by the United States with close to 400,000 and Japan with almost 300,000. Two Chinese companies, the telecom giants Huawei Technologies and ZTE Corporation, are in WIPO´s top 100. Both companies accounted for only 16% of the country´s applications meaning that most of other applicants are from smaller companies. (See Appendix 2)94 Besides the growth in international applications, China also increased the number of foreign researchers. According to the WIPO´s World Intellectual Property Indicators, companies like Huawei, ZTE; and Lenovo have established overseas R&D centers. In an annual report, Huawei is so far running 16 overseas R&D centers, which distributed in various countries, such as the United States, and countries in Europe. Other examples include Lenovo, a Chinese leading PC manufacturer, and Haier, a multinational consumer electronics and home appliances company. To gain technological advantages, they choose their competitors or upstream/downstream companies to constitute the innovation centers.95 The explosion of China´s recent patents has concerned the international players. Although China boomed in its patent applications, their value is questionable. "One thing is volume, quality is quite another”, Thomson Reuter said. The quantity of Chinese applications is not equivalent to the quality of dominant players in intellectual property. However, China´s efforts are ambitious signals for global competition and innovation in global market. 96 1.4.3 Drivers of Development and Market Challenges -

Strength:

For China there are three main reasons that can be traced for such growth of the ICT sector at this stage: 97

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The first aspect is demand, which includes two parts: one is the demand arising from the opening up or internalization and the second is the domestic demand itself arising from the improvement of people´s living standards due to overall economic growth. The second is the policy aspect. The government introduced several preferential policies and strategies for this sector, for example support in financing, reduction of taxation for compa-

93

Zhan A. (2012) Zhan A. (2012); Lee C. Y. (2011) 95 Zhan A. (2012) 96 Lee C. Y. (2011) 97 Zhu G. (2005) 94

37

nies. In addition, there are also other policies at macro economic level such as foreign exchange rate, equipment import policies, R&D strategies and national procurement. The third is the system aspect. In the past, the telecommunication was mostly in a monopoly position. Today competition gains in the significance. The facilities as well as non-facilities services are opened up, not isolated as before.98 Nevertheless, the telecommunication sector, the broadcasting and the TV sector, in China is still a monopoly situation strictly controlled by the government. It prevents foreign investors in this market. -

Weaknesses:

The first weakness to be considered in China is the gap between urban and rural areas. Internet development and application in China is imbalanced regionally. Education, informatization progress, and the Internet have been developing more rapidly in the eastern than western parts of the country. By the end of 2009, Internet use had reached 40% of the population in eastern China but was only 21.5% in western China. Urban Internet users made up 72.2% of the national total. The price basket for mobile phone, internet, and residential fixed line are 3.2 times higher for rural residents than urban ones. 99 Therefore, China still needs to make arduous efforts to bridge these "digital gaps".100 Over the past decade, informatization has been a significant phenomenon in China. This continuing process is considered by the government of China as one of the country’s strategies to reduce rural poverty and diminish the rural-urban divide. (For more details, see “Government policy” part). 101

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The second problem is the Intellectual Property Rights Protection, the same as the case of Vietnam ICT development. Although the Chinese ICT industry is considerably developed for its own IPRs and its government has tried to introduced laws and frameworks regarding to IPR security, China still faces problems with international players in this issue. Any ICT product sold in China should be considered at high risk to IPR infringement given the difficulty in enforcing these rights. The piracy issues have and will continue to hinder the development of the software market. Due to extremely high rates of piracy, software companies are forced to compete by cutting prices. Therefore, software companies become unwilling to expend resources in product innovation.102 The third problem is that China is still a developing market. Although growing quickly the ICT market is in the process of developing. Software companies are facing too many challenges associated with operating in an immature commercial environment. For example, many Chinese organizations are unable to take on the latest ICT solutions. Intangible products

98

IOS Press (2009) a Fong M. W. L. (2009) 100 The Information Office of the State Council (2010) 101 IOS Press (2009) b 102 APCP Worldwide (2010) 99

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such as IT consultancy and software are not viewed as being as value adding as in Korea or in the West; therefore for these services the price is sensitively high.103 -

Opportunities:

The Chinese ICT industry, however, has an enormous potential because the worldwide market is still growing. China itself is the world´s most populous country in the world. Its growing domestic market is very attractive to foreign enterprises and can boost the Chinese domestic demand in ICT sector.104 -

Threats: 105

China´s government establishes regulatory barriers to international players in the market, but protects its domestic producers. This consequently makes China less interesting than the other developing countries. For example: -telecommunication sector: international enterprises including foreign investors are now being allowed to operate in China in certain telecommunication sectors. However, the category is restricted to basic telecommunication business. -hardware, software and IT services: these three fall into the “encouraged industries” category for guiding foreign investment. Although foreign companies are unrestricted in this sector, all products sold in China must be registered with the Local Software Industry Association. Such bureaucratic delays and controls may constraint the international ICT firms from expanding in the Chinese market. -Standard requirements: international certification is rejected in China, no matter whether the manufacturers have obtained certified quality fulfillment in other markets. Even if the quality requirement exceeds the Chinese minimum, it is prohibited in the Chinese market. There are different kinds of requirements, for example: technical regulation, industry or provincial standard. Before market entry, the Chinese quality, safety authorities require type testing, factory inspection and a comprehensive documentation process to be carried out by a Chinese inspection bureau.106

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-Government procurement policy: This policy introduced by Chinese government refers to a discrimination against foreign products. The government gives strong preference to domestic companies. But in many cases, due to insufficient technology capabilities of domestic firms, foreign software vendors still find access to the market by becoming technological partnerships with Chinese companies.107 It makes “the ease of doing business index” in China lower comparatively to other Asia countries. According to a World Bank report published in 2012, China was ranked at 91st out of 181 countries in 2011. The first place indicated the most business friendly regulation. A 103

EUSME Centre (2011) NL Agency, Ministry of Foreign Affairs (2011) 105 EUSME Centre (2011) 106 American National Standards Institute (ANSI) (2011) 107 APCP Worldwide (2010) 104

39

higher ranking a country is evaluated, the more conductive its regulatory environment is to business operation. 108 Countries

Global ranking “Ease of doing business index” 2012

Singapore

1

Hong Kong

2

South Korea

8

Japan

24

Malaysia

12

Thailand

18

China

91

Vietnam

99

Indonesia

128

India

132

Cambodia

133

Philippines

138

Laos

163

Source: World Bank, International Finance Corporation

Table 11: Ease of doing business rankings 109

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Beside the regulation in the market, the Chinese government never allows the world of media a freedom of speech. Social media control could negatively affect the development of the internet or ICT in China. 110 In China, there are some 220 million bloggers. According to a sample survey, each day people post over 3 million messages via news commentary sites, blogs and over 60% of Chinese citizens frequently place postings to discuss various topics or express their opinions.111 However, the Chinese Communist Party (CCP) takes control over traditional mass media. The social media businesses in China´s ICT sector, particularly the Chinese micro blogging platforms, such as Sina Weibo and Tencent Weibo (the two biggest players in this segment) are not totally outside the conventional lines of the party-state bureaucracy´s control. Micro blogging has been called China´s first “free speech arena”. However, the Economist Magazine argued that the impact of Chinese micro blogs should not be overestimated, because they believe that micro blogs in China are observed by Chinese politicians and it becomes a “virtual political system”. 112 Over the past decade, the number of private enterprises increased by 35% annually, which accounts for 66% China´s total GDP. It is unsurprising, that the political system in China has changed since the beginning of the 1980s. Nonetheless, instead of criticizing each other in public, Chinese business leaders usually criticize and convey concerns behind closed doors. It is noteworthy that changes in the Internet and communication may affect the routes of reaction. The first example is „Green Dam youth escort software”. The Chinese government requires the installation of a specific filtering software product, Green Dam, on notebooks for protecting children from harmful Internet content.113 But the effort failed. This failure by the 108

The World Bank Group (2013) b The World Bank Group (2013) a 110 Lagerkvist J. (2012) 111 The Information Office of the State Council (2010) 112 The Information Office of the State Council (2010) 113 Faris R.; Roberts H.; Wang S. (2009) 109

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government to implement Green Dam shows the increasing liberty in decision making for foreign business organizations and domestic journalists, which was not the case before. Another example is the Google shut down of the Chinese search engine that moved to Hong Kong, Google argued that “we are well aware that it could at any time block access to our services”. The Chinese government has done the same to YouTube, Facebook and Twitter.114 Some business leaders believed that it would negatively affect business innovation in the ICT sector.115 In short, it could be seen that the new media and private business have increasingly resisted Internet controls. However due to the one-party political system, China´s market and social media cannot be changed in the short term. China´s overview Real GDP growth is averaging around 10% year-on-year and is spurring development across the ICT industry. The number of internet users has more than tripled between 2006 and 2010. Mobile phone usage grew at an average of 18% in period 2005-2010. The internet penetration rate in 2010 was 34%, up from 29% in 2009, which was still less than half of the rate in Korea or Japan. By the end of 2009, the number of Chinese internet users had reached 384 million, 618 times higher than that of 1997 with a yearly increase of 31.95 million users. Furthermore, the Internet had reached 28.9% of the total population, higher than the world average. At the same time, there were 3.23 million websites running in China, which was 2.152 times that of 1997. Among the internet users, 346 million used broadband and 233 million used mobile phones to access the Internet. Users had shifted from dialing the access numbers to broadband and mobile phones. These statistics make China among the top of the developing countries in developing and popularizing the Internet.116 However, since the mobile phone penetration rate in China (31.6%) is less than the average of the world, there is still room for further expansion.

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The Chinese government has created some preferential policies for the ICT industry, especially the software sector, with the purpose of promoting ICT development. However due to the strict control of the one-state government, China´s market still has many constraints for foreign investors as well as international ICT firms.

114

Helft M. ; Barboza D. (2010) The Information Office of the State Council (2010) 116 The Information Office of the State Council (2010) 115

41

S Strengths and Opportu unities

• Growin ng demand of world market • Softwa are export grow wth • Outsou urcing demand d growth • Middle-- end and low-end software e • Low lab bor costs • ICT tra aining and edu ucation grows • China is i the world´s most populou us country • China is i theworld´s second s biggesst country • China is i the world´s biggest expott country • The po olitical initiative e in ICT sectorr • The hig gh annual grow wth rate

Weakne esses and Threats T

• We eak in high-end software development • We eak in innovatiion and own IP PR • Sho ortage in perssonnel with hig gh proficiency and d mangement expertise • We eak in English language skillls. • Urb ban /rural divission • Hig gh control of CCP C • Hig gh discriminatiion for foreign firms

117 Figure 5: SWOT analysis a

1.5

E Economic D Dynamic a ICT Deevelopmentt in South K and Korea

The folllowing section introducces informaation of Souuth Korea allso in two parts: nation nal backgro ound and IC CT developm ment. Inform mation suchh as econom mic status, trrading partn ners, GDP, GDP G growth h will be desscribed in th he first part whereas moore informaation on egovernm ment, e-education and ICT I industrry will be giiven in the ssecond part.

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1.5.1 Economic E D Dynamic of South Koorea The Republic of Korea K or So outh Korea (SK) is a developed country. It belongs too a highincome group with h a very high h standard of o living. O Over the pastt four decad des, SK hass demonstrated an incredib ble growth and globaal integratioon to becom me a high--tech indusstrialized econom my. In the 11960s, GDP P per capitta was com mparable with w that of levels in the t poor countriees of Africaa and Asia. However, SK S joined thhe trillion-d dollar club of o world ecconomies in 2004 4, and curreently is am mong the world´s w 20 llargest econ nomies witth its GDP PPP of 118 US$1.554 trillion in i 2011. The T econom my of SK is mainly exp port-driven and concen ntrated in electron nics, automo obiles, shipps, machineery, petrochhemicals and robotics. The countrry is the most industrialized d member country of O OECD becau ause of a higgh GDP perr capita PPP P, which st th S$31,200 in n 2011, placcing the couuntry 41 , aand 12 byy PPP in thee world, resspectivewas US 119 ly. Kong, Singaapore and Taiwan), T thee country Togetheer with otheer three Asiian Tigers (i.e. Hong K continues to grow fast in developed coun ntries categgories. The economic growth g rate reached n 2010, fro om 0.2% in n 2009 and it also preedicted a G GDP growthh of 3.5 peercent in 6.2% in th 120 2012. SK is rank ked 8 in thee “Ease of Doing D Businness 2012” rreport by th he World Baank.121

117

Zhu G.(2005); G NL Agency, A Ministry of Foreiggn Affairs (20111) Centraal Intelligencee Agency (CIA A) (2012) b 119 International Monettary Fund (2010) 120 Baik O.M. O (2011) 121 The World W Bank Grroup (2013) a 118

42

In trading with international partners, SK maintains diplomatic relations with more than 188 countries. It is a member of ASEAN plus Three (ASEAN and China, South Korea, Japan). Notably, in 2010, SK and the European Union (EU) concluded a free trade agreement to reduce trade barriers, because the EU has become an important trading partner of SK, the second largest export destination. SK established a close relationship with China. The two countries have steadily improved bilateral relations since 1992.122 1.5.2 ICT Infrastructure of South Korea In 2011, the number of smartphone users in SK exceeded 20 million, and the 4G LTE commercial service was launched in the same year. This indicates that South Korea has stepped into the fully-fledged smart age.123 90% of the South Koreans are estimated to own a mobile phone. The South Korea corporations, Samsung and LG, were ranked first and third largest mobile phone companies in the world in the first quarter of 2012, respectively. The three major wireless communications providers, including SK Telecom, KT and LGU+ provide coverage in all major cities and other areas. They provide the fastest Internet download speeds in the world, with an average download speed of 17.5 Mbit/s. This allows mobile phones to be widely used for watching Digital Multimedia Broadcasting (DMB) in the country.124 Since 2000, the Internet user rate for individuals and households is high in comparison with other Asian countries. Especially in the broadband development, SK has achieved the biggest success. Broadband speed increased extremely rapidly with a growth rate of almost 50 fold within 10 years between 1999 and 2010. According to ITU, SK ranks first in ICT development (2011), and E-Government readiness (2012). SK has the fastest broadband speed and highest broadband connection in the world. 125 Table 12 shows performance by category. Internet users and usage rate, internet subscribers (in 1000 persons) 1999

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10860 Internet user Internet usage 22,4 rate Subscribers per 3,34 100 inhabitants Household online ratio % 366 Broadband Source: BMI report, Q1 2011

2000

2001

2002

2003

2004

2007

2008

2009

2010

19040

24380

26270

29220

31580

34820

35360

36958

37163

44,7

56,6

59,4

65,5

70,2

72,3

73,2

76,3

76,5

11,5

18,08

23,07

24,08

30,6

32

33,8

35,5

70,1

82,3

89,3

91,5

92,8

4017,49

7805,52

10405,49

11178,5

11921,44

14710

15475

16349

17250

Table 12: South Korea´s ICT performance 126

122

Central Intelligence Agency (CIA) (2012) b Korea Communications Commission (2011) 124 ComScore (2007) 125 ITU (2003) 126 ComScore (2007) 123

43

As a measure of engagement, comScore analyzed the top-ten countries that were ranked, based on the average hours online per visitor in January 2007. Among the top countries, Canada led the list where the user spent an average of 39.6 hours (and 41.3 hours/month among broadband users) online during the month. Rounding out the top-five were South Korea (34 hours), Israel, the U.S. and the U.K (see Appendix 3). Currently, the mobile coverage infrastructure in SK, including the building and underground coverage, is nearly 100%.127 In rankings of total fixed (wired) broadband subscriptions per 100-population for OECD countries, SK is also in the top five. With a score of 36.2 in 2012, SK is led by countries, like Sweden, Denmark, and Netherlands. SK with ranking 4th is ahead of the US (15th), Germany (8th) and the UK (9th).128 To become a global ICT powerhouse, the country has been among the first countries in the world to commercialize technologies such as CDMA 2000, EV-DO and handset-based HSDPA. Wireless Broadband (WiBro) is a wireless broadband Internet technology developed by the South Korean telecoms industry.129 WiBro has been recognized worldwide for its technical competence in the outsourcing of network solutions and relevant equipment.130 1.5.3 ICT Industry of South Korea The ICT sector is significant and highly developed in SK. This sector accounts for 28% of the total exports of the nation, making it one of the leading information economies. South Korea is the number one market for manufacturing of Liquid Crystal Display (LCD), memory chips and smart phone.131 The ICT industry accounted for more than 17% of South Korea's GDP by 2007. According to the Bank of Korea, about 30-40% of total GDP growth of the country is contributed by the ICT industry. The ICT industry is distributed in three main sectors: ICT equipment, telecommunications services and the software industry. 132 -

ICT Equipment (Hardware):

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ICT equipment sector is the most significant in terms of production, accounting for more than 2/3 of the industry. SK has established itself as a global ICT powerhouse by leading the development of ICT-based society. The growth of ICT industry has been more concentrated in the hardware sector, which focuses on expanding wired and wireless telecommunication network penetration, rather than the software sector.133

127

Moran A. (2012) OECD (2012) a 129 http://www.wibro.or.kr/new/overview01.jsp 130 Jung M. (2010) 131 National University of Singapore (2008) 132 Press Release Distribution (PRLog) (2010) 133 Baik O. M. (2011) 128

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In 2003, the ICT export of Korea was US$57.2 billion, making 29.5% of the total export, US$194.3 billion. The ICT export grew to US$114 billion in 2007, and doubled to 2003 in 4 years.134 ICT´s export (In Billion USD)

2002

2002

2002

2002

2002

2002

46,4

46,4

46,4

46,4

46,4

46,4

Source: NSO, KAIT, KITA

Table 13: South Korea´s ICT export 135 SK´s PC market was worth around US$3.5 billion in 2011, Business Monitor International reported. Total PC revenues including notebooks and desktops are forecasted to rise to US$4.3 billion in 2015 at a CAGR of 5%. Local producers, e.g. Samsung and LG, are the leading players in the Korean PC market, with a combined market share more than 50%.136 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

12720

13737

14561

15144

16053

16855

18035

19478

20647

22092

IT market as % GDP

1,43

1,42

1,79

1,63

1,71

1,71

1,47

1,41

1,4

1,4

Hardware (computer market sales)

3400

3655

3765

3840

4141

4254

4451

4697

4862

5121

Services

5200

5521

5841

6021

6311

6677

7198

7832

8364

9017

Software

4120

4560

4955

5282

5599

5923

6385

6948

7420

7953

PCs( including notebooks)

2720

2887

3012

3110

3354

3455

3650

3889

4025

4251

Servers

306

329

338

345

372

382

400

422

437

460

IT market

Source: BMI report – South Korea Information Technology Report Q1, 2011

Table 14: South Korea´s Information Technology Sector 137 -

Software industry:

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In 2011, the software industry had been forecasted to account for about 35% of the domestic IT market. The software market is seen as the fastest-growing segment, especially in a pplication packages and new cloud computing. 138 In 2015, software spending is predicted to raise around US$ 8 billion, at a CAGR of 7%. Microsoft has disclosed plans to invest about US$ 60 million in Korea over the next 3 years for launching software development centers with Korean companies. Recently, Microsoft has teamed up with Huyndai, a Korean motor company, opening a research center to develop new IT products and services for automotive applications.139

134

National University of Singapore (2008) Okjeong Monica Baik (2011) 136 Press Release Distribution (PRLog) (2010) 137 Okjeong Monica Baik (2011) 138 Press Release Distribution (PRLog) (2010) 139 ComScore (2007) 135

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Security is another growing area. The Korea information security agency has estimated that the domestic information security market is valued at more than US$600 million, and was predicted to climb to over US$800 million by 2012.140 -

Services industry:

In 2010, the IT services had been projected to account for about 40% of the domestic IT market, with a spending of US$6.7 billion. The CAGR for this segment is estimated at 8% over the period of 2011-2015. For many IT services vendors, the Korean market is home to a number of large global IT services accounts. The fastest-growing segment of Korean IT service market has been the IT outsourcing. SK has the outsourcing market with the size of estimated in the US$6,000 million range141. As the global outsourcing business shifts from cost-saving to capacity building and from basic development to higher-value-added areas, SK wants to capture a larger share of the global market. The government agencies have also encouraged Korean companies to develop their own global software outsourcing model.142 The global platforms such as Facebook, YouTube or network devices such as iTunes have increased gradually over time. The spread of smartphone with 3G and the success of Apple´s iPhone and App Store have also created another trend. The SK sees more advantages in this field of value-added services for the network; mobile operators have promoted the platform businesses by developing a service, called “innovative killer service”. In early 2000, many different areas like portal, navigation, music, SNS, finance and commerce as network related value-added-service were offered. They first attracted a significant number of users in SK, then were exported to the global market, and nowadays have improved in order to be adopted widely as global standards. 143

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-

Content industry:

The home-grown content has developed stronger in SK than in other parts of the Asia. The country is also home to the government-funded Korea Game Industry Agency (KOGIA), which was founded in 1999 with the objective of developing the game industry as the key future strategic industry of the country.144 In the period of 2002-2007, the content industry in SK has grown at an average of 25.8%. Thanks to online games and entertainment services as the key contributors, the industry has a share of more than 30% of total industry revenue (see Appendix 3). 145 However, the communication content market is very concentrated. There were 2,018 content providers as of 2006. About 1% of total providers achieved the revenue of over US$25.4 million, while the rest accounted for revenues of less than S$2.5 million. NHN is the dominant content provider with a market share of 70%. It has also been used as a test bed for globally popular services such as Facebook and MySpace.146

140

Baik O. M. (2011) Baik O. M. (2011) 142 ComScore (2007) 143 Jung M. (2010) 144 http://www.kogia.or.kr/english/main/english_main.jsp 145 Central Intelligence Agency (CIA) (2012) b 146 OVUM Consulting (2009) 141

46

1.5.4 Policies in ICT development of South Korea Globally, SK is at the forefront of key developments that take place in the IT industry in terms of growth potential, trade, and added value. In 2005, the country was ranked among the topthree in the production and trade of IT equipment, accounting for almost 6 % of the world production and export volume in the industry. In 2010, the rate of ICT goods export took 21.4% of total goods export of the economy. SK has kept pace with the global competition in the IT industry due to continuous investments in technology innovation147. To achieve these successes in ICT, SK has initiated many reforms in its administration system during the last decade. Informatization Master Plan To ensure a fertile environment for development, the SK government has implemented policies specifically for ICT development. In early 1987, the SK government established a national policy to promote the development of IT in the public and private sectors with its “Framework Act on Informatization Promotion”. This act created the National Information Society Agency (NIA) to control: (i) the construction of high-speed networks; (ii) the use of information technology in the government agencies, promoting the e-government; and (iii) programs to promote public access to broadband and digital literacy.148 Year

Initiative

1987 1994 1996 – 2000 1999 – 2002 2002 – 2006 2003 – 2007 2006 – 2015 2006 – 2010 2011 – 2015 2006 2006

Framework Act on Informatization Promotion Korean Information Infrastructure Initiative First National Informatisation Promotion Plan Cyber Korea 21 initiative e-Korea vision 2006 Broadband IT Korea vision 2007 U-Korea Master Plan Phase 1 Phase 2 Broadband Convergence Network (BCN) Basic Establishment Plan

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Table 15: South Korea´s Informatization Master Plan 1996-2015 149 In 1994, the NIA established the Korean Information Infrastructure Initiative (KII) to construct a nationwide optical fiber network. The KII consists of three sectors and three phases: KII government, KII private and KII test bed called KOREAN (Korea Advances Research Network). KII government spent US$ 24 billion to construct a national high-speed

147

Korea Communications Commission (2010) The information Technology & Innovation Foundation (2008) 149 OVUM Consulting (2009); The information Technology & Innovation Foundation (2008); National Information Society Agency (NIA) (2010) 148

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public backbone network, which provides broadband services to about 30,000 government and research institutes and 10,000 schools.150 In 1999, the government followed KII with a string of a 5-year program that combined government loans with private sector contributions, including “Cyber Korea 21”. In 2002 were the “E-Korea Vision 2006”, and finally the “Broadband IT Korea Vision 2007” in 2003. The NIA also implemented programs to promote E-government. In 2006 the Ministry of Information and Communication (MIC) launched the “IT 839 strategy” (also called the “UKorea Master Plan”) to create a ubiquitous information infrastructure by 2010. The “Broadband Convergence Network (BCN) in IT 839 Initiatives” was launched for support further development of broadband connection in government. In the same year (2006), the government launched the “Basic Establishment Plan” to develop a seamless secure broadband access anytime, anywhere to convergent multimedia services.

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In additional to the NIA, the government established several agencies to promote broadband access in both the public and private sector. The “South Korean Agency for Digital Opportunity (KADO)”, which ensures that all South Korean citizens have the ability to access the Internet, including the elderly and those with disabilities through targeted training programs. Other agencies were also created to spur demand for broadband access and to ensure that the consumer knows how to access the Internet (digital literacy) as well as feeling secure while using it (Internet security and privacy). Thus, “Korea Information Security Agency” (KISA) was established in 1996 to create a safe, reliable information distribution climate. 151 “The National Internet Development Agency (NIDA)” were created to promote the Internet society through education and promotional programs. These include the “PC for everyone” program in 2006, “the computer literacy drive” in 1998, and “The cyber Korea 21 initiative” in 1999.152 The SK government´s national broadband strategy includes direct and indirect supports for broadband infrastructure development, including loans and other incentives. Especially, the KII provides a combination of the government and the private sector investment. For example, the government provided US$ 1.76 billion in government low-cost-loans in 2000-2005 from its public fund grogram and the private sector invested US$ 14.5 billion for a total public-private investment of US$16.4 billion. Furthermore, to stimulate demand for broadband, the SK government gave small and medium sized businesses a tax exemption equal to 5% of their total investment in the broadband communication system. This project funding continued with the programs to the KII The Broadband Convergence Network (BCN) and the IT 839. In this program, the Korean Government provided broadband service providers

150

National Information and Technology Agency (NITA) (2010) ; The information Technology & Innovation Foundation (2008) 151 http://www.kisa.or.kr/eng/main.jsp 152 The information Technology & Innovation Foundation (2008)

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incentives of over US$ 70 billion in low-cost-loans to build high-speed broadband networks.153 Throughout these programs, SK not only invested a substantial amount of money from government budget, but also enacted a lot of promotional regulations. For the supply side, the government provided incentives to private companies to build up the networks. For the demand side, considerable effort was made to promote broadband usage and digital literacy for individuals. 577 Initiative Under Lee Myung Bak’s administration, the 577 Initiative was established with the goal to pursue science and technology systematically. The name indicates: 5% of GDP for expenditure on R&D, 7 focuses strategic technology areas of R&D, and the world´s 7 S&T power.154 This initiative aims generally at Science & Technology (S&T) as a whole, not selectively just information and communications technology. The gross domestic expenditure on R&D has been expanded from 3.2% of GDP in 2006 up to 5% by 2012. The government expenditures on R&D increased from US$8.4 billion in 2008 to US$14.6 billion in 2012, an expansion of about 2-fold in 4 years. By 2012, half of the government's R&D budget was spent on basic and fundamental research—up from the current 25.6%. The funding pot for individual research grants tripled to more than US$1 billion in 2012.155

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Through the drastic reform of the educational system, the Lee Myung bak´s administration wants to cultivate a creative human resource, and establish a social climate in which the scientists are respected and given preferential treatment. Moreover, the efficiency of R&D investment is enhanced through systemic changes. 156 The National S&T council (NSTC) plays a key role for national R&D budget coordination and allocation. In the support system, the Korea Science & Engineering Foundation (KOSEF) and the Korea Research Foundation (KRF) are integrated under the Ministry of Education, Science and Technology (MEST). At management level, five directives and seven guidelines are integrated under regulation of MEST, indicating that MEST plays a very important role and is the leader of the whole system. Evaluation burden on researchers, mitigation of national R&D evaluation cycles is changed from annually to once every three years. With this longer period for evaluation, the bureaucratic procedure should be less imposing. Moreover the provision of tax incentives for R&D investment and deregulation for corporate research institutes are planned. The purpose is to expand private sector expenditure. For example a 7%-10% tax deduction rate for R&D facility investment was introduced by the government.157

153

The information Technology & Innovation Foundation (2008) OECD (2012) c 155 Stone R. (2010) 156 Ministry of Education, Science and Technology 157 Ministry of Education, Science and Technology; Jeong Hyop Lee (2012) 154

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Competition policy To intensify competitiveness between the main broadband providers (e.g. Korea Telecom, Powercomm and Hanaro Telecom (then renamed SK Broadband), the government has been directly involved in promoting competition. For example, Korea Telecom (or KT Corporation) founded originally in 1981 as a public corporation. The SK government licensed a new telecommunications service provider to compete directly with Korea Telecom in 1997. In 1998, Hanaro Telecom was created, which began offering broadband services in 1999. The government encourages the facilities-based competition for these players in pricing, infrastructure development and quality of service. By 2006, South Korea had 79 Internet Service Providers. The 3 largest providers control 85% of the broadband market.158 In 2009, local vendors such as Samsung and LG remained the leading player positions in the Korean PC market, with a combined market share of more than 50%. Samsung took pole PC market position, with a market share approaching 40%.159 Foreign vendors could join the market in what had previously been one of the most closed computer markets in the world. Companies like Asus, MSI rise sales of 50% in 2009 compared to 2008. The leading US vendor, HP, had around a 10% share.160 E-Education:

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The education system of South Korea is technologically advanced and it is the first country to bring high-speed fiber-optic broadband internet access to every primary and secondary school nation-wide. Using this infrastructure, the country has developed the first Digital Textbook in the world, which will be distributed for free to every primary and secondary school nationwide by 2013.161 Nearly all South Korea students are online, with a rate of Internet usage of over 99 percent. Driving this rate of Internet usage are SK government programs that require teachers to encourage students Internet usage by giving online assignments and communicating with them via e-mail. In addition, as part of the “Closing the Digital Divide Act” of 2002, the government provided free computers to 50,000 low-income students who have good grades.162 The Educational Broadcasting System (EBS) is a public multi-platform media organization, which broadcasts high school education programs via the Internet. EBS has more than 10 million registered subscribers and has been dedicating itself to leading in future media.163 The purpose of this system is that students need broadband access in order to complete their assignments and access to educational programs; these schemes encourage parents to get high-speed access for their children. The government´s digital literacy programs also introduced the “Ten Million People Internet Education Project 2000-2002”. The goal is provide Internet education to approximately a fourth of South Korean´s citizens. Similarly, the 158

The information Technology & Innovation Foundation (2008) ComScore (2007) 160 Press Release Distribution (PRLog) (2010) 161 Central Intelligence Agency (CIA) (2012) b 162 Hwang D. J.; Yang H.; Kim H. (2010) 163 http://www.ebs.co.kr/ 159

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government provided subsidies to around 1,000 private training institutes across the nation for the purpose of educating housewives, who usually do not access the internet. This program offered 20 hour, week-long courses to housewives for about US$30. The result was that in the first 10 days, 70,000 women signed up for the courses. 164 KADO has a variety of programs to promote digital literacy and access to computers. These include the establishment of 8,263 Local Information Access Centers throughout Korea where the public can access to the Internet for free. The government has realized that broadband demand would stagnate if the citizens did not have access to a PC at home. In 1999, the “PC Diffusion Promotion” was established to provide PCs at low-prices. Through this program, the government purchased 50,000 PCs and provided them to low-income families on a fouryear lease with full support for broadband free for 5 years. 165 In E-learning and U-learning programs, a widely accepted educational software, named EDUNET, (introduced in 1996) has been used by 90% of students and teachers. EDUNET is accessible for everyone from everywhere via the Internet with no costs. By September 2008, EDUNET had 5.8 million members. The number of visitors to EDUNET is estimated at approximately 440,000 per day.166 E-commerce The latest “South Korea B2C E-commerce Report 2011” of Hamburg based market research firm yStats.com reported the fact and figures on SK. According to the report, B2C Ecommerce is very well established. After double-digit growth rates in recent years, B2C ECommerce sales in SK reached more than EUR 10 billion in 2012. Revenue of B2C Ecommerce is expected to generate more than US$ 20 billion by 2015. Credit card payment becomes very popular; more than 70% of the total online trade volume is processed using this payment method. Not only are the popular online products such as travel arrangements, reservations, clothing and fashion-related goods, traded online, but a virtual grocery store was recently opened by Tesco. Other online shopping websites such as Gmarket.co.kr, 11st.ko.cr, Naver.com are expanding in retail online business.167

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E-government SK has the most developed e-government in the world by 2012, according to by UN Departments of Economic and Social Affairs.168 In SK, all procurement producers are handled online through the Korea Online E-procurement system (KONEPS). KONEPS was introduced by the central procurement agency. It provides a convenient one-stop service, enabling users to process all necessary operations for procurement-registration, bidding, contract and payment.169 The effectiveness of the Korean e-government applications are widely recognized by the international community, for example, KONEPS has won the UN Public Service Award 164

The information Technology & Innovation Foundation (2008) The information Technology & Innovation Foundation (2008) 166 OVUM Consulting (2009) 167 YStats.com (2011) 168 United Nation (2010) 169 http://www.chinapost.com.tw/business/africa/2012/11/21/361577/South-Korean.htm 165

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and Global IT Excellence Award by the World Congress Information Technology (WCIT) in 2008.170 Since its introduction in 2001, KONEPS has become one of the world´s largest cyber markets with total procurement business volume amounting to Won 52,579 billion (US$ 48 billion) in 2010 and 92% of all biddings has been done electronically in 2007.171 With KONEPS, all tax activities and Internet civil services, including filing, billing and payment are processed online. Taxpayers are able to retrieve information at anytime without having to visit the tax offices in person. E-people, by processing people´s complaints and initiatives via a single portal, allows people to provide their opinions or complaints about procedure or their rights and interests. The users have shown their satisfaction with the platform, it means that the e-government facilitated people´s participation in policy making.172 R&D investment in ICT Productivity studies reveal that ICT contributed to the 2.6 percent productivity growth rate realized from 2007-2008. On the other hand, ICT also represents a substantial source of job growth, and ICT workers earned more than the average worker. 173 For these advantages of investment, SK announced that it spent US$ 224.5 million on preparation for the launch of fully-fledged cloud computing services in 2010. The funds would be used to develop technology and build infrastructure required to support the services. Around 27% of the fund has come from the government, with the rest coming from private companies such as LG CNS. In human resources, the government spent US$27.4 million on support for software training programs and a plan for the training of 35,000 IT workers and 4,000 high-grade experts was also announced in March 2010.174 To help develop the domestic software industry, the Korean government plans to invest US$ 341.1 billion by 2013 and sets a target for the country to achieve annual electronics exportation of US$3000 million by 2015 with the semiconductor industry playing a key role. The Ministry of Knowledge Economy (MKE) plans to make SK a regional R&D hub for the chipdesigning segment that is currently dominated by Samsung.175

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From the very early 1970s, SK had the initiatives in investment for Research and Development. Until 2008, the ratio of R&D to GDP had reached 3.37 percent, as one of leading countries in the world, after Finland, Sweden and Japan. However, SK is better than the USA (2.68%) and Germany (2.54%). Not stopping at this level, the Korean Government plans to further investment to 5% of GDP in R&D. 176 (See 577 Initiative).

170

World Information Technology and Service Alliance (WITSA) (2009) Public Procurement Service (2006) 172 OVUM Consulting (2009) 173 Stephen Ruth (2010) 174 Press Release Distribution (PRLog) (2010) 175 ComScore (2007) 176 The Economist (2011) 171

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1970

1980

1990

2000

2002

2004

2006

2008

Total R&D expenditure

105

2117

32105

138485

173251

221853

273457

344981

Ratio of R&D to GDP

0,38

0,54

1,68

2,3

2,4

2,68

3,01

3,37

Source: World Bank

Table 16: Trend of R&D expenditure and R&D percentage of GDP (100 million won, %)177 Policy in Broadband development South Korea has the highest penetration rate of active mobile-broadband subscriptions, in a comparison to the top 25 economies (See Appendix 3). In fixed and mobile broadband penetration rates, SK and Japan are the first countries launching 3G mobile broadband network. By the end of 2010, SK, in particular, did not offer any broadband connection below 2 Mbit/s.178 Year 1998 2000 2002 2004 2006 2008 2009

per 100 people 30 57 68 76 83 94 97

Source: ITU ICT Indicator database 2011

Table 17: Mobile broadband penetration 1998-2009 in % 179 Broadband services were first launched in Korea in 1998. The research of the Global Information and Communications Technologies Department of the World Bank suggests that the fixed broadband market in Korea has evolved through 4 stages: Introduction stage (1998-1999)

Growth stage (2000-2002)

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Market maturity (2003-2005)

Move to Fiber (convergence) (2005 onwards)

Figure 6: Development of the mobile broadband market in South Korea 180 177

World Bank indicator (2012)l ITU (2011) 179 OVUM Consulting (2009) 178

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Broadband development in SK started in 1998. Within just 5 years, it had achieved successful milestones at global level. Besides other infrastructure investment by Korean government, “The certification program for broadband buildings” was driver of the success. SK has a much higher population density per sq. km than Vietnam (Vietnam at 280.35 and SK at 508.86 in 2010, according to a World Bank report)181, the way that Korea´s population is distributed is also different. Apartments make up more than 50% of Korea´s housing. However, this would not be as much of an advantage if the government had not required 2000 buildings to be designed to enable high speed broadband connections. Such techniques like locating Digital Subscribers’ Line Access Multiplexers (DSLAM) or cable head-ends in apartment basements are the most used. The buildings were evaluated based on the level of high-speed access, from 1st, 2nd to 3rd class, which indicate different speeds of provided access of 100 Mbps, 10-100 Mbps or 10 Mbps, respectively. The result is that 90% of South Korean households live more concentrated and with higher speeds of broadband installed in every building. 182 South Korea´s overview According to the Information Technology and Innovation Foundation, South Korea's broadband network is the fastest and most developed in the world. The average Internet speed was 17.5 Mbit/s, with a peak Internet connection speed of 47.9 Mbit/s. The Internet has a higher status for many Koreans than it does in the Western Countries, and the government actively supports this development. Particularly Seoul, the nation's capital, has been called "the bandwidth capital of the world".183 It has also the cheapest broadband, as well as the most developed e-government and e-education in the world. Additionally, the mobile broadband penetration has reached 97% in 2009, far away from the average mobile-broadband penetration in the developing (8%) and the developed countries (51%).184

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Its market is projected to continue to grow in 2013, the IT spending is expected to increase further from US$16.1 billion in 2010 to US$ 20.3 billion in 2014. Per capita IT spending will also rise from US$ 750 in 2010 to US$ 921 in 2014. In the consumer segment, growing broadband penetration and increasing speed create rising demand for ICT. In the enterprise segment, the industry trend is towards specialized vertical-specific applications, advanced ITservices and outsourcing. 400 billion Korean Won (US$ 341.1 million) is planned for investment in the software industry with the ambition of becoming a global software power. Remaining as leading hardware producers and leading in PC manufacturer is not enough for SK. The Ministry of Knowledge Economy has announced a plan for the training of 35,000 IT workers, and the creation of “University IT Research Centers.”185

180

OVUM Consulting (2009) World Bank Indicators (2012) 182 The information Technology & Innovation Foundation (2008) 183 Korea Communications Commission (2011) 184 ITU (2012) a 185 Press Release Distribution (PRLog) (2010) 181

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The government has introduced significant initiatives for promoting ICT, for example the “ICT informatization master plan” with different stages. Alternatively, various programs have helped people in increasing Internet literacy, which additionally support the usage penetration in SK. In E-education and e-government, many organizations and platforms have achieved enormous success due to the high-speed broadband backbone. 1.6

Comparison Between South Korea, China and Vietnam

Following are some macro economic indicators of three countries compared. Figure 7 shows different levels of development in Vietnam, China and SK. In GDP, growth rate and foreign investment inflow, China surpasses the South Korea due to its population and big market. In ICT goods import and export, SK has reached a comparable level to China, however China´s market and ICT industry is growing and playing more important role in the last decade. Vietnam is a country, which joined in the ICT market later, with its small population and low middle income level, can still not compete with other countries in all areas, except its high growth rate at average of 7% annually. Vietnam

China

South Korea

Population 2011

87.840.000 (13th)

1,347,350,000 (1st)

50,004,441 (25th)

GDP 2012 PPP

$320.874 billion

$11.299 trillion (2nd)

$1.622 trillion (12th)

st

GDP 2012 PPP Per capita

$3,549

$8,382 (91 )

$32,431 (25th)

GDP nominal 2011

$135.411 billion

$7.928 trillion (2nd)

$1.151 trillion (15th)

GDP nominal 2011 Per capita

$1,498

$5,413

$23,020 (32nd)

Source: UNESCAP, Worldbank

Table 18: Vietnam, China and South Korea at glance GDP growth (annual %) 16 14 12 10

Korea, Rep.

8

China

6 Vietnam

4 2 0

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2003

2004

2005

2006

2007

2008

2009

2010

2011

55

GNI per capita, PPP (current international $) 35000 30000 25000 20000 15000 10000 5000 0 2003

2004

2005

2006

2007

2008

2009

2010

2011

Foreign direct investment, net inflows (% of GDP) 12 10 8 6 4 2 0 -2

2003

2004

2005

2006

2007

2008

2009

2010

2011

Internet users per 100 population 90 80 70 60 50 40 30 20 10 0 2000

2005

2007

2008

2009

Fxed broadband internet subscribers per 100 population

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40 30 20 10 0 2000

56

2005

2007

2008

2009

Fixed telephone mainlines per 100 population 60 50 40 30 20 10 0 2000

2005

2009

Mobile cellular subscriptions per 100 population 120 100 80 60 40 20 0 2000

2005

2009

Source: Author's own graphs based on World Bank and UNESCAP database

Figure 7: Vietnam, China, South Korea in Comparison In general, South Korea achieved a higher GNI per capital than China and Vietnam. South Korea belongs to the developed economies in the world, while China and Vietnam are in the middle income group, according to the World Bank and IMF. The different ICT indicators such as Internet users per 100 people or fixed broadband internet subscribers per 100 people show that South Korea was very successful in ICT adoption in comparison to China and Vietnam, especially in the period of 2000-2005. China and Vietnam, however, have more advantages in term of economic growth rate and foreign direct investment, which could lead to further development in the next decade. Vietnam particularly did a great jump in mobile cellular subscriptions per 100 people in 2005-2009, which resulted in a higher penetration of mobile cellular than one of South Korea and China.

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Chapter 4 and chapter 5 will focus on further ICT indices and comparisons in different indicators of Vietnam, China and South Korea together with other Asian countries. These two chapters could provide in more detailed the development trends in Asia.

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ICT Performance Measurement Indexes This chapter deals with three ICT indices: Digital Economy Rankings of Economist Intelligence Unit, Networked Readiness Index of The World Economic Forum and ICT Development Index of International Telecommunication Union. For each part, definition, construction and the critical points of view of each index will provide more details for evaluation and interpretation. 1.7 Digital Economy Rankings 1.7.1 Introduction to Digital Economy Rankings Since 2000, the Economist Intelligence Unit (EIU) has evaluated the world’s largest economies on their ability to absorb ICT and use ICT for social and economic progress. The evaluation was named “E-readiness Index”, until 2010 then renamed to “Digital Economy Rankings”.186 Digital Economy Rankings (DER) is defined as the grade of an economy to use information and communications technologies to integrate traditional business into a new economy. DER has become very important because it can act as a strong predictor on how well a country can perform in the economy of ICT. It also provides policy makers with a detailed score card of their economy compared to its international competitors. Based on the comparison, policy makers can oversee the strengths and weaknesses from which they can propose an appropriate strategy for a country in digital transformation. 187 Many governmental and global organizations such as World Bank, Mc Connell, EIU, ASEAN, and APEC have created their own rankings. Their elements and measurements either in the form of self-assessment tools or surveys are different; however, there is a common standard among them. They all consider economical, political and social factors.188 Depending on the objective of assessment, an organization chooses a model and indicators for evaluating the e-readiness. Indicators can be classified into five main groups: Access, Learning, Society, Economy and Policy. 189

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The following section will introduce the calculation method to give information on how economy ranking was given to the country. .The same procedure can be used for other indices generally.

186

Economist Intelligence Unit (2010) Bui T. X., Sankaran S., Sebastian I. M. (2003) 188 Vaezi S. K.; H. Bimar S. I. (2009); Bui T. X., Sankaran S., Sebastian I. M. (2003) 189 Budhiraja R., Sachdeva S. (2002) 187

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1.7.2 Calculation Method Below is an example of a conceptual framework to measure e-readiness, introduced by Bui T.X., Sankaran S. and Sebastian I.M. E – readiness i = σ࢐ୀ૚ǡ࢔ ࢝࢏࢐ ࢋ࢏࢐ Τ࢔ e-readiness: the overall e-readiness value i: country j: each of the measures wij: relative weights assigned to the measures (j) eij: individual score for each measure n: total number of measures 190

The criteria, both qualitative and quantitative, evaluated for each country by an organization´s analysts, are different between organizations. The categories and individual criteria in each category are weighted differently according to their relative importance to promote the country´s information economy. A lot of information for the measurement comes from the United Nations Department of Economic and Social Affairs, the global centre for Economic Development and other international research institutes.191 In this example, the 8 factors and their 52 measures are used to calculate e-readiness. Eight factors include: knowledgeable citizens (KC); access to skilled workforce (ASW); macro economy (ME); digital infrastructure (DI); competitiveness (CMP); culture (CLT); Attitude to invest (ATI); cost of living and pricing (CLP).For example in “access to skilled workforce”, 6 measures are used. Taking the first measurement; the smallest value and the highest value are given the score of 1 and 5, respectively. The difference is divided into 4 equal intervals, which results in score 1 for smallest value, 2 for next range, etc, and 5 for the highest value. Countries with values closer to these values will be noted by this score. The average of all measures makes up the score for this factor of a country.

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The same calculation will be applied to other factors. At the end, all 8 factors are assessed for e-readiness points. These weightings reflect the analyst´s view of how important or influential that criterion is relative to the country´s economy. The e-readiness index values for the example are:

190 191

Bui T. X., Sankaran S., Sebastian I. M. (2003) United Nation (2010)

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Factors KC

ME

CMP

ATI

ASW

DI

CLP

CLT

ereadiness

China

2.33

1.75

2.14

3.00

2.33

2.00

3.00

2.00

2.32

Singapore

4.17

4.58

4.29

4.50

4.00

4.00

3.67

4.50

4.21

Hong Kong

3.67

4.33

3.29

3.50

3.67

4.00

3.67

4.00

3.76

Korea

4.50

2.50

4.29

3.25

3.33

3.44

3.67

3.25

3.53

Philippines

3.50

2.33

2.29

2.00

2.50

2.22

2.67

4.25

2.72

Indonesia

2.50

1.83

1.57

1.75

2.17

1.56

3.00

3.00

2.17

Malaysia

3.00

2.67

2.57

3.00

3.00

3.00

3.33

3.50

3.01

Thailand

3.50

2.58

2.43

2.50

2.83

2.00

3.00

3.00

2.73

Taiwan

4.00

3.17

3.86

3.50

4.00

4.22

3.00

3.25

3.62

Vietnam

2.50

1.83

1.86

3.00

2.17

1.78

2.67

2.50

2.29

East Asia

3.17

2.75

3.00

3.25

3.00

2.56

3.00

3.25

2.99

USA

4.67

4.42

4.71

3.75

5.00

4.56

4.50

3.25

4.36

G7

4.50

4.50

4.29

3.25

4.67

4.00

3.33

3.75

3.91

Country

Table 19: An example of calculation E-readiness 2003 192 With these indices, it is easy to see, which countries lag behind in which factors. For example, for “Knowledgeable citizens (KC)” factor, South Korea has achieved a 4.5, the same as G7 and very close to USA. China, Indonesia and Vietnam, are scored with very low grades. That means these countries need to plan additional investments in education.

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The e-readiness also provides policy makers guidance for improvement by identifying the country´s strengths and weaknesses. For example, China, Indonesia and Vietnam with low scores in “macro economy (ME)” show that these countries have macroeconomic environment not conducive to e-business. China and Vietnam are strictly controlled by the government in all sectors especially in communication and press. It indicates the need for policy makers in China and Vietnam to work on improving macro-economic environment. In order to improve macro conditions, they can look through component measures in this factor such as “business climate” or “ease of business”. From here, the regulatory environment for an ebusiness incentive to the economy is focused, for example more liberalized market, opener regulatory standards. Moreover, to catch up with competitors, the policy makers can learn from the leaders, how they can achieve high score in defined areas. 193From the general understandings of index and its calculation method, next part provides more practical result of Digital Economy Index in 2010.

192 193

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Bui T. X., Sankaran S., Sebastian I. M. (2003) Bui T.X., Sankaran S., Sebastian I. M. (2003)

1.7.3 Digital Economy Index 2010 The 2010 digital rankings of EIU are slightly different from that of previous years in terms of evaluation of the quality of broadband and mobile connections. With this in mind, the rankings of Europe and North America declined in comparison with the absolute and position gaining of the Asian countries, such as Taiwan (12th), South Korea (13th) and Japan (16th), due to their heavy investment in the next generation of broadband infrastructure. The number one of the year 2010 Sweden (1st) and number two Denmark (2nd) were close in the rating. In other words, a whole the digital division is narrowing, where 5.9 points (on a 1-10 scale) separated the top-ranked country from that of the bottom ranked in 2009 into 5.5 points in 2010.194 Broadband has become the default mode of Internet access. In Asia, fiber access is a key part of broadband connections, with more than 70% of the world´s fiber-based broadband subscribers at end of 2009. The abundant dense fiber connection of Japan, South Korea and Taiwan has risen significantly, which shows in their overall ranking as well. 195 The price for broadband is also decreasing. The monthly fee charged by the main broadband provider amounted to less than 2% of median monthly household income. While only 33 of 70 countries in 2008 achieved this price, in 47 of 70 countries people pay less than 2% of their median monthly income for broadband internet in 2010. The world´s highest fees for broadband access include Vietnam (62nd) and Indonesia (65th).196 1.7.4

Critical Evaluation

E-Readiness assessments are intended to guide development efforts and improve processes, by providing benchmarks for comparison and improving process. Detailed scores for all influential factors, the current situation is determined in order to plan for the future and specific needs changes. Since many countries use ICT for improvement, a country can face a threat of being left behind without chance of catching up or following the global trend.197

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All international donors, lending agencies, and foreign investors are integrating ICT into development and aid programs. A country which does not strive to be part of this global playing field would fail to receive support and investment from other parts of the world. This especially applies to developing countries and emerging countries where investments crucially are needed. 198 E-readiness is a useful benchmark for comparison and progress overview in ICT adoption of an economy, but there are some methodological weaknesses: 199

194

Economist Intelligence Unit (2010) ; The Economist (2007) Economist Intelligence Unit (2010). 196 CAVAL Collaborative Solutions (2006) 197 Budhiraja R., Sachdeva S.(2002) 198 Economist Intelligence Unit (2010) 199 Budhiraja R., Sachdeva S. (2002) 195

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• •

•

•

1.8

The commonly used additive functions cannot reflect the composite effect of the factors and the interaction between different measurement factors. Understanding exactly what a readiness index means and how it is achieved is difficult and unavailable for everyone. It is important to develop a specific e-strategy. However not every stakeholder and implementation partner is aware of the interpretation of the measurements. Lack of transparency: the EIU does not represent how the index values come into existence. Many sources are mentioned in the reports, such as EIU, Pyramid Research, World Bank, and United Nations, etc., but the database itself is not reported. So it is unclear how the sub-index values are calculated and how the final E-readiness index is calculated. Reflection on the weighting factors: The weight of each parameter in DER is explicitly chosen. The most important (the highest weighted category with 25%) is the “acceptance by consumers and businesses”, which makes this category a quarter of the total index and 2.5 times more than the “statutory framework”. Whether the consumer acceptance is 2.5 times as important as actual legal conditions is not clear. The weights of each factor in the DER is given by the analysts, there is no standard or logical explanation for the weights.200 Networked Readiness Index

This section of Networked Readiness Index will firstly give some insights into how NRI is constructed and then explain some highlights as well as weaknesses of NRI that should be taken into account. 1.8.1 Introduction to Networked Readiness Index

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The Networked Readiness Index (NRI) of the World Economic Forum (WEF) was published in 2003. It is one of the most important indices for measuring equipment for ICT in a country. Over time, the indicators have been changed due to emerging significant developments in ICT, for example the additional variables in the mobile area.201 In 2011, the WEF published the NRI for 138 countries, based on a total of 71 variables. Generally NRI contains three groups of sub-indices: Environment, Readiness and Usage. In each sub-index group other, smaller, groups of indicators are divided as follows:

200 201

62

Dada D. (2006) World Economic Forum (2012)

Figure 8: NRI Construction 202 The survey data is processed in a representative study from the Institute of Economic Research WIFO. Managers of companies are surveyed. Their answers are ranked from 1 to 7. The values of the individual surveys are averaged to the score for the components in the sub index. The values of the components again averaged to the score of sub indexes, and finally the 3 sub indices to the Index value. The weights used are equal among component, sub-index or indexes. The same procedure is applied to the case of E-Readiness Index (see chapter 4a).203 1.8.2 Networked Readiness Index 2010-2011 The top 3 nations of NRI categories 2010 worldwide include the following Asian countries: Singapore (in “Environment” and “Readiness”), Korea and Taiwan (in “Usage”). Hong Kong leads in the Market Sub-index and the Individual Sub-index.204

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The result gives an overview of the leading nations at the NRI and its sub-areas. Besides leading global countries like Sweden, Finland, Luxembourg and Switzerland, the far eastern countries like Singapore (2nd), , Taiwan (6th),SK (10th) and Hong Kong (12th) are also at the top rankings.205 The explanation for this is that governments of these countries are actively investing on this field. For policy makers, digital channel adoption remains an elusive goal. South Korea is well known for both the density of its broadband penetration and its high digital ambitions. The country leads the world in e-government.206 However, although the awareness of egovernment was high, less than one-half of the citizens actually used e-government and more

202

Rundfunk und Telekom Regulierungs-GmbH (2011), World Economic Forum (2012) Rundfunk und Telekom Regulierungs-GmbH (2011) 204 Dutta S., Mia I. (2011) 205 World Economic Forum (2012) 206 United Nation (2010) 203

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than 150 service portals offered by the government in different areas such as tax-filling or the anti corruption and complaint channel are not fully used.207 In the spotlight of information security, South Korea did a great job in promoting e-business. A new cyber crime office has been established by the Ministry of Interior. Rules for protecting individual information have been introduced, with fines for violators. Laws are developed to protect critical telecommunications and information processing centers, by requiring compliance with security standards. The government inspected each of its own computers and removed pirated software thus ensuring intellectual property protection. In addition, a national public key infrastructure was introduced and legalized in 1999, which enabled wide use of digital signatures and encryption. This was a significant endeavor in promoting trust and confidence in e-business and e-government interactions.208 1.8.3 Critical Evaluation It is important to note the following weaknesses of NRI: • •

•

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•

207

Biased responses. While taking the surveys, the responses are likely affected by subjective opinions and attitudes of the participants.209 Eventual impact. Similar to DER, it might take a long time for changes to generate results. For instance, the time until the enactment of legislation on law, tax or education. 210 Limited authorization. Some changes, such as taxes and legislation, can only be executed by federal authorizations. Others changes are affected indirectly by state (e.g. budget of the company for research and development, cooperation with universities, operating subsidiaries of large multinational enterprises corporations). It is critical that these factors have the same weights as in the calculation of NRI.211 Weighting schema. The NRI provides no emphatic weighting of the factors. On the first level each sub-index has equal weight of 1/3. On the next level, each sub-index contributes 1/3 for each column. However, the numbers of items in each survey column are different. For example in “political and regulatory environment” 11 indicators are used while “maturity of the public sector” only makes use of 3 indicators. Therefore, each indicator in the latter weights a lot more than one in the first.212

Economist Intelligence Unit (2010). Mc Connell (2000) 209 World Economic Forum (2012) 210 Rundfunk und Telekom Regulierungs-GmbH (2011) 211 Dada D.(2006) 212 Rundfunk und Telekom Regulierungs-GmbH (2011) 208

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1.9 ICT Development Index 1.9.1 Introduction to ICT Development Index The ICT Development Index (IDI) was developed in 2008 also by the International Telecommunication Union (ITU). ITU, based in Geneva, is a special Organization of the United Nations. ITU is the only organization that officially works with technical aspects of telecommunications worldwide. IDI is a composite index combining 11 indicators into one benchmark measure that serves to monitor and compare developments in ICT across countries.213 The main objectives of the IDI are to measure: 214 - The level and evolution over time of ICT developments within countries and relative to other countries - Progress in ICT development in both developed and developing countries - The digital division, the differences between countries with different levels of ICT development - The development potential of ICT that countries can make use of to enhance growth, based on available capacities and skills.

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Based on three ICT development process: ICT readiness, ICT intensify and ICT impact, the IDI is divided into three sub-indices: Access, Use and Skills, in each of which, other indicators are attributed into a detailed index of development.

Source: ITU

Figure 9: ICT Development Index´s construction 215

213

World Economic Forum (2012) ITU (2011) a 215 ITU (2011) a 214

65

1.9.2 ICT Development Index 2010 The IDI analysis The IDI is represented by scale from 1 to 10. Between 2008 and 2010, 153 countries participated. Overall, the average value of the IDI increased from 3.62 to 4.08, by 0.46 points. However the change in the sub indices is more interesting than the IDI itself. In the past, 2002-2007, the “access sub-index” had the strongest growth. Between 2007 and 2008, both “access sub-index” and the “use sub-index” increased equally. Between 2008 and 2010, the “use sub index” surpassed the “access sub index” to become the most quickly growing one. This change could be explained by the conceptual framework above, that is, the world is moving to stages of “intensity” from the state of “readiness”. IDI 2008

IDI 2010

7,01

Average value 4,08

4,05

7,97

Use Sub-index

1,75

Skills Sub-index

6,49

IDI

Average value 3,62

Access Sub-index

Range

Change in average value 2008-2010

Range 7,57

0,46

4,53

8,19

0,48

6,91

2,37

7,84

0,62

8,44

6,58

8,45

0,09

Source: ITU

Table 20: ICI changes, 2008-2010 The “access sub-index” has an average value of 4.53. The “Use sub-index” is still considered relatively low at an average of 2.37 although it has increased considerably since more people are using internet and broadband over the past few years. The “skills sub-index” changed a little. It indicated that literacy and education for ICT skills were focused moderately compared to the other two sub-indices. This has already reached a rather high level.

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In the IDI rankings 2008 and 2010, most of top 10 countries are European countries with the exception of Hong Kong and SK. It is worth to note that SK belongs to top three, and has surpassed the 8 point-mark in IDI rankings. The value difference between SK and the other following countries (except Sweden in 2nd place) is quite high. In other words, the performance of this country is outstanding. SK is ranked top in both IDI 2008 and 2010. The country has made ICTs the core engine of economic growth and implemented policies allowing it to become an “IT powerhouse”. By creating a competitive and dynamic regulatory environment, SK has an inclusive information society and a number of government-driven initiatives, including the Giga Internet Pilot Project- the construction of 100 Mbit/s broadband networks in rural areas. Especially in IDI “use sub-index”, with its highest mobile-broadband penetration worldwide (91 per cent) and very high fixed broadband penetration (36.6%), SK tops in this use sub-index 2010. The high number of households with Internet connection (almost 97%) and the very high performance

66

on 3 indicators (Secondary, tertiary school enrolment and adult literary) also make SK stand out on the “skills sub-index”. 216 IDI dynamic analyses: IDI 2010 rank 72 90 81 74 46 Source: ITU

Changes in IDI ranking Country IDI change 2008-2010 Armenia 14 Morocco 10 10 Vietnam Azerbaijan 9 Saudi Arabia 9

Change in IDI value (%) IDI % change 2008-2010 31 31 28 28 28

Table 21: Most dynamic countries (top 5)-changes between IDI 2010 and 2008 Access rank 2010 51 43 72 28 Source: ITU

Country Belarus Saudi Arabia Vietnam Qatar

Access value change 1,36 1,32 1,28 1,06

Access rank change 10 8 16 9

Table 22: Top economies with the greatest change 2008-2010 in the “Access sub-index”

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From the list of the most dynamic countries in the period 2008-2010, a number of developing countries have made significant progress, including Vietnam. This is very a useful analysis to identify countries with the big change in IDI ranking and IDI value in both absolute and relative terms. Vietnam (ranked 81st) increased it IDI value from 2.76 in 2008 to 3.53 in 2010 by 28%, rising 10 places.217 Vietnam jumped 16 places in the “access sub-index” ratings with significant gains in mobile penetration and international internet bandwidth per users. The mobile-phone penetration changed significantly from 87% in 2008 to 175% by the end of 2010. According to Telecom Operator VinaPhone, with 3G services mobile subscriptions was doubled from 2008-2010. It puts Vietnam in 8th place worldwide in terms of mobile-cellular penetration. It is also believed that the product introduction of Iphone and HTC, has together with 3G availability contributed to the country´s mobile-broadband success. 218 In international internet, the bandwidth rates rose from 50064 Mbit/s to 134420 Mbit/s. Vietnam is now connected with the 3 Asia America Gateway (AGG). It connects southern Asia to America by an undersea cable network with an internet transmission capacity of 500 Gbit/s. Government support has boosted the country´s ICT in a positive direction and status. For example the Law on Telecommunications and a Law on Wireless Radio Frequency, launched in July 2010, aims to encourage all economic and private sectors to develop their telecommunication services, investments and infrastructure.219

216

Rundfunk und Telekom Regulierungs-GmbH (2011). ITU (2012) c 218 Vietnamese Ministry of Information and Communications (MIC) (2011) 219 ITU (2011) a 217

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However, household access to computers and Internet is still low and mobile broadband was practically non-existent in 2008. In 2010, it reached 13%. However, compared to SK with 91%, there is much work needed to increase internet usage and broadband penetration in the near future. 1.9.3 Critical evaluation • •

•

Data collection problem. the same criticism as for the Digital economy ranking. The frequency of the rankings. The first rankings was in 2002, the next in 2007 then 2008 and the last update in 2010. The irregular frequency is a problem, another problem is that developments in technology are very rapid however data used in reports may have been taken from earlier surveys . 220 No absolute best value. In determining the Sub-index values, an ideal value is calculated, which is observed from the average of all values plus 2 standard deviation yields. This makes it difficult to evaluate the value of a country or the value is solely used for comparison between countries, otherwise it is meaningless.221

In general, three indices have some common framework for measuring ICT development and adoption of a countries. Because of different concepts and databases, it could rank differently for the same country or the same year. There are still obvious weaknesses of indices which should be considered in the interpretation and implementation for comparison between countries. In next chapter, the selected countries will be examined based on these three indices to see how different their ICT dvelopements are within Asian region.

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ICT Development in Selected Asia Countries With the information and the measurement of how the ICT was adopted by countries in chapter 3 and 4, the natural questions have been: 1) What are the difference between country strategies for ICT adoption? and 2) a question for policy maker: What are the impacts on and possible improvements to growth, GDP, GNI ? These questions have motivated many researchers. The focus of the relevant studies was on ICT and the economic growth and the relationship of E-Readiness and GNI or income level. Subsequently, the studies of ITU, UNDESA, OECD and World Bank, have extended the investigations on the impact of ICT on Europe, USA, and Africa.222 The present paper focuses the analyses for only 12 selected countries in east and central Asia (Japan, Singapore, Hong Kong, Taiwan, South Korea, China, Malaysia, Indonesia, Vietnam, Philippines, Laos and Cambodia). The data used was mostly obtained from ITU and World Bank and the methodology applied is basically the correlation analysis.

220

Rundfunk und Telekom Regulierungs-GmbH (2011) Dada D.(2006) 222 ITU (2011) a 221

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1.10

Cluster Building

The analysis of ICT development in Asia was integrated into many studies, which has resulted in different clusters. According to The Vietnam Competitiveness Initiative (VNCI), funded by the U.S. Agency for International Development (USAID), there are three groups of countries within Asia-Pacific region. In another study of ITU, four groups of countries were formed, according to the income group division. This study has a high preference of making three groups of countries; mostly relying on the ICT indicators´ performance and ICT level development. However further study and technical assistance will be required to validate and implement the initiatives identified in this study. 1.10.1 Countries Classification According to Southeast Asia Competitive Initiative The Southeast Asia Competitive Initiative (SACI) divides countries into three groups:223 •

•

•

The first group consists of countries that have been proved to be the world´s most successful in exporting software and related ICT services, having robust technologies, high levels of productivity and a business climate that is conducive to the growth of ICT sector. This group includes Singapore, Hong Kong, Japan and Taiwan. The second group comprises successful software and ICT exporting competitors having moderate industry success, attractive fundamental resources and potential. These countries tent to have lower labor costs than those of the first group. This group consists of China, India, South Korea and Malaysia The third group is composed of countries that are now lagging in software exports, despite having also low labor cost. Countries listed in this group include Vietnam, Thailand, Indonesia and Philippines.

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The 3 groups were compared in detail, separately in different criterions. The ICT indicators and the influencing factors which contributed to their ICT success are shown. For example, Business Climate, Human Resource, Supporting Infrastructure and Marketing Promotion are indicator categories influencing group division. Below are some important criterions for four countries Singapore, China, South Korea and Vietnam. Group 1

Group 2

Group 2

Group 3

Comparison of ICT success

Singapore

South Korea

China

Vietnam

ICT export sale

1 billion

290 Million 2001

Success in global branding

Creative lab

Samsung, Blizzard, Apex

0,76 Billion- 2001, 1,2 Billion 2003 Neusoft, Chinasoft, Eastsoft

20 Million 2001, 25 Million 2002 IBM, Cisco, NTT, IDG, Intel

Language skills

global leader

fair

Limited

very limited

Technical skills

excellent

excellent

excellent

poor to good

good

ok, chaebol

medium-rising

almost none

Human resources

Entrepreneurial culture Venture capital access

223

Vietnam Competitiveness Initiative VNCI (2003)

69

Telecoms and Internet Affordability

very affordable

global leader

high but dropping

very expensive

excellent

good-Daedok science Town

good-Suzhou Park

improving-Quangtrung, SSP

piracy rate 50%

56%

94%

97%

global leader

Excellent

good to excellent

low

Other supporting infrastructure Software parks Business climate Intellectual property safeguards Marketing/promotion Image as market leader

Table 23: ICT in ASIA Cluster building of Southeast Asia Competitive Initiative (SACI) 224 In this study in 2003, South Korea still belonged to the second group and was at the same level of ICT development as China and India. But in fact at the end 2011, South Korea became the ICT powerhouse and is one of the most developed countries in ICT at world level. This was because South Korea made the greatest developments in the last decade to improve their ICT sector, as well as the ICT performance (see part 3.3). In spite of the study being outof-date, these comparisons of different criterions and factors influencing the ICT development are still useful for researchers and policy makers in identifying the key drivers their countries should address for future improvement. For example, five categories of influencing factors: marketing, business climate, infrastructure, human resources and entrepreneur culture, consistently play important roles in the ICT ranking. This paper will focus in the next chapter on the political recommendations related to these aspects, 1.10.2 Countries Classification According to the World Bank From another perspective, the World Bank in The Global Information Technology Report 2010-2011 grouped the countries based on their economic ability or the GNI per capita. 225 In this report, the calculation of Networked Readiness Index (NRI) was also described. • •

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• •

Group I: the high-income (> US$ 11,905): 48 nations, including Singapore, Japan, Hong Kong, South Korea Group II: the upper-middle-income (US$ 3,856-11,905): 31 nations, including Malaysia Group III: the lower-middle-income (US$ 976-3,855): 34 nations, including China, Thailand, Vietnam, Indonesia, Philippines Group IV: the low-income (US$ < 976): including Laos and Cambodia.226

Another paper of International Technology Union (ITU), which introduced IDI rankings, has described close relationship between ICT development and income level in terms of GNI per capita.227 It was also found out that a national economy with rising income tends to increase 224

Vietnam Competitiveness Initiative VNCI (2003) Rundfunk und Telekom Regulierungs-GmbH (2011) 226 World Bank (2008) 227 ITU (2009) 225

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the NRII. This is expectable e cconsidering the tight link betweenn the devellopment an nd use of ICT finaancial resou urces of a country. How wever, theree are exceptions to thiss rule. For eexample, China and a Vietnam m as lower-m middle inco ome nations have higheer NRI than n the other in ndustrial nations with higherr income, suuch as Greeece, Slovakiia or Kuwaiit. The samee case is app plied for K Whille Japan annd Hong Ko ong obtain higher inco ome levels than SK, th heir ICT South Korea. perform mance standss clearly behhind the Ko orean ICT ddevelopmentt.

Source: IT TU

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Figure 10: IDI and d GNI per capita, PPP, 2009 To inveestigate relaationship beetween ICT T indicators and countrries nation income lev vels ITU used thee correlatio on model, which w shows a strong rrelationship p between GNI G per cap pital and IDI in 2010 2 from both b data froom all coun ntries includding the Asiia-pacific reegion. The R2-value of 0.8 point p indicaates a stronng relationsh hip betweenn the two vvariables. Itt is evident that the points locate l closeely to the logarithmic curve, meaaning lowerr income leevels corresspond to lower ID DI levels an nd vice verssa. Howeveer, some couuntries score relatively y far from th he curve, for exam mple, South h Korea (thee top-ranked country), Japan and Hong Kongg (China) with w their 228 IDI leveels much higgher relativ ve to the GN NI per capitaa levels (Figgure 32). The reasonss for this phenom menon are the t strong IICT targeteed policies, including a widely available a brroadband infrastru ucture, and a strong IC CT industry sector of thhese exceptiion countriees. At the lo ower end of the curve, c there are countriies well bellow the currve. These ccountries haave higher levels l of income than the IC CT developpment that is i expectedd to develop p at the sam me pace or stronger d in sectorss besides than thee income peer capita. Itt indicates that these ccountries haave focused ICT and d achieved level l incom me through revenues r froom these ind dustries succh as oil or banking. b 2 In shortt, the R -vaalue illustraated a stron ng correlatioon between n the IDI an nd national income, howeveer, some exceptions off countries lying above or below w the trend line is appaarent. In general,, the higherr income lev vel a countrry has, the higher ICT T developmeent index sh hould be 229 achieved.

228 229

Data: ITU (2011) a Inform mation and Coommunications for Developpment (2009)

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1.10.3 Countries Classification According to Author Based on ICT Development In this part, the conclusion of this report depends on the available data. Thus it would be different from the empiric results from other papers and is not applied to other regions because the data used are only specified for 12 countries with points missing for some indicators. Firstly, the three ICT indices (NRI, DER, IDI) will be compared for 12 countries. Then, the clusters built on important ICT indicators will be reviewed. Further analysis in the two aspects, affordability and infrastructure, will give more details on the differences between clusters. Rankings based on ICT indices It is clear from Table 24 that the different ICT measurement methods can result in different rankings of countries. For example China was ranked at 37st (NRI), 56th (DER) but 80th (IDI); and Vietnam ranked at 54rd, 62nd and 101st places, respectively. The gap between countries in ICT rankings within the region is noteworthy. While Singapore achieved the second grade in NRI 2012, the Philippines lagged at 86th position out of 142 countries. One reason for the different rankings obtained from different measurements was the total number of surveyed countries in each index. In DER, 70 countries were surveyed, the DER rankings of China and Vietnam were relatively lower than that of NRI which concluded 133 countries. The same was true of Singapore, which was ranked 2nd in NRI (2010) and 8th in DER (2010). Moreover, due to different measurement indicators and survey methods, the rankings cannot be compared in absolute terms with each other.230

Country

Singapore South Korea Hong Kong Japan Malaysia China Thailand

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Vietnam Phillipines Indonesia Laos Cambodia

Income group

High (More 12274) High (More 12274) High (More 12274) High (More 12274) Upper middle (3975-12274) Upper middle (3975-12274) Upper middle (3975-12274) Lower middle (1005-3974) Lower middle (1005-3974) Lower middle (1005-3974) Lower middle (1005-3974) Low (1005 or less)

NRI 2012 (142 countries)

NRI 2010 (133 countries)

Ranks

Points

Ranks

Points

Ranks

Points

Ranks

Points

Ranks

Points

2

5,86

2

5,64

8

8,22

19

7,08

15

6,71

12

5,47

15

5,14

13

7,94

1

8,4

1

7,8

13

5,46

8

5,33

7

8,22

6

7,79

6

7,14

18

5,25

21

4,89

16

7,85

13

7,42

11

7,01

29

4,8

27

4,65

36

5,93

58

4,45

57

3,96

51

4,11

37

4,31

56

4,28

80

3,55

75

3,17

77

3,83

47

3,97

49

4,86

89

3,3

80

3,03

83

3,7

54

3,87

62

3,87

81

3,53

91

2,76

86

3,64

85

3,51

54

4,47

92

3,22

95

2,69

80

3,75

67

3,72

65

3,6

101

2,83

107

2,39

121

1,9

119

1,64

117

1,99

120

1,63

108

3,32

117

Source: ITU, World Economic Forum, EIU, World Bank.

230

72

Dutta S., Benat B. (2012)

3,03

DER 2010 (70 countries)

IDI 2010 (154 countries)

IDI 2008

Table 24: ICT Indexes of 12 countries It should be noted that NRI scores in 2010 for Vietnam, China and SK are 3.87, 4.31 and 5.14, respectively, despite the big difference in ICT performances between these countries in all aspects, from access to usage, as well as in skills. It means that a country has to invest significant effort to achieve one more score by NRI. 231 Especially in 2012, the NRI scores of China and Vietnam decreased from 4.31 to 4.11 and from 3.87 to 3.7, respectively while SK achieved a better score from 5.14 to 5.47. These changes in NRI scores indicate that China and Vietnam had done worse in contrast to SK in their ICT performances in 2012. Therefore, the rankings of China and Vietnam declined strongly in 2012 in comparison to 2010, 37th to 51st for China and 54th to 83rd for Vietnam. Another argument isthe NRI 2012 focused more intensively on the broadband infrastructure and e-government. It is obvious that, both China and Vietnam underachieved in these areas in 2012 and obtained a worse evaluation than SK, which was very successful in broadband development. The indices based on different measurement methods and indicators give different results in ranking and evaluation. For example SK ranked top in IDI, but far away from top 10 in DER and NRI, after Hong Kong and Singapore. Vietnam generally past Thailand in IDI, but in DER and NRI ranked after Thailand. In short, the two indexes DER and NRI provided approximately the same information for the level of ICT performance adopted by a country. On the other side, IDI measured the progress of the countries in ICT performance over the time. SK (1st rank) and Vietnam (81st rank) in IDI 2010 showed a higher score in this index than other indies because they had achieved significant improvement from 2008-2010 relative to other countries. The DER in 2010 for ASIA _PACIFIC region is as follows: 232 • • • • • •

Connectivity and technology infrastructure: South Korea (7.90), Japan (7.70) Social and cultural environment: South Korea (8.80) and New Zealand (8.60) Business environment: Singapore (8.63) and Hong Kong (8.40) Legal environment: Hong Kong (9.0) and Singapore (8.70) Government policy and vision: South Korea (9.20) and Hong Kong (9.18) Consumer and business adoption: Singapore (8.48) and New Zealand (8.29)

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In almost all categories, South Korea, Hong Kong and Singapore took the leading positions. New Zealand achieved a certain level, however this will not be discussed in this paper. Japan is a highly developed economy, but in ICT development it was not as successful as three other leaders. Cambodia and Laos were ranked as the two lowest countries in the group. Their bad performance in ICT adoption is evident in 2010 the NRI and DER had no evaluation for them at all. In addition, the IDI 2010 gave them the very low rankings of 121st for Laos and 117th for Cambodia out of 154 countries. 231 232

CAVAL Collaborative Solutions (2006) Economist Intelligence Unit (2010)

73

a. Few stylized facts .

In order to have a visual comparison, some important indicators of the 12 countries were analyzed in more detail. Individual Using the Internet in % (2010-2011) 90 80 70 60 50 40 30 20 10 0

Well-developed group individuals using the Internet % (2010)

Median-developed group

individuals using the Internet % (2011)

Fixed broadband subscriptions per 100 inhabitants (2010-2011) 40 35 30 25 20 15 10 5 0

fixed broadband subscriptions per 100 people(2010)

fixed broadband subscriptions per 100 people (2011)

Household performance access in % (2010) 120 100 80

household with a computer %

60 40 20

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0

household with internet access at home %

Source: Author's own graphs based on World Bank, ITU and UNESCAP database

Figure 11: Comparison some ICT indicators of 12 countries 2010-2011 Asia, especially East Asia consists of countries that greatly vary in the levels of economic development and consequently in their ICT indices. Hong Kong (China), Singapore, Japan and South Korea were ranked top for the DER, NRI and IDI. China and Malaysia achieved the lower rankings, even that, they are currently the largest and fastest growing consumers and producers of technology in the world. The other countries including Indonesia, Philip74

pines, Vietnam and Thailand are catching up in the ICT sector and ICT development but still face challenges. All factors (infrastructure, internet security, innovation, regulatory framework and skills) must be developed to ensure the development of e-readiness. The last two countries, Cambodia and Laos were far behind in the ICT development. Based on the indicators, “fixed broadband subscription per 100 inhabitants” and “internet user per 100 inhabitants”, Cambodia and Laos showed no improvement during the last decade, while other countries strived to achieve some development (Figure 12). Internet users per 100 population 90

Korea

80

Japan

70

Hong Kong

60

Singapore Malaysia

50

China

40

Vietnam

30

Thailand

20

Philippines

10

Indonesia Lao PDR

0 2000

2005

2007

2008

2009

Cambodia

Fixed broadband internet subscribers per 100 population

Korea

40

Hong Kong

35

Japan

30

Singapore

25

China

20

Malaysia Vietnam

15

Philippines

10

Thailand

5

Indonesia

0

Cambodia

2000

2005

2007

2008

2009

Lao PDR

Source: Author's own graphs based on World Bank database

Copyright © 2016. Diplomica Verlag. All rights reserved.

Figure 12: Internet users and fixed broadband internet subscription rate of 12 countries 20002009 In this study, the 12 countries can be divided into three groups. The first group which includes 4 countries: Hong Kong, Singapore, Korea and Japan. This group has reached a stable level of ICT performance as well as ICT industry. It can be named the “well-developed group”. The second group consists of 6 countries: China, Malaysia, Vietnam, Indonesia, Philippines, and Thailand. Although these countries had achieved positive results for their ICT development, they were inadequate for competing in the global playing field. The obvious obstacles and fragile ICT performance, specially the fast ICT development of the world, still made this group the “median-developed group”. The third group is defined as countries with very strong obstacles to further development and no clear improvement achieved in the last decade,

75

the so called “non-developed group”. For countries in the last group, Cambodia and Laos, the problems that hinder the country´s ICT implementation are not only the development strategy for ICT adoption, but also the lack of infrastructure and low income level. Affordability aspect For half of the economies in the Asian region, the ICT Price Basket (IPB) is less than two percent of monthly GNI per capita.233 The countries with the most affordable fixed broadband sub-basket were all high-income economies, including Hong Kong, Singapore, South Korea, and Japan. In both cases, the mobile cellular sub-basket and fixed broadband sub-basket, the list of countries with the relatively most expensive cost was dominated by developing countries. The reason is the low income level of developing economies relative to the mobile cellular or fixed broadband price. The two countries that suffer the extremely high mobile cellular sub-basket and fixed broadband sub-basket, are Laos and Cambodia. In Laos, the fixed broadband sub-basket exceeds the average monthly GNI per capital level. (Figure 13). Cellular mobile telephone sub-basket in Cambodia was more than double of that from Laos and significantly surpassed all other countries. The reason may be that the telephone services were very limited and limited access to the international telecommunication network and international Internet bandwidth. These obstacles particularly applies to landlocked countries like Laos. 234 Mobile-cellular sub-basket % of GNI per capita

Fixed-broadband sub-basket % of GNI per capita

7

Lao P.D.R Cambodia Philippines Vietnam Indonesia Thailand China Malaysia Korea, Rep. Japan Hong Khon SAR Singapore

12,1 5,9 4,9 3,9 2,5 1,5 1,4 1,3 1,4 0,4 0,2 0

5

10

15

111

Lao P.D.R Cambodia Philippines Vietnam Indonesia Thailand China Malaysia Korea, Rep. Japan Hong Khon SAR Singapore

48 12,9 10,8 10,4 5,8 5 3,2 1,6 0,7 0,8 0,8 0

50

100

150

Source: Author's own graphs based on ITU IPB database

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Figure 13: Affordability: Sub-basket /GNI per capita of 12 countries in comparison Japan and Korea were two countries with relatively high mobile cellular baskets (US$ 50.4 and 21.8, respectively).235 However, because of a higher income average, the percentage of this basket to GNI was not high. The same case can be seen for other well-developed countries such as Hong Kong, Singapore and SK. In China, mobile cellular prices were also relatively low, since the country can use its very large population and exploit economies of scale. China is the largest mobile cellular market in the world in terms of subscriptions. The 233

ITU (2010) ITU (2011) a 235 ITU (2013) 234

76

country reached over 1 billion mobile-cellular subscription in early 2012.236 China Mobile, a state-owned communication company, accounted for about 2/3 of Chinese mobile cellular subscriptions (703 million as of November 2012) and could best leverage the economies of scale.237 In 3G subscriptions China Mobile was recognized to be less mature; therefore its market share was much lower. The company tends to spend more money in the 3G standard, in order to acquire large numbers of customers, including those in rural and remote areas.238 Other countries in median-developed group also pay for the fixed broadband and mobile cellular in an affordable price. 20 non-developed group 10 0 -10 -20 -30 -40

Source: Author's own graphs based on ITU IPB database

Figure 14: Relative change % in 2010-2011 of fixed telephone sub-basket/GNI per ca

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The fixed-broadband sub basket displays the strongest price fall over recent years, particularly in developing countries, where prices continue to fall by over 30% annually. In developed countries, on the other hand, prices changed minimally between 2010 and 2011. A key explanation is that entry-level fixed-broadband prices in most developed countries have reached relatively low levels. Moreover, in many cases, operators are increasing speeds and data volume caps instead of further reducing prices.239 Another reason for violation in prices can be found in the market transparency. In the developed countries, markets perform well because the prices of goods are known. In developing countries, such signals are concealed, the coordination of economic activity rarely works well. Especially in rural areas of most developing countries, there are virtually no sources of information and the market is uncoordinated. The main reason is that many people lack access to even very basic communications infrastructure. In the case of rural China, despite decades of urban growth, China remains largely a rural country (2/3 of population). A study of Harvard University found out that the “Law of one price” is strongly violated across 200 villages (about 3800 households) in China. In other words, in these areas, if greater access to basic communications or internet infrastructure existed, it could significantly improve price transparency and market performance. It is because with ICTs, both consumers and producers

236

ITU, The World Bank (2012) China Mobile (2013) 238 ITU (2011) a 239 ITU (2011) a 237

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will be able to participate in effective markets with competitive and high controllable prices. 240

It could be said that for the first group with well-developed ICT performance, IPB is basically not cheaper than that of the countries in usual-developed group. However, in relative to GNI per capita terms, the high level income countries have more affordable Internet than other group. Laos and Cambodia suffer from very high prices for mobile phones and broadband connections, which constraint people from using Internet. Additionally, the prices have increased from 2010 to 2011 while in other Asian countries a stable basket or cheaper prices are found. Access and infrastructure aspect The report of Budde Communication Research Company divides Asia-Fixed (wired) broadband markets ranked by population penetration by June 2012 into three groups: Market ranking

Cluster

Markets

High

Penetration range (as proportion of population) Greater than 20%

Well-developed group

Medium

Between 1% and 12%

Median-developed group

Low

Less than 1%

Non-developed group

South Korea Hong Kong Japan Singapore China Malaysia Thailand Vietnam Philippines Indonesia Laos Cambodia

Source: BuddeComm, ITU

Table 25: Penetration range of 3 groups of countries 241

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Asia as a whole is leading the world for DSL. The Fiber To The X (FTTX) has arrived recently, which is another platform for broadband access using optical fiber. 242 This new technology comprises over 50% of the high speed internet access connections in the leading technology markets of Japan and South Korea.243 The gap between countries inside the region is very big. The “well-developed group” dominated the broadband services and infrastructure in terms of penetration as well as technology. Their fixed broadband penetration rates are in excess of 20% and the fixed broadband household penetration rate is between 90% and 100%.244 As described above, South Korea is the most remarkable example of the Asian broadband revolution. The country has very high speed broadband internet connections. The average Internet speed is 17.5 Mbit/s, with a peak Internet connection speed of 47.9 Mbit/s. (See 240

Kirkman G. S., Cornelius P. K., Sachs J. D., Schwab K. (2002) Evans P. (2013) 242 ITU (2011) b 243 Wood L. (2010) 244 Evans P. (2013) 241

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chapter 3.3). Another special market in the region is Singapore. The government of Singapore has implemented broadband internet access (wired and wireless) for the whole island. Thereby, Singapore´s residential wired broadband household penetration rate reached to 105% as of March 2012.245 For the economies in the “median-developed group” with fixed broadband penetration by population of between 1% and 12% include China, Malaysia, Vietnam, Thailand, Philippines and Indonesia. So these countries lag behind the first group with a clear gap of 8% (population penetration range). This gap to the top group is relatively wide to bridge. These economies are busily expanding their broadband capability. China, with over 160 million broadband subscribers and a growth rate of over 15% per annum, is the largest broadband internet market in the world. Malaysia also plays an important role, because in the last few years, Malaysia has expanded its market significantly in comparison to other players at the same income level, for example China or Thailand. The last group with fixed broadband penetration below 1% of population includes countries that have not adopted internet efficiently. One reason could be the long-running civil war, which leads to poor telecom infrastructure and constraints in social as well as economic development. Another reason is the plainly dysfunctional and generally underdeveloped regulatory regimes combined with low GDP per capital. Broadband (>4 Mbps)/high broadband connection (>10 Mpbs) in Asia-Pacific (2012) 100 80

well-developed group

60 40

% above 4 Mbps % above 10 Mbps

20 0

Average measured / peak connection speed in Mbps 60 50

well-developed group

40 30 Copyright © 2016. Diplomica Verlag. All rights reserved.

20 10 0

average measured connection speed average peak connection speed

Source: Author's own graphs based on ITU broadband database

245

Bombourg N. (2013)

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Figure 15: Broadband speed of 12 countries in comparison 246 To conclude, the cluster analysis of this chapter is that the different ICT development processes of 12 countries in Asia are fostered into three groups: well-developed group, mediandeveloped group and non-developed group. The countries listed in each group are not the same as those bundled in other papers. Because of the rapid development of ICT itself and the high competition between countries, the rankings and cluster building change very fast. One country may succeed one year but be out of the top listed in the coming years. For instance, Japan is a strong economy with a high technology level and high income level globally. This country finds a lot of difficulty in building ICT infrastructure backbone, resulting from catastrophic incidents. The Fukushima is a clear example that influenced Japan heavily on ICT development. Conversely, Malaysia, an upper-income economy, has achieved notable ICT milestones in a short time. This is not always the case for developing countries. For the three groups division, three argumentations can again be outlined:

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1) The well-developed group (Singapore, South Korea, Japan, Taiwan, Hong Kong) has reached a high level of ICT development because of the successful technical revolutions. It is obvious that such an achievement is respectable not only in the Asia region, but also in global competition. Most of these countries have effective regulation, competitive telecommunications markets and strong government supports for ICT. Moreover these countries have a more liberalized ICT industry, which has benefited from the establishment and strengthening of robust institutions to enforce fair competition rules. The ICT reforms from early 1990s are paying off, for example in the case of South Korea. The government accomplished numerous investments and regulatory reforms, particularly in infrastructure backbone, competition in ICT industry and educational support. In addition, the development strategy into an ICT export-oriented industry was an important driver that contributed to its high score achievement. The best examples are Singapore, Taiwan and Hong Kong. They have pursued outward looking export strategies for ICT goods and services since for long time. 2) The median-developed group (Malaysia, Vietnam, China, Thailand, Indonesia and Philippines), although having achieved some changes and improvements during the last 10 years, are still facing constraints in many areas of economy, infrastructure and regulatory framework. All these problems cannot be completely solved in a short term. In addition, they require radical strategies and the right decisions of policy makers. The gap between the two groups can still go unchanged if the well-developed countries further advance on the path of potential growths in the future ICT era. The usual-developed ones must endeavor to catch up or close the gap. Within the group of lower scoring, Malaysia, China and Thailand (uppermiddle-income) scored highest, while Vietnam, Indonesia and Philippines (lower-middleincome) had performances also improving over time. However, there was no radical improvement as in the cases of well-developed group. Nevertheless, it should be noted that some countries in this group, such as Vietnam, stood out as better ICT performers than their incomes would suggest.

246

80

ITU (2012) b

3) For the non-developed group (Laos, Cambodia), no successful plans had been implemented for ICT adoption in recent years. The infrastructure, usage as well as skills index, were low in comparison to other neighboring countries. For ICT development, many significant reforms are important. 1.11

Correlation Analysis

This section presents the correlation analyses between ICT indexes and ICT indicators with GNI. The correlation understandings can give policymakers evidence of how ICT development is related to the income level of a country. Analyses had been performed from the data about 12 countries, based on the GNI per capita in 2010 according to the World Bank.

NRI 2010

DER 2010

IDI 2010

Fixed telephone subscriptions per 100 people

Mobile cellular telephone subscriptions per 100 people

Active mobile broadband subscriptions per 100 inhabitants (2010)

Fixed broadband subscriptions per 100 people (2010)

Household with a computer %

Household with internet access at home %

Individuals using the Internet % (2010)

0,7926

0,5512

0,2023

0,7369

0,7429

0,8606

0,7538

0,7135

Correlation with GNI R2=

0,7168

0,8361

Source: Author's own calculations based on World Bank, ITU, EIU, and WEF database

Table 26: Correlation between ICT indexes, ICT indicators and GNI per capita 247 The correlation between GNI and DER 2010 for the 12 countries can be expressed in an equation: y= 7831.8 x – 30747

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It shows a positive relationship between two variables. The relatively high R2 value of 0, 8361 indicates that this equation fits the data well. The two indicators are well correlated. In another word, the more GNI per capital an economy owns, the better rankings it achieved. For other indexes, the correlation is also built upon the GNI per capita 2010 of the 12 countries. The clusters of countries, as described above, are easily seen in the Figure 16. At the right side of all below graphs, the four countries of the developed group (Singapore, Korea, Hong Kong and Japan) stand far apart from other countries in terms of GNI per capita as well as the IDI, NRI or DER. The developing countries (including Malaysia, China, Thailand, Indonesia, Vietnam and Philippines) are close to each other and build another cluster in the middle. Two last nations, Laos and Cambodia, are on the left side of the developing group and are very close to the horizontal line. In the graph of the correlation between GNI per capita and DER 2010, Laos and Cambodia are omitted due to the fact that there was no DER evaluation for these two countries in 2010.

247

Economist Intelligence Unit (2010), World Bank, ITU, World Economic Forum

81

GNI per capita in US$

IDI 2010 & GNI per capita 2010

Singapore Korea, Rep.

50000

Hong Kong SAR

40000

Japan

30000

Malaysia China

20000

Thailand

10000

Indonesia Vietnam

0

Philippines

0

1

2

3

4

5

6

7

8

9

IDI 2010

Cambodia

GNI per capita in US$

NRI 2010 & GNI per capita 2010

Singapore

50000

Korea, Rep. Hong Kong SAR

40000

Japan Malaysia

30000 20000

China Thailand

10000

Indonesia Vietnam Philippines

0 0

1

2

3

4

5

6

LAOS Cambodia

NRI 2010

DER 2010 & GNI per capita 2010 GNI per capita in US$

LAOS

Singapore Korea, Rep.

45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Hong Kong SAR Japan Malaysia China Thailand Indonesia Vietnam

0

2

4

6

8

DER 2010

10

Philippines LAOS Cambodia

Source: Author's own graphs based on World Bank, ITU, EIU, and WEF database

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Figure 16: ICT indexes and GNI per capita in Cluster analysis The correlation analysis has three approaches. The first approach is to examine how the correlation between ICT indicators rankings and the GNI is per capita 2010. The second approach is to find out the clusters in the correlation. The third approach is to check the correlation between ICT ranking indexes and individual growth rate of economies 2010 and 2011. •

ICT rankings indexes and GNI per capita:

It is proven that between GNI per capita and the three indexes (NRI; DER; IDI) a strong correlation exists. The other important ICT indicators such as the mobile broadband subscrip-

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tion per 100 inhabitants, individuals using internet or household with internet penetration rate are well correlated to income level. A regression of GNI per capita levels and the mobile broadband subscription shows y = 334.22x + 3878.8 with an R-squared value of 0.7369 meaning a significant relationship between two indicators. 50000 y = 334,22x + 3878,8 R² = 0,737

GNI per capita

40000 30000 20000 10000 0 0

20

40

60

80

100

120

Active mobile-broadband subscriptions per 100 inhabitants

Source: Author's own graph based on World Bank and ITU database

Figure 17: GNI per capita, active mobile-broadband subscriptions per 100 inhabitants (2010) •

Cluster building correlated to GNI per capita and ICT indexes:

Extracting from Figure 16, the three divisions could be reasonable because of the distances between the groups. For a more precise cluster building, it would be better to use the dummy variable method for checking the assignment of a country to a cluster. However, due to time and labor limitation, further analyses could not be done for this paper. •

R2 =

ICT rankings indexes and GDP Growth rate: NRI 2011 & Growth rate 2011

NRI 2010 & Growth rate 2010

NRI change & Growth rate change

IDI 2011 & Growth rate 2011

IDI 2010 & Growth rate 2010

IDI change & Growth rate change

0,0464

0,0499

0,2211

0,0997

0,0067

0,0722

Source: Author's own calculations based on World Bank, ITU, EIU, and WEF database

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Table 27: Correlation ICT indices and GDP growth rate Correlation analyses of ICT indices and GDP growth rate showed very low R2 values. The correlations were drawn by various cases, between NRI/ IDI and growth rate in 2010, in 2011, the changes of NRI/ IDI from 2010 to 2011 and the changes of GDP growth rate in this period. For example the regression drawn for IDI 2011 and GDP real growth rate 2011 for 12 countries is y=0.2873x + 6.3305 with R² = 0.0997. The equation implies a positive relationship between IDI points and the growth rate in year 2011. However the R2 value was very low, indicating that the regression was not significant. The explanation for such a result should be found in the individual economy of each country. For example, China is very strong in the manufacturing sector, it is the world´s biggest manufacturing exporter. China´s is becoming the second biggest economy in the world with

83

GDP a nominal growth rate of 11.1%, and not because of the ICT industry alone. China´s ICT goods export and import proportions are 29.1% and 20.4%, respectively. 248 Vietnam as one of the fastest growing countries in the world, with 8% per year, was nevertheless valued with a low ranking in e-readiness. Some countries with the relatively high GDP growth rate such as Indonesia (6.2% in 2010)achieved a much less developed ICT performance in comparison with Japan. Most of the developed countries have reached a high level of economy and can rarely experience a high growth rate like the emerging economies. It could be an explanation for the low correlation found between GDP growth rate and ICT indexes. The advantages ICT can differ by country depending on the industry structure and the integration level in the networked market of a country. This correlation analysis for GDP growth rate and ICT indices is in fact based on different idea compared to other studies of ICT and economic growth. While other research had a look at time analysis of ICT and economic growth in term of productivity of a country, this paper focus only on the correlation of one year growth rate. For example, Matilde M. and Javier Q. did the research on Spain from 1985-2002 or a paper of Paul Schreyer on contribution of ICT to output growth for G7 countries. That is the reason why the relationship between two variables: ICT index and growth rate is not proven. The contribution of ICT development on economy development is undeniable. ICT brings many technical advantages to an economy, makes it more efficient, more transparent and more effective (see chapter 2). For example an electronic business can result in up to 15% lower costs to consumers and up to 20% lower costs in business procurement. In Singapore, net-based B2Bis applied in the transforming process among many players, including customers, banks, ports, shipping agents, cargo handler and authorities, which save transaction costs by a dramatic 1% of Singapore ´s GDP. The E-Commerce sales in SK reached more than EUR 10 billion in 2012.249 The effects of ICT on economic growth are also found in many studies on different countries and regions.250

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Political Options The previous chapters have provided important insights into the development of ICT infrastructures and technologies in South Korea, China and Vietnam, including broadband internet and the progress of improvement. Based on the empirical study that GNI per capita is closely correlated with the ICT level of a country, this section will introduce guidelines and suggestions to developing countries and improve ICTs as well as increase a country’s economy. The summary understanding in this work is general with respect to the individual conditions of each country. Therefore this framework should be tailored to each country and its policy makers needs, markets and resources.

248

World Bank YStats.com (2011) 250 Alessandra C.; Paul S. (2002); Souter, D. (2004); OECD (2005) 249

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1.12

Steps for Accelerating E-economy

The suggestions begin with logistic steps for accelerating the e-economy as follows: access (infrastructure), learning (education system), society, economy, and policy. 251 Access (Infrastructure) For developing countries, the minimum necessary condition for e-readiness is the ability of access to an adequate network infrastructure, which combines the following components: -Information infrastructure: the infrastructure is a major challenge for most developing countries due to low investment in a telecommunication basic infrastructure. There many local loop technologies: copper wires, coaxial cable, fiber optics, satellite network or wireless technologies.252 The economies should review their own communications infrastructure and identify an appropriate option. Especially for this issue, governments should consider investment as solution for further development of the network. Otherwise, the network infrastructure can never be improved which is essential at the early phase of ICT adoption. -Internet availability: Internet access is provided by local Internet Service Providers (ISPs). The competition among the ISP plays a very important role in the quality of services, speed of connection, and availability of the network as well as the pricing issue. Governments could encourage competition through laws and financial incentives for new comers in this industrial sector, or stimulate the demand for computers through campaigns and financial supports for households. For those people without personal access, public access such as in Internet cafes should be available. It is extremely important to bring Internet to everyone, due to network effect of ICT.253 -Internet affordability: In the developing countries, due to the high cost for basic telephony and internet services, the Internet usage is constrained. Pricing packages can be structured in ways that are conducive to Internet usage. For example, the prepaid telephony for mobile is attractive to users on relatively low incomes, and flat rate package for internet usage encourages people spending time online.254 Minute or hourly pricing rates may inhibit the use of the network since it does not motivate users to use the Internet sufficiently.255 Education system

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For a successful e-readiness adoption, education plays a very important role. It includes three points: -Access to ICT in schools and universities: It is important to build classrooms or libraries equipped with enough computers, good connectivity and available electronic content. For developing economies, especially in rural areas, it is hard to build the connection for the 251

IBM, Information Technologies Group Center for International Development at Harvard University OECD (1996) 253 IBM, Information Technologies Group Center for International Development at Harvard Universit 254 ITU (2012) b 255 IBM, Information Technologies Group Center for International Development at Harvard Universit 252

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whole system of education to ICT. Therefore computers should first be adopted at university level, then expanded to school as a top-down direction. A study of ITU shows some differences of application rates for a number of developed and developing economies. In countries with high average educational levels (secondary or tertiary), people use the Internet more than those with a lower level of education. In South Korea, for instance, more than 60% of persons having attained primary or lower secondary education were Internet users. In the case of people who having attained tertiary education, the rate is more than 90%. The developed countries (in this case South Korea) have applied stronger internet interaction than the developing countries (for example Vietnam, Indonesia). In other words, Vietnam should improve the tertiary or secondary enrollment rate first in the in the early phase of education reform. 256 -ICT for teachers: not only the computers and internet access needs to be prepared, but also the teachers should be able to give advices in using internet. For such knowledge, teachers and trainers must be taught in ICT usage and teaching skills for teaching students how to use a computer and Internet access. A study of Rozinah Jamaludin & Mohammad Iranmanesh described the E-learning Readiness issue in Vietnam for three groups of people: policy makers (as administrators), lecturers (as enablers) and students (as receivers).257 It showed that the average readiness of e-learning for these three groups was scored only 5.6 - 6 .6 point at the scale of 10. The survey indicates the lowest readiness for e-learning belonging to the lectures group. Consequently, it is noteworthy to point out that staff readiness needs to be improved. The country must realize the importance of the ICT implementation in education as key driver for the whole economy.

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-The ICT workforce: another issue in education is that the ICT industry itself needs sufficient workers for hardware engineering, software programming and IT services. The developing countries are themselves facing the lack of ICT professionals and high-skill workers because of low investment in ICT universities, lack of ICT training programs and the lack of training cooperation with international ICT experts.258 Therefore, the government should focus on the ICT oriented education system; support the ICT training centers as well as programs for further education of ICT in the companies. It is further recommended that training courses should be taken in a preferred language, especially in non-English speaker countries.259

256

ITU (2011) a Rozinah Jamaludinm Mohammad Ranmanesh (2011) 258 IBM, Information Technologies Group Center for International Development at Harvard Universit 259 CAVAL Collaborative Solutions (2006) 257

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Society -Usage: In developing countries more attention can go to where internet users face disadvantages. For example women, the physically disabled and ethnic minorities often do not participate in the online environment as much as other demographic groups.260 In private lives, internet users are attracted by chat rooms, online software or websites, which are relevant to their interests. For example, games, music and movies online are the best way to bring people into the online entertainment world. It is worthy to improve more content available in local languages and to match the interests of local users. -Social network: An important trend that has driven Internet access over the last few years is the growth of social media and networking sites. They allow people to expand social and business contacts. They provide information and content in innovative ways. Young people enjoy sharing photos, information, thinking, videos and music on social networks. The data from Facebook, one of the most popular networking sites in the world, indicates that in some developing countries there are as many Facebook users as Internet users. For example, Indonesia and India are among the top countries in the world in terms of Facebook accounts. In China, the leading social network is Renren, which by end June 2011 had reached around 124 million activated users. 261 It can be concluded that social networks are gaining importance in the developing world where the population needs more incentive to go online and use the Internet. However, in Vietnam and China, for example, Facebook is blocked by the government and people must find another way to get in. It could inhibit people from going online and connecting to the world. Economy

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-Business-to-Consumer (B2C) E-Commerce: This new channel of business allows more retail businesses to compete with each other. The consumers receive more choices and price advantages. For an efficient e-commerce, the online payment system and internet security should be employed by government to protect the online market participants. For the virtual transactions, lawmakers must introduce the necessary regulatory frameworks, for example, truthful advertising or the right to return in case of defect products. -ICT industry: A country can improve their GDP and trade in ICT products or services, especially for developing economies in outsourcing sector. In the past, each group of ICT suppliers limited themselves to a specific area. For instance, software companies only sold software, and telecom operators built communications networks and sold phone services. Nowadays, ICT companies are consolidating to build integrated systems that help them manage convergence. For example, in 2009, Hardware Company Dell bought IT services provider Perot System. Oracle purchased Sun Microsystems, and moved toward more complete software integration in 2010. 262 That is why emerging economies have higher opportunities when joining the market. The government plays a key role in opening up the market and attracting target partners. Especially in sectors with a high proportion of innova260

IBM, Information Technologies Group Center for International Development at Harvard Universit ITU (2011) a 262 Acker O., Gröne F., Schröder .G., Geerdes H.(2012) 261

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tion like ICT where investment mostly comes from government budget. Competition, regulation and other regulatory frameworks are extremely important for development of ICT industry. Policy Policy and government. As the leaders creating regulatory frameworks and laws, they can encourage the demand as well as supply by diverse means such as tax incentives, competitive strategies, pricing control, etc.263 Policy-makers can build a favorable climate for investing in ICT infrastructure ICT will become more available when there are low barriers to trade, including reducing tariffs on ICT products and ICT services. The governments should play a more active role to address systemic failures which may block the function of a system. 264 Government needs to refocus specific objectives and create the framework conditions that are conducive to ICT improvement. Reform measurement must be introduced to be sure that implemented improvements can be monitored regularly. The most important thing is the financial resources which must be secured for a long-term adopting and implementing process. On one side, the government could apply the fiscal policies to ease the flow of capital from foreign investments. On the other side, governments need to provide an incentive to private sector to join in this field. The experiences from South Korea show that a high broadband speed allows for gaming and music online services. The consumers who are familiar with internet usage will prefer online shopping than traditional channels. Therefore, advertising on e-commerce can yield significant income for the internet provider companies making private investors interested in developing access and broadband system.265 So the basic framework for e-readiness is concluded in five aspects: infrastructure, society, education, economy and policy. However due to the different constructs of each economy, it should be taken into account that there is no best strategy for all. Some other recommendations follow for developing countries, particularly concerning the adoption of ICT, that were successfully noted by other countries, Mexico, India and South Korea, 15 years ago.

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1.13

General Lessons for Developing Countries

There are three important lessons for developing countries to learn in order to achieve better ICT performance. The first is to close the gap between computer penetration and internet user penetration rate. The next point is to create a cluster of Asian countries to enforce attraction from foreign investors and strengthen the cooperation between countries in the region. The last point is to learn from the successful countries which have done the right policies in adopting ICT and became ICT leader at the world level.

263

Kirkman G. S., Cornelius P. K., Sachs J. D., Schwab K. (2002) Ka Ho Mok (2010) 265 The information Technology & Innovation Foundation (2008) 264

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1.13.1 Computer and Internet User Penetration Discrepancy It is useful to compare the percentage of owned computer with the percentage of computers with internet access. In high income countries, computer and Internet user penetration rates are noticeably similar. In Hong Kong, South Korea, Singapore and Japan, there is only a relatively small difference between the percentage of the population using a computer and using the Internet. However, in developing countries, the discrepancy between computer user and Internet user penetration is often greater. In China, for example, around 35% of household had a computer, compared with only 23% having Internet access at home in 2010. In Indonesia, computers in households in 2010 were more than twice the number of Internet users at home. In these countries, policy makers should try to identify the problems for internet users, which may include high prices for Internet access, lack of awareness of the benefits of using the Internet or lack of available infrastructure.266 In South Korea, more households have internet access than have a computer, which can be explained by the prevalence of Internet access through mobile devices. For developing countries where the mobile phone user rate is growing significantly, we can expect similar developments in the near future, with more people accessing the Internet via a mobile phone or a tablet than via a computer. There is a clear trend towards cheaper smart phones, and the mobile phones are cheaper and more flexible than computers. To increase Internet use through mobile phones, mobile phones taxation needs to be reduced. 267 The prepaid internet mobile telephony could also be a potential driver for using Internet, as African countries have done. Prepaid internet services allow low income customers to purchase a limited amount of data volumes to access the Internet. So, mobile internet and prepaid internet will allow more people access to the Internet.268

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1.13.2 Networking of ASEAN To facilitate the ICT development, the group development can be a good tool. Firstly it is a driver for foreign investment in big projects for technology innovation. For example ASEAN countries attract more investors from Europe, USA, and other Asian countries such as Japan, South Korea and China than each country standing alone. The explanations are that the potential of the whole group is anticipated as larger than that of individual country and the market for demand is also larger. Secondly in international cooperation with global companies, ASEAN is a group attracting more interest due to higher governance of its membership and the flexibility in human resources. In order to promote these strategic alliances, governments in ASEAN should remove unnecessary barriers to alliances. 269 So far the ASEAN has done well in the cooperation and development of a framework for the whole region until 2015:

266

ITU (2011) b ITU (2011) a 268 Aker J. C. and Mbiti I. M. (2010) 269 Mok K. H. (2010) 267

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For example, ASEAN and China have augmented ICT cooperative partnerships in different aspects. China agreed to support ASEAN in terms of ICT infrastructure development such as the implementation of the greater Mekong sub region information super highway project. China also wants to intensify on regulatory regimes and enhance mutual understanding of ICT regulatory frameworks, which helps an open and transparent environment.270 With a high cooperation, it is estimated the Asia-Pacific region would surpass other regions such as America and Europe in 2015. This means for participants more chances in the global network market. Billion €

2009

2010

2011

2012

2015

North America

868

904

931

960

1008

Europe

847

861

872

883

946

Asia/Pacific

725

771

825

880

1067

Latin America

224

245

263

280

335

Africa/Middle East

148

163

179

194

241

World

2813

2944

3069

3197

3598

Source: IDATE

Table 28: DigiWorld markets by region 271 1.13.3 Learning from Successful Countries Taking the case of South Korea as a successful ICT adopter. In education, the government built a new concept of education, which focuses on knowledge based services and ICT development. The computer and internet access in schools and universities (EDUNET) were given high priority in South Korea. The ICT literacy campaign (Computer for Women) was another example of promotion ICT in the population. (See chapter 3.3). For the ICT industry particularly, the government supported the R&D for computer science as well as a high preference for researchers in all sectors. This action played an very important role in promoting the incentive for ICT skills development.

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In coordinating the public-private sector, South Korea did a great job through financing division between government and private investors. Promotional funding (1993-2002) included three parts: government budget (39%), private sector (46%) and miscellaneous profit and interest (15%). (Source KISDI). Money from the fund was used to support ICT-related R&D, to develop and encourage standardization in the ICT industry, to train ICT human resources, to promote broadband network roll-out and to promote e-government.272 The South Korean government implemented many preferential policies and incentives in ICT promotion. With tax exemption for investments in ICT network and special loans for ICT start-ups, the government could improve ICT investments from private sectors. Not only in the supply side, but also in the demand side, South Korea´s government played an active role in encouraging people to use computer, internet and broadband services. PC Bangs or PC 270

Irawan T.(2012) IDATE (2012) 272 OVUM Consulting (2009) 271

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rooms are similar to Internet cafes and provide affordable public access to broadband services via high-speed leased lines and multimedia computers. In the early stage of broadband development, many young Koreans first experienced high-speed Internet services at a PC bang, which created a big attraction for them to be online. 273 1.14

Policy Recommendations for Vietnam

Here are some guidelines for improving ICT in Vietnam only. As demonstrated above in case of South Korea, cyber laws and intellectual property rights (IPRs) protection are one of the important steps towards effective information technology innovation. Vietnam has significant problem with intellectual property rights issues and secure e-payments, which inhibit the development of the e-business and software industry. The software piracy rate in Vietnam was 97% in 2003. 274 Up to 90 percent of all digital content provided to users on the Internet in Vietnam is pirated. 275 It is urgent for the government to consider IPR protection. Law enforcement agencies should make IPR a high priority, and this campaign should be supported by software industry and investors. Fines and penalties must be practical and applied in cases of illegalities. Besides the security problem, de-regulation, transparency in governance and competitive markets are other aspects which need more changes at a macro level. 276 These actions require a strong cooperation between government and industry players. In other words, government should foster the public-private partnership.277 Businesses and government must learn to build a relationship that promotes long-term sustainable growth for all participants.

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Vietnam should pay more attention to the ICT workforce and experts because without ICT experts the country could never be successful in this knowledge-based industry. ICT programs should provide students with more practical knowledge than theoretical information. The Vietnamese traditional education style of “passive learners and active teachers” in universities, schools and training institutes must be dismissed as soon as possible. Practical training on computers, coaching and work-study projects for ICT students are essential.278 If the universities lack facilities, laboratories and practical rooms, then private investors and government should support the basic infrastructure of computers, software, digital contents and teaching staff. For the last five years, Vietnam has laid the foundation for IT human resource development. However, the implementation of policies has been limited and not assertive enough. The government has applied preferential policies not only to IT human resource development but also to all other training subjects. Thus, the IT industry became less attractive for investment,

273

OVUM Consulting (2009) Vietnam Competitiveness Initiative VNCI (2003) 275 Vuong L (2012) 276 Mc Connell (2000) 277 Ka Ho Mok (2010) 278 Truong B.T.; Nguyen T.Q.V 274

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study and work especially to women. If policies were more concretized and aggressively implemented, it would create a stronger attraction in the ICT training area. 279 It is also noteworthy that ICT workers and experts need to expand other technical skills including software project management, quality assurance, and process engineering. These skills can be gained through seminars, university short- and degree-courses, custom training non-formal education, distance learning, on-demand learning, and simulations. Government could support the ICT education or ICT training by scholarship programs, study abroad programs connected with international universities or, create more chances of ICT jobs after graduation. 280 The important “soft skills” such as second language (English, Chinese) or business presentation, sales, marketing should be learned and improved for ICT people. Without those soft skills, Vietnamese engineers cannot compete with engineers from other countries such as India and Philippines where mostly ICT experts can use English very well.

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The World Bank also pointed out that reliable, high-bandwidth and inexpensive Internet access is one of the fundamental requirements for a software industry. Unfortunately, present Vietnamese conditions do not meet these minimum standards. However, Vietnamese the policy-makers and industry players seemed not to realize this fact.281 Conducting researches and reports on ICT performances of other countries in the region is necessary.282 The greater the understanding about competitors, the better Vietnam can identify its position and possible weaknesses or threats. For example, successful South Korea can be a good model to follow due to the same beginning point in 1980s and the same population as Vietnam. The ICT information of Philippines, Thailand and Indonesia should also be studied, especially in outsourcing of software industry because these countries are competitive to Vietnam in ICT workforce and labor costs. In addition, conducting studies about institutional reforms, pilot projects, market trends, laws in IPRs as well as other regulatory frameworks of other countries are crucially useful. For strengthening the branding of firms in ICT industry, more international certifications and focus on key partners should be seriously considered. Vietnam does not need to expand to the global market, but only to some important and potential markets such as China and Europe with which it has begun the relationship with Vietnam´s ICT industry for a decade.283 Although many Japanese and Korean electronics manufacturers are attracted by Vietnam´s relatively well-educated workforce and low-cost unskilled labor, the Vietnamese government has not yet fully understood the opportunities of potential growth. 284 Thus in promotional campaigns, policy-makers and individual firms should organize international conferences in

279

Ministry of Information and Communications MIC (2011) Vietnam Competitiveness Initiative VNCI (2003) 281 Pedro H.; Enrique H.; Ernesto L.; Lucio R. (2004) 282 Vietnam Competitiveness Initiative VNCI (2003) 283 IOS Press (2003) 284 The World bank (2003) 280

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Vietnam to attract international experts and join ICT events organized by important partners.285 The Vietnamese government should realize the importance of ICT industry, especially the software sector as drivers of development for the future. More concentrated strategies, high investment in education and regulatory frameworks supporting IPRs are necessary at the macroeconomic level. From enterprise perspectives, intensive marketing promotion and regular reports of other competitors are useful. The cooperation between government and private sector should promote ICT implementation positively in the future. 1.15

Policy Recommendations for China

The same as in Vietnam, China´s ICT workforce faces the problem of relatively low level of English skills and other soft-skills. This weakness could lead to difficulties for the country to win business contracts from the USA and EU market in competition with such countries as India and the Philippines. 286 In Intellectual Property Rights issue, China is believed to be one of the countries with very high incidence of pirated copies of ICT software. An estimated 78 percent of software installed on PCs is illegal. Microsoft conducted an investigation in 2012. The company purchased 169 PCs from retail stores in China. Every single PC purchased was installed with pirated Windows software. In addition, 91 percent of the computers were installed with malware or other types of security vulnerabilities.287 This problem could be reason why the sales rate of ICT products in China is lower than other countries; even it is the most populous country in the world. So, harder regulation on the market and penalties in case of software piracy are extremely essential for the Chinese software industry.

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The Chinese government implemented supportive policies for the software industry particularly, for example, the centralized government website . The website provides information on China´s outsourcing market, which creates competitive incentive for international partners. Moreover, the government gave loans for outsourcing enterprises, tax incentives for ICT investment and, a subsidy of US$650 to vendors, which employed college graduate for at least a year. Last but not least, the exchange rate system of China is another advantage for ICT products and services exporters. The low exchange rate of Yuan compared to other currencies makes it cheaper for foreign markets than other outsourcers. Because China is so large and has begun from an agriculture industry, the government must focus on specified areas to develop ICT power house. In this point, the Chinese government did concentrate on Peking, Shanghai and Dalian in both software parks and ICT universities. For the development at country level, the urban and rural division must be a priority. (See chapter 3.2) In the investment strategy, the Chinese government should open the market and permit access to foreign investors. This is because in China there are numerous constraints on international enterprises that deter to join the market, especially concerning the technological regulation or software standards. (See chapter 3.2). Therefore, law-makers and industry leader 285

IOS Press (2003) CAVAL Collaborative Solutions (2006) 287 Vuong L (2012) 286

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should ease the business climate for the further development of ICT industry or overall economy. The central government can attract innovative technologies by attracting talents from overseas and easing labor regulation. The cultural differences between China and western countries should also be acknowledged in order to improve integration for a longterm cooperation. Learning from India, Chinese software service providers are seeking to export services globally. India was ranked 54th out of a total of 75 nations for e-readiness index in 20002011.288 Despite its low position in most rankings, the Indian software industry is widely recognized as a success story. The Indian software sector succeeded not just in terms of total volumes, but also in terms of quality and technical excellence with a high number of qualitycertified software companies and, companies with the most international certifications in the world. To reach a very high growth rate in software export, the Indian government had to induce significant changes in the product code and capital markets. For example, a favorable regulatory environment for foreign firms in India allowed raising debt and equity in global capital markets from an early phase of development. Indian software experts went abroad for further trainings, coaching and practical experience is another useful lesson. Education in India focused on well-trained computer people, which helped with establishing the Indian low-cost software workforce. For attracting leading global and national IT firms, the Indian government created the high-tech clusters with the ambition of leading the world. 289

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The success story of Motorola India Electronics Limited (MIEL) in India is another lesson for China. MIEL is a software development center of Motorola in India. Despite that the most challenging and mission-critical projects were given to India, MIEL had satisfied Motorola by achieving the highest possible CMM software process maturity rating of level 5 in 1993. This certification was considered very difficult to achieve at this time. There are two reasons for the success of MIEL. The first was the excellent workforce. MIEL is the employer of the best ICT graduates from the best universities, because MIEL had provided the funds for universities and many cooperation programs for students in IT areas. 290 And the second reason is the ambitious MIEL in achieving difficult challenges. For China, this is a very useful lesson to learn. Because most IT firms in developing countries process outsourcing projects from developed nations, which are assigned only low-risk code assessment. The developing nations play mostly a supporting function and can rarely learn about high technology knowledge. China could learn from India about achievements in global standards, branding promotions focused on target market and establishment of a high skilled ICT workforce.291

288

Kirkman G. S., Cornelius Peter K., Jeffrey D. Sachs, Klaus Schwab (2002) Kirkman G. S., Cornelius P. K., Sachs J. D., Schwab K. (2002) 290 Dutta S. (2002) 291 Popkin J.(2006) 289

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Conclusion ICT is believed to be a powerful driver for development. ICT can expand economic opportunities for example in mobile banking, off-shoring of electronically deliverable services, elearning, and so on. ICT also makes the society better through freedom of speech and information exchange. Developed countries tend to gain more advantages from ICT sectors than developing countries. Some newly industrialized countries back in 1980s became more developed due to ICT development. For example Korea´s ICT plays a very important role in fostering the country´s economy, while other countries have not fully explored the ICT benefits for their economies. The main contribution of this study is to identify the cluster of ICT adoption in Asia region. It is one of the studies which investigate the correlation the GNI per capita and the ICT indexes. Considering the Networked Readiness Index, Digital Economy Ranking and ICT Development Index, the surveyed economies end up in 3 categories: well-developed, usual-developed and non-developed countries. The first group includes countries, which have achieved a very high level of ICT in society as well as in economy and government. Their ICT sector focused in improving all other ICT sub-sectors such software, hardware, content and services. They are Singapore, Japan, South Korea and Hong Kong. The second cluster contains the countries, of which economies are lagging in ICT development compared to the first group. Because of lower income level, these countries achieved lower ICT usage rate, weaker domestic demand of ICT products and less developed broadband connection. This group includes Malaysia, China, Vietnam, Thailand, Philippines and Indonesia. The last group, according to this paper, includes countries with very little ICT improvement in the last decade. Cambodia and Laos are the two countries in this non-developed group. They faced many obstacles in adopting ICT efficiently and the price for network is extremely high.

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This paper analyses ICT development of 12 countries based on the ICT indices. Three used indices are digital economy ranking (ranked by Economist Intelligence Unit), networked readiness index (ranked by World Economic Forum) and ICT development index (ranked by Information Technology Union). The leading Asian countries in all of there indices are ones from the first cluster. The second cluster contains the countries in the middle of the list. Cambodia (117th) and Laos (121st) lagged relatively at the end of list with very low score of ICT development index. Besides the cluster building for selected countries in Asia in ICT development, this research also identify the correlation between ICT index and GNI per capita of 12 countries. The results show a high correlation between all of three ICT indices and income level. The higher GNI per capita a country obsesses, the better NRI, IDI and DER can be achieved, and vice versa. South Korea however was very successful in ICT adoption and its broadband penetration exceeds one of other countries with higher income per capital like Japan and Singapore. With the result of our research, Asian countries would see which cluster of ICT development they belong to. This paper reports the actual situations of ICT development in 3 representative countries: Vietnam, China and South Korea. Vietnam and China have not achieved a high

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technology level like South Korea, because South Korean government has done many radical changes to become an ICT power house. The key factor that leads to South Korea´s success is that the government understand how important the ICT for the whole economy from the very beginning. Recommendations identified in this study are from the subjective review of the author and from the literature. It is possible that additional guideline for better ICT adoption can be missed. In addition, no nation can become E-ready overnight and there is no one-size-fits all guideline for E-Readiness. ICT adoption would vary depending on the economic structure and political system of each country. There are, however, common trends that have proven to help the E-readiness-process. The investments in education and ICT backbone are the most important factors. India and South Korea are the best examples for these 2 leading factors to success. Other obvious useful reforms include: deregulation, fostering competition, promoting IPRs´ protection, enforcing e-education, e-commerce and e-government. These actions require strong cooperation of government and private sectors. The public-private partnership is the new approach in promoting ICT both national level and international level.

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This paper is limited to 12 surveyed countries. Some other nations such as India, New Zealand or Pakistan are not here represented. These countries may create another influence in ICT cluster building and the guideline recommendation for the whole region. Therefore, further research hold on for the whole Asia-Pacific region would be very useful.

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104

Appendix 1. Vietnam ICT Import-Export (in Million USD)

2008

2009

2010

Computers, spare parts and electronic products export turnover

2638

2763

3590

Telecommunication equipments export turnover

168,8

606,8

2076

Computers, spare parts and electronic products import turnover

3714

3953,9

5208,6

Telecommunication equipments import turnover

1995,8

2573

2429

Average of revenue per employee in IT sector USD/person/year

2008

2009

2010

Hardware industry

37200

38582

44148

Software industry

12000

13750

14816

Digital content industry

13300

16829

18339

Total number of employees in IT sector persons

2008

2009

2010

Hardware industry

110000

121300

127548

Software industry

57000

64000

71814

Digital content industry

33000

41000

50928

Average of wage in IT sector USD/person/year

2008

2009

2010

Hardware industry

1440

1809

2201

Software industry

3600

4093

5123

Digital content industry

2820

3505

4896

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Source: Ministry of Information and Communications MIC (2011)

105

Appendix 2. China Top Five Countries -Internet Users 2011 and Top Five countries -Mobile Phone Users 2010 Top Five Countries -Internet Users 2011 China USA Japan India Brazil Top Five countries -Mobile Phone Users 2010 China India USA Russia Brazil

457 240 99 81 76 850 771 292 214 205

Source: CNNIC & www.internetworldstats.com, Reuters

Major software science parks Name

Number of companies

Software revenue in 2009 USD million

Beijing Zhongguancun software science park

18

317,4

Dalian software science park

387

4342,3

Shanghai Pudong software science park

163

1841,9

Nanjing software science park

189

2923,7

Hangzhou software science park

651

6398

Shangdong Qilu Software science park

496

2151,4

Changsha software science park

248

583

Quanzhou Tianhe software science park

693

4583,3

Zhuhai Nanfang software science park

89

513,1

Chengdu software science park

227

3774,2

Xián Software science park

492

2714,2

Source: APCP Worldwide (2010). “Market Analysis Report: China´s Enterprise Software Industry”

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Companies with highest PCT applicants worldwide in ICT sector Applicant´s name

Country of origin

Panasonic Huawei Qualcomm Ericsson LG NEC Siemens Nokia Samsung Motorola ZTE Sony Ericsson Nokia Siemens

Japan China U.S Sweden South Korea Japan Germany Finland South Korea U.S China Sweden Germany

Source: Ailan Zhan (2012)

106

PCT Applications 2008 1629 1737 907 984 992 825 1089 1005 639 778 329 402 ..

2009 1891 1847 1280 1240 1090 1069 932 663 596 538 517 435 313

2010 2154 1528 1677 1149 1298 1106 833 632 578 290 1863 289 345

Appendix 3. South Korea Top 10 countries by Internet Penetration (worldwide, Unique Visitors Age 15+) 2006

2007

change

United State

150897

153447

2

China

72408

86757

20

Japan

51450

53670

4

Germany

31209

32192

3

United Kingdom

29773

30072

1

South Korea

24297

26350

8

France

23712

24560

4

india

15867

21107

33

Canada

18332

20392

11

Italy

15987

18106

13

676878 736934 10 World Source: http://www.comscore.com/Insights/Press_Releases/2007/03/Worldwide_Internet_Growth Top 10 countries by average monthly hours online per Unique visitor (among visitors age 15+) 2007 unique visitors rank

among all users

Canada

9

39,6

Israel

28

37,4

South Korea United states United Kingdom Chile

6 1 5 20

34 31,6 31,2 30,9

Brazil

11

30,2

Finand

30

28,7

Spain

12

27,9

Sweden

21

27,5

Copyright © 2016. Diplomica Verlag. All rights reserved.

Source: http://www.comscore.com/Insights/Press_Releases/2007/03/Worldwide_Internet_Growth

107

Top 25 broadband economies 2010 Fixed broadband subscriptions per 100 inhabitants

Active mobile-broadband subscriptions per 100 inhabitants

Liechtenstein

63,8

Korea Rep.

91

Dominica

47,1

Japan

87,8

Monaco

41,9

Sweden

84

Switerland

38

Austria

82,7

Netherlands

37,4

Finland

78,1

Denmark

36,6

Hong Kong

74,5

Korea (Rep.)

34,6

Portugal

72,5

Iceland

34,6

Luxembourg

72,1

Norway

34,6

Singapore

69,7

France

33,9

Austria

67,4

Luxembourg

32.8

New Zeaand

66,2

Germany

31,6

Kuwait

63,5

Sweden

31,6

Israel

62,2

Belgium

31,5

Brunei Darussalam

61,4

United Kingdom

31,4

Cyprus

61,3

Hong Kong, China

30,2

Italy

59,4

Canada

29,8

UAE

58,4

Finland

28,1

Greece

58,3

Andorra

28,9

Saudi Arabia

57,8

Malta

27,5

Macao, China

56,1

Japan

26,9

United Kingdom

56

United States

26,3

Spain

55,7

Israel

25,1

Denmark

54,7

New Zealand

24,9

United States

54

Singapore

24,7

Ireland

47,3

Copyright © 2016. Diplomica Verlag. All rights reserved.

Source: ITU world Telecommunication/ICT Indicators database and Wireless Intelligence

108

109

0.3

0.6

1

1.1

1.8

2.5

3.4

5.5

6

9

24.3

37.4

3

8

25

32

51

67

78

104

106

113

130

144

Country

Singapore

Hong Kong SAR

Japan

Korea, Rep.

Malaysia

China

Thailand

Indonesia

Vietnam

Philippines

Cambodia

Lao P.D.R

4.6

7.9

14.4

2.2

4.6

6

3.9

5.1

5.8

26.4

14.2

8.2

Fixed telephone sub-basket US$

6.2

7.6

10.1

4.8

8.1

8.7

5.3

8.8

21.8

50.4

9.8

8.1

Mobilecellular subbasket US$

Source: ITU Measuring Information Society 2012

IPB point

Global IPB rank

IPB ranking and sub-basket

Appendix 4. ICT data of 12 countries

Copyright © 2016. Diplomica Verlag. All rights reserved.

97.2

30

22.1

10.5

21.6

20.2

17.8

20.5

25.7

24.2

21.2

26.2

Fixebroadband subbasket US$

9.9

21.7

26.7

5.9

6.8

11.1

6.6

9.1

8.2

20.8

20.7

10.7

Fixedtelephone subbasket PPP$

13.4

20.8

18.7

12.8

11.8

16.2

9.1

15.5

30.7

39.6

14.4

10.6

Mobilecellular subbasket PPP$

211.8

82.4

41.1

28.1

31.5

37.5

30.4

36

36.3

19

31.1

34.2

Fixedbroadband sub-basket PPP$

5.2

12.6

8.4

2.3

2.2

1.7

1.1

0.8

0.4

0.8

0.5

0.2

Fixed telephone subbasket % of GNI per capita

14

8

-6

-11

-8

-32

-17

0

0

0

0

0

Relative change % in 2010-2011 of fixed telephone subbasket/GNI

7

12.1

5.9

4.9

3.9

2.5

1.5

1.4

1.3

1.4

0.4

0.2

Mobilecellular subbasket % of GNI per capita

-2

-2

0

-15

3

0

-11

0

-3

-5

0

0

Relative change % in 2010-2011 of mobile cellular subbasket/GNI

111

48

12.9

10.8

10.4

5.8

5

3.2

1.6

0.7

0.8

0.8

Fixeboradband subbasket % of GNI per capita

1050

750

2060

1160

2500

4150

4270

7760

19890

41850

32780

40070

Average annual GNI per capital USD, 2010

Important indicators by countries in 2010 Vietnam

China

Korea

Budget expenditures

35,70 billion

1,73 trillion

242 billion

Singapore 38,52 billion

Budget revenues

21,15 billion

1 trillion

199,9 billion

101 billion kWh 96,3 billion

4,693 trillion kWh 1,9 trillion

GDP purchasing power parity

299,20 billion

GD real growth rate (%) Imports

Electricity consumption Exports

Industrial production growth rate Iinflation rate (consumer prices)

2.48 trillion

Malaysia 3.80 billion

Indonesia 144.10 billion

Phillippines 36.71 billion

74.99 billion

Cambodia 2.54 billion

40.90 billion

1.19 billion

54.17 billion

131.6 billion kWh 244.40 billion

1.559 billion kWh 5.35 billion

1.59 billion 941.50 million 2.23 billion kWh 1.84 billion

39,33 billion

1.76 trillion

45.01 billion

93.03 billion

23.56 billion

455,1 billion kWh 556,5 billion

41,2 billion kWh 409,20 billion

859.7 billion kWh 800.80 billion

93.8 billion kWh 212.70 billion

126.1 billion kWh 208.90 billion

11,29 trillion

1,55 trillion

314,20 billion

4.39 trillion

447.00 billion

1.12 trillion

389.80 billion

601.40 billion

32.95 billion

17.44 billion

350.40 billion

5.8

9.2

3.6

4.9

-0.05

105,3 billion

1,74 trillion

524,4 billion

36,55 billion

794,70 billion

5.2

6.4

3.7

0.1

6.7

8.3

5

168,00 billion

172,10 billion

68.84 billion

214.60 billion

6.96 billion

2.37 billion

482.60 billion

7.50%

13.90%

3.80%

7.60%

-1.5%

1.4%

3.5%

6%

4.3%

5.7%

17.7%

7.6%

18.60%

5.40%

4%

5.20%

0.4%

3.2%

5.7%

5.3%

3.8%

6%

7.8%

5.3% 3.701 million 3.4%

Japan

54.4 billion kWh

Thailand

Laos

45.23 billion 43.14 billion kWh 427.90 billion

Labor force

46,48 million

816,2 million

25,1 million

3,212 million

65,93 million

11,9 million

117 million

39.81 million

39.62 million

8.8 million

3.69 million

Unemployment rate

2.30%

4.10%

3.40%

2%

4.8%

3.1%

6.7%

7.2%

0.7%

3.5%

2.5%

Population below poverty line

14.50%

13.40%

15%

16%

3.8%

13.33%

32.9%

8.1%

31%

26%

Population growth rate

1.05%

0.48%

0.20%

-0.077%

2%

1.04%

2%

0.543%

1.69%

0.0165 5

0.421%

Railways

2,632

86,000

3,381

27.182

1.849

5.042

995

4.071

690

Airport

44

502

116

8

176

118

684

254

105

17

41

2

Highways

180,549

3,860,800

103,029

3.356

1,210,251

98.721

437.759

213.151

180.053

38.093

39,568

2.067

2%

Source: http://globaledge.msu.edu/global-insights/by/country

Sector structure Separate telecommunications/ICT regulator

Status of main-fixed line operator

Level of competition

Foreign ownership

Singapore

yes

mixed

CCC

100

Korea, Rep.

yes

private

CPC

49-100

Hong Kong

..

..

..

..

Japan

no

private

CCC

100

Malaysia

yes

mixed

CCC

30

China

no

mixed

P..

49

Thailand

yes

public

CCC

49

Indonesia

yes

mixed

CCC

35

Vietnam

no

public

CCC

..

Philippines

yes

private

.CC

40

Laos

yes

mixed

MPP

49-100

Cambodia

no

public

PCC

100

Source: World Bank and ITU: A little Data Book on Information and Communication Technology Copyright © 2016. Diplomica Verlag. All rights reserved.

Hongkong 46.97 billion

M: Monopoly, P: Partial Competition, C: Full competition A: allowed, B: banned, C: closed

110

Sector Performance Access Fixed telephone subscription per 100 people

Mobile cellular telephone subscriptions per 100 people

Active mobilebroadband subscriptions per 100 inhabitants (2010)

Active mobilebroadband subscriptions per 100 inhabitants (2011)

Fixed broadband subscriptions per 100 people(2010)

Fixed broadband subscriptions per 100 people (2011)

Household with a computer %

Household with internet access at home %

Singapore

39.2

145.2

98.2

110.9

24.94

25.5

84

82

Korea, Rep.

59.2

105.4

98.2

105.1

35.68

36.9

81.8

96.8

Hong Kong

61.8

195.6

38.9

51.8

29.93

31.5

77.9

75.4

Japan

31.9

95.4

88.2

93.7

26.91

27.4

83.4

81.3

Malaysia

16.1

119.2

10.1

12.3

6.5

7.4

41

55.6

China

21.9

61

3.5

9.5

9.42

11.6

35.4

23.7

Thailand

10

103.6

0

0

4.61

5.4

22.8

11.4

Indonesia

15.8

91.7

10.8

3.9

Vietnam

18.7

175.3

8

18

4.13

4.3

14.2

12.5

Philippines

7.3

85.7

2.3

3.4

1.85

1.9

13.1

10.1

Laos

1.7

64.6

0.4

0.6

0.19

0.7

6.9

3.4

Cambodia

2.5

57.7

4.3

0.4

Fixed wiredbroadband subscriptions % of total Internet (2010)

International Internet bandwidth bit/s per Internet user

0.79

0.25

Source: World Bank and ITU: A little Data Book on Information and Communication Technology

Usage and Quality performance

International voice traffic, total minutes/subscription/ month

Domestic mobile traffic minutes/subscription/ month

Singapore

89.1

..

71

75

5.633803

100

95.1

172151

Korea, Rep.

3.5

175.6

83.7

83.8

0.119474

100

100

11878

Hong Kong

63.8

139.5

72

74.5

3.472222

100

72.2

776625

Japan

2.9

101.2

78.2

79.5

1.662404

100

..

15833

..

..

56.3

61

8.348135

95

29.9

11445

1.3

190.4

34.3

38.3

11.66181

99

93.2

2389

Thailand

..

21.5

21.2

23.7

11.79245

..

Indonesia

..

..

9.9

-100

..

57.5

2948

Vietnam

..

..

30.7

35.1

14.33225

..

30.6

5552

Philippines

..

..

25

29

16

99

47.8

10723

Laos

..

..

7

9

28.57143

80

53.7

2304

Cambodia

..

..

1.3

-100

99

86.7

28067

Malaysia

Copyright © 2016. Diplomica Verlag. All rights reserved.

China

Individuals using the Internet % (2010)

Individuals using the Internet % (2011)

Relative change in % 20102011

Population covered by a mobilecellular network %

10829

Source: World Bank and ITU: A little Data Book on Information and Communication Technology

111

Trade and application performance ICT goods exports % of total goods export

ICT goods import % of total goods imports

ICT service export % total service exports

E Government Web measure index 1 = highest presence

Secure Internet servers per million people

Singapore

34.3

27.9

2.8

1

607.3

Korea, Rep.

21.4

11.9

1.2

1

2536.4

Hong Kong

44.2

42.8

1.8

..

567.5

Japan

10.7

12

1.3

0.86

743.3

34

29.8

7

0.79

54.4

China

29.1

20.4

6.1

0.53

2.4

Thailand

18.9

14.2

..

Indonesia

5.1

8.6

7.4

0.5

3.4

Malaysia

Vietnam

5.8

8.6

...

Philippines

35.6

31.6

12.6

0.5

7.5

..

..

..

0.22

1.3

0.1

2.5

5.5

0.19

2.5

Laos Cambodia

Source: World Bank and ITU: A little Data Book on Information and Communication Technology

ICT indexes, GDP Growth rate and GNI per capita Networked readiness index 2010

Networked readiness index 2011

Networked readiness index 2012

IDI 2010

IDI 2011

Digital Economy Ranking 2010

Gdp growth rate 2010

Gdp growth rate 2011

GNI per capita 2010 in US$

Singapore

5.64

5.59

5.86

7.47

7.66

8.22

14.8

4.9

40070

Korea, Rep.

5.14

5.19

5.47

8.45

8.56

7.94

6.3

3.6

19890

5.33

5.19

5.46

7.39

7.68

8.22

6.8

4.9

32780

Hong Kong SAR Japan

4.89

4.95

5.25

7.57

7.76

7.85

4.4

-0.7

41850

Malaysia

4.65

4.74

4.8

4.63

4.82

5.93

7.2

5.1

7760

China

4.31

4.35

4.11

3.58

3.88

4.28

10.4

9.3

4270

Thailand

3.97

3.89

3.83

3.29

3.41

4.86

7.8

0.1

4150

Indonesia

3.72

3.92

3.75

3.01

3.19

3.6

6.2

6.5

2500

Vietnam

3.87

3.9

3.7

3.41

3.68

3.87

6.8

5.9

1160

Philippines

3.51

3.57

3.64

3.04

3.19

4.47

7.6

3.9

2060

1.84

1.99

8.5

8

1040

3.03

3.23

3.32

1.88

1.96

6

7.1

750

LAOS Cambodia

Copyright © 2016. Diplomica Verlag. All rights reserved.

Source: World Bank, ITU, World Economic Forum and EIU

112

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