The Use and Economic Impacts of ICT at the Macro-Micro levels in the Arab Countries Paper presented at the fifth GLOBELICS Academy 2008 Ph.D. -School on National Systems of Innovation and Economic Development The Unit for Science, Technology and Innovation Studies (TaSTI), University of Tampere, Tampere, Finland, June 2-13, 2008 By Samia Satti Nour UNU- MERIT/Maastricht University and Economics Department-Khartoum University 1
Outline Introduction Aims of the research. Theoretical and Empirical literature on the importance and impacts of ICT. Economic characteristics of ICT in the Arab region. Main findings: Stylised facts on the use and economic impacts of ICT in the Arab region. Conclusions and Policy Implications. 2
Introduction Rapid increase in the diffusion of information and communication technologies (ICT). Increasing economic importance of ICT in both developed and developing countries. Increasing debate about the positive and negative economic impacts of ICT in both developed and developing countries. 3
Aims of the research Show the status, nature, trend and determinants of the use/demand for ICT at macro-micro levels. Examine the economic impacts of the use/ demand for ICT in the Arab Gulf countries. Compare between the use and economic impacts of ICT at macro-micro levels in the Gulf countries 4
Theoretical and Empirical literature on the importance and impacts of ICT (1) Theoretical and empirical literature confirmed the importance and impacts of ICT on economic growth. Use of many ICT indicators to measure economic impacts (e.g. IT, computer, computer equipment, investment/expenditures on ICT) Positive impacts of ICT on productivity (cf. Hitt and Brynjolfsson, 1996; Brynjolfsson and Yang,1996), growth and development (cf. Jorgenson and Stiroh, 1995, Phojola; 2000, 2001), work place organization (cf. Bresnahan, Hitt and Brynjolfsson, 1999) and skill upgrading (cf. Hwang, 2000). Complementary relationships between ICT and human capital, skills and upskilling (cf. Goldin and Katz, 1998; Bresnahan et al. 1999; Autor, Katz, and Krueger, 1998 Acemoglu, 1998) 5
Theoretical and Empirical literature on the importance and impacts of ICT (2) Negative impacts of ICT: e.g. skilled biased technical changes of the increasing use of ICT (cf. Bound and Johnson, 1992; Berman Bound and Griliches, 1994; Freeman and Soete, 1994; Acemoglu, 1998; Autor, Katz, and Krueger, 1998). Controversy: the increasing use of ICT leads to negative impacts for the developing countries, because of - Intensifying competition, - Creating more comparative advantageous for developed countries, - widening the gap: digital divide between developed and developing countries. 6
Economic characteristics of ICT in the Arab region (1) Considerable variation across Arab countries in the use of ICT, which can be interpreted due to differences in the level of economic development (e.g. GDP per capita income) across Arab countries. Relationship between development (measured by income level) and the use of ICT, since the use of ICT is mostly concentrated in the high rather than medium and low income. Regional disparities in the use of ICT in the Arab region (defined by income level) (2001-2002) Share in total High income Medium income Low income Reference year All region (%) a 18 59 23 2002 Area (%) b 1 64 35 2001 Population (%) c 2 76 22 2002 Internet (%) c 81 17 2 2002 Telephone mainlines (% ) c 68 27 5 2002 Cellular Mobile (%) c 78 16 6 2002 Sources: Adapted from (a) World Bank (2004) (b) CIA World Factbook (2001), (c) UNDP (2004) 7
Economic characteristics of ICT in the Arab region (2) In terms of both ICT use index and PC purchasing power the average for the Gulf countries is higher than all Arab countries. Table 3- ICT use index and PC purchasing power in Arab Gulf countries 2002-2003 End of 2002 IC use Index End of 2003 IC use Index PC units purchasable by GDP per capita Bahrain 1.15 1.26 11.39 Kuwait 0.95 1.17 15.13 Qatar 0.75 0.92 23.05 Oman 0.35 0.39 6.66 Saudi Arabia 0.50 0.61 7.90 UAE 1.40 1.50 18.19 Average Gulf 0.85 0.975 3.03 Total Arab 0.22 0.27 2.27 Source: Madar Research Group: www.madarresearch.com 8
Methodology and Data of ICT use in the Arab Gulf Descriptive and statistical (OLS technique) methods. Micro level: use primary data based on the results obtained from the survey of Nour (2002b) that cover the medium and large size firms which are active in the chemical and metal industries in the United Arab Emirates as a case of the Gulf countries. Macro level: use secondary data. 9
Main findings: Stylised facts on the use of ICT(1a) -At macro level:dynamic increasing trend of ICT/Internet demand over time across the Gulf countries Figure 2- The use of Internet in the Gulf countries (Per 1,000 population) (1992 2002) 400 Per 1,000 Population 350 300 250 200 150 100 50 Bahrain Kuw ait Oman Qatar Saudi Arabia UAE 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1992-2002 Average Gulf Sources: World Development Indicators database and International Telecommunication Union 10
Main findings: Stylised facts on the use of ICT(1b) -At macro level:dynamic increasing trend of ICT/telephone demand over time across the Gulf countries Figure 1: Access to main telephone lines in the Gulf countries (Per 1,000 population) (1992 2002) 450 Per 1,000 Population 400 350 300 250 200 150 100 50 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1992-2002 Bahrain Kuw ait Oman Qatar Saudi A rabia UA E Average Gulf Sources: World Development Indicators database and International Telecommunication Union 11
Main findings: Stylised facts on the use of ICT(1c) -At macro level: Dynamic increasing trend of ICT/mobile demand over time across the Gulf countries Figure 3- The use of mobile cellular telephones in the Gulf countries (Per 1,000 population) (1992 2002) 800 Per 1,000 Population 700 600 500 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 1992-2002 Bahrain Kuw ait Oman Qatar Saudi Arabia UAE Average Gulf Sources: World Development Indicators database and International Telecommunication Union 12
Main findings: Stylised facts on the use of ICT (2a) At the micro level: the demand: use and spending on ICT is characterizing by considerable dynamism: shows a dynamic but a decreasing trend over time across firms. Figure 4 Trend of Total ICT Spending across firms (1999-2001) (Million UAE Dirhams) Trend of Total ICT Spending across f irms (1999-2001) (Million UAE Dirhams) 80 Million UAEDirhams 70 60 50 40 30 20 10 0 1998 1999 2000 2001 2002 1999-2001 Chemical Metal Large Medium Total Source: Survey of Nour (2002b) 13
Main findings: Stylised facts on the use of ICT (2b) At the micro level: the demand: use and spending on ICT is characterizing by considerable dynamism: shows a dynamic but a decreasing trend over time across firms. Figure 5- The increasing use of technology and ICT across firms, 1999-2001 90% 80% 70% 60% 50% 40% 30% Increasing use of technologies Increasing use of ICT 20% 10% 0% All firms Chemical Metal Medium Large Source: Survey of Nour (2002b) 14
Main findings: Stylised facts on the use of ICT (2c) At the micro level: the demand: use and spending on ICT is characterizing by considerable dynamism: shows a dynamic but a decreasing trend over time across firms. Figure 6 The share and trend of total spending on ICT across firms (1999-2001) 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Chemical Metal Large Medium 1999 2000 2001 Source: Survey of Nour (2002b) 15
Main findings: Stylised facts on the use of ICT (3) At the macro level the use of ICT (demand) shows a normal demand curve decreasing in price and increasing in income (GDP per capita). Different from the conventional view in the literature, the use of telephone shows upward sloping demand curve. Table 4- Determinants of ICT use: demand, price and GDP per capita across the Gulf countries at the macro level (2002-2003) Coefficient (t-value) R 2 Constant INTERNET : Price HRS INTERNET: Price MTH TELPHONE: Price MNTS GDPPC UNDP R 2 Internet Gulf 252.662 (1.614) -3.690 (0.653) 0.096 Internet Gulf 235.247 (2.491) -28.146 (-0.966) 0.186 Internet Gulf -243.240 (-1.550) 2.593** (2.593) 0.627 Telephone Gulf -74.800 (-0.531) 158.800** (2.110) 0.527 Telephone Gulf -157.437 0.022** 0.858 (-2.033) (4.923) Mobile Gulf -357.200 (-1.421) 0.047** (3.224) 0.722 **. Correlation is significant at the 0.01 level (1-tailed) 16
Main findings: Stylised facts on the use of ICT (4) At the micro level, the use/demand and spending on ICT increases in firm size (capital and labour) and industry level. Table 5 Total spending on ICT, labour and capital across firms (1999-2001) Independent variables Labour Capital Constant R 2 N Dependent variable (ICT expenditures) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value) Large 1.523** 4.008 0.641 14 (4.625) (2.138) Medium 9.418** -29.257 0.610 9 ICT expenditures (3.307) (-2.454) Chemical 2.065** (3.361) 1.179 (0.370) 0.485 14 Metal 1.167** 5.655 0.505 9 (2.674) (2.537) 1999 0.860** 0.241* 3.805 0.630 13 (2.636) (1.651) (1.805) ICT expenditures (All firms) (log) 1 2000 1.068** (2.461) 0.189 (0.978) 3.763 (1.290) 0.517 13 2001 0.739** (2.243) 0.175 (1.264) 5.491 (2.573) 0.541 12 *. Correlation is significant at the 0.05 level (1-tailed), **. Correlation is significant at the 0.01 level (1-tailed). Note (1) Log value for all estimated variables: ICT, labour and capital. 17
Main findings: Stylised facts on the Economic Impacts of ICT (5a) At the macro level, the use of Internet and mobile shows positive significant correlations (complementary relationships) with the use of telephone. Table 6-The complementary relationship between the use of Internet, telephone and mobile and the impacts of ICT: ICT/GDP on GDP and schooling across the Gulf countries at the macro level (2002-2003) Internet and Telephone Coefficient (t-value) R 2 Constant INTERNET TELPHONE Mobile ICT/GDP R 2 Internet Gulf -52.036 (-0.564) 0.959** (2.403) 0.591 Telephone Gulf 120.590 (2.531) 0.616** (2.403) 0.591 Mobile Gulf -8.978 (-0.073) 2.063** (3.903) 0.792 Telephone Gulf 48.394 (1.033) 0.384** (3.903) 0.792 GDPUNDP Gulf -18.323 26.659** 0.847 (-0.538) (3.331) GDPPCUNDP Gulf 21306.635-1187.698* 0.654 (8.200) (-1.944) SCHOOLING2 Gulf 4.869 0.507 0.635 (excluding SA) (5.619) (1.290) **. Correlation is significant at the 0.01 level (1-tailed) 18
Main findings: Stylised facts on the Economic Impacts of ICT (5b) At the micro level, the use of/ total spending on IT (computer) shows positive significant correlations (complementary relationships) with both telecommunication and ICT training. Table 7- The relationship between Computer, training and Telecommunication expenditure Independent variables Computer expenditure Training expenditure Dependent variables (All Coefficient Coefficient firms) (t-value) (t-value) Computer 1999 0.620** expenditure: All (2.489) firms 2000 0.487 (1.325) 2001 0.847* (1.627) Training 1999 0.820** expenditure: All (2.489) firms 2000 0.369 (1.325) 2001 0.247* (1.627) Telecommunica 1999 0.309 0.405 tion (0.626) (0.515) expenditure: all 2000 0.261 0.512** firms (1.007) (1.972) 2001-0.0276 1.107** All firms (-0.125) (5.219) Telecommunication expenditure Coefficient (t-value) 0.198 (0.626) 0.431 (1.007) -0.0564 (-0.125) 0.343 (0.985) 0.639* (1.972) 0.661** (5.219) Constant R 2 N Coefficient (t-value) 2.484 (1.097) 0.633 (0.220) 2.178 (1.141) -2.544 (0.957) -0.936 (-0.376) 0.546 (0.504) 3.720 (1.377) 3.601 (1.934) -0.127 (-0.090) *. Correlation is significant at the 0.05 level (1-tailed), **. Correlation is significant at the 0.01 level (1-tailed) 0.815 10 0.677 12 0.670 14 0.830 10 0.755 12 0.911 14 0.675 10 0.735 12 0.888 14 19
Main findings: Stylised facts on the Economic Impacts of ICT (5c) At the macro level: positive but inconclusive economic impact of spending on ICT Table 6-The complementary relationship between the use of Internet, telephone and mobile and the impacts of ICT: ICT/GDP on GDP and schooling across the Gulf countries at the macro level (2002-2003) Internet and Telephone Coefficient (t-value) R 2 Constant INTERNET TELPHONE Mobile ICT/GDP R 2 Internet Gulf -52.036 0.959** 0.591 (-0.564) (2.403) Telephone Gulf 120.590 0.616** 0.591 (2.531) (2.403) Mobile Gulf -8.978 2.063** 0.792 (-0.073) (3.903) Telephone Gulf 48.394 0.384** 0.792 (1.033) (3.903) GDPUNDP Gulf -18.323 26.659** 0.847 (-0.538) (3.331) GDPPCUNDP Gulf 21306.635-1187.698* 0.654 (8.200) (-1.944) SCHOOLING2 Gulf 4.869 0.507 0.635 (excluding SA) (5.619) (1.290) **. Correlation is significant at the 0.01 level (1-tailed) 20
Main findings: Stylised facts on the Economic Impacts of ICT (5d) At the micro level: positive but inconclusive economic impact of spending on ICT Table 8 Total spending on ICT, labour capital, output and profit across firms (1999-2001) Independent variables Labour Capital ICT spending Constant R 2 N Dependent variables All firms (log) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value) Coefficient (t-value) 1999-45897.058 1.207** 53.858** 8423985.9 0.993 12 (-1.606) (5.623) (11.852) (2.570) 2000-52249.455 2.120** -1.473 7906055.0 0.978 12 Total output (-1.477) (7.150) (-1.615) (1.891) (total sales 2001-48147.057* 1.808** 13.133* 10655725 0.984 11 value) (-1.936) (8.189) (1.922) (3.004) Profit 1999-1527.002 0.140 1.988 129363.28 0.730 11 (-0.130) (0.560) (0.496) (0.101) 2000-5014.495 (-0.641) 0.310* (1.820) -0.710 (-0.921) 15621.632 (0.012) 0.652 11 2001-11348.674 (-1.236) 0.182 (0.608) 1.561 (0.240) 1888472.6 (1.657) 0.515 10 *. Correlation is significant at the 0.05 level (1-tailed), **. Correlation is significant at the 0.01 level (1-tailed) 21
Summary of the main findings: ICT in the Arab Gulf At the macro and micro levels, the demand for ICT (measured by the use and spending on ICT) is characterizing by considerable dynamism: shows a dynamic increasing trend over time across countries but a decreasing trend over time across firms. At the macro level the use/demand for ICT shows a normal demand curve decreasing in price and increasing in income (measured by GDP per capita). At the micro level, spending on ICT increases in firm size (capital and labour) and industry level. At the macro level, the use of Internet and mobile shows positive significant correlations (complementary relationships) with the use of telephone. At the micro level, the use of/ total spending on IT (computer) shows positive significant correlations (complementary relationships) with both telecommunication and ICT training. At the macro and micro levels spending on ICT show positive but inconclusive economic impact. 22
Conclusions and Policy Implications Rapid growth on the use of ICT in the Gulf countries. Inconclusive economic impacts of ICT at the macromicro levels in the Gulf countries. Major policy implication: it is essential for policy making in the Arab Gulf region to enhance the use and economic impacts of ICT, mainly through: - Enhancing quality and accumulation of human capital; - Motivating the effective use of ICT. 23
Comments are Welcome Thanks for Your Kind Attention! 24