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    Playing @ the Digital Game

     

     
     
    © International Trade Centre, International Trade Forum - Issue 1/2001

    Too few firms in developing countries are taking advantage of new technologies which can help them export better. In this article, ITC focuses on what developing countries can do to shift their attention from the "Digital Divide" to the "Digital Dividend".

    From the "Digital Divide" to the "Digital Dividend"

    Recent information and communication technology developments, particularly the growing use of Internet, have affected almost every facet of modern life. Technology has brought both new challenges and new opportunities, leading to digital "haves" and "have-nots". Experts and analysts describe this phenomenon as a "Digital Divide". It has been argued that this divide is often congruent with others such as the economic divide, the education divide or the health divide. But nowhere has the impact of technology been more pronounced than in the area of international business.

    In an effort to bridge this divide, many institutions have conducted extensive studies, discussions and dialogue. The aim of this research and dialogue is to harness technology so that it makes a positive impact on development and poverty reduction.

    For our purposes here, we will leave aside the analysis of the root causes of this divide or the measures to bridge it. Rather, ITC has focused on what developing countries, especially small and medium-sized enterprises (SMEs), can do to gain the "Digital Dividend" - by exploiting "Digital Opportunities" that have now become available.

    Business views in developing countries

    ITC's starting point was in-depth consultation with business communities in developing countries. We began by talking to business representatives and their public-sector counterparts to obtain the view from the playing field and from the sidelines. We held a year-long running dialogue with the key players over the course of 2000. We undertook surveys, consultations, analyses and practical research, posing such questions as: "Do you know about the digital developments under way? Do you know how they will affect you and your business? Do you know what you need to do?"

    This dialogue helped shape the Executive Forum 2000 on "Export Development in the Digital Economy", held in Montreux in September 2000. At the event, 45 national export strategy-makers and business leaders from 24 developing countries and transition economies and 20 e-commerce specialists met for three days to deliberate over identified issues of major concern. E-mail discussions enabled a further 600 e-trade specialists and businesses from 86 countries to join the debate and share their views. This was further supported by the Executive Forum web site (http://www.intracen.org/execforum), which hosted ongoing consultations prior to and during the event.

    A new game, defined by e-competency

    The newly introduced "Digital Game", despite its apparent mysteries, dark secrets and technical complications, has nevertheless provided many interesting opportunities for exporting SMEs in developing and transition economies. These enterprises are concerned about being left behind due to technological and infrastructural weaknesses, as well as insufficient knowledge of recent technology developments and their implications for developing countries. At the same time, they are energized by evidence that governments and businesses in developing countries have managed to turn these developments to their advantage.

    Let us take a closer look at some of these issues.

    Technology has altered relationships between producers and consumers of goods and services; redefined the roles of intermediaries in the global supply chain; and generated both new opportunities and new players. New business models are emerging and there is pressure on existing business approaches to adjust to the new definition of competitiveness. The emerging key factor is e-competency. It is an entirely new ball game. And as with all games, only those with the full knowledge of the rules and who have been trained in the appropriate skills will be able to excel in the playing field.

    Game rules: the law-maker's dilemmas

    The rules of the game are developing in response to these and other considerations - not all of which are fully compatible. Developing country governments face competing resource demands between traditional priorities such as food security, health and education, on the one hand, and emerging priorities such as technology infrastructure and human resource development, on the other. Technology proponents advocate speedy establishment of telecommunication networks with affordable access; development of standards and protocols; as well as software, hardware and "brainware" (an e-savvy workforce). There are also competing considerations related to societal values - equity and social justice, preservation of cultural values, freedom of information and others. Governments can either stand back or intervene to create an enabling environment for their own companies and citizens.

    This brings us to the law-maker's dilemmas. Among them:

    Innovation vs control. Innovation occurs through ruptures in a stable structure. It prospers when demand characteristics are strong, infrastructure exists and there is a stable investment climate. Once an innovative concept prospers, or even shows promise of doing so, it brings with it the accompanying turbulence, it attracts the attention of regulators... and the tax man cometh. But then, new technologies are developing at such a rapid rate today that innovation is clearly one jump ahead of the regulators. The challenge is to develop regulation which is technology neutral and development supportive.

    Entrepreneurial vs social benefits. Entrepreneurial activity may be good for individual business interests, but it has to be reconciled with issues of right to privacy, social justice, security and public good.

    Bricks vs clicks. The traditional econo-my ("bricks") has great potential to be e-enabled, especially in key sectors where the physical product and the market structure lend themselves to e-trade migration. It has an even-greater potential to be e-facilitated. The new economy ("clicks") requires a different business development focus, as the products are e-based, e-facilitated and digitally deliverable.

    Balancing options

    It is all a question of striking the proper balance. The balance between unfettered innovation and total regulation will depend, among other considerations, on the state of e-development or e-readiness of the country. An experienced e-player country might favour a tilt towards regulation, while a country in e-training will prefer a tilt towards facilitation.

    The essential point to remember is that technology does not impose an either/or situation. E-commerce or e-facilitated trade should not be viewed as an alternative to traditional trade. Technology is but a tool, and it is up to the user to employ this tool to his or her advantage. As B.M. Vyas, head of the Gujarat Cooperative Milk Federation (AMUL), noted during the Executive Forum, "The Internet or new communications technol-ogies are new ways of doing my business. You may call it e-commerce or you may call it by any other name. For me it is a means of expanding my business and improving my competence and competitiveness in the market."

    Roles in a knowledge economy

    Whatever the rules of the game, it is necessary to be well informed about them. More importantly, it is necessary to develop the skills to play the game effectively and competently.

    In the knowledge economy, it is essential both to acquire knowledge and to be able to apply it to increase competence and competitiveness. It is for this reason that different people acquiring the same knowledge end up reaping differing levels of benefits.

    Governments need to take an active role in raising awareness, building consensus and coordinating activities that are mutually reinforcing. They need to identify competitive advantages for export sectors, both existing and potential ones. They need to put in place training programmes for e-competency. In short, they need to have a well-articulated e-trade strategy and an action plan. These have to be developed and implemented by working in close partnership with the business-sector representatives.

    A phased approach for SMEs

    E-trade development is more than mere e-commerce development. Most developing countries face low levels of Internet connectivity, inadequate bandwidth and high access costs. Hence, the number of developing country companies actually doing e-commerce (i.e., completing entire business transactions over the Internet) is small indeed.

    Yet technology is still relevant to the vast majority of SMEs which are not ready for e-commerce. They can benefit immensely from the new technology at almost every stage of their business cycle. Equally importantly, it is not necessary that these firms be e-literate. There are many service companies and support agencies that act as intermediaries to pass on the benefits of technology to SMEs. Against a fee, these intermediaries can do market research, prospection, analysis, opportunity identification and even make the first contact with potential business partners. This can generate considerable savings for SMEs, rendering them more competitive internationally.

    In short, success in e-trade is about doing old business in new ways and creating entirely new businesses.

    ITC's role

    In response to these challenges, ITC has developed an e-trade strategy and implementation plan. It focuses on helping countries build e-competence, through a package of training, advisory services, information and partnership networks. At the same time, ITC is also moving forward to enhance its own e-capability.

    More information on the Executive Forum event and ITC's e-strategy is available elsewhere in this magazine issue, as well on ITC's Executive Forum site: http://www.intracen.org/execforum

    R. Badrinath is Director of ITC's Division of Trade Support Services.

    These views are adapted from a presentation at the OECD Emerging Market Economy Forum on Electronic Commerce (Dubai, January 2001), consultations with the DOTforce (March 2001), and research for the Executive Forum 2000.



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