The prospects for accelerated growth and development offered by electronic commerce are leading most developing countries to turn their attention toward information and communication technologies (ICTs) and an assorted array of related policy areas. ICTs are now recognized by technologists and economists alike to be drivers of economic growth. The widespread deployment and utilization of ICTs by developing countries are expected to improve intellectual capital, workforce skills, productivity, market access and social structures, and enable them to become more competitive, both regionally and globally.
2. However, some of the cyber optimists are still debating the “productivity paradox” first raised by the Nobel Laureate Robert Solow who observed that “you can see the computer age everywhere but in the productivity statistics”. For the sceptics, there were still doubts about the acceleration in productivity growth in the past decade.
3. But the biggest puzzle about America’s productivity gains is why Japan’s and Europe’s IT investments have not delivered similar increases. One of the most recent publications “Information Technology and the G7 Economies” shows that in all G7 countries, not just America, a boom in IT investment helped to boost growth in the second half of the 1990s. Indeed, the contribution to GDP growth from IT capital spending was almost as big as in America – although it was offset by a fall in investment of other sectors. Thus, America’s growth resurgence due to the investments is not unique.
4. Productivity growth in the US, which slowed in the 1980s and early 1990s, despite massive investments in computers and telecommunications, started to increase in the second half of the 1990s by an annual rate of 3.3%, significantly higher than the rate of the previous two decades. This is indeed not different from previous technological upheavals that have had profound consequences for the economy. The steam engine, railways, the internal combustion engine and the industrial application of electricity, all, took a long time, even decades, to spread productivity gains to the rest of the economy.
5. Still better, this acceleration has survived the recent economic downturn when it might have been expected to slow down. There is thus an increasing consensus that the acceleration in productivity growth is attributable mainly to changes induced by ICT and Internet, through improvements in all aspects of corporate organisation, production, finance, marketing and logistics. ICT will continue to support rapid productivity growth and drive the global economy as firms in advanced countries, and more importantly, in developing countries, engage more into e-business.
6. The rules of business are now being rewritten to be the rules of e-business. E-business is more than an inflexion point in the application of technology to business. It is increasingly seen as a radical transformation of the traditional ways of doing business. Technology has always had a significant impact on the business world, both in terms of new products and new business processes and tools. But in recent years, the pace of change has accelerated dramatically. The technologies and services associated with the new technology ways of trading will have to be integrated within the existing commercial practices. The new ways of trading are cost effective, sustainable through time and lead to increasing and profitable trade. Intensified competition and new e-commerce opportunities are pressing traditional companies to build e-business models that are flexible, fast moving and customer focussed, and that are oriented toward continuous service improvement and ceaseless innovation. E-business is not just about e-commerce transactions or about buying and selling over the web; it is the overall strategy of redefining old business models, with the aid of technology, to maximise customer value and profits. To quote Business Week: “Forget B2B or B2C, E-business is about P2P – Path to Profitability.”
7. The real challenge surrounding e-business is the task of making it happen in a systematic way without derailing existing business. The dot.com crash has shown that the dot.coms which have not been able to overthrow the dominant, outdated business design have disappeared, while some market leaders has seen their share prices down by 98% from their peaks. Only few online businesses like Yahoo, eBay, Intel, Dell, Nokia and Amazon have successfully challenged existing business models and have made their mark.
8. Globalisation and liberalisation, the development of e-markets and the expansion of telecommunications infrastructure are providing new opportunities for e-business. In the most optimistic forecast, the share of e-business in worldwide B2B and retail transactions is expected to increase to 18% in 2006. Developing countries like Mauritius with appropriate IT infrastructure can harness the powers of e-business to develop niche markets in e-insurance, e-education, data capture and repair, management of electronic medical records, back office services for airlines, business process outsourcing, brokerage firms, and credit card processing.
9. With its unique mix of assets, Mauritius does have competitive advantages derived from a strong political commitment, special ties with India with its beneficial knowledge spill-over, the multi-lingual skills of its labour force and its emerging state-of-the-art physical and communications infrastructure. Capitalising on these advantages Mauritius can expect to increase the share of the ICT sector to GDP from the present 2.1% to 2.6% in FY 2004/05 and to 3.5% in FY 2007/08. This is expected to be achieved by gradually gravitating from:
§ the lower end, exporting IT services by attracting Indian and other international firms to provide IT services by setting up call-centres, back-office operations, training, and programming centres;
§ gradually moving on to the next stage which will basically consist of the creation of software packages particularly for French-language markets in Africa, Europe and Canada; and
§ in the longer term moving up the export value chain of sophisticated ICT product lines through learning by doing as we progress towards an information technology and e-commerce centre of excellence.
10. As we connect to a new economy we will have to keep on reminding ourselves that the structure of competitive advantages will shift ever more rapidly as technology changes quickly and newly liberalised ICT-based service oriented emerging markets become more competitive. Neither countries nor companies can afford to sit on their laurels in the New Economy. The e-business and connected economy give a premium to scale, branding power and critical mass. Hence a surge in flexibility, multi-skilling, new work ethics and strategic alliances are likely.
11. Our Mauritian companies will need to give up their treasured and traditional ways and adapt to the new exigencies of the New Economy. They will have to abide to the new rules of the business game. And these are not necessarily loaded against us. There are opportunities for the taking. To benefit from the New Economy, our companies will have to be nimble and entrepreneurial – flexible enough to ensure that the emerging growth sectors are allowed to blossom. Our organisational approaches will have to remain customer focussed; its incentive and compensation structure competitive while optimising strategic partnerships, venture capital, and technology transfers as vehicle for business development. We have to ensure international industry standard and make a sustained commitment to training and education. Diversity will be needed in decision-making, ownership structures and size of companies. And our institutions and practices should be able to unleash the intellectual potential of our knowledge workers, through innovation, creativity and efficiency to find new forms of knowledge, new ways to sell it and new means to provide services and products.
12. The new business environment is, in many ways, already upon us. We see it in the emergence of small companies, in the rise of outsourcing and telecommuting, and in the formation of independent business units. SMEs have thus new opportunities to compete because the new rules of the game reduce transaction costs and barriers to entry but their e-business model must be adapted to their competitive strengths and not just replicate the approaches of bigger players. Just as many businesses have to transform their operations in order to survive and adjust to this new connected economy, Governments too have to undergo a process of reinvention.
14. As networked technologies take hold, it makes governments more accountable to the public and gives citizens greater voice. Customers and citizens expect governments to get on with e-business and become active partners in the governance process. Government will need to find new ways of working, new ways of interacting with the public, new ways of organising their responsibilities, and new forms of value that they can provide to the public.
15. The stakes in the digital economy are high. But we are confident that - Government, the private sector, civil society, our present and future knowledge workers - will succeed in harnessing the new technologies of the digital age for higher growth, healthier lives, increased knowledge and more productive livelihoods.
