The Use and Economic Impacts of ICT at the Macro-Micro levels in the Arab Countries

1. 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

2. 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.

3. 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.

4. 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

5. 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)  

6. 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.

7. 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.

8. 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 Source: Madar Research Group: www.madarresearch.com

9. 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.

10. 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) Sources: World Development Indicators database and International Telecommunication Union

11. 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) Sources: World Development Indicators database and International Telecommunication Union

12. 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) Sources: World Development Indicators database and International Telecommunication Union

13. 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) Source: Survey of Nour (2002b)

14. 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 Source: Survey of Nour (2002b)

15. 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) Source: Survey of Nour (2002b)

16. 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.

17. 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.

18. 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.

19. 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.

20. Main findings: Stylised facts on the Economic Impacts of ICT (5c) • At the macro level: positive but inconclusive economic impact of spending on ICT

21. Main findings: Stylised facts on the Economic Impacts of ICT (5d) • At the micro level: positive but inconclusive economic impact of spending on ICT

22. 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.

23. Conclusions and Policy Implications • Rapid growth on the use of ICT in the Gulf countries. • Inconclusive economic impacts of ICT at the macro-micro 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.

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