MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | DR. YONG-KYUNG LEE
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | DR. YONG-KYUNG LEE
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Dr. Yong-Kyung Lee
1) Introduction Ladies and gentlemen! I am very pleased to talk about the new paradigm of IT and telecommunications to all of our distinguished guests here today. Understanding economic change is a formidable challenge,1 which has driven analysts from research institutions all around the world to overcome. I'd like to cover four topics today. I will start by discussing the emergence of the new economy and the real R(E)volution of IT & telecommunications. Then, I will talk about the importance of IT infrastructure, the model case of the U.S. and the status of Korea. In conclusion, I will suggest the development of IT infrastructure and information sharing among the countries of the Pacific Region. 2) The Emerging New Economy The evidence of a new digital economy [$2.8 tril. (7% of global output)]2 lies with the explosion in electronic connections among individuals and businesses via the Internet. Now, more than 300 million people use the Internet, compared to just three million in 1994. They can access more than 1 billion web sites, with an estimated 3 million new pages added every day.3 The world is witnessing an explosive increase in innovation. Using open standards, people around the world are creating new products and services that are instantly displayed to a local and global audience. There are new forms of economic activity like e-marketplaces linking buyers and sellers in the global market [ca. $1.2 tril. (25% of world trade) in 2003]4, and also changes in business processes covering from customer services to product design that necessitates new technologies which make businesses more efficient, e.g. e-CRM. 3) R(E)volution in IT and Telecommunications Recently, the world has witnessed technological shifts: from circuit to packet, from electrical to optical, and from 2G to 3G mobile services.5 The emergence of e-business (B2C, B2B etc.), walking networks, convergence of telecommunications, IT & broadcasting, and the growth in broadband multimedia content (text, audio-visual, etc.) traffic are the underlying drivers fueling the rapid growth of these technological trends. The explosion in the demand for bandwidth is directly caused by the growth in e-commerce, price elasticity6 and reduced entry barriers.7 Broadband access is expanding worldwide. With the revolution starting in the U.S., Europe may grow faster and have larger volumes, and Asia will follow at a distance only to witness an exponential growth later on. At present, we need to prepare for the post PC era. Mobile phones will overtake TVs (probably at about 2004) as a median for information access. Network computing will demand higher bandwidth, low cost web hosting and servers, reliable IDC, diverse ASPs, etc. The growth of the Internet and wireless services is tremendous in the face of change in global market capitalization. 4) IT Infrastructure as an Indicator of National Competitiveness Next, I will talk about the importance of IT infrastructure, a key indicator of national competitiveness. In the new economy, there are expanding opportunities. To meet these opportunities, we should ensure a stable economic & legal framework for continuing IT innovation. We need to encourage the building of a broadband infrastructure that allows all citizens to have access to advanced services, and take the necessary steps with respect to security, reliability, privacy, consumer protection (including children and adolescents), and IPR (Intellectual Property Rights) that will inspire confidence in the Internet. To realize the full potential of this digital economy, every person & business should be able to participate fully. The U.S. Economy has been expanding for the past 10 years and the rate of labor productivity has doubled in recent years. I'm sure that the major reason for this economic strength in U.S. is the investment and diffusion of IT Infrastructure by nationwide players including not only government and large companies but also SMEs8. IT industry investment (including computer H/W and S/W) has doubled between 1995 and 1999, from $243 billion to $510 billion. Moreover, NII (National Information Infrastructure) & NGI (Next Generation Internet) have made the nation's electronic connectivity much cheaper with seemingly unlimited potential. As a result, most of the B2B e-commerce companies belong to the U.S. (68% of world B2B market) and the U.S. has played its economic role as the leader of the Internet era. Korea also has a strong position in the Internet and wireless telecommunications. The number of Internet subscribers recorded 6.685 million in Dec. 2000, rising 181% in 3 years since 1998. Broadband services including ADSL made a great contribution to these figures. Korean broadband services have skyrocketed and the penetration rate will reach over 50% at the end of this year. There are four well-known reasons for this exponential growth; first, massive deployment of low price, high-speed network access. Second, a rapid growth in contents compared to other nations. Third, market openness for new entrants. Fourth, consistent government policy on high-speed information infrastructure. Also the total number of mobile subscribers reached more than 26 million (78% penetration rate) at the end of 2000, outnumbering the subscription of fixed-line telephones. This growth of Internet and wireless communications has been a driving force in overcoming the Korean economic crisis. The Internet has made e-commerce easier and cheaper for all businesses to transact and exchange information and goods. There is growing evidence that firms are moving their supply networks and sales channels online, and participating in new online marketplaces. Firms are also expanding their use of network systems to improve internal business processes in order to coordinate product design, manage inventory, improve customer service, and reduce administrative and managerial costs. Nonetheless, the evolution of digital business (especially B2B) in Korea is still at an early stage. A recent survey by the Ministry of Communications (MIC) of Korea found that the total revenue from the Korean Internet industry amounted to $31bn. (40tril. won) in 2000. The vitality of the Internet economy is based on IT-related industries.9 Analysis of growth and investment patterns shows that its economic importance has increased sharply since the mid-1990s. IT-related industries still account for a tiny share of the Korean economy's total output (0.87% as of Nov. 2000)10. For instance, the manufacturing aspect of the IT industry has accounted for about 0.481% in 2000. The pro-competition government policies towards the Internet and a national IT strategy as displayed by e-Korea, e-School and access to high-speed Internet will contribute to the expansion of the IT industries. An environment for e-community in Korea has been created, where Korea Telecom plays a leading role. Already, KT has set up high-speed Internet access to 10,000 educational institutions, and 37,000 lines to public agencies. KT Freetel, as the wireless arm of KT, has set new business strategies that will help increase our corporate value: E-Biz (B2B), M-commerce, and strategic alliances in the era of convergence. Especially, we will focus on high growth businesses, such as the wireless Internet and M-commerce on the basis of our core competence. In line with this strategy, Freetel has completed the roll-out of cdma2000 1x network in the Metropolitan area and will expand its coverage to major cities by end of this year. And also we successfully completed 1x-EV DO technical trials using equipments from multiple vendors. The data transmission rate has risen to 1.3 Mbps while on the move and a stationary speed of 850 Kbps. Utilizing these two cutting edge technologies, Freetel will bring high-speed wireless multimedia services to our 8.5 million subscribers. 5) Conclusion: The Pacific Region at the Center of the Global Economy In conclusion, I sincerely hope that the new emerging economy in the Pacific Region would stand at the center of the world economy, and the development of IT infrastructure and information sharing among countries could be more activate than the present. These environments are driven not only by government leadership, but also by a powerful relationship between all economic sectors, including telecommunications, and especially the cooperation between the private sectors in the Asia-Pacific Region. Partnership among Pacific Region companies will help all of us understand and exploit the dynamics of each national market. For this, PBEC needs to take an active interest in the development of IT infrastructure. I believe that PBEC, as a leading pan-Pacific business organization, will play a critical role in accelerating the new economy based on the development of IT infrastructure. I deeply appreciate your attention. Thank you.
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