MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | HARVEY PLUMMER
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | HARVEY PLUMMER
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Mr. Harvey Plummer
Good morning, I'm going to build on a few comments about the digital divide and the social and economic implications around e-commerce. I find as I look through the data for industries that are moving as fast as e-commerce and the Internet, looking back provide us little value, there's a fair amount of dust and a blur. So as we go through this data, some of it may be a little stale, it's about a year old and in this industry that's equivalent to seven or eight years in traditional industry. Probably the most significant take away from merely looking at the data is that roughly 90 person of the Internet users are industrialized countries with about 60 person of those in the U.S., Canada and Mexico. The implication of that is that less than 1 person of Asia outside of Japan are connected with a huge potential for future growth in the industry. At the same time, it signals a problem in these regions as world populations are increasingly excluded from access to the net and participating in these new markets because of costs, technical infrastructure and other problems. I think as Mr. Shahril said that governments alone can't attack this problem, it has to be a collaboration with industry, public groups as well as government to solve the considerable problems. Another very significant problem facing Asia and other developing countries is that the vast majority of Internet content and e-commerce is English based. With only 10 person of the world population speaking English, you can see that that alone is a significant problem for achieving the full capabilities that e-commerce promises to offer for the global economy. The numbers that I have up here show relative percentages of GDP to online commerce versus total commerce and I think what you can see in these numbers is that a fair amount of business transactions in North America, Europe and Japan were as I said over half of the total GDP as generated by knowledge-based services. When you look to other economies, they are lagging considerably again mostly due to lack of infrastructure, absence of laws to support privacy and security and I think governments and public companies need to focus on bringing those laws and regulations into effect as we deploy the technology. I think our experience has suggested that there are two fundamental factors in these markets that drive e-commerce. One is product complexity, products that are highly commodity focused tend to be the easiest to integrate and then those products that are highly packaged, things like rudders, automobiles and other highly specialized products end up being well suited to e-commerce applications and particularly business to consumer applications that were discussed in the previous presentation. Again the problems that are being faced by emerging markets are those of infrastructure, language but also an increasing trend for skilled and knowledge workers to immigrate to developing countries even broadening the information and skill gap in these markets. The question generally comes up for emerging countries and emerging economies: do I have to participate in e-commerce? I picked a European food product example to demonstrate that even emerging economies that are very in need to face the challenges of the e-commerce revolution. This diagram shows on the left developing country with the background bar representing traditional business, as you can see there is a fair amount of gap between the developing country and the European counterpart delivering the service mostly in the area of labor and raw materials but transportation and multi middlemen to deliver the product make up the difference in those markets. What you can see in the European country bar on the far right is that as exchanges come in, they tend to eliminate the multiple middlemen, reduce the material and labor cost and transportation cost remain relatively constant. The graphic shows about a 20 person reduction in middlemen cost in this model. If the emerging and developing countries don't follow the model, you can see that they quickly are on par or at a disadvantage with countries that have adopted that model. Hence the conclusion that we've reached is that despite significant advantages in cost of material, cost of labor, you can't ignore the impacts of e-commerce on all markets. The question usually comes up, who are these people involved in e-commerce? As I look around the room, with a couple of minor exceptions, the typical Internet users represented in the room, male under 35 and for those of us that still think we are under 35, you can consider yourself in that category, college educated. I think the significant note here is 4 times the per capita income, urban based English speaking. What that suggests is the digital divide is not limited to emerging countries versus industrialized countries but is also exhibited within industrial countries as well. The pie chart on the top right demonstrates the emerging trend in China, we're saying roughly two thirds of the population using the Internet, 2x the per capita income and about 40 person of those folks earning over three times the GDP of the typical user. Hence the data is starting to show the same as the markets in China emerged. I've mentioned a couple of times the limitations and problems facing emerging and developing markets and for that matter rural economies in developed nations, accessibility is probably one of the largest problems. New technologies such as wireless both threshold and satellite offer some promise but I'll get to the but on the last point and hence there are some potential solutions emerging to take care of the accessibility issue but I think as we look at infrastructure cost, that's probably one of the major challenges for emerging nations as we move forward. Usable and Useful - I mentioned English language representing 80 person of the content on the net, there's also basic illiteracy problems with people that can't read being addressed with voice recognition and other technologies. I think from a longer-term perspective, useable and useful probably require significant public and corporate support of education to actually have the net and e-commerce reach its full potential. And then affordability, I think my experience in running networks across the world suggest that more dollars per capita are spent by low income, lower quartile than upper quartile particularly if you relate as a percent of their total income. The even greater problem is we look at web enablement is that Internet access devices in many cases cost more than the per capita income of individuals in the economy hence even if people are educated, even if people have use of tools there tends to be a problem with affording access. There are a number of examples where community based solutions have been applied, common terminals, common access that have promise but I think at some point hard line policy decisions need to be made by local governments and businesses about how to address the affordability issues in emerging markets. Private sector collaboration, I'm not going to spend a great deal of time on this. I think there are many companies in the public sector recognizing the need for collaboration to develop markets to sell their products. I think many of these ventures that have been active are now facing earning pressures in the financial markets and my concern on this slide is that they have the cash and capital to continue developing and supporting projects that are listed up here. Finally, I will conclude with some thoughts about the digital divide. I think in many instances the impact of digital divide will be less felt than the health divide, the sanitation, food and housing but at the same time moving forward with e-commerce and improving the economy in those countries will help address those underlying social issues. I think that for this group we need to question how we can work together to bring changes to both the education environment to the business environment and help emerging countries take advantage of this new technology, participate in the revolution because in all revolutions, there are winners and losers. I think it should be our objective to help the economies participate and enjoy the success through their participation. Thank you. |
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