|Asia-Pacific III 2001
|E-business – Challenges to Technology and Innovation Promotion in Local Economies
|Dr. Jurgen Bischoff
|Asian and Pacific Centre for Transfer of Technology (APCTT)
This article explores issues related to e-business and related challenges to technological and economic development potential. ICT and e-business are rapidly demolishing national and international barriers. This explosion has generated the term ‘new economy’ with two distinct elements: the shift towards knowledge resources as production factors and the shift from manufacturing to service sectors. Here Dr. Jürgen Bischoff of the APCTT describes these trends and how they have been successfully implemented in small enterprises in some rural settings in India.
The explosive growth of ICT and e-business has spawned the concept of the ‘new economy’. This has two dimensions: a shift from manufacturing to services, and a shift in production factors from physical resources to knowledge resources. E-businesses are the extreme example of a knowledge-based service with minimal physical assets. The rapid development of ICT together with globalisation have expanded challenges and opportunities and increased the social and economic returns of developing and emerging technologies. They are also changing how technology is created and owned and how it is disseminated and adopted. New mechanisms for technology innovation and diffusion are appearing both among and within countries. Technology and Innovation Imperatives The New Industrial Revolution provides a leap-frogging opportunity for less developed countries and industries and will be contingent on their commitment to increase their technological capabilities in both qualitative and quantitative terms. It is bringing about tremendous changes in industry, economies and the competitiveness of industries and nations. Economies are, therefore, going to emphasise technological innovation as a means of fostering economic growth and societal welfare. It is innovation activity that turns technological opportunities created in R&D into commercial reality. An innovation is usually defined as a new product or service that is successful in the market place. To create a conducive environment, innovation and technology growth hubs that bring together research institutions, business start-up initiatives and risk capital companies are coming up in many economies-e.g. Bangalore, India; Taejeon, Republic of Korea; Multimedia Super Corridor, Malaysia. These hubs are often linked through technology development networks. Many countries are using the latest technology competitively in manufacturing industries, as shown by their success with high-tech exports. Of the 30 top exporters, 11 are in the developing world of the Asia- Pacific region and among these countries China, Malaysia and the Philippines are showing strong growth rates. Small and medium-scale enterprises (SMEs) have come to play a predominant role in the domestic economies of most countries around the world. This is the case in terms of their relative number in the total population of firms, their share in total employment, or their contribution to value added and exports. Many economies with a high share of small-scale units are among the most successful, for example Japan and the Republic of Korea. The SME share in total exports is almost as much as that of large firms in absolute terms. Several developing countries have also experienced spectacular growth in the export of manufactures, having captured ever-increasing shares in both industrialised and developing country markets. Furthermore, Fordism has given way to flexible specialisation to suit the specific needs of consumers’. This has further increased the significance of SMEs and the need to keep them technologically competitive. In the emerging global information economy, it is the smaller firms that could be the most significant winners. This, however, is to a great extent dependent on the quality and competitiveness of their products in the international market. E-business offers SMEs exceptional possibilities to compete on global markets and to weave strategic and networking alliances with other players around the world. The “death of distance” provides enormous potential for inter-industry trade, cross-border partnerships and strategic alliances. In addition, Internet-based e-business offers SMEs cost-effective possibilities to advertise their products and to contact buyers and suppliers on a global basis. Information Needs of SMEs Effective application of ICTs in the SME environment can help: · lower the SME’s costs; · improve timeliness of SME product development and delivery to the market place; · enhance SME product quality; and · improve SME innovation of products and processes. Impact of ICTs on Productivity and Employment Generation In India, the National IT Task Force estimated that 3 million software professionals would be required by 2008 to achieve the projected software exports of US$50 billion. The development of new technologies-IP V6, WAP and others-may open opportunities for countries of the Asia-Pacific region, if an early initiative could be taken to secure the commercial advantage of such technologies. New technologies and e-business are effecting a radical transformation in the way business is done. They are changing the basic methodologies and strategies used for normal business. They are breaking the barriers of distance, time and costs; they are impacting on quality management, distribution, delivery, packaging, marketing, trading and how services are rendered. They are necessitating changes in organisational structures; and they are modifying the relationship between producers and consumers, suppliers and partners, and bankers and business. The development of e-business is likely to have both direct and indirect impacts on labour markets and the composition of employment. The rapid growth in e-business should boost the demand for jobs in e-businesses. Although the direct employment consequences of e-business may not be large, it is likely to drive widespread changes in the labour market, shifting the composition of workers required to produce and deliver a product or service. For example, a retail sale via the Internet does not require the same intensity of sales staff; it requires people with IT skills to develop and programme software, operate and maintain computer servers and networks. It also requires people skilled in graphics design to keep the web site attractive and others to dispatch orders. In short, the focus in the sector is likely to be on white-collar, skilled jobs such as creative, direct marketing, customer service and managerial positions. Particularly, there will be high demand for IT personnel who combine technical and network programming skills with business application skills. Faster rates of innovation and diffusion may also be associated with greater turnover of jobs. In such an environment it is important that workers have the opportunity to learn new skills and that policies do not prevent the swift reallocation of labour to the changing needs of the economy. Otherwise, the new opportunities offered by the Internet may be missed or unnecessarily delayed. Many industrialised countries are very short of skilled staff for the new economy and depend on migration from developing countries, which, as a consequence, are already facing a brain drain and shortage of qualified staff for their own development. India, for example, forecasts a shortage of 500,000 skilled technology workers for e-business by 2002 alone! Developing nations-especially those that have an education system that promotes writing/speaking skills in English, have comparatively low labour costs and highly skilled labour-can cash in on this dependence by boosting technical education, training and investment in telecom networks. Applications of ICTs in Small Enterprises in Local Economies – Successful Experiences While the application of ICTs in large and medium enterprises is well documented, not much has been publicised about ICT applications to enhance productivity and competitiveness in small enterprises. The following examples from rural India throw light on a few success stories in this sector. One successful application of ICT has been the use of a microprocessor-based Automatic Milk Collection System (AMCS) to enhance milk collection in milk co-operatives in Gujarat, India. Electronic technology is used to measure and transmit the quality and quantity of milk that farmers are delivering. This system makes the collection and evaluation process faster and more efficient and reduces cheating of farmers by intermediaries. The Baroda Dairy in Gujarat, India, has installed extensive IT infrastructure for the computerisation of its function. This includes a Local Area Network with 4 servers and 65 client systems. The servers are used for e-mail and applications/data services. The computerisation of most of the functions at the Baroda Diary has not only improved the overall level of efficiency of the organisation but also resulted in a much better utilisation of its manpower. Regular MIS reports have helped senior management in the organisation to take informed decisions in time. Successful Experiences in Rural Areas The Warana Co-operative Complex in India is one of the finest examples of successful integrated rural development programmes in India resulting from a co-operative movement through people’s participation. It comprises 25 co-operative societies in the areas of sugar, milk, poultry and house construction with an annual turnover of US$ 130 million. The Wired Village Project at Warana Nagar in Maharashtra State in India has been set up to utilise IT to increase the efficiency/productivity of co-operative societies in order to provide greater transparency in the working of co-operative societies; provide agricultural, medical and educational information to villagers by establishing networked facilitation booths in 70 villages, bring the world to Warana through the Internet; provide tele-education at both primary and higher level educational institutions. It will also develop user-friendly map- based information systems for better administration and governance. The Gyandoot Project seeks to take the benefits of ICT directly to the people in rural areas, helping them in their day-to-day economic and other activities. The project specifications were prepared based on a detailed study of the needs of the people in villages of the Dhar district. The condition of telecom facilities in the district was also checked so that village- level connectivity to the network could be established under the project. Nineteen Gram Panchayats (village-level administrative units) were identified as serving the needs of the people in the district. One local person in each of these nineteen Panchayats was identified to act as a resource person, called a Suchak (information provider). These people were given an adequate level of computer training to run computer booths called Suchanalkayas (Information Kiosks). The range of services provided include commodity prices at agriculture produce auction centres; rural e-mail facilities; village level auction sites; government sponsored loan project preparation; on-line employment exchange; transparency in government working and ‘ask the expert’. Conclusion To assist SMEs in developing countries and countries and economies in transition with access to ICTs, it is imperative that coherent measures and activities consistent with national development strategies are taken. At the enterprise level, these measures and activities would include effective planning, organisational capabilities and related managerial skills with regard to ICTs. The establishment of electronic networks, common databases and various value-added services that speed up transactions is fundamental at the industry level. Governments have substantial scope to influence the development of the ICT industry and the promotion of ICT diffusion through actions such as standard setting, outsourcing and application of competition policies. An enabling environment for introducing ICTs could be ensured also by the provision of the legal protection for confidential information, security for electronic transactions and standards.