WTO Information Technology Symposium Impacts of globalisation on

WTO Information Technology Symposium Impacts of globalisation on the IT Sector Growth and market dynamics in OECD countries, China and India Graham Vickery OECD www. oecd. org/sti/ito graham. vickery@oecd. org Wednesday, 28 March 2007 1

Overview – ongoing restructuring n n n Growth in the ICT supply side is sustained and expected to continue across all segments Growth more balanced across OECD. ICT supply growth more sustainable than late 1990 s. Highest in Internet-related applications and support systems Non-OECD and Eastern Europe supply and markets growing much faster and taking larger share Drivers are shifting from technology push => commercial applications and new uses. User-driven applications increasingly important Challenges for ICT policy to build competitiveness 2

IT industry - developments and outlook n Recent developments – Output and markets robust in the US. Now stronger in Japan and Europe. Other Asian countries growing rapidly – ICT markets: OECD share down 2000 89% => 2006 83% – Non-OECD countries (incl. Russia, India and China) took 13 of top 15 market growth positions 2000 -2005 n Top 250 ICT firms (over ½ of global ICT industry) – Growth across the board. Revenue growth 2000 -2005: Total 250 firms 23. 5%, OECD 20%, India 680%, Chinese Taipei 200%, Singapore 132%, Hong Kong-China 100%, South Korea 28% – China and India increasingly important. Their growth currently driven by foreign investment and sourcing 3

Structural change and adjustment n Structural change in the ICT sector – Late 1990 s 20 -30% annual OECD growth – 2000 s slower. Many products => commodities – Rapid growth: new / niche products, software and services, and Emerging Markets (E. Europe, Asia) – ICT R&D dynamic although signs of slow-down n Major adjustment pressures – Open source (the “Linux effect”) – Online delivery of IT services (the “Google” effect) 4

n Ko lan re d I a U rela (7) ni te nd d (7 N U Kin ) ew ni gd Ze ted om S al an tat e d (1 s , 4 H , 6) un N et ga he ry rla n Sw ds ed O en EC D Au 25 st N ria or w D ay en m a Po Fr rk rtu an ga ce l( 1, 7 EU ) Be Au lgiu 14 st m ra ( lia 7) (2 C , 3) an J ad G ap a a er m n( an 5) y (5 , 7 C ) ze Ita ch ly R ep Sp a u Sl Gr blic in ov ee ak ce (5, 7 ) R ep (5, 6 ub , 7 lic ) (5 M , 7) ex ic o Fi ICT sector increasing share of GDP Share of ICT valued added in business sector 1995 and 2003, percentages % 18 2003 1995 16 14 12 10 8 6 4 2 0 Source: OECD Information Technology Outlook 2006, SNA compatible 5

Top 250 firms rebound Performance trends 2000 -05 Current USD, index 2000 = 100 Source: OECD Information Technology Outlook 2006 6

And they increase R&D intensity Top 250 ICT firm R&D intensity by sector, 2000 -05 R&D spending as a share of revenue, percentages 2000 2005 Software Comms equipment Electronics & components IT equipment Services Telecommunications 0 2 4 6 8 Source: OECD Information Technology Outlook 2006 10 12 14 16 7

The shift to Asia World semiconductor market 1990 -2005 USD billion, current prices North America Japan Europe Rest of Asia 250 200 150 100 50 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: OECD Information Technology Outlook 2006 2000 2001 2002 2003 2004 2005 8

ICT globalisation and trade n n n New wave of global restructuring of ICT production – Global restructuring of ICT production – ICT sector a leader in international trade and M&As 9% of business VA, 13% of goods trade, 20% of M&As Trade in ICT goods: new highs Trade in ICT services: growing strongly – Ireland leader in computer and information services exports (still number 3 in packaged software) n n ICT FDI and M&As high: Business cycle effect M&As: ICT and comms services continued high share – Some shift to Eastern Europe and non-OECD 9

re un a ga Ire ry la n M d ex ic o N Ja et pa he n rla nd U Fin s n C ited lan ze d ch Sta t U ni Rep es te d ubl Ki i ng c d Sw om Lu e xe de m n b G our er g m a Po ny rtu g Fr al a D nce en m a Sl ov A rk us ak R tria ep ub Tu lic rk e Po y la nd Sp a C in an a Be da lg iu m Sw I itz taly er la n G d re A ec N ust e ew ra Ze lia al a N nd or w a Ic y el an d H Ko ICT goods trade has tended to increase Share of ICT goods in total goods exports, 1996 -2004 Percentages 35% 1996 Source: OECD Information Technology Outlook 2006 2004 30% 25% 20% 15% 10% 5% 0% 10

And grow in all segments OECD trade in ICT goods, 1996 -2004 USD billion, current prices Communication equipment Audio & Video equipment IT & related equipment Other ICT related goods Electronic components 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 1996 1997 1998 1999 2000 Source: OECD Information Technology Outlook 2006 2001 2002 2003 2004 11

With new trade competition ICT goods exports 1996 -2004 Current USD, 1996 = 100 China Mexico and Eastern Europe Other OECD 1 000 900 800 700 600 500 400 300 200 1996 1997 1998 1999 2000 Source: OECD Information Technology Outlook 2006 2001 2002 2003 2004 12

New sources of trade – ICT-enabled services Exports of computer and information services and business services Percentage of world totals Source: OECD Information Technology Outlook 2006 13

Exports of computer and information services and business services Billion current USD and share of GDP Source: OECD Information Technology Outlook 2006 14

Employment potentially affected by ICTenabled services offshoring Share of employment 1995 -2004 Source: OECD Information Technology Outlook 2006 15

China and ICTs n n n China increasingly important in production and trade in ICT goods and services Strategy: Host foreign ICT firms or third-party contract manufacturers (unlike Japan and Korea) Chinese ICT firms developing rapidly despite relatively limited size and technological know-how. Investing overseas to obtain technology, brands and distribution ICT industry must make transition from low-cost manufacturing to higher value-added products Services high potential, but not yet 16

China biggest ICT goods exporter in 2004, and increasing Imports and exports, billion current USD Source: OECD Information Technology Outlook 2006 17

China imports components and exports computers, telecoms, audiovisual equipment Trade balances, billion current USD 80 60 1996 40 1997 1998 20 -80 -100 Source: OECD Information Technology Outlook 2006 2000 Other ICT goods -60 Electronic components -40 Computer&related equipment -20 Telecommunication equipment 0 Audio&video equipment 1999 2001 2002 2003 2004 2005 18

China deficits with Asia, surpluses everywhere else Trade balances, billion current USD Source: OECD Information Technology Outlook 2006 19

Rising to the challenge? IT policies for growth and competitiveness n Co-ordination and priority setting n Promoting ICT R&D and innovation n Increasing business use (and improving government efficiency via e-government) n Expanding ICT skills and employment (education) n Digital content n Enhancing network infrastructure (broadband) n ICT business environment (IPRs) 20