2005: IT outlook

Although the slump that began in 2000 remained severe in ICT manufacturing, telecommunications services and information technology, services are expected to continue to grow this year.

According to the OECD this recovery is spreading, underpinned, as it happens to be by the strong performance in the United States, China and Korea.

The major development of 2004 was that most of the top ICT and Internet firms returned to profitability while they continued to gain revenue share.

While venture capital in Malta remains conspicuous by its absence, the long-term development of the ICT sector is considered to take over half of the global allocation of venture capital.

While world trade grew last year and is expected to continue to grow at twice the rate of GDP, trade in ICT goods and services are expected to grow even faster.

If proof was ever needed that China is destined to be the new giant in the IT sector, one has only to note that its trade in ICT goods now exceeds even that of Japan.

While the OECD's annual growth rate of ICT goods trade has stood at circa four per cent since 1996, in China's case it has been a spectacular 28 per cent.

Trade in software and ICT services is difficult to track satisfactorily, but, as currently measured, Ireland and the United States continue to dominate.

While the Maltese government is committed to develop our island into a centre of excellence as far as IT is concerned, it is worth noting that in most OECD countries, ICTs account for a large and growing share of investment and contribute significantly to GDP growth.

Perhaps the unifying force that has driven ICT forward in the last two decades, has been that it has increasingly grown globalised. Both its structure and dynamics ensure its position at the forefront of globalisation, even though the role of its different segments tends to vary.

One consequence of the 2001-2002 ICT downturn was that countries that specialised in ICTs became even more specialised. In fact the global rationalisation of production has actually led to countries specialising in even smaller ranges of products and services.

Perhaps our biggest challenge as a small island in the Mediterranean is that the international expansion of ICT firms is driven by the need for market access, growth, economies of scale and access to skills and technology.

The reason that ICT expansion has had a faster build-up than greenfield investment is that cross-border M& As have become the most common form of such an expansion.

Regarding the much read about 'offshoring', the international sourcing of IT- and ICT-enabled business services has grown into a major development being driven by the dynamics of digital delivery, the need to fill skills shortages, increase efficiency and cut costs, in a context of increased competition and services liberalisation.

The reason why 'offshoring' is often perceived as a somewhat dirty word in the trade is that although it delivers cost savings for firms, it may also initially involve job losses in the home countries and job creation in the host countries.

Nevertheless, efficiency gains and cost savings tend to underpin productivity growth and the creation of new employment opportunities in both home and host countries.

The sector which continues to lag behind remains e-business, in the sense that although it is spreading, the adoption of more complex applications remains and is bound to remain slow in the near future. Its biggest challenge is to increase effective use internally and externally through the use of e-business software and changes in interactions with suppliers and customers.

Although many firms continue to use the Internet mainly for information search, supply and on-line banking, use for e-commerce varies far more extensively - by size, sector and country, with many e-business applications not always being suitable for all processes and sectors.

The major growth area so far has been that of business-to-consumer e-commerce. In fact such growth has been of a somewhat solid nature.

However, relatively few firms have comprehensively adapted their business concepts, value chains, organisation and supplier and customer relations.

Yesterday's digital divide may be receding but instead we now face a so-called new 'e-business divide' whereby access to the more advanced applications tends to widen.

The OECD predicts that the impact of e-business, although significant, will be lower than expected, reflecting over-optimistic expectations and measurement difficulties.

Another dawning realisation is that now that ICT access is widely available to individuals and households, the digital divide is becoming a 'use' divide.

One has to realise that although PCs remain by far the main route for Internet access, ICT uptake remains affected by income, educational attainment, children in the family, age and gender.

In the final analysis one can safely say that socio-economic characteristics tend to determine how people interact with ICTs.

In the coming years attention should increasingly be paid to 'how to use' issues.

As time progresses, ICTs and digital delivery are increasingly being used in health care for administration and routine tasks, as well as advanced medical specialisations.

Although the need for ICT skills can be satisfied in part through education and training, various levels of ICT skills are increasingly and more intensively used throughout the economy.

In fact emerging technology applications underpin the future contributions of ICTs to the economy.

I am aware that Government is looking into the spam issue, but not all that many are aware that spam is now estimated to account for as much as 60 per cent of all e-mail!

Spam raises concerns ranging from simple inconvenience to users to issues of economic costs and its potential as a dangerous vehicle for computer viruses and cyber-terrorism.

For ICT to remain at the forefront it is important for ICT policies to remain increasingly integrated into economic development strategies and co-ordinated across government.

ICT policies in the coming years will continue to focus specifically on R&D support and ICT innovation; particularly development and use of ICT skills; the impact of e-government, infrastructure, particularly broadband and areas such as authentication and digital signatures; and promoting trust, notably in the area of system and information security.

Leo Brincat is the main Opposition spokesman on Foreign Affairs and IT.

leo.brincat@gov.mt