3.1.4 Enterprise

Given the important role played by the private sector in developing ICT infrastructure, creating jobs, and fueling growth (highlighted in Section 2.2.3), supportive conditions and prospects for endogenous and sustainable wealth creation are central to the working of the dynamic. The following appear to be critical factors for enterprise development:

Finance and Credit. Access to credit and financing is fundamental for the smooth functioning of the development dynamic. One of the major reasons for the lack of dynamic enterprise in developing countries is the shortage of affordable credit and investment to support new enterprises. This is often the result of adverse macroeconomic policies (including those aimed at bringing in foreign capital flows or preventing their outflow) and a lack of appropriate financing channels and mechanisms suited to developing market conditions. The development of the two key financial sectors—banking (including micro-finance) and venture capital—is crucial.

The banking sector is critical to channeling resources across geographic zones and economic sectors. It is also ICT-intensive and provides niche opportunities for local enterprises—Brazil is a case in point. As financial institutions proliferate deeper into the different areas of the country, they also help to expand opportunities for under-served communities and businesses.61 At the same time, ICT can help to make financial services more cost-effective and affordable for poor communities and small enterprises.62

Although the venture capital sector is a key engine of enterprise growth in developed countries, this is not yet the case in most developing countries and transitional economies. Many factors account for this—in Hungary, for example, the lack of patent regulations can be held as partially responsible for the shortage of venture capital.63 Business incubators and accelerators can play a crucial role in this regard.

Property Rights and Commercial Law. The establishment of a favorable business environment can increase foreign direct investment and trade. Although historically many developing countries appeared to benefit from reverse engineering and lax enforcement of intellectual property rights, in the long run the development of knowledge-intensive industries is unlikely to take place without appropriate property and commercial laws. These regimes should incorporate generally accepted principles of fairness, speed and dependability of execution, effective enforcement,64 and compliance with international norms regarding intellectual property rights protection.65

Fair Tax Regime. Policymakers need to ensure that the tax regime is non-distorting and does not act as a disincentive to investment and entrepreneurial efforts.

Access to Relevant Global and Local Markets. Reducing a country's barriers on inward and outward trade flows is an important prerequisite to securing the full benefits of global positioning and gaining access to ICT at affordable prices.66 ICT, in turn, can play a useful role in making shipping and trade-related rules and regulations transparent in order to facilitate more efficient trade.67

Increasing Efficiency and Reach of Local Business. The examples given in Section 2.2.3 suggest that it is crucial that ICT be used to improve the efficiency and reach of local businesses to make the entire local economy more productive, globally competitive, and better connected to local and global markets. This requires that businesses can use both newer trading platforms (such as business-to-business exchanges) and, where appropriate, more traditional business software supporting efficient logistics, good accounting practices and high levels of customer service. Local businesses need to acquire a strong awareness and understanding of the business opportunities these technologies make available. Artificial obstacles to the purchase and use of such software should be removed and steps taken to attract appropriate inward investment from providers of world-class software. It is important that providers take care to price appropriately for local marketplaces. Foreign direct investment specifically targeted at assisting local suppliers is critical.

Demand Stimulus. The different sectors of the economy differ in their demand for ICT infrastructure and services. High value-adding sectors tend to rely heavily on ICT. In developed countries, demand for ICT products and services comes predominantly from the financial services sector, manufacturing, government,68 the telecommunications industry, and the retail/ wholesale sector (see Figure 3.2).

In many developing countries, the government is one of the major consumers of ICT products and services. Governments can therefore lead by way of example in the use of ICT and can also implement best organizational practices—some involving the use of ICT—to ensure that public funds are spent in the most optimal way.69 Procurement of services by the government via ICT channels can generate a strong demand for ICT services. For example, in South Africa, the government currently spends US$1-2 billion a year on information technology systems for public use.

Governments can also encourage ICT deployment by enterprises to make them more competitive and efficient. The Chinese government, for example, believes the Internet can help to reform inefficient state-owned enterprises (SOEs) and is encouraging SOEs to adopt e-commerce. The "Enterprise On-line" initiative aims to put seven million Chinese businesses, including many SOEs, on the Internet by the end of 2002.70

Figure 3.2 The Value of Information and ICT spending in the US by the Economic Sector


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