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East Asia in the Information Economy Opportunities and Challenges

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East Asia in the Information Economy Opportunities and Challenges East Asia in the Information Economy Opportunities and challenges Jamus Jerome Lim Jamus Jerome Lim is at the Regional Economic Studies Institute of Southeast Asian Studies, Pasir Panjang, Singapore. Keywords Information, Economy, East Asia, information revolution. The reality of the situation is likely to Information technology fall between the extremes of limitless opportunity and Abstract The Information Economy has captured the impossible challenges. This essay seeks to mop away imagination of all levels of society. Yet very often, analyses tend excessive hype and scepticism and to draw lessons from to reflect personal biases or propose incredulous scenarios. objective analysis, based on a multidisciplinary approach. This essay does not seek to rewrite old rules for a new economy; rather, it seeks to provide a balanced perspective on The information economy landscape in East opportunities and challenges facing East Asia, using a Asia multidisciplinary approach. It finds that although these countries The economies of East Asia are a unique as they are diverse. differ in their levels of development in the Information Economy, their prospects of growth depend on the policies that they They range from those seeking to pursue the siren song of choose to pursue. Deliberations on economic issues &such as development to those whose levels of development rival the the potential for productivity gains from ICT), political concerns very best in the world; from economies that have embraced &including the need to cope with changing government-people laissez-faire to those that are now in the throes of transition. dynamics), and social changes &such as the diminution of local In terms of their progress in embracing the Information cultures and the widening digital divide) often involve both costs Economy, however, the economies show a greater degree of as well as benefits. The optimal balance is likely to differ convergence, albeit at different levels[1]. between countries, with no clear model answers. Information economy building blocks The backbone of the Information Economy rests upon Introduction telecommunications infrastructure ± without which the The almighty NASDAQ, once held as the paragon of the promise of interconnectivity and interactivity would be but an Information Economy, is now languishing in a backlash of empty shell. In concert is the diffusion rate of personal weary investors and spooked fund managers. Early hopes computers &PCs), the workhorse of Information Economy. that this so-called New Economy would prove to be a Such building blocks are often the limiting factors that malady for all forms of economic ills have largely been prevent the deployment of more advanced forms of ICT, dashed, and the vociferous bull voices ± whether founded in such as the Internet. ignorant optimism or sheer foolishness ± have mostly been The telecoms infrastructure in East Asian nations ranges silenced. Yet stock markets, like a wanton woman, are by from moderate to high levels of development. Beyond nature fickle, and although valuations of Information Economy firms have firmly returned to palatable levels, they are by no means the true measure of the true potential of information and communications technologies &ICT) and the information age that they herald. Indeed, even as the continued drama of the Information The current issue and full text archive of this Economy continues to unfold, it has become possible ± in journal is available at retrospect ± to make some early assessments on this http://www.emeraldinsight.com/1463-6697.htm info 4,5 2002, pp. 56-63, # MCB UP Limited, 1463-6697, DOI 10.1108/14636690210453226 56 inter-country differences, some larger countries ± notably consciousness about the importance of the software sector. China[2] ± experience fractures within their economies with As such, efforts have been directed towards expanding the regard to infrastructure, where rural areas lag far behind industry, although they have yet to pierce the software urban areas. Newly industrialist economies &NIEs) all fortresses of Bangalore, Israel or Silicon Valley. possess high levels of telephone penetration, and employ, or These production fronts, however, hide an underlying are in the process of implementing, advanced digital weakness in ICT diffusion in the region. The potential exists technologies. Telecommunications players in these countries for the region to exploit its fount of hardware and software tend to operate in a competitive environment, and PC production and increase the level of informatisation in their penetration in these economies is usually also fairly high. respective countries ± and there is ample evidence that this Such technological sophistication, however, is not insight has not been lost on the region's governments[5]. duplicated in emerging Asia. Most have only about one line shared between ten people. Technologies vary widely The two-edged sword: opportunities and between countries, and although most have flirted with challenges liberalisation in the telecommunications market, the mark of Economic theory has long trumpeted the benefits of dominance exerted by the former state monopolies is technology as a source of economic growth[6]. However, the unmistakable. The situation is worse in the transition actual processes underlying technological progress were economies. Most languish with poor line densities, backward often a black box ± technology was envisioned as an technologies, and almost a total absence of computers. exogenous, almost mythical force that impacted economies during arbitrary spurts. This view has since been challenged The Internet and e-commerce by the endogenous growth literature that has asserted a role Infrastructure, obviously, feeds into Internet and e-commerce for governments to intervene in the provision of technology, activity. The statuses of both reflect a similar pattern to that due to its nature as a public good[7]. PC and telecoms development. In East Asia, Japan is the leader with the largest number Productivity magic and other possible myths of hosts. It also dominates e-commerce activity ± with The essential motivator of such growth in the Information estimates amounting to US$27.3 billion, or a full 70 per cent Economy revolves around the positive effects of increases in of all Asian e-commerce &eMarketer, 2001). Following closely total factor productivity through improvements in labour and behind, the NIEs have an average of some 787,000 hosts capital productivity. Up till the 1990s, though, there were between them, and account for much of the remaining e- questions as to whether ICT would fulfil its initial promise of commerce activity in East Asia. Internet penetration rates are increased economy-wide productivity growth ± to the extent high, typically competing with developed nation levels. Due that the phenomenon came to be known as the productivity to freely competitive ISP markets, costs of access are paradox[8]. This conundrum was devastatingly demolished affordable. by a series of studies[9], based on US data, asserting the Again, emerging Asia lags the group, although individual positive effects that ICT had on productivity growth. A breed success stories exist. Brunei, for example, has a host-to- of New Economists then emerged, crediting ICT for population ratio only slightly shy of Korea's[3]. Worse would everything from slaying inflation to taming be the transition economies, which have largely been left unemployment[10]. This optimism was not limited to behind by the Internet revolution. The only oasis amongst the America ± studies on industrialised countries showed transition economies' ICT wilderness comes from Vietnam. positive returns to ICT investment. For the Asia Pacific, China, for all its promise, still has an e-commerce scene in its however, gains were far more modest[11]. Although productivity gains have generally been taken for nascent stages, with access charges prohibitive to all save granted as an expected return to ICT investment, recent the wealthy[4]. thinking ± both in academic and business circles ± has ICT hardware and software increasingly come to question the sustainability of such East Asia has traditionally been associated with electronics productivity gains ± or the very existence of gains to begin goods production. The NIEs, together with some of the with[12]. Indeed, the recent demise of the technology bubble, countries in developing Asia &namely, Malaysia and the and the accompanying slippery slide down the &supposedly Philippines), are major world manufacturers and exporters of dead) business cycle, has reinforced the case of the sceptics ICT hardware. The famed production networks in the region and has descended into a chorus of ``told-you-so''. account for large chunks of world output in virtually all ICT Nonetheless, the investments in ICT made over the past goods ± from semiconductor equipment &Taiwan) to hard 10-20 years are faits accomplis, and few would deny the disk drives &Singapore) to memory chips &Korea) to PCs widespread effect ICT has on the macroeconomy and &Malaysia). modern life &DeLong, 2002). Of primary concern to the Although the traditional strength of the NIEs is in their academic and policy maker today is how these already hardware industries, there has been a growing expended resources can be translated into economically info 4,5 2002 57 productive ones. Here, the existing research on general First, due to low marginal costs of production and purpose technologies[13] &GPTs) provides a clue. distribution
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