Development of ICT Statistics in Korea

Bongho Choi* and Chanil Seo**

< Abstract >

Information society measurements are explosively gaining attention as the development of ICT and a rapid spread of Internet are altering social and economic activities of business, households and goverments. Compiling ICT statistics has been an urgent matter for many economies, and Korea is no exception in that respect. Firstly, this paper provides the measurement frameworks developed by OECD and Eurostat and then presents the initiatives which have been launched in Korea to measure the size, growth and nature of the information society. On the basis of the initiatives and the frameworks, this paper shows the trend analysis on the ICT industries as well as ICT usage and penetration in business and household sectors. This paper also deals with the classification issue on ICT sector, which is closely relevant with ICT statistics. As the United Nations is in the process of revising its International Standard Industrial Classification (ISIC) Revision 3 and plans to prepare ISIC Revision 4 by 2007, Korea needs to keep an eye on this change and to reflect the change into the Korean Standard Industrial Classification.

Key words : measurement framework, ICT usage, e-commerce, classification

* Bongho Choi, Regional Statistics & Sampling Division, Korea National Statistical Office ** Chanil Seo, Short‐term Services Statistics Division, Korea National Statistical Office

- 1 - Ⅰ. Introduction

Information society, digital economy, knowledge‐based economy, new economy, or E-commerce: names for new phenomena have not been very well defined yet and are used interchangeably1). It is difficult in that respect to reach an agreement on new concept (the terminology). However, more or less irrespective of how one define them, information‐ and communication‐technology (ICT) has something to do with them, by taking advantage of the digitalization of the economy.

In the 1990s, as ICT started to penetrate every facet of economic and social interaction, the need for measurement that would satisfy the growing thirst for understanding of the underlying transformation became very clear. In a number of developed countries, it was articulated by a vocal demand, both from policy makers and from business. Korea is no exception in that respect. Therefore, a number of initiatives have launched in Korea to measure the size, growth and nature of the information society.

In addition, the 8th revision of the Standard Industrial

1) Distinction between each concept is as follows: e-Commerce is a subset of

e-Service carried out by e-Business in the e-economy (Statistics Canada, A Reality Check to Defining e-Commerce, 1999).

- 2 - Classification (KSIC) was published in 2000 in accordance with the recommendation of OECD to reflect the change of economy and society including the development of ICT. In 2002, special purpose Classification for Internet Industry was also devised in this context.

The emphasis in this paper is given to the present situation of Korean official ICT statistics covering ICT industry analysis, ICT usage and penetration in business and household sectors, and electronic commerce. It should be noted that this paper primarily deals with so-called official or semi-official statistics. Other data collection or studies are generally outside the scope.

Revision of statistical standards such as industrial classification, products classifications corresponding to the development of ICT and socio-economic change is also necessary to analyse the information society. In this context the ICT sector classification issues is dealt with in detail.

Ⅱ. A Measurement Framework

As the rapid development of ICT and wide expansion of the Internet are revolutionary altering economic activities, surrounding social environment and the daily life of individuals, there have been a lot of efforts to develop a measurement

- 3 - framework internationally. Among those, OECD has taken many initiatives concerning the definition and methodology since 1997 and the works of OECD are now playing as an actual international standard. For a better understanding of ICT indicators, a brief description for the framework will be described.

To start measuring the information society, a taxonomy is needed, devising indicators that will track the progress of ICT in a staggered process: There has been first by measuring e-readiness, then the intensity of ICT usage and, finally, the impact and outcome of ICT on business organizations, individuals and the economy as a whole.

The readiness indicators indicate the potential for use of ICT and describe variables such as ICT structure, access to and availability of Internet, e-mail, PCs and IT skills.

The intensity indicators indicate the actual use and applications of ICT and describe variables such as ICT investments, the extent of use of Internet, e-mail, PCs, e-commerce, for what purpose they are used by different user groups – people and households, businesses and government2).

2) Olof Gardin, The New Economy – New Challenges for the Statistical System, Paper presented at the IAOS Conference, 2002.

- 4 - These two kinds of indicators represent the basic indicators for the information society and provide the main basis for analysis of the digital divide. They relate mainly to the infrastructure and the transfer of possibilities and participation of the people.

The impact indicators relate mainly to the micro level, enterprises and governments, but also to the industry level. They describe new ways of organizing work, referring to the relations among individuals as well as between individuals and the enterprise; of organizing production, which refers to inter-enterprise relations such as outsourcing, joint ventures, licensing, etc.; knowledge supply/human investment/human resources; mobility; innovation/R&D and spin-offs.

The outcome indicators relate mainly to the macro or societal level. They describe economic growth, productivity and competitiveness; employment and the labor market; social inclusion and participation.

The relationship is shown in the S-shaped path diagram presented in Figure 1. The policy needs and the indicators will vary depending on the degree of e-commerce activity that is occurring. Initially there will be a demand for indicators about how ready an economy is for participating in e-commerce; subsequently there will be a set of indicators required to measure the intensity of the use of e-commerce; at later stages of development of e-commerce there will be a need for

- 5 - indicators about the impact of e-commerce on the economy and society generally3).

However, there is a degree of overlap between the various components. In addition some of the indicators that might be developed can serve as indicators for more than one of the levels of e-commerce activity. Thus, a very useful representation of needs for e-commerce metrics as related to the three areas of the S-shaped path for the diffusion of new technologies was developed.

3) Bill Pattinson (OECD), E-Commerce–Toward an International Definition and International Comparable Statistical Indictors.

- 6 - Meanwhile EUROSTAT devised a conceptual model ‘SEAMATE’ (Socio‐Economic Analysis and Macro‐modeling of Adapting to Information Technology) to make estimates of the socio-economic impact of ICT. As mentioned in the OECD framework the focus of ICT indicator definition has evolved over times, from readiness, to intensity, to impact, and finally to outcome.

The EUROSTAT extended this approach to include a dynamic system view, that puts the decision makers at the core of the model. Based on this system view, EUROSTAT adopted an inductive, hypotheses-driven approach for the identification of relevant indicators.

Figure 2. Dynamic Model of SEAMATE

POLICY OBJECTIVES OPPORTUNITY (digital inclusion,modern (stimuli,obstacles,costs, e-activities Growth, prices,risks,security,etc.) STEERING work places,etc.)

MONITORING

POLICY USER`S DECISIONS IMPACTS & OUTCOME DECISIONS/ PREPAREDNESS (INDIVIDUALS & (growth, ACTIONS SOCIETAL to adopt ICT(knowledge, FIRMS) productivity, flexibility,management, to promote ICT VALUES & POLITICAL to adopt ICT jobs,mobility, (research, resources,culture,demo-, ATTITUDE (degree,intensity, benefits,digital regulations, geo-socio-graphic, investment,time, divide,etc.) social capital,etc. infrastructure, penetration, etc.). money,education, etc.)

MONITORING MONITORING

AVAILABILITY of ICT(broadband,digi-TV, internet software,etc. STEERING

Source : Switzerland(2003), Indicators for the Information Society

- 7 - SEAMATE aimed to identify the relevant social, business, and macroeconomic performance indicators and suggested new statistical classifications and data which should be collected to track the ICT changes and their impacts in the future.

Efforts to define statistical indicators are traditionally based on a deductive reasoning approach, where a group of experts identifies the statistical measures of interest. The complexity of the ICT system, however, calls for a hypothesis-driven inductive reasoning approach to indicator definition. This approach must root in a model of the ICT system from which hypotheses can be derived. Indicators are then sought which can provide answers as to whether to accept or to reject the identified hypotheses. The benefits of this systems approach are that the focus is on providing answers to questions posed by policy and business decision makers. For this purpose we developed a conceptual model of the ICT system which depicts the causal relationships and mechanisms to monitor and control the ICT system.

Ⅲ. Indicators for the Information Society in Korea

As Korea adopts a decentralized statistical system, each government or non‐governmental agency has the responsibility to compile various statistics of its own field. National Statistical Office(NSO), Ministry of Information and Commu-

- 8 - -nication (MIC) and Ministry of Commerce, Industry & Energy (MOCIE) are the three main agencies collecting ICT statistics in Korea.

Generally four options are employed to collect the ICT statistics as follows; ⅰ) utilizing administrative data ⅱ) adding ICT related items to existing surveys or censuses ⅲ) compiling ICT statistics from various incumbent surveys ⅳ) develop ICT dedicated surveys

: Major ICT-related Surveys/Censuses Launched in Korea

Title Organization Main features

Four Annual Surveys Korea National ‐ Manufacturing & Mining on selected industries Statistical Office ‐ Service Industries (KNSO) ‐ Wholesale/Retail trade ‐ Transport Industry Five monthly surveys KNSO ‐ Production index on selected industries ‐ Service Industry index ‐ Wholesale/Retail trade index ‐ CPI ‐ Equipment investment Three Censuses KNSO ‐ Service Industry Census ‐ Population and Housing Census ‐ Agriculture & Fishery Census Monthly Cyber KNSO Conducted since August 2000. Shopping Mall Survey E‐Commerce (B2C) survey

- 9 - Quarterly E‐Commerce KNSO Conducted since June 2001. Survey on Enter‐prise- E‐Commerce (B2B/B2G) survey and Government

Annual Survey on Korea Ministry of Information Compiled since 1998 using four ICT Industries and Communication (KMIC) incumbent surveys of KNSO (Korea Association of and KAIT. Compiling authority Information & was transferred from KNSO to Telecommunication, KAIT) KAIT in 2003.

Bi‐annual Survey on KMIC This was started by KNSO, but Computer & Internet (National Internet transferred to NIDA in 2003. Usage Development Agency (NIDA) Annual Survey on KMIC Conducted since 1999. ICT Usage in (National Computerization Enterprises Agency, NCA) Annual Survey on Korea Ministry of Commerce, Conducted since 2001 E‐business status and Industry & Energy (KMOCIE) Prospect (Korea Institute for Electronic Commerce, KIEC)

Note : Agencies in parenthesis are responsible for compiling statistics

1. E-readiness indicators

In Korea, e-readiness indicators are mainly collected from various administrative data sources as with the same case of most countries. According to World Economic Forum (WEF) in

- 10 - 2003, Korea ranked 14th among 82 countries, with the highest grades for broadband service and Internet access by individuals. Meanwhile International Telecommunication Unit (ITU) devised Digital Access Index (DAI) made up of simple 5 indicators with a view to comprising as many countries as possible. DAI compiles data for more than 160 countries in terms of infrastructure, affordability, usage, knowledge and quality. Korea ranked 4th in the year 2003 DAI.

: DAI Results for Top 10 countries

Infrast- Afford- Economies Knowledge Quality Usage DAI ructure ability

Sweden 0.94 0.99 0.99 0.64 0.67 0.847

Denmark 0.89 0.99 0.99 0.66 0.60 0.828

Iceland 0.89 0.99 0.96 0.50 0.76 0.820

Korea, Rep. 0.74 0.99 0.96 0.74 0.65 0.817

Norway 0.84 0.99 0.99 0.55 0.59 0.793

Netherlands 0.78 0.99 0.99 0.61 0.60 0.792

Hong Kong 0.93 1.00 0.83 0.68 0.51 0.790

Finland 0.81 0.99 0.99 0.55 0.60 0.786

Taiwan 0.98 0.99 0.95 0.56 0.45 0.786

Canada 0.69 0.99 0.97 0.64 0.60 0.779

Source : ITU, Digital Access Index (DAI) 2003

2. E-intensity indicators

- 11 - E-intensity indicators are compiled mainly using the questionnaires of censuses or surveys mentioned above Table 1. In Korea, ICT statistics compiling system can be illustrated as follows;

ICT Industry Statistics ¾ Survey on ICT industry ¾ Survey on ICT manpower

ICT Demand Others Statistics ICT Statistics ¾ Ad‐hoc surveys ¾ Survey on ICT usage in business ¾ Survey on ICT usage in HH ¾ Survey on ICT literacy

E‐Commerce

(EC) ¾ Survey on E-Commerce

1) ICT Industry Statistics

The ICT sector grew strongly in the Korean economy over the late of 1990s and the first half of 2000s (over 1998-2003). It seems that this phenomenon is almost as the same as of the economies of some other countries, particularly of the economies of Finland, Sweden and Norway.

- 12 - In Korea, it is found that ICT industries account for a large share of economic activity in terms of three important variables-employment, value-added and economic growth as presented in Table 3. Firstly, as regards the ICT sector’s share of employment, it shows an increasing trend from 3.4% of total employment in 1999 to 4.6% in 2003. However, this level of 4.6% is found to be lower than the level (6.6%) of the 21 OECD countries for which estimates are available4).

Secondly, the ICT sector’s share of value-added has also increased from 22.3% in 1998 to 27.8% in 2003. It was observed that the ICT services have increased their relative share of the ICT sector, owing to the increasing importance of telecommunication services and software.

Thirdly, the ICT sector’s export shows a slower growth compared to the faster growth of the ICT sector’s employment and the value-added. However, the share of the ICT sector’s export in total export is shown to be 27.8% in 1999 and 29.7% in 2003. It is worthwhile mentioning that the level of 29.7% is found to be more than double of the level of OECD member countries. ICT goods trade of OECD countries was revealed to represent only 14% of total trade in 2002.

4) OECD, The Highlights of the STI Scoreboard 2003.

- 13 - Fourthly, the ICT sector far exceeded the non-ICT sector in terms of GDP growth during the past few years, serving a major growth engine in Korean economy. ICT sector shows 3-10 times the growth rate of non-ICT sector during the period.

: ICT Sector’s Share of Employment, Value-added, Export and Economic growth in Korea

1999 2000 2001 2002 2003 2004 Employment in all 12,920 13,604 14,110 14,608 14,729 - Industries(in thousand)

Employment in ICT sector 443 540 496 585 673 - (in thousand, %) (3.4) (4.0) (3.5) (4.0) (4.6) Value-added in all 529.5 578.7 622.1 684.3 724.7 - Industries(in trillion Won)

Value-added in ICT sector 117.8 148.2 150.1 188.9 201.6 - (in trillion Won, %) (22.3) (25.6 (24.1) (27.6) (27.8)

Export of all industries 143.7 172.3 150.4 162.5 193.8 - (in billion US dollars)

Export of ICT sector 39.9 51.0 38.2 46.0 57.5 - (in billion US dollars) (27.8) (29.8) (25.6) (28.5) (29.7)

GDP growth 10.9 9.3 3.1 7.0 3.1 4.7

- ICT sector growth 36.0 35.8 9.1 17.6 14.2 17.5

- non-ICT sector growth 3.3 5.7 2.0 5.9 1.7 3.3

Sources: 1) Korea Association of Information & Telecommunication, "Results from the Survey of IT industries" 2) The Bank of Korea, "1999-2004 National Accounts"

- 14 - 2) ICT Usage in Households and Businesses

The National Internet Development Agency of Korea is carrying out the Survey on the Computer and Internet Usage on a bi-annual basis. The survey gathers information on the penetration and the use of the Internet by households and individuals. Especially, the following information are compiled from this survey: 1) Internet use rate by gender, age, occupation and region, ICT environment in households, 2) computer and Internet using hours, main purpose of computer and Internet use, 3) purchasing items through Internet, paid contents usage, and 4) reasons for not using the Internet.

In the case of the most recent survey (1～30 June 2005), it covered 17,698 individuals residing in 7,087 sample households located in 700 Enumeration Districts from the 2000 Population & Housing Census. Data were collected by the face-to-face interviewing method. According to the survey, 71.9% of all Korean population aged 6 or more are found to use the Internet once or more in the last month prior to the survey period as shown in Table 4. This is a remarkable increase compared to the level of 46.2% revealed from the 2000 Population & Housing Census.

- 15 -

: ICT Usage in Households and Individuals (Unit: %)

Nov.2000 June 2005 Proportion of Population aged 6 & 46.2 71.9 over using Internet Males 53.2 77.4 Females 39.7 66.3 Proportion of Households owning PCs 53.6 78.5 Proportion of Households with Wired 21.7 73.4 Internet Access at Home

Sources: 1) Korea National Statistical Office, 2000 Population and Housing Census Report, Status on Computer and Internet Use, Vol.8, No.2-2, Dec.2002. 2) National Internet Development Agency of Korea, Survey Result on the Computer and Internet Usage, Executive Summary presented at ITU-MIC New Initiatives Symposium during 3-5 March 2004.

The survey also reveals that 78.5% of Korean households own usable computers at home, and 73.4% of households are connected with the wired Internet at home5). It is worthwhile mentioning that this proportion of households with Internet access at home (73.4%) is a big increase compared to the level of 21.7% from the 2000 Population & Housing Census.

5) On the other hand, the proportion of households connected with the wireless Internet at home is estimated to be 13.8% as of December 2004.

- 16 - This level of 73.4% is also seen to be very high level compared to that of Canada. In Canada, 64% (6.7 million households) of the total households (12.3 million) had at least one member who used the Internet regularly in 2003, either from home, work, school, a public library or another location. Then, of the 6.7 million households with a regular user from home in 2003, an estimated 4.4 million had a high-speed link to the Internet through either a cable or telephone connection (xDSL)6).

Meanwhile, the Internet diffusion rate as of June 2004 amounted to 85.9% in terms of all business establishments with 5 or more employees (496,591 establishments) and 99.5% in establishments with 300 or more employees. However, the proportion of all establishments having the network system (55.1%) is found to be much smaller than that of Internet diffusion rate (85.9%), mainly due to the poor situation of small business establishments.

In a summary, the current high level of Internet use by population, households and establishments essentially mean that the penetration of ICT among a given population in Korea has increased very fast over the very short term.

6) Statistics Canada, Household Internet Use Survey, available at http://www.statcan.ca/Daily/English/040708/040708a.htm

- 17 -

ICT Usage in Business Establishments

Total 5-9 10-49 50-299 300-999 1000 +

Establishments 85.9 79.6 93.2 98.8 99.5 100.0 using Internet (%)

Establishments having network 55.1 43.7 67.1 86.4 97.2 98.1 system (%)

Source: Results of the 2004 Survey on ICT Usage in Establishments, National

Computerization Agency.

As a consequence of the increasing trend of the penetration of ICT in Korea, the consumption expenditure on telecommunication also shows an increasing trend as presented in Table 6. Households’ consumption expenditure on telecommunication is found to have increased by about 6 times just over 10 years. Specifically, households are shown to spend 21,700 Won (1.9% of total consumption expenditure) in 1994, but 130,400 Won (6.6% of total consumption expenditure) in 2004.

: Households’ Consumption Expenditure on Telecommunication

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

% 1.9 2.1 2.2 2.6 3.4 3.9 4.7 5.5 6.0 6.7 6.6

Notes: 1) The survey covers households living in urban areas as well as nonfarm households in rural areas. However, one-person households are excluded.

- 18 - 2) Such items as expenditure on Internet use, telephone, mobile phone and postage charge are included in the expenditure on telecommunication. Source: KNSO, Results of Family Income and Expenditure Survey.

3) Electronic Commerce

The measurement of e-commerce is one of core components of digital economy. In respect of user needs, three basic sets of indicators are required for policy purposes: those relating to Readiness, to Intensity and to Impacts as mentioned earlier.

It is clear that the knowledge requirement in the electronic marketplace concerns far more than growth in transactions. When e-commerce markets reach a certain maturity, and differences in e-commerce uptake level out, there will be less concern about growth in e-commerce, and more concern about the wealth‐creation potential of e-commerce. At that stage it is far more important to have knowledge of the qualities of the transactions in terms of who transacts with whom under what conditions, the evolution of products and services, value chain and supply chain dynamics, market and industry structure, industrial organization and management7).

7) Alessandra Colecchia (OECD), Defining and Measuring Electronic Commerce.

- 19 - Anyhow, in this paper, the volumes of e-commerce by transaction type are only analyzed as shown in Table 7. In the case of Korea, the Korea National Statistical Office is the agency to conduct surveys to capture the size, growth and nature of e-commerce. Specifically, KNSO has carried out two e-commerce dedicated surveys (B-to-C Survey on a monthly basis, and B-to-B and B-to-G Survey on a quarterly basis) since 2000.

As shown in Table 7, Korean e-commerce business is revealed to grow very fast to be a market of over 314 trillion Won, which accounts for 17.1%(provisional) of whole business transactions (except for finance and insurance) as of 2004. The total volume of Korean e-commerce increased from 119 trillion Won in 2001 to 314 trillion Won in 2004, up more than 260% in just 3 years. Consequently, the proportion of e-commerce among total business transactions rose dramatically from 7.7% to 17.1% in 20048).

This level of 17.1% is found to be very high, compared to those of OECD member countries. For example, electronic sales, i.e. sales over any kind of computer-mediated network is found to reach 10% or more of sales in Austria, Sweden, Finland and Ireland in 2001. In the case of Canada, online sales by

8) Chanil Seo, Korean Electronic Commerce Dedicated Surveys: Results for

2000-2004 and Some Methodological Issues thereof, Paper presented at OECD Working Party on Indicators for the Information Society during April 2005.

- 20 - companies and government departments grew substantially for the fifth consecutive year in 2004, but e-commerce (CAN $ 28.3 billion) was still seen to account for less than 1% of total operating revenues for private businesses9).

It is also worthwhile looking at the situation by size of firms. It is revealed that large firms use the Internet more frequently than small ones to sell goods and services. It is also more common to purchase than to sell over the Internet. As many as two-thirds or more of enterprises with 250 or more employees in Australia, Canada, Denmark and Finland buy goods or services via the Internet10).

9) Statistics Canada, Electronic Commerce and Technology, 20 April 2005, available at http://www.statcan.ca/Daily/English/050420/d050420b.htm

10) OECD, The Highlights of the STI Scoreboard 2003.

- 21 -

: Size of E‐Commerce by Transaction Type11)

(Unit: in billion Korean Won) 2001 2002 2003 2004

Total 118,980 177,810 235,025 314,079

Business to Business 108,946 155,707 206,854 279,399

Business to Government 7,037 16,632 21,634 27,349

Business to Consumer 2,580 5,043 6,095 6,443

Other 417 427 442 888

Sources: 1) KNSO, Monthly Survey on Cyber Shopping Malls (B2C). 2) KNSO, Quarterly Survey on Enterprise and Government (B2B and B2G).

3. Impact indicators

The ICT sector may have considerable impacts on economic performance, as it is characterized by very high rates of technical progress, output and productivity growth. These impacts can be examined at different levels of analysis, that is,

11) The data are based on the OECD’s broad definition of e-commerce.

According to the OECD definition, when the order is placed or received over the internet, it is the narrow definition. Meanwhile, when the sale or purchases of goods and services are conducted over computer-mediated networks, it is the broad definition. However, the difference between them is found to be very small (3%) nowadays.

- 22 - using macro-economic data, industry data or data at the level of individual firms or establishments. Many studies have been attempted to examine the impacts of ICT. The result analyses show some meaningful data on productivity and capital investment. However a number of problems still affect the measurement of the economic impacts of the ICT sector like the definition of ICT sector, available deflators and so on. Accordingly further studies need to be done to settle these measurement issues.

Ⅳ. Classification on ICT Industries

Revision of statistical standards such as industrial classification, products classifications corresponding to the development of ICT and socio-economic change is also needed for the survey vehicles to gain and maintain their relevance in this information society. The OECD developed an activity-based definition for ICT sector in 1998, and is in the process of revision in accordance with revision of UN ISIC. One notable point from ISIC Rev 4 is that it will create a new section on Information and Communications where it breaks the traditional ISIC dichotomy between manufacturing and service activities

Industries for ICT sector were defined as a combination of manufacturing and services industries whose products capture, transmit or display data and information electronically by the OECD Working Party on Indicators for Information

- 23 - Statistics(WPIIS) in 199812). This definition was based on UN International Standard Industrial Classification of activities Rev. 3 (1998) and Rev. 3.1 (2002)13).

The OECD’s ICT sector definition brings together business units that have common ICT activities. In 1998, it was felt that the ISIC Rev.3 was the best option available to collect statistics on an internationally comparable basis, even though it did not precisely identify all the activities that could be considered to be ICT activities. The ICT sector defined is shown in Box 1.

One important feature of this definition is that it conceptually breaks the traditional ISIC dichotomy between manufacturing and

12) Sheridan Roberts, OECD Work on Measuring the Information Society, Paper presented at the 19th Meeting of the Voorburg Group on Service Statistics, 2004.

13) There were some changes between ISIC Rev. 3 and Rev. 3.1. For example,

the class 5150 in ISIC Rev. 3 was split into two new classes–5151 (wholesale of computers, computer peripheral equipment and software and 5152 (wholesale of electronic and telecommunication parts and equipment). In principle, ISIC is based on a material production and take little account of services or immaterial products of the new economy. In other words, the ISIC is built on likeness in production and output. Thus, new innovative ways of constructing the classification are called for, for example, classification built on distribution, markets or purposes (Olof Gardin, The New Economy-New Challenges for the Statistical System, Paper presented at the IAOS Conference held in London, 2002).

- 24 - services activities. Activities producing or distributing ICT products can be found everywhere in the economy.

Box 1. The current OECD ICT sector definition (originally approved in 1998 and amended in 2002): ISIC industries included in the ICT sector

Manufacturing: ‐ 3000 Office, accounting and computing machinery ‐ 3130 Insulated wire and cable ‐ 3210 Electronic valves and tubes and other electronic components ‐ 3220 Television and radio transmitters and apparatus for line telephony and line telegraphy ‐ 3230 Television and radio receivers, sound or video recording or reproducing apparatus, and associated goods ‐ 3312 Instruments and appliances for measuring, checking, testing, navigating and other purposes except industrial process equipment ‐ 3313 Industrial process equipment

Services: ‐ 5151 Wholesale of computers, computer peripheral equipment and software ‐ 5152 Wholesale of electronic and telecommunications parts and equipment ‐ 6420 Telecommunications ‐ 7123 Renting of office machinery and equipment (including computers) ‐ 7210 Hardware consultancy ‐ 7221 Software publishing ‐ 7229 Other software consultancy and supply ‐ 7230 Data processing ‐ 7240 Database activities and online distribution of electronic content ‐ 7250 Maintenance and repair of office, accounting and computing machinery ‐ 7290 Other computer‐related activities Source: Roberts, Sheridan, OECD Work on Measuring the Information Society, Paper presented at the 19th Meeting of the Voorburg Group on Service Statistics, 2004.

- 25 - Meanwhile, the United Nations is now in the final stage of preparing ISIC Rev.4, totally revising previous ISIC Rev.3 (1998) and ISIC Rev.3.1 (2002). This revision work will be finalized by the year 2007. In connection with the classification on ICT sector, it is emphasized that the growing importance of information14) in the economy and in society be reflected in the ISIC Rev.4.

In the case of IT services, although it requires specific skills and expertise and it does not comply with the mass distribution concept, it is decided to be included in this Section on Information & Communication rather than in the category on professional, scientific and technical services.

It is also worthwhile mentioning about two specific characteristics of information and communication products. One is that an information or cultural product does not necessarily have such tangible qualities as the followings: 1) the traditional order “physical production" distribution is no longer always valid, 2) value lies on content not on format, and 3) it is protected from unlawful reproduction by copyright laws. The other characteristics are that no direct contact between supplier and consumer is needed. This means that there are many ways of distributing the product between supplier and consumer.

14) Information has always been a vital resource. The instantaneous transmission of information from anywhere to everywhere has profound implications both for the functioning our economies and the evolution of our societies.

- 26 - The main components of this section will be publishing activities (division 58), including software publishing, motion picture and sound recording activities (division 59), radio and TV broadcasting and programming activities (division 60), telecommunications activities (division 61) and information technology and other information service activities (division 62). Meanwhile, the distribution of the complete television program in division 61 can be done through broadcasting, satellite or cable systems.

Therefore, the specific differences between the previous ISIC Rev.3.1 and ISIC Rev.4 are revealed to be: 1) publishing (ISIC Rev.3.1-221) is removed from Manufacturing and is placed in the new section on Information and Communication, 2) IT services (the larger part of former 72) is also placed in the new section, and 3) telecommunication is removed from the section on “Transport, storage and communications” in ISIC Rev.3.1 and is also placed in the new section. In other words, a new section for ISIC Rev.4 pulls together a variety of activities from throughout ISIC15) as shown Box 2.

15) John Murphy (US Census Bureau) and Paul Johanis (Statistics Canada),

Comparability between NAICS and ISIC Rev.4, Paper presented at Meeting of the Expert Group on International Economic and Social Classifications, June 2005.

- 27 - Box 2. Proposed ICT Industries at ISIC Revision 4 (2007)

J. Information and communication ‐ 5811 Book publishing ‐ 5812 Publishing of directories and mailing lists ‐ 5813 Publishing of newspapers, journals and periodicals ‐ 5819 Other publishing activities ‐ 5820 Software publishing ‐ 59 Motion picture, video and television program production, sound recording and music publishing activities ‐ 6010 Radio broadcasting ‐ 6021 Television broadcasting ‐ 6022 Cable and other subscription programming ‐ 6110 Wired telecommunications activities ‐ 6120 Wireless telecommunications activities ‐ 6130 Satellite telecommunications activities ‐ 6190 Other telecommunications activities ‐ 6211 Data processing, hosting and related activities ‐ 6212 Web portals ‐ 6221 Computer programming activities ‐ 6222 Information technology consultancy activities and computer facilities management activities ‐ 6229 Other information service activities ‐ 6231 News agency activities ‐ 6232 Library and archives activities ‐ 6239 Other information service activities n.e.c.

- 28 - Ⅴ. Concluding Remarks

Korea began to map out an IT strategy from 1994. The initial focus was on constructing IT infrastructure and a more comprehensive, nationwide IT strategy was formulated in 1996, which later expanded to the project named “Cyber Korea 21”. The gist of this project was to construct a high-speed optical fiber backbone by 2002. Consequently, at around the latter part of 1990s, there has been a huge growth in the number of information and telecommunication venture businesses, as well as in the information services and software industries.

Thus, Korea has become one of the IT powerhouses in the world since the dawn of the new millennium. The International Telecommunication Union (ITU) placed Korea at the fourth place in the world and the first in the Asia-Pacific region at the digital access index for 2003, a measurement to gauge access to information and telecommunication technology.

Especially, it was revealed that Korea stands the top in term of the number of subscribers to the high-speed link to the Internet and the third in term of the use of Internet. As of December 2004, the proportion of Korean households connected with the wired or wireless Internet at home were found to be 86.0%, and the proportion of population used the Internet once or more in the last month prior to the survey period were found to be 70.2% among total population aged 6 or more.

- 29 - However, such phenomena as the digital divide16) and online gaming addictions are still observed in our society. Rates of Internet use are seen to vary substantially across the population groups. Rates of Internet use among the following groups are witnessed to be below the average: the small-size firms, the low-income households, the women, the elders, the group having the low level of educational background, the single-family households without children, and the one-person households.

Another aspect of IT development also needs to be given a high attention–the impact of IT on key indicators of aggregate activity such as productivity and living standards as well as on labor markets and the income distribution. However, this task is not easy to be dealt with since existing statistics do not capture all the changes in output, quality and cost savings associated with IT.

The other challenge is also to develop new indicators in areas of significant policy interest but are inherently difficult to measure17). International communities like OECD are in the process of settling the measurement issues on these areas. First

16) The digital divide refers to the gap that exists between those who have

and those who do not have access to technology like computers and Internet as well as related services.

17) Sheridan Roberts, OECD Work on Measuring the Information Society, Paper presented at the 19th Meeting of Voorburg Group on Service Statistics.

- 30 - of such areas is the trust in on-line environments for industry and government. This is the confidence users should have in all phases of online working environment - platforms, application and services. Those cases in point are IT security, spams, phishing, pharming, spyware, various forms of spoofing, web page hijacking, viruses, consumer protection and privacy policy.

The second one is about the digital content. There is an industry view of electronic content and a product view. The industry view has received a little bitslightly more attention but unlike the ICT sector, suffered from the fact that there is not a good correspondence between electronic content sector and electronic content products.

The third one is the ICT skills. OECD has recently done the measurement work on the distribution of ICT skills in the economy which includes attempts to measure the potential offshoring of jobs. ICT skills are defined at two levels, narrow and broad definition18). However the absence of official guidance about the ICT-related works in the occupational classification is also one of the problem to be solved.

Fourth one is the digital delivery. This was not still covered in

18) The narrow definition is ICT specialists who have the ability to develop and maintain ICT systems and for whom ICT is the main part of their job. The broad definition includes ICT specialists as well as basic and advanced ICT users for whom ICT is a tool for their job.

- 31 - the OECD definition of e-commerce. For example, an order could be placed in a conventional manner (i.e. offline) but delivered online. This would not be captured under the current e-commerce definition.

It is hoped that more investments be put into studies to improve data collection and measurement of the emerging digital economy, especially in the above‐mentioned areas–the digital divide, the impact of IT on key indicators of aggregate activity and the development of new indicators which are inherently difficult to measure. It is also needed to keep an eye on the United Nation’s revision work of its ISIC. Those changes need to be reflected in Korea Standard Industrial Classification (KSIC) as soon as possible.

- 32 - References Allin, Paul, et al., “The Impact of the Internet on Society”, Paper presented at IAOS Conference, 27~29 August 2002, London. Colecchia, Alessandra, “Defining and Measuring Electronic Commerce”, OECD, Paris Furuta, Hiroshige, “Recent Development of IT Indicators in Japan”, Paper presented at IAOS Conference during 27‐29 August 2002, London. Gardin, Olof, “The New Economy–New Challenges for the Statistical System”, Paper presented at the IAOS Conference, 2002, London. Murphy, John (US Census Bureau) and Paul Johanis (Statistics Canada), “Comparability between NAICS and ISIC Rev.4”, Paper presented at Meeting of the Expert Group on International Economic and Social Classifications, June 2005, New York. OECD, The Highlights of the STI Scoreboard 2003, 2004, Paris. OECD, The Highlights of Information Technology Outlook, 2004, Paris Pattinson, Bill, “E‐Commerce–Toward an International Definition and International Comparable Statistical Indictors”, OECD, Paris Seo, Chanil, “Korean Electronic Commerce Dedicated Surveys: Results for 2000-2004 and Some Methodological Issues thereof”, Paper presented at OECD Working Party on Indicators for the Information Society during April 2005, Paris Sheridan, Roberts, “OECD Work on Measuring the Information Society”, Paper presented at the 19th Meeting of the Voorburg Group on Service Statistics, 2004. Statistics Canada, A Reality Check to Defining e‐Commerce, 1999. Statistics Canada, Electronic Commerce and Technology, 20 April 2005, available at http://www.statcan.ca/Daily/English/050420/d050420b.htm Statistics Canada, Household Internet Use Survey, available at http://www.statcan.ca/Daily/English/040708/040708a.htm Statistics Netherlands, “Building Blocks for the Description of the Digital Economy”, 2002.

- 33 - United Nations Statistics Division, ISIC Rev.4 draft, Section K, Information and Communication, Power‐point version. UNCTAD, “Information Society Measurements: The Case of E‐ Business”, Background paper presented at Expert Group Meeting, 8~10 September 2003, Geneva. ITU, Digital Access Index (DAI) 2003, available at http://www.itu.int/ITU‐D/ict/dai/index.html

SEAMATE, Socio‐Economic Analysis and Macro‐modeling of Adapting to Information Technologies in Europe, available at http://www.seamate.net/data.shtml

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