The ICT Globalisation Index


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The ICT Globalisation Index is a quantitative ranking of the degree of globalisation of national ICT sectors. The ranking comprises more than 25 indicators across four thematic categories: openness to ICT trade, openness to foreign investment in the ICT sector, R&D globalisation, and strength of the ICT environment. Read the full report now.

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The ICT Globalisation Index

  1. 1. The ICT Globalisation Index A report from The Economist Intelligence Unit Commissioned by
  2. 2. 1© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Contents About the report 2 Executive summary 3 Introduction 5 Openness to ICT trade 7 Foreign investment and ownership in the ICT sector 9 RD globalisation 11 Strength of ICT environment 13 Conclusion 15
  3. 3. 2 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index About the report The ICT Globalisation Index is an Economist Intelligence Unit report, commissioned by Huawei. Kim Andreasson was the author and Laurel West was the editor. The report is based on a quantitative index composed of more than 25 indicators across four thematic categories: openness to information and communication technologies (ICT) trade, openness to foreign investment in the ICT sector, research and development (RD) globalisation, and strength of the ICT environment. The categories, and the individual indicators within them, are weighted according to The Economist Intelligence Unit’s assumptions regarding their relative importance in fostering a country’s information economy. The findings from the index were supplemented with wide- ranging research and interviews with experts to uncover the challenges and opportunities related to greater globalisation of the ICT sector. The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings do not necessarily reflect the views of the commissioner. Our thanks are due to the following people (listed alphabetically by surname) for their time and insights: l Dieter Ernst, senior fellow and professor, East-West Center l Stephen Ezell, senior analyst, Information Technology Innovation Foundation l Hosuk Lee-Makiyama, director of the European Centre for International Political Economy l Susan Teltscher, head of ICT Data and Statistics Division, International Telecommunication Union l Thian Teck Teo, vice-president, head of Service Logistics Asia Pacific, Middle East and Africa, DHL
  4. 4. 3© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Executive summary An ICT sector open to international flows of investment, people and ideas brings competition and innovation and leads to enhanced economic growth. Indeed, the International Telecommunication Union (ITU) has found strong links between ICT development and income variables. In spite of this, the globalisation of the ICT sector is contentious, particularly in light of recent revelations regarding the limits of cyber- security. Governments are concerned about critical national infrastructure and corporates fear industrial espionage and lack of intellectual- property rights (IPR). In response, some countries have used national security as a reason to nurture their domestic ICT sector or improve their cyber-security. An index measuring the extent of ICT globalisation in 20 economies around the world, compiled for this report, indicates that individual markets balance this tension differently and that digital openness broadly follows economic development. The key findings of the research are as follows: l The link between ICT globalisation and economic growth is strong. Numerous studies illustrate the connection between technology and growth; this report also confirms a link between the extent of ICT-sector globalisation and GDP per capita at a correlation of 0.78, suggesting that richer countries have more globalised ICT sectors or that open ICT policies contribute to higher GDP. l Key barriers to further globalisation are lack of transparency and knowledge of foreign markets: Despite the obvious benefits of globalisation, all countries have some way to go in terms of effectively promoting it—some a longer way than others. To overcome their fears, governments should counter barriers through greater transparency, while many companies would do well to improve their knowledge of foreign markets by increasing their presence in those markets. l Europe leads the way, but development within the region is uneven. Northern European countries (the UK [1st], the Netherlands [2nd] and Germany [3rd]) have the most globalised ICT sectors. This is partly attributed to their embrace of new technologies. Meanwhile, southern European countries, such as Italy (and, to some extent, Spain) lag behind, particularly in openness to ICT trade and RD globalisation. l With the exception of Taiwan, emerging territories fare poorly. The top half of the rankings is occupied by developed economies —Taiwan being the lone exception—whereas the bottom half consists of emerging markets,
  5. 5. 4 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index reinforcing the link between levels of economic development and ICT globalisation. Among the BRIC countries, China leads the way (12th), followed by India (13th), Brazil (15th) and Russia (19th). Although the reasons for weaknesses vary, one discernable trend indicates that, while emerging markets often do well in terms of openness to ICT trade (China is second in this category overall, India eighth), they fare poorly in terms of current ICT environment, which captures Internet-, mobile- and broadband- penetration, as well as ICT usage and spending (here, China is 17th and India last). l The sectorial landscape will continue to change rapidly. A combination of ever-changing corporate opportunities, government policies and technological progress ensures that the ICT landscape continues to shift, with volatility increased by new trade agreements and security concerns. Such an environment demands flexible policies, with a view that delicately balances greater openness over potential challenges. The number of —sometimes contradictory — factors that determine ICT globalisation makes it difficult to predict the sector’s future. Cyber- security concerns are important to national security, yet countries that favour greater openness also stand to benefit economically, through improved competition and increased innovation. In light of emerging restrictions on cross-border data flows, however, tensions are only likely to increase.
  6. 6. 5© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Introduction There are two ways in which countries can enhance productivity, according to Stephen Ezell, a senior analyst at the Information Technology Innovation Foundation (ITIF), a Washington, D.C., think tank, and co-author with Robert Atkinson of Innovation Economics: The Race for Global Advantage (Yale University Press, 2012).1 These are: to replace basic industries with more advanced ones and to use ICT to increase productivity across all sectors—the latter of these two methods Mr Ezell calls “the golden road” for emerging markets. Mr Ezell’s assertion is backed up by the statistics. Over the last five years, the Internet itself accounted for 21% of GDP growth among developed countries surveyed by McKinsey, a consultancy.2 The same study also shows that 75% of that growth took place outside of the technology sector; in other words, in traditional industries that benefit from ICT deployment. Research from the International Telecommunication Union (ITU) also illustrates a strong link between ICT progress and income; this trend has been reinforced by the introduction of advanced technologies, such as broadband.3 Because ICT can contribute strongly to global competitiveness and improved socio-economic outcomes, countries are investing heavily in ICT in order to move up the value chain. Mr Ezell explains that countries have moved from being price makers to price takers: while countries used to set the terms of the deal, it is now companies who shop the world for the most attractive solutions available to them. “Countries are becoming more sophisticated about their innovation and technology policy, which has driven competition among what governments offer,” he says. In Europe, the European Commission (EC) is supplementing individual country efforts by promoting RD related to ICT. Under the 7th Framework Programme for Research and Technological Development (FP7), the EU spent €51bn (US$69.9bn) between 2007 and 2013.4 Under Horizon 2020, the new initiative to improve the region’s competitiveness from 2014, the EU has raised its overall commitment to €70bn.5 The index constructed for this report, measuring the extent of ICT globalisation in 20 economies around the world, finds three northern European countries leading the way: the UK (1st), the Netherlands (2nd) and Germany (3rd). “It is not surprising,” says Thian Teck Teo, vice- president, Head of Service Logistics Asia Pacific, Middle East and Africa, DHL, to find a group of northern European countries heading the table, “because they have a culture of embracing new 1 For more information regarding the book, see http://www. 2 com/Insights/MGI/ Research/Technology_ and_Innovation/Internet_ matters 3 net/pressoffice/press_ releases/2012/70.aspx net/pressoffice/press_ releases/2013/67.aspx 4 information_society/ activities/sustainable_ growth/funding/index_ en.htm 5 research/horison2020/ index_en.cfm
  7. 7. 6 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index technologies”. Taking the Scandinavian countries as an example, Hosuk Lee-Makiyama, director of the European Centre for International Political Economy (ECIPE), also points to the fact that many northern European countries have export- led economies, which means they encourage free trade because it brings growth. The 2012 European Commission Regional Innovation Scoreboard also finds that leadership in innovation tends to cluster in the north.6 Meanwhile, emerging markets lag behind in the ICT Globalisation Index, in part due to a lack of current ICT infrastructure from which to derive additional benefits. This is not unexpected, but the challenges are more complicated than simply low income levels. For example, the BRIC countries, China (12th), India (13th), Brazil (15th) and Russia (19th), have big populations spread across large geographic areas and hence face uneven development levels and lower ICT penetration overall. However, some of these countries are making serious efforts to improve. Under its Innovation 2020 strategy, for example, China intends to invest US$1.7trn in seven “strategic emerging industries” over the next seven years, one of which is focused explicitly on a new generation of ICT.7 Unintended consequences of ICT-sector development The globalisation of the ICT sector is far more complicated than the policies of individual countries. Dieter Ernst, senior fellow and professor at the East-West Center in Honolulu, Hawaii, calls it a “complex process” and cites a combination of drivers, such as market supply and demand, government policies and various global factors. For instance, efforts to capture the benefits of digital development—in part through openness to ICT trade and foreign investment in the ICT sector—can negatively affect domestic industries by exposing them to more efficient foreign competitors, while a high reliance on ICT in and of itself brings cyber-security challenges. In the UK, for instance, the 2010 National Security Strategy cites “cyber attack” as one of the four highest risks facing the country.8 In March 2013, the US identified it as the greatest threat to national security, surpassing the threat posed by terrorist groups such as Al‑Qaeda.9 Cyber security is often of less concern in emerging markets as their reliance on ICT has yet to reach a high level; with less dependence, there is also less exposure. However, as emerging markets strive to capture the benefits associated with the information society and move along the digital-development curve, they are also becoming more susceptible to cyber threats. In an effort to measure the extent to which various economies have globalised their ICT sectors, this report reviews digital development according to the four underlying thematic categories of the overall Index: openness to ICT trade, openness to foreign investment in the ICT sector, RD globalisation, and strength of the ICT environment. 8 uk/prod_consum_dg/ groups/dg_digitalassets/@ dg/@en/documents/ digitalasset/dg_191639.pdf 9 http://edition.cnn. com/2013/03/12/us/ threat-assessment 6 enterprise/policies/ innovation/files/ris-2012_ en.pdf 7 http://mobile. idUSTRE7AK0MT20111121?ir pc=932 Rankings overview table The ICT Globalisation Index Scored 0-100 where 100=most globalised OVERALL SCORE 1 UK 69.6 2 Netherlands 60.3 3 Germany 56.0 4 US 53.3 5 France 52.8 6 Canada 51.8 7 Australia 48.6 8 Taiwan 47.3 9 Japan 45.9 10 Spain 43.9 11 Italy 43.6 12 China 43.0 13 India 37.6 14 Turkey 37.1 15 Brazil 36.1 16 Vietnam 33.9 17 Mexico 33.7 18 Nigeria 33.3 19 Russia 32.1 20 South Africa 32.0
  8. 8. 7© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Openness to ICT trade 1 Openness to ICT trade captures the extent to which each economy is willing and able to trade freely. It is measured, in part, by the number of trade barriers and the amount of ICT-sector imports and exports as a percentage of overall trade. Some emerging markets do very well in this area, led by China (second in this category). At first glance, this is surprising, given the perception of trade barriers imposed by China; indeed, the country is third to last in that category. However, the country’s amount of overall ICT trade makes up for this deficiency. In 2004, for example, China overtook the US as the world’s largest exporter of ICT goods and services.10 Similarly, Taiwan and Vietnam (goods) and India (services) all do well in this category, in part due to the ratio of their ICT exports to overall exports. But shifting labour costs, tax rates and trade agreements mean some emerging markets may be unable to sustain their advantage in this category. In particular, Vietnam has benefited from the China Plus One strategy, under which global companies have been seeking to diversify their investments away from mainland China. For instance, in 2010, Intel, the American chip- maker, opened its largest assembly and testing facility in the world in Ho Chi Minh City, at a cost of around US$1bn.11 As well as a desire to diversify, the location of such facilities is often determined according to simple trade formulas, such as the ability to move finished goods rapidly at low rates of taxation. New expectations The 1996 WTO Information Technology Agreement (ITA), in which participating countries removed tariffs on eight types of ICT product, led to a massive increase in trade. Under the ITA, developing countries more than doubled their share of global exports. The impact on emerging markets in Asia was particularly notable, as the region is the source of almost two-thirds of the world’s total ICT exports of US$1.8trn.12 Negotiations concerning a possible extension of the ITA are ongoing, although countries OPENNESS TO ICT TRADE 1 Netherlands 68.8 2 China 68.0 3 UK 58.0 4 France 56.0 5 Germany 55.7 =6 Spain 54.8 =6 Taiwan 54.8 8 India 54.4 9 Vietnam 53.3 10 Canada 52.5 11 US 51.0 12 Japan 50.9 13 Mexico 49.4 14 Italy 48.9 15 Australia 47.4 16 Turkey 46.3 17 Brazil 39.8 18 Nigeria 34.9 19 South Africa 30.7 20 Russia 17.4 10 general/chinaovertakes usasworldsleading exporterofinformation technologygoods.htm 11 com/news/2010-10-29/ intel-plant-put-vietnam- on-high-tech-map-ceo- otellini-says.html 12 http://unctad. org/en/pages/ InformationNoteDetails. aspx?OriginalVersionID =37Sitemap_x0020_ Taxonomy=1629;
  9. 9. 8 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index have widely differing expectations of what it should look like and observers are sceptical as to whether trade can trump talk. “I think trade agreements are going to matter less and less, because I think geopolitics are the most important [factor],” says Mr Lee-Makiyama, who believes the best way to remedy national-security concerns is through greater transparency. As debates about ownership of ICT-sector assets and national security rage on, companies and consumers have new expectations as, increasingly, they demand the instant global supply of popular products, such as the Sony PlayStation. “To be able to sell the same product across multiple markets simultaneously is one of the biggest supply-chain challenges today,” says Mr Thian Teck of DHL. Companies want global product launches but they remain difficult to achieve logistically. “In this regard, we have some way to go to have a truly global ICT supply chain,” says Mr Thian Teck.
  10. 10. 9© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index This category captures the extent to which each territory is willing and able to attract foreign investment into its ICT sector. It is measured here through the overall policy environment for foreign investment, the number of cross- border mergers and acquisitions (MAs), foreign ownership of ICT companies and any restrictions on foreign ownership. The UK does particularly well in the openness to foreign investment in the ICT sector, being ranked first. The reason for its openness may be due to Foreign investment and ownership in the ICT sector2 its lack of domestic innovation as indicated by its relatively low proportion of patents in ICT. Foreign investment in the ICT sector is often a politically charged topic. Governments may invoke national security as a reason to bar investment in key ICT infrastructure in order to protect and nurture domestic companies or for cyber-security reasons.13 The EC, for instance, published a cloud-computing strategy in September 2012, which could be the basis for moving data from US clouds into Europe, in the process saving money for business while generating new jobs for Europe. Such localisation strategies—geographically storing data where it is used—are also becoming a global trend as countries seek to counteract allegations of cyber- snooping around data hosted elsewhere, often in the name of national security. Despite having the worst policy environment for foreign investment generally, Russia (8th in this category) and Nigeria (12th), both score relatively well because they do not have any restrictions on foreign ownership of telecommunications infrastructure. In Russia, for instance, Sweden’s Tele2 mobile operator ran the country’s fourth-largest carrier, with around 23m customers, for a decade before it sold the company last year to a Russian private-equity group. More recently, Deutsche Bank, a German bank, announced it would invest in Rostelecom, Russia’s largest telecoms company. Enter cyber security Until Edward Snowden, a former US government contractor, revealed the extent of US secret OPENNESS TO FOREIGN INVESTMENT IN THE ICT SECTOR 1 UK 91.7 2 Netherlands 54.2 3 Germany 53.3 4 France 50.5 5 US 46.6 6 Italy 44.9 7 Canada 43.8 8 Russia 43.5 9 Turkey 41.1 10 Spain 38.7 11 Australia 36.7 12 Nigeria 35.7 13 Brazil 33.2 14 Taiwan 32.6 15 India 30.5 16 South Africa 28.0 17 Japan 27.8 18 China 20.4 19 Mexico 19.9 20 Vietnam 15.2 13 Disclosure: Huawei, which commissioned this report, has been restricted from investing in several markets.
  11. 11. 10 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index spying programmes, cyber security was primarily viewed as a threat emanating from emerging markets. “The discussion is more balanced now,” says Mr Ernst, who observes that this has practical implications for many businesses. Indeed, in December 2013, a group of American technology companies joined forces to push the case with US politicians that their government’s actions are hampering the country’s competitive position in the global marketplace. In Asia, the Association of Southeast Asian Nations (ASEAN) trade bloc also recently called on its members to tackle cyber-security concerns through greater regional co-operation and transparency with Japan and South Korea.14 Cyber security can also be viewed as a modern version of the much older practice of invoking national-security reasons to protect and nurture domestic industries in the face of foreign competition. “In contrast to the official line, the fact is that every country has an implicit policy on strengthening their domestic players,” says Mr Ernst. However, using political instruments to bar competition in certain sectors can have long- term effects, says Mr Ezell. Firstly, if countries are not exposed to strong competition, it is unlikely that they can innovate at the highest levels and, therefore, will not be sufficiently well prepared for global competition. He gives as an example Japan which shielded many of its industries in the 1980s and has since suffered in the marketplace and is placed 17th in this category. “What you find is that they only hurt themselves in the long run because they don’t build any true innovation capabilities and are not equipped to innovate for the future,” Mr Ezell says. 14 news/asean-statement- communiques/item/ joint-media-statement- of-the-12th-asean- telecommunications-and- it-ministers-meeting-and- its-related-meetings-with- dialogue-partners
  12. 12. 11© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index overall RD spending and the amount of patents filed, suggesting a lower amount of research activity than that of the top performers. It is also indicative, however, of the increasingly global nature of RD where large numbers of engineers are produced in emerging economies, such as China, India and Taiwan, from which foreign and domestic companies alike seek to reap the benefits. For instance, Lenovo, the Chinese computer manufacturer, not only benefits from its low-cost manufacturing and RD base to develop products for the global market but is also helped by foreign investment in export- led manufacturing, because it improves quality and creates economies of scale, according to a case study from the Center for Strategic and International Studies (CSIS), a US think tank.15 Research from the EC also shows that Asian countries are increasingly prominent on the global ICT RD landscape, often led by China, which had the highest annual growth rate, as measured by Gross Domestic Expenditure ­on RD (GERD)/GDP ratio (23%), between 2000 and 2008. China’s contribution helped Asia’s world share increase from 27% to 32% between 2002 and 2007, at the expense of developed markets in the EU, US and Japan.16 IP, above all Lack of intellectual property rights (IPR) protection is a global problem that is particularly relevant in an Asian context, since the region is seen as particularly weak in this area. This is reflected in current negotiations in the Trans- Pacific Partnership (TPP), a free-trade agreement (FTA) with 12 negotiating members, in which IP The globalisation of research and development (RD) category measures the extent to which each territory’s ICT sector is willing and able to benefit from foreign involvement. It captures, among other things, RD spending, appeal as an RD location, quality and availability of technology skills and patent filings. The Netherlands and the UK both rank in the top three in all of the categories in the index, except for RD globalisation (7th and 8th, respectively). In particular, they underperform in comparison with their peers in respect of RD globalisation 3 RD GLOBALISATION 1 Canada 78.6 2 US 77.6 3 Australia 76.3 4 Taiwan 72.5 5 Japan 72.4 6 Germany 62.7 7 Netherlands 61.6 8 UK 61.3 9 China 57.5 10 France 57.2 11 South Africa 48.6 12 India 46.6 13 Brazil 43.7 14 Mexico 40.5 15 Russia 39.5 16 Spain 39.1 17 Vietnam 37.4 18 Italy 33.3 19 Nigeria 30.6 20 Turkey 25.6 15 publication/130129_ competitiveness_Lenovo_ casestudy_Web.pdf 16 http://publications.jrc. bitstream/111111111/ 22526/1/jrc66110.pdf
  13. 13. 12 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index protection has been a source of controversy. From a business perspective, a lack of IPR raises the prospect of counterfeit products supplementing or even replacing real ones in the market which has two immediate implications: a potential loss of revenue; and increased exposure to cyber threats, as pirated products cannot be properly secured. IP protection is, therefore, a large consideration when building RD facilities, which can cost upwards of US$5bn. Intel, for instance, keeps its high-end development facilities primarily in developed markets. Its largest RD facilities are found in Oregon and Arizona in the US, with significant ones also in Germany, Israel and Ireland. Meanwhile, the company conducts lower-end assembly and testing in many developing markets, such as Vietnam, Malaysia and Costa Rica. However, Mr Ernst argues, multinational companies would be wise to conduct more high- end RD in places, such as China and India, in order to better understand the local market and the demand for their products. “Anyone can deal with Mumbai or Beijing but, in lower-tier cities, it is much more difficult for them,” he says. “Unless they are [based] there, they can’t understand the developments.” Besides increased familiarity with growing markets, an additional benefit of globalised RD is access to larger pools of engineering talent and inspiration to develop disruptive technologies.
  14. 14. 13© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Strength of ICT environment 4 STRENGTH OF ICT ENVIRONMENT 1 Germany 56.0 2 Netherlands 53.4 3 UK 53.2 4 Australia 51.5 5 US 50.2 6 Japan 50.0 7 France 46.2 8 Canada 41.7 9 Taiwan 38.6 10 Italy 38.2 11 Spain 35.5 12 Russia 32.3 13 Vietnam 28.6 14 South Africa 27.5 15 Nigeria 26.7 16 Brazil 26.4 17 China 22.8 18 Mexico 22.3 19 Turkey 17.5 20 India 6.2 The strength of ICT environment category captures a snapshot of the current landscape in terms of Internet, mobile and broadband penetration, as well as ICT usage and spending. As a result, the category ranking reflects levels of overall economic development, although there are outliers from this trend: Vietnam appears relatively strong (13th), while Turkey is relatively weak (second to last), primarily due to a lack of overall IT spending. Northern European countries lead the way, with Germany ranked first. As all nine indicators underlying the category are equally weighted, no particular factor determines a strong or weak showing. On average, smaller developed countries benefit, as high broadband and Internet penetration levels are harder to achieve in large emerging markets. For instance, a report from the Boston Consulting Group notes that China has witnessed a dramatic improvement in digital adoption but it also points to significant room for growth, particularly in less-developed regions within the country.17 An exception is a broad rise in mobile-phone uptake, an indicator led by Russia, with Vietnam third. According to the ITU, global mobile- cellular subscriptions rose from 34% penetration in 2005 to 96% in 2013. Encouragingly, the fastest-growing market segment in the past few years has been the increase in mobile-broadband subscriptions, which enable users to access the Internet via their mobile phones, potentially bridging the penetration gap in the process. From supply to demand Most countries focus on the supply of ICT products and services and the production thereof, says Mr Ezell. “However, the reality is that vast benefits come from usage or the consumption of ICT, not its production.” To capture those benefits, policymakers are trying to bridge the digital divides. One challenge in many countries is the divide between young and old, and ensuring an inclusive digital society moving forward. According to the most recent Measuring the Information Society report from the 17 cn/en/files/publications/ reports_pdf/BCG_China_ Digital_Generations_2.0_ May_2010_English.pdf
  15. 15. 14 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index ITU, digital natives—defined as people between 15 and 24 who have been using the Internet for at least five years—are almost twice as likely to use the Internet compared to the overall population.18 “This is important from a policy point of view,” says Susan Teltscher, head of ICT Data and Statistics Division at the ITU. “Because the young population plays a more important role [compared with the overall population] in driving the information society, especially in developing countries, it is important to focus on them without neglecting the older population.” Access at an affordable cost is generally accepted as the best way to achieve greater inclusiveness. But, as basic uptake has risen, new challenges have also emerged. Among them is the need for greater speed and quality of broadband services. “Because of the increasing demand for more data-heavy Internet applications, such as video streaming, the data-traffic challenge and bandwidth are the main issues of the future,” notes Ms Teltscher. To resolve it, there is need for a greater mixture of fixed and wireless solutions. 18 ITU-D/Statistics/Pages/ publications/mis2013.aspx
  16. 16. 15© The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index Conclusion The ICT sector has rapidly become globalised in the past few decades, driven initially by companies seeking to reap the immediate cost- benefits of outsourcing. Today, the landscape has grown increasingly complex as governments, too, seek to capture the benefits of technologies while simultaneously trying to nurture domestic industries and protect against global digital threats. The index constructed for this report finds that individual markets balance this tension differently and that digital openness broadly follows economic development. The link between ICT globalisation and economic growth is strong and Europe leads the way. With the exception of Taiwan, emerging markets fare poorly. Barriers to greater globalisation include lack of transparency and knowledge of foreign markets, with cyber- security looming large as a real—not just a perceived—threat. Rapid technological progress and shifting political concerns also make it difficult to predict the extent of ICT globalisation in the future. Governments who favour greater openness stand to benefit economically but may expose themselves to risk. A delicate balance must be found in which those that can ensure the former, while minimising the latter, will certainly continue to reap the greatest benefits. In the short term, trade agreements appear increasingly politicised and the failure to agree to basic terms—such as an extension of the ITA agreement—may slow the pace of further globalisation, although the shift in investment and RD from west to east may counterbalance that effect. For instance, China was 20th globally in overall outward foreign direct investment (FDI) ten years ago; it is now third (behind the US and Japan). In the long term, disruptive technologies may completely change the face of ICT globalisation, as cloud computing and the potential of additive manufacturing (or 3D printing) could enable any country (or individual) to access many global products instantly, while eliminating transportation costs and minimising supply- chain risks. But, if the past can serve as a guide for the future, such new technologies are unlikely to slow the growing complexities of ICT-sector globalisation. As indicated, many territories are now introducing restrictions on cross-border data flows, some mandating that data use is linked to where the data are geographically stored, slowing the global flow of information in the process.
  17. 17. 16 © The Economist Intelligence Unit Limited 2014 The ICT Globalisation Index
  18. 18. While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report. Cover image - Dave Simonds
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