With hindsight retrospective policy assessment

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With hindsight retrospective policy assessment

• Governor Erkki Liikanen
• ENCIP Business MeetingSeville, 25 March, 2007

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ICT-policy framework in Europe
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On the economic impact of the ICT and the use of
ICT

• When we started in autumn 1999, there was a
  little knowledge on the accelerated productivity
  growth in the US since 1995 and the declining
  development in Europe
• The first research results were coming on the US
  development, but only later on Europe
• The strong economic argument was not presented in
  Lisbon in March 2000 the declining productivity
  development was not mentioned in the conclusions
• (China, India and the rest of the emerging
  economies were also missing)

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Three channels through which ICT impacts on growth

• 1st channel Effect of ICT investment which
  raises output and labour productivity
• 2nd channel Rapid technological change in ICT
  producing industries leading to Total Factor
  Productivity (TFP) growth
• 3rd channel TFP growth in industries that make
  intensive use of ICT
• In process of transition, structural changes can
  drive a lot of the TFP growth differential
• For ICT adjustment costs related to intangibles
  investment
• ICT-induced innovation may create real knowledge
  spillovers

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Intangible capital that may affect ICT-TFP
relationship

• ICT is general purpose technology so that
  productivity effects come with time lag
• Need to raise investments in human capital,
  education, training, knowledge, etc.)
• Organizational innovations critical, in
  particular in services
• ICT is an enabler, productivity benefits can be
  achieved only when complemented by changes
  organisation and investments in human capital

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(No Transcript)
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The TFP residual is key to understand impact of
innovation and intangibles on productivity
Source van Ark, Bart
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Source van Ark, Bart
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Industry Decomposition Highlights Importance of
Market Services
Source van Ark, Bart
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Major market service industries account for US-EU
growth differential
Source van Ark, Bart
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ICT-policy framework in Europe
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Reform of telecoms regulation

• Unbundling of the local loop, to promote cheaper
  and faster access to Internet the last sector
  specific legal act
• Telecom package, presented in 2000, was based
• on convergence we were convinced that boundaries
  between telecommunications, IT and media sectors
  were blurred so we had to apply technological
  neutrality
• on competition more emphasis on competition
  policy principles instead of sector specific
  rules
• simplicifation a reduction of legal acts from 20
  to 6
• flexibility allow for adaptation for future
  market changes
• coherence try to guarantee a coherent
  application in all member states

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eEurope 2002the Action Plan adopted in Feira
June 2000

• focus on internet penetration and connectivity
• 18.3 March 2000, 42.6 November 2002
• more competition to reduce prices support for
  ULL and telecom package
• Action Plan included 64 (!) targets in 11 action
  areas.
• A huge benchmarking exercise in the early Lisbon
  spirit

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A new Action Plan, eEurope 2005Seville European
Coucil June 2002

• We had in 2002 more research and analysis on the
  impact of the ICT and the use of ICT on
  productivity (Jorgensen, van Ark etc.)
• Focus on the demand side areas, where public
  sector has the leading role and where
  digitalisation can increase productivity due to
  data sharing
• Demanding applications require high speed access
  and at the same time high security
• A conclusion from the earlier plan if you want
  to make a difference by an action on the European
  level, you must concentrate

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• eEurope2005 by 2005, Europe should have
• modern online public services
• e-government
• e-learning services
• e-health services
• a dynamic e-business environment
• and, as an enabler for these
• widespread availability of broadband access at
  competitive prices
• a secure information infrastructure

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Take-off of broadband Number of broadband lines
in percentage of population
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How to measure success in public services?

• to measure productivity in public services is a
  continous challenge but however difficult we
  must advance
• when there is not pressure from the markets the
  role of management even more important
• changes in organisation and processes cannot be
  led by IT-departments, if there is not commitment
  from the top, the bureaucracy fights back and
  prevents a change
• the exchange of best practices useful, when also
  political leaders participate in the process

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IST-programs

• IST program in 6th Framework program had the
  biggest resources
• The relations of the lead research DG and DG
  Information Society often tense
• The technology platforms were the major new
  inititives
• Integration of technology and content still slow
• IST program has the greatest significance when it
  creates platforms for European-wide
  participations from research, industry and other
  stakeholders
• without a risk there is no innovation

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Parameter estimates for quadratic trend and RD
intensities by countries
Source Pyyhtiä, Ilmo
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RD expenditure, total business enterprise, of
GDP
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RD expenditure, total business enterprise, of
GDP
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Technical progress
Source Pyyhtiä, Ilmo
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Technical progress
Source Pyyhtiä, Ilmo
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Improve Operational Efficiency by Bringing Firms
Closer to Local Best Practice

• ACTIONS TO IMPROVE BEST PRACTICES
• Remove local restrictions in labor and product
  markets
• Invest in hard infrastructure (transport, etc.)
• Invest in education (in particular primary
  secondary education for low skilled)
• Programs for small enterprise to raise
  employment and productivity jointly
• Raise productivity of supply of government
  services

Source van Ark, Bart
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Move out Technology Frontier by Becoming Part of
International Best Practices

• ACTIONS TO PROMOTE INNOVATIONS
• Higher education and scientific research (RD)
• Attract foreign physical and human capital
• A larger market for goods and services
• Venture capital facilities
• ICT infrastructure
• Government as partner or client in innovation
  projects

Source van Ark, Bart
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Successes?Failures?

• the telecom package was a modern, leading-edge
  solution convergence and technological
  neutrality forward-looking choices
• eEurope 2002 too fragmented to make a difference
• eEurope 2005 more focussed, mobilised political
  and business leaders made a difference at least
  in broadband
• IST programs technology platforms can become an
  effective tool the program still too fragmented
• A weakness the commission was to slow to make a
  strong economic case from the productivity angle

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i2010

• a positive continuation to eEurope2002 and
  eEurope2005 action plans
• a qualitative step, when it merges the fragmented
  efforts in digital content field in an integrated
  framework
• a major challenge maintain the attention of the
  European Council
• the digital Europe is vital for the inclusion and
  quality of life, but also for the productivity
  growth in an aging Europe