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East: Report Says Information Technology Development Lagging

The already enormous international market for information and communication technology is now growing at a rate of 8 percent a year. A recent study emphasizes the importance of the barely 20-year-old technology in the world economy, but also says that Eastern Europe and Russia lag behind other regions in terms of absolute spending on information technology.

Prague, 8 December 2000 (RFE/RL) -- The development of information and communication technology, or ICT -- the backbone of the Internet infrastructure -- is crucial to any country's advancement in electronic commerce and services.

This is a major conclusion of the latest annual report -- known as "@Digital Planet@" -- released by the World Information Technology and Services Alliance, or WITSA.

The survey also reveals that, in total spending on ICT, Eastern Europe and Russia are at the bottom of the scale, the Eastern countries are behind not only Western Europe and North America but also regions grouped as the Middle East/Africa, Latin America and Asia-Pacific. The survey's finding confirms a trend first recorded three years ago.

According to the report, however, Eastern Europe and Russia are now moving rapidly to catch up. When it comes to growth in ICT spending, the Eastern countries and Latin America -- the regions with the smallest ICT bases -- are currently outpacing by a rate of two-to-one Western Europe and North America, regions with mature ICT structures.

The WITSA annual reports are based on solid scientific research and are considered highly reliable among ICT professionals. The first @Digital Planet@ survey was conducted in 1998.

John Gole, a telecommunications analyst for International Data Corporation, Central Europe, tells RFE/RL that the stumbling block for ICT development in Eastern nations is primarily their governments' restrictions on competition.

"Governments from Central and Eastern Europe continue to restrict competition in the telecommunications market. That varies by degree in different markets, in different countries, with [the] Czech market completing [its] liberalization at the end of this year and some others -- for example Hungary -- following the following year, and other markets working their way in that direction. I think that the restrictions on competition in telecommunications are a big barrier to development and use of IT [information technology] in business in these countries."

In Russia, lack of revenue and insufficient Internet-related investments are holding back the development of ICT. Robert Farish, research manager of International Data Corporation, Russia, tells our correspondent that Russia also lags behind some East European countries in developing its own Internet and ICT legislation.

"Russia has been particularly known for the absence of state policy on the development of IT. I think in other countries, like Hungary or [the] Czech Republic, there's far more active state intervention in the development of IT."

Among other findings in the @Digital Planet 2000@ survey is that ICT development is no longer driven by the production of hardware, which was typical of the period prior to 1999. The current trend is toward increasing the dominance of software and services. While the hardware market grew worldwide by 6 percent in 1999, software grew by 10 percent and services by 14 percent.

According to several analysts, there are now three distinct ICT development groups among East European countries. The Czech Republic, Estonia, Hungary, Poland, Slovakia, and Slovenia are in the first, most advanced group. The second-ranking ICT regional group is composed of Bulgaria, Croatia, Latvia, Lithuania, Macedonia, Romania, and, to a lesser degree, Yugoslavia. Russia and Ukraine make up the third, least-developed group -- each with special ICT circumstances.

John Cole of International Data Corporation puts it this way:

"Ukraine and Russia are interesting cases in which the governments aren't so restrictive, but the markets themselves are not especially competitive, despite some deregulation. In these markets, [it is] in some ways an issue [of] government not taking an effective regulatory approach toward competition more than a matter of just prohibiting competition."

At present, neither Albania and Belarus fit into any of the three groups. Both countries have poor ICT infrastructures and have attracted virtually no interest from potential Western investors.

@Digital Planet 2000@ recorded ICT annual growth of more than 10 percent in Poland, Hungary, Romania, and Slovakia. But when it came to per capita spending on ICT, Russia, Romania, and Bulgaria were at the bottom of the list, along with Indonesia.

Kimberley Claman, WITSA's executive director, say such findings should not be a concern.

"I actually feel that the focus here should not be on why Eastern Europe lags behind the others in terms of total spending. Rather, the focus should be on the growth of total spending over time. Of the top 10 fastest growing ICT markets -- [determined] by compounded annual growth rate from 1992 to 1999 -- Eastern Europe is the highest represented region. The top 10 include countries such as Poland, Hungary, Romania, Slovakia, and a catch-on group of other Eastern European countries. If you would take this list of top 10 and extend it to the top 15, the Czech Republic and Slovenia would also be captured. Eastern Europe is doing in fact quite well on the growth of IT."

Analysts say there is generally a correlation between a political system in a given country and its ICT development. But they warn that the correlation is not always negative. They point to Vietnam and China -- communist countries with restrictive political systems -- which have enjoyed the world's fastest ICT annual growth rates between 1992 and 1999 -- 35 and 30 percent, respectively.