Broadband and economic growth -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

Broadband and economic growth

By: Ibrahim Sajid Malick

It is a common practice in Pakistan to invoke Turkey as a model state, a perfect role model for Pakistan to follow. Our proclivity, however, is often to demonstrate how a predominantly Muslim country became a tolerant and secular nation.

While it is plausible to study Turkey’s growth model from the ideological lens, I believe Pakistan should earnestly follow Turkey’s economic growth model.

Between ancient history and the Middle Ages, Turkey was an important “hub” along the Silk Road, a system of caravan trade routes that lasted for centuries, linking Eastern and Western civilisations. Such trade generated a wealthy economy for Turkey.

History is on the road to repeating itself. In the near future, one can imagine Turkey’s Silk Road taking on a new life as a digital hub that connects East-West economies, enabling strategic industries to flourish and contribute to Turkey’s goal of becoming the 10th-largest economy by 2023.

As basic infrastructure such as roads, rails, and electricity evolved, it became a catalyst in the growth of trade, enabling economy-wide efficiency gains and deployment of new products and services. Today, broadband and information and communications technology (ICT) have become the basic infrastructure connecting the global economy–an infrastructure that the Organisation for Economic Co-operation and Development (OECD) refers to as “general-purpose technology.”

In today’s knowledge-based and connected economy, sound competitive strategies and investments in sustainable economic growth and social value incorporate broadband to realise above-normal returns. Like many countries that compete to adopt, build, and use better broadband networks, Turkey understands that broadband-based economic policies could be the answer to its vision of achieving growth rates in excess of 7 percent by 2023.

Turkey, like Pakistan, also had financial, economic, and social barriers to effectively absorb broadband technologies on a large scale. But Turkey is on its way to accomplish this objective through several government-driven broadband-based initiatives that will generate a multiplier effect far greater than that derived from commercially driven programmes. These initiatives, it is estimated, will contribute an additional 2.3 percent to the country’s GDP (7.3 percent compound annual growth rate) each year until 2023.

Turkey is in an enviable position. After the impact of the global economic slump, which played a part in the country’s huge decline in foreign direct investment (FDI) for most of 2008 and 2009, Turkey’s growth trajectory is back. OECD’s forecasts to the International Monetary Fund estimate a 5 to 6 percent GDP growth over the next few years.

According to the OECD, Turkey is also expected to grow faster than any other country within the next decade with the exceptions of China and India. Turkey outperformed the OECD’s growth expectations as it entered 2010, and was heralded as the organisation’s strongest country.

According to the 2010 Global Competitiveness Index, the Turkish economy is positioned between efficiency- and innovation-driven stages of development due to efficiencies achieved in its labour and goods markets, combined with sophisticated financial markets and technology readiness. In addition, Turkey is a relatively large market, with a population of roughly 75 million people.

In the midst of growth, though, Turkey faces a number of challenges. Most serious is high unemployment, which fell sharply this year, but still remains above 10 percent. Half of Turkey’s population is under the age of 29–prime working years.

Government estimates show that for Turkey to create millions of new jobs, the country’s economy must grow 2 percent faster. Broadband is one way of accelerating this growth. While studies vary in their estimations of broadband’s impact on economic growth, the consensus seems to be that a 10 percent increase in broadband penetration delivers a boost to a country’s GDP between 0.1 percent and 1.4 percent, with developing nations at the more advantageous end of this spectrum. A similar elasticity is found to be experimentally valid for employment effect.

Despite significant growth (11 percent) in broadband penetration rates among OECD countries during 2009, Turkey maintains a broadband gap of more than 20 percent compared to leading OECD countries such as the Netherlands, Denmark, Norway, and South Korea, which boast anywhere from 33 to 38 broadband subscribers per 100 inhabitants.

Broadband networks are at the core of an innovation-driven economy and play a pivotal role in creating jobs and economic value, even during tough financial times. Ubiquitous access to infrastructure is enabling Turkey to develop new business models that drive innovation, progress, and prosperity.

I have no doubts that Pakistan should follow Turkey’s model of progress but economic growth is directly coupled with governance and ideology. Can Pakistan match that?

I am often reminded by the Pakistani stakeholders that their country already has broadband internet strategy. I don’t think many in Pakistan understand what competitive broadband-based economic policies entail. We often talk about how the network affects the way we work, innovate, learn, care, play, and live. The “how” partially depends on transmission speed, reliability, quality, security, and other factors. Today, a standard definition of broadband does not exist, although the term “broadband” generally refers to a high-speed internet connection. While the International Telecommunications Union defines broadband as a technology providing a transmission capacity that is faster than the primary ISDN rate (1.5 or 2 Mbps), and OECD defines it as a technology providing downstream speed in excess of 256 Kbps and upstream access speed in excess of 128 Kbps.

Pakistan has to build an infrastructure that supports functions such as web surfing, email, data exchange, or voice over IP but this infrastructure will not scale to support next-generation applications. And, building the next generation infrastructure is key for growth of Pakistan’s economy.
Source: The News
Date:8/8/2011