narrowing the digital gap in the apec region - united...

Narrowing the Digital Gap in the APEC Region

May 2002

Yoo Soo HongSenior Research Fellow

Korea Institute for International Economic Policy

_________________

A preliminary draft not to be quoted. Any comments and suggestions arewelcome.

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1. Introduction

This paper has several purposes. First, it reviews and assesses the trends in the

digital gap in the APEC region.1 Second, it identifies the factors that contribute to

enhancing the digital level or the digitization of economies. Third, it discusses the

role of the key actors, resources, institutions, and policies in narrowing the digital

gap.2 Finally, the desirable role of APEC in narrowing digital gaps, if any,

between member economies is discussed, on the basis of the previous reviews and

discussions.

Following an interactive digital gap model, the relative role and contributions

of pairs of factors such as people and resources, the market and government,

multinational corporations (MNCs) and international organizations, and TILF and

ECOTECH in APEC, are discussed.

The paper is structured in the following way. First, trends in the digital levels

of APEC member economies are statistically reviewed. Then, factors affecting the

trends are analyzed. The review and analysis are the starting point for the

successive broader discussion of the above-mentioned contributors to narrowing

the digital gap in the APEC region. The paper ends with some policy suggestions

for APEC and member economies to consider for narrowing the digital gap in the

future.

2. Trends and Determinants of Digitization

2-1. Trends in Digitization in the Asia-Pacific Region

1 In this paper, the APEC region and the Asia-Pacific region are not strictly distinguished.2 The term digital divide and digital gap are used interchangeably in this paper.

2

In the existing literature, not a few observers have claimed that the

digital divide in a region or an economy tends to get wider over time unless

proper efforts are made to reduce it. Considering the interesting

characteristic of information subject to increasing returns to scale and

positive externalities, it is natural to assume that ‘the rich get richer and the

poor get poorer’. However, this is not necessarily true.

Choi (2000) claims that there is no digital divide but a digital disparity

in the APEC region. Even the digital disparity will eventually be reduced

since the growth of the fixed network in developed economies is at a

saturation point whereas developing economies are catching up at a high

speed. Compared to Choi, Wong (2002) reports a gloomier picture of wider

disparities in IT diffusion between Asian and non-Asian economies. These

two contrasting views are enough to suggest that the existence and dynamic

change in the digital gap is a matter for empirical testing.

As an economy grows and the convenience of IT is acknowledged,

production, dissemination and utilization of information tend to increase. This fact

is well demonstrated by Table 1. All of those major economies in the Asia-Pacific

region have witnessed increases in the four IT indexes, ‘telephone lines’, ‘cellular

mobile telephone subscribers’, ‘computers in use’, and ‘Internet users’, during the

period of 1995 to 2000.

During the same period, the digital gap in the region, defined as disparity in

terms of digitization and measured by the coefficient of variance in each index,

was narrowed. The only exception is the case of the ‘digitization index’, which

was quoted from the computation by the Korea National Computerization Agency

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for 45 economies around the world. The digitization index itself was computed by

a statistical deviation so the coefficient of variation should not be interpreted as a

proper measure of annual change in digitization in each economy. Rather, it

should be used as a reference.

Based on the above statistical analyses, we can safely conclude that the digital

gap in the Asia-Pacific region has narrowed in recent years.

2-2. Determinants of Digitization

In order to identify the major contributing factors, or determinants of

digitization, a multiple regression has been performed. The regression is based on

the following equation:

Di = c + Σ j aj Xj , i = 1, 2, ···, m

j = 1, 2 , ···, n

where Di = the ith digitization (component) index,

Xj = the jth determinant (contributing factor),

c = constant, and

aj = coefficient.

For the test, based on the existing literature, five indexes for Di as the

dependent variable and eight variables for Xi as the explanatory variables are

considered. As summarized in Table 1 and Table 2, they are as follows:

D1 = telephone lines (per 100 inhabitants),

D2 = Cellular mobile telephone subscribers (per 100 inhabitants),

D3 = Internet users (per 1000 inhabitants),

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D5= the digitization index (computed by the Korea National Computerization

Agency),

X1 = GDP/Capita (for demand and resources),

X2 = mean school years (for HR),

X3 = the Human Development Index (of the World Bank),

X4 = the Network Policy Index (of the HIID)

X5 = Exports/GDP (for the openness of an economy)

X6 = FDI,

X7 = R&D/GDP for R&D efforts, and

X8 = (Scientists in R&D) for technological capacity.

Except for variables such as X7 and X8, all data are for the year 1999 due to

the lack of accurate data for the more recent period. The regression is a cross-

economy type for 45 economies in the world (see Appendix), the result of the

regression is summarized in Table 2 through Table 6. Based on the regression

result, we observe the following.

First, the index of telephone lines is significantly affected by GDP per capita

only.

Second, the index of cellular telephone subscribers is significantly affected by

the Network Policy Index and by FDI.

Third, the index of computers in use is significantly affected by all variables

except for FDI.

Fourth, the index of Internet users is significantly affected by school years and

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by the Network Policy Index.

Last, the overall digitization index is significantly affected by GDP per capita,

school years and the Network Policy Index.

Among all the explanatory variables, the Network Policy Index is identified as

most influential. Dasgupta et al. (2001) report a similar result but with different

regression models. In their work, all variables were rates of change rather than

levels. They found that the rates of change in the urban population and a policy

index were significant determinants for the rate of change in the ratio of Internet

subscribers to total main line connections. For mobile telephone growth, again

population and the policy index were significant, but, income per capita was also

significant in this case.

2-3. An Interactive Model of the Digital Gap

As a result of the interactions among these determinants, the relative

performance of digitization or the digital gap of economies is materialized. In

order to grasp these complex interactions, a model describing the domestic and

global relationship between the major agents and components of digitization is

introduced. Figure 1 shows six major actors and components, namely, people,

resources, government, domestic firms, foreign governments, foreign firms, and

the connecting mechanisms of the state, domestic markets, networks, international

organizations or institutions, the world market, and international networks such as

strategic alliances or MNC network.

The interactions involve various transactions and flows of knowledge and

information. The interactions may be pro-competitive or pro-cooperative

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depending on the purpose. In terms of information, the interactions shape the

digital performance of each economy and the resulting digital gap between

economies.

We should acknowledge that the mere existence of the digital gap or the

difference of digitization level among economies does not necessarily mean that

the gap or difference should be immediately eliminated. This is because the level

of digitization of an economy may reflect the level of economic development and

the necessity of digitization or the demand for modern IT services is determined

by each person’s socio-economic situation. Only to the extent that the

convergence of economic development is desirable, can we claim that the digital

gap should be narrowed. In what follows, we discuss the issue of the digital gap in

the APEC region on the basis of the assumption that the convergence of economic

development is a desirable thing. The main considerations in narrowing the digital

gap among economies with implications for APEC are discussed.

3. Relative Importance of Contributing Factors

3-1. People and Resources

In the knowledge and digital economy, people are the core. People produce,

disseminate and use knowledge and information. The income of people is an

important factor for all these activities. Further, the quality of people, manifested

in the human resources, affects the digitization level of an economy. This is the

reason for the emphasis on human resource development (HRD) as a policy for

enhancing digitization or narrowing the digital gap.

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Resources such as capital, labor, technology, natural resources are another set

of fundamentals of an economy in general and of the digital economy in particular.

The possession and composition of these resources determine the comparative

advantage of an economy and growth. The relative importance of people vs.

resources is hard to judge. However, people have labor power, which can utilize

natural resources from which other resources are produced. Further, information

and knowledge are human phenomena. Considering these facts, we may claim

that the quality of people is more important than resources per se.

3-2. The Market and Government

Narrowing the digital gap can be achieved by either competition or

cooperation among economic agents. In the past, the telecommunications sector

was used to being under heavy government control due to its technological

characteristic of economies of scale and to its quality of being a public good.

However, the general trend in liberalization in the world economy and the

digitization of economies pressed governments to deregulate the sector and to

encourage competition through the market.

Encouraging marketization has several implications and impacts on the

development of the IT sector and the digital gap. It has been observed that

performance in the sector, especially in terms of efficiency, tends to improve with

deregulation and increased competition. However, at the same time, the uneven

performance of the sector may result in widening the digital gap within an

economy as well as between different economies.

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There have been significant changes in government views and policies on the

telecommunications industry. In the past, regulation of the industry was the

dominant approach on the basis of the natural monopoly argument. However, The

rapidly changing nature of technology in the industry and the general trend in

liberalization or deregulation changed the government’s views and policies in the

direction of active private sector participation through an enhanced role of the

market mechanism.

A recent report prepared by the Australian APEC Study Center (2002)

emphasizes this aspect; namely, the importance of the market in bridging the

digital divide. The growing importance of the role of the market in the

development of IT is not denied. Rather, it is strongly supported. However, the

fact to be emphasized in this paper is that the role of government should also be

strengthened at the same time in order to develop the IT industry and narrow the

digital gaps. This is due to the following reasons:

First, the role of government shifts towards the creation of a favorable

business environment and provision of infrastructure including human resource

development. Since these factors crucially affect firms’ competitiveness, the role

of government should be strengthened.

Second, as in the case of the e-government, government itself is at the center

of the digital revolution. Government procurement creates important demand for

the IT business.

Third, the need for the government to play a role in managing conflict and

coordinating various activities and projects is greater in the digital economy due

to ever-increasing complexities.

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As in the case of the Super Highway Strategy of the U.S., most governments

with developed IT sectors initiated well-planned IT development strategies and

policies for digitization of their economies.

The importance of the role of government is well demonstrated by the

regression results in Table 2 through Table 6. Except for the case of ‘telephone

lines’, the Network Policy Index significantly affects all other dependent variables.

The Network Policy Index is the sum of the weights of components in Table 7.

The OECD (2000) identified three policy areas of particular importance to

reducing the digital divide within an economy: pro-competitive regulatory

initiatives to increase network competition (short-term), increasing access to

public institutions including schools (medium-term) and education and training

(long-term). Table 8 summarizes the policy packages adopted by OECD member

economies. It is interesting to notice that these developed economies are less

dependent on international cooperation for reducing their domestic digital divide.

Although OECD economies are less concerned with international cooperation

for their domestic digital divide, this is not necessarily the case for developing

economies. Developing economies are exposed not only to a domestic digital

divide but also to an international digital divide or digital gap, which makes their

situation and problem worse. Even worse, their problem is more structural and

combined with other kinds of gaps (Chung, 2001 b).

3-3. MNCs and International Organizations

Firms compete with each other, but they cooperate as well. Strategic alliances,

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standardization and networking are good examples of the latter behavior. In the

case of IT and digitization, the cooperation among firms tends to increase because

of the network externalities or the benefits of sharing resources, assets and

information, However, this kind of cooperation is merely another measure of

competition against a third party.

In this age of globalization, governments also compete. The international

competitiveness reports by IMD or WEFA prove this fact. However, the

international relationship among governments is one of more cooperation than

competition. Or, at least, their main role in the international context is to establish

a mutually acceptable environment for competition among firms. The WTO is a

good example of this. This case of inter-governmental cooperation draws our

attention to the potential contributions of APEC to narrowing the digital gap in

the Asia-Pacific region.

The role of MNCs and FDI in shaping the digital divide has been well

documented. For example, Clarke (2001) reports that FDI increases Internet

access for firms in the transition economies. Their effects on narrowing the digital

gap may be positive or negative, depending on the relative contributions to host

country and parent company.

The roles of MNCs and international organizations in the digital gap differ

from each other. The difference is analogous to the case of the market vs.

government. While MNCs are more concerned with competition, international

organizations are more concerned with cooperation. International organizations

such as the OECD, Word Bank, and UN have been working to narrow the digital

divide in various ways. Regional multilateral organizations including APEC also

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have been making efforts for the same purpose.

A recent initiative for dealing with the world digital divide is the proposal for

a Global Information Society, adopted at the Okinawa summit of the G-8 in 2000.

Although the original announcement reflected the liberalization-oriented views

and interests of developed economies, the final report, “Digital Opportunities for

All: Meeting the Challenge” in 2001 was more balanced to take into account the

situation of the developing economies.

4. TILF and ECOTECH in APEC

APEC aims at regional economic cooperation on the basis of ‘open

regionalism’. IT or digitization should be regarded as an important facilitator for

community building, if the ultimate goal of APEC or any sub-regional institution

is achieving an economic community like the EU. The importance of digitization

in the case of the EU has been pointed out by Holms (1990):

The provision of telecommunications infrastructure and services play

a crucial integrative role in the fabric of the (EU) Community system.

(Parenthesis added by the author)

Thus, it is natural to emphasize the importance of the efforts made by APEC

to narrow the digital gap through various initiatives and programs.

APEC has been working in collaboration with member economies to narrow

the digital gap in the Asia-Pacific region. From the earlier stage of its

development, the organization well understood the importance of IT, and has

introduced institutional innovation and initiated several important programs.

TILF and ECOTECH are seen as complementary, like the interaction between

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the market and government. The desirable complementary relationship of the two

basic activity columns in APEC has been well documented and need not be

repeated here. (See APEC Economic Committee (2001) and Ahn and Han (1998)

among others.) However, ECOTECH is more important for narrowing the digital

gap since TILF does not necessarily narrow the gap or it narrows the gap only

indirectly. In contrast, ECOTECH can directly narrow the gap. The importance of

ECOTECH for the promotion of the KBE in general and for the development of

IT in particular has been emphasized in various reports (e.g., APEC Economic

Committee, 2000) and articles (e.g., Hong, 2000).

Sidorenko and Findlay (2001) emphasize that the right policy environment to

deal with the digital divide should include strong economic and social

fundamentals, utilization of IT, an innovative environment, HRD, and a means of

fostering entrepreneurship. This view is in line with ECOTECH.

The active role of the TEL Working Group of APEC, together with other

related working groups such as the IST Working Group and the HRD Working

Group, is a good example of this (Chung, 2001 a; Chung, 2000). The APEC

Economic Committee (1998) published a comprehensive report on APEC’s status

and strategy for digitization. Another important report of the APEC EC (2001) is

on the new economy, which includes a discussion on the issue of the digital divide.

Existing efforts and initiatives of ECOTECH are highly evaluated for the

narrowing of the digital gap. Among others, the programs of the TEL Working

Group and e-APEC are of great importance. It is also recognized that the three

APEC programs for the promotion of the KBE, namely, the igniting policy, the

KBE indicators, and the APEC Knowledge Clearing House are also important

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initiatives for narrowing the digital gap.

The strategy of ‘e-APEC’ inaugurated at the Shanghai Leaders’ Meeting in

2001 is an important example of an earmarking achievement and progress of

APEC towards its objectives. (For the details, see APEC, 2001.)

5. Concluding Remarks

We have observed that the digital gap in the APEC region has recently been

narrowing. We also noticed that among the factors contributing to narrowing the

gap, the IT-related policy package is the most significant and that there is much

for APEC to do as a regional multilateral organization for economic cooperation

in order to further narrow the digital gap in the region.

The efforts of APEC so far to enhance digitization in member economies are

highly evaluated. Among various initiatives and programs in line with ECOTECH,

the activities of the TEL Working Group and the initiative of e-APEC deserve

positive acknowledgement.3

Developed economies tend to emphasize liberalization and the role of the

market and competition. They may be more concerned with their own domestic

digital divides than the international one. To a certain extent competition is

helpful in solving the digital gap. But, excessive competition does more harm than

good (The Group of Lisbon, 1995). Since the situation of the digital gap or the

digital divide in developed economies may differ from developing economies, it

is strategically very important for APEC to emphasize ECOTECH.

3 A more thorough assessment of APEC’s IT development efforts are to be undertaken in the final draft.

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All of those factors contributing to digitization should be considered for

narrowing the digital divide and a policy package that includes all the possible

measures affecting those factors should be developed. However, under the

constraints of resources and relative effectiveness, prioritization is inevitable.

Each individual government and people in the APEC region should work

towards narrowing the digital gap within and across economies. However, the

discussion on the relative importance of contributing factors in this paper has

emphasized the importance of the role of APEC, especially, ECOTECH in

narrowing the digital gap in the Asia-Pacific region.

The future course of strategy and action for APEC is recommended as

follows:

First, implementation of the existing initiatives and programs of APEC should

be strengthened and accelerated.

Second, bilateral and multilateral initiatives announced by leading member

economies in IT and by sub-regional institutions such as ASEAN and NAFTA

should be materialized. In particular, an effective and accelerated implementation

of the e-APEC initiative is strongly recommended.

Third, a new grand program similar to the EU framework should be seriously

considered by APEC in order to facilitate technological capability building in

general and IT development in particular.

APEC and member governments should also encourage firms to strengthen

international business networks by providing a proper environment and incentives,

since strengthening international networking is both a cause and effect of

narrowing the digital gap.

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References

Australian APEC Study Center. 2001. Bridging the Digital Divide: Refocusing on

a Market-Based Approach: An APEC Perspective.

Ahn, H. D. and H. Y, Han. 1998. “APEC’s Ecotech: Linking ODA and TILF.”

KIEP Working Paper 98-12. Seoul: Korea Institute for International

Economic Policy (KIEP).

APEC. October 2001. e-APEC Strategy. People's Posts & Telecommunications

Publishing House in APEC.

APEC Economic Committee. 1998. Toward an Information Society:

Developments In APEC. APEC.

APEC Economic Committee. 2000. Towards Knowledge-based Economies in

APEC. APEC.

APEC Economic Committee. 2001. The New Economy and APEC. APEC.

Center for International Development. 2001. Readiness for the Networked

World. Harvard University.

Choi, B. I. 2000. “Digital Divide in the APEC: Myth, Realities and A way

Forward.” APEC Study Series 00-02. Seoul: KIEP.

Chung, I. U. et al. 2000. “A Study on Activating Manpower Exchange for Solving

the Digital Divide in APEC.” A Policy Study Series 00-15. Gwachon:

Korea Information Development Institute (KISDI) (in Korean).

Chung, I. U. et al. 2001a. “A Study on IT Policy for Digital Divide.” A Policy

Study Series 01-23. Gwachon: KISDI (in Korean).

Chung, I. U. et al. 2001b. “A Study on Telecommunication Policy in the APEC

Region for IT Cooperation.” A Study Series 01-38. Gwachon: KISDI (in

Korean).

Dasgupta, S et al. 2001. Policy Reform, Economic Growth, and the Digital

Divide: An Econometric Analysis. World Bank.

Holms, P. 1990. “Telecommunications in the great game of integration,” in

Locksley, G. The Single European Market and the Information and

Communication Technologies. London: Belhaven.

Hong, Y. S. 2000. “Measures for Promoting Knowledge-based Economies in the

APEC Region.” APEC Study Series 00-05. Seoul: KIEP.

Group of Lisbon. 1995. Limits to Competition. London: the MIT Press.

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Kirkman, G. S. et al. 2002. The Networked Readiness Index: Measuring the

Preparedness of Nations for the Networked World. Center for

International Development at Harvard University.

OECD. 2000. “The Digital Divide: Diffusion and Use of ICTs.” Paper presented

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Sidorenko, A. and C. Findlay. Nov 2001. “The Digital Divide in East Asia.”

Asian-Pacific Economic Literature Vol. 15, Issue 2 : 18. Blackwell.

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Readiness: What can Developing Countries Learn from OECD

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Digital Drive?” Information Economics and Policy 1. Singapore:

National University of Singapore.

.

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Table 1. IT Trends and Digitization in the Asia Pacific Region

Telephone Lines (per 100inhabitants)

Cellular Mobile TelephoneSubscribers (per 100

inhabitants)

Computer in Use (per 100inhabitants)

Region Economy

1995 2000Rate of

Change (%) 1995 2000Rate of


Change (%)

Japan 50 58 16.0 9 53 488.9 12 32 166.7

Korea 52 58 11.5 4 57 1325.0 11 19 72.7

China 3 9 200.0 0 7 - 0 2 -

Hong Kong 53 58 9.4 13 64 392.3 15 35 133.3

Northeast Asia

Taiwan 43 57 32.6 4 80 1900.0 10 22 120.0

Singapore 41 43 4.9 9 68 655.6 20 48 140.0

Malaysia 17 21 23.5 5 15 200.0 4 10 150.0

Thailand 6 9 50.0 2 4 100.0 1 2 100.0

Philippine 2 4 100.0 1 8 700.0 1 2 100.0

Southeast Asia

Indonesia 2 3 50.0 0 2 - 1 1 0.0

Australia 49 52 6.1 12 45 275.0 28 46 64.3Oceania

N. Z. 47 50 6.4 10 40 300.0 22 36 63.6

USA 61 69 13.1 13 40 207.7 33 59 78.8

Canada 61 68 11.5 9 28 211.1 22 39 77.3North America

Mexico 9 12 33.3 1 14 1300.0 3 5 66.7

Brazil 9 17 88.9 1 14 1300.0 2 4 100.0

Argentina 16 22 37.5 1 18 1700.0 2 5 150.0

Chile 13 22 69.2 1 22 2100.0 3 9 200.0

Colombia 10 17 70.0 1 5 400.0 2 4 100.0

South America

Peru 5 6 20.0 0 6 - 1 4 300.0

Average 27.5 32.8 42.7 4.8 29.5 797.4 9.7 19.2 114.9

Coefficient of Variance 81.8 72.4 - 99.2 83.0 - 106.8 98.0 -

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(Continued)

Internet Users (per 1000inhabitants) Digitization Index

Region Economy

1995 2000Rate of


Change (%)

Japan 16 304 1800.0 68 77 13.2

Korea 8 403 4937.5 53 75 41.5

China 0 18 - 16 12 -25.0

Hong Kong 32 336 950.0 73 82 12.3

Northeast Asia

Taiwan 12 281 2241.7 51 80 56.9

Singapore 29 299 931.0 71 85 19.7

Malaysia 2 150 7400.0 25 26 4.0

Thailand 1 20 1900.0 18 11 -38.9

Philippine 0 26 - 14 11 -21.4

Southeast Asia

Indonesia 0 7 - 13 9 -30.8

Australia 28 350 1150.0 90 86 -4.4Oceania

N. Z. 50 217 334.0 86 75 -12.8

USA 76 347 356.6 99 98 -1.0

Canada 42 413 883.3 91 86 -5.5North America

Mexico 1 27 2600.0 20 15 -25.0

Brazil 1 29 2800.0 19 16 -15.8

Argentina 1 24 2300.0 26 19 -26.9

Chile 4 116 2800.0 24 26 8.3

Colombia 2 21 950.0 19 14 -26.3

South America

Peru 0 3 - 15 12 -20.0

Average 15.3 169.6 2145.9 44.6 45.8 -6.1

Coefficient of Variance 138.9 91.9 - 70.0 76.2 -

Note: 1. Symbol (-) means that calculation is meaningless.2. All 2000 statistics are preliminary

Source: Korea National Computerization Agency, National InformationWhite Paper 2001. (Basic statistics are from ITU.)

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Table 2. Telephone Lines (per 100 inhabitants)

Statistics of Regression

Multiple R 0.952361378R Square 0.906992195Adjusted R Square 0.886323794

Standard Error 7.334978873Sample Size 45

Variance Analysis

　Degree ofFreedom Sum of Square

Mean ofSquare F Significant F

Regression 8 18887.93106 2360.991382 43.88303612 2.73564E-16

Residual 36 1936.868942 53.80191506

Total 44 20824.8　　　

　

　Coefficient Standard Error t P

Constant -62.87508835 25.98908874 -2.419287917 0.020730387

X 1 (GDP/Capita) 0.001083931 0.00047289 2.292140566 0.027850342

X 2 (School Years) 1.318128587 0.93078676 1.416144539 0.165327929

X 3 (HDI) 59.27978696 35.83000035 1.654473525 0.10672569

X 4 (Policy Index) 3.840383077 3.45060466 1.112959454 0.273102448

X 5 (Openness) 0.013237569 0.03587074 0.3690353 0.714263088

X 6 (FDI) -4.09119E-07 7.92844E-06 -0.051601442 0.959131537

X 7 (R&D/GDP) -0.27943161 0.64121229 -0.435786423 0.665593726

X 8 (Scientists in R&D) 0.001816109 0.001940503 0.935896346 0.355562647

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Table 3. Cellular Mobile Telephone Subscribers (per 100 inhabitants)


Multiple R 0.89372271

R Square 0.798740282

Adjusted R Square 0.754015901

Standard Error 9.890797555

Sample Size 45

Variance Analysis

　Degree ofFreedom

Sum ofSquare


Regression 8 13976.99645 1747.124557 17.85916881 2.07042E-10

Residual 36 3521.803546 97.82787628

Total 44 17498.8　　　

　


Constant -72.77783907 35.04479288 -2.076709066 0.045025347

X 1 (GDP/Capita) 0.001031197 0.000637665 1.617144014 0.114577545

X 2 (School Years) -1.992975438 1.255112465 -1.587885942 0.121057578

X 3 (HDI) 66.9543033 48.31469674 1.385795789 0.174334681

X 4 (Policy Index) 9.508762142 4.652942119 2.043602069 0.048363283

X 5 (Openness) -0.008280631 0.048369632 -0.171194826 0.865029217

X 6 (FDI) -2.19856E-05 1.0691E-05 -2.056446903 0.047043338

X 7 (R&D/GDP) 0.486723526 0.86463793 0.562921784 0.576977431X 8 (Scientists in R&D) -0.00092707 0.002616656 -0.354295822 0.725184122

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Table 4. Computers in Use (per 100 inhabitants)



R Square 0.934388523

Adjusted R Square 0.919808195

Standard Error 4.634859936

Sample Size 45

Variance Analysis

　Degree ofFreedom

Sum ofSquare


Regression 8 11013.45064 1376.68133 64.08556151 5.57048E-19

Residual 36 773.3493586 21.48192663

Total 44 11786.8　　　

　


Constant -3.809317148 16.42210404 -0.231962795 0.817880476

X 1 (GDP/Capita) 0.001074412 0.000298812 3.595609202 0.000962792

X 2 (School Years) 1.452078568 0.588149787 2.468892447 0.018433365

X 3 (HDI) -61.76512638 22.64042419 -2.72809051 0.009787067

X 4 (Policy Index) 7.676625551 2.180383826 3.520767977 0.001187991

X 5 (Openness) 0.048530601 0.022666167 2.141103104 0.039108381

X 6 (FDI) 2.94312E-06 5.00986E-06 0.587466215 0.560557582

X 7 (R&D/GDP) -0.750293657 0.405172149 -1.851789812 0.072271468X 8 (Scientists in R&D) 0.003403187 0.001226174 2.775452713 0.008688649

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Table 5. Internet Users (per 1000 inhabitants)



R Square 0.811418061Adjusted R Square 0.769510964


Variance Analysis

　Degree ofFreedom

Sum ofSquare


Regression 8 593445.1324 74180.64155 19.36230636 6.70811E-11

Residual 36 137922.7787 3831.188297

Total 44 731367.9111　　　

　


Constant -232.2850019 219.3102518 -1.059161621 0.296581275

X 1 (GDP/Capita) 0.004690697 0.00399051 1.175463143 0.247525234

X 2 (School Years) 17.96269035 7.854491583 2.28693228 0.028184104

X 3 (HDI) -472.7981108 302.3532866 -1.563727374 0.126630687

X 4 (Policy Index) 104.5762497 29.11810354 3.591451263 0.000974141

X 5 (Openness) 0.15796306 0.302697072 0.52185196 0.604969646

X 6 (FDI) -7.45495E-05 6.69046E-05 -1.114266869 0.272548809

X 7 (R&D/GDP) -3.960752137 5.410902633 -0.731994716 0.468910623


23

Table 6. Digitization Index



R Square 0.960902405Adjusted R Square 0.95221405


Variance Analysis

　Degree ofFreedom

Sum ofSquare


Regression 8 42850.39642 5356.299553 110.5965927 5.41231E-23

Residual 36 1743.514689 48.43096359

Total 44 44593.91111　　　

　


Constant -61.4155159 24.65776673 -2.490716884 0.017498277

X 1 (GDP/Capita) 0.001885803 0.000448666 4.203133975 0.00016595

X 2 (School Years) 1.818277479 0.8831061 2.05895699 0.046789119

X 3 (HDI) -14.37495451 33.99456592 -0.422860364 0.674912463

X 4 (Policy Index) 14.55683826 3.273843329 4.446406502 8.04027E-05

X 5 (Openness) 0.023231247 0.034033219 0.682605062 0.499225641

X 6 (FDI) -5.05621E-06 7.5223E-06 -0.672162622 0.505771507

X 7 (R&D/GDP) -0.524908835 0.608365427 -0.86281832 0.393949143


24

Table 7. Computation of the Network Policy Index

Factors Remarkets

ICT policymicro-index

1.Internet access cost 2.Perceived effect of telecommunications competition in quality and price 3.Perceived effects of ISP competition on quality and price 4.Legal framework supporting IT businesses 5.ICTs as overall priority for the Government

Hard dataSurvey data

Survey data

Survey dataSurvey data

Business andeconomicenvironmentmicro-index

1.Income per capita (PPP) 2.Rule of Law 3.Government Effectiveness 4.Regulatory Burden 5.Number of days to start a new firm 6.Women`s participation in the economy 7.Minority groups` participation in the economy 8.Country`s relative position in technology 9.New government`s respect for previous government`s commitments10. Trust in public postal system

Hard dataSurvey dataSurvey dataSurvey dataSurvey dataSurvey dataSurvey dataSurvey dataSurvey data

Survey data

Note : All factors are equally weighted.Source: International Center for Development at Harvard University. Global

Information Technology Report 2002.

25

Table. 8. Policies and Programs to Reduce the Digital Divide (OECD)

No. of EconomiesGeneral policies Broad policies Infrastructure development Regulatory initiatives to enhance Network competition

161110

Diffusion to individuals and households Access in other public institutions Access in schools IT for the elderly/disabled Access in rural/low income areas Programs to lower costs of IT Demonstration and awareness Programs to increase demand for IT Diffusion of ICT equipment

1211868334

Diffusion to businesses Support and training for SMEs Assistance to regions and rural areas Diffusion of information Encourage high-tech start-ups

11882

Government projects Government services on-line Governments as model users of ICT Foster ICT applications

1192

Education and training Training in schools Vocational training Teacher training Lifelong leaning Distance leaning IT Certification

13128751

International cooperation Multilateral cooperation (EC,UN) Bilateral programs

105

Source: OECD. DSTI/ICCP/IE (200)9. p.35. Adapted.

26

Figure 1. Interactive Model for the Digital Gap

Note: represents interactive relations including the production, dissemination,

and utilization of information.

Source: The author

GovernmentPeople Foreign Government

Foreign FirmFirmResources

Cooperation

Competition

GovernmentPeople Foreign Government

State

Domestic Market

Network

Foreign FirmFirmResources

Cooperation

Competition

Intern. Organ.

World Market

Intern. Network

27

Appendix: Major IT Indicators of 45 Economies in the World

TelephoneLines

(per 100inhabitants)

Cellular MobileTelephone

Subscribers (per100 inhabitants)

Computer inUse (per 100inhabitants)

Internet Users(per 1000

inhabitants)

DigitizationIndexRegion Economy

1999 1999 1999 1999 1999

China 9 3 1 7 13

Hong Kong 58 64 30 362 85

Japan 56 45 29 214 80

NortheastAsia

Korea 58 50 18 232 70

India 3 0 0 3 8

Indonesia 3 1 1 4 8

Malaysia 20 14 7 69 19

Philippine 4 4 2 7 9

Singapore 48 42 44 244 79

SoutheastAsia

Thailand 9 4 5 13 12

Australia 52 34 47 317 87Oceania

N. Z. 50 37 33 184 75

Canada 65 23 36 361 91

Mexico 11 8 4 19 16North

AmericaUSA 67 32 52 272 99

Argentina 20 12 5 25 25

Brazil 15 9 4 21 17

Chile 21 15 7 47 23

Colombia 16 8 3 16 16

Peru 7 4 4 16 11

SouthAmerica

Venezuela 11 14 4 22 17

Austria 48 51 26 225 74

Belgium 50 31 32 138 74

Bulgaria 35 4 3 28 22

Czech 37 19 11 68 37

Denmark 68 49 41 282 90

Finland 55 65 36 415 94

France 58 37 22 92 61

Germany 59 29 30 175 70

Greece 53 37 6 71 44

Hungary 37 16 7 60 35

Ireland 48 45 31 183 72

Italy 46 53 19 122 56

Netherlands 61 44 36 189 87

Norway 71 61 45 447 97

Poland 26 10 6 54 25

Portugal 42 47 9 70 52

Romania 17 6 3 27 18

Europe

Russia 21 1 4 18 19

28

Slovakia 31 17 11 111 35

Spain 41 31 12 116 48

Sweden 66 58 45 414 95

Switzerland 70 41 46 200 88

U. K. 57 46 30 210 76Africa South Africa 13 12 5 42 14

Average 34.3 24.7 17.0 124.2 44.9

Coefficient of Variation 63.5 80.9 96.1 103.8 71.0Source: Korea National Computerization Agency, National Information White Paper 2001.

(Basic statistics are from ITU.)

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