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Setting the sceneThe ICT landscape in BRIC countries

Prepared by Jean Paul SimonFor the IPTS workshop, Johannesburg, October 5

/DisclaimerThe views expressed are those of the presenter and may not in any circumstances be regarded as stating an official position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this presentation.

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IPTSPart of DG JRC of the EC

Mission“to provide customer-driven support to the EU policy-making process by developing science-based responses to policy challenges that have both a socio-economic as well as a scientific/technological dimension”

European Commission – Joint Research Centre Institute for Prospective Technological Studies (IPTS)

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Fast growing economiesThe size of the ICT sector: a global viewThe size of the ICT sector: BRIC countriesToward a new global equilibrium?

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Fast growing economies

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Brazil is the world's seventh largest economy by nominal GDP (US$ 2.090 trillion) and the ninth largest by purchasing power parity (US$ 2.172 trillion). The Indian economy is the world's ninth-largest economy by nominal GDP and fourth largest economy by purchasing power parity (PPP)On a purchasing power parity (PPP) basis and by nominal GDP, China is the second largest economy in the world after the US, representing about 41.56% of total EU27 (World Bank, 2009). Russia has the world's 11th largest economy by nominal GDP or the 6th largest by purchasing power paritySouth Africa is ranked 25th in the world in terms of GDP (PPP) as of 2008

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Engines of the global growth

An intensive process of redistribution of production across the world is taking place. The BRIC (Brazil, Russia, India, China,) countries are proving to be the major engines of the global growth. They were far less impacted by the financial and economic crisis than developed economies or recovered more quickly The growth rates for these emerging economies have been far above average during the last decade, and have exceeded those of the more advanced countries (EITO 2011). Consequently these four countries are driving most of the world’s GDP growth.

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China and India are among the fastest growing economies in the world.China’s GDP has achieved more rapid growth than most other countries.

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The size of the ICT sector: a global view

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Economic weight of the ICT sub-sectors, % of sub-sector’s value added in GDP, 2008, or latest data available

1.1%

0.5%

0.3%

1.0%

0.6%

2.7%

1.9%

3.9%

2.2%

1.7%

1.9%

2.7%

1.9%

2.0%

1.9%

2.3%

1.0%

2.7%

1.8%

2.4%

0.6%

2.0%

0.8%

1.3%

0.02%

0.03%

0.10%

0.14%

0.12%

0.11%

0.4%

5.7%

0.14%

0.02%

0.5%

0.6%

0.3%

0.5%

0.3%

0.14%

0% 2% 4% 6% 8% 10% 12%

Australia_2007

India_2006

EU_2008

US_2008

China_2006

Japan_2007

Korea_2007

Taiwan_2007

IT Equipment

Components, Telecom and MultimediaEquipmentMeasurement Instruments

Post and Telecom Services

Computer Services and Software

Source: JRC-IPTS based on data from EUROSTAT, OECD, EU KLEMS, IPTS (2010,a,b) and IPTS

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R&D investments in the ICT sub-sectors by EU, US, Japanese, Asian and RoW ICT Scoreboard companies, in

billions of € (2008)

4.8

11.8

1.7

4.63.7

9.4

19.7

11.5

0.3 0.7

23.3

8.810.1

0.1

9.1

2.3 2.1

9.1

0.5 0.5 0.60.9 1.3 1.8

0.10.9

0.30.31.3

0.10.0

5.0

10.0

15.0

20.0

25.0

IT Equipment IT Components TelecomEquipment

MultimediaEquipment

Telecom Services ComputerServices  andSoftware

EU US Japan Asia RoW

Note: Bold numbers above bars represent total sectoral R&D investmentsSource: IPTS Predict Report 2011.

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Location of ICT R&D centres by region of ownership, 2009, in %

28%

11%

14%

21%

51%

35%

12%

14%

50%

18%

1%

3%

56%

2%

3%

14%

69%

15%

16%

18%

21%

5%

1%

11%

10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

RoW

Asia

Japan

US

EU

R&D cen

tre ow

nership

R&D centre locationEU US Japan Asia RoW

743

1078

678

273

85

Source: JRC-IPTS ICT R&D Internationalisation Database, 2010.

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Global perspective on ICT patenting

ICT priority patent applications by inventors from the EU, US, Brazil, China, Korea, India, Russia,

South Africa and TaiwanSource: IPTS, 2011

Brasil

Russia

South Africa

EU

US

China

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

ICT

pate

nt a

pplic

atio

ns

Brasil Russia South Africa EU US China Korea India

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Contribution of world regions to ICT inventive output, 1990-2007, %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Years

Reg

iona

l con

tribu

tion

to IC

T pr

iorit

ypa

tent

app

licat

ions

EU ICT appl. US ICT appl. JP ICT appl. Asia ICT appl. RoW ICT appl.

Source: JRC-IPTS calculations based on PATSTAT data (April 2010 release). Priority patent applications to the EPO, the 27 Member States’ National Patent Offices,

the USPTO, the JPO, and 29 further Patent Offices. Inventor criterion.

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Increase of ICT inventive activity: the EU, the US, China and Korea

74%-3%

161%

20%

259%

1059%

825%

64%

-200%

0%

200%

400%

600%

800%

1000%

1200%

1990-99 2000-07

Countries

Ave

rage

incr

ease

of I

CT

inve

ntiv

eac

tivity

EU US CN KR

Source: JRC-IPTS calculations based on PATSTAT data (April 2010 release).

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Regional distribution of collaboration (1990-2007) : co-invention

a: Co‐invention with the EU

0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006

US Japan Asia RoW

a: Co‐invention with the US

0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006

EU Japan Asia RoW

Source: JRC-IPTS calculations based on PATSTAT data.

a: Co‐invention with Asia

0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006

EU US Japan RoW

a: Co‐invention with Asia

0%

20%

40%

60%

80%

100%

1990 1992 1994 1996 1998 2000 2002 2004 2006

EU US Japan RoW

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The size of the ICT sector: BRIC countries

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Share of BRIC countries in the 2009 global ICT market

Source: EITO in collaboration with IDC, PAC and Idate, published in EITO (2011).

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Major players (1)

In 2010, BRIC countries accounted for 13% of global demand, with spending of about € 328 billion in ICT (EITO, 2011). Therefore, they are becoming major players, not just as plain ICT users/ importers but also as producers of ICT goods and services.The ICT sector is certainly representative of the massive changes in the Brazilian, Indian and Chinese industry and economy. China Mobile is the world largest mobile operatorIndia is the second-largest (after China) and one of the fastest growing mobile markets in the world. China has become the world’s largest producer of ICT products

exports of ICT increased fourfold between 2004 and 2008, though many of these are re-exports from other Asian countries).

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Major players (2)

BRIC countries are also becoming major players in the entertainment and media markets.According to PricewaterhouseCoopers (Global Entertainment and media outlook, 2011), Brazil, India and China will be the fastest growing leaders:

with a projected compound annual increase of 11.4%, 13% and 11.6% respectively between 2011 and 2015 (versus US: 4.7%, EMEA: 5.2%).

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Innovators

In 2009, 46% of Internet users (1.8 billion global Internet users) concentrate in five countries, the top Internet markets: China, USA, Brazil, India, Russia, four are BRIC countries.Several Chinese electronics firms have become global players, including Huawei Technologies, Lenovo, and ZTE.India produced an interesting case study of innovation with the budget telecom model or "bottom of the pyramid" (BOP) model.

based on pre-paid and fitted to meet the demand of the poorest segment of customers. The lowest mobile rates in the world.

The output of structural reforms of the markets

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Some remaining weaknesses

Still, GDP per capita lags at a very low level.Despite the growth the overall domestic ICT market size is small.Truly global R&D in most countries companies is still a long way away.

Besides, in spite of the growth of R&D expenditure, the level remains modest

Strong presence of foreign companies in the ICT (FDI).

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Toward a new global equilibrium?

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Toward a new global equilibrium?

Is the growth model sustainable?Resiliency to crisis: Russia and South Africa badly hit, Brazil and China more resilientLimits of the innovation model? Need to change pace for R&D?Shortage of skilled workers? Need for improvement of the quality and quantity of science?

Role of the BRIC countries in global production's networks? As a part of a global value chain?

Relationship with China: what kind of division of labour?China as the world’s assembler not the world’s factory.

Potential evolution with increasing disintegration of innovation capabilitiesMoving up the value chain?.Is low cost different from low tech?

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Drastic shifts in trade?

The emerging trade relationships between Asia and Brazil displaced the former relationships with other regions like the EU and the USA.

Between 1998 and 2007, the volume of imports from China toward Brazil grew at an "exorbitant" four digit rate (over 2000%) (Kubota and Nogueira Milani, 2009) with an average annual increase of 46.60%.

Russia: « Northern locomotive between West and East » (S.Schandera)

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Thanks

Jean-Paul.Simon@ec.europa.euJRC-IPTS-idea-TEAM@ec.europa.eu

Data from the set of Predict reports: Performance of R&D, Internationalisationof ICT R&D, ICT in BRIC countries 1, The 2011 Report on R&D in ICT in the European Union.

IPTS publications page: http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=3759All pictures: Jean Paul Simon