The economic impact of ICT in Europe

The economic impact of ICT in

EuropeLucilla Sioli

Head of UnitDG Information Society and Media

European Commission

Economic impact of ICT: 3 channels

• Investment in ICT

• Efficiency gains in ICT-producing sector

• Efficiency gains in ICT-using sectors

Economic impact of ICT (1995-2000): ICT drives half of productivity gains in the EU (and 75% in the US)

Aggregate Labour Productivity Growthand its sources (1995-2000)

36%44%

14%

9%

25%

17%

0

0.5

1

1.5

2

2.5

EU-15 US

An

nu

al g

row

th, i

n p

er c

ent

Efficiency gains inthe rest of theeconomyNon-ICT relatedinvestment

Efficiency gains inICT producing sector

Investment in ICTs30%25%

Economic impact of ICT (2000-2004): ICT drive half of productivity gains in the EU (and

efficiency gains in the US)Aggregate Labour Productivity Growth

and its sources (2000-2004)

21%30%20%

48%18%

50%

0

0.5

1

1.5

2

2.5

3

EU-15 US

Ann

ual g

row

th, i

n pe

r ce

nt

Efficiency gains in therest of the economy

Non-ICT relatedinvestment

Efficiency gains in ICTproducing sector

Investment in ICTs

11%

2%

ICT

2%

ICTquanti-fied effect

The ICT sector alone drives 20% of productivity growth

Size in GDP Contribution to labour productivity growth 2000-

2005

5% 20%

ICT sector Biggest sector in terms of

R&DICT

26,4%

Pharmaceutical and biotechnology

13,0%

Machinery and equipment

7,9%

Automotive15,3%

Aerospace7,1%

Other sectors30,3%

Share of ICT in EU total Business Expenditure R&D (2005)

ICT R&D spending in EU and US

3

ICT spending on Research & Development

R&D spending in billions €

0

10

20

30

40

50

60

70

80

EU US

Public

Private

ICT Segments

IT Equipment13%

IT Services24%

Software9%

Telecom Services

45%

Telecom Equipment

9%

EU Recovery Package on ICT: (1)Public Private Partnerships

• Factories of the Future

• Energy Efficient Buildings

• Green Cars

R&D in national recovery packages

• The size of R&D stimulus measures is relatively small

• The magnitude of the stimulus varies across countries

• The crisis may have increased gaps between countries

(2) Broadband in EU recovery package

• 1.02 bn € earmarked for broadband in Rural Development Programme

• Objective: BB for all by 2013

• Only 1/3rd (35%) was used for broadband

Broadband coverage and take up

2005 2006 2007 2008 2009

87% 89% 91%93%92%

23%30%

42%

56%49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BB penetration (Households) BB Coverage

Broadband penetration rate in EU27

24%23%

21%

20%

18%16%

14%

12%

10%8%

6%5%

16%16%

15%14%

13%11%

10%9%

8%7%

5%4%

0%

5%

10%

15%

20%

25%

Jan-04 Jul 04 Jan-05 Jul 05 Jan-06 Jul 06 Jan-07 Jul 07 Jan-08 Jul 08 Jan-09 Jul 09

Broadband DSL

Lagging behind on FTTH deployment

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

14.000.000

16.000.000

18.000.000

2005 2006 2007 2008 2009

Japan South Korea USA EU

1/3rd Europeans never used the internet

• Besides income, age and education play a role

eCommerce

2

No EU single market for eCommerce

Estimated value of online transactions: around 150 billion € in 2009

8%

37%

0% 10% 20% 30% 40%

% of all EU Individuals ages 16-74

OnlinePurchasing

Cross-borderOnline

Purchasing

The eCommerce potential

Allindividuals

Allindividuals

16-24

Willingness to pay for content

% % of individualsof individuals

10 %

NOT having paid for online audiovisual content

in last 3 months

30 %

40 %

50 %

70 %

60 %

20 %

80 %

Having paid for online audiovisual content

Source: -

16-24

What can we do to support a sustainable recovery/what should

our ‘Digital Agenda’ be?Support R&D

• Provide for adequate competition and regulatory conditions in telecoms markets

• facilitate the spread of high speed broadband

• Encourage the uptake of ICT– addressing issues related to inclusion, privacy and security

• Invest in education and ICT skills

• Encourage innovation in content markets – addressing issues of IPR

• Make the most of ICT for the environment and for government and public service provision