The Information Technology Revolution and Economic …€¦ · electronic publishing, broadcasting, management information systems, and so on). agencies, businesses, communities,

The Information Technology Revolution and Economic Development

The Information Technology Revolution andEconomic DevelopmentNagy K. Hanna

World Bank Discussion Papers

Copyright © 1991The International Bank for Reconstructionand Development/The World Bank1818 H Street, N.W. Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing March 1991Second printing December 1995

Discussion Papers present results of country analysis or research that are circulated to encourage discussion andcomment within the development community. To present these results with the least possible delay, the typescriptof this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and theWorld Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents thatare not readily available.

The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) andshould not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of itsBoard of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy ofthe data included in this publication and accepts no responsibility whatsoever for any consequence of their use.The boundaries, colors, denominations, and other information shown on any map in this volume do not imply onthe part of the World Bank Group any judgment on the legal status of any territory or the endorsement oracceptance of such boundaries.

The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sentto the Office of the Publisher at the address shown in the copyright notice above. The World Bank encouragesdissemination of its work and will normally give permission promptly and, when the reproduction is fornoncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted throughthe Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A.

The complete backlist of publications from the World Bank is shown in the annual Index of Publications , whichcontains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countriesand regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, TheWorld Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66,


The Information Technology Revolution and Economic Development 1

avenue d'Iéna, 75116 Paris, France.

ISSN: 0259−210X

Nagy K. Hanna is chief staff officer in the Policy and Strategy Staff of the World Bank's Information,Technology, and Facilities Department.

Library of Congress Cataloging−in−Publication Data

Hanna, Nagy.The information technology revolution and economic development /Nagy K. Hanna.p. cm.—(World Bank discussion papers; 120)Includes bibliographical references.ISBN 0−8213−1784−91. Information technology—Economic aspects—Developing countries2. Information services industry—Developing countries. 3. Economicdevelopment. I. International Bank for Reconstruction andDevelopment. II. Title. III. Series.HC59.72.155H36 1995025.06´3389—dc20 95−11622 CIP

Abstract

Information ranks with other major development resources: human, natural, and financial resources. Developmentassistance agencies must thus understand the role of information and information technologies (informatics) in thedeveloping countries to respond to a rapidly evolving global environment. Recent experience applyinginformation technology in developing and industrial countries that appear to offer promising solutions toinformation problems is the basis for that understanding.

The ongoing information explosion in the industrialized economies contrasts sharply with the information povertyof the developing countries. This poverty takes many forms: planning without facts, poor information support formacroeconomic and sectoral policy formulation and implementation, inadequate financial control andcumbersome reporting and monitoring systems, underdeveloped decision support systems at all levels ofmanagement, limited access to information for the rural populations, isolation of researchers and professionalsfrom international research findings, lack of information on natural resources, poor access to timely informationon national and international markets, and so on.

Information technology is the driving force for a new techno−economic paradigm (radical technological change)with far−reaching effects for all types of industries and services and for the competitive position of developingcountries. It is transforming the industrial and financial sectors and becoming indispensable to economiccompetition in an increasingly integrated and information−intensive global economy. Even the least developedcountries cannot be insulated from its pervasive impact.

Informatics applications offer new ways to make the most of the managerial and institutional resources ofdeveloping countries, in both the public and private sectors, by creating new capabilities for learning andadaptation within and among organizations. Informatics is a powerful tool to simultaneously integrate anddecentralize.


Abstract 2

The most widespread benefits for developing countries are likely to come from applying informatics to prioritysectors. Information technology can improve the planning, management, and productivity of all types of economicdevelopment activities: agricultural and rural development, poverty alleviation, environmental management,infrastructural development, and population and human resources development. It can improve policy analysis,macroeconomic management, debt management, enterprise management, financial intermediation, financialaccountability, and popular participation.

Governments are recognizing their roles as information providers and users, facilitators of information technologydiffusion, and providers of information and communication infrastructures, as well as their role in setting policiesfor informatics. In accepting a stronger role in each of these areas, they will have to pay special attention to: (1)regulatory policies governing the supply and use of information technology and information services; (2)priorities for information resources development and the infrastructural requirements to support them and todiffuse the best practices; (3) educational and employment policies to prepare human resources to exploitinformation technology; (4) proactive public policies to provide equitable and easy access to nationalcommunication and information resources and to develop information markets; (5) public−sector procurementand standardization of information technology; and (6) international informatics policy issues, such as standards,intellectual−property rights, and transborder data flows. While the OECD countries and a few NICs now have inplace powerful public policies and business strategies conducive to a wider diffusion and effective exploitation ofinformation technology, most developing countries are falling further behind.

The impact of information technology will be felt increasingly in the 1990s. Developing countries at all levels ofdevelopment must stay abreast of the information revolution: they cannot afford to ignore this "second industrialrevolution."

Acknowledgements

Many people have contributed to the development and review of this paper. In particular, the members of aninformal Bank−wide task force on information technology for development have provided insight, examples ofapplications, and a forum for debate. Special thanks to Anthony Churchill, Bruce Ross−Larson, James Cowie,Carl Dahlman, Robert Schware, Ramesh Chander, Ian Scott, Bernard Woods, Shahid Akhtar (IDRC), and DieterErnst (OECD). The policy staff and the Operations Consulting Group of the Information, Technology, andFacilities Department also provided useful comments. The paper evolved out of the task force's discussions tohighlight the importance of information technology and the need of the World Bank to take a more proactive anddeliberate strategy to support borrowers in joining the information age and managing its implications.

Table of Contents

The Information Explosion link

Information Poverty link

Changing Competitive Advantage link

Industrial Development link

The Service Sector link

Public Sector Management link

Agricultural and Rural Development link


Acknowledgements 3

Infrastructure link

Human Resource Development link

Decentralization and Organizational Change link

Information and Informatics Policies link

Diffusion of Information Technology link

Conclusions link

1. The rapid advance and the diffusion of information technology (informatics) in industrialized countries posemajor new challenges for developing countries.1 They also raise fundamental issues for development assistance.

2. Understanding the ongoing transformation. Understanding the basic, ongoing transformations in theindustrialized economies caused by the information technology revolution is important in two respects. First, formany years these transformations will remain a major feature of the international trade and competition that thedeveloping countries must face. Second, the experiences and best practices of "front−runner" organizations inadvanced economies could suggest approaches for the successful application of information technology to thedeveloping economies.

3. For development assistance agencies to respond to a rapidly evolving environment, they must understand thecurrent and potential roles of information and information technologies in developing countries. Thisunderstanding should be based on recent experiences with informatics applications in developing countries aswell as on widespread applications in industrialized countries, which appear to offer promising solutions toinformation problems of fundamental importance to development.

4. Information as a strategic resource. Information now ranks with other major development resources: human,natural, and financial. Moreover, information can accelerate and reinforce the development of these resources.Leading industrial societies recognize the importance of information as important to their economic health and toglobal competition. Daniel Bell and Peter Drucker, among others, have characterized the coming of thepost−industrial society as one in which knowledge has become one of society's most important resources. Japan'seconomic success is attributed largely to the relentless pursuit and diffusion of information by government

1 Information technology , used interchangeably with the term informatics , is defined here broadly to include thesupply side (computer hardware and software, telecommunications equipment, and electronics−based industries)as well as the demand or user side (informatics applications in all economic sectors, information services industry,electronic publishing, broadcasting, management information systems, and so on).

agencies, businesses, communities, and working groups.2 Information and communication systems have becomethe nervous system of modern economies.3

5. Rapid technical change. A primary force for the ongoing information revolution is the continuing high rate oftechnical change in the information technology industries. These technical improvements in computing andcommunications include:

A continual 20 percent annual decline in the real cost of hardware for storing, processing, and transmittinginformation for the last four decades; this rate of technological improvement far outstrips the decline in energycosts (50 percent over a 30−year period) that fueled the 18th−century Industrial Revolution;


Acknowledgements 4

Increasing miniaturization, portability, and diversity of information−processing and communication devices(personal computers, optical disks, facsimile, satellite dishes, etc.);

Ability to present information in all media—data, text, voice, image, and video—in ways that increasingly matchhuman preferences and cognitive styles;

Recent advances in artificial intelligence, expert systems, optical storage discs, and other cutting−edgetechnologies with unlimited possibilities for information−intensive decision−making; and

Convergence and synergy among all these technological advances so that they now offer extremely versatileapplications in all sectors of the economy (see Figure 1: Freeman).

2 Ezra Vogel, Japan as Number One , Cambridge: Harvard University Press, 1979.

3 The growing role of information in the economy suggests the need to reorient the traditional categories ofeconomic analysis. The classical factors of production—capital, labor, and land—reflected the social classes andactivities of 19th−century Europe. Some argue that these classifications maybe useful for the analyses ofagriculture or manufacturing, but they have become inadequate for services−based economics. Perhaps a moreuseful trinity as Kenneth Boulding has suggested, would be material, energy, and information. See GeraldFaulhaber, et al. , eds.m Services in Transition , Cambridge: Ballinger Publishing Co., 1986. A vast amount ofliterature is now available on the growing importance of knowledge and timely information for gaining andmaintaining competitive advantage.


Acknowledgements 5

Figure 1SOME KEY EVENTS IN THE CONVERGENCE OF INFORMATION TECHNOLOGYSource: Christopher Freeman

The Information Explosion

6. Growth of information−based activities. The explosive growth in the amount of information generated and inthe demand for information are often referred to as the information explosion. The rapid growth of information orknowledge−based activities in industrialized economies is typified by the results of a US Department ofCommerce Study of the US economy in 1967: more than 46 percent of the GNP and 53 percent of labor incomewas accounted for through knowledge, communication, and information work. In recent years informationtechnology has become the largest component of fixed capital formation in OECD countries. In manufacturing,most of this capital formation is not applied directly to manufacturing processes but to tools for gatheringinformation for research and development, design, marketing, and management.4 Investment in informationtechnology tools is a necessary response to the information explosion.

7. New ways of handling information. As a consequence of the information explosion, knowledge workers willprocess, store, and retrieve information in new ways, responding to specific and urgent information needs.Specialization and collaboration will increase, as will the use of information intermediaries and informationscientists.

8. Joint ventures in information acquisition. The information explosion in science and technology has caused afundamental shift in the ground rules that guide enterprises in their acquisition of knowledge. These changesinclude partnerships in research and development among firms on national and international levels;university−industry scientific collaboration; technology ventures that couple new entrepreneurial firms with largeestablished corporations; and research and technology scanning on a worldwide basis. Enterprises are striving tostay in the information loop. Information technology has accelerated the pace of research and innovation andsignificantly cut the lead time for bringing innovations to the market place. In an increasingly competitiveenvironment for science−based industries, taking advantage of this shorter lead time has become cruciaL

9. Competition and information overload. The accelerating rate of change in demand patterns and products andthe growing complexity of economies are placing heavy demands on acquiring and managing information withinorganizations. These demands are reflected in the ''information overload" experienced by most managers,increased attention to gathering information about the

4 OECD, Information Technology and Economic Prospects , 1987.

external environment, and heavy investments in management information systems. The globalization ofcompetition in manufacturing, finance, and services is accelerating as information flows more freely to consumerseverywhere, who are demanding high−quality products and services. Information is a strategic resource inshaping competitive advantage and business strategy. Within firms, information resources are increasingly used toreinforce or enlarge business strategies, to develop and market new products and services, to increase flexibility,and to help strategic management.

Information Poverty

10. The computing and information gap. Almost two decades ago, it was predicted that computing power wouldone day be within the reach of every nation. In its 1970 plan for the decade, the United Nations (UN) wrote:


The Information Explosion 6

Computers will play an increasingly important role in developing countries which intend to participate in theworld economy in ways other than the supply of raw materials. Developing countries will find computers anecessary ticket of admission. The next decade should see developing countries even more active in closing thecomputer gap.5

11. Unfortunately, the UN prediction did not hold true for most developing nations. While the OECD countriesand a few NICs now have in place powerful policies and strategies conducive to a wider diffusion of informationtechnologies, developing countries are falling further behind. Moreover, many changes have occurred since then,including the introduction of the microcomputer. Although this could assist the diffusion of informatics indeveloping countries, the new information technologies and their fast diffusion in the industrial countries couldfurther exacerbate this gap, which ultimately translates into an information gap, a competitive gap, and adevelopment gap.

12. Information poverty. The ongoing information explosion and the extensive use of information technology inindustrial economies contrast sharply with the "information poverty" of the developing countries. This povertytakes many forms: planning without facts, unreliable information on external debt and poverty, poor informationsupport to top decision−makers,

5 The Application of Computer Technology for Development , United Nations, Department of Economic andSocial Affairs, New York, 1971.

inadequate financial control and cumbersome reporting and monitoring systems, poor information on theperformance of public enterprises, limited access to development information for the rural populations, limitedchannels for exchanging development experiences within and among countries, professionals and researcherswithout access to national statistics and international research findings, scarce information support to knowledgeworkers, insufficient information on natural resources, underused indigenous and locally produced knowledge,poor access to timely information on national and international markets, and so on. Developing countries (theirpolicy−makers, managers, knowledge workers, and entrepreneurs) face major problems in acquiring, retrieving,processing, and disseminating various types of information.

13. Planning without facts. The problems of planning without facts have been well documented in Africa. Withthe onset of the debt crisis, the world learned of the dangers of ignorance about a country's financial position. Arecent report by the Economic Commission for Africa asserted that the lack of data describing the demographic,social, environmental, and economic situation seriously hampered development management. Statistical systemsin many developing countries are not oriented to support macroeconomic management and policy analysis, andthey have failed to respond to changing information needs.

14. Lack of reliable socioeconomic information. Information problems for macroeconomic management arewidespread beyond Africa.6 For instance, many Latin American countries lack current and adequate nationalaccounts, balance of payments estimates, and price series as they grapple with the challenges of adjustment. Thehighly populated Asian countries lack current and reliable information on the nature and extent of poverty and onthe effect of various national programs on poverty alleviation and population control. Despite the importance ofexternal trade for countries like Mexico, the latest information on exports is two to three years old.

15. Rigid information structures. Top decision−makers often have to respond to complex and strategic issues onshort notice and in a crisis situation; their decisions are often based on poorly organized and unreliableinformation. The current rigid information structures are suitable neither for exploring alternative policy scenariosnor for providing quick information inputs to decision−makers. Even when the problem is not the lack of data,frequently the information is not current or in readily usable form. Budget officers and financial managers facesimilar problems in planning and controlling public expenditure programs and in preparing the annual budget for



the

6 For details, see R. Chander, "Building National Statistical Capabilities: a Role for the Bank," 1989 (draft paper).

government. Existing information systems do not adequately support budget analysis, assessment of the financialimplications of various programs and policies, or up−to−date expenditure control.

16. Cumbersome reporting and poor support. Reporting and monitoring systems on national developmentprograms are usually voluminous, overlapping, and burdensome for field managers and field workers as well asslow and massive for any effective use at the center. These systems overload senior managers with data, but donot give field managers the necessary problem−solving support. An impressive amount of primary data may becollected at the lowest level of the bureaucracy, but its potential for decision−making is not exploited sincemanual information systems are not suited for quick processing of large amounts of data. Senior managers indeveloping countries often have to make up for the skill gap at the subordinate level; hence their scarcest resourceis time.

17. Inadequate monitoring systems. Reliable and relevant information on the performance of large organizationsis scarce or nonexistent in many developing countries. This is mainly due to monitoring and evaluation systemsthat are poorly designed for decision−making and strategic control. This causes major problems in managingpublic enterprises (as well as private companies) and in developing adequate levels of autonomy, accountability,and incentives.

18. Lack of access to local information. Developing−country workers do not often analyze or use their own datato formulate policies and development assistance programs. Population and demographic surveys are sometimessent overseas for processing and analysis; thus opportunities for verification of data are lost and results are slow toreturn to the originator of the data. Similarly, large amounts of information are collected from field levels;however, without the appropriate processing and communication systems, results are slow to come and often notreported back to the field. Government economists and planners provide large amounts of data to visiting aidagency professionals, but they often are not involved in analyzing this information to jointly reach the conclusionsand prescriptions with the external agencies. This lack of cooperation reduces the chance not only to build localcapacity for policy analysis, but also to build commitment for the results. Similarly, many development activitiesand public investments fail because of poor communication with and involvement of the stakeholders andbeneficiaries.

19. Poor information on natural resources. Information on natural resources (forests, water, fish, minerals, oil,and so on) is extremely poor in most developing countries. Yet little technological and methodological assistancehas been given developing countries to address the information requirements for environmental policies andnational resource development strategies.

Remote sensing and the recent development of geographic information systems (GIS) provide powerful tools forintegrating and analyzing spatial information in urban and regional planning, land use and water resourcesplanning, natural resource assessment, mineral resource exploration, and environmental protection. The challengeis to build local capability to exploit these new tools and to organize and analyze the vast amount of data involvedin environmental and natural resources management

20. Isolation from current developments. Researchers, scientists, engineers, and other knowledge workers indeveloping countries are often isolated from current developments in their professions. This stunts theirprofessional development and lowers their productivity. Lack of information services, a weak communicationinfrastructure, and scarcity of information sources result in needlessly repeated research, poor−quality research,



and ignorance of relevant development elsewhere. Even more relevant is professional practitioners' lack of timelyaccess to research findings for use by professional practitioners. Developing−country professionals waste theirvaluable time and scarce skills on inefficient information searches and routine information−handling activities.Similarly, development practitioners and policy−makers in developing countries are isolated, since they havelimited access to databases and networks for sharing their cross−country experience.

21. Underuse of locally produced information. Indigenous information and locally−produced knowledge areunderused. There is a need to capture and record local knowledge and experience and to make them readilyavailable to a larger audience within countries and regions. Information is not tailored or packaged for differenttarget audiences. For example, local research on agriculture, health, and environment often is not adapted andmade accessible to policy makers, administrators, extension workers, or farmers. Oral traditions, an important linkin the information chain in Africa, can be used to disseminate information on health, sanitation, and farmingmethods. Putting indigenous as well as outside knowledge within reach of the people would allow them to fit theinformation into their own problem−solving processes. However, attempts to tap and disseminate indigenousknowledge are thwarted by negative attitudes toward traditional farmers, local researchers, and other sources ofpragmatic, indigenous information. Central planners, administrators, and scientists too often what the localcommunity knows. Because local efforts to generate development information are largely uncoordinated,underfunded, and isolated, excessive reliance on Western experts continues. Lack of resources, particularly inAfrica, also limits the publishing and the dissemination of local research. An unknown but appreciable amount ofresearch fails to be published, and its results are largely wasted.

22. Few guides to local information. Moreover, information on the location and scope of local informationresources is often scarce. There is little investment in information directories, bibliographic systems, libraries, anddocumentation centers. Institutional memory is idiosyncratic and development studies, often funded by outsideaid agencies, are lost to future planning efforts. Information resources are not yet viewed as important assets todevelop, exploit, maintain, and market.

23. Information for negotiation. Information is a key factor in the capability of developing countries in variousbilateral and multilateral negotiations. Skillful use of information may be the most crucial factor for a negotiatingadvantage; however, many developing countries have yet to redress the growing gap in their bargaining powerarising from poor information support.7

24. Lack of information on markets. Information on national and international markets and business opportunitiesis difficult to find for local entrepreneurs. The marketing and intelligence functions of domestic enterprises aretypically underdeveloped. The governments in most developing countries are not yet equipped to play rolessimilar to those of Korea and Japan in providing information on domestic and foreign markets and technologies.

25. Institutional and infrastructural weaknesses. Information poverty is the product of many basic institutionaland infrastructural weaknesses. Information management and statistical methodologies, especially in dataprocessing and communication, have not been sufficiently diffused and adapted to local conditions. Institutionsconcerned with information resources management, such as libraries and central statistics offices, lack thenecessary investments and managerial capabilities because of the absence of strong information−based traditionsin decision−making and because of the absence of an organized, articulate, community of information users.Policy−makers often assign low priority to information development and management. This is reflected in the lowsalaries and limited career opportunities of statistical staff and information professionals in the government.Libraries, information services, and statistical offices are first to suffer from budget cuts.8

7 For details of specific negotiating situations where information is crucial to the bargaining power of developingcountries, see Information, Economics and Power by Rita Cruise O'Brien, ed., Boulder, Colo.: Westview Press,1983.



8 Chander, op. cit.

26. Poor communications infrastructure. The institutional and physical infrastructure for information services atthe village and local government levels is extremely poor. Information scientists have yet to understand thespecial and basic information needs of rural populations. The communications infrastructure is also lagging inmany developing countries; for example, Tokyo alone has more telephones than the whole of Africa. Developingcountries, representing 80 percent of the world population, account for only 2 percent of the total globalexpenditure on informatics.

27. Centralized information infrastructure. In developing countries, institutions concerned with informationmanagement and national statistics typically lack user−orientation. Information flow is unidirectional, with littleor no feedback to local levels for local problem solving. District and community−level development workers haveno access to the data concerning their constituencies, and the aggregate published statistics are not useful forparticular community needs.

28. Information management practices. Information is commonly perceived as a source of power, and there aremany cultural, political, and institutional barriers to sharing it and to using it for decision−making. Dealing withthese constraints in developing countries is essential to alleviating information poverty and to promoting informeddecisions. The information profession is still relatively new in developing countries, and its potential contributionto solving common development problems is not yet widely recognized.

28. Illiteracy. Access to the formal education system is still limited and may get worse for the foreseeable future.When levels of illiteracy are high, the majority of the population does not have access to even those fewinformation resources available within the country. Visual and tailored information becomes critical. Theprevailing educational and communication technologies are an important cause of this limited reach. Moreover,the prevailing pedagogy does not encourage and teach students to gather information from various sources and toanalyze rather than learn by rote.

30. Increasing premium on alleviating information poverty. Policy and economic changes in developing countriesput an increasing premium on alleviating information poverty and on generating an efficient flow of information.The ongoing changes require enhanced intelligence capabilities for an effective supply response to tradeliberalization and export promotion policies (in order to exploit market opportunities); reliable and timely flow ofinformation on the health of financial intermediaries; sophisticated internal management information systems; andeffective supervision systems for more liberal and open financial systems; and reorientation of the informationsystems of government and private enterprises to support deregulation and the movement toward increasedmarket−based competition.

31. Consensus on development strategies. Timely accounting and evaluation of project activities and their effecton the ultimate beneficiaries have become increasingly important to many donors and aid agencies (particularly inAfrica). National consensus on reforms and development strategies are essential for successful and sustainabledevelopment. Attaining such consensus requires broad participation, information sharing, and intensiveinteraction among all levels of the society. Generally, strategic change and structural adjustment in developingcountries can be managed only when key performance indicators, of the social costs of adjustment, supplyresponses, and the effect of changing policies and programs are reliably and continuously monitored.

32. Information technology can make a difference. Countries where improved statistical software packages havebeen introduced for household surveys, have reduced the time lag between field collection of data and theavailability of tabulated results from the traditional two to four years to about six months. The introduction ofmicrocomputers in many information environments and offices has increased awareness of and interest in how



information is generated, how it flows within organizations, and how it is used. Microcomputers, when properlyintroduced, have motivated local staff to learn new analytical skills; to change their thinking andinformation−gathering behavior; to review their office procedures; to impose discipline upon informationhandling activities; and to improve data quality. The power of informatics is not merely in automating existinginformation processing activities, but also in encouraging "what if" questions, conducting new "thoughtexperiments," examining implications of various assumptions, and expanding the range of strategic choices.Improved telecommunications, shared databases and analytical tools, and local data processing could also assistmutual learning and information sharing among developing−country professionals and between them and aidprofessionals, thus contributing to capacity building and ownership of solutions.

33. Information resource management can also make a difference. Emphasis should be on treating local andoutside information as a strategic asset to be maintained and exploited. Farming−systems research is one exampleof capturing and building on the indigenous knowledge of local farmers within similar ecological conditions andproduction systems. Information technology could also revolutionize information services (such as libraries) thatconsolidate and share information resources among a large network of village− and district−level informationcenters and that repackage information to fit the needs of diverse users. Desktop publishing offers an attractivemeans of producing and disseminating local scientific material and research among otherwise isolated localscientists and researchers. Vast amounts of agricultural research and information on

crop protection and pest management (the equivalent of 400,000 abstracts) were put on one optical disc(CD−ROM), which can be mass produced. This pilot project successfully demonstrated the capabilities of the newtechnology as a cost−effective means of improving agricultural information and research findings.Microcomputer−based software has been developed in Chile to make small−area census information available forplanning purposes at affordable cost to public− and private−sector users.9

34. Many Latin American countries have developed electronic−based information networks to share all types ofinformation—bibliographical, statistical, ongoing research, referral, and so on. Such networks promote thetransfer of experience within and among developing countries, as well as the dissemination of informationproduced in a particular region or area of knowledge and communication among otherwise isolated researchers indeveloping countries. Communication technology can assist the free flow of information and widespread use ofindigenous knowledge, with equal access regardless of where people reside or where information is located.

Changing Competitive Advantage

35. Changing market forces. The rapid and efficient transmission of information has been a driving force forgreater international integration of markets, industries, and services. Accelerated international transfer oftechnology and greater mobility of service industries are among the probable consequences. Changes within thefinancial services industry have had major consequences for the mobility of capital and the relative decoupling ofcapital flows from trade flows (capital flows were estimated in 1986 at about 35 times the value of worldtrade).10 Deregulation and liberalization trends in many countries have accelerated the international integration ofeconomies and the demand for transborder flow of information. Multinational enterprises are contributing to thisprocess now that their telecommunication networks allow them to share information in real time for research anddevelopment, engineering, manufacturing, marketing, finance, distribution, planning, and management.

36. Changing global economy. Empirical research on technological change indicates that the ongoing change inthe techno−economic paradigm brought about by the information revolution

9 Shahid Akhtar, "Regional Information Networks: Some Lessons from Latin America," IDRC, 1989.


Changing Competitive Advantage 11

10 Peter Drucker, "The Coming of the New Organization," Harvard Business Review, JanuaryFebruary, 1988.

accentuates the technological and competitive advantages of the leading countries and contributes to a severedisequilibrium in international trade.11 The current structural crisis will spur the transition of the world economyto a new technology based on information−intensive products and processes, just as the structural crisis of the1930s spurred the transition to an energy−intensive assembly line and flow−production system. Such changesgive rise to great instability, intensify the uneven development of the world economy, and call for new regulatoryand institutional frameworks at the national and international levels. They are also associated with shifts in theinternational division of labor and international technological leadership. Newcomers are sometimes more able tomake the necessary social and institutional adaptations than the established leaders who may have more rigidsocial structures. On the other hand, countries lacking the necessary educational, research, and design capabilitiesmay be even more seriously disadvantaged in international competition.

37. Impact on competitiveness. 12 The likely effect of information technology on the competitive position ofdeveloping countries in the world economy may be illustrated by the following:

The knowledge advantage enjoyed by enterprises in developed economies is greatly enhanced by informaticsapplications.

Information technology applications for manufacturing and product design are reducing demand for rawmaterials and energy supplied by developing countries.

The continued growth of electronic networking and communications for various purposes, such as globalresearch and development and Just−In−Time procurement, is disadvantageous for developing countries outsidethe loop of shared information.

Information technology allows foreign competitors better access to timely information on the local market and onconsumer preferences in a developing

11 C. Freeman, Technology Policy and Economic Performance: Lessons from Japan , University of Sussex,Printer Publishers Ltd., 1987.

12 The literature on the growing impact of information technology on the competitiveness of nations and firms isextensive, and the brief treatment here may not do justice to this fundamental issue. For further insight and goodexamples, see: Ernst and O'Connor, Technology and Global Competition: The Challenge for NewlyIndustrializing Economies , OECD's Development Center, Paris, 1989; Emil Herbolzeimer, "The Effects of NewTechnologies on Exports of Manufacturing Goods from Developing Countries," and other articles in ATASBulletin , United Nations, October, 1987; and Soete (1988), Child (1987), Aoki (1989), and Mody (1989).

country than even the local suppliers have, thus putting the domestic industry at an increasing disadvantage.

Informatics applications are likely to speed up the integration of the global economy and the transmission ofmarket signals and producers' responses; even the least developed countries will feel the effects of thisfundamental change in the global economy.

Information technology has the potential to affect global distribution of employment, possibly promotingproduction of labor−intensive parts to developing countries or relocating employment in traditionallylabor−intensive activities back near the final markets in the richer countries.


Changing Competitive Advantage 12

Informatics is increasing the mobility of service activities, with the result that services are far more easily tradedbetween countries.

38. There is nothing predetermined about how the new technologies will affect the distribution of competitiveadvantages and world market integration of different groupings of developing countries. Much of the impact canbe shaped by national and international policies. So far, the new, knowledge−intensive technologies have workedprincipally to the benefit of the industrialized countries. The new technologies can both drastically increasebarriers to entry, and at the same time open up new possibilities for destabilizing established market structures.They can strengthen both spatial decentralization and reconsolidation of production and complementary supportservices within and among nations. However, since the late 1970s, access to advanced international technologyhas become increasingly restricted and politicized. Moreover, users and procurement officers in developingcountries are poorly informed about available technologies and the benefits and risks involved. The worldeconomy is thus at a critical juncture. If ''neo−mercantilistic" trade and industrial policies are followed, inequalityand concentration in the international economy are bound to increase. If the manifold possibilities for revitalizinginternational technology diffusion and for assisting developing countries to absorb these powerful technologiesare pursued, the chances for more equitable worldwide development could be improved substantially.13

13 See Ernst and O'Connor, op. cit.

Industrial Development

39. Industrial transformation. Advances in information technology constitute a new techno−economic paradigm,sometimes likened to the invention of the steam engine and electricity in its profound transforming effects.14Some of these pervasive effects are reflected in mutually reinforcing changes in the design of products andprocesses and in the nature of industrial competition. Market horizons have become broader, due not only to moreinformation available on markets, but also to competitor responses to developments in those markets. Timely anddetailed information about markets, point−of−sale information, and electronic linkages to clients and distributorshas enhanced the capability to tailor products and services to consumer groups and market niches (and to trackchanges). The use of computer−assisted design permits greater flexibility and speed in product design changes,while built−in software and "intelligence" in products, automatic diagnosis of malfunctions, andelectronically−assisted after−sales service increase the value added of physical products.

40. Quality and flexibility. The quality of products and services can be improved through real time monitoring andcontrol of outputs, and the reduction in electro−mechanical components provides material and energy savings inproducts and processes. Greater speed and flexibility in manufacturing systems are achieved through flexibleautomation techniques (flexible manufacturing systems), which efficiently accommodate changeovers fromproduct to product and changes in volumes, processes, sequencing, and materials.15 Taken together, design,production, procurement, sales, administration, and technical service functions within enterprises are unitedthrough computer−integrated manufacturing systems and electronic office systems. Increased subcontracting andtighter coupling of enterprises is occurring in various industries, both within and among nations.

41. Industrial competitiveness. The effect of information technology on the industrial competitiveness ofdeveloping countries is likely to vary between countries at different levels of

14 See Paul−David, "Computer and Dynamo: The Modern Productivity Paradox in a Not−Too−Distant Mirror,"Center for Economic Policy Research, Stanford University, 1989.

15 The impact of information technology on flexibility and quality in various industries is pervasive andprofound, and this is not limited to engineering or high−tech industries. For example, in the textiles and clothing


Industrial Development 13

industry, an industry traditionally labor−intensive and of high importance to developing countries, informatics haspermitted a much closer link between design, supply of inputs, production, and marketing, thus facilitating rapidadjustments to the demand for changing combinations of yarns, fabrics, and colors. Informatics has also increaseddesign and cutting speed and accuracy, and reduced wasted material, thus enhancing product quality and theindustry's flexibility to respond to frequent fashion changes.

industrialization. Flexible automation technologies and organizational innovations are coalescing into a newbest−practice manufacturing system that is spreading throughout industry in advanced economies. Its diffusion indeveloping countries is still very limited, occurring primarily among the newly industrialized countries (NICs),and even there, diffusion may be slow. In the course of this process, the determinants of internationalcompetitiveness, at least in industry, are being rewritten. For example, while the NICs may enjoy good exportperformance in those industries where products are simple and where the effects of flexible automation arerelatively minor, they are likely to run up against new obstacles in many other industries (such as machine tools)where these techniques are being rapidly adopted by the OECD countries (with substantial improvement to theircompetitiveness). There is a real concern that significantly differing rates of the diffusion of informationtechnology would undermine the low−wage advantage of developing countries that are already major exporters ofmanufactured goods. Some researchers argue that some NICs are already losing competitive advantage in lowmarket segment products based on cheap labor, but they do not know yet how to implement successful strategiesof upgrading competitive advantage, which increasingly depends on mastering information technology.16

42. New locations for industries. The uneven diffusion of the new industrial paradigm has important long−termimplications for decisions about locating industries. A case in point is the ongoing restructuring of the automobileindustry, with massive investment in automation technology and in new inter−firm relations of production. Therigors of Just−In−Time and Total Quality Control demand proximity. Supplier and assembler need much closerworking relationships than ever before, from predesign stages to delivery. The supplier's design and producttechnologies are also becoming important determinants of competitiveness due to the growing use ofmicroelectronics. These trends create both new problems and unexpected opportunities for developing countries.The outcome depends in part on whether flexible automation, other applications of information technology, andnew organizational practices can be successfully introduced in industrializing developing countries. One couldargue that the complexity of the new systems, their engineering intensity and capital cost, and the increasedcoupling between suppliers and assemblers would work strongly against the introduction of these systems in allbut the advanced NICs. On the other hand, the flexibility and lower−scale economies of these systems might wellbe suited to the market conditions of many developing countries, and, if successfully adopted, could enable thesecountries to become attractive locations for global industries.

16 See Ernst and O'Connor, op. cit.

43. Industrial restructuring. Management information systems (MIS) are an essential component of the ongoingindustrial restructuring process in many developing countries. For example, two Industrial Restructuring Projectsin Hungary (assisted by the World Bank) provide financing to the major manufacturing organizations (rubber,chemical, electrical goods, instruments, and so on) to enhance organizational and production capacities. Eachparticipating organization is installing new MIS and production management systems. These information systemsare considered essential to planning, programming, and controlling production processes, particularly forenterprises that are expected to generate hard currency through the export of manufactured goods.

44. Industrial research and extension. Informatics can be used to improve industrial research and extensionservices in ways similar to its applications in agricultural research and extension. Information technology canbring affordable information to small and medium industries in such areas as markets, products, technology, rawmaterials, and industrial standards. It can provide access to information from government agencies, research



institutions, patent offices, international databases, trade and industrial associations, and non−governmentalorganizations directly involved with small and medium enterprises. This information can be repackaged forvarious users, such as the managers and engineers of these enterprises and the associations and agencies thatsupport them.

45. Electronics industry. These technical changes and the demands generated by the information explosion havespurred not only the revitalization and modernization of old industries, but also the rapid growth of the electronicsindustry itself. The electronics industry now accounts for about 10 percent of worldwide manufacturing, andestimated worldwide production reached US$ 500 billion in 1987. At present, electronics ranks as thefourth−largest industry in the world. Research and development expenditures in information technology industriesare, by far, the largest among all industries in all industrialized countries, accounting for almost one−third of totalresearch and development.

46. Involvement of developing countries. The participation of developing countries in the production ofinformation technology (as opposed to the use of information technology in other industries) poses significantopportunities and challenges. Information technology industries are likely to constitute the largest industrialsubsector before the end of the 1990s. The Indian electronics industry, although growing under protectionistconditions, has accelerated its growth from 10 percent annually in the 1970s, to 18 percent annually in the firsthalf of the 1980s, to

nearly 25 percent annually from 1985 to 1987. Korea has moved in less than a decade from virtually noproduction capacity in semiconductors to become the third largest manufacturer in the world. Developingcountries with large technical manpower and markets, such as India, have promising opportunities in certainimportant areas of information technology such as the software industry. Mexico, Brazil, Korea, India, Singapore,and other developing countries consider the information technology industries as "strategic" because they offerhigh value−added services, attractive market opportunities, import−substitution potential, and close ties to manyother industries.

47. Dangers of protectionism. Developing countries face the danger of growing protectionism in the industrialsector. Policies regarding the electronics industries, as well as regarding the incorporation of electronics in otherindustries and services, are high on the political agenda of industrially advanced economies. The role ofgovernment in this sector is quite widespread, and in some aspects essential. The rationale for "infant industry"protection of information technology production within developing countries must be reexamined in view of thespecial nature of this technology, which continues to change at a fast pace, requiring substantial spending onresearch and development and continuous adaptation and learning. The lack of responsive financial institutionsand venture capital is a major constraint to local private−sector participation in the information technologyindustry and information services. Trade and foreign investment policies are therefore essential, but there are nosimple or uniform strategies for the development of the sector. These strategies should be guided by the potentialcontributions of various information technologies to the rest of the economy and by the varied skill and capitalrequirements of these different but related technologies.17

48. Lessons of experience. Industrializing countries that wish to participate in information technology industriescan learn several lessons. First, a combination of nurturing and protection during the initial phase of developmentmay be necessary, but this must be combined with constant pressure to improve performance through strongdomestic competition and by encouraging firms to export. Second, access to foreign technology and market trendsis needed because of continuous innovation and rapid change in this sector, and this often requires emphasis onexports, foreign investment, and strategic alliances. Third, rather than targeting the electronics sector as a whole(as in India, Brazil and China), many developing countries may be selective and broaden their coverageprogressively and sequentially as capabilities build up (like Korea and other Asian NICs).



17 William R. Cline, Informatics and Development , Economics International, Inc., 1987.

Fourth, the role of government is to promote competition through appropriate incentive regimes, to provide anenvironment for flexible adjustment through appropriate training and financing institutions, and to strengthen thetechnical infrastructure by improving access to technological research and information and by developingtechnical human capital.18

49. Country−specific strategies. A competitive strategy for informatics development must be country−specific. Itshould recognize the interdependencies within the information technology industry as well as among userindustries and in the economy at large. The most advantageous route for the development of the electronics sectoritself cannot ignore the short− and long−term effects on domestic user sectors. Developing countries that arelatecomers to industrialization or that are unlikely to become major participants in the export of mass−producedinformation technology products still need to build technological capabilities that would support the requirementsof local user industries. Microelectronics−based technology is unique in its malleability to fit an infinite variety ofuser needs, and this adaptation process depends on design capabilities and understanding of the special needs oflocal industrial users. This opens up dynamic opportunities for industrial latecomers. Accordingly, manydeveloping countries may choose user−oriented industrial strategies that would put emphasis on informationtechnology products, activities, and capabilities that would support local user advantages and flexibility.19

The Service Sector

50. Transforming the private service sector. Informatics is profoundly changing private services in theindustrialized countries. The nature and structure of banking, financial services, insurance, marketing,distribution, retail, and travel are changing because of the speed, reliability, and low cost of manipulating vastquantities of information related to financial, inventory, and sales transactions. Information technology isincreasing the fixed capital and information intensity of services, such as banking, and is breaking down barriersamong other service industries; for

18 See Carl Dahlman, "Electronics Sector Development Strategy—The Role of Government," Washington, D.C.:World Bank, 1989.

19 Application−Specific Integrated Circuits (ASIC) is one example of a technology that requires intensiveinteraction between information−technology suppliers and users. ASIC may prove to be one of the most importantsegments of the information−technology industry in terms of its contribution to the overall industrial sector andthe economy in industrializing developing countries. For details, see Carlota Perez, "Electronics and Developmentin Venezuela: Strategic Options and Policy Implications," Technological Change and the Electronics Sector:Implications for Newly Industrializing Economies , Ernst (ed.), OECD Development Center, Paris (forthcoming).

example, American Airlines, through its reservation system (SABRE), is now in the business of hotelreservations, car rentals, software development, and rapidly supplying spare parts. Service providers, traditionallysmall and decentralized, are being linked nationally and globally through communications technology.

51. Information−intensive services. Information−based services, such as publishing, broadcasting, libraries,engineering, and professional services, are being transformed, and new information services, such as datacommunication and processing and databanks, are being created. The information services industry (for example,commercial databases) is still a small part of the service sector, but it is growing very rapidly.

52. Growing interdependence of industries and services. Goods−producing industries have become highly


The Service Sector 16

dependent on service activities, either performed within the firm or purchased from producer−services vendors(see Figure 2: Quinn). Services have become critical to industrial competitiveness. The role of services in theglobalization of competition and economic integration has forced virtually all large manufacturers to considertheir supply sources, markets, and competition on an worldwide scale. The services industry has become a majoremployer in the industrial economies: in the U.S., about 75 percent of employment is directly in the servicesindustries; in addition, within manufacturing, about 75 percent of all costs (and a much higher percentage of valueadded) are generally for services activities.20

53. Improving the quality of life. In contrast to the advanced effect of information technology on producerservices, its effect on consumer services is still at an early stage. However, over time, information technology islikely to revolutionize many consumer services such as telebanking, teleshopping, teleworking, on−lineequivalents of many public services, increased self−service and entertainment options, and High DefinitionTelevision. Applications of informatics outside the workplace are likely to be pervasive in their effect onexpanding human choice and improving the quality of life. Informatics promises novel ways of self−educationand self−training, such as the Open University model of the United Kingdom and computer−aided instruction.This role will be particularly important for the continuing education and retraining of qualified teachers inindustrial and developing countries alike. Another potentially major field of information technology applicationsis health care. Health monitoring systems in the home will play the role of "electronic house nurses" bytransmitting key health parameters to the nearest medical center to spot any

20 Office of the U.S. Trade Representative, U.S. National Study on Trade in Services , Washington, D.C.: U.S.Government Printing Office, 1983.

Figure 2SOME MUTUAL INTERACTIONS AMONG MANUFACTURING AND SERVICES ACTIVITIESNote: Double−headed arrows indicate that each party benefits from the presence of the other in the trade.Source: Quinn/Doorley



apparent deterioration in the patient's condition. The effect of information technology on the cultural arena islikely to be as profound, since all hobbies have a strong information component, and information technologyproducts and services could facilitate participation in diverse cultural and audio−visual activities.

54. Public services in industrialized countries. The potential effect of informatics on the delivery of publicservices in the industrialized countries is likely to be as great as in the private services, although the pace may beslower. Information systems are becoming a basic tool for improving the management, productivity, andresponsiveness of diverse public services. The governments of developed countries are setting up information andcommunication systems in support of policy formulation, planning and budgeting, financial and personnelmanagement, taxation, coordination among public agencies, office automation, paperwork reduction andprocedures simplification, contract management, communication between various levels of government,monitoring and control of various public programs and services, and monitoring the environment and themanagement of natural resources.21 Increasingly, communication in various media is used to generate nationalconsensus on public policy issues and socio−economic priorities and for increasing participation by the privatesector and the public at large in the delivery of various services.

55. The public sector in most industrialized countries is exploiting informatics to make fuller use of thesubstantial information resources that governments collect from businesses and citizens. This is particularly thecase with regard to demographic, trade, and business information. An interesting example is the set of guidelinesrecently issued by the Commission of the European Communities for improving the coordination between thepublic and private sectors in the information market.22 Public administrations regularly collect basic informationon the performance of their governmental functions and the economy. Member states are asked to publicize theinformation and to clarify the procedures by which it can be obtained and exploited by the private sector. Theseguidelines also clarify the role of the public sector as a provider of electronic information services. The U.S.government has formulated similar policies for improving the private sector's access to public information. Thissharing is common practice in

21 See, for example: Management of the United States Government , Office of Management and Budget,Washington, D.C.: U.S. Government Printing Office, 1988.

22 Commission of the European Communities, "Guidelines for Improving the Synergy Between the Public andPrivate Sectors in the Information Market," 1989.

Japan. Governments are also disseminating scientific and technological information as they realize that theireconomic competitiveness depends timely access to this information.

56. Financial services in developing countries. Information technology applications to banking and financialservice institutions are spreading rapidly in developing countries, often parallel to financial sector reforms andliberalization. To manage increased competition and uncertainties, financial institutions need to improve theirmanagement information, supervision, and monitoring systems and to use information technology to innovatenew services and to improve the quality and efficiency of current services. For example, a World Bank−assistedFinancial Systems Modernization Project for Hungary intends to implement the new regulatory and institutionalframework of the banking and securities market; to improve the financial health of participating banks; and toimprove reliability of enterprise accounting. An effective monetary policy and management and an electronicinter− and intra−banking transactional network are goals of the project. The informatics components, constitutingalmost 80 percent of the project cost, will provide an effective operational framework for the mobilization ofresources from the private sector, decentralization of foreign exchange operations, improved customer service,and effective liquidity management



57. Participation in global service industries. The mobility of service jobs (within and across national boundaries)and international trade in information−based services are increasing. Causes for this increase are the demandcreated by multinational corporations, the substantial and increasing service inputs required by modernmanufacturing systems, the emergence of international networks, and the advances in microelectronics.23Accordingly, international networking, including the establishment of network services in the country withinwhich trade is to take place, are becoming imperatives for participation in the fast−growing international trade ininformation−based services, and for competing in international trade in general.

58. Developing countries' participation in international trade for services will depend on their successfulexploitation of information technology. For example, computer−assisted design (CAD) is transformingengineering services and displacing traditional engineers and draftsmen. As manufacturing industries rely moreon information−based producer services to reduce lead time, differentiate product quality, and support customerservice after sale, the competitiveness of developing countries in these industries could be substantially eroded.However, the vast new

23 Faulhaber, op. cit.

labor−intensive industry for information creation, processing, and transmission presents new opportunities fordeveloping countries. Data entry services for U.S. companies are provided via telecommunication by suchdeveloping countries as India, Jamaica, Barbados, Mexico, China, and the Philippines. Indian software companiesare being subcontracted to develop large information systems for U.S. corporations.

59. Adapting software to local conditions. One major barrier to the diffusion of information technology in theservice sector of developing countries is that commercially available software packages for various businessapplications are not adapted to local conditions, which differ in accounting rules, business culture, and language.Local capability to adapt software applications to the local business environment is a precondition for exploitingthe power of technology and of the knowledge embedded in these software packages. Similar arguments can bemade about the relevance of most international databases to the business−support services in developing countriesbecause the information content is geared more to the developed world.

60. Need for telecommunications. Aid agencies and developing countries have grossly underestimated the role oftelecommunications in supporting various services and in contributing to the economy as a whole. Extending andadapting the telecommunications infrastructure should be central to the emerging role of telecommunications asthe distribution or communication channel for an increasing number of services, including information services.UN−financed studies in countries such as Kenya and the Philippines have estimated the benefits to be derivedfrom improved telecommunications. Direct benefits are savings of personnel time and reduced expenditures onmore expensive communications media (such as messengers or telegrams) or on alternative transportationservices. Other benefits come from the use of a more effective communications medium such as in the acquisitionof supplies, the operation of organizations, and the sale and marketing of goods or services. Business expansion isachieved mainly through reaching a wider range of customers. Studies have also assessed the benefits oftelecommunications in agriculture, health care delivery, wholesale/retail trade, services, transportation,construction, and light industry. Many developing countries have underestimated the substantial indirect benefitsand externalities arising from telecommunications, and this may have led to serious underinvestment incommunication systems. In some cases, the total estimated benefits of telecommunication investments were 40 to80 times greater that the usual measure of benefit, namely, revenues or even willingness to pay?24

24 Philip F. Palmedo, ''Microcomputers, Informatics, and Development Issues for Foreign Assistance," PolicyIssues in Microcomputer Applications for Developing Countries (report of an ad hoc panel), Boulder, Colo.:Westview Press (forthcoming).



61. Telecommunication services in developing countries generally lag far behind the needs of the economy. Thisis clearly indicated by large unmet demand for connections, heavy call congestion, excessive concentration in afew urban centers, users' willingness to pay more than official tariffs, business pressure to develop independentnetworks, and high economic and financial rates of return on investment. Inadequate telecommunications result inmajor inefficiencies throughout the economy and in reduced quality of life. The high cost of communication usingalternative means, the waste of users' time trying to communicate, slowdown of business and government activity,and loss of competitiveness are among the well−documented effects of telecommunications shortages.25

Public−Sector Management

62. Need for effective public−sector management. Several factors have contributed to the increased importance ofmore efficient and responsive public−sector management: (1) the need to adjust to changing macro−economicconditions; (2) the need to mobilize domestic resources, improve taxation and banking systems, and improvefinancial management in all public−sector activities in response to the debt crisis; (3) the need to improve publicentities' public expenditure programs and the links between planning, budgeting, and evaluation; (4) pressures toreduce the size of the civil service and, simultaneously, to improve its productivity; (5) pressures to devise clearperformance measures and incentives for public enterprises and public service delivery systems; (6) the growingdemand to share information within the government and with the public; and (7) the need to acquire anddisseminate information (on foreign markets, technology, science, economy, and regulations) essential to thedevelopment of the private sector.

63. Information technology applications. Information technology offers novel means for reorienting andimproving public−sector management. The following examples of World Bank−assisted projects illustrate someof the ways informatics has become indispensable to public−sector improvements:

25 For references on the role of telecommunications, see: R.J. Saunders et al. , Telecommunications andEconomic Development , Baltimore: The Johns Hopkins University Press, 1983, and Wellenius et al. ,"Telecommunications and Economic Development," Washington, D.C.: World Bank, 1989.

A Public Administration Support Project for Morocco supports economic reform measures by strengtheningfinancial planning and control, resource mobilization, trade facilitation, and promotion of indigenous industries.Information technology components constitute more than 50 percent of the total project cost and include systemsfor budgeting, economic management, tax/revenue generation, debt management, and external trade management.

A Technical Assistance Project for Uganda supports adjustment measures to sustain economic recovery. Theinformatics component will enhance public−sector budgeting, strengthen economic and financial policyformulation, and rationalize procurement to avoid redundant investments. This will involve the development of anautomated financial information system for the Ministry of Finance/Planning and the Central Bank. Thiscomponent is vital since the government's books have not been "closed or balanced" for 17 years. There are noreliable figures on expenditure trends and commitments on capital projects, rendering informed economicplanning and allocation of scarce resources impossible.

An Economic Management Support Operation for Bolivia aims to improve management of the public investmentprogram, support decentralized operation of regional development corporations, and strengthen the Ministry ofPlanning. The information technology component covers computerized capital project financing, disbursementtracking, and physical progress and technical assistance monitoring capability. The integrated informationsystems are essential for accurate budgeting and planning of capital investments and monitoring of foreignexchange commitments; previously, sector ministries and development corporations operated autonomouslywithout coordination.


Public−Sector Management 20

In Kenya, microcomputers were introduced to both the Ministry of Agriculture and to the Ministry of Financeand Planning to improve budgeting and financial management. Microcomputers are beginning to transform theprocess of budget production from an inaccurate and disorganized process to one that is tailored to policyanalysis, expenditure monitoring, timely decision−making, and better financial management.26

26 See Stephen Ruth, et al. , eds., "Kenya's Introduction of Microcomputers to Improve Budgeting and FinancialManagement in the Ministry of Agriculture" and "Microcomputers for Improved Government

(footnote continued on the next page)

64. The Kenyan application and many similar ones may not just improve the multiple drafting and thepresentation of the national budget on time, but more importantly, may enable budget analysts anddecision−makers to break new ground, simulate options, detect poor data, communicate and coordinateeffectively, retrieve and analyze a large volume of data, ask new questions, and perform tasks that would havebeen left undone with the existing technology. With the mechanics of budget production under control,professionals have both the time and the processing power to carry out budget analysis, to fine−tune projections,and to make thoughtful revisions of investment priorities to meet changing revenue situations.

65. Flexible policy−making. To assist flexible policy−making, governments need to make more use of samplesurveys and administrative records. Microcomputers are being used more frequently for household expendituresurveys and farm management surveys for a wide variety of socioeconomic management issues. The poorly usedrecords at all levels of government and different agencies can be linked through information technology and thenbe mobilized to manage various national programs. For example, in Malaysia and Indonesia, information onfamily planning acceptors has been combined with records on birth to indicate the effect of their family planningprograms and to fine−tune these programs over time.

66. Strategic applications. Some new and strategic applications of information technology are just beginning toappear in developing countries in support of top policy−making. For example, a decision support center has beenrecently established to develop information and decision support systems for the Cabinet and top policy−makersin Egypt.27 Despite the center's relatively brief existence, these systems have been used in synthesizingmulti−sectoral information from the ministries and public−sector companies, facilitating communication andestablishing a common information basis for Cabinet members, and providing timely information in variouscrises. Some early applications include: monitoring and analyzing debt issues, simulating the effect of variouscustom and tariff reforms, providing access to international trade and commodity databases, and tracking strategicmanagement issues.

(footnote continued from the previous page)

Budgeting: An African Experience," Microcomputers in Public Policy , Boulder, Colo.: Westview Press, 1987.

27 H. El Sherif and O.A. El Sawy, "Issue−Based Decision Support Systems for the Egyptian Cabinet," MISQuarterly , Vol. 12, No. 4., December 1988.

67. The benefits of such strategic decision support systems are elusive to quantify. However, experience in moreadvanced governments suggests that they can have a powerful effect not only on the quality of informationrelevant to strategic decision−making, but also on the whole process of policy making and of coordination amongministries. Such systems have contributed to better crisis response, better understanding of cross−sectoralimplications of important decisions, uncovering hidden assumptions, quicker and more effective consensus ongroup decisions, generation of alternatives for better negotiation, and identification of new strategic issues.


Public−Sector Management 21

68. Tax collection. In a growing number of countries, tax collection systems are being overhauled with theintroduction of modern information systems. Property tax collection rates are generally low due to inconsistentproperty valuation, poor records, inability to identify nonpayers, and the long time required to process propertyvaluations and to issue tax notices. Collection rates can be greatly increased by improving the speed and accuracyof tax billing and by early pursuit of nonpayers. Similar results are likely with the application of informatics toother sources of taxation at all levels of government.

69. Management of the civil service. In many developing countries the civil service is under pressure to reducesize, increase productivity, improve the provision of basic services, improve training and skills, monitorperformance, and actively manage personnel policies. Information systems can be developed to identify humanresources and training needs in the civil service, to formulate plans for the effective use and development ofpublic servants' skills; to monitor performance and link incentives to performance; and to supportcareer−development systems. The World Bank's experience in assisting borrowers to improve and reorient publicadministration suggests that improved information systems are indispensable to managing administrative change.

70. Management of public enterprises. Information systems are being established in all types of public enterprisesto hold managers accountable for results, enable them to manage effectively with adequate autonomy, formulateinvestment programs and financing plans, design better pricing systems, monitor quality and improve marketingand billing, and provide regular and reliable flow of information. Effective public−enterprise management isbecoming critically dependent on these systems.

71. Microcomputers in public administration. As public administration becomes an information−intensiveindustry, information technology, especially the microcomputer, can assist overburdened developmentadministrators who operate with scarce resources. Microcomputers improve turnaround time for data and reports,increasing their value as an input for ongoing

planning and management. Database software and digital communication make data collection, organization,analysis, and dissemination more timely and effective. By improving presentation of budgets and costimplications, computers can help policy−makers communicate more effectively with diverse audiences. Whenused to empower information workers and upgrade the skills of civil servants, microcomputers have alsoinfluenced organizational renewal, staff motivation, and individual learning.

Agricultural and Rural Development

72. Agricultural planning and research. Agricultural and rural development planning and management requireprocessing large amounts of information for distribution and marketing of agricultural products, agriculturalresearch and extension, rural financing, flood forecasting and drought relief, crop monitoring (through remotesensing), food security, natural resources management, and poverty alleviation.28 In many developing countries,the introduction of microcomputers and telecommunication facilities has simplified the information−intensivework of agricultural research projects. In Nigeria and Indonesia, pilot applications of information technology havemade it easier to conduct agricultural surveys, analyze survey data, and use such surveys for developingagricultural research databases and for designing agricultural development projects.

73. Agricultural inputs, extension and marketing. In India, informatics has been used to support the training andvisit system, agricultural extension, and dissemination of information about marketing and improved methods ofcultivation. Successful development of agricultural systems often requires better control over inputs, includingwater. In northeast Thailand, microcomputers are being introduced to regulate the operation of the irrigationsystem in view of changing environmental parameters. In an Agricultural Sector Management Program forKenya, the World Bank has financed an integrated management information system at the National Cereal


Agricultural and Rural Development 22

Produce Board for crop forecasting, storage, budgeting, pricing, accounting, marketing and distribution. Also inKenya, microcomputers were introduced by USAID to improve crop forecasting, assess the country's foodsecurity, and monitor project implementation, as well as to strengthen the management of the Ministry ofAgriculture.

28 For details and other examples, see: Microcomputers and their Applications for Developing Countries , Reportof an Ad Hoc Panel, Boulder, Colo.: Westview Press, 1986.

74. Rural development. Information technology is likely to play an important role in mobilizing financialresources for rural development. For example, a World Bank−assisted project for the National AgriculturalDevelopment Bank of Madagascar includes a significant information technology component (about 25 percent ofthe total credit), which supports the development of management information systems, planning tools, creditcollection systems, automation of major transaction systems, and electronic linkage of regional centers withheadquarters.

75. Natural resource management. Recent developments in geographic information systems combined withremote sensing have various applications for natural resource management, land use and water resourcesplanning, forest defoliation, and soil cover monitoring. In the past, establishment of the link between economic(particularly macroeconomic) analysis and environmental considerations was frustrated by the inadequacy ofphysical data. This situation is changing rapidly: recent developments in geographic information systems haveimproved assessments of current natural−resource endowments and trends in their use, as well as projections offuture endowments under various scenarios of economic growth and sectoral output. In particular, remote sensingfrom space may offer a broad synoptic view and uniformity with respect to the way information is collected.Combined with traditional methods of collecting physical data and the integration of such information withsocioeconomic data on population, land tenure systems, and so forth, these developments suggest that systematiclinking of macroeconomic and resource planning can indeed become a reality.29 The World Bank and theOrganization of American States are planning to collaborate on the applications of geographic informationsystems to integrate environmental considerations into macroeconomic planning and economic policy analysis indeveloping countries.

76. Participation of local communities. Environmental information could be enhanced through informationtechnology applications, especially if local communities in provide feedback on national policies and collaboratewith national agencies on environmental monitoring. Management of natural resources is often location−specific,yet most environmental management has been aimed at achieving conservation by controls rather than throughservices to communities. Services would cover information on the stability of the resources base to supportagriculture and environmental protection in areas such as desertification, hazardous and toxic materials, and soilerosion.

29 Gunter Schramm and Jeremy Warford, Environmental Management and Economic Development ,Washington, D.C.: World Bank, 1989.

77. Poverty alleviation. Over the past decade, efforts to alleviate poverty have been hampered by poor knowledgeof the effects of different policies and technological packages on the people they are meant to benefit. Informationsystems are valuable tools for planning, monitoring, and evaluating programs to alleviate poverty. Among theimportant lessons learned from designing information systems within various rural development projects is theneed to identify early on the potential users of these information components within the country and to buildin−house and in−country capabilities for monitoring and evaluating poverty alleviation programs.30 Ruralplanning and special assistance programs to the poorest regions could make extensive use of information andmonitoring systems. Such systems would facilitate decentralization, improve socioeconomic analysis and the


Agricultural and Rural Development 23

design of the programs, and strengthen the technical assistance and support services provided by the centralministries. India, for example, is creating databases and information systems at various levels of government tosupport district planning and poverty alleviation programs.

78. Empowering the poor. Poverty alleviation is not only about reaching the poor (with the right set ofinvestments and services), but more fundamentally about empowering them and their organizations with basicinformation, skills, and opportunities to actively participate in their own development. Information technologycould provide community groups and non−governmental organizations access to relevant, information thatpromotes indigenous solutions to development. Several developing countries are experimenting with ways tomeet these information and communication needs: involving remote communities in assessing the relevance ofinformation obtained through various communication channels (Philippines); district−or village−level informationcenters (Africa); and bottom−up research and extension that takes into account the information−seeking behaviorand needs of small farmers, entrepreneurs, and rural groups.31

79. Information in rural areas. District−level information centers (local government information systems) coulddiffuse information into the rural areas and link local knowledge with national information systems. Such centerscould identify the information needs of rural groups and extension agencies; explore alternative modes ofinformation gathering and delivery at the local level; evaluate communications programs and indigenousknowledge networks; tailor information for local audiences and for local decision−making; provide informationlinks to the national rural development agencies, the research and development systems, and rural developmenttraining

30 Guido Deboeck and Bill Kinsey, Managing Information for Rural Development: Lessons from East Africa ,Washington, D.C.: World Bank Staff Working Paper No. 379,1980.

31 K.P. Broadbent, "Information Needs for Rural Devolopment," Ottawa: IDRC, 1989.

institutions: and maintain baseline socioeconomic data in support of a bottom−up approach to rural developmentplanning.32

80. The telephone is still underrated as an instrument of development for the rural areas. It improves informationfor the marketing and distribution of agricultural goods and it also assists information exchanges between therural and urban areas. Similarly, radio, television, and (more recently) portable microcomputers offer powerfulmeans for diffusing knowledge and enhancing learning, thus increasing the productivity of vast rural populations.

Infrastructure

81. Planning and management. Information technology has had a tremendous effect on sectors such as energy,transport, and urban infrastructure. The following examples illustrate a range of applications in which informaticsis making significant contributions to the quality of planning and management. The emergence of microcomputersin the late 1970s, when oil prices were rising, stimulated many pilot microcomputer applications to improve theplanning and management of the energy sector in several developing countries. In Morocco, Sudan, and SriLanka, energy planning, energy assessment surveys, supply and demand analysis, and policy analysis (forexample, pricing) were undertaken with the assistance of the World Bank, USAID, and UNDP. Microcomputersbrought the analytical process closer to local analysts and decision−makers, forcing them to become moreorganized in their information gathering and to develop more extensive sources of data, and it encouraged them toexplore more options.

82. Energy planning. The use of utility planning and design models in the electricity subsector (India and Sri


Infrastructure 24

Lanka) is now possible with the wide availability of software packages in the public domain. Informationtechnology is also applied to improve energy efficiency in areas such as commercial buildings and factories(India), to analyze energy conservation measures (Tunisia, Togo), and to reduce power distribution losses.Software packages are also available commercially (and from non−governmental organizations) for developingenergy resource strategies and for evaluating alternative renewable energy resources, such as fuelwood, wind,biomass, solar, and small hydropower. They have been used successfully for training in energy

32 Sharing Knowledge for Development , Ottawa: IDRC, 1989.

planning in Africa. By providing relief from "number crunching," software packages let participants focus on theissues and on "hands on" analysis with real data.

83. Management information systems. Funded by a large World Bank loan ($400 million) to Turkey, the PowerGeneration and Distribution Project, a management information system will support institutional strengthening, aswell as improve customer accounting and billing. Although the information technology component constitutes asmall percentage of total project cost, it represents the core institution−building measure. Without improvedbudgeting, accounting, and billing, the enterprise would continue to be in deficit and to rely on governmentsubsidies.

84. Transport planning and management. Similar informatics applications are underway in transport planning andmanagement. Applications to air transport are well known, and even the least advanced developing countries arenow trying to cope with the effect of information technology on airline reservations and customer service. Lesswell known examples are informatics applications to road network planning and to railway and port management.For example, at the Indian Institute of Management, it was possible to cut down the estimated construction cost ofa rural road network for Cujarat by 20 percent through optimization. Computerization of the India railways(which carry 10 million passengers daily) resulted in increased wagon availability and a 40 percent reduction ininventory.

Human Resource Development

85. Development communication. Advances in informatics improve the responsiveness of developmentcommunication across all economic sectors. Basic education and health services, agricultural support andextension, and family planning programs require effective communication, social marketing, and mass education.Investments in physical facilities in support of human resources development and social and agricultural servicesare often underused because of poor development communication. Recent advances in informatics should spurbasic rethinking of the role of communication in human resources development and in accelerating necessarysocial learning processes. The conventional approach to development communication attempted to build up acommunication channel separately within each sector or subsector—each relying on field workers to be theprimary conduits of its information. This approach led to duplication, fragmentation of channels, highlyinefficient communication processes, and neglect of developments (such as such as non−agricultural employment,environment, and women's development) that did not fit within existing governmental structures. Informaticsshould spur

assistance to strengthen generic communication systems and information services to support current sectoralneeds as well as foster learning in fields of development that lie outside the mandates and expertise of existingsystems. This could lead to more responsive ''information highways" and networks for processing andtransmitting information across all economic sectors.


Human Resource Development 25

86. Adoption of new practices. Development depends on appropriate learning for all the activities involved, andinformation technology can meet the growing demand for learning and communication.33 This leads to newperceptions, attitudes, skills, and institutions. These in turn, lead to the acceptance of new ideas and the adoptionof new practices. Continuing in−employment learning is increasing in industrial and developing countries.

87. Current training programs cannot make scientific and technical knowledge accessible to target populations.The entire range of learning needed for sustainable development depends on information transfer mechanisms thatare demand−driven (learner−driven), interactive, reliable, comprehensive, and low−cost. The combination ofcomputers, video, and telecommunication now makes it possible to carry out interactive learning and to provideinformation on demand in various media. Information technology thus promises a new way to transferinformation from one in which the recipient is dependent on limited, predetermined, uniform, and top−downinformation to one in which the learner has access, at demand, to a large body of knowledge and experience. Inparticular, information technology could link rural institutions to agricultural research centers, universities, supplyand marketing organizations, government offices, and central hospitals. The role of education would be to showlearners (villagers) how to use the information in making decisions. Pilot experiments in developing countries andworldwide experience suggest that the graphics and visual communications made possible throughmicrocomputers can enhance learning even among very young children, illiterate technicians, and uneducatedvillagers.

88. Health and population applications. Current applications of informatics in the health and population sectorsbroadly cover: (1) information support for policy formulation, program design, planning and budgeting, andmonitoring and evaluation of national programs; (2) pharmacy and drug logistics control systems; (3) informationsystems for health care delivery and for vertical integration of primary, secondary, and tertiary levels of healthcare; (4) knowledge bases and decision support systems for health workers; (5) statistical analysis for health andfamily planning indicators, epidemiology, demographics, maternity care, and medical research; and (6) health

33 See Bernard Woods, "A New Opportunity in Development," Policy Issues in Microcomputer Applications forDeveloping Countries , Boulder, Colo.: Westview Press (forthcoming).

manpower planning, management, and training. Informatics has been applied most extensively at the secondaryand tertiary levels of patient care, namely the hospital level. At this level, information handling accounts for about25 to 30 percent of total hospital costs.34 The following illustrates some of the applications of informatics to thehealth and population sectors.35

89. Decentralized monitoring and delivery systems. In Thailand, microcomputers are used to collect and transmitinformation from health posts at the village level to the district, provincial, and central levels for analysis,monitoring, and dissemination. In Central and West Africa, health information systems have been developed tostrengthen the health delivery system, improve regional and national disease surveillance, and integrate thisinformation into national health planning systems. Computers are simulating the effect of various policies andprograms on population control to assess current demographic conditions and to project future health carerequirements. China is developing expert systems for computer−aided medical diagnosis for common diseases forits rural hospitals, and in the Philippines, rural health workers have been able to communicate (through low−costpacket radio networks from remote areas to the health centers) their daily treatment cases and needs for drugs.This has proven very effective for monitoring, on a daily basis, the outbreak and spread of diseases(epidemiology) and for producing more reliable health information than has been available at the central offices.

90. Public health information systems. A World Bank−assisted Social Sector Management Project for Argentinaincludes institution building measures for the Secretariat of Health, including information systems for publichealth laboratories and hospitals and for health manpower resources management. The information systems areessential for institutional strengthening and will improve the provision of social services, the quality of statistical



and research activities, and the updating of legal frameworks. Out of a $42 million loan, the informationtechnology component amounts to $17 million.

91. Education and manpower development. Informatics can improve the management of the education sector atall levels; transform traditional approaches to teacher−and text−based learning

34 The World Health Organization has recognized the growing importance of informatics for the health sectorand produced a report to assist national health authorities in understanding the implications of informatics forhealth services. See Informatics and Telematics in Health: Present and Potential Uses , New York: WHO, 1988.

35 For many other applications cited, see Microcomputers and Their Applications for Developing Countries, op.cit.

systems; and prepare the future generation and current work force to exploit information technology in allrelevant fields by creating computer literacy or a computer "culture."

92. Education management. The education sector often suffers from the poor quality of data that hampers policyanalysis, research, and performance analysis. There is considerable fragmentation, duplication, and waste in thedata collected by various branches of educational institutions from poor and rigid means of organizing data andlack of decision support tools and management information systems. The lack of information systems onpersonnel, physical facilities, student records, and performance contributes significantly to problems such as lowefficiency, poor monitorng and evaluation of various policy measures, poor accountability, and excessivecentralization and rigidity. These problems are also common at the primary, secondary, and university levels. Thelack of information on labor markets and manpower requirements is also a major constraint to improving thequality and relevance of current educational programs. The development assistance community is nowincorporating major information technology components in its programs to improve the planning andmanagement of various public education institutions, including the ministries of education in many developingcountries. The potential for improvement remains substantial.

93. Innovative teaching applications. An early stage of informatics application is the use of computers andcommunications in the core process of teaching−learning. Computer−assisted instruction can complementtraditional teaching by providing individualized, self−based instruction or by teaching subjects to students (mainlyadults) who do not have access to other means of instruction in these subjects. There are promising applicationsfor remedial instruction and for teaching handicapped children, for simulation in several areas of applied scienceand vocational training, and for reaching distant students. Information technology applications in distant learningand mass education are known, although still not diffused in most developing countries.

94. National policies for education software. There are major pitfalls in the use of current educational softwarepackages. Many of them have limited educational value, and others address a narrow audience. Educationalsoftware that is user−controlled, multipurpose, and not dependent on language ability is less likely to faceadaptation problems and cultural bias in developing countries, and more likely to encourage creative and criticalthinking. Regional cooperation among developing countries (with similar cultures) could reduce the cost of localdevelopment of culturally−adapted educational software. The adoption of national policies and strategies for theuse of educational software would simplify teacher training, support faster diffusion of best practices, and reducethe cost of domestic software development.

95. Manpower development. The greatest challenge for the education sector is to develop the necessary humanresources for exploiting informatics in support of the country's long−term development strategy. There are at leastfour broad goals of information technology education and training: (1) to raise policy−makers' awareness of the



growing role of information and information technology in development and provide computer literacy for thepublic; (2) to enable professionals in various sectors to identify informatics applications (in fields such asmanagement, health, and agriculture); (3) to prepare teachers to use microcomputers and various softwarepackages as powerful educational tools in schools and to promote computer literacy, and (4) to train informationscientists and information technology professionals.

96. Computer−literacy programs. Among industrialized nations, the United Kingdom, France, Italy, and Japanhave nationwide computer−literacy policies. Although there is no national plan in the U.S., by 1985 more thanhalf of the schools at all levels had access to microcomputers. In Singapore, computer literacy and informaticseducation are integral parts of a national strategy for developing the infrastructure to make Singapore a regionalcenter for informatics−based services. In Brazil and India, computer science education is given increasingemphasis in business, engineering, and technical schools. In Chile, a pilot program has used television courses topromote computer literacy. Many experiments and pilot programs are being developed to promote computerliteracy, but there is little evaluation of the emerging experience or dissemination of the best practices amongdeveloping countries.36

Decentralization and Organizational Change

97. Demand for responsive organizations. To remain competitive and effective in the 1990s, organizations mustbe able to handle increasing complexity, interdependence, uncertainty, and change. New development issues callfor reorienting the role of government, promoting competitiveness, accelerating innovation, and providingaccountability. To achieve this, public policy institutions must base their policies on reliable data, sufficientanalysis, timely feedback, and extensive communication with various stakeholders and the private sector. Povertyalleviation and human resources development will become increasingly dependent on information about potential

36 One of the few attempts to share this experience is the meeting sponsored by the National Research Counciland USAID, reported in Microcomputer Applications in Education and Training for Developing Countries ,Boulder, Colo.: Westview Press, 1987.

target groups, networking among public agencies and non−governmental organizations, close monitoring andevaluation, and improved experimentation and social learning. Both public and private enterprises will have tocope with technological innovation, a rapidly changing mix of products and markets, and a growing demand forquality and service. The emerging role for government agencies is one of supporting decentralized activities,private−sector development, and non−governmental organizations and of creating an enabling environment forflexible supply response.

98. Informatics for flexibility and learning. Literature on strategic planning, management, and control suggeststhat the new demands placed on institutions for flexibility and learning that institutions face require enhancedinformation acquisition and communication capabilities both within the organization and with its environment.37Timely and reliable access to external information and databases on markets, technologies, competitors, andcustomers has become essential for corporate survival and growth. Management information systems andelectronic data communication are creating new forms of flexible organizations that combine decentralizedoperations with strategic planning and control. Monitoring and evaluation systems assist organizational and sociallearning, continuous self−evaluation, deliberate experimentation, and sustainable institutional effectiveness. Thetrend induced by informatics is toward greater functional integration and less hierarchical stratification.38

99. Inadequacy of traditional institution−building So far, however, technical assistance to developing countriesfor institutional development has been based on a "static view" of organizations and guided by a blueprintapproach that does not take account of individual and organizational learning capabilities.39 This has led to rigid


Decentralization and Organizational Change 28

and unsustainable performance, as well as to a general lack of institutions capable of handling new tasks and newenvironments. Even when monitoring and evaluation components or information systems were incorporated indevelopment projects, they almost exclusively focused on the requirements of external aid agencies

37 See, for example, Nagy Hanna, Strategic Planning and Management—A Review of Recent Experience ,Washington, D.C.: World Bank Staff Paper No. 751, 1985; and Peter Lorange et al., Strategic Control , St. Paul,Minn.: West Publishing Co., 1986.

38 While informatics is an "enabling" technology that can facilitate decentralization and flexibility, managing theorganizational change processes and realizing these benefits are not easy. Changes in management style anddoctrine are necessary to view human involvement and participation as a strength rather than a nuisance.

39 For a background on shortcomings of institutional development assistance, see several of the World Bank'sOED studies, including, most recently, "Evaluation Study of Free−Standing Technical Assistance in Support ofPublic Sector Management in Sub−Saharan Africa" (draft, November 28, 1989).

or central planning and finance ministries. They were seldom designed for local management and built−ininstitutional learning. Little attention has been given to the monitoring of project operation and maintenance, thesustainability of benefits, and the assessment of effects. Information technology applications can helpdevelopment assistance agencies and developing countries to build viable and agile institutions better suited forthe 1990s.

100. Informatics for decentralized programs. There is a growing recognition of the limitations of the state and ofthe need to mobilize other local and grass−roots organizations. Decentralization in government takes three forms:(1) deconcentration—transferring resources and decision−making from headquarters to other branches of centralgovernment; (2) devolution—to autonomous units of government such as municipalities and local governments;and (3) delegation—to organizations outside the regular bureaucratic structure, such as non−governmentalorganizations, cooperatives, and public enterprises. Informatics offers new and powerful approaches todecentralization of government services. Improved information and communication systems assure centralauthorities that accountability and coordination are possible under these various forms of decentralization.

101. Since microcomputers are relatively cheap and easy to operate, they are suitable for managers and for fieldstaff in the rural areas. Combined with telecommunication capabilities, they can help decentralize mass services tourban and rural areas. For example, the Indonesian government's successful family planning program is greatlyhelped by strong central monitoring and timely reporting systems combined with decentralized day−to−daymanagerial authority and quick feedback from the field. Such monitoring systems, essential if field managers aregranted greater autonomy, serve two purposes: to maintain central direction and accountability and to motivatelocal managers.40

102. Microcomputers can also strengthen the management capability of local governments, devolve basicgovernment services, and improve local tax collection. To assist this process in Tunisia, the Ministry of Interiorand the National Computer Center provide software development and training in information systems to localgovernments. In Brazil, the Institute of Municipal Administration is developing a microcomputer−based softwareto analyze the effect of municipal investments on local government finances.

40 World Bank, World Development Report , New York: Oxford University Press, 1983.

103. Local participation in decision−making. Some countries are piloting innovative uses of informationtechnology to enhance the participation of people in the development decisions and services that affect them. A


Decentralization and Organizational Change 29

pilot project involving different levels of government in Thailand is developing a more decentralized system forgathering and using information for rural planning. A "bottom−up" approach to data collection is likely to makethe information more useful to local decision−making is likely to make it more relevant and responsive to localneeds. At the same time, such an approach will improve the quality of aggregate information at higher levels ofgovernment. Applying informatics to improve information flow to and from the rural areas and to empower localcommunities for local decision−making suggests the need for better understanding of communication processesand decision−making needs at these levels. The University of Botswana, with International DevelopmentResearch Centre assistance, is researching factors that could improve the design of information services for ruralcommunities. These factors include the information needs of different groups, their information−seekingbehavior, access to indigenous knowledge, and the demand and supply of information from external sources.41

104. Decentralization and Globalization. Information technology makes it possible to carry out productive andservice activities efficiently on a small scale. Meanwhile, advances in telecommunications enable dispersedenterprises to communicate nationally and internationally. The growing decentralization and globalization ofmany industries provide new opportunities for developing countries to participate in regional and globalsubcontracting. Participation, however, will depend on the quality of the local telecommunications infrastructureand the ability to work in an electronic communication environment. Within developing countries, theorganizational changes and decentralization options made possible by information technology could facilitate thespatial distribution of economic activities and industrial operations, which are currently centralized in the capitalsand large cities of developing countries.

Information and Informatics Policies

105. National information policies. There is a growing awareness that the more complex a society, the moreinformation is central to its economic activities. Industrialized countries are giving more attention to thedevelopment of national informatics policies, and recognizing their important roles as major users, sources ofinformation, facilitators of information technology

41 Paul McConnell, "Information for Development: Experiences of the International Development ResearchCenter (IDRC)," Ottawa: IDRC, 1989.

diffusion, and providers of information infrastructure, as well as their role in setting policy for informatics. In thisrapidly changing and innovation−driven field, governments should orient themselves toward promotion andsupport rather than control and rcstriction.

106. Technology adoption and the general environment. Successful country experiences in industrial technologydevelopment and diffusion point to important lessons for the acquisition and exploitation of informatics indeveloping countries.42 Donors and developing countries often see access to technology as the magic solution tothe problems of underdevelopment. Yet the lessons of experience, most recently of Japan, suggest that there areseveral necessary conditions for the successful adaptation and use of technology, and that these conditions applywith special force to information technology.

107. The three most fundamental conditions are: strong domestic competition, human−resources development,and active government policies to promote diffusion and disseminate information about the new technologies.Active competitive forces in Japan have generated strong pressure for technology acquisition, diffusion, anddevelopment. The main role of government has been to expand the scope of technological opportunities availablefor enterprises. The remarkable expansion of science and engineering expertise has been one of the critical factorsenabling the rapid technological absorption by enterprises, as well as the rapid growth of their R&D capability.Industrial extension information and promotional policies also have contributed to the rapid diffusion of


Information and Informatics Policies 30

technologies across the economy, and particularly into small and medium−sized enterprises.

108. These policies were especially successful because the services provided by intermediary institutions (R&D,extension, testing, joint facilities, venture capital) were in line with user needs. User industries activelyparticipated in designing these services. The nationwide emergence of quality control systems, television andradio courses on quality control, industrial standardization and prize grants to factories with the bestquality−control programs, and the participation of many professional and promotional associations created agroundswell of commitment to quality improvement and, in turn, to best technology

42 Existing literature is most extensive on the Japanese experience in industrial technology development. Anexcellent overview of this literature is in Overview of Japanese Industrial Technology Development , by SadaoNagaoka, Industry Series Paper No. 6, World Bank, March, 1989. Also see: Anthony Churchill, "TechnologyTransfer and Training of Manpower in the Energy Sector," paper presented at the Fourth Symposium on PacificEnergy Cooperation, Tokyo, January, 1990.

management practices.43 The extensive subcontracting system, the strong incentives and pressures for asubcontractor to innovate, the high level of education, and a managerial style encouraging innovation andparticipation also facilitated technology diffusion. A variety of productivity, research, standardization, extension,and marketing institutions have been used to gather and disseminate information to small− and medium−sizedfirms. These factors have accelerated the development and adoption of informatics in Japan, and more recently inKorea, Taiwan, and Singapore. In similar ways, the incentive framework and responsive intermediary institutionsare critical to information resources development, communication, and dissemination.

109. Key policy choices. Developing countries face difficult policy choices as they acquire, adapt, and diffuseinformation technology products and services.44 These policies include: (1) trade, investment, and regulatorypolicies governing the supply and use of informatics; (2) policies establishing priorities for the development ofinformation resources, informatics applications, and the infrastructural requirements; (3) education andemployment policies to prepare human resources to exploit information technology and to absorb employmentshifts; (4) proactive public policies to provide equitable access to national information resources andcommunications; (5) public−sector procurement, standardization of information technology, and development ofinformation markets; and (6) international informatics policies on issues such as transborder data flows,international trade in information services, access to information technology know−how and markets, intellectualproperty rights, and donor coordination in informatics assistance.

110. Trade, investment, industrial, and regulatory policies. First, public policies are vital for the diffusion ofinformation technology. Many developing countries have adopted a supply−oriented informatics policy. Few havedefined policies in support of the wider interests of informatics users throughout the economy. Informaticspolicies should give first priority to the effective diffusion of the new technologies in support of the wholeeconomy. Experience so far suggests that a too−restrictive import policy in the information technology industriescan have a positive effect on the country's technological autonomy, but a negative effect on its industrialinfrastructure and on the diffusion of this valuable technology to the rest of the economy. Because of the rapidpace of

43 Examples of these associations are: the Japanese Standards Association, the Japan Management Association,the Union of Japanese Scientists and Engineers, and the Japan Productivity Center.

44 For an early and interesting treatment of the major national policy issues involved, although limited tomicrocomputers, see "Microcomputer Policy Development: A Case Study of Sri Lanka," by Mohan Munasinghe,in Microcomputers and Their Applications for Developing Countries, op. cit.



change in information technology and the investments needed to support the very large research and developmentrequirements, the sector is not always suited for successful infant industry protection. The highly protectionistpolicy of Brazil for microcomputers alone is probably costing user firms and the public about $500 millionannually in direct costs alone, not even taking into account the qualitative dimensions. On the other hand, even a"user−oriented" informatics policy would require increasingly strong local capabilities in design and adaptation ofthe technology.45 Across−the−board and drastic liberalization is too simplistic a prescription for countries atdifferent levels of industrialization. Even among the NICs, the challenge is bow to foster selective liberalizationwithout jeopardizing the learning and industrial linkages necessary in this field.

111. Industrialized and developing countries alike are strongly inclined to view the information technology sectoras strategic to the technological modernity of the economy; this view is based on a common fear that countries notpursuing production in the sector will be left out of the information age. Countries as diverse as Japan, France,India, Brazil, Mexico, Argentina, Korea, and Taiwan have adopted explicitly proactive informatics policies withvaried degrees of protection and success. It is important to examine these and other countries' experiences in orderto advise developing countries on appropriate informatics policies. In general, there is a need for long−termstrategies that place the informatics industries at the service of the entire economy, rather than the reverse. Settingthe right policy framework is perhaps the most essential area for public action in support of informatics diffusion,particularly in the private sector.

112. Competition and regulatory policies also play an important role in the application of information technologythroughout the economy. Assuring a competitive environment (domestically and through import liberalization andexport promotion) is one of the most effective means to stimulate modernization and structural change inindustrializing economies.46 These general policies must be tailored to the specifics of information technologyand service industries to cover, for example, protection of intellectual property and copyrights, protection ofsovereign interests such as data on defense and budget, and promotion of the private sector in providinginformation services. Currently, the demand side for information resources and information technology is poorlyunderstood in most developing countries. Governments often err on the side of vocal local suppliers ofinformation technology hardware and of centralized control of information resources.

45 Ernst and O'Connor, op. cit.

46 For an excellent treatment of this topic, see Claudio Frischtak, et al., Competition Policies for IndustrializedCountries , PPR Policy Paper, Washington, D.C.: World Bank, 1989.

113. Setting priorities. A second policy area of common concern to developing countries is the selection ofpriority sectors or areas for the application of information technology. They must identify infrastructuralrequirements and prepare concrete informatics strategies and plans to support priorities and to monitor progress.Applications of information technology should be driven by needs and national priorities, not by the technologies,no matter how dazzling those technologies may be. Several developing countries, such as Singapore and Korea,and industrial countries, such as Japan, are targeting certain sectors for accelerated application of informatics. Inmany developing countries, a case can be made for public promotion of information technology applications tocertain sectors and to local problems where current market conditions, straightforward technology transfer, andprivate−sector capacity are inadequate (for example,agriculture and rural development and the social sectors).Information technology has a special role in developing resources in the education sector, which helps form thehuman resources of societies.

114. Clear priorities must also be set in the face of scarce resources, particularly to meet the skills and basicinfrastructural requirements for exploiting informatics. Setting priorities could then be used to formulate coherentnational strategies and programs, to promote collaboration and coordination among public and private institutionsconcerned with informatics, to build common infrastructural capabilities and support services, and to support



demonstration projects and diffusion of successful practices. This could clarify the roles of the public and privatesectors by promoting coordination and consultation between them. Information providers such as libraries, centralstatistical offices, and public databases often have little idea of the potential users and public demand forinformation. It is necessary not only to build national capabilities for common information technologyinfrastructure and informatics development, but also to wed that expertise to priority users and sectors.

115. Priorities for informatics application should also guide the development of nationwide telecommunicationsfacilities and appropriate institutions to adapt the infrastructure to the changing needs of information technologyusers. Priorities and strategies could also identify and support the development of various information servicescenters for the application of information technology to common local business problems, and local technicalsupport services (local consultancy) for maintenance and training in computers and software tools. Finally,establishing policies and priorities could also spread the best practices in information management Somegovernments have created national centers and networks to help develop and disseminate innovative and priority

applications of information technology, provide shared processing facilities, and raise the awareness of entitiesthat would otherwise respond more slowly.

116. Employment and skills profile. The third area of policy concern is the effect of information technology oneducation and employment and—the need to prepare human resources to apply information technology in supportof a development strategy. There is concern about the possible negative effect on employment of certaininformation technology applications as well as concern about the human resource and employment policiesnecessary to accelerate the diffusion of this promising technology. Evidence so far suggests that the negativeeffect of information technology on direct employment is small compared with its positive effect on economicgrowth. However, this positive effect may be considerably smaller in the absence of institutions supportingwidespread diffusion of the technology or without linkages among major economic activities.

117. Industry−level studies suggest that large−scale information technology diffusion causes enormous changes inskill requirements at all levels and significant degrees of labor displacement among firms, industries, and regions.The social costs of these displacements are highest for the slow−growth economies and for the less educated andless trainable members of the workforce. The effect of informatics diffusion on the skill mix and employment isalso a function of labor legislation, worker participation, and corporate employment and retraining policies. Theimplications for employment vary according to the country's phase of development, the rate of its economicgrowth, the size of its domestic market, and its place in the new international division of labor.47 The newlyindustrialized economies are already incorporated into the new international division of labor and have a greaterability to absorb displaced labor into higher−skilled jobs in the information industry. Public debate on these issuesis growing in the industrialized countries. Governments are realizing that they must play a more active role insupporting the human and institutional adjustments necessary to broaden the benefits of the technologicalrevolution. In general, all countries require flexibility in education, institutions, labor markets, and policies tominimize the transitional costs of labor redeployment and labor displacement arising from information technologydiffusion.

118. Education and training policies. What does this imply for educational and training policies for countries atdifferent levels of development? In general, a literate labor force is more trainable and flexible, and thus raises therate of return of investing in information technology. It also

47 Martin Carnoy, ''The New Information Technology—International Diffusion and Its Impact on Employmentand Skills," a literature review (draft), 1989.



provides a basic condition for the diffusion of technological change from particular firms and industries to others.Countries at the low end of industrialization require much more informal, labor−market−oriented vocationaltraining for the successful adaptation of informatics applications. In industrializing countries, increased flexibilityof the labor force could be the single greatest reason to invest in higher quality general schooling.

119. More emphasis should be given to management training and higher education in computer sciences. Mostdeveloping countries sorely need information science education to organize, disseminate, and apply informationresources in support of all development activities. For the newly industrialized countries, much broader technicaland scientific education is necessary to prepare the labor force for participating more intensively in theinformation age. Other policies and incentives to promote enterprise−based training and the participation ofmultinationals in informatics skill transfer could be important vehicles to communicate the best practices ininformation management Informatics policies should address the rigidity of current educational systems andsupport the most promising channels for the transfer of "know−how" and best practices. In Korea, Taiwan, andSingapore, these policies also include training of informatics users in the civil service and private sectors.

120. Socio−political issues. The fourth informatics policy area is the socioeconomic issues arising frominformation technology applications to facilitate access to information resources for the public at large. Examplesof these issues include control of information and communication channels; equitable access to publicinformation; the effect of foreign media on local cultures; privacy and security; ownership of information; and therole of government in developing information resources and promoting informatics applications in direct supportof social policies and the poor.

121. Equitable access to information. Without appropriate policies and programs, information technology mayreinforce social and economic dualism, widening the gap between the urban and rural areas and between the richand the poor. The poor suffer the most from information poverty, as both produces and consumers. So far,informatics development has been biased toward military applications and labor−saving techniques, as well astoward high−quality consumer goods for the high−income consumers. Without appropriate public action, this biasmay increase, and the mass of the world's population could miss out on information technology benefits. Unlikethe green revolution in agriculture, information resources and information technology skills are likely toconcentrate in urban areas and in the more advanced sectors of the economy. This dualism will remain (or even bereinforced) unless there is greater recognition of, and public support for, the

vast needs of the rural population for learning and information exchange. The substantial externalities oftelecommunications and information services justify expanding access to information services on the grounds ofboth growth and equity.

122. While the potential for magnifying existing inequalities exists, there is far more exciting potential for usinginformatics to reduce inequalities. For example, in many countries, such as Brazil, microcomputers are alreadybeing used In private and other advantaged schools, raising questions of equal access and opportunity for thepoor. However, the experiences in these schools may be used as models for a public policy of introducingmicrocomputers in the public schools. Similarly, some new informatics−based health technologies could improveequity and broaden access to health services (through support for paraprofessional health workers andtropical−disease control). Yet other applications of informatics could accentuate inequities and enhance the powerof entrenched members of the health professions (through support for high−cost, hospital−based,physician−delivered services).

123. Developing countries must devise policies and strategies to apply information technology for the bettermentof the poor and rural populations. For example, informatics could assist in providing social services toinaccessible areas. Information technology also could be used to broaden public access to information resourcesand empower the poor, the non−governmental organizations, and the rural population through timely and relevant



information on resources and opportunities. Television is having a profound effect on the quality of life of therural populations in such countries as Brazil and India. Shaping informatics policies in support of growth withequity requires an understanding of the role of information in the primary economic activities among the ruralpoor and the role of information technology in meeting the learning and communication needs of the ruralpopulations.

124. Government as a major user of information technology. The fifth policy area is concerned with the role ofthe government as a major user of information and information technology in the management of the economyand the delivery of services. For example, standardization in hardware, software, and communication is important,particularly in the low−income countries. Guidelines for public−sector procurement of information technologycould promote: (1) efficiency in setting up maintenance and support systems; (2) shared experiences andapplications among users within a country (3) economies of scale in training and procurement and (4)compatibility and communication between computers and applications. The African countries, in particular, havesuffered from excessively diverse and incompatible information technologies that have been

acquired mainly through bilateral aid without adequate regard for the recurrent costs and local capabilities formaintenance and support services.

125. Informatics policies may also promote improved information management practices and information sharingamong government agencies and with the public. Many governments in industrialized and developing countriesare devising government−wide policies and programs for data management, Information sharing, andcommunication, as well as for guiding various government agencies to formulate their own informationmanagement strategies and information technology plans. Increasingly, Information management is viewed as animportant function in all types of organizations. Information technology has increased the value of informationresources as a strategic asset and has opened more effective channels for information sharing. Public policiesshould be designed to exploit these opportunities.

126. International policy issues. Finally, public policy must address the international issues arising from theglobal transfer of information and information technology and from trading in information−based services, whichincreases the need for international and regional cooperation. One example is the transfer of information acrossnational boundaries (transborder data flows) through global communication links. This raises issues aboutsecurity, data ownership, and commercial concerns. The speed of both data and financial transfers (for example,multinational banks shifting large sums of capital in lockstep) is seen by some researchers as inherentlydestabilizing.

127. Many developing countries are concerned about the possible effect of information technology on the controlof their own social and economic development But at the same time, developing countries are dependent on a freeflow of information to provide them with access to research findings and technological information. Internationalcooperation may help redress the imbalances in the world's flow of information through practical assistance andlocal communication capability building, while at the same time safeguarding the fundamental principles offreedom of information and communication.48 Regional cooperation holds similar promise in areas such ascommon training facilities and regional software development for common problems or languages. Of particularimportance to developing countries is the issue of access to information technology as technology−exportingcountries attempt to restrict the flow of advanced technology to the developing countries on security orcompetitive grounds. Developing countries may have to

48 This is the stated thrust of UNESCO's International Program for the Development of Communication.



rethink traditional approaches to technology acquisition in light of intensifying efforts by OECD governments andfirms to tighten intellectual−property regimes and escalate the entry barriers for the NICs.

128. Role of international agencies. The diffusion of information technologies internationally is related as muchto national policies as it is to market forces. International agencies are called upon to assist developing countriesin articulating their interests and concerns in various international fora (and in shaping their national responses tothese issues) and in facilitating international cooperation and negotiation. These agencies could also accelerate thelearning process, within and among countries, and help diffuse the lessons of experience and best practices in theacquisition and use of the new technologies. They may also provide information and influence to strengthen thenegotiating capabilities of developing countries in technology acquisition in a supplier−dominated market Thestakes involved are significant

Diffusion of Information Technology

129. Continuing change in informatics. Information technology will continue to change at a fast pace for the restof this century. Recent advances, such as expert systems and text storage and retrieval systems, are likely torevolutionize knowledge work. Even the "leading edge" industries and organizations are likely to continue tolearn the capabilities of new information technologies and the strategic use of the relatively establishedtechnologies. These organizations are gradually moving from the early stages of automation of routine productionand administrative processes toward exploiting information technology for increasing their capacity to respond totheir clients and to transform their relationships with them.

130. Delayed measurement of full impact. The effect of information technology on the productivity of wholeeconomies will take time to be fully realized. It is likely to resemble the profound shifts of earliertechno−economic paradigms. Researehers have been preoccupied with the seeming contradiction betweenaccelerated technical change in the 1980s (fueled primarily by information technology advances) and the failureof industrialized countries during this period to reach average post Second World War levels of productivitygrowth.49 The growing consensus is that productivity statistics and indicators currently in use only capturefundamental technological

49 See: summary of the discussions and conclusions of the International Seminar on the "Contribution of Scienceand Technology to Economic Growth," held in June, 1989 by OECD.

change long after it has begun to take place. Productivity data cannot capture what is happening at thetechnological frontier or measure technological potential. Corporations and social institutions are undergoingprofound organizational change to absorb the potential productivity benefits of information technology. Asproblems of diffusion and systemic adjustment are overcome, the effects of information technology will be fullyrealized.

131. High qualitative impact on developing countries. When microcomputers appeared about a decade ago inindustrialized countries, the computing power from mainframe computers was already taken for granted. Indeveloping countries, however, there was relatively little installed mainframe computer capacity when themicrocomputers began to trickle in. Therefore, the importance of microcomputers may be especially profound inthe developing countries. Today's inexpensive and powerful microcomputers are easy to set up in the developingworld; they represent a far greater qualitative change for public and private management in the developingcountries than in the developed ones.

132. Constraints to diffusion. The spread of information technologies will vary significantly among developingcountries. It could be more rapid than in the history of previous technologies, largely because global


Diffusion of Information Technology 36

telecommunications has integrated the world economy, and new technologies such as software are more difficultto protect. But the most important constraint is that these new technologies are effective mainly whenincorporated into new organizational structures with practices that require a heavy infusion of complementaryinputs, such as highly skilled management and flexible, trainable labor. Managers may hold fundamentallydifferent perceptions of change and power and of the value of time, quality, schedules, responsiveness, risktaking, and so on. In the "wrong" hands, information technology could be used to de−skill, dehumanize, andexcessively centralize decision−making. Adoption of organizational innovations and practices depends on anenvironment where competition and accountability are important In addition, high−quality telecommunicationsare required for the successful diffusion of information technology.

133. Opportunities for diffusion. These constraints are balanced by very significant possibilities. First, mostdeveloping countries' enterprises and organizations are relatively small and free of labor union problems. Mostlack advanced specialization or complex systems that might otherwise hinder reorganizing away from an"assembly−line" model. Second, developing countries can learn from the experiences of "front−runner"organizations in industrialized countries, and management consulting firms are making the new organizationalpractices codifiable and accessible. Third, subsidiaries of foreign firms whose headquarters are pursuingorganizational

changes aided by information technology can become conduits for transferring their accumulated organizationallearning to their subsidiaries and other associated suppliers in developing countries. Fourth, learning from theJapanese experience, developing countries may use informatics to build upon some of their traditional strengths,such as group decision−making and intensive informal and horizontal communication. Finally, some recentmodels of "best practices" in organizational change are emerging from the private sector in the developingcountries themselves. Among them, a large clothing producer in Brazil, who by reorganizing production aroundgroup technology concepts, reaped 200 to 400 percent productivity increases for various tasks.50

134. Opportunities will vary among developing countries. Strategies for applying informatics should bedifferentiated for countries at different levels of development The more industrialized developing countries arealready participating in the information technology revolution and are able to overcome many barriers. For them,the emphasis would be on using informatics to remain competitive in global industries and services. Othercountries, with large domestic markets, such as India and China, could negotiate their integration into theemerging techno−economic system on the basis of their potential domestic markets. However, most developingcountries are not yet participating significantly in the new technological revolution. The poorest countries sufferthe most from information scarcity as it hinders effective functioning of markets and of public and privateinstitutions. The new technology could be blended with traditional technologies to improve their performance (forexample, by using remote−sensing and geographic information systems to support agriculture and water resourcesdevelopment). Informatics could also accelerate regional integration, for example, by using electronic networks toexchange information among developing countries in areas such as trade. Not surprisingly, the developmentassistance community is actively involved in informatics application for information management improvement inthe poorest and least developed regions.

135. A period of transition. The shift from the technological paradigm of mass production to a new paradigmbased on informatics represents a "window of opportunity" for many developing countries.51 During the initialphase of the new paradigm, new entrants have full access to the necessary technical and organizational principlesfrom universities and the public domain. As shown in Figure 3, what makes it difficult to enter during the latergrowth phase of the paradigm is

50 Manuel Gaetan, "An Alternative to UPS," Bobbin , February 1986.



51 For example, see Carlota Perez, "The Institutional Implications of the Present Wave of Technical Change forDeveloping Countries," paper prepared far World Bank seminar on technology and long−term economic growthprospects, November 1988.

Figure 3LIFE−CYCLES OF SUCCESSIVE TECHNOLOGICAL PARADIGMS: Accessibility of Knowledge and ExpertiseSource: Carlota Perez



Figure 4INFORMATION TECHNOLOGY APPLICATION EVOLUTIONSource: Nolan/Norton

the accumulation of increasingly private expertise, as well as the development of in−house knowledge that ispatented or kept secret. This sets up barriers to entry in each specific industry and also generates externalities forall organizations in that particular region or country. Entry at an early stage of a paradigm shift thus enables acountry or firm to learn before others translate their learning into complete dominance and competitive advantage.This model is particularly relevant to the information technology paradigm. Developing countries need to get onthe learning curve as quickly as possible so that they do not miss this "second industrial revolution."

136. Stages in learning. As organizations accumulate experience with information technology applications, theygo through stages in learning how to capture more fully the potential benefits of the technology (see Figure 4). Inthe first stage, the focus of the organization is on automation of administrative functions and routine transactionaldecisions, with primary concern for efficiency gains. The second stage involves the use of information technologyin the core business activities to reorganize work relationships, to decentralize and create flexible structures, andto leverage the knowledge and managerial resources of the organization, thus enhancing overall organizationaleffectiveness. This stage requires mastering the institutional and behavioral factors that determine the effectiveuse of information technology. In the third (most advanced) stage, information technology is used to transformrelationships with clients, suppliers, and collaborators and to develop new services and products. Only thefront−runner organizations have reached the third stage, demonstrating the transforming power of informatics.

137. Developing countries at the first stage. Informatics applications in developing countries currently focus onthe automation of tasks that can no longer be handled manually. Most organizations are at the first, or efficiency,stage of organizational learning, if at all (see Figure 4). Aid agencies have primarily focused on such applicationsas computerized customer billing (for public utilities) or transaction systems (for taxes and banking), but they arealso beginning to use informatics to generate valuable planning, management, and marketing information.Moreover, a high percentage of informatics applications has supported short−term goals, giving little attention tosustainability and to building the necessary local conditions for cumulative organizational learning. Exploitinginformatics on a significant scale—for organizational effectiveness, for a sustainable competitive advantage, forinnovation of new products and services, or for linking organizations to their suppliers and customers—has yet to



be learned.

138. Growing importance in the 1990s. The real promise of information technology may lie not in what it is doingnow, but in what it will do in the future. This is particularly the case as more "intelligence" is incorporated intosoftware. Increased application of expert systems could raise the

productivity of the relatively few scientists, engineers, and professionals in many developing countries. Forexample, pilot projects are under way to develop expert systems to evaluate public enterprise performance (Peru),to use national economic databases for planning (Philippines), and to disseminate the accumulated knowledge ofagricultural research in an interactive problem−solving mode.52 Information technology can improve theparticipation of country officials and non−governmental organizations in designing and monitoring developmentassistance programs and in analyzing economic policy. This could transform these processes into real partnershipby building capabilities within countries and engendering ownership of solutions. The development assistancecommunity must develop the necessary approaches and capabilities for a field that will only increase inimportance during the 1990s.

52 Peter Browne, ''Support for Information Technology Development," Ottawa: IDRC, 1989.

Conclusions

139. Analysis of the information explosion in industrialized countries, pervasive information poverty problems indeveloping countries, and the emerging experience with informatics applications in both groups of countries leadto the following six broad conclusions:

140. First, information technology is the driving force behind a new techno−economic paradigm (radicaltechnological change) transforming and creating all types of industries and services. It has become indispensableto economic competition in an increasingly integrated and information−intensive global economy.

141. Second, rapidly shifting global economic conditions and structural changes in developing countries put anincreasing premium on timely and reliable information for macroeconomic, sectoral, and institutionalmanagement and for effective supply response.

142. Third, informatics applications offer new ways for leveraging the managerial and institutional capabilities ofdeveloping countries; form an essential part of public−sector management improvement and private−sectordevelopment; and create new forms of flexible and responsive organizations. Informatics provides powerful toolsand new ways to decentralize, integrate, and communicate, and to facilitate broad participation.

143. Fourth, the most widespread benefits for developing countries are likely to come from the effectiveapplication of informatics in priority sectors. Information technology has been applied to improve the planning,management, and productivity of all types of economic development activities: agricultural and ruraldevelopment, poverty alleviation, environmental management, energy and transport, urban development, healthand family planning, and education. Increasingly, informatics is used to strengthen macroeconomic management,monitor reforms, modernize financial institutions, improve industrial competitiveness, and manage financial,natural, and human resources.

144. Fifth, to exploit the immense potential of informatics, developing countries must strengthen their capabilitiesto manage five key areas: (1) institutional adjustments and managerial practices; (2) informatics policiesnecessary to support national priorities and to promote the diffusion of best practices in information management


Conclusions 40

and technology adoption; (3) educational and training programs to develop awareness and raise skills ofpolicy−makers, managers, professionals, educators, and information and technology specialists; (4) physical andinstitutional

infrastructures for broad application of informatics; and (5) technological capabilities and informatics supportservices required to meet local needs.

145. Finally, the information technology revolution will grow in importance in the 1990s. Countries' abilities toadapt to and exploit this revolution will differ significantly. Strategies for the diffusion of informatics should thusvary among countries at different levels of development. Even the least developed countries must selectivelyapply informatics to develop their scarcest resources: information, managerial and skilled labor, and institutions.Developing countries cannot afford to ignore the "second industrial revolution." They have a significant windowof opportunity during this transition period.

Recent World Bank Discussion Papers (continued)

No. 89 Implementing Educational Policies in Uganda. Cooper F. Odaet

No. 90 Implementing Educational Policies in Zambia. Paul P. W. Achola

No. 91 Implementing Educational Policies in Zimbabwe. O. E. Maravanyika

No. 92 Institutional Reforms in Sector Adjustment Operations: The World Bank's Experience. Samuel Paul

No. 93 Assessment of the Private Sector: A Case Study and Its Methodological Implications. Samuel Paul

No. 94 Reaching the Poor through Rural Public Employment: A Survey of Theory and Evidence. MartinRavallion

No. 95 Education and Development: Evidence for New Priorities. Wadi D. Haddad and others

No. 96 Household Food Security and the Role of Women. J. Price Gittinger and others

No. 97 Problems of Developing Countries in the 1990s. Volume I: General Topics. F. Desmond McCarthy, editor

No. 98 Problems of Developing Countries in the 1990s. Volume II: Country Studies. F. Desmond McCarthy,editor

No. 99 Public Sector Management Issues in Structural Adjustment Lending. Barbara Nunberg

No. 100 The European Communities' Single Market: The Challenge of 1992 for Sub−Saharan Africa. AlfredTovias

No. 101 International Migration and Development in Sub−Saharan Africa. Volume I: Overview. Sharon StantonRussell, Karen Jacobsen, and William Deane Stanley

No. 102 International Migration and Development in Sub−Saharan Africa. Volume II: Country Analyses. SharonStanton Russell, Karen Jacobsen, and William Deane Stanley

No. 103 Agricultural Extension for Women Farmers in Africa. Katrine Saito and C. Jean Weidemann


Conclusions 41

No. 104 Enterprise Reform and Privitization in Socialist Economies. Barbara Lee and John Nellis

No. 105 Redefining the Role of Government in Agriculture for the 1990s. Odin Knudsen, John Nash, and others

No. 106 Social Spending in Latin America: The Story of the 1980s. Margaret E. Grosh

No. 107 Kenya at the Demographic Turning Point? Hypotheses and a Proposed Research Agenda. Allen C.Kelley and Charles E. Nobbe

No. 108 Debt Management Systems. Debt and International Finance Division

No. 109 Indian Women: Their Health and Economic Productivity. Meera Chatterjee

No. 110 Social Security in Latin America: Issues and Options for the World Bank. William McGreevey

No. 111 Household Consequences of High Fertility in Pakistan. Susan Cochrane, Valerie Kozel, and HaroldAlderman

No. 112 Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature.Wolfgang Siebeck, editor, with Robert E. Evenson, William Lesser, and Carlos A. Primo Braga

No. 113 World Bank Lending for Small and Medium Enterprises. Leila Webster

No. 114 Using Knowledge from Social Science in Development Projects. Michael M. Cernea

No. 115 Designing Major Policy Reform: Lessons from the Transport Sector. Ian G. Heggie

No. 116 Women's Work, Education, and Family Welfare in Peru. Barbara K. Herz and Shahidur R. Khandker,editors

No. 117 Developing Financial Institutions for the Poor and Reducing Barriers to Access for Women. Sharon L.Holt and Helena Ribe

No. 118 Improving the Performance of Soviet Enterprises. John Nellis

No. 119 Public Enterprise Reform: Lessons from the Past and Issues for the Future. Ahmed Galal


Conclusions 42

The Information Technology Revolution and Economic …€¦ · electronic publishing, broadcasting, management information systems, and so on). agencies, businesses, communities,

Documents