About the RIS
The Rearch and Information System for the Non-Aligned and Other Developing Countries (RIS) is an autonomous rearch institution established with the financial support of the Government of India. RIS is India’s contribution to the fulfilment of the long-felt need of the developing world for creating a ‘Think Tank’ on global issues in the f ield of international economic relations and development cooperation. RIS has also been envisioned as a forum for fostering effective intellectual dialogue among developing countries.
RIS is also mandated to function as an advisory body to the Government of India on matters pertaining to multilateral economic and social issues, including regional and sub-regional cooperation arrangements, as may be referred to it from time to time. RIS f unctions in clo association with various governmental bodies, rearch institutions, academicians,policy-makers, business and industry circles in India and abroad.RIS has a consultative status with UNCTAD and NAM and has conducted policy rearch and other activities in collaboration with other agencies, including UN-ESCAP , UNCTAD, UNU,Group of 77, SAARC Secretariat, Asian Development Bank (ADB), The World Bank, and the South Centre.
RIS publication programme covers books, rearch monographs, discussion papers and policy brief s. It also publishes journals entitled South Asia Economic Journal , Asian Biotechnology and Development Review, and RIS Diary .
Rearch and Information System for the
Non-Aligned and Other Developing Countries
RI
RIS
Discussion Papers
Rearch and Information System for the Non-Aligned and Other Developing Countries
RIS
India-ASEAN Cooperation in Information and Communication
Technologies: Issues and
Prospects
K.J. Joph
&
Govindan Parayil RIS-DP # 70/2004
India-ASEAN Cooperation in Information and Communication Technologies: Issues and
Prospects
K.J. Joph
&
Govindan Parayil
RIS-DP # 70/2004
April 2004
India-ASEAN Cooperation in Information and Communication Technologies: Issues and Prospects
K.J. Joph* and
Govindan Parayil** Abtract: Against the backdrop of India-ASEAN cooperation since the early 1990s,
and the recent initiatives towards taking the partnership to new heights, the prent
paper examines India ASEAN cooperation in IT during the recent past and highlights
the prospects for the future. It has been argued that India-ASEAN cooperation
could be instrumental in addressing the ASEAN divide – the development gap
between old and new ASEAN countries. For India, it could help diversifying its
software export markets on the one hand and facilitate reviving its lagging hardware
ctor. Also, an exploitation of the synergies between India’s software capability
and the hardware capability of old ASEAN could facilitate enhancing the IT
capability in Asia as a whole – a prerequisite for making 21st century Asia’s
century. While, a good beginning has been made at the instance of Governments
and private ctor, the paper calls for hastening the process and highlights certain
specific areas for focud actions.
Becau of its ability to increa productivity of various economic ctors and also due to its key role in forging a new economic paradigm to usher in a knowledge-bad economy, ICTs cluster pos tremendous importance to all An earlier version of this paper was prented in the First ASEAN-India Forum, ASEAN-India Economic Relations: The Road Ahead, 9-10 February 2004, Singapore, organid by the Institute of South East Asian Studies (ISEAS), Singapore. We have benefited from the helpful comments and suggestions of the minar participants, especially that from the discussant Dr Indrajit Banerjee. Special thanks to Dr Nagesh Kumar, Director-General, RIS, New Delhi, Dr. Matthias Bruckner of UNESC AP for very uful discussions and Mr. D.P. Gupta of Electronics and C omputer Software Export Promotion C ouncil, New Delhi for sharing information.
Mrs Sujata Taneja provided the needed cretarial assistance. For all the errors that remain we would like to blame each other.
*Visiting Senior Fellow, RIS, New Delhi (Professor on leave from C DS, Trivandrum) E-mail:
**Head, Information & C ommunications Management Programme Faculty of Arts and Social Sciences National University of Singapore
E-mail: icmhead@nus.edu.sg
nations. India’s recent emergence as an IT powerhou in the area of software and IT-enabled rvices has been geared towards meeting the demands of external players like the United States. Although IT export adds to India’s growing foreign exchange rerves and creates large number of jobs, India’s existing IT policy of export dependence needs to be revid. India needs to develop an internal demand driven IT industry and it must also broaden its export market to more reliable economic partners within the region. At the same time there is great interest among ASEAN countries to forge stronger economic and technological relationship with India. India is also following a look east policy to develop economic, political and cultural relationship with its neighbours in the A
SEAN region.
It is in this context that we look at the challenges and opportunities for cooperation between India and ASEAN in the area of ICTs. In ction one of the paper, we look at the importance of ICTs in economic growth and development. The rest of the paper is organized as follows; the cond ction prents the background for IT cooperation by taking stock of India-ASEAN relationship during the last decade. The third ction prents certain factors from both ASEAN and India perspective that provide a conducive environment for mutually beneficial cooperation. The fourth ction makes an empirical analysis of the recent trends in India-ASEAN cooperation and the final ction prents some concluding obrvations
Theoretical Framework
In countries or regions within countries where ICTs have become part of the economic infrastructure, firms and business organizations, regardless of their size or spatial-temporal location, have experienced steep decline in transportation, communication, arch, and distribution costs. The information revolution ushered in lower transaction costs, greater competitiveness, and lowered entry barriers for business where fixed costs are usually low (Guha, 2003). The development and
diffusion of IC Ts, inter alia, by minimizing transactions costs have become a source of comparative advantage of nations (James, 2001). The assumption, hitherto, that the standard Heckscher-Ohlin model of international trade, where comparative advantages in factor and resource endowments held away, has been replaced by the finding that comparative advantages are driven by international differences in production functions due to innovation and rapid technological change (Krugman, 1995). The major driving force for technological change in contemporary production functions emanate from ICTs and biotechnologies, especially, the former. Thus the advances in information & communication and related innovations have spawned a new form of comparative advantage and international division of labor in the global economy. The factors have facilitated the emergence of developing countries like India and some ASEAN countries as major players in ICTs. This is unlike the earlier transformational technologies, wherein only the developed economies had the needed capabilities. While the new technology has the potential to enable developing countries to leapfrog, it also pos a potential threat. If developing countries fail to harness IT for comprehensive economic and social development, they are likely to lag behind developed countries becau of the aggravating development divide between them.
There is hardly a country in the developing world that has not embraced ICT as a short cut to prospe
rity. Accordingly, new institutional mechanisms and policy measures have been initiated not only to develop ICT capabilities but also to harness the power of this new technology cluster to accentuate the process of socio-economic transformation. The reality, however, is that the capability to develop and diffu ICTs for development is unequally distributed due to inherent structural problems in developing countries. Yet, the policies and institutional interventions in the developing world, in general, appear to be to emulating their counterparts in the developed world without taking into account their specific contexts. The result appears to be that the countries turn out to be less successful in taking advantage of the full benefits from connectivity and ICT capability. For example, India’s recent advances in the IT ctor were mostly geared towards taking advantage of external market stimulation, which in turn is said to have had adver effect on other ctors of the economy that compete for skilled manpower (Joph and Harilal, 2001). The stimulus for the expansion of IT industry in India was to meet the demands of advanced industrialized countries, especially the United States. Domestic demand driven ICT growth was slow to develop. India has a potential to develop products and rvices to satisfy demands within as well as that of ASEAN countries. The old ASEAN Member countries (ASEAN-6) are known for their manufacturing capabilities in a range of IT goods. Yet the synergies between their capabilities are yet to be tapped fully. Similarly, new members of ASEAN (Cambodia, Lao PDR, Myanmar and Vietnam), the ASEAN-4, have made institu
tional interventions and policy measures to develop and harness IT for development. Their policies, following the IT policies in developed countries, aim at building up IT infrastructure, developing IT manpower and promoting IT u. Given the fact that the countries are constrained by their limited technological and financial capabilities, there is immen scope for cooperation with countries like India to build up the needed
capabilities. But this aspect is yet to receive the attention that it derves. History teaches us that the development of technological capabilities in the developing world has been a combined outcome of import of technology and its adaptation and up gradation though in-hou R&D effort. It is against this background that the prent paper explores the issues and possibilities of IT cooperation between India and ASEAN.
India-ASEAN Cooperation in ICTs: The Background
India had an option to joining the ASEAN when it was formed in 1967. But due to the prevailing political environment of the time and India’s stated foreign policy of “non-alignment,” India cho not to join ASEAN (Sachdeva and Wadhava, undated). But by early 1990s, as part of its globalization process, India initiated its “Look East” policy, which involved developing clor relations with the ASE
AN. This short time span of India-ASEAN relationship has recorded significant progress. This began with India’s position as a ctoral dialogue partner, and culminated with the signing of the framework agreement on Comprehensive Economic Cooperation between India and ASEAN in October 2003. Simultaneously, with fast growth in trade and investment relations, India has also been fostering bilateral relations in a wide range of areas with almost all the ASEAN member countries. While new developments in the global trading environment in the last decade provided a fertile soil for regional economic integration, the leap forward in India-ASEAN relationship should be en in the context of the congruence in their development philosophies as well as their fostering economic and trade relationship with rest of the world.
From the Indian side, the period witnesd major changes in India’s overall development strategy as manifested in its greater economic integration with the rest of the world. More specifically, in the early 1990s India adopted the “Look East” policy to foster stronger relationship with its East Asian neighbours. There has also been perceptible change in India’s image among other countries as an emerging economic power with a large domestic market and open trade and investment regime. Moreover, India has been recognized as a major player in the field of Information technology — a technology considered instrumental in the economic and social transformation of all countries in the
new millennium. India’s policy of external integration has given rich dividends in terms of, but not limited to, almost 50 percent increa in its share in world trade, more than 15 fold increa in the inflow of Foreign Direct Investment (FDI), and, above all, an unprecedented build up of its foreign exchange rerve to over $100 billion by the end of 2003. Drawing from past experience, India’s 2020 vision aims at fostering clor relationship with all major countries in the world, and,particularly, with countries in the region in the years to come. According to the Report of the Committee on India Vision 2020, “India’s progress over the next 20 years will be intimately linked to events within the region as well as around the world” (Government of India, 2002a).
ASEAN today compris of a highly heterogeneous group of countries with varying levels of development. While the old members of ASEAN have been successful in achieving higher growth performance, facilitated inter alia, by greater economic integration with the rest of the world, the new entrants with the possible exception of Vietnam, exhibit the characteristics of least developed economies with high dependence on the primary ctor.
C oncentrated on an export basket of agricultural and extractive primary commodities with limited comparative price advantage and low levels of social ctor development, the least developed ASEAN members need urgent technological up gradation to improve their economic fortunes. Not o
nly that their per capita incomes are at a much lower levels as compared to ASEAN-6, the countries also face rious external payment problems as evident from their relatively high trade deficit. ASEAN-6 countries have been successful in developing production ba and export competitiveness in a wide rage of activities. They have also acquired product development and marketing capabilities in a range of medium and high technology industries. Particularly notable is their production capabilities in electronic and telecommunication equipment, heavy engineering, capacity in the construction and management of infrastructure.
At the same time, the old members of ASEAN are also conscious of the weakness of their economic structure built up over the years. Today, there appears to be a connsus in terms of the need for a shift away from the strategy of “investment-led growth” to “innovation-led growth,” and from value-adding industries to value-creating industries. Hence, Vision 2020 for the ASEAN envisions “a technologically dynamic ASEAN competent in strategic and enabling technologies, with an adequate pool of technologically qualified and trained manpower, and strong networks of scientific and technological institutions and centers of excellence” 1. As regards the new entrants to ASEAN (CMLV Countries or ASEAN-4), given the lower levels of development, ASEAN vision for 2020 underlines the need for bridging the development gap between the old and new members of ASEAN.
This new vision is manifested in the Initiatives for ASEAN integration, wherein informational technology has been considered as strategic instrument for bridging this gap. An indication of the
importance given by ASEAN to new technology is evident from the fact that IT is identified as one of the four components of the Initiative for ASEAN Integration as well as for narrowing the development gap between the older and the newer members.2 More importantly, ASEAN envisages India’s cooperation in bridging the ASEAN divide as is evident from the fact that one of the objectives of the Comprehensive Agreement for Economic Cooperation signed by ASEAN and India is to facilitate more effective economic integration of the new ASEAN member states and to bridge the development gap among the parties3.
Thus, if India’s look east policy is well conceived and successfully implemented, it would certainly yield rich dividends in terms of more intimate relationship between ASEAN in general and individual member countries in particular in a wide range of areas. Hence the future appears to be more optimistic in terms of fostering a mutually beneficial relationship with ASEAN (RIS 2004)4. Factors Inducing IT Cooperation: An ASEAN Perspective
India and the old ASEAN member countries are known for their differential capabilities in ICTs. India’
s capability in software and the old ASEAN countries’capability in hardware manufacturing provide a highly fertile environment for mutually beneficial cooperation. But with the entry of new members in ASEAN, further opportunities for cooperation are opened up. There are thus, certain factors, both from ASEAN and India, which provide added inducement for cooperation. We highlight the factors below.
Let us begin with the ASEAN side by examining the prent state of ICT infrastructure and ICT u in ASEAN (e Table 1). From table it is evident that there is a significant difference between the old and new ASEAN member countries in terms of their IT infrastructure and u.
With respect to IT infrastructure, it may be noted that the number of fixed
telephone lines per 1000 people even in the largest city of the new ASEAN member countries is lower than the national average for the old ASEAN countries. When it comes to mobile telephones, computers and Internet, the divide between the old and new ASEAN countries is much wider. In general, in terms of ICT infrastructure and u, while the old ASEAN member countries are found to be either on par with or at a higher level than the middle-income countries, the new ASEAN member countries lag not only behind their counterparts but also behind the low-income countries in general. Here, Vietnam appears to be an exception.T
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