4.0 How do we recover faster and build a foundation for long-term stability?
Many economists say that the standard Keynesian macroeconomic prescription is to stimulate the economy by increasing borrowing, reducing interest rates, lowering taxes and raising spending on public works such as infrastructure.
These measures are exactly what the bailout plan and stimulus packages set out to do.
Yet, economies cannot depend on government action alone. The government can give the head start, but every revival must have its roots planted in the PRIVATE SECTOR.
In times like these, both the public and private sectors must come together and work in concert.
His Excellency President Umaru Yar’adua, said this late last year when commenting on the global financial crisis. He said that “There is no better time than now for government and the private sector to collaborate”.
His Excellency the President then called on both sectors to rise to the challenge “to chart a path to growth”.
Charting a path to growth requires more than just a reaction to our current predicament. It needs a pro-active posture that not only provides for the short term, but also guarantees sustainability for the long term. After all, no farmer ever cultivates his land for only one harvest.
With this in mind, the concept of creative destruction popularized by the Austrian economist and political scientist, Joseph Schumpeter comes to play. Creative destruction describes a process of industrial mutation that continuously revolutionizes the economic structure from within, all the while destroying the old in creating the new. To remain competitive and maintain excellence in this current economic climate, organizations must adopt the dynamic strategies of discontinuity and creative destruction.
It is the process of transformation that accompanies radical innovation.
The Chinese have a similar hypothesis – WEI JI. Where there’s danger, there’s also opportunity.
Such an opportunity is now at hand. Instead of seeking to make money out of money, it is time to create opportunities via the tried and tested way of producing products and services that people want to use, that markets seek to buy. In the age we live in today, few products and services can match the demand for information and communications technology, ICT. It is the solution to expedite a recovery in the short term and the vehicle to generate prosperity in the long term. This said, it is imperative that stimulus packages to revive and kick-start the economy include meaningful portions to encourage the development of ICT.
For starters, the injection of capital for this purpose would immediately spur job creation in the short run, offering much needed income to the otherwise unemployed.
In turn, they would contribute to domestic consumption that goes towards supporting other businesses – thus, keeping the economy ticking along.
The Information Technology and Innovation Foundation or ITIF has estimated that an investment of 30 billion US dollars in ICT would create almost one million jobs. That works out to one job created for every $30,000 spent. While this extrapolation was made for the US economy, there is no reason why it cannot apply to other nations.
ITIF’s Robert Atkinson, Daniel Castro and Stephen Ezell said in their joint paper that “Investments in certain parts of our national information technology infrastructure will have a positive impact on jobs, productivity and innovation. And economic stimulus measures that go to consumption, as opposed to investment, will have a less beneficial impact on productivity and innovation than infrastructure investments”.
On this score, governments are the only ones who have the means to take this first step in stimulating short term recovery.
Few other institutions have the financial muscle to pump in investment and incentives in the limited time period and at the sort of scale necessary to do the job.
An immediate short-term stimulus package for ICT can start the ball rolling, after which it can be passed on to the private sector to keep things running along to generate and sustain long-term prosperity.
For the development of ICT comes with three clear benefits.
First, the creation of an ICT industry as a key sector of the economy. This is an industry with the potential to drive the economy by building lucrative businesses and creating jobs.
Secondly, leveraging ICT to raise productivity and efficiency in other economic sectors. Industries that harness the power of ICT tend to achieve much higher growth rates than those that don’t.
And finally, the adoption of ICT to better our lives. It has revolutionized the way we do things and live our lives, whether as individuals or as communities, societies, governments and nations.
It is beyond a doubt that ICT is one of the fastest growing industries with the power to enrich economies.
The World Information Technology and Services Alliance (WITSA) has projected that global ICT spending will exceed US$4t in 2009. This represents an increase of almost 50% over the last five years. Few if any industries can match such a healthy growth rate.
Here are ways ICT can become a principal engine of recovery and growth.
- It creates new industries that can in turn, grow the services sector.
- It produces new products and services that can engage export markets.
- ICT generates wealth and creates jobs that can raise the level of local income to boost domestic consumption.
- It improves efficiency in operations that can lower the cost of doing business and finally
- It facilitates better decision making which can raise productivity and overall output.
Spurring investment in ICT would certainly create a market for the components and technical services of domestic firms. We only need to look at India, and to a lesser extent Malaysia, to gauge the impact an ICT industry can have on economic growth. These are the countries that have embraced the power of ICT that are today reaping the many benefits that come with it. ICT has transformed their economic landscape and given them a platform to achieve sustainable high growth and development.
As I have often said, Information Technology is the composite stream of Applied Sciences (Information and Communications) and nations that have mastered them are able to acquire wealth improve the living standard of their peoples and also able to affect others without.
A vibrant ICT industry creates not just any jobs, but jobs that produce more knowledgeable and better-skilled human capital. Beyond the growth of its industry, ICT also enables other sectors of the economy by innovating the way they operate, the way they reach out to markets, and the way they compete.
It is the key element that is revolutionizing and supporting the growth of many industries – from traditional industries like education, communications and healthcare, to new ones such as biotechnology and genetic engineering.
In education, it is extending accessibility to education beyond the traditional modes of learning. Today, hundreds of millions are tapping into online education (e-learning) to broaden their knowledge and enhance their capabilities.
In communications, ICT has revolutionized community networking by giving us such tools as mobile communications and the internet.
Likewise in healthcare, it is offering care givers new systems and structures for the collation and exchange of crucial medical data.
ICT is also becoming an indispensible tool for information dissemination on climatic changes, assisting many communities worldwide to make the necessary adjustments to crucial resources such as water, sustenance and agriculture. Without it, we would not have the means to map the human brain in order to better understand how it functions. We would not be able to build a simulated model of the brain that allows us to explore and better understand the wonders of the mind. Without ICT, we would not have mapped the human genome and determined the sequences of the six billion bits of information that make up the human DNA. We would not have made such advances in genetic engineering for the benefit of human health and the environment.
Indeed, investment in ICT has a multiplier effect across all economic sectors.
It promotes higher productivity and increased competitiveness, a fact verified by various studies done on this matter. The business sector, however, is not the only one to profit from the use and adoption of ICT. So too do society and government.
ICT not only enables, it empowers and enriches. One of the key challenges facing our world is the growing income gap between the haves and have-nots. This problem exists within nations and also between nations. If left unchecked, it could give rise to discontent among the disenfranchised. We have seen the ugly consequences that this disparity can bring about over and over again in many parts of the world. Reducing the income gap is largely an issue of access. Access to information, to knowledge, opportunities, business and to capital.
ICT offers all that and more. Its impact on society has been revolutionary. It has played a key role in overcoming societal problems and contributed significantly towards many aspects of our lives – from education to healthcare, personal and public safety, the environment, energy, transportation and government.
- Education: ICT enables better access to education by paving the way to open and distance learning (e-learning). In the US for instance, student enrolment in online education is said to be growing at six times the rate of conventional education.
- Healthcare: ICT has impacted the delivery of healthcare in many ways. In some cases, delicate and intricate procedures are guided by physicians halfway across the world via electronic link. They call this telemedicine. It has the potential to offer patients anywhere and everywhere access to the best medical diagnosis and treatment at only a fraction of the cost.
- Public Safety: For greater public safety, there is now a tsunami warning system in place in response to the tragic event in December 2004. Here again, ICT is a significant feature of the system. This is, of course, just one example.
- Private Safety: ICT has given us the tools to secure ourselves, our loved ones and our property. These include home monitoring systems and the various GPS or global positioning system devices that allow the users to pinpoint their exact locations.
- New lease of Life: It has also given people with disabilities a new lease in life with tailor-made tools like digital conversion from text to speech and various other mobility tools.
- Environment: ICT also enables governments and organizations to track, assess and combat environmental sources better than ever before.
- Energy: Likewise, it enables more energy-efficient practices and processes in every industry that have the net effect of reducing energy consumption.
- Transportation: Its use today is ubiquitous in modern transportation systems, from the GPS locators and navigational aids to smart systems for controlling traffic.
- Government: Similarly in Government, the adoption of ICT has vastly improved public services. Efficiency and convenience are now the hallmarks of e-Government, confining to history the long queues and bureaucratic delays. Tasks such as filing tax returns or renewing passports now take mere hours where once they took weeks.
Supplying these innovative and life-changing products and services are the ICT and other technology companies. All of them value one thing in common above all others. Knowledge
In fact the Bible says in Hosea 4:6a that “my people are destroyed for lack of knowledge…”. Therefore, Knowledge, creativity and innovation are the driving forces of a knowledge economy and nations or entity that refuses to embrace it do so at its own peril. More than any other factors, Knowledge, creativity and innovation are critical to generating and sustaining growth in today’s global economy.
Here, human capital is the most valuable asset. It is people who are knowledgeable, creative and innovative. For this reason, a knowledge economy is much less reliant on the physical infrastructure. It needs, instead, a knowledge infrastructure as its foundation. Only then can any developing nation hope to attract FDIs in technology and ICT. Only then can it spawn local entrepreneurs to support the activities of these global enterprises.
Herein are some components of a knowledge infrastructure.
- Education: We need an education system that can produce a large pool of talent in science, technology, engineering and other creative disciplines. This is our human capital. It is sad that as we speak, Nigeria’s students in high education are idle at home because the teachers have down tools in a stalemated discussion with the Federal Government on demand of teachers for more robust Government investment in ICT.
- Research and Development: R&D serves to generate knowledge at the frontiers and new technologies required by the production and services sectors.
- Intellectual Property (IP): A strong IP regime that provides effective protection and appropriation of intellectual property rights.
- Technology Transfer: A system must be put in place to facilitate the efficient transfer of knowledge and technology from the R&D system to the industry and business sectors and
- Critical Mass: There need to build a critical mass of innovative firms and entrepreneurs to exploit knowledge to produce goods and services for the local and then, the global market. Collectively, the R&D system, IP regime, technology transfer system and critical mass of tech-based firms will provide our nation with the necessary technology and knowledge capital.
- Finance: It is vital to have a financial system that promotes investment in high risk ventures, providing risk capital that enables entrepreneurs to engage in R&D.
It is this architecture that has propelled several developing nation’s transformation (like Malaysia, India, China, Singapore, South Korea etc) from an industrial nation driven by the manufacturing sector into an emerging knowledge-based economy.
This is the path to a transformed economy. We must jump on the bandwagon that is taking the rest of the world deep into the Knowledge Age.
As we have missed out on the industrial revolution, it is imperative that we seek to cheetapolevault into the knowledge economy.
We must take action now! It is critical that we take advantage of today’s digital revolution. It must be emphasized that Governments cannot rely on the private sector alone to develop the nation’s ICT infrastructure. It is the responsibility of policy makers to proactively put in place policies and programs to create the industry and promote the adoption of ICT by both business and society.
Having said that, it is important to note the specific challenges we still face in our bid to build a knowledge-based economy with ICT as the driving force. One of such is Infrastructure. We are still lacking the infrastructure necessary to bridge a yawning digital divide that exists in Nigeria.
There are also many other obstacles that need to be addressed. These include making ICT more affordable, increasing connectivity, increasing the amount of digital content available and increasing digital literacy.
These issues need to be addressed first and quickly. We must not be left behind again!
5.0 Key levers for Economic Recovery and Reform
There are no quick fixes for the global economic crisis as it affected Nigeria. Recovery will take time afterall it’s said that it’s easier to destroy than to rebuild. With regard to the aforesaid, the following are keys to Economic recovery and reform:
- Let there be a plan – framework
- Robust Stimulus plan particularly in the financial sector and in the economy in general to create jobs and employment; and build infrastructure
- There should be holistic financial sector reform, implementing reforms to regulation, and looking ahead to a supervisory regime more in tune with today’s global realities
- Ensure stable financial sector because a stable financial sector is a prerequisite for building sustainable recovery.
- Investment in ICT as a sure growth lever.
- We need to build a formidable education resource for human capacity and capability for quick recovery and long term prosperity
- Craft a new economic model based on sustainable growth for the long run in tandem with the G20 Forum.
There must be a commitment to reforms predicated on a policy of consistent and regular policy reviews due to the dynamic state of the interdependent world economy. This is key to sustaining transformation in Leadership and in the economy. This indeed constitutes the shift in paradigm, the anticipated transformation as against a dogmatic reactive scenario of indolence.