1. Introduction
The information age is changing the lives of businesses, governments and ordinary people all over the world. Information technology has been the engine driving the us economy’s resurgence and simultaneously, the economic integration of the global economy itself, particularly through international financial markets.
All of us in Australia and throughout the Asia pacific region need to understand the profound changes that are not only under way, but are accelerating throughout the global economy. Accordingly, I welcome this forum organised by the Research Institute for Asia and the Pacific (RIAP). Educational institutions like RIAP have a key role to play in the information economy. One of Australia’s key comparative advantages is its well-educated highly skilled and multicultural workforce. Institutions like riap have made a significant contribution to Australia gaining this advantage and maintaining it in the region.
2. What is the information age?
The information age is a shorthand reference to a whole range of technological phenomena impacting information exchange, business systems, commercial transactions and simple communications. In some ways the information age is part of the debate over globalisation that has dominated public policy in the late twentieth century. One of the most influential books written on globalisation is ’The lexus and the olive tree’ by New York Times Foreign Correspondent Thomas Friedman. Friedman describes the dilemma that people face that the more they want the globally produced high tech car ’the lexus’ the more they worry about losing their ’olive tree’. The lexus symbolises a nation’s share of the modern high tech global economy whilst the olive tree represents our land, soul, national identity, or culture. There has to some balance between the lexus and the olive tree. All nations have been dealing with this balance to varying degrees of success. However, ultimately, as Friedman points out in his book, those nations who shun globalisation and try to bypass the information age will ultimately punish themselves.
Friedman’s book has greatly influenced my own thinking on this topic. When I first looked at globalisation, whilst in my previous job at the Australian Council of Trade Unions (ACTU), I thought it was just about the reduction of formal barriers to trade and investment. Through my work at Austrade on the information age project, I now see that the phenomenon of globalisation is in fact driven by the technologies associated with the information age. These changes are driving new business practices, creating anxiety between the information rich and the information poor, and impacting on the macro-economic statistics that governments rely upon when formulating public policy.
3. How is the information age affecting the us economy?
I now wish to outline how the information age is affecting the us, Australia and Asia. First, the USA.
There are two influential American figures in the world today. Neither occupies the white house (or is married to anyone in the whitehouse). Both symbolise the power of the information age in the global economy.
I am going to quote both. The first is a business figure, Bill Gates. He says:
“If the 1980s were about quality and the 1990s were about reengineering, then the 2000s will be about velocity. About how quickly the nature of business will change. About how quickly business itself will be transacted. About how information access will alter the lifestyle of consumers and their expectations of business. Quality improvements and business process improvements will occur far faster.”
Bill Gates, Microsoft founder and CEO in Business@the speed of thought.
The second is a central banker, Dr Alan Greenspan chairman of the federal reserve board and one of the most powerful figures in the global economy:
“..the synergies in laser, fiber optic, satellite, and computer technologies with older technologies have increased the return on capital and accelerated the rate of growth of productivity over the past five years.”
Dr Alan Greenspan, Chairman, Federal Reserve Board, Humphrey-Hawkins testimony to US Congress, February 1999.
Greenspan’s speeches and testimonies to congress, that receive so much media and financial market attention, are typically literred with references to the information age. These changes in business systems described by gates have clearly influenced the macro-economy and affected Greenspan’s way of thinking and ultimately, his decision-making at the federal reserve.
Seminal work has been done on the impact of the information age by the US Department of Commerce in its report ’the emerging digital economy’
The digital economy’s framework concentrates on electronic commerce (business transactions on the web) and the information technology (IT) industries that make ’e-commerce’ possible. The main findings of the report include the following points:
1) growth in the value of e-commerce business transactions have outpaced even the most optimistic predictions of 1998 even though as a share of the retail sector of the economy, e-commerce remains quite small at 1 %
2) the IT producing industries whilst accounting for only 8 % of gdp, contributed on average 35 % of the nation’s real economic growth.
3) falling IT prices have brought down inflation by an average 0.7 percentage points, allowing unemployment to fall to 30 year lows without any upward pressure on prices
4) IT industries have produced extraordinary productivity gains, which have pulled up the national average for the total private non-farm economy. This seemingly resolves the puzzle set several years ago by nobel prize winnng economist Robert M Solow who famously said ’you can see the computer age everywhere these days except in the productivity statistics.’
5)by 2006, almost half of the US workforce will be employed by industries that are either major producers or intensive users of IT products and services. The demand for high paid ’core’ IT workers has raised the wages gap between IT and non-IT workers.
6) there is anxiety about a ’digital divide’ between certain groups in the American community. For instance, the divide increased between 1994 and 1997 along lines of income, race (whites faring well compared to blacks and hispanics), and regions (urban over rural).
Despite these robust results, there is always a tendency in the us to fear that they will no longer be ’winning the race’. America is seemingly always in a race whether it be the arms race, a trade race or a now, technology race.
The digital economy report is no exception. It suggested that growth gap between the US and the rest of the world may be narrowing. It notes: driven by customer demand and business imperatives, the digital economy is becoing truly global. The United States continues to lead the world in many measures of the utilisation of digital technology. However, this lead is diminishing. From the emerging digital economy – part 2, page 1.
But the question is who else is in the race? Is it Australia?
4. How is it affecting the Australian economy?
If Australia is any guide the economic effects of the information revolution will be considerable.
The information age, to date, has had a significant impact on Australian economic performance and is part of the reason for our relative strength despite the severity of the Asian financial crisis. The ’new Australian economy’ has spurred considerable interest amongst economic commentators. In an article in the Business Review Weekly (BRW), HSBC Chief Economist John Edwards was interviewed saying that the new Australian economy might ultimately be more sustainable than Robert Menzies’ golden age:
“There is no doubt that we are in a unique period, with a continuation of productivity and economic growth likely to deliver the longest and best-balanced expansion in our history.” HSBC Chief Economist John Edwards
Australia is currently enjoying one of the fastest rates of economic growth in the industrialized world. We are experiencing a productivity boom, and benefit from a low inflationary, stable economic environment. Part of this is due to the advances in the information economy but part is due to the structural reform that has taken place in the 1980s and 1990s.
The extent of the rise of the information economy was illustrated in a recent BRW survey of Australia’s top 500 companies. The BRW surveyreads:
“..two years ago there was a disquieting absence of companies in new-age industries such as travel, recreation, business, financial and investment – now information-age companies are jumping on to and up the list reflecting a country in transition. In fact, the rapid emergence of services companies is a sign that Australia is taking its first steps towards becoming a knowledge economy.”
Amanda Gome, “Information age makes its mark” BRW 6 August 1999, pp80-81.
Examples include increasing revenue in the finance and investent sector , accomodation cafes and restaurants and cultural & recreational services. For instance, Tatterstalls, was the top private company indicating the potential of on-line gaming which is also likely to increase – in fact you can bet on it.
Now, to Asia.
5. How has the rest of the Asian pacific region been affected?
The main question that comes to my mind from looking at the us and Australian data is how these benefits from the information revolution will be replicated in Asia. Much of it will depend on reform of Asia’s financial and corporate sectors after the recent financial crisis. Another important consideration is how open Asian markets will be to information technology and how secure the us feels about intellectual property. Accordingly, the millennium round of WTO talks in Seattle will place the spotlight on the General Agreement on Trade in Services (GATS) and on negotiations over intellectual property.
The digital economy report provides data from NUA, an internet strategy firm.
As of may 1999, 171 million people across the globe had accessed the internet with over half of them (56.6%) coming from the US and Canada. Our part of the world, the Asia-pacific accounted for 15.8% of users, behind Europe on 23.4%. But ahead of Latin America (3.1%), Africa (0.6%) and the Middle East (0.5%). (the Middle East’s last place illustrates Thomas Friedman’s example about the olive tree which after all comes from the River Jordan).
A report from the Department of Foreign Affairs and Trade (“Putting Australia on the new silk road”) notes that whilst developed country dominance of the internet will continue in the medium term, the highest rates of growth in internet usage are expected to occur in the developing Asian countries. Forecast growth for East Asia, excluding Japan is for compound annual growth of 52% per year from around 2.7 million users in 1996 to 21 million by 2000.
Major factors driving this growth are: ? Greater local Asian language content ? Deregulation of the telecommunication markets ? And improvements in the quality of internet service providers Of the Asian counties, china, india, korea and malaysia are expected to experience strong growth despite concern of the effect of censorship on the internet. This provides a relatively optimistic picture for Australian exporters in Asia in the new millennium.
6. What does this mean for Australia?s exports to Asia?
With the economic recovery underway in Asia and the anticipated rapid growth in e-commerce the future looks reasonably bright for Australian exporters in the region. But how well connected are they to the online economy?
According to the business longitudinal survey compiled by the Australian Bureau of Statistics (ABS), Australian exporters are more engaged in the information economy than the average Australian company. Exporters have a higher tendency than the average Australian company: to use computers, be electronically networked within their business, and to have internet access.
However there is evidence that full embrace of electronic commerce still has a way to go amongst exporters.. In fact the same ABS survey shows this. Of some 18,000 exporters surveyed by the ABS, 11,000 (or 63 %) had internet access. However, only 8.6 %of those exporters marketed their products on-line (whilst transacting off-line) and a mere 2.3 % marketed and transacted on-line.
However at Austrade we do know of exporters who have embraced the on-line economy and are exporting it products to Asian markets. Examples include:
- Baltimore pty ltd who are developing security products for the information super highway in Singapore\FNS who provide banking software to Korea, Hong Kong, Malaysia and Indonesia
- Bantech who won a contract to provide imaging and check processing technology to the Korean financial and telcommuncations clearing house institute
- ERG, intellect Australia and VJF Electronics who provide smart card technology to Singapore public transit system, Indonesian commercial banks, and the Shanghai metro (respectively)
- Vision Systems who provide laser technology for fire prevention in Korea
- Bytecraft who provide stage automation and lighting systems to Hong Kong, Singapore and Japan,
- The Millennium Design Group, who picked up a multi media design contract for the Shanghai Huangpu River pedestrian tunnel
Austrade itself has become an on line organization given the global nature of our operations (with approximately 1100 staff, a majority of whom are in our overseas offices). Our internet site, ’Austrade on line’ provides tagetted up to date export information as well as the chance for Australian companies to advertise their product on ’Australia on display’. Austrade’s internal operations are increasingly undertaken on-line too. Austrade is currenty involved in a major information age project led by corporate adviser Greg Joffe and e-commerce adviser Helen Monro.
7. Summary
In conclusion, the information age is upon us. Changes are racing ahead. However, Australia has much to look forward to as the Asia Pacific begins to embrace the information age.
The USA, whilst setting the pace, will compete primarily via quality and innovation.
Asia , has begun the ’catch-up’ process, but much will depend on telecommunications policy as cost and price will greatly affect internet take up in Asia. Much will also depend on reform in financial systems, corporate governance and the role of trade negotiations in services.
For Australia, there are some promising signs. Our take up of information technology is reasonably robust, we have a vibrant services sector, and are strongly competitive in telecommunications and financial services. Importantly, we have a well-educated, highly- sklled multicultural workforce. This will assist us as Australia connects further with our neighbours in Asia in the information age.
Thank you.
