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Author: JSiraj Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 289  
Subject: IT Can Bail Out Smaller Debt Ridden Economies Date: 1/29/2001 2:27 AM
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Opinions have been expressed in general terms recently spelling out Information Technology (IT) as a means of an economic bail-out. But the big question now is whether information technology can be effective without a working, if not actually a booming, economy? What comes first, IT or an energetic economy; in other words, whether the former would lead to the latter or the latter to the former? Most of the people placing IT before the economy may actually be putting the cart before the horse.

A realistic appraisal demands that while taking advantage of the developments in the field, we do not pin too great expectations on it that may remain unfulfilled and thus lead to disappointment and diversion of energies from other important areas. IT should go hand in hand with other sectors of the economy.

We have on this issue two extreme groups. One believes that IT can greatly increase the GDP. (What they perhaps mean is a great increase in GNP, through remittances from overseas Pakistani IT professionals and workers that they intend to export to the industrialized world. The Minister of S & T optimistically estimates it to 'increase' from around $ 60 million to $ 200 million p.a. The other group is skeptical of even the advisability of going after IT in a big way. The actual truth may lie, perhaps, somewhere between these two extremes.

It may be unrealistic to expect miracles from IT alone. Merely jumping onto the bandwagon of IT without adequate thought as to its necessity or efficacy in a particular case can be wasteful and expensive for the country as a whole, which we can ill-afford. However, used the right way. IT can help generate income for a segment of the population, and provide valuable foreign exchange. Secondly, computerization does make many tasks easier, and can be used to advantage in a number of fields, improve accuracy, reduce bottlenecks, keep data bases quickly accessible and retrieve them when necessary, and may even, if its potentialities are exploited honestly and judiciously, lead to a decrease in crime and corruption! But that is a big if.

Only an honest application that can yield the desired results and justify the high cost of a computerized system. One example is the computerization of billing of various utilities, motor vehicle tax and record keeping, compilation of academic results of boards and universities, and so on.

Despite computerization, information is not easily retrieved when needed, and mistakes made are often difficult to rectify. This is due both to paucity of skills and (sometimes) a deliberate falsification of issues by vested interests.

Of course, by its very nature, computerization in case of taxation and billing is geared more in favour of the taxation authority than of the tax-payer, but retrieval of information must at least be assured at the time it is needed, and mistakes rectified quickly. Yet, there are several fields where IT can be used to advantage, with salubrious effects on the economy.

Application in governance: Since computerization can aid and assist, do things faster, quicker and more accurately, it can improve governance thereby, subject to honesty of purpose. It can facilitate keeping records of criminals and thus help in crime detection, improve control over smuggling and tax evasion, the advantage and benefits of these in the control of corruption and improvement of government revenue are, of course, immense. In this sense, it is productive. But without accountability, it can lead to tyranny.

However, the decision makers must try to answer the following fundamental question in specific cases. Is computerization the most economical, the only, or the best solution of doing a job? The criteria for computer use has to be this: Is best use of available resources being made? Was it appropriate to use computers in this particular place at the expense of cheap available labour. Does it reduce bottlenecks?

A private enterprise will have little difficulty in answering the question. Their considerations are relatively few, besides, generation of profits. If they can do something more quickly, with less labour, or less hassle, save money and generate profits, they'd go for computerization. For an organization in the public sector, this may not be the only consideration. The government has to consider also the various implications of computerization of a particular operation. If there is a large scale loss of jobs, its social and political implications are obvious, unless the labour so released can be used to advantage in some other tasks.

Industry and commerce: The applications of computerization are for the most part in commerce and industry, or the related services. What can computerization achieve if there is no enterprise and if the industry is sick and dying? One the contrary, it may only give rise to more unemployment.

It was perhaps some former German chancellor, who put it succinctly when he said that the tragedy of the Third World is that there are too few producers and too many sellers. E-commerce is merely an accessory to commerce, nothing by itself. It provides services to the rest of the economy. What can e-commerce do if industry, trade and commerce themselves decline? For reasons that are obvious, most local companies are yet to go beyond just creating a web site on the Internet to announce their presence.

Instead of truly rejuvenating the industrial sector, much has been made in recent months of the capability of our defence production sector to generate revenue out of the sale and export of defence equipment. In fact, defence equipment has been exported for many years in the past. But the thing to explore is whether we are really producing and supply the equipment at a cost smaller than the revenue it is generating? Accurate costing has to be done to evaluate the real net gain to the country of such ventures.

Actually, the industries being under the control of the defence forces, are perhaps not really subject to a cost analysis - and audit - in the probing way to which a commercial industry subjects itself. If it turns out, in the ultimate analysis, that the cost of production of such products is greater than the price they would fetch in the world arms bazaar, we might well be making a net loss instead of a net gain on each sale!

Of course, this is not the same thing as saying that indigenous production should be commercialized. In some areas, considerations other than commercial, - security and self reliance, for instance - rule. But commercial production for the purpose of sale is quite another matter.

Coming back to the subject of IT, which as stated already, is a service industry, we should not forget that our best comparative advantage in many production industries is cheap labour. Hardware production industry can be encouraged to export components of computers. A secondary benefit of this will be the availability of such equipment for our own use at comparatively lesser cost, and the stimulation of industry overall. The job can be done by small and medium firms, given the proper enabling conditions.

In order for e-trade or e-commerce to exist, there should be trade and commerce and industry in the first place, with the least amount of obstacles and interference by the bureaucracy, and the government should create enabling conditions for the business to flourish. One recent good step was the tax exemption for five years for new software companies. This exemption is welcome, provided it is not nullified by conditions imposed and ifs and buts. The benefits of decreased cost of band width for Internet service providers was not passed on to consumers to the extent it should have been.

Communication infrastructure is important. For example, something as elementary and basic for communications as the telephone, has been allowed to become a vehicle for profiteering, without real improvement in the service. Industries are dying for want of entrepreneurship, and lack of capital as well as external factors that include severe competition from foreign products, made cheaper by either reduced import duties or smuggling. The perpetual political crisis in Pakistan and a strident struggle and jockeying for power within the elite groups has exacerbated the crisis.

Provision of services: In our present state of the economy, what we can hope to do so to export trained manpower, provided we have enough professionals. The second thing we might be able to export, if we are lucky enough and clever enough to obtain contracts, is software development. The third avenue that has opened up recently is the providing of a range of services through the Internet that are costly in the developed world but can be provided by some Third World personnel at much smaller cost due to availability of cheap labour. This kind of work includes the provision of services in the field of finance, accounts, as well as consulting services in various fields of engineering, wherein work can be done and sent over through the Internet. R and D finance, software development and medical transcription services are some other areas that the Indians, in particular, have been able to use to earn large amounts of foreign exchange through the export of IT related services.

The Indians have done so in the second stage of their IT development. In the first stage, they developed a strong cadre of people in the IT field, both in India and abroad, particularly in the US. The Indians gained a lot of expertise in the field in the advanced countries. In the United States, they gained experience and achieved credibility for their expertise, and later used that experience to set up software houses. Now there is a current of reverse migration of Indian experts to India, where they have successfully set up large software houses and /or companies for manufacture of hardware components. This booming IT industry has clientele in India as well as in other countries, but this has been possible primarily because India's development has been all round. Industry has not decayed and degenerated prematurely and unlike Pakistan, their infra-structure is not a victim of neglect.

Now let us see what potential there is for our entering the first stage of IT development in a big enough way to make a difference. Despite there being in theory, a vast potential among our people as a source of trained manpower in this field, we have not even crossed the threshold. Why?

IT education: In a country with not even the basic infra-structure in place for many essential needs of the economy, priorities have to be set right. Education of course is, or should be, the first priority. But education in the public sector, reasonably cheap and within reach of the lower income groups, and not private education affordable only by the affluent, should be the first priority. This is as true of IT education as for education in general.

In Pakistan, one of the main problem has been the continually mounting cost of IT education, indeed of all education. Privatization of education has rapidly increased its cost. The result is its being affordable by only a small segment of the population. These conditions are hardly conducive to a "revolution" in IT. No revolution, not even an IT revolution, can come without the existence of inexpensive public education. Unless its cost is brought down to a level the lower income groups can afford, we will not be able to tap the potential talent of the entire population. At present, money, not talent is the determining factor for access to computer education, and the cost of such education is mounting.

Thus all this hype in the absence of creative economic policies, entrepreneurship and widespread education and literacy, is so much of bombast. It may benefit a small class of privileged people; or highly skilled professionals, it cannot change the destiny of the nation, as being claimed by a section of the elite. The best the planners can hope for at present is to act as suppliers of cheap labour for the advanced countries in the field of IT. To an extent, it helps, but this by no means should be regarded as the be-all and end-all of the IT 'revolution'.

A semi-literate society must simultaneously try to get the majority of its people out of the dark and despairing trap of illiteracy and ignorance. If the society can be pulled out of this trap of illiteracy and ignorance, and if the needed infrastructure and baseline industry can be put in place, IT will come on its own. Unfortunately, the current policies do not indicate any real change as far as this aspect is concerned.

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