IV. INFORMATION TECHNOLOGY, GLOBALIZATION AND DEVELOPMENT

A hallmark of the closing years of the twentieth century is the marked intensification of the process of globalization. This process has manifested itself in accelerated movement of goods, services, factors of production and technology across national boundaries. The rapid spread of the use of information and communication technology (ICT) around the globe is both an outcome and a determinant of this process of globalization. While there are many positive outcomes from the continuing improvements in ICT, there are also escalating risks associated with its use. In this theme topic study, an attempt is made to analyse the relationships between ICT, the process of globalization and economic development in the developing economies of the Asian and Pacific region, with particular attention being paid to trade, investment patterns and financial flows. These issues are also viewed from the perspectives of economic volatility and economic security, with the objective of identifying options for ICT-related strategies for the developing countries of the ESCAP region.

ICT is a generic term covering computers, broadcasting, telecommunications, data networks and "smart" components, which are becoming increasingly common in all types of appliances such as cars, televisions and washing machines. It can be defined as the totality of the electronic means to collect, store, process and present information to end-users in support of their activities. It consists of computer systems, data communication systems, knowledge systems, office systems and consumer electronics, as well as networked information infrastructures, the components of which include the telephone system, the Internet, fax machines and computers.

The pace of technological change in ICT in recent years has led to revolutionary changes in the processing and dissemination of data and to the emergence of an information society, with an immense effect on production, services, economic development, organization of labour and the environment. A core component of ICT is the semi-conductor chip which, since the early 1980s, has not only decreased in size and cost but also increased steadily in capacity and complexity. This has enabled computers to evolve from room-size machines to palm-size devices. Today, information technology reflects the convergence of technologies associated with computing, telecommunications and office systems. Information technology processes and packages information, and telecommunications allow information technologies to interact with other information technologies and remote devices in networks, permitting users to access databases and communicate with other users over long distances. The combination of information technology and telecommunications technology has greatly enhanced existing service industries and has led to a spin-off of numerous new ones. It has increased the productivity of banking, business management, administration, education and health-care services, and so on. It has also allowed greater mobility and flexibility in capital and financial movements. It is this combination of information technology and telecommunications into ICT that defines the global information network and the development of a global information infrastructure.

It is almost universally accepted that the use of ICT is beneficial for individuals, organizations, economies and the international community. While there are reservations in specific contexts, suggestions to return to the work habits of the age prior to the informatics revolution are not taken seriously. There is no reason to doubt that the benefits of what is being experienced today are likely to increase with the further evolution of ICT. On the other hand, the changes that ICT is bringing to individuals and economies are creating significant new uncertainties. Organizations and people are forced to adapt to new circumstances and to new requirements at the workplace and outside, and these adaptation processes are complicated and often initially difficult to absorb.

GLOBALIZATION AND ITS CAUSES

While the definition of globalization varies with the context of analysis, it generally refers to an increasing interaction across national boundaries that affects many aspects of life: economic, social, cultural and political. In the context of this study, in order to keep the analysis within reasonable bounds, the focus is only on the economic aspects, with particular emphasis on the role of ICT. As such, globalization narrowly refers to the growing economic interdependence of countries worldwide. This includes increases in the international division of labour caused by swelling international flows of FBI, accompanied by an increasing volume and variety of cross-border transactions in goods and services, international capital flows, international migration and the more rapid and widespread diffusion of technology. This should not be construed to imply that social, cultural and other forms of globalization are unimportant, only that they are less germane to discussions of economic security and development.

Economic globalization arises out of the interaction between market- and technology-related factors as well as economic policies at national and international levels. Market-related factors include increased competition for resources in the production of the same goods and services, greater engagement in international trade and enhanced efforts to attract FBI. These have all been assisted by technological and information-related improvements. For example, the growing role of transnational corporations in both production and service sectors of practically every country has placed competitive pressures on home country firms, exerting an inordinate influence on the existing pattern of technological specialization. Since 1970, financial innovations have led to lower transaction costs and the development of new financial institutions and instruments, as well as dramatic growth in cross-border financial transactions. Additionally, increasing urbanization around the world has resulted in more uniform tastes, preferences and demand, spurring market growth even further.

In terms of technology-related factors, the componentization of production, facilitated by advancements in both manufacturing technologies and ICT, has led to lower costs and the dramatic shortening of economic "distances". With the microelectronics revolution, new communication technologies have facilitated the international diffusion of new production, marketing and organization technologies at low cost, allowing faster and cheaper movements of goods and services. Advances in telecommunications and transport, for example, have helped to lower the costs of communication and transportation¹ while the emergence of fax and global computer networks has drastically reduced the economic significance of geography. At the same time, systematic rationalization of procedures and documentation for international trade, together with wider and easier dissemination of prices of traded goods, has contributed to the convergence of market prices, resulting in fewer distinct markets.

The convergence of policies at national and international levels, leading to increasing coordination, has been stimulated and facilitated by the globalization process. At the national level, there has been a continuous but often gradual removal of government restrictions and controls towards less planned and more private sector-based economic systems in both developed and developing countries,² and market-related reforms in the economies in transition. More flexible exchange rates and freer foreign exchange transactions have also been adopted more widely. The more recent reforms to reduce capital and exchange controls coincided with an intense period of deregulation of domestic financial markets. At the international level, there was an increase in multilateral agreements on rules affecting international transactions in goods and services.³

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¹ The cost of phone calls, for instance, has declined by a factor of 60 since 1930 while air-passenger miles per capita have increased 15 times in 20 years. See P. Alonso-Gamo and others, "Globalization and growth prospects in Arab countries", IMF Working Paper, WP/97/125, September 1997, p. 7.

² Starting in the early 1970s, the relatively tight restrictions on international capital movements which were still in existence in many industrial countries began to be dismantled. See IMF, World Economic Outlook (Washington DC, May 1997), p. 60.

³ For example, the Uruguay Round is viewed as one of the most comprehensive set of agreements on multilateral rules ever devised to govern most areas of cross-border transactions. In addition, other frameworks have been established to enhance macroeconomic stability, for example, annual G7 meetings since 1975, and the Basle Accord in 1988 which increased and harmonized risk-weighted capital ratios for banks, initially in 10 major industrialized countries and now in many more countries (Survey 1997, p. 7).