2001 Baltic Sea Region E-Business Forum, Digital Economy Development in Transition Economies
Riga, 28 September 2001
Statement by Dr. Danuta Hübner,
United Nations Under-Secretary-General,
Executive Secretary of the UN Economic Commission for Europe
Excellencies, ladies and gentlemen.
One of the challenges of the accession process (not included in the Copenhagen criteria) is catching up with the European Union. The major part of the catching-up process will eventually take place after accession, but the process itself is also of tremendous value now. The only chance for countries in transition in this effort to catch up is to follow the way of knowledge-based economy. Knowledge-based economy is the only chance for leapfrogging, and without leapfrogging there will be no successful catching up.
Building a knowledge-based economy implies a lot of restructuring, a massive restructuring – not so much in terms of shifting between sectors and industries. It is, indeed, about all dimensions of enterprise restructuring, about implementing information and communication technologies outside the ICT sector, about expenditures on research and development. Also, about technology transfer. To be successful in building knowledge-based economy, transition economies need newest technologies. There’s no time to lose, countries in transition will not make it without technology transfer. We are not talking about the ability of those countries to produce information technology –much welcome as it is – but first of all about the ability of those countries to use ICT in a creative way.
That is why, in the process of consolidating European efforts for developing knowledge-based economy in candidate countries, we must focus on the actual use of ICT outside ICT sector and on preparing the whole of society to absorb innovations.
This consolidation of efforts needs a good and forward looking partnership between public and private sectors with regard not only to establishing regulatory system, including intellectual property rights, but also with regard to the education system and research and development which are a precondition for successful building of knowledge-based economy. We need also entrepreneurship spirit – which exists in transition economies.
There is a good chance also generated by the window of opportunity opened by massive restructuring in countries in transition, a chance for industries and enterprises to embark on ICT path.
But there is a long way to go, a shorter if we go together. When we consolidate efforts to build knowledge-based economy in our region, we must see this challenge against real problems of countries in transition. These are largely poor countries if judged by income level, with poor budgets. On average, they lag behind EU-15 in all measures of access to and use of ICT. There are also large disparities between the countries. They suffer from large costs of access to ICT, from lack of regulations, from lack of security and trust of customers.
Lack of comparative or any statistical data is also a stumbling block. Differences among countries go well beyond what traditional statistics reflect and they are even deeper with regard to the real capacity to use ICT and the scope of the role of black market.
In Europe we must see ICT as a public good – we can have more of it if we cooperate, if we share lessons and there are already plenty of them. We must consolidate efforts for all the areas of knowledge-based economy: infrastructure, infostructure and skills.
With regard to infrastructure – it seems that the main stumbling block is financing. The role of foreign direct investment and public-private partnership can facilitate the process. With regard to the information and content, candidate countries are moving ahead fast, but the critical mass with regard to e-business and e-government has not been reached yet. Policies and regulations are critical here. With regard to capabilities and skills, education and training are of utmost importance. Over the last ten years, the erosion of human capital took place in transition economies, putting new pressure on education system reforms. The real challenge here is not only skills but also attitudes. Additionally, social inequalities with regard to access to education do exist, making building knowledge-based society even more difficult.
Europe extends beyond enlargement area and we must think now about creating one e-Europe in the broad sense. This is what makes my own institution, which has a broad definition of Europe of 55 member States, work as a pan-European or even a global forum with regard to using ICT for the development of investment and enterprises.The primary goal of the United Nations Economic Commission for Europe is to encourage greater economic cooperation among its member States. The Commission has a sui generis expertise on e-business issues within the UN system with its long standing activities on trade facilitation, United Nations Code for Trade and Transport Locations called UNLOCODE and the UNEDIFACT, the international standard for electronic data interchange. This effort preceded by almost two decades the current e-commerce developments.
Based on the factors mentioned before, we realized that, first, ICT is becoming key factor and agent in the far-reaching changes in the world economy today; second, transition economies are not exempt from this fundamental change; and third, the compelling force of these technologies is moving the region toward an economic structure that is significantly different from the time when the transition process began a decade ago. Therefore UNECE conceives that there is a need for a substantial paradigm shift from the conventional transition approach to a new one. We would coin this new approach as "E-Transition approach".
As a first step, UNECE held two annual executive fora on digital economy. The first one was the 2000 Forum on E-Commerce for Transition Economies in the Digital Age, organized in June 2000, and the second one was the 2001 Forum on E-Services Development which was held in June this year. Both fora were attended by more than 300 participants from over 30 countries which included most of transition economies.
At the conclusion of these fora, a number of recommendations were issued which are currently being reflected in the UNECE’s digital economy development programme. These recommendations include the establishment of the Team of Specialists on Internet Enterprise Development for transition economies, with a need to contribute to wider utilization of information and communications technologies for the development of trade, investment and enterprises in the region. I will give you an overview of these activities in the next part.
There are several pillars of UNECE’s work on digital economy which are coordinated by the UNECE intergovernmental Committee for Trade, Industry and Enterprise Development, and its subsidiary bodies.
The first one is the work programme of the UNCEFACT, the Centre for Trade Facilitation and E-Business. The second one is a series of new initiatives for facilitating electronic trade such as UNetradeDoc. The final one is related to the E-Transition Programme of the UNECE Team of Specialists on Internet Enterprise Development, which was established to act as the UNECE focal point for the design, development and implementation of governmental policies relating to the advancement of digital economy and information society for the region.
With these work programmes UNECE continues to conduct analytical activities and provide policy advice and technical assistance to the Governments in transition economies by producing guidelines, best practices and recommendations on e-business and e-government development issues.
To begin with, in the early eighties, UNECE established an e-agenda with its focus on standardizing electronic data interchange called conventionally UNEDIFACT, the international standard used in more than 100 countries. This forward thinking of UNECE in the field of e-commerce had led to the creation of CEFACT in 1996, the Centre for Trade Facilitation and E-Business embodying the past expertise and experience on e-commerce. In recent years, the CEFACT has reoriented its pioneering leadership into setting a common language of the Web-based business data called ebXML, considered as one of critical instruments to facilitate the e-business.
The CEFACT has issued more than 30 recommendations on both trade facilitation and e-business in collaboration with thousands of international experts and other international organizations such as WCO, UNCTAD, WTO, UNCITRAL and the European Commission.
The UNECE has just launched the United Nations electronic trade Documents (UNeDocs) project. UNeDocs aims to facilitate the use of documents in international trade by providing default forms for trade documents that can be used both on paper and with computerized systems, such as new ebXML (e-business extensible markup language) and Internet-based communications systems.
UneDocs specifically targets to incorporate the needs of SMEs, developing and transition economies and allows them to link to the international supply chain using either paper or the Internet. With this new initiative, the UNECE will provide a simple and low-cost documents exchanging system in order to help transition economies to participate in electronic trade.
In addition, we have recently embarked on a new ambitious programme for transition economies aiming to help better understand the real challenges and benefits of the digital economy with the launch of the UNECE Team of Specialists on Internet Enterprise Development. In close consultation with governments and the business community in the region, this expert group held two regular sessions over the last ten month of its existence. At its second session held in March this year it has set out the strategy for the development of digital economy under the theme of "E-Transition for All" which encompasses the assistance of governments in the region in establishing national council on digital economy, development of e-government initiative and e-payment systems, e-regulatory framework, e-learning platform, and virtual SME development, among others.
In order to raise awareness of the issues, the UNECE organized the first conference on digital economy development in October last year in Bucharest, Romania and this year the second conference will be held on 4-5 October in the same venue as a follow-up. In parallel, the UNECE workshop on e-government will be hosted by the Hungarian government on 7-8 November this year in Budapest with an aim of setting the new agenda for digital public administration in transition economies.
Now let me make some remarks on the digital economy development in the Baltic Sea Region. In a number of transition economies there is increasing recognition of the importance of the digital economy. This is particularly true for the Baltic States.
Whereas many governments in the region still focus mainly on the traditional economic dimensions of this transition process, the Governments of the Baltic States have adopted national strategies for digital economy development at a relatively early stage as in the case of e-Latvia, e-Estonia and e-Lithuania.
This policy setting is creating a synergy with the regional comparative advantage manifested by its neighbouring countries of Europe. This externality has been furthermore enhanced by the factor endowments of this region based on human resources such as high-level of education, digital literacy and high skilled labour, essential elements for knowledge economy mentioned previously.
As revealed in the UNECE survey on "Internet Enterprise Infrastructure Development in Transition Economies", a pattern of uneven development is emerging in several sectors of Internet development, as well as in the rate of growth for each country in transition economies. The Baltic countries currently have more Internet hosts, secure servers, percentage of Internet users, and a wide range of online services available than the other regions of the transition economies.
Against this background, the Baltic Sea region is now facing the need for "deepening" interaction with the digital economy. This deepening occurs by developing linkages with the "digital value added" economy.
One way of realizing digital values is by creating a full spectrum of digital information such as large collections of scanned images, electronic office documents, XML files, computer output, audio, video, online customer services, digital asset management, distance learning, etc.
This e-content development and management is highly desirable in this respect and helps to create jobs and welfare. In this regard, UNECE will collaborate closely with the European Commission’s E-content development initiatives such as the "East-West Economic Network" and the "Euro-Town Development Project" in order to better assist the governments in the region.
The advanced and advantageous position of the Baltic Sea region will enable to create this "digital value" linkage which will provide further lessons to be drawn by other transition economies in order to attain the full potential of digital economy.
In conclusion, I would like to stress that transition economies and especially the Baltic Sea Region have enormous potential for trade, investment, enterprise development and economic growth based on the innovative power of the new information and communications technology.
In this regard, a close cooperation of governments and the business community in the region is needed to give a new momentum to building the Information Society in order to make the accumulated experiences and the current transition process toward market-based economy fully compatible with the rapid technological change in global e-marketplaces.
In this context, the role of governments could be further explored in accelerating the new Internet-based transition process, in particular for those areas in which public and private sector partnerships could benefit from closer collaboration with each other and with International organizations. In this connection, I would like to once again congratulate the Latvian government for its the nation-wide initiative of developing the Information Society and the knowledge-based economy.
The UNECE, in our mission to assist in integrating transition economies into European and global processes, will intensify its work through "E-transition programme" with the countries in the region as full participants in the knowledge-based economy and the global information society. Therefore, I would like to invite governments, private sector leaders and the academic community of the transition economies to join the UNECE in its efforts to develop further the knowledge-based economy.
This conference in Latvia is definitely contributing to our common efforts. On behalf of the UNECE secretariat I would like to sincerely congratulate the Latvian government for organizing this event which is a major building block for the process of shaping information society in our region.
Thank you for the kind invitation.