Vice President of Finance and Private Sector Development, The World Bank

Thank you very much, Rita. I will talk about three things: First, the new world economy and what is happening in it; second, what developing countries can do to take part in this tremendous potential that is coming up; and third, what the World Bank can bring to the table.

On the new world economy, there are two big forces that are reshaping everything right now a technological revolution and an economic revolution.

The technological side is the topic that you have been debating all day. We have been hit by a very powerful cluster of innovations in telecommunications, informatics, transports, advanced materials, microelectronics, robotics, biotechnology, and software applications. What is so exciting about the heart of this information technology revolution is that it is still very young, and there is still a lot more to come.

We now think in the Bank that we may have interAtlantic phone calls down to three cents per hour around 2010 it is almost free. We think that the voice traffic cost through undersea cables will be about one percent of the 1987 cost by the year 2000. There are a lot of things coming down the pike in digitalization and data compression techniques.

The other fascinating thing about this information technology revolution is that it shrinks time and distance and that it causes knowledge to flow very liberally throughout the whole planet: Knowledge suddenly becomes a key factor of production.

The result of all of this is that we have a companion revolution in business practices worldwide, and this is the one that is so important for developing countries as well. A first example of this business practices revolution is highly accelerated business processes. There are lots of examples of highly accelerated business processes: Just-in-time production, very fast ordering cycles, and outsourcing exploding everywhere. Second, we now have hypercompetitive purchasing going on everywhere, be it for car parts or cotton goods or anything, with interactive catalog shopping this will become even more spectacular. Third, we are now seeing that smaller units are gaining over larger units; flatter units are gaining over hierarchical units; and basically, the speed of response in a company and its size are becoming actually assets.

Fourth, we now have services which were completely and utterly untradable which are suddenly becoming tradable. We have phone operators in the Caribbean working for United States companies. We have the Indian software industry having popped up out of nowhere. Swiss Air has its accounting done in India. In this town, we have my favorite example: Doctors dictate memos over the phone that get typed in Bangalore, India, and seven seconds later they are returned.

We also have this boundaryless flow of capital now throughout the whole planet $175 billion in private funds last year to developing countries. These are just a few examples of the revolution that is coming in the business practices area.

Longer-term, it will be even more spectacular. With low-cost digital systems, we will have education becoming a traded commodity available anywhere life-long. We will probably see deposit banking almost disappearing during our lifetime and being replaced by paperless money systems and securities. We may see teleshopping completely changing the way people buy and sell. We may see teleworking within and between countries occupying almost 20 percent of the work force at some point. A sort of global highly competitive tele- economy will be born within a generation.

Then there is the other revolution the massive entry of new players like China into the world economy. In general, the Bank now projects that two-thirds of the increase in GDP from hereon will be coming from nonrich countries that is, from developing countries and from the so-called "transition" countries.

These two big forces combined produce what I call this new world economy, and it has four features. It is a high-speed economy; it is global; it is knowledge-intensive; and it is highly disciplinarian because it is so competitive. This new world economy will bring two good things: High efficiency and high opportunities. We may have a sort of Golden Age in that the four billion people in the developing world may now have a real chance at catching up, and we may have a more balanced planet as a result.

At the same time, it will be a stressful Golden Age, if we get one. It will be stressful because not only will there be demographic and environmental stress, but there will also be a sort of rat race for competitiveness, and it will be expressed in four terms: Agility, networking, learning, and reliability.

Agility means that every country will have to achieve higher and higher agility standards, not just for their companies, their firms, and their industries, but also for their governments.

Countries will have to become very good at networking, because these days if you are not part of big commercial networks you are going nowhere. That will be a way for distinguishing winners from losers.

Countries will increasingly have to become what we call "learning nations." This means nations which keep upgrading their products, markets, and human resources, and not relying on static comparative advantages.

Finally, countries will have to become very good in competing through their legal, and political reliability, because if you have so many alternatives, business can always shift somewhere else.

In the future there will continue to be the distinction between rich and poor countries. In addition, there will be new distinctions between fast and slow countries, plugged-in and isolated countries, and learning and static countries, as well as 100 percent reliable countries and those that are less than 100 percent reliable.

How can developing countries seize these opportunities from this new world economy? It is clear that there is a negative to these new technologies, and the negative is that we may see an increase in the information and knowledge gaps for many countries, which would then make the income disparities that we have today even worse. That is the threat.

At the same time, there is this tremendous opportunity in that the developing countries have probably the biggest chance at leaping forward in development, in growth, and in competitiveness therefore in poverty reduction than they ever have had before. This is particularly clear as regards information technology and low-cost telecommunications.

These technology opportunities will clearly matter in three areas: They will be important for poverty in people, for the environment, and for growth in competitiveness.

In terms of poverty in people, we will see the importance in the next decades of new technologies in the areas of health, population planning, basic education, technical education, biotechnology, food, high-tech aquaculture, and in general, knowledge-based agriculture, and of course, infrastructure in all its forms.

In terms of the environment, we will see the importance of new technologies in the areas of new forms of energy (particularly solar energy) transportation, new forms of fertilizers, bio- remediation, and in general, ecologically balanced aquaculture and agriculture.

In terms of growth and competitiveness, developing countries can really get a lot of help from new technologies in the telecommunications and information technology area. Let me give you a few examples, using these four buzzwords of mine agility, networking, learning, and reliability.

Regarding agility, developing countries are full of entrepreneurs, but they are generally dragged down by their governments, which are not as agile as they are. This is an area where information technology can help a lot. You can have tremendous improvements in customs and tax administration, for instance, with digital systems, with electronic data interchange systems, and so forth.

In Singapore, the customs system runs through a boat in 15 minutes thanks to these sort of techniques. You can also have computerized land mapping and land titling systems that will help small entrepreneurs and businessmen access collateralized credit because they will have a title on their land. You can make an enormous difference by having cellular phones in rural areas, helping farmers and local businessmen bypass the postal system.

In terms of networking, developing countries can now leap-frog ahead across their information handicaps and use electronic bulletin boards and data services between companies in a way they have never been able to do before: There are already four or five of these systems afoot.

Teleconferencing and networking between universities, applied research laboratories, and productivity centers will make an enormous difference as well. In the Ivory Coast, the farmer who has a hand-held phone can find out the real cocoa price instantaneously as opposed to relying on information in relayed by the traders.

The learning side is probably where the biggest leap-frogging can occur. You can take mediocre universities in East Africa and almost instantaneously hook them up to good European or United States universities. We hear about a business school in Madras that will be hooked up to a business school near Paris that way. With a cellular link and a cheap PC, you will be able to completely reinvent the concept of the village school itself, as well as the concept of the teacher, and turn the whole thing into a community learning center.

With a simple CD-ROM, we will be able to give highly task-specific technical training in virtually anything. In other terms, distance learning will completely change the education equation and the quality of education in developing countries.

On the reliability side, I have no doubt that just increasing the access of developing country citizens to information and to these low-cost telecommunication methods is probably the best way to lead to more transparent, better, more democratic governments, just as has happened essentially in the Eastern Bloc. In our view at the Bank, low-cost telecommunications information technology is a major strategic factor of development from now on. The same is true for other technologies, from biotechnology to knowledge-based agriculture. All of these things have to be now factored into the long-term development game plans in developing countries.

That leads me to my third point: What is the World Bank doing about it? We have been around for 50 years. We have done virtually everything from reconstruction in Europe and Japan after the War to basic services infrastructure in the Sixties and Seventies. Then we went into social programs, agriculture, and the debt crisis. These days we are involved in environmental work on a large scale, social programs in private sector development, and we are now beginning to see that bringing these new technologies to developing countries will be one of the next biggest challenges that we will have to face.

What are we doing about this? Right now we are raising the awareness of Bank management and Bank staff about the importance of the technology-development link, and we are doing this mostly through partnerships with others. We have an important partnership with the NRC. We are now in a commission called the Global Information Infrastructure Commission, a member of which is here, and we are trying to get alliances with others to be able to be much better in this whole area.

We are kicking off an initiative which is to be called the " information and development fund." It will be about five million dollars a year and we will use it systematically to do advanced regulatory work to help countries open up their telecommunication systems to private participation. We will use it for awareness seminars and workshops in developing countries about all these new technologies and the importance of them, and we will use it for advanced work, pilot projects such as bulletin boards, distance education pilots, distance health, and so forth.

In our daily work, country by country, sector by sector, we will try to get the World Bank staff and the other agencies that work with us to experiment and incorporate the new technologies in actuality in the projects we help finance, be it in education, health, or anywhere else, and we have a few initiatives launched in that area as well.

One is dealing with solar energy, and one of our other pet ideas is to take some countries and do so-called "knowledge assessments" in them, which would be a way to figure out how well-equipped the country is to process knowledge: Get it, absorb it, transform it, and turn it into operational products. This will be an ambitious concept where we will look at everything from the telecommunications and information infrastructure of a country to technical literacy, science education, and even the way countries are hooked up to foreign information through their embassies. We will look at the whole question of knowledge acquisition, transformation, and utilization in countries.

Thank you very much for allowing me to share the background to all this and what we are doing about it.

Shirley Malcom
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