1. Ibrahim Kholilul Rohman
Digital Economy
What and How to measure &
Some takeaways from the EU policies
Ibrahim Kholilul Rohman
Former Research Fellow at the Directorate Growth and Innovation
Joint Research Center, European Commission
( )
FEUI 1998
The views are my own
The 10th Research Day, FEB UI, 206
Tuesday, November 1st, 2016

2. Setting the scene Digital economy Where are we? Some policies
What and how to measure
Current landscape
Where are we?
Some policies

3. Setting the scene Digital economy Where are we? Some policies
What and how
Current landscape
Where are we?
Some policies

4. The new paradigm of economic growth theory
Setting the scene
The new paradigm of economic growth theory
The future of economic growth depends on how a country raises the level of technological development where R&D and innovation play an important role.
Attached with the GPT concept, the emergence ICT sectors best suit this paradigm.
Scherer, F.M., (1999), “ New Perspective on Economic Growth and Technological Innovation”, Washington DC: Brooking Institute Press.
Also : Romer (1990), Quah (1999) and countless other authors.
1.      Proses Akumulasi Sumber Daya Produktif
2.      Proses Alokasi Sumber Daya Produktif
3.      Proses Distribusi Pendapatan
4.      Proses Perubahan Institusional/ Kelembagaan

5. Setting the scene: The future direction of economy
The total GDP for 48 Sub-Saharan African countries in was approximately USD 325 billion (1995) and USD 338 billion (1996), only 72% of the aggregate R&D and innovation driven value added consisting of the intellectual capital in General Electric, Microsoft and Shell.

6. Setting the scene Digital economy Where are we? Some policies
What and how to measure
Current landscape
Where are we?
Some policies

7. Digital economy
A transformation of the economy with the emergence of ICTs being used in every aspect of life.
Businesses activities adjust their supply and demand chains and their internal organization to fully exploit ICT responsible for creative destruction through the birth of new firms and greater productivity in other sectors of the so- called General Purpose Technologies (GPT).
The diffusion of ICTs in almost all aspect in the daily life from common users perspective (OECD, 2009, p.13)

8. Industrial revolution vs. ICT revolution
Watt’s steam has contributed about percentage points to the growth of labour productivity before 1830 and peaking at 0.4 percentage points in the period
The impacts are much smaller than the basis of many recent studies measuring the effects of ICT on the growth of the economy (Pohjola, 2002).
Why?
General purpose technology (GPT) ; the pervasive use of technology in a wide range of sectors enabling generalized productivity gains transferred to the rest of the economy as a consequence of innovation in the technology sectors (Rosenberg, 1982).

9. The emphasize is ICT, but how can ICT be defined?
Computer and the Internet
Burke (2009); Krizek and Johnson (2007); Verdegem and De Marez (2007); Grazzi and Vergara (2011); Salehi and salehi (2011); Spiezia (2011); De Vries and Koetter (2011)
Software
Howells (1995), Erumban and de Jong (2006); Gago and Rubalcaba (2007); Jalava and Pohjola (2008); Lucas (2008); Moshiri and Simpson (2011); Giuri, Torrisi and Zinovyeva (2008); Collard, Fève and Portier (2005); Van Der Laan, Van Oort and
Communication equipment
Corrocher, Malerba and Montobbio (2007); Antonelli, Krafft and Quatraro (2010); Tseng (2009)
Telecom
Gholami et al. (2006); Samoilenko and Osei-Bryson (2008); Hallikas, Varis, Sissonen and Virolainen (2008); Yu, Suojapelto, Hallikas and Tang (2008); Kushida (2012))
Intellectual property
Corrocher, Malerba and Montobbio (2007); Antonelli, Krafft and Quatraro (2010); Tseng (2009)

10. Alternative 1 : ICT ecosystem The producers and users of knowledge in the ICT Sector
There are 4 groups of players who create and use knowledge.
(1) networked element providers
(2) network operators
(3) platform, content & applications providers
(4) final consumers
[NOTE: The first 3 are intermediate consumers.]
Best suit for industry analysis
Source : Martin Fransman (2008)

11. Alternative 2 : ICT sectors
Best suit for country level analysis
(OECD, 2009)

12. Setting the scene Digital economy Where are we? Some policies
What and how
Current landscape
Where are we?
Some policies

13. Global perspective
Source : PREDICT (Prospective Insights on R&D in ICT), European Commission
De Panizza, De Prato, Rohman, Lopez, Rossetti (2016)

14. Global perspective Labour Productivity
Source : PREDICT (Prospective Insights on R&D in ICT)
De Panizza, De Prato, Rohman, Lopez, Rossetti (2016)

15. Industry perspective : the main players
Source : Industrial scoreboard study, European Commission

16. Digital economy : how big are they?
Sales = 77 billion EUR = 60% total penerimaan negara
R&D = 10 billion EUR = 1/3 total APBN pendidikan
Sales = 10.3 billion EUR = 63% total expor migas Indonesia (2015)
R&D = 2.2 billion EUR = 45% APBD DKI
Sales = 1.5 billion EUR = 10% total expor palm oil
R&D = 0.4 billion EUR = 25% total PDRB Bengkulu
Source : EC R&D Scoreboard (Top 2500 R&D based firms worldwide)

17. Nature of ICT industry High R&D intensity
High inter-relatedness to other ICT industries at different layers
Global value chain
High degree of both technical and non-technical innovations
High orientation on export/international market
Very high marginal productivity of labor (especially in ICT services sector)

18. BUT Digitization is not only about THINGS but also about HUMAN.
More and more high value-added activities are linked to the production of ‘‘ideas’’ rather than ‘‘things’’ .
Thus, unlike the manual worker who uses his/her hands to produce goods or services, the knowledge worker uses his/her head to produce ideas, knowledge and information.
Drucker (1966, p. 3)

19. Productivity gap
European Commission (2014, 2015): the rise of the productivity gap between EU and the US is attributable to the gaps in the ICT sector labour productivity.
The EC’s thus introduced the Grand coalition as an initiative to tackle the lack of digital skills in Europe to meet the demand ICT-related vacancies across all industry sectors.
A large digital talent pool ensuring labour force in Europe are equipped with adequate digital skills.

20. ICT specialists
ICT specialists are workers who have the ability to develop, operate and maintain ICT systems, and for whom ICT constitute the main part of their job.
The ICT specialists’ data is calculated based on occupations following the International Standard Classification of Occupations (ISCO).
Mainly : sourced from Labour Force Survey (LFS) and Central Population Survey (CPS-US).

21. ICT specialist (2015)
Source : European Commission-Unofficial data (De Panizza, Rohman, Lopez (2016)

22. Our position and the complexities..

23. 1. The over-all size is rather small
Source : European Commission’s PREDICT study (NACE 582, 61, 62, 631, 951), Indonesia’s data is taken from BPS
The figures are not exactly comparable
10 November 2018

24. 2. Low R&D intensity in general…
OECD (2010)
Gross Expenditure on R&D (GERD)/GDP

25. 3. Industry is not doing R&D
Asian companies among the top 2500 R&D intensive companies in the world
Source : IPTS-European Commission, Industry Scoreboard (2015). The top R&D intensive companies in Asia

26. 4. The policy makers do not take it seriously the importance of R&D data R&D data is even missing from the survey The data is only available in 2011

27. 5. The performance up to 2011 was very weak
Only 7.3% performs R&D (self-reported)
13.26% has innovation capabilities—quite contradictory
Can you be …innovative without performing R&D?

28. 6. ICT industry as the main lever for the digital economy is still out of context
Just too few sample

29. INDONESIA 7. ICT Diffusion side is …spurious In
Indonesia is one of the most growing market however the country is lacking on how to make use of this emerging society to increase the competitiveness of the country

30. Digital divide (BOP survey, LIRNEAsia and LPEM FEUI, 2012)
Awareness and actual access.
Do you aware of ”internet”?
Do you use the Internet/Are you an internet user?

31. 8. National broadband planning is rather …minimalistic
El-Darwiche (2009)

32. Systemic approach on the quality of broadband
Source : Chalmers & Arthur D. Little
 Doubling speed affect 0.3% of growth rate (Rohman & Bohlin, Int. J. of Management and Network Economics, 2012 Vol.2, No.4, pp.336 – 356)

33. Access, usage and the quality
Proportion of urban vs. rural
Access by devices
Source : Statistics Indonesia (BPS)

34. Indonesian broadband plan compared to other neighboring countries
Small and long delayed
Source : Gunaratne, Ilavarasan, Fernando and Rohman (2015)

35. Setting the scene Digital economy Where are we? Lesson learnt
What and how
Current landscape
Where are we?
Lesson learnt

36. Learning from Europe
Source : Stancik & Rohman (2014)

37. Learning from Europe : Digital Agenda for Europe (DAE)
100%
25%
10%
15% 5%
Cumulative growth rate
12% 1%
Year
€ 5.5 billion € 11 billion Target
Source: European Commission, Stancik (2012) & Stancik & Rohman (2014)

38. Epilogue : what should we do?
More evidence based analysis
Data, Data and Data !!
Targeted R&D policies
Promoting more R&D companies (R&D patent box, etc)
Universities
Stronger triple helix
Parallel processes between a more conventional economic structural transformation and leap-frog policies –new paradigm (R&D and innovation)
Some left-over in the ICT diffusion side
Broadband and telecommunication regulation

39. Ibrahim Kholilul Rohman
Digital Economy
What and How to measure &
Some takeaways from the EU policies
Ibrahim Kholilul Rohman
Former Research Fellow at the Directorate Growth and Innovation
Joint Research Center, European Commission
( )
FEUI 1998
The views are my own
The 10th Research Day, FEB UI, 206
Tuesday, November 1st, 2016