Asia and E-commerce: Investment and Policy Imperatives

by Michael C. Maibach

Michael C. Maibach is Vice President, Government Affairs, at Intel Corporation.

The challenge

In 1997 Intel invested 27% of its revenues in preparation for the future, $2.4 billion in R&D and $4.5 billion in new plant and equipment. These investments come at a time of great uncertainty, as well as opportunity, in the global economy. The world economy is rapidly moving to Internet-based electronic commerce. Indeed, the information revolution will surpass the global impact of the Industrial Revolution. Societies that choose the proper e-commerce investments and policies will certainly prosper.

Asia: exporting information technology

Information technology (IT) products have been a wonderful export business for Asian economies. High-tech exports account for 75% of Singapore's GDP and over 40% of Malaysia's GDP. South Korea's aggregate IT exports totaled $40 billion in 1996.

However, in relative terms, Asian nations do not buy the technology they produce. In the US, for example, investment in IT infrastructure has exceeded 3.5% of GDP, while China, Indonesia, the Philippines, and Thailand are investing less than 1% of their GDP. Furthermore, the current financial crisis has prompted Asian companies to reduce their expenditures on information technology, at the same time that the US and Europe have stepped up their investments.

A billion connected computers

The Internet delivers a global electronic network that will have one billion computers connected by early in the next century. The number of URLs had grown from 20 million in 1995 to almost 300 million in 1997. Metcalf's Law holds that the potential value of these connected computers will increase exponentially as each new "netizen" (Internet + citizen) brings new users in the form of friends, associates, customers, and suppliers. Seventy-six percent of Internet users reside in the US and Europe. The United States is at least twice as connected to the World Wide Web as are Pacific Basin nations.

Megatrends and mega-challenges

A billion connected computers will make access to information technology a competitive necessity in the 21st Century. In these difficult times, will Asia choose to make the IT investments that will guarantee its future?

Education. There are 500 million illiterate adults in Asia. In the Information Age this is a critical threat. More than ever, knowledge is king. Using communications systems such as Hughes's Direct PC, courses can be offered to any person or group with a PC and a receiver. IT products make remote PC education instruction available, affordable and adaptable.

Most people do not own and are not yet trained to use IT products such as PCs. While most IT activity rightly belongs in private markets, government should ensure that schools, libraries and other public places are "wired" and outfitted with PC communications technology. Teaching children to use this technology as part of their curriculum and giving adults access to the Internet in public places will create a ladder of opportunity for all segments of the population.

Health care. Fifty percent of the planet's adult population lives in Asia. Asian health care is often marginal. The US has one doctor for every 387 people. In Malaysia the ratio is 1/2000, while it is 1/6786 in Indonesia. PC-based tele-medicine would allow a doctor in Boston to care for a patient in Beijing or Bali.

In order to permit remote PC education and tele-medicine to thrive, governments should begin to discuss how to standardize the credentials of teachers, nurses, pharmacists, and doctors across national boundaries. Indeed, governments must reexamine all "certified" services, including insurance, banking, real estate, law, accounting, and engineering. This will entail years of negotiation and debate, but the time has come to address it.

Private and professional organizations may provide leadership in these areas. For example, bar associations can establish multinational committees to experiment with possible solutions.

E-commerce. A third area for opportunity in Asia is electronic commerce. Global e-commerce will have grown from zero to a $300-plus billion business by the turn of the century. Three quarters of e-commerce will be business-to-business. Few enterprises can afford to ignore this commercial wave. E-commerce will not only create new business, it will also make transactions vastly more efficient.

Governments around the world are now grappling with the issue of taxing e-commerce. The first rule should be "do no harm." Government and industry should study the issue and find solutions that are technology- neutral, as well as fair to all governments. Regulatory bodies must avoid placing analog-based telecom access charges on the Internet. Access charges are usually excessive because they contain subsidies created during the monopoly era of the telephone system. Sweeping the Internet into this regulatory regime will chill investment and growth. This issue will be joined wherever Internet protocol telephony begins to compete with traditional phone service. A "digital fire wall" is needed between the old, regulated analog world, and the new world of digital

communications.

Broadband issues

Telecommunications deregulation. The world is racing to deregulate monopoly public telephone networks. Deregulation will foster competition, which will bring in new investments and services. Among those services will be greater bandwidth—at home as well as at work. Digital customers are thirsty for bandwidth. Such "superhighways" are the key to high-data rate transmission that is vital to Internet use. Regulations and standards should also make ISDN and DSL technologies available and affordable.

PC-TV integration. Consumer electronics is moving from analog to digital. For example, the PC and TV technologies will converge. National regulatory and standard—setting policies for digital TV (DTV)—as well as devices such as the cable set-top-box—must establish market-driven "open" systems. TV cables, once switched and upgraded, will provide bandwidth competition to telecommunications systems for both voice and data.

Can Asia be an IT customer?

Asia has been an outstanding producer of IT products. The proliferation of IT products and technologies has created the Internet, e-commerce and tele-medicine. For Asia to share in the fruits of these developments—developments it helped to create—it must become a "customer" for technology products produced in the region and around the

world. Wise and pro-free market public polices will complement those investments and create the national business environments that will foster success in the Information Age.