. 9
( 15)


available. Some of the microstates in the Caribbean and Pacific Islands have as many URL
references or hyperlinks per capita as those in the traditional economic core regions of
the developed world. Their external economies, supported in large part by tourism, have
facilitated their entry into worlds where electronic information is vital for their raison

Research Directions
This initial study into classifying the world™s capital cities using the number of URL
references suggests a number of additional topics that merit investigation by social and
policy scientists. I mention four. First, it would seem most appropriate to follow up this
study on the number of URL references or hyperlinks to specifically examine the number
of linkages or pairs of hyperlinks between and among the world™s capital cities, that is,
between each capital and every other capital. We could construct a 199x199 matrix to
examine the number of linkages between each pair of cities. For example, how many
linkages are there between Cairo and Pretoria, Cairo and Paris, Cairo and Beijing, etc.?
Or between the capital cities in Southeast Asia, South America or Europe? This
investigation would identify those capitals with the fewest and the most linkages, and
the most and fewest links with what other capitals and which major regions. (See Brunn
(2003a) for an initial inquiry into the paired hyperlinks between four major Eurasian
capitals.) A similar “linkage” study was done by Brunn and Dodge (2001) on the “export”
and “import” of the world™s states. Saad, House and Brunn (2002) did the same for the
most and least linked states. A second study would examine the number of actual linkages
a capital city has with other large, medium, and small cities within its own country. This
study might be especially insightful where the capital city is not the largest, for example,
Ottawa in Canada, Canberra in Australia, and Brasilia in Brazil. A third study would
undertake a content analysis of Web pages of capital cities in a given region to discern
if there are any commonalities or major themes. For example, are the Caribbean and Pacific
Island regions mostly promoting tourism? Are investment Web sites more common in

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214 Brunn

Europe than South Asia? Also are the contents of Web sites similar for large and small
states and those with similar socioeconomic standing? A fourth would look at the number
of linkages each world capital has with New York, the site of the United Nations, and also
with Geneva and Vienna, which have U.N. offices. Also it would merit measuring the
number of linkages between existing and potentially new European Union member
capitals with Brussels and Strasbourg. In carrying out these and other studies that use
data from major search engines, we will learn more about individual capitals, information
that is becoming of increased importance to scholars, the commercial sector and
governments. We also learn more about capital cities in major world regions and their
place in contemporary and future worlds (Brunn and Ghose, 2003; Castells, 2002; Van der
Wusten, 2002).

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216 Brunn

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Online Services and Regional Web Portals 217

Chapter XI

Online Services and
Regional Web Portals:
Exploring the Social and
Economic Impacts1
Helen Thompson
University of Ballarat, Australia

This chapter examines community empowerment, economic and business development,
and equity of service as the issue of success and decline in regional and rural
communities is explored with a particular focus on community informatics initiatives
(CI). In Australia, there has been a vision for online services to be used to open up
regional communities to the rest of the world. Government support has been seen as
enhancing the competence levels of local communities so they become strong enough
to deal equitably in an increasingly open marketplace. But how effective have regional
portals and other online initiatives been? This chapter explores whether economic and
social benefits are generated via establishing and sustaining regional CI initiatives.
Theory relevant to online communities is introduced to provide a context for the
presentation of two case studies. The dissemination of the critical learning from these
cases can inform others about the diverse factors which impact on the effectiveness and
long-term sustainability of regional CI initiatives.

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218 Thompson

Information communications technology (ICT) has been identified as a key enabler in the
achievement of regional and rural success, particularly in terms of economic and
business development. The potential for achieving equity of service through improved
communications infrastructure and enhanced access to government, health, education
and other services has been identified. ICT has also been linked to the aspiration of
community empowerment where dimensions include revitalising a sense of community,
building regional capacity, enhancing democracy and increasing social capital.
There has been strong support for the view that the information economy will play a
seminal role in the growth of regional and rural Australia. Online capabilities and services
have been promoted on the basis that they can build stronger and more viable regional
communities with enhanced investment, employment and skills, and improved quality
and convenience of life. ICT has also been identified as providing opportunities to “level
the playing field” with access increasingly being seen as critical for both economic and
social well-being. Benefits have been espoused in terms of “location independence” and
the end of the “tyranny of distance” (Department for Information Technology and the
Arts, 1998; Department of Communications Information Technology and the Arts, 2000;
Department of Communications Information Technology and the Arts and National
Office for the Information Economy, 2000). In terms of enhancing community well-being,
it has been argued that online capabilities can help to stimulate and reinvigorate
geographic communities and communities of interest.
There has been considerable interest in promoting ICT and e-commerce uptake for small
and medium enterprises (SMEs) with the role of local government in promoting SME
uptake receiving consideration (Surridge, 2000; Romm and Taylor, 2001; SkillsNet
Association Co-operative Limited, 2001; Jakobs, 2002). Summary case studies have been
presented to demonstrate how individual businesses have adopted and benefited from
ICT and e-commerce (Department of Communications and the Arts and AUSe.NET
Australian Electronic Business Network, 1998; Papandrea, 1998; National Office for the
Information Economy, 2000; Papandrea and Wade, 2000; Ernst & Young and Multimedia
Victoria, 2002). These are, however, generally very brief accounts which lack detail in
terms of the processes, the challenges, the evaluation approach and actual outcomes
(both expected and unexpected). In terms of community informatics literature, the focus
tends to be either on discrete ICT initiatives or on telecentres. There is scant literature
which explores how communities can establish web-based services which support local
community goals, whether they are social, economic or environmental.
A raft of government policies and programs has been launched and reports published
and disseminated, based around the theme of ICT and online capabilities. However, a
range of barriers continues to impede uptake, particularly in regional and rural areas.
Issues which have been explored include the “digital divide” and “equity of access.”
While it is has been argued that regional and rural communities require first class
infrastructure to harness the power of ICT (Victorian Government, 2002), others, perhaps
more realistically, state that the goal of true equity of access may never be achieved
(Hunter, 1999; Fong, 2001). Hunter, for example, believes that regional Australia must

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Online Services and Regional Web Portals 219

stop “talking down” its ability to participate in the new global economy (Hunter, 1999,
p.3). Supply and demand and economies of scale “will always ensure technology and
therefore services will be rolled out in metropolitan areas long before they are even
considered for regional areas” (Hunter, 1999, p.1). “If we wait for equity of access, we
will wait forever” (Hunter, 1999, p.3).
Calls continue for regional communities to join the globalised, online world. These are
supported by the view that success today is based less and less on natural resource
wealth, labour costs and relative exchange rates and more and more on individual
knowledge, skills and innovation. But how can regional communities “grab their share
of this wealth” and use it to strengthen local communities (Simpson, 1999, p.6)? Should
communities be moving, as Porter (2001, p.18) recommends (for business), away from the
rhetoric about “Internet industries,” “e-business strategies” and the “new economy” to
see the Internet for what it is: “an enabling technology “ a powerful set of tools that can
be used, wisely or unwisely, in almost any industry and as part of almost any strategy?”
Recent Australian literature (particularly government literature) does indeed demon-
strate somewhat of a shift in terms of the expectations of ICT and e-commerce (National
Office for the Information Economy, 2001; Multimedia Victoria, 2002; National Office for
the Information Economy, 2002). Consistent with reflections on international industry
experience, there is now a greater emphasis on identifying locally appropriate initiatives,
exploring opportunities for improving existing communication and service quality and
for using the Internet and ICT to support more efficient community processes and
relationships (Hunter, 1999; Municipal Association of Victoria and ETC Electronic
Trading Concepts Pty Ltd, 2000; National Office for the Information Economy, 2002).
In spite of a context where ICT and online capabilities are promoted as critical elements
of potential regional and rural success, few attempts have been made to draw together
various intellectual streams of research with examples of community practice to gain a
clear understanding of their contribution. Goggin (2001) identifies the need to redress
apparent oversights in the literature dealing with online technologies and regional
development. Denison et al. (2002) recognise the need for research which clarifies many
of the assumptions and unspoken expectations about how electronic tools can be used
by groups and organisations. Black et al. (2000) make a specific call for research to be
instigated to collect case studies that demonstrate how community-based Internet
services can be established for socially and economically beneficial purposes.
This chapter makes a contribution by investigating factors which affect the success of
community informatics initiatives. It also examines impacts in terms of promoting
community empowerment, economic and business development, and equity of services.
Two case studies are presented. Both initiatives were premised on an understanding that
well-developed and well-implemented online services could make a positive contribution
to the future of regional and rural communities. These cases provide a focus for examining
the benefits and challenges of establishing and sustaining community informatics
initiatives in a regional and rural context.

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220 Thompson

Policy Vision
With the proliferation of information and Web sites, it becomes increasingly difficult to
find relevant information via the Internet. Web portals have developed to facilitate the
location of online information. Examples include: community portals, geographical or
interest-based; business portals, internally or externally focused; and government
portals, for particular groups such as businesses, young people, women or regional
communities. In most cases, the objectives include providing efficient access to
information, resources and services, reaching a larger audience, and providing “anytime,
anywhere” service, 24 hours a day, seven days a week (Hunter, 1999; Thompson, 1999;
Gill, 2000; McGrath and More, 2002; Telstra Country Wide, 2002).
In Australia, there has been a vision for online services to be used to open up regional
communities to the rest of the world. Government support has been seen “as enhancing
the competence levels of local economies and communities so they become strong
enough to deal equitably in an increasingly open marketplace” (McGrath and More, 2002,
p.40). Two Federal Government programs managed by the National Office for the
Information Economy (NOIE) provide examples of the support which has been available.
The Information Technology Online (ITOL) program aims to accelerate Australian
adoption of business-to-business e-commerce and encourage collaborative industry-
based projects (McGrath and More, 2002). The complementary, five-year $464 million
program, Networking the Nation (NTN), was designed to help bridge the gap in the level
of telecommunications services, access, and costs between urban and non-urban
Australia. Both programs have provided a funding source for initiatives, variously
termed as portals, online communities, comprehensive gateways and regional Web sites
(Department Communications Information Technology and the Arts, 2001). Funding
priority has been given to projects that offer regional aggregation of business, govern-
ment and community services and provide interactive services to clients both within and
external to a region (Commonwealth of Australia, 2001).
While no formal evaluation of the NTN program has been published, a recent evaluation
of the ITOL program explores the notion of online communities and reports on portal
projects funded through that program. Findings indicate that most ITOL-funded projects
are not fully meeting original objectives. Unforeseen challenges during the course of
project implementation have included: technological problems, delays in legal agree-
ments, slowness of industry and/or project beneficiaries to respond to the e-commerce
initiative, and an underestimation of the time and effort required. For most, the plan to
provide full online e-commerce capabilities (for example, online ordering and payments)
will not be achieved (McGrath and More, 2002).
McGrath and More (2002, p.67) observe that these potential online communities are
“evolving rather than having arrived.” Further, despite the rise of interest in online
communities, these alliances are not “magic bullets or quick-fix solutions for SMEs or
even larger organisations, communities, or industries.” They however observe that
“where commitment, compatibility, [and] shared strategic intent are at the heart of
collaborative relationships, success and learning is much more likely to occur” (McGrath
and More, 2002, p.68).

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Online Services and Regional Web Portals 221

Centre for Electronic Commerce and
The University of Ballarat (UoB) is a distinctive, dual-sector regional institution pre-
eminently serving the Australian communities of the Central Highlands and Wimmera
regions of Victoria. The UoB vision is to be a regional university of international
standing, highly regarded by the communities it serves. UoB provides clear educational
pathways between TAFE and Higher Education and offers a broad range of courses to
meet the diverse educational and training needs of the region. The University also has
a growing national and international focus. A key objective of the University is to
provide leadership for the uptake of ICT in industries, local government and within and
among regional groups. Through its activities UoB also seeks to contribute to the
educational, social, economic and cultural well-being of the region.
The Centre for Electronic Commerce and Communications (CECC) contributes to these
objectives by promoting the advancement of e-commerce, particularly in its practical
application in regional and rural Australia. Since being established in 1998 CECC has built
extensive partnerships and strategic alliances within and beyond the University region
and developed and implemented a range of projects utilising information communication
technologies. Different education and training strategies have been used by CECC to
foster learning and to build social capital through ICT and e-commerce.
Through the implementation of a $409,000 NTN-funded regional portal project
(www.mainstreet.net.au) during the period from 1999 to 2001, CECC gained an enhanced
understanding of regional ICT needs. CECC also established significant capabilities in
developing, replicating and customising online services capable of meeting the specific
needs of regional communities, groups and organisations. Diverse groups and commu-
nities now access online services through CECC. These include local governments,
town-based communities, membership-based organisations, industry groups and small
and medium enterprises. In almost all cases the Web sites, online communities and/or
Web portals are meeting or exceeding the initial client objectives. Clients have strong
ownership of their online activities, maintain their own web-based information and are
committed to investing annually to maintain the shared infrastructure and services they
access. The first of two case studies is presented. These case studies help in analysing
the complex and dynamic relationship between technological innovations and changing
social relations.

Ararat Online
Over the past two decades Ararat and district, like many Australian regions, has been
subjected to the consequences of economic rationalisation and restructuring. Popula-
tion has reduced from 8,336 in 1981 to 7,052 as of the last census of population in 2001
(Department of Infrastructure Research Unit, 1999; Australian Bureau of Statistics, 2003).

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222 Thompson

Declining commodity prices, changing farm practices, reducing family size and changes
in government policy have variously impacted on the Ararat region. Since 1990, the
closures of the Aradale Psychiatric Hospital and the regional rail yards have created a
direct loss of more than 700 jobs. Following the withdrawal of these two key employers,
the Ararat region experienced rapid decline with multiple impacts including: closure of
support industries, falling school enrolments, the loss of skilled workers, the withdrawal
of State and Commonwealth Government offices and services, and declining housing
prices (Surridge, 2000).
Ararat Rural City came into existence in 1996 as a result of the amalgamation of the Shire
of Ararat (rural area) and the Ararat City Council (city area). Prior to amalgamation “there
was a sense of belonging to either a rural municipality or a city municipality.” A “them
and us mentality” was apparent (Nicholson and Surridge, 2002, p.10). Since amalgam-
ation, this strong competitive environment has largely continued with residents from
outlying areas wary of city-centric decisions and resource allocations. Addressing this
perception has been a priority for the region. Increasing the uptake of ICT and e-
commerce has been another significant priority.
The Ararat Municipal E-Commerce Strategy was first presented at the Ararat Council
Management Group meeting in March of 2000 (Surridge, 2000). This report outlined how
the Ararat Rural City was seeking to facilitate an increase in the uptake of ICT and e-
commerce across the range of business and service organisations operating in Ararat and
district. Council™s activities were premised on a belief that the competitiveness of the
municipality would be enhanced by the earliest possible adoption of ICT and e-commerce
because it was “no longer a question of whether or not to start using the powerful
technology of the Internet. It was more a question of how” (Surridge, 2000, p.1). The
E-Commerce Strategy identified that a “bottom-up approach” would be adopted to
empower local businesses and individuals by providing them with opportunities to
become more ICT literate and to generate awareness and familiarisation with available
In 2000, Ararat Rural City partnered with the University of Ballarat to redevelop Ararat
Online (www.ararat.asn.au). Ararat Online (Stage 1) had evolved from a partnership
between Ararat Rural City and the Ararat Community College. Students had in early 1999
developed simple web pages for local businesses and community groups. But there were
some limitations. There was a lack of site consistency, no searching capabilities, some
quality problems, and an inability to easily update sites.
The project to upgrade Ararat Online included a range of elements. The site structure and
design was completely revamped and new toolsets were incorporated. These included
news building tools, a community events calendar, a searchable business directory,
online registration and payment system and a community discussion forum. Comprehen-
sive training was provided to the local project team so that future workshops, content
development, and the ongoing maintenance of Ararat Online could be managed locally.
More than 80 business and community groups directly benefited from an upgrade of their
web presence. Each organisation was provided with the opportunity to undertake
training to gain the skills to manage their own site.
Victoria™s Minister for Regional Development, John Brumby, officially relaunched Ararat
Online on August 4, 2000. The Ararat Online Web site was identified as “a first in Victoria

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Online Services and Regional Web Portals 223

because it uses unique ASP software providing easy and affordable community owner-
ship, access and input” (Wimmera Mail Times, 2000). Businesses and organisations
could therefore manage and update their Web sites from their business or home PCs
without the need for third-party expert involvement or additional costs to business.
The new site generated immediate benefits through the efficient linking of Internet-based
information and services. The region could now more effectively promote local busi-
nesses, tourism and regional events. The project also generated significant learning
opportunities for community members.
Reflecting on the project, the City™s Economic Development Manager identified that the
quality of the outcomes could not have been achieved without access to the project
management, web development, and training services provided by the University of
Ballarat. The project had enabled the community to access tools, technical services and
resources that were not previously available. The resultant functionality exceeded
original expectations. Three other areas of benefit were: reductions in recurrent operating
costs, enhancements in terms of accuracy of information and the achievement of
increased community participation.
The Ararat Online project has provided the catalyst for a range of complementary
projects. These have included:
1. E-commerce mentoring project for six businesses (2000).
2. Establishment of web services to promote Ararat Tourism (Late 2000).
3. Establishment of a Web site for the Rural City of Ararat (July 2001 version 1 and
March 2003 version 2).
4. Launch of web-based services to support the annual regional business awards
(2001 and ongoing).
5. Internet access point established in six small communities (Late 2001).
6. Development of web-based infrastructure to record and house information on the
skills of residents and groups in Ararat™s surrounding towns (2002 and ongoing).
7. A project which surveyed 500 businesses in conjunction with Council™s property
valuation process (2002 and ongoing).
8. A project to develop and launch township Web sites for six small towns in the
region (2002).
9. Further upgrades to Ararat Online with enhanced functionality, opportunities for
interaction and information sharing (2002 and 2003).
10. Appointment of staff with specific responsibilities for supporting further develop-
ment of Ararat Online and associated community-building activities (2003).

While many similar-sized towns and regions have yet to start their journey, the Ararat
region has progressively advanced its uptake of electronic commerce and improved its
online service delivery with Ararat Online, a critical component of the region™s efforts.
Ararat Online has been recognised as an exemplar online community, which demon-
strates how regional development approaches and online technologies can come
together. According to the SkillsNet Association (SkillsNet Association Co-operative

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224 Thompson

Figure 1. Ararat Online, September 2003

Limited, 2001, p.9), there are only a limited number of landmark implementations in e-
commerce which have been encouraged by local government. “The Ararat Online
Project, a community and business partnership project, with an online portal for the whole
of the Ararat community, and one which includes a mentoring component” is one of
The Ararat Online case study acts as a powerful mechanism for promoting online service
adoption. This is particularly effective when the Ararat Online “story” is linked with a
series of visual images (predominately screen grabs) gathered at regular intervals
between 1999 to the present. The presentation of this type of information helps
community groups and other regional organisations identify the “big picture” that they
can work toward.
The progressive adoption and expansion of online services in Ararat has been achieved
through a staged approach with regular local government investment to enhance the ICT
infrastructure and a continuing effort and commitment from individuals in the community
and in local government to renew, sustain and enhance the information accessible
through Ararat Online. The business directory has, for example, recently been redevel-
oped with the number of participating businesses expanded from approximately 100 to
500. The most recent redevelopment of Ararat Online (launched May 2003) has more
closely aligned its services with the wider business and community building efforts in
the region.

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Online Services and Regional Web Portals 225

Figure 2. Site statistics, Ararat Online, June 2002-August 2003



Monthly Total





Jun Jul Aug S ep Oct Nov Dec Jan F eb Mar Apr May Jun Jul Aug

Period June 2002 - August 2003

Visits Pages

Site statistics provide one measure of utilisation. From June 2002 to August 2003 the site
received 24,805 visits, provided users with 125,394 pages of information and recorded a
total of 325,970 hits. Figure 2 illustrates utilisation on a monthly basis. Usage peaked
in the lead up to the Christmas holiday period. While site visits have been relatively
steady, there has been a reduction in utilisation of the site in recent months, as measured
by page views. This may indicate that a review of the site content and services should
be conducted to ensure that these continue to meet the needs of online visitors.
The Ararat Online case illustrates benefits in terms of expanded local capabilities and
confidence, the fostering of business innovation, the provision of new education and
training opportunities and the establishment of improved communications services. For
the University of Ballarat, the partnership with Ararat Rural City has provided many
opportunities to develop and pilot services which promote the advancement of e-
commerce. This has assisted the University in developing a replicable portal framework
and a suite of scaleable and customisable applications, which are used to establish
geographical portals and other forms of online services to meet the needs of SMEs,
regional groups, local government and other regional initiatives.
The learning achieved through the Ararat Online project is being very effectively
transferred to other Australian communities as the University of Ballarat continues to
work with geographic and interest-based communities to identify their online service
needs and then to customise, develop and deliver relevant functionality and locally

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226 Thompson

appropriate web services (See Appendix 1 for web addresses). The case of the Young
Australian Rural Network is presented in the following section. This case demonstrates
how online services can be established to leverage the activities of a community of

Young Australian Rural Network
The Young Australian Rural Network (YARN) (www.yarn.gov.au) is an initiative of the
Commonwealth Department of Agriculture, Fisheries and Forestry “ Australia (AFFA).
YARN is an interactive online community, “a vehicle” for young people working in rural
industries “to communicate directly with AFFA and with each other” and to “keep in
touch, collaborate, share ideas and strengthen networks” (Downie [AFFA], 2002). The
University of Ballarat was invited to submit a proposal for the development of YARN in
June 2002 after AFFA identified the University™s involvement in projects including
Ararat Online, the MainStreet Regional Portal project (www.mainstreet.net.au) and
Moorabool Online (www.mconline.com.au).
The establishment of YARN was supported by research undertaken during 2001 which
sought to better inform AFFA about young people 18-35 years who represented one-
third of all people working in rural industries. The research outcomes were subsequently
communicated through a publication entitled, Guidelines for Reaching our Clients “
Young People, which was launched in May 2002 (Department of Agriculture Fisheries
& Forestry Australia, 2002). This guide was designed to help AFFA staff members
recognise opportunities to include young people in their work. In introducing the guide,
Michael Taylor, the Department Secretary, highlighted the importance of including
young people in AFFA™s decision-making:

Our research tells us that this significant group is impatient with prevailing
timeframes for government and industry policy development; is not enthusias-
tic about agro-political structures and decision-making; communicates dif-
ferently; is more likely to be positive about the future of agriculture and their
own future than their older peers; and, importantly, wants to roll up its
collective sleeves and get the job done¦This client group must be effectively
engaged in our work because not only have they inherited our current
agriculture, fisheries and forestry environments and the well-being of rural
communities, they determine the immediate future of rural and regional
Australia (Department of Agriculture Fisheries & Forestry Australia, 2002, p.2).

The research conducted for AFFA confirmed that the Internet represented a powerful
communication channel for reaching young people. Of the 350 young people surveyed,
67 percent had access to the Internet with 50 percent using it at least weekly. Email was
the preferred medium for communicating, but Web sites were identified as a more useful
way of accessing information, “particularly for keeping up with industry information”

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Online Services and Regional Web Portals 227

(Department of Agriculture Fisheries & Forestry Australia, 2002). The extensive use of
links to other relevant sites would be most likely to draw young people back to a site but
“out-of-date Web sites were unlikely to get a second chance.” In terms of designing
Internet communications, the need for interactivity was confirmed. There was also the
continuing requirement to be mindful of slow download times in some areas (Department
of Agriculture Fisheries & Forestry Australia, 2002, p.15).
In June 2002 AFFA recruited a person who would have the primary responsibility of
researching and overseeing the establishment and ongoing development of an online
community where “ownership” would be shared between AFFA and young people in
rural industries. The project objectives for the Young Australian Rural Network project
(YARN) would include:
1. Promoting and supporting further networking amongst graduates of the various
Young People in Rural Industries programs coordinated by AFFA.
2. Providing a two-way communication tool as a conduit for information flow between
AFFA and its stakeholders, with communication ideally being equally initiated at
both ends.
3. Serving as an information “hub” for young people in rural industries to find further
information on non-government organisations, networks and groups, particularly
by providing a facility for non-government youth networks to post information
about their organisation on the site.
4. Serving also as a general dissemination tool for the Young People in Rural
Industries program (YPIRI program), in conjunction with the existing AFFA Web
site (www.affa.gov.au).

While the intention was for AFFA to establish and maintain the site, graduates from
various elements of the YPIRI program would determine the content, and as far as
possible, the structure and facilities. AFFA clearly understood that functionality could
be created (discussion forums, event calendars, web page building facilities, member
listings, etc.) but that an online community would not exist unless its members were
actively involved and interacting with each other.
The framework for the online community would be developed by University of Ballarat.
It was proposed that the core functionality would include six key elements as detailed
in Table 1.
A key objective was to actively engage graduates of the YPIRI program in the initial and
ongoing development of YARN. Approximately 100 YPIRI graduates were contacted via
email on July 7, 2002 and asked to contribute to an online survey that would gather their
opinions on the features of an online community that they would find most useful. The
results would inform the development of YARN, confirm whether AFFA™s vision was
appropriate and also test the level of responsiveness and interest which was generated
from graduates. Three music gift voucher prizes were offered as an incentive to
encourage participation. One email reminder was sent during the two-week collection
period. Results were collated, prize winners were announced and detailed feedback
provided to all graduates on 25 July 2002. Table 2 summarises the responses which were

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228 Thompson

Table 1. Proposed functionality for YARN

Functionality Description

Discussion Have your say, share information, ask questions,
Forum or just find out what people are talking about.
Event Check out what events are available nationwide,
Calendar promote your events and get free publicity on
News Page Where you can submit news that you would like
young people to know about.
People Listing Look up who has been involved in AFFA's YPIRI
program, and get in contact with them.
Have Your Respond to draft policy posted on the site, or post
Say information for consultation and feedback by
young people.
Free Web Promote non-government organisations for young
Page people in agriculture, fisheries, forestry, food and
natural resource management.

Table 2. Web site survey results for YARN

Very Somewh Neutral, Not
Type of Useful at Useful or particularly
Functionality unsure useful
% % %
Events calendar 81 14 5 0
Member listing 69 31 0 0
Discussion forum 63 28 5 4
Document library 54 28 13 5
Site builder for 46 36 9 9

Source: www.affa.gov.au/content/ind_dev/youthsurvey.cfm

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Online Services and Regional Web Portals 229

communicated to graduates via email and to others by making the result available on the
AFFA Web site.
Strategies of “engage early” and “communicate innovatively” were embraced by AFFA
in implementing the YARN project (Department of Agriculture Fisheries & Forestry
Australia, 2002). The response from graduates supported findings from earlier research
which identified the benefit of getting young people involved early in a project:

Young women and men are likely to give new approaches and mediums a go.
They are more inclined to get involved if they can play a role in the direction
setting/planning stage, rather than if they are simply invited to participate at
the consultative stage. That is, they want to be part of driving direction rather
than reacting to it (Department of Agriculture Fisheries & Forestry Australia,
2002, p.16).

When the survey results were disseminated, graduates were thanked for their participa-
tion and advised that AFFA would contact them during the next week to seek contribu-
tions for content for the site. Graduates were assured that submitting content would not
be a complex process. Publishing information on the events calendar, news section, or
providing information about the rural networks or organisations they were involved in,
would be no more difficult than the online survey they had participated in.
Regular communication with graduates continued throughout the very short develop-
ment period for the YARN project. Graduates were, for example, provided with access
to the development site and asked for feedback on its design, navigation and function-
ality. They each received individual user names and passwords and were given
instructions on how to access the graduates™ area of the Web site and how to begin
submitting content in the lead-up to its official launch on the 27 August 2002.
Initial publicity associated with the launch of YARN included the issuing of a press
release, direct email notification to key people such as the presidents and/or convenors
of organisations for young people, and a front-page link and news story on the Federal
Government entry point at www.fed.gov.au. The key message was for young people to
“get online and get involved,” to “take pride” in their views, ideas and achievements and
to “watch the awareness grow amongst government and industry” of their valuable
contributions (Truss, 2002, p.1).
Longer-term promotion has been achieved through the fortnightly e-newsletter of the
Rural Industries Leadership Section of AFFA and by and providing all new graduates
of the YPIRI program with publishing and member access on YARN. Organisations that
use the “site builder” tool also promote YARN through their web address (see, for
example, the Bush Capital Club at www.yarn.gov.au/sites/BCC).
A key strategy has also been to ensure that site visitors are actively engaged when they
visit the site. This is being achieved by providing multiple opportunities for participation
and involvement, for example, by contribution or starting an online discussion, building
a site, adding a link, publishing events or suggesting new items.
During the 12 months since its official launch, YARN has received over 237,000 hits,
18,900 unique visits and provided users with more than 53,500 page views. Figure 4

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230 Thompson

Figure 3: YARN “ August 2002

illustrates how visits fell from the initial levels experienced at the time of the site launch.
Visitation statistics began to gradually increase in the early months of 2003. Significant
increases were then experienced during April and May.
This increase in site visitation coincided with the launch of GATEway, an opportunities
reference database which has been incorporated into the existing Web site and promo-
tional activities such as the issuing of a press release by the Federal Minister for AFFA.
The reference tool provides young people with a centrally housed information database
of relevant government and non-government programs, awards, events and training
opportunities. The initial database content was contributed by members of the Young
People in Rural Industries Working Group, but since the GATEway application has gone
“live,” other agencies and organisations have been invited to publish information.
While the application design is very functional, it is simple to enter information and users
are able to interrogate the database in a number of ways, for example, by using key terms
or by entering one or more qualifiers to narrow their search as required. Selections can
then be collated and printed in PDF quality format. The increase in site utilisation as
measured by page views indicates that site visitors were exploring more areas of the site.
In the months of June and July there has been some reduction in the levels of site
utilisation from the peak experienced in May 2003.
The next upgrade for YARN is currently in the planning stage. Objectives and outcomes,
graduate and visitor feedback, site statistics and other available information will
continue to be regularly reviewed to identify further opportunities for enhancement to
better ensure that YARN can meet the information and communication needs of AFFA
and young people in rural industries.

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Online Services and Regional Web Portals 231

Figure 4. Usage statistics for YARN August 2002“2003



Monthly Totals





Aug S ep Oct Nov Dec Jan F eb Mar Apr May Jun Jul Aug

Aug 2002 - Aug 2003
Visits Pages

The case studies for Ararat Online and YARN have highlighted a number of factors that
have impacted and influenced their development. Collaboration with a regional Univer-
sity has also been an important factor in the renewal and growth of each of these portal
initiatives. In terms of infrastructure, challenges have been reduced by the availability
of a comprehensive portal platform and toolset, which has been specifically designed to
meet regional and rural needs, particularly the skills and infrastructure gaps which often
exist. Initiatives have then been sustained by putting community members in charge of
the management of their online services. Through this model, local ownership and the
sustainability of infrastructure and technical support services have been achieved by
effectively aggregating demand for CI services.
Key factors in sustaining regional CI initiatives appear to be directly related to the level
of ownership that can be provided to stakeholders and site users, the ability for multiple
users to contribute, publish and maintain the web-based information, and finally the
degree to which web-based applications are tailored to meet the particular business or

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232 Thompson

community purpose. These finding are consistent with findings in the business-to-
business context. For example the report entitled, B2B E-Commerce Capturing Value
Online identified that “ultimately, the point of success is where industry can see the
broad-based business case¦and then take initiatives forward” (National Office for the
Information Economy, 2001).
Communities, however, just like businesses, require assistance in identifying the most
appropriate online services for their particular circumstances. Policies which encourage
communities to enter collaborative partnerships, which leverage existing infrastructure,
knowledge and learning should thus be seen as preferable to the funding of discrete
stand-alone initiatives. Well-developed and well-implemented online services can make
a positive contribution to the future of regional and rural communities. Case studies,
such as those presented in this chapter, are effective in illustrating the impacts,
influences and challenges that can be experienced in operationalizing and sustaining
regional community informatics initiatives.

The author acknowledges Dr. Brian West from the University of Ballarat who has
been generous in the provision of advice and encouragement that greatly assisted
in the preparation of this work.

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Selected Characteristics for Urban Centres and Localities: Victoria. Canberra, ABS.
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A Report for the Rural Industries Research and Development Corporation. RIRDC
Publication No. 00/130.
Commonwealth of Australia. (2001). Government Response to the House of Represen-
tatives Standing Committee on Primary Industries and Regional Services - Report
of the Inquiry into Infrastructure and the Development of Australia™s Regional
Areas - Time Running Out: Shaping Regional Australia™s Future. Canberra: Com-
monwealth Government.
Department of Agriculture Fisheries & Forestry Australia. (2002). Guidelines for Reach-
ing our Clients - Young People. Canberra, Commonwealth of Australia. Retrieved
16 May 2003 from the World Wide Web: <http://www.affa.gov.au/content/

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Online Services and Regional Web Portals 233

Department of Communications and the Arts and AUSe.NET Australian Electronic
Business Network. (1998). Where to Go? How to Get There. Guide to Electronic
Commerce for Small Business. Canberra: Commonwealth of Australia.
Department of Infrastructure Research Unit. (1999). Towns in Time Analysis: Population
Changes in Victoria™s Towns and Rural Areas, 1981-96. Melbourne: Department of
Ernst & Young and Multimedia Victoria. (2002). Victoria™s E-commerce Advantage: E-
commerce Case Studies. Melbourne: Government of Victoria.
Fong, G. (2001). Electronic Communities - Problems and Potential. Proceedings of the
Inaugural Telstra Consumer Consultative Council Annual Forum, Sydney, 14
November 2001, Telstra.
Gill, J. (2000). Portal Power - Online Communities Development and the Emergence of
the ˜New™ Community. Perth: HarvestRoad.
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Regional Communities. Telstra Consumer Consultative Council Annual Forum,
Sydney, 14 November 2001, Telstra.
Hunter, A. (1999). Opportunities Through Communications Technology for Regional
Australia. Regional Australia Summit, Canberra.
Jakobs, G. (2002, September). Building Online Community Capacity - The Challenges and
Opportunities. Institute for Regional and Rural Research Forum. Ballarat: Univer-
sity of Ballarat.
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Experience. Canberra: National Office for the Information Economy and Macquarie
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Melbourne: State Government of Victoria.
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Electronically - eBusiness. Canberra: Commonwealth Government.
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Collaboration. Canberra: Commonwealth of Australia.
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Papandrea, F. (1998). An Introduction to Electronic Commerce in Tasmanian Business.
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Tomorrow™s Businesses Today, Competitive, Innovative, Connected. Melbourne:
State Government of Victoria.

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Online Services and Regional Web Portals 235

Appendix 1
University of Ballarat URLs
University of Ballarat www.ballarat.edu.au
CECC www.cecc.com.au

MainStreet portal URL
Mainstreet.net.au www.mainstreet.net.au

Geographical portal URLs examples
Ararat Online www.ararat.asn.au
Moorabool Online www.mconline.com.au
Pyrenees Online www.pyreneesonline.com.au

Membership based communities URLs examples
Birchip Cropping Group www.bcg.org.au
Young Australian Rural Network www.yarn.gov.au
Rural Regional Research Network www.cecc.com.au/rrrn
Pyrenees Hay Processors www.exporthay.com
Central Highlands Exporters www.growexport.com

Comprehensive Web site URLs examples
Ballarat A Learning City www.ballaratlearningcity.com.au
Central Highlands Area Consultative
Committee www.chacc.com.au
Pyrenees Shire www.pyrenees.vic.gov.au
Regional Connectivity Project www.regionalconnectivity.org

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236 Borbora

Chapter XII

ICT Growth
and Diffusion:
Concepts, Impacts
and Policy Issues in the
Indian Experience with
Reference to the
International Digital Divide
Saundarjya Borbora
Indian Institute of Technology Guwahati, India

This chapter examines the role of technology in economic and social development in
developing countries, with a particular emphasis on India as an example. The concepts
of ICT growth and ICT diffusion are examined. From this the chapter reviews the Indian
government™s successful policies encouraging ICT Growth through the support of the
export-oriented service industry. This industry has witnessed long-term growth primarily
as the result of the increasing tradability and consequent internationalisation made
possible by changes in ICTs. However, the export focus policy has created enclaves
within the Indian economy without significant forward and backward linkages.
Evidence suggests that the International Digital Divide may be increasing. This
chapter suggests that in order to maintain its relative technological position and to

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ICT Growth and Diffusion 237

increase its comparative advantage in the IT sector, government policy should focus
on domestic ICT Diffusion. The chapter reviews several local public, private, and
public-private initiatives to spread the use of ICT throughout Indian regions that have
been successful and may serve to offer examples for future development. We conclude
that ICT-driven development may be achieved with supportive central government
policies, lessening the International Digital Divide.

Today Information and Communication Technologies (ICTs) pervade almost all human
activities. In both developed and developing countries there is an intense debate
concerning the contribution of these technologies towards economic development and,
consequently, human welfare. In relation to the economic benefits, several cross-country
studies in recent years have indicated that the return on investment in information
technology created by increasing productivity and growth is substantial (Kraemer and
Dedrick, 2001; Pohjola, 2001). According to Pohjola™s study, the output elasticity of IT
capital was found to be 0.31 for a sample of 39 countries, which is quite high, and a figure
of 0.23 in the OECD sub-sample. Another cross-country study by the IMF (2001) also
provides a similar conclusion. Country-specific studies, of Singapore for example, have
concluded that the net return to IT capital is 37.9 percent compared to 14.6 percent for
non-IT capital, which is about two and a half times higher (Wong, 2001). These studies
also highlight that IT-induced productivity, and thereby economic development, is still
concentrated in developed countries and the developing countries are yet to gain the
same order of benefits as their counterparts in developed economies.
This leads us to the ongoing debate over the International Digital Divide. Examining the
present unequal access to ICT, it may be stated that new technologies reinforce the
disparities between developed societies and developing societies. Several studies
supplement this view. OECD (2000) stated that affluent states at the cutting edge of
technological advantage have reinforced their lead in the knowledge economy. The
benefits enjoyed by the most technologically advanced economies have not yet trickled
down to their neighbors. Many European countries are still behind the most advanced
countries, not to speak of poor countries in the Sub-Saharan Africa, Latin America or
South East Asia that are much further behind. Similarly, UNDP (1999) argues that
productivity gains from ICT may actually widen the gulf between the developed
economies and those that lack the skills, resources, and infrastructure to invest in ICT.
The impact of ICT can be seen from the perspective of two inter-related issues: ICT
growth and ICT diffusion. ICT growth refers to the growth of IT-related industries and
services and their effect on employment, export earnings, and the outsourcing of
activities. ICT diffusion refers to IT-induced development, which increases productivity,
competitiveness, economic growth, and human welfare from the use of the technology
by different sectors of the economy. Until now, India has mainly benefited from ICT
growth through a series of institutional innovations and policy measures, although it
would not be correct to say that the importance of ICT diffusion has not been recognized.

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238 Borbora

For example, the software policy of 1986 explicitly recognized the importance of the
balanced development of the software industry both for export and domestic use. But
of late emphasis has been given to the diffusion of new technology and ICT-induced
development. Therefore, in the Indian context, the often-cited success of the IT sector
has not been achieved by the harnessing of new technology to increase efficiency and
productivity, but mainly derived from earning foreign exchange by exporting IT-enabled
goods and services. India™s export performance in this sector is noteworthy in compari-
son with other producers of exports, not only in terms of its growth rates but also in terms
of its stability.
The current chapter will focus on the direct benefits of ICT growth, paying special
attention to the service sector. We argue that the role of IT in economic development has
not received adequate attention. The purpose of the chapter is to highlight the contem-
porary economic realities and to suggest that the ICT development should be the focus
of research and policymaking in India. We propose to undertake this both on the basis
of empirical facts and on the basis of the arguments regarding the International Digital
Divide. The central message of this chapter is that although ICT growth is important for
developing countries such as India, it is time to shift the focus towards ICT-induced
development. The following section subjects these issues to analytical and empirical
scrutiny within the limits of data availability.

The Digital Divide
The concept of the Digital Divide is a complex one that manifests itself in different ways
in different countries. This leads us to accept that there is no single definition of the
Digital Divide, although it is clear that there are growing disparities between the “haves”
and “have-nots,” and to conclude that the potential impact on society will be exacerbated
by technology. This divide poses both practical and policy challenges. It is also evident
that solutions that work in developed countries cannot simply be transplanted to a
developing country™s environment. Solutions must be based on an understanding of
local needs and conditions.
Broadly, we can examine both International and Domestic Digital Divides. Real dispari-
ties exist both in the access to and the use of information and communication technology
between countries (the International Digital Divide) and between groups within coun-
tries (the Domestic Digital Divide). The concept of the Digital Divide is grounded in
substantial empirical research (Norris, 2001) and the extent of the Divide can be
suggested with some statistics: “In the entire continent of Africa, there are a mere 14
million phone lines “ fewer than in either Manhattan or Tokyo. Wealthy nations comprise
some 16 percent of the world™s population, but command 90 percent of Internet host
computers. Of all the Internet users worldwide, 60 percent reside in North America, where
a mere five percent of world™s population reside” (Nkrumah, 2000). In addition to this,
even the positive outlook adopted by the Economist (2000) accepted that “One in two
Americans is online, compared with only one in 250 Africans. In Bangladesh a computer

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ICT Growth and Diffusion 239

costs the equivalent of eight years™ average pay.” From such studies and statistics, the
following patterns emerge:
There is a trend of growing ICT disparities between and within countries:
• All countries are increasing their access to and use of ICT. But those countries that
are the “information haves” are increasing their access and use at such an
exponential rate that, in effect, the divide between countries is actually growing.
• Within countries, all groups are increasing access to ICT. But the “information
haves” are increasing access and use at such an exponential rate that the division
within countries is actually growing.

ICT Diffusion
The Digital Divide is not a simple phenomenon, but a complicated overlapping set of
issues created by varying levels of ICT access, basic ICT usage, and the patterns of ICT
applications among countries and peoples. Developing countries may have to achieve
higher levels of per capita income in order to support the level of IT dissemination
throughout society that is a precondition for ICT-induced development. However, due
to the characteristics of ICTs, the leapfrogging of stages of development is possible as
long as supportive government policies are in place. In fact it can be argued that there
is an advantage in not having the problems associated with obsolete IT infrastructures
and legacy systems typical in early investing countries for late entrants. Investment
made in new technologies also complements investments already made in communica-
tion technologies such as satellites, telephone, and cable networks. Again newly
developed technologies like the “wireless in local loop” (WILL) can significantly reduce
the cost of last-mile connectivity, making it possible to connect remote villages cost-
effectively (Planning Commission, 2001). Many new computer technologies are essen-
tially multi-user by nature and there is scope for Internet kiosks, community Internet
centers and hubs to provide access for many users. As previously indicated, late entrants
such as India have the advantage of access to frontline technologies and cost-effective
infrastructure development without the sunk costs in extant systems carried by many
more developed countries (Planning Commission, 2001). There exists real opportunities
for promoting ICT diffusion through the involvement of both the public and private
sectors, NGOs and other stakeholders (Mansell, 1999).
The new technologies are mostly supply-driven and provide a greater scope for diffusion
agents to influence the technology diffusion process. There are a large number of
organizations involved in developing country™s ICT development and adoption. This
multi-institutional stakeholder network should be in the forefront of diffusion of ICT in
developing countries. In India recently there have been a number of ICT diffusion
initiatives undertaken by the government, the private sector, and NGOs for economic
development and to provide services to citizens. Some of the initiatives are in the initial
stages, but acceptance by local communities has the potential to transform technological
usage in rural areas of the country.

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240 Borbora

Bridging the Digital Divide: Selected Experiments from
Indian States

The following section details some of the government initiatives that are underpinning
technological change in Indian regions. This does not seek to be a comprehensive
survey, but rather to present a selection of initiatives to give a feel for the type of
development plans currently being undertaken. The first example examines an initiative
in the state of Andhra Pradesh, which includes 23 districts, 1,125 mandals, 295 assembly
constituencies and 28,245 revenue villages. This area has been digitized to a certain
extent by a state-wide area network (SWAN) called APSWAN. With this SWAN the state
is in a position to provide government-to-citizen services. Agricultural market yards have
been computerized and connected with state headquarters, providing the prices of
commodities and arrival times to markets and other important information to agricultur-
ists. This process has the aim of eliminating middlemen and, in policy terms, the
exploitation of farmers. This digital connectivity also brings transparency and efficiency
to the functioning of government. Other states are also trying to undertake similar
The second example considers the Gyandoot Dotcom project in Madhya Pradesh, which
has demonstrated the feasibility of universal access to information. The Dhar district has
been connected by 21 centers situated in 30 villages using locally made servers and
multimedia kits in a cost-effective way. Villagers are required to pay a nominal charge for
services such as accessing land records and for regular market updates. Each of these
centers has a potential clientele of around half a million inhabitants in the Dhar district.
The success has emphasized the social and economic benefits of mass empowerment.
The potential of this project has been recognized internationally for introducing a new
paradigm in the use of IT in bringing about social transformation.
In addition, the region of Uttar Pradesh provides more examples of central and state
government-initiated ICT service-based projects. Initiatives such Internet kiosks pro-
viding e-mail and access to computer education programmes are common. In eastern Up,
for example, Kashika Telecom has established a presence in low-cost dhabas (computer
kiosks) financed through bank loans. Such initiatives can be seen in Karnataka, Tamil
Nadu as well in the North Eastern States of India.
The private sector also has been responsible for developing new IT initiatives. The Zee
Interactive Learning System Project, for example, provides interactive multimedia learn-
ing using satellite, video, Internet, and a cable network for delivery at several “ZED point”
kiosks. This is directed towards educating rural children by constructing “knowledge
building communities” at an affordable cost even to the rural population. With a
continuing focus on education, the Intel Corporation has taken the initiative to set up
teacher training laboratories to train 100,000 schoolteachers in India. At the time of this
writing, Intel also envisages operating a “cyber school on wheels” project also targeted
toward educating rural masses.
Despite the initiatives outlined above, there is no specific central government policy for
ICT diffusion in India. However, the current evidence suggests that there has been some
degree of ICT diffusion created by both the activities of industry and discrete public and

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ICT Growth and Diffusion 241

private initiatives. Within India, computers for accounting and management functions
are widespread, especially in private enterprises (as in Table 1). With regard to Internet
use, some industries are ahead of others. Evidence shows, in this time of liberalization
and globalization, that some firms are using technology to increase their productivity and
competitiveness. Some degree of ICT diffusion has been taking place, although it may
be mostly confined to the manufacturing sectors of the economy, even though this has
been a low central government political priority.

Table 1. Indicators of IT use in India™s industrial sector, 1997

Percent of Factories with:
Industries Total no. of Computers Robots or computer
Factories in office Network Internet in production
Food products 14,695 13.01 0.84 1.39 0.29
Other food products 8,109 24.17 1.38 2.01 1.64
Beverages, tobacco, etc. 8,669 47.81 0.36 0.28 0.14
Cotton textiles 9,227 22.28 0.54 1.87 1.37
Wool/silk textiles 3,989 49.76 1.25 2.28 0.25
Jute/other fibre textiles 503 16.70 0.40 3.78 0.60
Textile incl. apparel 5,409 51.32 3.18 11.31 2.09
Wood and wood products 3,787 8.98 0.40 0.95 0.24
Paper and paper products 6,304 38.50 1.84 3.73 4.71
Leather products 1,742 37.60 1.89 7.18 0.29
Basic chemicals/related 9,357 50.69 2.91 5.58 2.56
Rubber/plastic/coal 7,597 42.57 2.80 4.01 1.59
Non met. mineral product 11,376 13.37 0.41 0.95 1.09
Basic metal/alloys 6,915 41.94 0.93 3.69 1.72
Metal products 8,243 31.68 0.92 2.86 1.01
Machinery/equipment 8,203 44.46 2.12 5.63 2.66
Electric machinery 5,743 55.77 3.53 10.92 4.89
Transport equipment 3,999 46.96 1.63 7.15 2.58
Scientific equipment 2,243 48.02 4.01 14.00 3.97
Repair of capital goods 2,240 25.89 0.80 1.96 0.36
Electricity 3,644 64.71 0.93 3.10 3.24
Gas and steam 80 75.00 2.50 3.75 5.00
Water works and supply 293 10.58 0.68 1.02 0.68
Non-conventional energy 4 25.00 25.00 25.00 0.00
Storage and warehousing 1,078 0.37 0.37 0.09 0.00
Sanitation 102 0.00 0.00 0.00 0.00
Motion pictures, etc. 51 7.84 7.84 27.45 0.00
Laundry and others 94 0.00 0.00 0.00 0.00
Repair services 1,966 2.59 2.59 1.12 0.00
All Industries 135,679 34.70 1.50 3.72 1.77

Source: Annual Survey of Industries (CSO), 1997.

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242 Borbora

ICT and the Service Sector
Economic globalization has facilitated the internationalization of the service sector and
the advances in ICTs have made it possible for firms to provide novel services that are
creating new forms of international trade. Service industries provide links between
geographically dispersed economic activities and play an important role in the growing
interdependence of markets and production activities across nations. As technology
develops, it further reduces communication costs, stimulating the faster growth of the
international trade in services.
For developing countries such as India, the internationalization of services and the
development of the ICT sector have provided an opportunity as well as a challenge. The
opportunity has been in terms of the potential exports of services and of service-related
foreign investments and trade. The challenges are for designing appropriate regulatory
environments for the service sector as it is an important factor influencing productivity
and competitiveness, providing the necessary investments in the ICT sector and
adapting the education system in line with the requirements of the Information Age.
Until recently economists characterized the service sector as generally non-tradable
activities whose growth was perceived to be a by-product of expansion of the primary
and secondary sectors. The changes in the service sector driven by development in ICTs
have changed this conception and today service industries are regarded as a pre-
condition of economic growth. The main growth in this area has been the rapid expansion
of knowledge-intensive services (KIS), such as professional and technical services,
advanced health care, education, banking, and insurance. The growing tradability of
services has been a direct outcome of these changes, and many developing countries
have benefited from the outsourcing of services by multi-national companies (MNCs)
made possible by ICTs. Today service industries are important investors in IT through-
out the world, and KISs that have high income elasticity are growing in both developed
and developing economies. Technological innovation has expanded the opportunities
for the provision of services, and electronic networks such as the Internet are a dynamic
force for creating new possibilities for trade between distant areas. Technological
developments in ICTs are driving not only the internationalization of services but also
of manufacturing and primary industries, as technology blurs the boundaries between
products and services. In the United States, for example, as much as 65 to 75 percent of
employment in manufacturing may be associated with service-based activities (Braga,
1996). With falling communication costs the potential for international outsourcing in
both the service and manufacturing industries has grown.
Service activities such as data entry, the analysis of income statements, the development
of computer software and financial products are mostly exportable services. The impact
of ICTs on the tradability of services is not only limited to international markets, but has
facilitated the expansion of services within and between regions, from firms to final
consumers. Even services in which consumer-provider interaction has been very high,
such as education and health services, are today offered using high technology in ICT.
Advances in computer-mediated technology make it possible to effectively gain the
benefits in distance education and tele-medicine without relocating to provider loca-
tions. Trade in commercial services has been growing exponentially, and with the

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ICT Growth and Diffusion 243

internationalization of services the flow of FDI to developing countries has increased
faster than global trade and output. Services now represent a much higher share of FDI.
The prospect for the continuing internationalization of services through FDI is bright as
the demand for services is still in the growth phase. Developing countries are attracted
to FDI in services as a means of obtaining the transfer of technical and professional skills
and know-how.
As modern service industries are highly ICT-dependent they require human and financial
capital input. Developing countries such as India are carving out areas of comparative
advantage in IT-based services, and one of their key strengths is the ability to offer
access to large numbers of highly trained and lower-cost IT professionals. This phenom-
enon not only acts to expand exports, but also helps domestic producers gain access to
more efficient and diversified services in world markets. Efficient producer services are
increasingly important in this outward-oriented development strategy.
Developing countries have much scope for the expansion of traditional service export
areas. Data entry was one of the first services to be the subject of international
outsourcing. Software programming is another activity that is increasingly traded
internationally. India has taken a big lead in these areas and one estimate suggests that
India has captured roughly 12 percent of the international market for customized
software. Yet another area of strong comparative advantage is in “back office” service
activities. For example, several US and UK-based insurance and accounting companies
now send claims overseas for processing. In manufacturing, service activities such as
logistics management, design, and customer services are being outsourced internation-
ally. It may be difficult to estimate precisely the size of these markets, but from the
perspective of developing countries the potential impact in terms of higher exports over
the long term is significant. These important developments reveal that developing
countries with large workforces and a modern technology infrastructure can success-
fully exploit the changing patterns of international production made possible by ICTs.

The Indian IT Export Scenario
The growth of IT exports from India over the last decade has been the subject of
considerable interest to developed as well as developing economies. This attention has
been stimulated by studies demonstrating that the spillover benefits and linkages with
the rest of the economy from the IT sector are extensive (Joseph, 2002). The contribution
made by Software Exports to India™s Economy is shown in Table 2.
Table 2 illustrates the sustained growth of foreign exchange earnings represented by
Software Exports to the Indian economy, and highlights the rapid increase made after the
liberalization of the Indian economy to the international services sector began in 1991.
Whether the IT sector with its export-oriented growth strategy will generate significant
spillovers and linkage effects with the rest of the economy is not the focus of this chapter,
but on the basis of available data this seems unlikely. The Indian IT industry appears to
be locked into activities such as low-level design, coding and maintenance with
negligible linkages to rest of the economy (D™Costa, 2001). As these activities are

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244 Borbora


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