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LEAPFROGGING TRANSITION
Sam Vaknin, Ph.D.
Global Politician, NY
http://globalpolitician.com/articledes.asp?ID=3 354&cid=10&sid=46
Aug 29 2007
In many countries in transition cellular phones are more ubiquitous
than the fixed-line kind. Teledensity is vanishingly low throughout
swathes of Central and Eastern Europe (CEE). Broadband and e-commerce
are distant rumors (ISDN is available in theory but not so in
practice - DSL and ADSL are not available at all). Rare phone lines -
especially in urban centers - are still being multiplexed and shared
by 4-8 subscribers, greatly reducing both quality and usability.
Terrestrial television competes ferociously with satellite TV, though
cable penetration is low. Internet access is prohibitively expensive
and intermittent. Many technologies rely on network effects (i.e.,
a critical mass of users). CEE is far from reaching this elusive point.
When communism imploded in 1989, pundits were quick to spot the
silver lining. The countries in transition, they said, could now
leapfrog whole stages of development by adopting novel technologies
and through them the expensive Western research they embody. The East
can learn from the West's mistakes and, by avoiding them, achieve a
competitive edge.
In his seminal book, "Leapfrogging Development - The Political
Economy of Telecommunications Restructuring", J.P. Singh, examined
the acceleration of development through the adoption of ready-made,
off the shelf, technologies. His melancholy conclusion was that
development preferences are the outcomes of an intricate inter-play
between sectoral pressure groups and coalitions of interest groups -
and not the result of progress ex machina. He distinguished three
types of states - catalytic, near-catalytic, and dysfunctional.
Though he deals exclusively with Asia and Latin America, his typology
is applicable to post-Communist Europe.
I. An Overview
The Central and East European market will double itself (to $17
billion) by 2003, says IDC. Pyramid Research predicts a $60 billion
communications market by 2005. "Information Society", ICT (Information
and Communication Technologies), "leapfrogging", and "better online
than in line" are buzzwords and slogans oft-used throughout the
region. A horde of NGO's - local and international - collaborate with
domestic government and local authorities, with foreign governments,
multinationals, and international organizations to make the dream of
a digital Europe come true.
Russia pledged to attract $33 billion in investments in its
telecommunications infrastructure and services by the year 2010 (the
"Electronic Russia" initiative). The US Commercial Service, in the
American Embassy in Moscow, predicts an annual growth rate of the
Russian ICT sector of 15-20 percent through 2003. Conferences abound
(an important one regarding municipal collaboration in constructing
an information highway is to be held in the Czech Republic on March
26-27).
Even devastated Armenia succeeded to export $20 million worth of IT
goods in 2001 (its IT sector has grown by 30% last year). It hosts
branches of Silicon Valley household names such as Credence, HPL,
and Virage Logic. More than 4000 professionals are employed in 200
companies. Of 60 software development outfits - 26 were founded with
American capital. LEDA, a prominent local IT firm, finances IT programs
at the Armenian State Engineering University.
All EU candidates strive to get incorporated in existing European
networks (such as ELANET, Telecities, IDA, and ERISA) and new,
candidate-only, initiatives (such as eEurope+). The EU has applied
its "universal (i.e., also affordable) service" rule to Internet
access. EU members adopted a variety of measures to increase Internet
awareness and usage. Portugal, for instance, granted individuals with
tax incentives coupled with free e-mail accounts and Web hosting
services to encourage them to purchase PC's. The Dutch established
public computer literacy centers for the disenfranchised (e.g., the
unemployed) and provided them with discounted and subsidized hardware
and connection time.
In one of its more grandiose moments, the heads of governments of the
EU countries have decided in Lisbon (2000) that "each citizen should
have access to the Internet and the whole European Union should become
computer-literate", in the words of the Czech conference organizers.
This is an ambitious undertaking not only because Europe in general is
behind the USA where Internet matters (with the exception of wireless
Internet) are concerned - but because the countries which used to be
behind the Iron Curtain, now lurch in the Digital Divide.
According to Vasile Baltac from the Information Technology and
Communications Association of Romania ("The Balkan and Eastern Europe -
Digital Divide or Digital Opportunity"), Romania has invested $25 per
capita in ICT in 1999 (compared to Greece's $567 and the EU's average
of $1215). There were only 2.5 Internet users per 1000 inhabitants in
Romania and Bulgaria - compared to 56.4 in Westward-looking Slovenia.
New technologies are used mostly by the elites in CEE (as pointed
out by Zassourski and Vartanova in "Transformation in the Context
of Transition") - and perhaps advertently so. Still, Baltac fingers
the managerial class as the main obstacle to leapfrogging (i.e., the
rapid dissemination and assimilation of advanced technologies). They
pay lip service to modernization but feel threatened and repelled by
it. On the positive side, Baltac notes the annual yield of qualified
professionals (who mostly find work in the West) and the emergence
of telework and e-commerce. The technological vacuum makes the CEE
countries receptive to state of the art technologies. GSM penetration
in Romania surpassed the level of fixed line coverage in 1989. The
number of cable TV subscribers in the region is projected to double
(to 20 million) by 2005.
But the true picture is often obscured by anecdotal evidence, wishful
thinking, phobias (e.g., the West European fear of mass migration from
East Europe), lack of reliable statistics, and absence of qualified
analysts and investment bankers. Factors like hostile terrain and
climate, cross-subsidies, lack of real competition, corruption, red
tape, moribund financial systems, archaic legal ones, dearth of credit
card holders, urban-rural gaps, and English language illiteracy -
rarely appear in neat, colorful, presentations.
Pyramid Research is bearish on broadband. "Internet access is and will
remain for the foreseeable future a predominantly narrowband, dial-up
affair, even in the most advanced countries (in Central Europe)". This
despite plans by regional operators to offer DSL, FWA (Fixed Wireless
Access), cable TV and leased-line broadband access (already offered in
the Czech Republic by cable networks) and despite a regulatory welcome
in all three CE candidates (Hungary, Poland, and the Czech Republic).
Luckily, mobile telephony - the other pillar of the leapfrogging theory
- is getting increasingly concentrated in the hands of fewer operators
(though at least 3 per every major market). Pyramid projects that by
2006, 94 percent of Russia's cellular phone market will be in the
hands of the five leading providers (compared to 85 percent at the
end of 2001). Mobile penetration will increase (to c. 10 percent)
and prepaid customers will account for the vast majority of users.
Revenues from cellular networks exceed revenues from fixed line
networks in certain markets. SMS is booming. Second and third mobile
operator licenses are tendered by all cash strapped governments in
the region (though a Polish attempt to sell an UMTS license ended in
a fiasco). Poland introduced a wireless local loop service. Macedonia
just handed a second mobile operator license to the Greek OTE.
"By the end of 2005, the total number of mobile subscribers in CEE
will exceed 50 million (compared to 30 million by end-2001) and mobile
Internet accounts will constitute approximately 21 percent of total
mobile accounts", projects Pyramid. The Czech Republic will have 78
mobile users per 100 population - and Hungary 66. In a second tier
of countries - the likes of Bulgaria, Romania, Ukraine, and Russia -
a mobile phone will remain a luxury and a status symbol.
Hitherto domestic operators - from the Greek OTE to the Russian MTS -
are becoming regional. Multinationals, such as the British Vodafone
and the French Orange - have entered the regional fray. Some CEE
markets are as saturated (and customers as savvy and demanding) as many
advanced Western European ones. A host of value added services (VAS)
is thrust upon the - sometimes reluctant - users, leading naturally
to WAP (recently introduced throughout much of CEE), 2.5G, and 3G
(wi-fi or wireless Internet) services.
Moreover, Pyramid sees an intriguing opportunity in VoIP (Voice over
IP) telephony. It says:
"As the incumbents in the CEE markets continue to dominate
long-distance circuit-switched telephony, VoIP offers a unique
opportunity for new operators to gain a foothold in this traditional
monopolistic stronghold."
Internet Telephony Service Providers (ITSP's) have sprung up all
over the region (an Israeli firm is now planning to offer VoIP
services in Macedonia, Kosovo, and Albania). Even incumbents have
been offering VoIP - as early as 1998 in the Czech Republic. In his
keynote address to The Economist CEE Telecommunications Conference,
in December 2001, Ofer Gneezy, President and CEO of iBasis (a global
ITSP), cited industry analysts projecting VoIP average annual growth
rates in CEE of 80 percent through 2006.
This, coupled with a growing number of Internet users and access
providers (spurred on by telecoms liberalization and growing incomes),
may revolutionize the landscape in the next 5-10 years.
Pyramid expects annual Internet adoption growth rates of 40 percent
through 2005 (that's 30,000 new users a day!). Internet related
revenues will reach $10 billion by 2005 (five times today's $1.8
billion - but only one seventh the Internet market in Western Europe).
Internet penetration in Central Europe will reach 15 percent in 2005
(from 4 percent today and 3 percent in Russia) - and 40 percent
in Western Europe (compared to 18 percent today). Mobile Internet
accounts will constitute one third of the total in CEE - c. 20 million
users. Harald Gruber of the European Investment Bank is even more
optimistic, saying ("Competition and Innovation: The Diffusion of
Telecommunications in CEE", March 2000): "About 20 percent of the
population will adopt mobile telecommunications".
II. The Future
Leapfrogging is not a linear function of the ubiquity of hardware
and software. Though not a homogeneous lot, some lessons common to
all countries in transition are already evident.
Technology is a social phenomenon with social implications. It fosters
entrepreneurship and social mobility. By allowing the countries in
transition to skip massive investments in outdated technologies -
the cellular phone, the Internet, cable TV, and the satellite came to
be perceived as shortcuts to prosperity, the generators of the dual
ethoses of "rags to riches", and "creative destruction" (dizzying,
constant, and disruptive innovation). They are the future, a youthful
promise, and a landscape of opportunities.
Software developers in CEE countries tried to establish local
versions of "Silicon Valley", or the flourishing software industry
in India. Russian entrepreneurs developed anti virus software,
Yugoslavs offered web design services, electronic media flourished
in the Czech Republic and so on. But, as hard reality set in, most of
these talents left for Western Europe, the USA, Canada, and Australia
- where technology firms snatched them eagerly. Central and Eastern
Europe is a major net exporter of engineers, programmers, systems
analysts, Web designers, and concepts analysts.
Internet penetration in these countries - even in the most wired
- is still very low by European standards, let alone American
ones. The trauma of communism left them with decrepit and rarefied
infrastructure, a prohibitive, extortionist, and skewed cost structure,
computer illiteracy, inefficient competition, insufficient investment
capital, and entrenched luddism (e.g., computer phobia).
Foreign operators often exacerbate the situation. ArmenTel, the Greek
owned monopoly in Armenia, keeps Internet access costs prohibitively
high, ignoring court actions by the government and loud complaints
by disgruntled customers.
The Center for Democracy and Technology (in its report "Bridging
the Digital Divide: Internet Access in Central and Eastern Europe")
says that, as contrasted with India (or Malaysia), the countries
of the CEE did not invest in computerizing their schools, public
libraries, and higher education institutions, or in subsidizing
private computer-training colleges.
More crucially and less reversibly, decades of central (mis-)planning
rendered the societies of Central and Eastern Europe inert
and dependent, apart from their traditional conservatism. Many -
especially older mid- and high-level managers and engineers - feel
threatened by technology. Technology makes people redundant.
To a few open minded (i.e., foreign owned) firms, computer networking
stands for decentralized channels of distribution and marketing
as well as potential global penetration. But even there, only a
minuscule number of businesses took advantage of e-commerce (though
the countries of Central Europe and the Baltic may be the global
pioneers of m-commerce due to their wireless networks).
E-commerce is leapfrogging's litmus test because it represents
the culmination and confluence of hardware, software, and process
engineering. To have e-commerce, a country needs rich computer
infrastructure, a functioning telecommunications network, and cheap
access to the Internet. Its citizens need to be reasonably computer
literate, possess both a consumerist mentality (e.g., inability to
postpone gratification), and a modicum of trust between the players
in the economy - and hold credit cards.
Alas, the countries in transition lack all of the above to varying
degrees. The Economist Intelligence Unit ranked Russia 42nd (out
of 60 countries) in its year 2000 "e-readiness survey". Other CEE
countries fared little better.
Penetration and coverage rates (the number of computers and phone
lines per household), network reliability, and the absolute number of
Internet users - are all dismally low. Access fees are prohibitively
high. Budding Internet enterprises in the countries in transition are
happy exceptions that prove the depressing rule. They usually respond
to erratic local demand. Few have expanded internationally. Even
fewer engage in research and development.
Technology was supposed to be the great equalizer (with the rich,
developed countries). It did not deliver on this promise. Unable
to catch up with Western affluence and prosperity, the denizens
of CEE are frustrated. They feel inferior, neglected, looked down
upon, dictated to, and, in general, put down. New, ever-cheaper,
technologies, thought the locals, would surely restore the rightful
balance between impoverished East and filthy rich West. But the
Internet - and even technologies such as cellular telephony - belong
to those who can effectively deploy them (i.e., consumers in developed,
infrastructure-rich, countries).
The news get worse.
The Internet is gradually permeated by commercial interests and going
wireless. This convergence of content and business interests - means
less access to the underprivileged. The digital divide is growing
by the day. New technologies have done little to bridge this gap -
on the contrary: they enhanced the productivity and economic growth
(this is known as "The New Economy") of rich countries (mainly the
United States) and left the have-nots in the dust.
The countries in transition also lack the proper legislative and law
enforcement infrastructure (backed by the right cultural background).
Property rights, contracts, intellectual property - are all new,
often indigestible, concepts, emblems of Western hegemony and
monopolistic practices. Widespread copyright violation, software
piracy, and hacking are both status symbols and political declarations
of sorts. Admittedly, the dissemination of illicit intellectual
products may have served to level the playing field. But now it is
hindering entrepreneurship and holding back development.
After Asia, the countries in transition are the second largest centre
of piracy. Software, films, even books - are copied and distributed
quite freely and openly. There are street vendors who deal in
the counterfeit products - but most of it is sold through stores
and OEMs. This despite massive efforts (e.g., in Russia, Bulgaria,
Ukraine, and, lately, in Macedonia) by software developers, licensed
film libraries, and distributors - to fight these phenomena.
Intellectual property may go the way the pharmaceutical industry has.
Content owners and distributors may team up with sponsors (multilateral
institutions, private charities and donors). The latter will subsidize
intellectual property and, thus, make it affordable to the denizens
of poor countries. This is already happening in scholarly publishing.
This is very promising. But it far from leapfrogging development. In
hindsight, leapfrogging may have been nothing but another of those
intellectual fads whose time has gone before it ever came.
Sam Vaknin ( http://samvak.tripod.com ) is the author of Malignant
Self Love - Narcissism Revisited and After the Rain - How the West
Lost the East. He served as a columnist for Global Politician, Central
Europe Review, PopMatters, Bellaonline, and eBookWeb, a United Press
International (UPI) Senior Business Correspondent, and the editor of
mental health and Central East Europe categories in The Open Directory
and Suite101.
Sam Vaknin, Ph.D.
Global Politician, NY
http://globalpolitician.com/articledes.asp?ID=3 354&cid=10&sid=46
Aug 29 2007
In many countries in transition cellular phones are more ubiquitous
than the fixed-line kind. Teledensity is vanishingly low throughout
swathes of Central and Eastern Europe (CEE). Broadband and e-commerce
are distant rumors (ISDN is available in theory but not so in
practice - DSL and ADSL are not available at all). Rare phone lines -
especially in urban centers - are still being multiplexed and shared
by 4-8 subscribers, greatly reducing both quality and usability.
Terrestrial television competes ferociously with satellite TV, though
cable penetration is low. Internet access is prohibitively expensive
and intermittent. Many technologies rely on network effects (i.e.,
a critical mass of users). CEE is far from reaching this elusive point.
When communism imploded in 1989, pundits were quick to spot the
silver lining. The countries in transition, they said, could now
leapfrog whole stages of development by adopting novel technologies
and through them the expensive Western research they embody. The East
can learn from the West's mistakes and, by avoiding them, achieve a
competitive edge.
In his seminal book, "Leapfrogging Development - The Political
Economy of Telecommunications Restructuring", J.P. Singh, examined
the acceleration of development through the adoption of ready-made,
off the shelf, technologies. His melancholy conclusion was that
development preferences are the outcomes of an intricate inter-play
between sectoral pressure groups and coalitions of interest groups -
and not the result of progress ex machina. He distinguished three
types of states - catalytic, near-catalytic, and dysfunctional.
Though he deals exclusively with Asia and Latin America, his typology
is applicable to post-Communist Europe.
I. An Overview
The Central and East European market will double itself (to $17
billion) by 2003, says IDC. Pyramid Research predicts a $60 billion
communications market by 2005. "Information Society", ICT (Information
and Communication Technologies), "leapfrogging", and "better online
than in line" are buzzwords and slogans oft-used throughout the
region. A horde of NGO's - local and international - collaborate with
domestic government and local authorities, with foreign governments,
multinationals, and international organizations to make the dream of
a digital Europe come true.
Russia pledged to attract $33 billion in investments in its
telecommunications infrastructure and services by the year 2010 (the
"Electronic Russia" initiative). The US Commercial Service, in the
American Embassy in Moscow, predicts an annual growth rate of the
Russian ICT sector of 15-20 percent through 2003. Conferences abound
(an important one regarding municipal collaboration in constructing
an information highway is to be held in the Czech Republic on March
26-27).
Even devastated Armenia succeeded to export $20 million worth of IT
goods in 2001 (its IT sector has grown by 30% last year). It hosts
branches of Silicon Valley household names such as Credence, HPL,
and Virage Logic. More than 4000 professionals are employed in 200
companies. Of 60 software development outfits - 26 were founded with
American capital. LEDA, a prominent local IT firm, finances IT programs
at the Armenian State Engineering University.
All EU candidates strive to get incorporated in existing European
networks (such as ELANET, Telecities, IDA, and ERISA) and new,
candidate-only, initiatives (such as eEurope+). The EU has applied
its "universal (i.e., also affordable) service" rule to Internet
access. EU members adopted a variety of measures to increase Internet
awareness and usage. Portugal, for instance, granted individuals with
tax incentives coupled with free e-mail accounts and Web hosting
services to encourage them to purchase PC's. The Dutch established
public computer literacy centers for the disenfranchised (e.g., the
unemployed) and provided them with discounted and subsidized hardware
and connection time.
In one of its more grandiose moments, the heads of governments of the
EU countries have decided in Lisbon (2000) that "each citizen should
have access to the Internet and the whole European Union should become
computer-literate", in the words of the Czech conference organizers.
This is an ambitious undertaking not only because Europe in general is
behind the USA where Internet matters (with the exception of wireless
Internet) are concerned - but because the countries which used to be
behind the Iron Curtain, now lurch in the Digital Divide.
According to Vasile Baltac from the Information Technology and
Communications Association of Romania ("The Balkan and Eastern Europe -
Digital Divide or Digital Opportunity"), Romania has invested $25 per
capita in ICT in 1999 (compared to Greece's $567 and the EU's average
of $1215). There were only 2.5 Internet users per 1000 inhabitants in
Romania and Bulgaria - compared to 56.4 in Westward-looking Slovenia.
New technologies are used mostly by the elites in CEE (as pointed
out by Zassourski and Vartanova in "Transformation in the Context
of Transition") - and perhaps advertently so. Still, Baltac fingers
the managerial class as the main obstacle to leapfrogging (i.e., the
rapid dissemination and assimilation of advanced technologies). They
pay lip service to modernization but feel threatened and repelled by
it. On the positive side, Baltac notes the annual yield of qualified
professionals (who mostly find work in the West) and the emergence
of telework and e-commerce. The technological vacuum makes the CEE
countries receptive to state of the art technologies. GSM penetration
in Romania surpassed the level of fixed line coverage in 1989. The
number of cable TV subscribers in the region is projected to double
(to 20 million) by 2005.
But the true picture is often obscured by anecdotal evidence, wishful
thinking, phobias (e.g., the West European fear of mass migration from
East Europe), lack of reliable statistics, and absence of qualified
analysts and investment bankers. Factors like hostile terrain and
climate, cross-subsidies, lack of real competition, corruption, red
tape, moribund financial systems, archaic legal ones, dearth of credit
card holders, urban-rural gaps, and English language illiteracy -
rarely appear in neat, colorful, presentations.
Pyramid Research is bearish on broadband. "Internet access is and will
remain for the foreseeable future a predominantly narrowband, dial-up
affair, even in the most advanced countries (in Central Europe)". This
despite plans by regional operators to offer DSL, FWA (Fixed Wireless
Access), cable TV and leased-line broadband access (already offered in
the Czech Republic by cable networks) and despite a regulatory welcome
in all three CE candidates (Hungary, Poland, and the Czech Republic).
Luckily, mobile telephony - the other pillar of the leapfrogging theory
- is getting increasingly concentrated in the hands of fewer operators
(though at least 3 per every major market). Pyramid projects that by
2006, 94 percent of Russia's cellular phone market will be in the
hands of the five leading providers (compared to 85 percent at the
end of 2001). Mobile penetration will increase (to c. 10 percent)
and prepaid customers will account for the vast majority of users.
Revenues from cellular networks exceed revenues from fixed line
networks in certain markets. SMS is booming. Second and third mobile
operator licenses are tendered by all cash strapped governments in
the region (though a Polish attempt to sell an UMTS license ended in
a fiasco). Poland introduced a wireless local loop service. Macedonia
just handed a second mobile operator license to the Greek OTE.
"By the end of 2005, the total number of mobile subscribers in CEE
will exceed 50 million (compared to 30 million by end-2001) and mobile
Internet accounts will constitute approximately 21 percent of total
mobile accounts", projects Pyramid. The Czech Republic will have 78
mobile users per 100 population - and Hungary 66. In a second tier
of countries - the likes of Bulgaria, Romania, Ukraine, and Russia -
a mobile phone will remain a luxury and a status symbol.
Hitherto domestic operators - from the Greek OTE to the Russian MTS -
are becoming regional. Multinationals, such as the British Vodafone
and the French Orange - have entered the regional fray. Some CEE
markets are as saturated (and customers as savvy and demanding) as many
advanced Western European ones. A host of value added services (VAS)
is thrust upon the - sometimes reluctant - users, leading naturally
to WAP (recently introduced throughout much of CEE), 2.5G, and 3G
(wi-fi or wireless Internet) services.
Moreover, Pyramid sees an intriguing opportunity in VoIP (Voice over
IP) telephony. It says:
"As the incumbents in the CEE markets continue to dominate
long-distance circuit-switched telephony, VoIP offers a unique
opportunity for new operators to gain a foothold in this traditional
monopolistic stronghold."
Internet Telephony Service Providers (ITSP's) have sprung up all
over the region (an Israeli firm is now planning to offer VoIP
services in Macedonia, Kosovo, and Albania). Even incumbents have
been offering VoIP - as early as 1998 in the Czech Republic. In his
keynote address to The Economist CEE Telecommunications Conference,
in December 2001, Ofer Gneezy, President and CEO of iBasis (a global
ITSP), cited industry analysts projecting VoIP average annual growth
rates in CEE of 80 percent through 2006.
This, coupled with a growing number of Internet users and access
providers (spurred on by telecoms liberalization and growing incomes),
may revolutionize the landscape in the next 5-10 years.
Pyramid expects annual Internet adoption growth rates of 40 percent
through 2005 (that's 30,000 new users a day!). Internet related
revenues will reach $10 billion by 2005 (five times today's $1.8
billion - but only one seventh the Internet market in Western Europe).
Internet penetration in Central Europe will reach 15 percent in 2005
(from 4 percent today and 3 percent in Russia) - and 40 percent
in Western Europe (compared to 18 percent today). Mobile Internet
accounts will constitute one third of the total in CEE - c. 20 million
users. Harald Gruber of the European Investment Bank is even more
optimistic, saying ("Competition and Innovation: The Diffusion of
Telecommunications in CEE", March 2000): "About 20 percent of the
population will adopt mobile telecommunications".
II. The Future
Leapfrogging is not a linear function of the ubiquity of hardware
and software. Though not a homogeneous lot, some lessons common to
all countries in transition are already evident.
Technology is a social phenomenon with social implications. It fosters
entrepreneurship and social mobility. By allowing the countries in
transition to skip massive investments in outdated technologies -
the cellular phone, the Internet, cable TV, and the satellite came to
be perceived as shortcuts to prosperity, the generators of the dual
ethoses of "rags to riches", and "creative destruction" (dizzying,
constant, and disruptive innovation). They are the future, a youthful
promise, and a landscape of opportunities.
Software developers in CEE countries tried to establish local
versions of "Silicon Valley", or the flourishing software industry
in India. Russian entrepreneurs developed anti virus software,
Yugoslavs offered web design services, electronic media flourished
in the Czech Republic and so on. But, as hard reality set in, most of
these talents left for Western Europe, the USA, Canada, and Australia
- where technology firms snatched them eagerly. Central and Eastern
Europe is a major net exporter of engineers, programmers, systems
analysts, Web designers, and concepts analysts.
Internet penetration in these countries - even in the most wired
- is still very low by European standards, let alone American
ones. The trauma of communism left them with decrepit and rarefied
infrastructure, a prohibitive, extortionist, and skewed cost structure,
computer illiteracy, inefficient competition, insufficient investment
capital, and entrenched luddism (e.g., computer phobia).
Foreign operators often exacerbate the situation. ArmenTel, the Greek
owned monopoly in Armenia, keeps Internet access costs prohibitively
high, ignoring court actions by the government and loud complaints
by disgruntled customers.
The Center for Democracy and Technology (in its report "Bridging
the Digital Divide: Internet Access in Central and Eastern Europe")
says that, as contrasted with India (or Malaysia), the countries
of the CEE did not invest in computerizing their schools, public
libraries, and higher education institutions, or in subsidizing
private computer-training colleges.
More crucially and less reversibly, decades of central (mis-)planning
rendered the societies of Central and Eastern Europe inert
and dependent, apart from their traditional conservatism. Many -
especially older mid- and high-level managers and engineers - feel
threatened by technology. Technology makes people redundant.
To a few open minded (i.e., foreign owned) firms, computer networking
stands for decentralized channels of distribution and marketing
as well as potential global penetration. But even there, only a
minuscule number of businesses took advantage of e-commerce (though
the countries of Central Europe and the Baltic may be the global
pioneers of m-commerce due to their wireless networks).
E-commerce is leapfrogging's litmus test because it represents
the culmination and confluence of hardware, software, and process
engineering. To have e-commerce, a country needs rich computer
infrastructure, a functioning telecommunications network, and cheap
access to the Internet. Its citizens need to be reasonably computer
literate, possess both a consumerist mentality (e.g., inability to
postpone gratification), and a modicum of trust between the players
in the economy - and hold credit cards.
Alas, the countries in transition lack all of the above to varying
degrees. The Economist Intelligence Unit ranked Russia 42nd (out
of 60 countries) in its year 2000 "e-readiness survey". Other CEE
countries fared little better.
Penetration and coverage rates (the number of computers and phone
lines per household), network reliability, and the absolute number of
Internet users - are all dismally low. Access fees are prohibitively
high. Budding Internet enterprises in the countries in transition are
happy exceptions that prove the depressing rule. They usually respond
to erratic local demand. Few have expanded internationally. Even
fewer engage in research and development.
Technology was supposed to be the great equalizer (with the rich,
developed countries). It did not deliver on this promise. Unable
to catch up with Western affluence and prosperity, the denizens
of CEE are frustrated. They feel inferior, neglected, looked down
upon, dictated to, and, in general, put down. New, ever-cheaper,
technologies, thought the locals, would surely restore the rightful
balance between impoverished East and filthy rich West. But the
Internet - and even technologies such as cellular telephony - belong
to those who can effectively deploy them (i.e., consumers in developed,
infrastructure-rich, countries).
The news get worse.
The Internet is gradually permeated by commercial interests and going
wireless. This convergence of content and business interests - means
less access to the underprivileged. The digital divide is growing
by the day. New technologies have done little to bridge this gap -
on the contrary: they enhanced the productivity and economic growth
(this is known as "The New Economy") of rich countries (mainly the
United States) and left the have-nots in the dust.
The countries in transition also lack the proper legislative and law
enforcement infrastructure (backed by the right cultural background).
Property rights, contracts, intellectual property - are all new,
often indigestible, concepts, emblems of Western hegemony and
monopolistic practices. Widespread copyright violation, software
piracy, and hacking are both status symbols and political declarations
of sorts. Admittedly, the dissemination of illicit intellectual
products may have served to level the playing field. But now it is
hindering entrepreneurship and holding back development.
After Asia, the countries in transition are the second largest centre
of piracy. Software, films, even books - are copied and distributed
quite freely and openly. There are street vendors who deal in
the counterfeit products - but most of it is sold through stores
and OEMs. This despite massive efforts (e.g., in Russia, Bulgaria,
Ukraine, and, lately, in Macedonia) by software developers, licensed
film libraries, and distributors - to fight these phenomena.
Intellectual property may go the way the pharmaceutical industry has.
Content owners and distributors may team up with sponsors (multilateral
institutions, private charities and donors). The latter will subsidize
intellectual property and, thus, make it affordable to the denizens
of poor countries. This is already happening in scholarly publishing.
This is very promising. But it far from leapfrogging development. In
hindsight, leapfrogging may have been nothing but another of those
intellectual fads whose time has gone before it ever came.
Sam Vaknin ( http://samvak.tripod.com ) is the author of Malignant
Self Love - Narcissism Revisited and After the Rain - How the West
Lost the East. He served as a columnist for Global Politician, Central
Europe Review, PopMatters, Bellaonline, and eBookWeb, a United Press
International (UPI) Senior Business Correspondent, and the editor of
mental health and Central East Europe categories in The Open Directory
and Suite101.