Factors of
regional/national success in Information Society developments: Information
Society strategies for candidate countries by Marc Bogdanowicz, Jean-Claude
Burgelman, Clara Centeno, Elisaveta Gourova, and Gérard Carat

Bread or Broadband? The thirteen candidate countries (CCs) for entry into
the European Union in 2004 (or beyond) confront difficult choices between
"Bread or Broadband" priorities. The question raised in this article is how to
put Information Society (IS) policy strategies at the service of social
welfare development in these countries, while optimizing their resources and
economic output.

The article summarises a dozen original research studies, conducted at the
European Commission’s Institute for Prospective Technology Studies (IPTS). It
identifies ICT infrastructures, infostructures and capabilities in the CCs,
the economic opportunities these may offer their ICT domestic industry, and
the lessons from previous IS development experience in the European Union that
could possibly be transferable.

The paper concludes that only those trajectories that offer a compromise in
the Bread or Broadband dilemma, taking into account both welfare and growth
issues, will be politically sustainable.

Contents

1.
Introduction
2.
The specific context of candidate countries
3.
Building an IS: Lessons to be learnt from some EU15 experiences
4.
Potentials for a candidate countries’ ICT industry-led IS
development
5.
Future "Tigers" in the candidate countries
6.
Conclusions: Shifting the focus

1. Introduction

Immediately after the fall of the Berlin wall in 1989, the European Union
(EU) entered a process of "Enlargement". The aim was to negotiate the addition
of thirteen countries to the existing fifteen EU Member States (EU15). The
thirteen candidate countries (CCs) are the Baltic republics of Estonia,
Lithuania and Latvia; the Mediterranean countries of Turkey, Malta and Cyprus;
and, the Central European countries of Bulgaria, Czech Republic, Hungary,
Poland, Romania, Slovakia, Slovenia.

Ten years later in 2000, the Council of European Ministers meeting in
Lisbon formulated ambitious targets for the EU society to reach by 2010, the
so-called "Lisbon Strategy":

"Europe has today set itself a new strategic goal for the next
decade: to become the most competitive and dynamic knowledge-based economy
in the world capable of sustainable economic growth with more and better
jobs and greater social cohesion. Achieving this goal requires an overall
strategy aimed at:

preparing the transition to a knowledge-based economy and society by
better policies for the information society and R&D, as well as by
stepping up the process of structural reform for competitiveness and
innovation and by completing the internal market;

modernising the European social model, investing in people and
combating social exclusion;

sustaining the healthy economic outlook and favourable growth
prospects by applying an appropriate macro-economic policy mix.

(...) The shift to a digital, knowledge-based economy, prompted by new
goods and services, will be a powerful engine for growth, competitiveness
and jobs. In addition, it will be capable of improving citizens’ quality of
life and the environment".

Information and Communication Technologies (ICTs) were expected to play a
key role in this, and all thirteen CCs, while still striving to achieve the
conditions of the Enlargement process [1],
have signed up to the Lisbon strategy, which contains an ICT-related Action
Plan. This gives rise to the question of which IS strategy the CCs should
follow, given their overall social, political and economic problems.

To breakdown the problem, we put forward the following questions that are
answered in subsequent sections:

What characteristics of the CCs are relevant to the successful
development of an Information Society? Are there specific economic, social,
political or technological prospects (or threats) in candidate countries,
which should be taken into account? (See section 2.
The specific context of candidate countries)

Did we learn anything from EU15 experiences that is transferable to the
CCs? To what extent is IS development local and context-specific or is it
dependent on the global market? What are the possible trajectories for
developing an IS in the CCs? (See section 3.
Building an IS: Lessons to be learnt from some EU15 experiences)

How can ICT production, diffusion and use support growth opportunities?
Is the development of the ICT industrial sector a major opportunity for the
CCs? And to what extent would such development meet the challenges of the
emerging Knowledge-based Society? (See sections 4.
Potentials for a candidate countries ICT industry-led IS development and
5.
Future "Tigers" in the candidate countries)

Finally, in order to meet the Lisbon objective "to become the most
competitive and dynamic knowledge-based economy in the world", which
examples of best policy practice could CCs follow and where do the policy
paradigms need to be re-thought? (See section 6.
Conclusions: Shifting the focus)

2. The specific context of candidate countries

Future opportunities [2]
and possible barriers for IS development in the CCs can be clustered around
three enabling areas or necessary components for building an Information
Society: networks (infrastructure), services and applications (info-structure)
and skills (capabilities) [3].

Infrastructures

The rate at which an Information Society can be constructed is strongly
dependent on the availability and affordability of ICT to individuals,
organisations and the society as a whole. Most data confirms that there is no
purely technical reason why technological leapfrogging would not be possible
in the CCs. The CCs have demonstrated their ability to deploy and adopt mobile
telephony quicker than the EU15. Mobile phone penetration per 100 inhabitants
has, in a relatively short period of time, overtaken fixed line penetration in
Czech Republic, Estonia, Hungary, Slovak Republic, Slovenia and Turkey (Table
1).

Table 1: Fixed and mobile penetration in candidate
countries, 2001.
Source: ITU, 2002.

Year 2001

Mobile subscribers

Fixed lines

candidate countries

per 100 inhabitants

CAGR (%) 1995-2001

per 100 inhabitants

CAGR (%) 1995-2001

Bulgaria

19

106

36

2.8

Cyprus

46

37

63

2.6

Czech Republic

66

128

37

8

Estonia

46

68

35

4.1

Hungary

50

64

37

10.1

Latvia

28

90

31

1.7

Lithuania

25

100

31

3.6

Malta

35

52

53

2.4

Poland

26

127

30

12.1

Romania

17

175

18

5.7

Slovak Republic

40

136

29

5.5

Slovenia

76

95

40

4.4

Turkey

30

87

29

4.9

Average CC

39

97

36

5

Some CCs, for example Estonia, Malta, Cyprus and Slovakia, are performing
very well on infrastructure deployment, and already have a higher Internet
access penetration rate than some EU Member States. Similarly, Estonia and
Slovenia have reached EU15 levels in terms of mobile usage and personal
computer penetration. It should be noted also that cable television (CATV) is
quite well developed in most CCs. More than 50 percent of all households with
televisions in Slovakia, Romania and Malta, for example, have CATV
connections. CATV may thus be considered an essential future opportunity for
the CCs (more than for the EU 15) for the provision of low cost information
and communication services to end-users.

This high adoption rate of technology and the introduction of changes to
the telecommunications market may have raised excessive expectations as to the
ability of CCs to catch up quickly in technological terms. However, as
progress in ICT is correlated to a large extent to the level of economic
development and the purchasing power of the population, countries with low per
capita GDP are not capable of sustaining a high rate of ICT penetration
growth. Generally, the CCs continue to lag behind EU Member States in most, if
not all, measures of ICT access and usage. Furthermore, the overall economic
situation in the CCs — and the resulting uneven revenue distribution — is
widening the gap between people and organisations who can access the market of
advanced technologies and services and those for whom they are a luxury.

At the moment there are large differences in technology diffusion based on
geographic location, economic and social status, and age. In Turkey nearly 77
percent of all computers are owned by 40 percent of all households. These
belong to the highest socio-economic groups, while the low economic groups,
around 40 percent of households, own only 10 percent of all computers
(Tubitak-Bilten, 2001). In Latvia and Bulgaria, less than 15 percent of
households have computers (Eurostat, 2001). Consequently, the CCs had, for
example, an average of 6.3 PCs per 100 inhabitants in 2000, compared to an
average of 35 PCs in EU15 (ITU, 2001a). The gap exists and may be growing.
Internet usage has mainly developed in educational institutions (44 percent),
followed by corporate and government users (29 percent) and finally users at
home and in small offices (27 percent) (ITU, 2001b). In Estonia 58 percent of
Internet users are between 19-29 years old, while only seven percent of the
users are between 50-74 years old [4].
The high usage price is a serious barrier for the spread of new communication
technologies. Hungary and Poland, for example, have the highest Internet
access charges during off-peak times among OECD countries [5].
The low teledensity and long waiting lists in some of the CCs — e.g. more than
three percent of the population in Poland, Romania, Bulgaria and Turkey — also
hamper Internet penetration and increase the risk of growing regional
disparities in the provision of access to new communication networks and
services.

However, this growing digital divide in the CCs is much more complex than
it is in EU15:

rural/urban distribution: An estimated one third of the CCs
population lives in rural areas, particularly in the largest countries such
as Turkey, Poland and Romania. Some 22 percent of total population make
their living from agricultural activities (sometimes at subsistence level).

regional disparities: Two-thirds of all regions [6]
in CCs show significantly low figures [7]
in relation to labour and revenue indicators, with extremes often reached in
border regions, small provincial towns and former peripheral industrial
conglomerates.

demographic trends: The aging of the population is driving the
demographic outlook for CCs [8].
The transition years have seen a fall in fertility rates and strong outward
migration. As a result populations have decreased in many countries. Today,
demographic projections, particularly those for just after 2010, show that
this trend is even more pronounced than it is in EU15.

The impact of such disparities can be seen, for example, in the
distribution of fixed line penetration between rural and urban areas in some
countries. This can go from extremes of 0-100 percent, with no
telecommunication services at all in small peripheral towns and rural villages
and almost 100 percent penetration on new digital exchanges in capital cities.
Also, though national telephone penetration rates may have increased — for
example, 77 percent of households have fixed lines (European Commission, DG
INFSO, 2002) — 50 percent of calls in some regions are affected by the lack of
quality and reliability of these lines. This significantly limits the use of
these lines for Internet access.

In addition, average national revenue disparities (observable determinants
of divide) are expected to increase with Enlargement. It is estimated that the
income gap between countries in EU28 will double as compared to the existing
EU15 level (European Commission, DG REGIO, 2000). The impact and complexity of
the potential digital divide will therefore be such that it may endanger
market growth, social cohesion and democratic participation.

The ICT industry profile of these countries is as complex. The economic
transformations in the last decade, the inflow of foreign direct investment
(FDI) and the ability of companies in the CCs to absorb new technologies and
integrate large international production chains have contributed to the
emergence of new patterns of local industry specialisation. Many domestic IT
companies in the CCs, without financial resources to modernise their
production, were not able to compete with multinationals and have shrunk,
particularly during the privatisation period, into small producers in limited
niche markets. Many hardware companies have been integrated into the product
life cycle of western companies through subcontracting or outsourcing,
assembly, distribution, reverse engineering, etc. Consequently, in many CCs,
ICT sector manufacturing industries are increasing exports to the EU15 (Havlik
et al., 2001). Hungary is in a very strong position, as it has significant
specialisation in office machinery and computers and electronic components,
while in Poland the TV, radio and recording equipment industry has been a top
exporter since 1995. The Czech Republic also plays a growing role in these
market segments, while Estonia has been selected as a manufacturing and
assembly centre by high-tech western companies. Malta has a comparative
advantage in electronic products, which accounted for about half its exports
in 1999 (Eurostat, Statistics in focus, 2000), though these, of course,
remained comparatively small. Finally, the Turkish electronics industry is in
a strong position with its exports of consumer electronics and
telecommunications equipment. The potential role of the ICT industry
(including the software segment) in CCs will be explored in a further section
of this report.

The Information Technology (IT) hardware market in the CCs has grown
remarkably over the past few years, mainly due to government procurement
projects and foreign investments. It should be noted that as a percentage of
GDP, ICT expenditure in Hungary (6.42 percent), Slovakia (5.98 percent) and
the Czech Republic (8.49 percent) is higher than in Germany (5.27 percent) and
Finland (5.88 percent), while it is still comparatively low in Romania (1.78
percent), Bulgaria (1.76 percent) and Turkey (2.47 percent) [9].
However, the total size of the IT hardware market in 2000 in all CCs was still
very small, about five billion Euro (Poland and Turkey taking more than 60
percent of the whole market), compared to 235 billion Euro for the EU15
(Eurostat, 2001).

Finally, the presence of dominant foreign operators in the
telecommunications market in CCs exposes this market to the fluctuations in
the global telecom market.

Infostructures

In CCs, the rapid growth in numbers of domestic Web sites and Web portals
in local languages and the provision of governmental interactive services and
online content have been stimulated to a large extent by the strong demand
from businesses and civil society on the one hand, and government commitments
to EU policies on the other.

The advent of Internet and digital broadcasting platforms raises several
new issues for the CCs related to the protection of consumers and citizens’
rights, such as access to quality content in an overall context of low
per-capita revenues, and protection of intellectual property. The challenges
of how to prevent infringement of ethnic, religious and minority rights, and
to preserve human dignity, are a global prerequisite.

However, in these new democracies, it is more of a challenge to find the
right balance between regulatory and self-regulatory rules, and to ensure both
freedom of information and expression and protection from illegal or harmful
content and disclosure or misuse of private information.

In order to maximise the potential for the content industry in CCs, it is
important that critical mass in investment and usage is built up, and that an
awareness of the profitability and potential benefits of public and private
partnerships is created.

Simultaneously, governments should be a driving force towards an
'Information Society for all'. The private sector also plays a vital role in
this endeavour. While incumbent media companies further develop the
re-purposing and cross-promoting of content across multiple distribution
channels, Net-native companies offer targeted content or delivery options in
niche markets. The key to a competitive industry in the CCs is for them to
become producer, as opposed to consumer, countries.

Despite the fact that business players have undertaken different
initiatives providing consumers with online services, creating virtual shops
or taking the first steps towards setting up systems for e-banking and
e-business, the business-to-consumer market is still very limited. The few
customers that use the Internet do so predominantly to receive information and
to order products or services, paying on delivery. Business-to-business
commerce is also in its infancy — companies use electronic networks mainly to
access market news/analysis and new business offers, and to communicate with
suppliers — while contracts and business deals are carried out by direct
contacts and traditional means.

As in most EU15 countries, the spread of ICTs among businesses in the CCs
is a market-driven phenomenon rather than a real strategic choice to go
online. As already stated, investment capacity, especially domestic
investment, is still relatively weak, and in such circumstances risky options
are usually left to one side. Internal organizational factors may well be the
biggest obstacle to taking the right decisions and overcoming organizational
inertia. Additionally, most customers’ conservative attitudes, their lack of
trust in the security of technologies and their fear of misuse of personal and
business information further influence company investment in, and adoption of,
ICT-based strategic options. Under developed logistics systems, lack of
professional home delivery services, and the predominance of English language
materials on the Web are also obstacles in this respect. Surveys have shown
that the limited diffusion of ICTs, banking products and security enhancing
technologies are additional obstacles (PricewaterhouseCoopers, 2000).

It seems, therefore, overly optimistic to state that many CC companies will
soon be in a position to adopt and apply e-commerce technologies in order to
leapfrog economic development and join the EU on a more competitive basis.
Only countries such as Estonia, and possibly Slovenia, may be in a position to
successfully meet this ambitious challenge.

Capabilities and skills

The CCs face greater challenges than the EU15 in providing the kind of
education needed for the digital age, due to the massive economic and social
changes they are undergoing [10].
Economic decline in these countries has caused serious problems for their
educational systems as regards offering a common high standard and tackling
new challenges.

Despite this, the introduction of ICT is seen as educationally important
and is firmly on the CCs’ national policy agenda. Making computers with
Internet connection available is seen as essential for ICT-based learning
processes and this has dominated the first phase of the introduction of ICTs
into education. However, even where technologies and skills are now available,
the integration of ICTs into the learning process is hampered by the lack of
appropriate electronic books, multimedia contents and tools in the local
language. This problem could be resolved by the efforts of candidate country
governments and the collaboration of all actors — teaching staff, software
developers, content producers and learning content distributors — to
facilitate the development of educational materials meeting e-learning
requirements.

Though the availability of technologies and tools is a necessary condition,
the key factor for success in the e-learning field is the human factor. A
policy of connecting schools to the Internet is important, but not enough in
itself. The ability of teachers to adapt effectively to new technologies in
the learning environment is problematic despite many training programmes to
re-train and prepare them for the changing learning environment.

The restructuring of the economy in the transitional period has seriously
affected both vocational education and traditions of on-the-job training.
Existing links with enterprises have been broken, and the support system for
learning cut back. Insufficient financial resources have also limited the
ability of enterprises to provide on-the-job training and qualification
courses to their employees.

Initiatives have been set up in all the CCs to respond to the labour
force’s increased ICT training needs. Many of these focus on building an open,
flexible and transparent life-long learning system (European Training
Foundation, 2000). Schemes aiming at encouraging company-training activities
have been launched in Cyprus, Malta and Hungary. In Slovenia, existing
company-based training facilities have been transformed into inter-company or
regional practical training centres. As well as providing traditional
training, CCs are seizing the opportunities that distance education offers
them, mainly through the financial support of international institutions, such
as the EU, UNDP and World Bank.

Training in management and leadership is another essential issue. While the
Mediterranean countries have longer market-economy experience, the transition
decade has faced the ten Central and Eastern European Countries (CEEC) with
the challenge of preparing managers able to raise their companies’
competitiveness and adapt them to the rapidly changing technological and
market conditions. There are some indications that individual entrepreneurship
is driving the take-up of economic activity in CCs, particularly in the
service sector, nonetheless lack of initiative and aversion to risk are still
claimed to be business weaknesses. The European Bank for Reconstruction and
Development (EBRD) pointed out in its 2000 Transition Report that foreign
investors have experienced more difficulties in finding good managers than IT
or financial staff.

Despite the downturn in the "new economy" and the cutting of many IT jobs
in western countries, the ICT sector in CCs is still buoyant, attracting many
young and qualified people. Some countries (such as Latvia and Bulgaria),
though they worry about future shortages, consider the present availability of
highly-qualified IT specialists to be an important strength for sector growth.
In particular, the expansion of software applications in many CEEC has been
facilitated by the existing human capital accumulated previously in the sector
(Kubielas et al.,2000).

Larger companies have established their own programmes in order to retrain
employees, as a result of the problems faced by the educational system and the
speed with which ICT skills become outdated. In Bulgaria, Cisco has its own
academy, in the Baltic States Microsoft runs authorized training programmes,
and IBM computer classes are part of the University of Latvia. This tendency
to private certification is particularly important for enterprises involved in
ICT development and maintenance, and major users and providers of
knowledge-intensive services. Specialized training and re-training courses are
also offered to bank and telecommunications employees and computer
specialists.

The impact of the immigration policies of western countries aimed at
attracting workers with IT skills from other countries is disputable. Talented
people from Poland and the Czech Republic would rather remain in their
country, whereas the probability of a brain drain is estimated to be much
higher in Bulgaria and Slovakia [11].
In Latvia, some hopes are expressed that talented people working abroad will
return (brain circulation) and that the best IT specialists are unlikely to
emigrate due to the high living standards they enjoy at home [12].
On the other hand, around 50 percent of all Turkish post-graduates studying in
the U.S. would be potential emigrants to that country (OECD, 2001).

Assessment of the present IS in the candidate countries

Taken together, these trends illustrate the capacity of CCs:

to catch up in technological terms;

to integrate existing global companies;

to develop competitive niches for local industry, mainly in software and
content services; and,

to use local knowledge and geographic situation as competitive
assets.

However, the domestic industry’s low investment capability and the
population’s low purchasing power hinder balanced economic and social
development and the building of a critical mass of usage. This and the
associated risk of a marked digital divide could weaken the economy, social
cohesion and the development of democracy in these countries.

The formation of human capital is also a key issue. Candidate countries are
focusing on meeting human resource needs in the ICT sector and generally
building excellence in some areas of science and technology, while doing too
little about their largely ICT-illiterate population. The strong correlation
between income level, education and ICT know-how points to the need for a more
holistic policy approach for all levels of society and all categories of the
population.

These difficulties and opportunities have to be seen against the backdrop
of the overall challenges these still newly democratic societies face in the
transition to market economies. Their policy makers are under huge pressure to
respond to both the legitimate short-term needs and current problems and the
long-term issues of development of an inclusive and competitive Information
Society. Striking a balance between these two sets of policy objectives —
acute societal day-to-day needs and IS development-related needs — is probably
the most difficult policy challenge.

It is clear that choices made today will drive their economies and
societies to alternative scenarios:

If present development imbalances are not addressed, the CCs will build
a society which has islands of ICT development. However, large disparities
between countries, regions and groups of people, as regards ICT and other
areas, will remain. There is a risk that the social and economic benefits of
the Information Society will not be reaped. CCs may even find themselves
limited to low wage, low quality and lower added-value production and
consumption patterns.

If the CCs wish to establish themselves in a stronger position, a policy
push and sufficient financial support are needed, to achieve a more balanced
Information Society development. In times of limited public resources,
striking a balance between competitive objectives (the social/the economic,
the short term/the long term), targeting the major relevant factors of
sustainable development and acting cooperatively with the private sector
could become the guidelines of a sort of "Marshall plan" for the Information
Society in CCs. Only this kind of multi-layered policy push will ensure that
the CCs build up their own socially inclusive and competitive Information
Society.

What lessons from past experiences would help in setting this up?

3. Building an IS: Lessons to be learnt from some EU15
experiences

The last decade of ICT-related development in EU15 Member States provides
evidence of national successes and failures, set against the particular
economic, industrial, historical, social and geographical context of the
country or region concerned [13].
It is worthwhile considering how relevant initiatives in given EU15
national/regional contexts have set out conditions favourable for achieving
ICT-related regional and national development, and what this development has
meant in each case.

We labelled this the "Tigers approach" [14],
"Tigers" being regions or countries with fast economic growth at high rates,
rapid reduction of unemployment rates and strong growth of employment rates,
reduction of outward migration or even reverse migration, etc.

Six cases were selected and are briefly described below [15]:

Austria: Austria was the fastest-growing European economy from
1950-1960, only surpassed by the German "Wirtschaftswunder". The catching-up
done in the 1950s and 1960s and above-average growth rates in the 1970s and
1980s make Austria one of the richest countries in Europe today. However,
Austria’s current favourable economic position cannot hide structural
problems that will affect economic performance. If we assess Austria’s route
to the Information Society, we see structural change in a mature, developed
economy. Hence, this is more the story of an "old" Tiger, which has to keep
up with, or even shape, development, rather than simply catching up.
Austria’s story is also a story of old virtues, some of which are turning
into burdens. Austria’s institutional set-up with its strong corporativist
elements and its consensus-orientated policy did well in the times of
catching up, but did not achieve as much structural change as Finland or
other countries. Therefore, Austria should be seen as an illustration of a
country in the post-"Tiger" period.

Dresden (Germany): Saxony was the most industrialized area in
Germany before World War II. During GDR times, Dresden was the largest
research centre for semiconductor production (producing, for example,
Europe’s first Megabit memory chip in 1988). In the course of German
re-unification, employment shrank considerably. After an initial boom,
growth rates later dropped to the relatively low West-German levels. For
West Germany, the decision by Siemens in 1993 to invest the equivalent of
EUR1.38 billion in a semiconductor plant was essential. It was followed by
AMD in December 1995 and by other players. In May 2002, AMD, Infineon and
DuPont Photomasks founded the Advanced Mask Technology Centre (AMTC) — a
global research centre. This major investment made it economic for about 30
international equipment producers to open permanent offices themselves. New
producers started business such as DAS or Wacker Siltronic (in near-by
Freiberg). About 10,000 semiconductor-related jobs were created in the
region, more than initially expected. Government subsidies of about EUR1.2
billion will probably be much smaller than the expected social insurance and
tax payments, which will be about EUR5.9 billion by 2010. The economic
sustainability of these initiatives will largely depend on whether the
investors will be able to make enough profit in the future, while continuing
production during downturns at revenues below average costs. The timing,
size and duration of the next boom will therefore be crucial.

Flanders (Belgium): Flanders general profile has many "Tiger"
characteristics. It is a very wealthy region within a complex institutional
structure, yet it has a large degree of autonomy. It has a high population
density and degree of urbanisation and hosts an important manufacturing
industry. The economy is remarkably open in terms of trade and FDI; showing
very high levels of productivity, though salary costs are also remarkably
high. The population is highly educated.

Overall, the analysis shows that Flanders reaches at least the average
European level for many aspects of the "Digital Society" but these
achievements are not evenly distributed through the society:

Flanders is strong in ICT infrastructure developments

It hosts a reasonably important ICT sector

This strong position is not matched with similar rates of ICT use

There are signs of a digital divide, as a comparatively large share of
the population is not yet accustomed to ICT applications.

Thus, the potential for ISTs in Flanders is stronger than their actual
effective and widespread use. The full development potential of ISTs has not
been realised in the society as a whole and ISTs are under-exploited.

Greece: Here, IS development started later than in most other EU
Member States. The first and second CSF (Community Support Frameworks) made
a major contribution to building the telecommunications infrastructure,
computerising public services and developing mobile telephony in the
country. However, the success could have been much greater if these efforts
had not been hindered by internal organizational matters like limited
experience of the public sector in administration and implementation, lack
of co-ordination, delays, fragmentation in programme design and
implementation, etc.

Today, the Information Society initiative in Greece is taking place
within an economic environment marked by high growth rates, low inflation
and interest rates, and the elimination of public sector deficits. Since
1995, the GDP growth rate has been higher than the EU average. In 2002,
Greece’s economy was considered to be the fastest growing economy in the
European Union. High development rates led to an increase of employment and
unemployment has decreased during the last couple of years (however, as a
percentage, it remains one of the highest in the EU zone). Although real
salaries were increased, labour costs per unit have been steadily
decreasing, with labour productivity growing fast, approaching the absolute
levels of other developed economies. This fact is undoubtedly related to the
major increase of investment over recent years. Overall expenditure on ICT
is the most widely used indicator of IS development. In the past few years,
significant efforts have been made and ICT expenditure as a percentage of
the GDP almost reaches the EU average. Consequently, the current situation,
comparable to Portugal and Spain is characterised by some of the lowest
figures in IS-related indicators. It is, however, supported by some of the
highest growth rates.

Ireland: Important early foundations for the Information Society
in Ireland can be traced back to a number of events such as the early
consideration given to FDI, the decision to expand the national education
system, initially at secondary level and then at tertiary level, and
accession to the EU. More recently, it was against a backdrop of emigration,
unemployment and national indebtedness in the 1980’s that led to the first
of a series of National Partnership Agreements in 1987. These laid the
foundations for the economic turnaround of the early 1990’s. Due to a
combination of factors from the mid-1990s, the country was in the fortunate
position of having a young educated workforce, a strong presence of FDI
companies — particularly in IS relevant industries (e.g. IT, software) — and
the fiscal resources to make strategic investment. In effect, these factors,
which caused the "Celtic Tiger" period from the mid 1990’s, also provided
fertile ground for an Information Society initiative. In Ireland, this
commenced with a report to the Government in 1996, which defined an IS
vision for the country. The Government quickly recognised the potential of
the IS in its own right, and as a result, the IS agenda became an integral
part of government policy.

Several recent international benchmark studies suggest that,
notwithstanding the significant momentum behind the Ireland’s Information
Society, not enough has been done to propel the country to becoming an IS
leader. Moreover, two recent benchmark studies show that Ireland’s relative
standing deteriorated between 2001 and 2002, suggesting that there is
reduced momentum behind its Information Society.

The analysis of these six cases (and additionally, Finland) brought up the
following seven factors which, taken together, help our understanding of the
birth (and death) of a "Tiger". The assessment was done without taking into
account these factors’ potential transferability to the CCs.

A committed and adaptive (smart) public policy

ICT-related developments do not develop spontaneously, even less in an
socially inclusive way. Each strong ICT-related development was guided, in
EU15 national or regional cases, by a strong pro-active public policy push.
Strong does not mean centralised or top-down. Rather, the examples show the
need for adaptive and committed policies, allowing risk-taking and long-term
objectives, and for public authorities to play a coordinating role. Also,
those policies were often seen as holistic — or multi-layered — showing a
strong interest in the overall (economic) development of the country, rather
than being focused strictly on ICT. They also rely on a broad set of
interdepartmental co-operative means. IS policies are seen as being part of
the broader category of development policies, covering a variety of domains
such as economic development, industrial policy, science and technology,
employment, regional policy, innovation policy, education and media. This type
of holistic policy seems to have been more possible in countries which had
acknowledged domestic crises or which were seeking strong identity building.
Pro-activity is another typical feature in these policies, though the risk was
high for individual actors because of the level of uncertainty and the
apparent necessity for visible individual "champions". Government played a key
role in coordinating an on-going learning process and creating predictability
for most partners. This was done, for example, by establishing innovative
partnerships among actors and by creating clear policy goals and roadmaps.

Co-opetition frameworks

Co-opetition refers to the search for the right and creative mix of
co-operation and competition, through, for example, the co-ordinated meeting
of diverse — possibly competing — actors in a goal-focused and time-determined
taskforce. This mix aims at creating mutually beneficial situations where
providing diversity and generating synergies may help to create common goals
and trajectories for all. This concept calls first for innovative
institutional arrangements in public policy management, which includes the
delegation of decision making and implementation capacity, as well as a
citizen/entrepreneur-oriented mindset. Co-opetition frameworks have been used
in areas such as infrastructure development for the benefit of the public, a
safe digital environment, standards and interoperability, and also education,
societal assessments, and democratic and environmental initiatives. Such
arrangements also appear to be crucial in cluster development [16].
They based on the idea that reciprocal responsibilities pay better than
"Winner takes all" games. They may nevertheless translate into privileged
arrangements, which escape democratic control (nepotism) particularly because
they seek consensus among a set of contradictory interests.

The scale and scope of co-opetition matters. The geographical scale or the
technological scope may be too large for a given set of actors to ensure
commitment and pursue a common goal. International, national, regional
partnerships are necessary and successful when they imply adoption and
adaptation as concomitant processes. Smaller co-opetition frameworks seem to
be easier to handle, and thus more obviously successful (as in the example of
smaller countries).

Co-opetition demands that government plays an important role as coordinator
of a diversity of actors of varying sizes. This role encompasses the difficult
challenge of 'policy learning'. The environment for policy makers and
partner-actors becomes highly complex and constraining.

From ICT manufacturing industry to the adaptive use of the industrial
profile

During the second half of the 1990’s, several national economies benefited
from the contribution of ICT industries to added-value, GDP and employment.
Countries such as Ireland, Finland, Sweden can easily be identified as
"Tigers", when trends across a broad range of their socio-economic indicators
are taken into account. In these cases, the presence of foreign and indigenous
ICT manufacturing multinationals and/or a dynamic SME-sector successfully
developing international niche-markets were essential ingredients.

It is evident, however, that national/regional industrial structure also
matters. Countries and regions, which have a tradition in industrial
manufacturing, may succeed in modernising that industry through ICT use.
Relevant software production and the adaptive use of ICTs are at the core of
these IS strategies. Specific national or regional assets — including in
services — can help generate ICT-intensive industries and are referred to as
'sweet spots', which are either 'given', historical, or strategically
created.

Mature industrial products, no longer susceptible to large productivity
improvements, tend to end up in low cost locations. Traditional industries are
product or supply oriented, and cannot escape simple cost-based competition;
modern industries, however, can compete on quality and be much more marketing,
or demand-oriented. In order to develop — as a country or a region — there is
a need to seize the right opportunities, by innovating on new products or
becoming more productive in almost mature ones. In these cases, pre-existing
industrial structure and its interaction with ICTs plays a major role, the
effects of which may trickle down to the rest of the economy.

A variety of financing tools

Foreign Direct Investment is a major tool, particularly for funding and
developing an ICT (manufacturing) sector. However, venture capital, seed
capital, public subsidies and the protection of revenues through adequate
regulation (for example, intellectual property rights) are also essential
tools to promote domestic development. ICT-related development is an uncertain
path that needs considerable trial and error, and also a range of financial
tools appropriate to very diverse scales of initiative and risk. This
flexibility is important where innovative products and services may start from
very different points and involve a wide range of actors.

A major challenge is to transform funding into knowledge transfers,
incentives into committed involvement in the domestic economy and society, and
isolated bets into spillovers that generate more sustainable and embedded
benefits.

Financing tools should be integrated into a broader framework encouraging
an entrepreneurial mindset. If this framework is absent, there is a risk that
financing is entirely devolved to possibly fragile mono-industrial aims and/or
high volatility.

Education, info-culture, awareness: The intangible facet

National intangible assets play a major role in fostering ICT potential.
Some are demand-side oriented, such as the general educational level of the
population and explicit support to creativity and self-learning — in both
technical aspects of ICT and also general literacy and infoculture [17].
Others assets lie in facets of the supply chain: R&D capacities,
fundamental research and curiosity-oriented research, technology transfer
mechanisms, patent regulation and innovation policies.

Education always plays a major role in successful ICT-related development,
and has to be viewed in the long-term. The upgrading of each generation’s
educational level is a central ingredient to development. It could also be
argued that our education systems should be supply-side oriented and directly
support the necessary professional ICT skills, even at the risk of being too
"answer-oriented" [18].
It is also true, however, that our modern societies seem to need
"question-oriented" education where a general ability for "learning to learn"
and creativity is fostered. The same argument goes for infoculture.

While the political decisions concerning the supply-side — particularly if
translated into hard investments in visible initiatives such as industry or
science parks — seem to be more obvious, governments have an essential role to
play in the development of a solid demand side, by the relevant co-ordination
of education, or policies supporting knowledge seeking behaviours. These
intangible assets rely strongly on the level of awareness of the public and
private decision-makers themselves. The managerial capacity of the
decision-makers and their sensitivity to the issues raised by the IS, are
themselves an essential facet of a country’s intangible assets.

Creative use of specific contexts: Alliances by position, language,
identity

Geographical position or size may confer on a country a specific role in
geopolitics or international trade. Traditional migration flows may reveal
unexplored networking capacities as well as access to foreign resources.
Language specificity may translate into market access or the affirmation of
national identity. Traditional skills may be a hidden attraction. Such
features can be embedded in international alliances or in ICT products and
services, in marketing behaviour and mobilising visions or in the distribution
of managerial responsibilities. Strategic creativity matters more than the
hurdles. Addressing these apparent hurdles to ICT-development at national or
regional level may reveal opportunities for creating competitive advantages.
Not addressing them often turns them into real weaknesses.

EU policies

EU policies have an important impact on ICT-related development. In most
cases, they have supported development both by mandatory regulation frameworks
and by awareness raising, direct subsidies or benchmarking initiatives.

Reciprocally, EU policies may also generate reverse effects. The focus on
the EMU and the stability pact, and on the Enlargement process and its
conditions, may have distracted some governments from other priorities.

4. Potentials for a candidate countries’ ICT industry-led IS
development

The "European Tigers" — Ireland, Finland, and Sweden — have features in
common and their position contrasts with the rest of Europe, and even the
world in some cases [19].
These three countries stand out with very strong ICT manufacturing profiles.
ICT manufacturing mobilizes 40 to 70 percent of their ICT workforce. Around
four percent of their total employment and eight percent of their total
business employment is concentrated in the ICT sector. In Ireland and Finland,
this has had a very positive impact on employment rates during the last
decade. These countries generate a comparatively major share of their national
ICT turnover and added value through ICT manufacturing, putting them far above
EU15 averages. They also show above average turnover and added value in ICT
manufacturing per person employed. Finally, their trade balance on ICT goods
is positive which, compared to the rest of Europe, is remarkable. These
financial results in turn have had a positive impact on the overall national
economy.

Closer observation of these cases shows that they do not share a common
model of development and that the various strategies may lead to positions
which may be differently appreciated regarding their longer term
sustainability.

Ireland specializes in the manufacturing of office machinery and computers,
and foreign, mainly American, firms have a very strong presence as a result of
a long-term development strategy. Attracting foreign business firms is a
strategy shared by Ireland and the U.K., both of which have developed
information technology-oriented specialization in close cooperation with U.S.
companies.

Finland has specialized strongly in the manufacture of television and radio
transmitters and apparatus for line telephony. It is EU15’s second largest
telecommunication equipment producer after France (2001). This success is
usually attributed to the history and activity of one large company, Nokia,
and its suppliers.

Sweden has also specialized successfully in the manufacture of television
and radio transmitters and apparatus for line telephone. This success is also
attributed to the activity of one large company, Ericsson, and its suppliers.
Developing strictly domestic companies, particularly those specializing in
communications technology, has been a Nordic strategy.

The case of the Dresden microelectronics cluster development, coming a
little later historically, again shows some similarities with the
"Anglo-Saxon" model of development described above, in that it is embedded in
microelectronics manufacturing, and is FDI and U.S. oriented. The case of
Flanders, possibly because it has resulted in few effective and domestic
manufacturing industries, follows a different path. In these two cases,
whatever their industrial ambitions, one hesitates to speak (so soon?) of
"Tigers" and today’s downturn of the ICT sector and the economy as a whole,
brings into question the fragility of the initiatives taken.

These examples of European "successful" Information Societies often give
rise to the view that there is a need for a competitive ICT sector in Europe
and possibly in each country of Europe. It is then argued that ICT industries
have strongly demonstrated during the last decade that they account directly
for an important share of Europe’s economy and growth and at the same time,
have been an essential enabler for competitiveness in other sectors of the
economy.

In a report on the competitiveness of Europe’s ICT markets, Booz-Allen and
Hamilton argue that it is the stated goal of most governments to encourage
vibrant indigenous ICT industries as a source of economic growth, quality
employment and broader innovation. Market positioning, efficiency of
production, quality of skills and a context for innovation are important for
the European ICT industry irrespective of who owns the ICT companies based in
Europe. The authors claim that unless Europe addresses these issues, jobs and
other benefits of the ICT industry are inexorably doomed to move out of
Europe. The report concludes: "the competitiveness of Europe’s ICT industry
and markets will determine the future competitiveness of Europe" [20].

However, if this statement is true, it may well be related to the specific
sector-related growth trend of the 1995-2000 period. While the trajectory of
the European "Tigers" cannot be reduced to a mere "industrial" story — a view
that would dramatically oversimplify their effective development — the
long-term sustainability of their winning positions should be assessed from
two perspectives:

they occupy the positions of "first served" countries in an important —
even if provisionally stagnating — sector of the economy. "Followers" should
therefore assess the difficulty of challenging these positions when they
consider their strategy.

they may have developed a vibrant innovation capacity in ICT and other
branches, reinvesting the benefits in a new cycle of value creation which
makes them less dependent on the potential downturns of the ICT
manufacturing industry.

In the 1990s, several factors combined to accelerate ICT diffusion and
growth. Technological change, coupled with large price reductions, led to a
surge in the use of digital technologies. With firms ready to exploit the
opportunities offered by ICT, the liberalization of telecommunications and the
growth of the Internet economy — allowing for economies of scale and network
effects — brought new vigour and eagerness to investment in new technologies.
In the U.S., business investment in computers and peripheral equipment,
measured in real terms, jumped more than fourfold between 1995 and 1999. A
rapid increase is also detectable in the EU, though not at the same pace as in
the U.S.

Consequently, the assessment of IS successes — and their transferability in
time and space — has to be put under the microscope. The burst of the "new
economy" and the global economic downturn have strongly reduced the vigour of
ICT markets and leave less space for new challengers. It is thus quite
possible that times have changed for national Information Society projects
relying strongly on the building block of ICT manufacturing industries growth.
This question has a direct bearing on the transferability of the observed
success and failure factors to the context of the CCs and, more specifically,
to the support given to their ICT manufacturing industries.

5. Future "Tigers" in the candidate countries

To what degree are "Tiger" scenarios possible for CCs? Do their ICT
industries show signs of a potential "Tiger" renaissance or not?

Identifying potential "Tigers"

The ICT manufacturing production value generated by the CCs is
proportionally small as compared to world or EU15 production. Considering the
dramatic effects of the transition period — generally in the early 1990’s —
and the consequent collapse of most of their ICT industries, this cannot be
seen as a surprise. Since then, strong FDI flows and the arrival of most, if
not all, major ICT multinationals in these countries have given local industry
a second chance and increased competencies. Nevertheless, candidate country
production today does appears to have little effect on the position of Europe,
as an Enlarged Europe, in the global ICT production market. Production by the
candidate countries only accounts for 1.2 percent of the global market. EU25+
expands the EU15 production value by only 5.9 percent. The scale of the change
is thus of little significance.

A look at the country shares (Table
2) is more interesting. Hungary leads with nearly half the total
production value in ICT manufacturing in the CCs. It generates 73 percent of
the total electronic data processing (EDP) equipment production value. It also
leads in consumer electronics (CE) and in components, with 39 percent and 32
percent respectively of total candidate country production value. Poland ranks
second with around one fifth of the total ICT manufacturing production value
in CCs. Turkey is third with a slightly smaller share than Poland. The Czech
Republic comes fourth with a share of about one tenth of the total candidate
country production value.

Table 2: Candidate country domestic production in each ICT
segment as share of total candidate country production in ICT manufacturing
1998 [21].

EDP

Office equip.

Control and Instr.

Med and Ind

Radio com, mobiles, radars

Telecommunications

Consumers electronics

Components

Total

Bulgaria

0.1%

6.8%

1.0%

0.6%

0.4%

0.6%

0.8%

1.2%

0.7%

Romania

1.5%

10%

11%

12%

3.2%

9.1%

1.7%

2.2%

3.9%

Slovenia

1.3%

6.8%

10%

4%

4.1%

7.9%

2%

5.2%

3.9%

Slovakia

3.3%

12%

4.4%

17%

11%

6.1%

2%

3.7%

4.6%

Czech Republic

4.4%

29%

21%

22%

18%

8.5%

3.2%

18%

10%

Turkey

7.3%

21%

3.3%

15%

21%

26%

32%

12%

18%

Poland

9.1%

13%

32%

10%

27%

35%

19%

25%

21%

Hungary

73%

0.9%

16%

19%

16%

8%

39%

32%

38%

Candidate countries

100%

100%

100%

100%

100%

100%

100%

100%

100%

CC/World

1.0%

0.6%

1.6%

1.4%

0.7%

3.9%

4.2%

0.7%

1.2%

Poland and Turkey’s high ranking can be attributed to the fact that they
are larger than most of the CCs [22].
Hungary and the Czech Republic’s ranking, however, can be attributed to a form
of ICT specialization, which echoes that of some EU15 Member States such as
Ireland, Sweden and Finland. Further data should show whether these
similarities are more than superficial.

Hungary, Poland, the Czech Republic and Turkey contribute 80 percent of the
total candidate country production value in ICT manufacturing. In each of
three major segments — consumer electronics, EDP and components — they
generate as a group 93.2 percent, 93.8 percent and 87 percent respectively of
total production value. Each of these countries specializes in particular
areas:

Hungary in EDP and secondly, in consumer electronics;

Poland and Turkey in consumer electronics and secondly, in telecoms
equipment; and,

the Czech Republic in components, and secondly in control and
instrumentation equipment.

Assessing the potential "Tigers"

These countries — particularly Hungary and the Czech Republic — show high
growth rates, and declining unemployment and emigration. They usually score
high on FDI flows, but rather weakly on R&D spending [23].
As regards these indicators, these countries can be assessed as fairly classic
examples of "Tigers".

Hungary is performing particularly well, and its ICT industry is quite
exclusively export-oriented. It is the only country showing an overall
positive trade balance on ICT goods.

Nevertheless, a closer look at the ICT manufacturing industry in these
countries shows specific weaknesses which may affect the health of their
development in the mid-term.

Hungary, Poland, the Czech Republic and Turkey have the following problems
in common:

Dependency: The development of a local ICT manufacturing capacity, over
the last few years has been highly dependent on external factors such as
fluctuating FDI flows and their relation to incentive policies. In addition,
foreign firms design their strategies in an ultra-competitive environment
where relocation of activity may not be seen as an obstacle. Strong
competition from other European and non-European countries, access-to-market
based competition for plant and R&D centres, and the strong dependency
of export-oriented industries on overall economic health, all contribute to
this problem.

There is an observable shift in production specialization towards
lower-value ICT manufacturing such as consumer electronics (which represent
today less than 10 percent of total world production value) or even
components. This goes with a general shift towards assembling activities
with low added value and little accompanying knowledge intensive activity
(R&D for example). This is partly due to a focus on cost-based
competition strategies rather than knowledge-based ones.

In all these countries — with the exception of Hungary — the overall
trade balance on ICT goods is negative. Even though these countries have a
stronger ICT manufacturing industry than other CCs, their economy has to
absorb the effects of a much larger demand. Poland and the Czech Republic
show negative annual trade balances of approximately two billion Euro and
one billion Euro respectively.

Last but not least, it may well be that these ICT manufacturing
strategies will be sensitive to the impact of accession itself. While the
single market rules will boost export capabilities as doing business becomes
logistically easier, it may well be that some facets of today’s policies
will be subject to scrutiny under the rules of fair competition. Excessively
generous incentive policies, for example, may be cut back.

When considering these factors and observing recent company decisions [24]
in such countries, it seems fair to conclude that developing "classical" tiger
strategies by encouraging foreign or domestic companies to invest in ICT
manufacturing and grow, may be a mistake today. While the 1990’s were
rewarding years for such strategies, the position today of western European
"Tigers" — Ireland, Finland, Sweden — is weakened by the market downturn and
the difficulties in the telecom sector. The timing may thus play against new
candidates repeating such scenarios.

Additionally, CCs may still lack some of the essential ingredients that
have made some west European countries’ ICT industries so successful. These
ingredients are a committed and strongly supportive policy focus,
institutional creativity allowing the necessary consensus (about targets) and
decision building (about actions to be taken) across a broad range of
partners, and a wide diversity of solid financing tools able to support the
creation (and possible failure) of a multiplicity of initiatives and players
of various sizes.

There is nevertheless room for an ICT industry in CCs. As already stressed
in Section 2.
The specific context of candidate countries, some parts of the ICT
industry, like software supply, can clearly be competitive on a global scale.
Such activity depends more on skills and human resources than on hard core
plants and machines that can be moved from one country to another. The
development towards a market economy has inspired individual entrepreneurship
which has driven economic activity, as a result of which many successful
businesses have developed in an environment of uncertainty and risk,
unattractive for foreign investment. Domestic software firms in many countries
have shown themselves to be highly competent and many of them provide
successful services to U.S. and EU companies in ICT design, testing,
maintenance or support. For example, software firms in Bulgaria, Poland and
Romania have specialised in the development of fully integrated systems,
database applications, CAD/CAM software and expert systems. Some of the CCs
are already strong players and have started supplying on a global scale. As
the software industry is mainly 'brain' driven, the future looks promising.
First, their historical ICT R&D potential, and their highly qualified
researchers have encouraged multinational companies (IBM, Nokia, Xerox,
Ericsson) to establish R&D centres. In addition, international
benchmarking indicators [25]
give some of the CCs, such as Hungary, Estonia, Czech Republic and Slovak
Republic, a good ranking compared to EU countries, and show a good stock of
ICT labour in Rumania, Bulgaria and the Baltic countries.

In order to benefit from that local expertise, many foreign companies have
invested in software houses (e.g. in Estonia, Bulgaria and Hungary) or have
outsourced their work, taking advantage of the high quality and low prices in
computer software markets in the CEEC. Estonian IT companies, for example, are
becoming more and more integrated into the supply chains of their Nordic
counterparts — thus getting leading edge know-how and project management
expertise. Estonia, with its well-educated population and government emphasis
on ICT development, is considered to be an 'excellent test market' for new
technologies [26].
In Latvia, however, despite the availability of good specialists, insufficient
government support and access to venture capital limit the competitiveness of
IT companies. Other drawbacks are the lack of marketing skills in many
companies and the mismatch between university training and practice [27].

Software services represent one of the fastest growing sectors of the IT
market in the CCs. There has been particularly strong growth in the market for
packaged software, such as PC applications software, enterprise resource
planning applications and application tools for database development and
management. Most growth in the software and services sector derives from
large-scale projects in banking, financial services, government
administration, telecommunications and industry. Many domestic software
companies have exploited their local knowledge of customers and the local
language as a competitive asset. Local firms play an essential role as system
integrators, value-added service providers, software developers and training
centres, and thus dominate the segment for computer-connected services such as
installation, implementation and customer training [28].
They are often ahead of foreign companies in the local market in areas like
company management, financial accounting software, banking software and
software for SMEs.

The ICT manufacturing industry could also come up with local solutions to
specific domestic needs. Some issues raised by the implementation of the
Acquis Communautaire, such as Universal Service and Internet access, may well
serve as catalysts for domestic R&D and procurement. This also could be
the basis for the build up of a domestic ICT manufacturing industry, oriented
towards export (i.e. exporting local solutions to similar transition and
developing economies).

To sum up: There are chances for (some) CCs to build up strong ICT
industries, however these will mainly be in the software sector. However, the
degree to which these will be strong enough to generate Tiger dynamics remains
very questionable.

6. Conclusions: Shifting the focus

If we link the analysis of the IS state-of-play in the CCs (Section 2.
The specific context of candidate countries) to the analysis of what makes
a potential "Tiger" (Section 3.
Building an IS: Lessons to be learnt from some EU15 experiences) we have
to conclude that there is no simple way forward. Moreover, the factors that
encouraged successful IS development in some EU15 countries and regions are
almost impossible to repeat in the CCs.

This leads us to some key conclusions, centred on the need for a shift of
focus from Information Society technologies to the development of a
Knowledge-based society for the CCs:

(a) Emulating or learning

While the example of some Western European countries could be seen as
showing the way forward, the simple emulation of these "best practices" is
seen as less and less relevant for CCs. In particular, Information Society
development should not be seen exclusively as targeted industrial development
around the ICT sector itself. While this was possible for the "Tiger"
countries of the EU15 during the last decade, today’s economic conditions —
the burst of the speculative bubble around the new economy, and the overall
downturn of the global economy — no longer seem to favour such scenarios.

Furthermore, in a strongly competitive and global industry, it is obvious
that not everybody can be a major player. Current market developments are
making the future of the ICT industry, even in EU15 countries or regions,
uncertain.

(b) Bread or broadband?

CCs today confront, and will continue to confront, difficult choices
between "Bread and/or broadband". Only policies offering a compromise solution
to this dilemma — by seeking growth and at the same time, attending to welfare
and quality of life issues — will be politically sustainable. Technology will
be considered as unaffordable unless it can be clearly seen as contributing to
the country’s well-being. The strong disparities that accompany the
Enlargement process at European level, and the potentially complex digital
divide that may derive from these disparities illustrates this dilemma. The
key question is how best to put IS policy strategies at the service of social
welfare development, while, at the same time, optimizing a country’s resources
and economic output.

(c) Doomed to compliance

The implementation of the Enlargement process carries financial and
political burdens. Compliance to the Acquis Communautaire offers the virtues
of effective harmonization, levelling the playing field so that the market
economy can prosper. For the Information Society, it has the additional
advantage of offering stability and technological neutrality. Nevertheless, it
also raises huge (financial) challenges, which might distract from other
priorities and could undermine many of the upcoming decisions. Maximising the
chances of converting Acquis compliance into opportunities may be the most
productive way forward.

(d) A need- and user-defined societal project

In this context, Information Society strategies are expected to be targeted
as a need-defined societal project. The development of a vision statement and
its translation into goals and means will be deeply rooted in a
context-related analysis of the conditions (strengths and weaknesses) of a
country or a region. Considerable variations in these conditions and needs,
both between the CCs themselves, and with EU15 countries, are expected. This
will continue to be the case even when the CCS are subject to the rules of the
Single Market and the Acquis Communautaire after joining the EU.

Information Society strategies should not be reduced to the exclusive
creation of, or support to, ICT industry clusters. Though an industrial policy
— focused on services rather than manufacturing — is still necessary, this
should complement a broader strategy encompassing targets such as the general
modernisation of existing economic strengths, or education, social welfare and
governance. There is also a need to co-ordinate and ensure consistency between
ICT policy strategies and education, employment, administration policy
strategies, and development plans at different national and regional
levels.

Such strategies must be driven, from their conception to their
implementation, by the needs of ICT users, be they corporate or civil. EU15
experience has taught that institutional settings must be innovative enough to
allow these strategies to develop and that, depending on each specific
context, there is a role to play for a variety of actors from national
politicians, industrialists, unions, to local NGOs.

(e) Targeting the knowledge-based society

Information Society strategies should be integrated into the broader
development of a knowledge-based society. Thus ICTs would be seen much more as
enablers for economic, political, social and intellectual growth than goals in
themselves.

The concept of a knowledge-based society is still under debate and it has
also been contaminated by the rhetoric of "new economy" and its subsequent
downturn. It offers, nonetheless, a challenging shift of focus for debate,
which, once matured, could be enshrined in pragmatic down-to-earth decisions
and actions. For example, from an economic perspective, the Knowledge-based
Society concept allows us to strike the right (and evolving) balance between
cost-based competition (low wages, incentives, low added value activities) and
knowledge-based competition (high qualifications, R&D, design and high end
and upstream activities). It would also allow us to balance the use of
knowledge as a competitive advantage (for the few) with its use as a common
resource to be for the benefit of all.

About the Authors

Marc Bogdanowicz has a Social Sciences background. Before joining
IPTS in April 2000, he worked as a senior researcher in two successive
university departments with continuous participation in European activities,
networks and observatories. Since 2001, Marc Bogdanowicz coordinates an "ICT
and Enlargement" cluster of research activities as part of the IPTS
prospective research actions on ICT (http://fiste.jrc.es/).
Direct comments
about this paper to [email-masked] and [email-masked].

J.C. Burgelman is project leader at the ICT unit of the JRC-IPTS,
(on leave from his position as professor of communication technology policy at
the Free University of Brussels). He has degrees in social sciences (BA, PhD)
and in science and technology policy (MA) from the Free University of
Brussels. He directed at the VUB the research centre Studies on Media,
Information and Telecommunications which is a centre of excellence in Belgian
Research.

His main research activities concern the macro sociological (welfare state)
and economic impacts (knowledge based economy) of information society
technologies in relation to technological foresight (convergence of platforms,
innovation dynamics etc.) and innovation policies.

His latest books (as editor) are Beyond competition: Broadening the
scope of telecommunication policy (Brussels); Communication,
citizenship and social policy: Rethinking the limits of the welfare state
(Boulder), and E-merging media (forthcoming, Berlin).

Clara Centeno has degrees in Telecommunications Engineering and
Business Administration. She worked for 13 years in electronic payments
business, systems, security, technology and regulatory aspects across Europe,
providing independent management advice as well as solutions to financial
institutions and national and international payment service providers. Her
work largely focused on new technology areas — namely debit, credit and
electronic purse payment tools, smart cards, Pay-iTV, e-commerce, mobile,
multi-application platforms and fraud prediction and detection. Since 2001,
she has been working at IPTS carrying out prospective research on ICT policy
related areas, such as Internet payments, security and consumer trust, PKI and
digital signatures, Internet banking, cyber-security (including skills and
training needs, the future of identity, identity management systems, security
and privacy balance), and foresight on Information Society technologies in the
enlarged EU.

Elisaveta Gourova has degrees in Electronics and Automatics
Engineering (MSc) and Electrical Engineering (PhD) from the Technical
University of Sofia. She formed part of the IPTS-JRC team working on the
Enlargement (Futures) Project from 2000 to 2003. During this time, she made a
considerable contribution to research on Information Society development in
the candidate countries. She co-authored panel reports on information and
communication technologies and on technology, knowledge and learning. She also
wrote a report providing insight into the skills of professionals and the job
availability in the ICT sector in the candidate countries.

Gérard Carat holds an MBA from ENST (Ecole Nationale Superieure des
Télécommunications, France), an MA in American Literature, and a BA in
History. Before joining the ICT Unit at IPTS in 1998, he worked at DG
Information Society (part of the European Commission) in the team of the
Advisor to the Director General on Economic and Strategy Aspects, Analysis and
Forecasts, where he focused on market analysis of the telecoms and multimedia
sector. Before this, he worked as a consultant (1993-1995) and with British
Telecom (1992).

Acknowledgements

List of experts that contributed to the research [29]:

Ms. Effie Amanatidou, Atlantis Consulting S.A., Greece

Mr. Attila Bartha, ICEG European Centre, Hungary

Mr. Jaro Berce, Government Office for EU Affairs, State
Undersecretary, Slovenia

Mr. Andries Brandsma, European Commission, IPTS, TECS Unit

Ms. Jennifer Cassingena Harper, Malta Council for Science and
Technology, Malta

Mr. Antanas Cenys, Vilnius Technical University, Information Systems
Department, Lithuania

Mr. Vladimir Cermak, EEIP, Czech Republic

Mr. Bernard Clements, European Commission, IPTS, ICT Unit

Ms. Dinka Dinkova, ARC Fund, Program Director, Bulgaria

Mr. Tibor Dory, European Commission, IPTS, Futures Project

Mr. Peter Druga, PD Consulting, Slovakia

Mr. Theo Dunnewijk, Merit-Infonomics, Netherlands

Ms. Umit Efendioglu, International Labour Office (ILO), Employment
Strategy Department

Mr. Gustavo Fahrenkrog, European Commission, IPTS, TECS Unit

Mr. Roman Galar, Technical University Wroclaw, Institute of
Engineering Cybernetics, Poland

Mrs. Katalin Gara-Nagy, European Commission, IPTS, EIPPCB

Mr. Blaz Golob, European Commission, IPTS, TECS Unit

Mr. Tero Hirvilammi, European Commission, Directorate General
Information Society

Ms. Renata Anna Jaksa, ICEG European Centre, Hungary

Mr. Tarmo Kalvet, Praxis Center for Policy Studies, Estonia

Mr. Martin Kenney, Department of Human and Community development,
UCLA, U.S.

Mr. Jan Kozlowski, European Commission, IPTS, TECS Unit

Mr. Terry Landers, CIRCA Group Europe Ltd., Ireland

Mr. Jeremy Millard, Danish Technological Institute, Denmark

Ms. Rukiye Ozcivelek, Tubitak Bilten, Turkey

Mr. Adrian Pascu, Ministry of Research and Education, Romania

Mrs. Corina Pascu, European Commission, IPTS, ICT Unit

Ms. Lidia Pola, European Commission — DG Employment

Ms. Klara Toth, Toth & Partner Consulting Ltd, Hungary

Mr. Ilkka Tuomi, European Commission, IPTS, ICT Unit

Ms. Petra Wagner, ARC, Austria

Mr. Arnd Weber, Forschungszentrum Karlsruhe, ITAS, Germany

Dr. Uta Wehn de Montalvo, TNO-STB, Netherlands

Mr. Haluk Zontul, Tubitak Bilten, Turkey

The authors of this article do work at the Institute for Prospective
Technological Studies of the Joint Research Centre Directorate General of the
European Commission. The views expressed in this article are the authors’ and
do not necessarily reflect those of the European Commission.

Notes

1. At the end of 2002, negotiations were concluded with
Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,
Slovak Republic and Slovenia. After ratification these countries will join the
EU on 1 May 2004. Detailed roadmaps have been agreed for Bulgaria and Romania,
which offer them the perspective of membership from 2007 and the prospect has
been established of starting Turkey’s accession negotiations without delay
after December 2004, if it fulfils the Copenhagen political criteria.

2. This section is mainly based upon: Gourova, Burgelman,
Bogdanowicz and Herrmann, 2001; Bogdanowicz, Fahrenkrog and Golob, 2002;
Burgelman, Gourova and Bogdanowicz, 2002; Bogdanowicz, 2003; and, Burgelman,
Gourova and Bogdanowicz, 2003.

3. This quite holistic approach was first introduced by
Mansell and Wehn (editors), 1998.

4. Data from surveys carried out by Baltic Media Facts
Ltd., accessible at http://www.bmf.ee/.

5. Data from OECD accessible at http://www.oecd.org/dsti/sti/it/cm.

6. Regions are based on the European Nomenclature of
Statistical Territorial Units (NUTS). Regional borders are determined by the
different sizes of countries and administrative divisions, which developed in
the course of history. As a result, the regional units may differ in area and
population.

7. Such as for example above 50 percent unemployment
rates among the 15-24 years old.

8. With the strong exception of Turkey and slightly
better figures for Malta.

9. Data from World Development Indicators, accessible at
http://www.worldbank.org/data/wdi/.

10. This issue is particularly true for the 10 Central
and Eastern European countries going through the transformation of their
economy to a market economy.

11. An argument developed for example in "Analysis of
the Bulgarian Technology Development" (2001), Working Paper, p. 110, http://www.ced.bg/.

12. An argument developed for example in Tukisa (1999),
"An important anniversary for the University of Latvia’s Mathematics and
Informatics Institute," Baltic IT Review, volume 15, p. 11.

13. This section is mainly based on the case studies
developed in Amanatidou and Damvakeraki, 2003; Landers, 2003; Nauwelaers and
Wintjes, 2003; Wagner, Dachs and Ananos, 2003; Weber, 2003; and their
Synthesis in: Bogdanowicz, Burgelman, Dunnewijk, Wintjes, Nauwelaerts, Weber,
Dachs, Wagner, Ananos, Damvakeraki, Amanatidou and Landers, 2003.

14. The concept of "Tiger" countries was originally
coined in earlier decades with the observable rapid development of a series of
Asian countries such as Taiwan and South Korea. Interesting enough, the model
of development here already was largely based on the strength of a
manufacturing industry (automotive, consumer electronics, etc.). The word has
been used again, in particular when referring to Ireland as the "Celtic Tiger"
in: Ferreira and Vanhoudt, 2002. Catching the Celtic tiger by its tail:
Unveiling the causes behind the growth success story. EIB Sector Papers.
European Investment Bank. Draft.

15. These brief descriptions are based on executive
summaries written by the authors of the cases studies and published in the
Tigers Synthesis Report (See References at the end of this report): For
Austria, Petra Wagner, Bernhard Dachs and Mar Ananos from ARCS; for Dresden,
Arnd Weber from Forschungszentrum. Karlsruhe. The full case studies are also
available.

16. The literature on regional innovation clusters shows
that too much or too little competition between companies in a cluster may
prevent growth of the cluster as a whole, due to the result of too much or too
little diversity. The same holds for co-operation. See Cowan and Wintjes
(1999) "Addressing the Creation, Operation and Exploitation of Localised
Technological Change". Chapter 4.2 in: "Industrial District and Localized
Technological Knowledge", Final Report to the European Union, DG XII. With
respect to the role of cooperation and partnership in such network or cluster
development we also refer to Granovetters’ statement on "the strength of weak
ties", see Granovetter (1985) "Economic action and social structure: The
problem of embeddedness," American Journal of Sociology, volume 91,
number 3, pp. 481-510.

17. "Infoculture" is approximated in the case studies as
the will and capacity of a population to spend time on rather symbolic
activities such as reading and writing, cultural heritage, etc.

18. Some case studies mention the confrontation of those
two types — or pedagogic methods — of education: "Yet Austria’s education
system is also associated with a conservative academic tradition which is more
"answer" — than "question"-oriented (...). This implies that it does not
broadly and proactively promote creativity and/or research skills."

19. This section is mainly based on: Bogdanowicz (2003)
The future of the ICT manufacturing industry in candidate countries.
IPTS Internal Working Paper. IPTS, Sevilla, Spain.

20. Booz-Allen & Hamilton, 2000, p. 4.

21. Source of data: Reeds Electronics, 2002. Calculation
IPTS. Countries are ranked by increasing production value. Data is processed
for eight of the 13 candidate countries. Those eight countries represent
approximately 95% of the population and of the GDP of the 13 candidate
countries. Complementary data, mainly for the case of Estonia, would be
valuable but should not transform radically the observed trends. Beyond 1998,
1999 data and forecasts on 2000 and 2001 confirm also the overall trends.

22. The size of ones’ country total economy impacts
potentially these measurements. This bias simply underlines the strong
positions of smaller countries, such as Hungary or the Czech Republic.

23. Gross Domestic Expenditure on R&D (GERD) is on
average 0.84% of GDP in candidate countries as compared to 1.93 in EU15.
Hungary, Poland and Turkey show even lower shares ranking from 0.6 (TK) to 0.8
(HU). Only the Czech Republic shows a 1.33% GERD (Data 2000).

24. Those decisions translate in observable
re-investment and reallocation decisions in Asian countries, in particular
China and/or investment in Consumer Electronics assembling.

25. Such as: Center for International Development, 2002.
Network Readiness Index. Harvard University. U.S.; or the Brainbench, 2001.
Global IT IQ Report. Brainbench. U.S. (http://www.brainbench.com/).

26. CEEBIC, http://www.mac.doc.gov/eebic/countryr/estonia/market/EstTeleServices.htm.

27. Ernst & Young, "Opportunities for investment and
co-operation in the IT Sector in Latvia: A study of the IT Services Sector,"
Baltic IT Review (1999), p. 15.

28. Weber et al., "The Wider Picture: Enlargement and
Cohesion in Europe," Futures project Series No.15, IPTS, 1999.

29. The subject of this research — the IS in candidate
countries — received up till now little or no academic attention. Also the
most basic data on the ICT sector in the candidate countries are missing and
what exists (from official or consultancy sources) raises serious heuristic
problems with regard to comparability, accuracy and reliability. We therefore
used very much what our networks of 'local' researchers and experts gave us —
networks the IPTS has been building since 1999. More in particular we relied
very much on a process of validation which is specific for much of IPTS work
and which is a result of its mission: Giving scientific independent policy
support to the European Commission. This validation is done by bringing
together key experts on the subject and from the candidate countries,
confronting them with our research and achieving a consensus. Everything in
this article has therefore been through this process. The list above is made
out of the experts having participated directly to the discussions rooting the
elaboration of this article. Several other feedback loops, organised in
parallel for each of the discrete research reports, have mobilized possibly
several hundred specialised experts in the various domains that have been
discussed above.

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Editorial history

Paper received 15 September 2003; revised 18 September 2003; accepted 22
September 2003.

Copyright ©2003, First
Monday

Copyright ©2003, Marc
Bogdanowicz, Jean-Claude Burgelman, Clara Centeno, Elisaveta Gourova, and
Gérard Carat

Factors of regional/national success in Information Society developments:
Information Society strategies for candidate countries by Marc Bogdanowicz,
Jean-Claude Burgelman, Clara Centeno, Elisaveta Gourova, and Gérard
Carat
First Monday, volume 8, number 10 (October 2003),
URL:
http://firstmonday.org/issues/issue8_10/bogdanowicz/index.html