Vladimir Bessonov, Head of HSE Expert Institute's Laboratory for Studies of Inflation and Economic Growth, presented the following report at YevgenyYasin's seminar Economic Policy in Transition.
According to Bessonov, there is a gap between existing macroeconomic measurements and the new technological reality in Russia. While official data indicates an economic crisis,the reality may in fact be different since the 'new' economy (high-tech products and services) is largely ignored by conventional statistics.
'The widespread belief is that the Russian economy mainly produces raw materials and traditional products and services, and remains stuck at the industrial phase and "hooked" on oil, while the new, high-tech economy has a limited role and faces serious obstacles', says Bessonov. Thus, without the development of a new economy, Russia faces anunenviablefuture, even more so since advanced countriesare moving towards a new economy of high-tech products and services based on information and communication technology (ICT).
But, in fact, the ICT sector is evolving at a fast pace in Russia, too. 'There is evidence of the new economy all around us', says Vladimir Bessonov. Russia is ahead of the curve in the penetration of mobile phones. Broadband internet and digital TV are spreading rapidly all over the country. An impressive number of Russians own computers. Under these circumstances, is it really true that Russia is taking too long to develop its own high-tech industry and has yet to produce a noticeable effect on the overall Russian economy?
To answer this question, one has to look at the dynamics of high-tech production at constant prices, consider the upward or downward trends of these prices, and take into account various production factorsand performance data.
Table 1: The ICT sector share in the G8 economies (%, data collection year in brackets)
|
Country |
Share in GDP |
Share in employment |
|
United Kingdom |
12 (2005) |
7 (2004) |
|
Germany |
9 (2004) |
5 (2004) |
|
Italy |
9 (2004) |
5 (2004) |
|
Canada |
4 (2002/2003) |
4 (2005) |
|
Russia |
5 (2005) |
4 (2005) |
|
U.S. |
9 (2006) |
5 (2006) |
|
France |
11 (2004) |
7 (2004) |
|
Japan |
12 (2005) |
7 (2005) |
Source: The Global Information Society: a Statistical View. – UN, 2008. p. 71-72
The ICT share in developed economies is small, but nevertheless, it is two times higher than in Russia.
However, the sector's share in the GDP is a misleading indicator, Bessonovargues, since it is not sensitive to the difference between the high-tech industry’s dynamic growth, marked by a rapid increase in real output and an equally rapid drop in prices, and stagnation marked by unchanging levels of real output and stable prices.
'The first scenario is certainly true for developed economies, where double-digit growth rates of annual real outputare accompanied by an equally rapid decline in relative prices', he says.
The ICT industry (based on the telecom industry) is a structural sector of the economy, ie its development drives other sectors' growth. The author compares the effect of telecom development on today's economy to the effect of railways on the 19th-century economy or highways on the 20th-century economy. Moreover, the indirect impact of the 'new' sectors is noticeable in less developed economies as well as in countries with advanced ICT. The intensity of effect is determined not by the ICT sector advancement per se, but by whether the government's policies facilitate the spread of innovation, says Bessonov.
Russia lags behind more advanced countries when it comes to ICT development but looks good in comparison to other BRIC countries.
Table 2. Expenditures on ICT in the G7 and BRIC countries in 2007 (% of U.S. dollar equivalentat current prices)
|
Country |
Hardware |
Software |
IT Services |
Telecom |
|
United Kingdom |
15 |
11 |
28 |
46 |
|
Germany |
15 |
11 |
23 |
51 |
|
Italy |
12 |
8 |
18 |
61 |
|
Canada |
15 |
11 |
25 |
50 |
|
U.S. |
14 |
12 |
31 |
43 |
|
France |
15 |
10 |
29 |
46 |
|
Japan |
14 |
4 |
19 |
63 |
|
Brazil |
13 |
3 |
10 |
74 |
|
India |
15 |
3 |
10 |
72 |
|
China |
13 |
5 |
8 |
75 |
|
Russia |
16 |
6 |
8 |
70 |
Source: OECD Information Technology Outlook. - OECD, 2008. p. 53
In Russia, the advancement of fixed and mobile telephony –ie telecommunications – has been particularly rapidbut does not indicate a rapid development of ICT. According to experts, economies with more advanced ICTtend to have a lower share of telecom in the ICT sector. In Russia the pposite is true.
But increasing rates of spending on ICT gives Russia hope that it might eventually catch up with the world's most advanced countries. In 2003-2008, the growth of ICT expenditures in Russia totaled 25.9%, compared to 22% in China, and 23.9% and 30%, respectively, in Brazil and India. Spending growth rates are lower in more advanced countries, with 7.7% in the UK, 8.4% in Germany, 8.9% in Italy, 10.3% in Canada, 5.1% in the U.S., 8.3% in France, and 4.8% in Japan.
The high-tech sectors of the Russian economy are growing at much faster rates than those reported by traditional industries. However, high-tech appears to be a statistical blind spot in Russia.
For example, wireless communication grew six-fold in constant prices between 1995 and 2010, i.e. the average industry growth was 12.7% per year. The country's GDP at constant prices grew by only 73% over the same period, ie by 3.7% per year on average. The amount of communication services provided to the public increased seven-fold over the same fifteen years, i.e. by approximately 13.6% per year. However, the amount of paid services delivered to the public over the same period grew by only 71%. The communications sector showed growth even in the 1998 and 2008 crises.
At the same time, mobile tariffs have been falling. 'The expansion of mobile networks between 2003 and 2010 was accompanied by an overall 28% (4.6% per year)drop in prices', estimated Bessonov. Prices of other consumer products and services increased over the same period.
Mobile penetration was accompanied by a significant increase in employment, with new, highly skilled jobs created in the mobile communications sector. Mobile operators' assets also increased dramatically.
Data suggests that the telecomsector is growing much faster than the overall economy and is resisting the effects of the crisis. Service prices are going down in this rapidly growing sector, contributing to inflation control, and the sector's productivity is on the rise. Official statistics, however, fail to capture these developments, and telecom's contribution to the Russian economy is seriously underestimated as a result.
There are reasons behind the 'blindness' of the official statistics. For example, available statistical tools lack measurements (or terminology) to describe a high-tech economy.
The industry's dynamics are not captured. Data is limited to ICT output at current prices and ICT expenditures, but one cannot tell boom from stagnation just by looking at these numbers. Companies' public reports do not reveal the dynamics either but only provide accounting data. To complicate matters even more, ICT data isscattered over different statistical categories.
The fact that statistics use a mixof indicators, some of them relevant to the 'new' economy and others to the 'old', adds to the confusion – e.g.telecom is reported under the same category as conventional postal services. It is impossible to calculate aggregates from available statistics because access to certain statistical data is restricted by law, Bessonovadds.
Overall, the current statistical system in Russia has been designed for the industrial phase of economic development. 'Its methods are convenient for capturing data on steel production or potato crops', says Vladimir Bessonov. Using the current system, it is easy to keep statistics on things measured in natural units, e.g. in pieces or rubles, but difficult to measure products or services delivered at the end of a long technological chain.
The new economy requires new and more sophisticated measurements. Hedonic indexes have been used to account for rapid changes in product quality; they take into account an item's various characteristics as well as the pleasure derived from using it. Such indexes have been applied to computers and other gadgets, objects of art, and real estate.
Proxies may also be used to describe the vast and frequently updated nomenclature of 'new' products and services – such as microchips or software.
However, so far, without adequate statistics, the Russian government cannot fully understand the country's sources of economic growth, which negatively affects the quality of its decisions.