Policy

Emerging Markets Rise in Tech Readiness


Here's a quick quiz: Which country has the most mobile-phone connections in the world? According to the International Telecommunications Union, China is by far the largest, with an estimated 641 million mobile subscribers as of the end of 2008—more than twice the number five years earlier and easily double the market in the U.S.

China's growing telecom sector is just one example of how emerging economies are taking on a larger role in the technology industry. The latest annual Global Information Technology Report, released on Mar. 25 by the World Economic Forum (WEF) in Geneva, finds that such countries as India, Malaysia, and Vietnam are among the fastest-growing centers for IT anywhere in the world.

The WEF ranks countries on such factors as public- and private-sector use of technology, consumer access to the latest gadgets, and the quality of infrastructure, such as 3G mobile networks and broadband connectivity. While Western countries—especially the Nordic nations—still dominate the top rungs, the developing world is rising fast.

"Europe and North America will have to innovate to stay ahead," says Soumitra Dutta, professor of information systems at French business school Insead, who co-authored the report. "It won't be long before someone like China or India breaks into the top 20."

Leapfrogging Development

The emerging giants' success isn't due to luck, of course. From Beijing to Bombay, policymakers have spent billions of dollars to upgrade or subsidize development of domestic phone lines and Internet connections to give local businesses an edge. That has allowed certain regions, such as financial center Shanghai or outsourcing capital Bangalore, to match rival cities in developed countries. The fast-declining cost of technology, particularly mobile phones and other computing devices, also has allowed many countries to leapfrog generations of IT. With access to the latest technology, local companies such as Chinese search-engine giant Baidu can now compete with larger foreign businesses, which are desperate to break into fast-growing developing economies.

"Mandarin is already one of the largest languages used on the Internet," says Irene Mia, a senior economist at the WEF. "China is emerging as a superpower in the tech sector."

To be sure, the world's most networked countries are still largely in the West. The No. 1-ranked nation this year, for the first time, is Sweden, which enjoys a excellent tech infrastructure, strong education, and a beneficent business environment. All told, European countries grabbed 12 of the top 20 places.

The rest of the top include the U.S., which fell two places this year, to No. 5, due partly to a declining political environment, and No. 7-ranked Canada, which rose three places. Asian countries made a strong, showing too, topped by No. 2-ranked Singapore and including Hong Kong (No. 8), Taiwan (No. 11), and Korea (No. 15). Australia and New Zealand rank 16th and 19th, respectively.

IT Education as a Priority

The big news, though, is the continuing rise of emerging economies such as Vietnam. The Southeast Asian country, with a population of 82 million, finished 74th out of 75 countries in the WEF's first global information technology report in 2001. Since then, the government has offered tax incentives and other subsidies to entice foreign tech companies to invest. Local policymakers also have prioritized IT education and spent billions to upgrade the country's broadband and mobile phone infrastructure. That explains why Vietnam jumped 16 spots, to No. 54 (out of 133 countries), in this year's WEF ranking—the biggest of any country.

"It's a dynamic economy with a bright, enterprising culture," says Insead's Dutta, adding that Vietnam also benefited from its close proximity to the booming Chinese economy.

Not every developing country is making progress in IT. Compared with the other so-called BRIC countries (Brazil, Russia, India, and China), Russia, ranked No. 80 in the 2010 report after dropping six spots since last year, is falling further behind. The WEF's Mia says the country's leadership has focused on developing Russia's hydrocarbon industry over its tech sector. "Regulation remains weak, and support for companies is poor," she says. "That's widening the gap between Russia and the other BRICs."

For a look at the top 10 countries and 10 other countries of interest, please see our slide show.

For a look at last year's ranking, see our report from 2009.

Scott is a correspondent in Bloomberg Businessweek's London bureau.

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