IMPACT OF INFORMATION COMMUNICATION TECHNOLOGY (ICT) ON THE REPUBLIC OF BENIN-ECONOMIC GROWTH AND DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Economies around the globe differ extremely regarding their rates of economic growth. The developed world steadily grows at high levels of national income. In some developing countries, e.g. Developing Asia, extraordinary high growth rates can be identified, in contrary to the rest - there is a widening economic divide. This disparity is not a result of a coincidence, but rather the consequence of several interacting factors, which are given by the economic and political environment. The economic situation depends on the capabilities of an economy to produce valuable products and services efficiently. The general literature suggests that the key to accelerate economic growth is the creation of more productive labour. Theoretically, the substantial source of the long-term growth rate of real per capita economic output is the increase of the rate of productivity growth that primarily arises from technological progress and innovation, knowledge and human capital accumulation, research and development activities (henceforth R&D), learning-by-doing processes, and spill over effects. However, the impact of these factors depends on the establishment of essential conditions that trigger processes for long-term growth, such as certain levels of physical and human capital, political rights and governmental regulations, competitive oriented market structures and appropriate infrastructure. The enormous variety of capabilities of Information and Communication Technologies (henceforth ICT) has revolutionized growth opportunities that lower the operation efforts needed for establishing the foundation for sustainable growth and enormously facilitate enhanced productivity improvements afterwards. As a result of the accelerated technological progress and permanent price declines of ICT since the mid-1990s, the last decade was marked by rapid diffusion of ICT throughout the world, especially all over the developed nations. ICT has gradually conquered many various parts of social life and economic processes, e.g. the mobile phone penetration rate averagely exceeds the 95 percent point and the average worker and household in the developed world features at least one personal computer with access to the Internet, of which a considerable share even uses broadband and wireless access. ICT’s potential has enforced the business world to substitute and modify conventional capital and labour. Though the concomitant slowdown in economic growth has hindered the euphoria, ICT investment and application have increased substantially in both developed and developing countries, but to lesser extent and lower level in developing regions, such as Latin America, Middle East, Africa and Eastern Europe. Nevertheless, due to the relative high ICT investment and use, economic processes and trade are more and more influenced by the creation, dissemination, accumulation, processing and application of information and knowledge. ICT’s multidimensional capabilities facilitate extensive innovations in products and processes, and thus lead to a more productive exploitation of capital and labour. ICT’s wide scattered application allows new business models and management practices, new products embedding ICT, easier expansion to global markets and ICT-enabled emergence of new markets. Moreover, the impact is even more far-reaching through spill over induced by ICT- based networking, and has been much increased by the Internet. Through the diffusion of ICT, transaction costs are reduced and facilitate more productive ways of interaction between businesses and division of labour worldwide. Furthermore, ICT allows an easier interchange of international innovators and dissemination of new technologies, and thus accelerates the invention and circulation of new ideas that in turn trigger further technological change. Due to these network effects the impact of ICT increasingly grows crossing the threshold of ICT uptake and becomes more important than ICT investment and production with regard to contribution to economic growth. However, the macroeconomic differences in developing countries give reason to assume that the impact channels of ICT do not affect in the same extent and pace like in the developed world due to missing preconditions. The prime challenge now is to understand how ICT should be deployed properly under the prevailing conditions in developing economies to benefit from ICT. Apparently, the developing countries only partly succeed to benefit from ICT’s potential to boost their economic growth and thus even the digital divide within the developing world is expanding. Many developing countries are still far away from having fully exploited the benefits of ICT. But even though they are lagging behind with regards to the size of the ICT sector, integration of ICT in the service and manufacturing sector and an appropriate ICT environment, they would have lower costs and fewer risk of making errors identified by experiments and research. They have the opportunity to look overseas and directly adopt state-of-the-art technologies and Best Practice strategies for business and regulation strategies. However, the research still confirms the huge potential of ICT in the developing world. But these countries face a major obstacle in accumulating capital for increasing their level of per capita economic output. Since ICT tends to be only complementary tool to existing practices, the developing world needs to attain a certain level of conventional capital and public infrastructure, e.g. education, health services, roads, rather to substitute them. They have to understand that ICT enhances the traditional infrastructure and implementation strategies must be accompanied by international openness, less regulated business environment, higher competition, security and maintained solid financial and regulation system. Investment in technology contributes to overall capital deepening. The greater use of technology may help firms reduce their costs, enhance their productivity and increase their overall efficiency, and thus raise economic growth. Moreover, greater use of information and communication technology may contribute to network effects, such as lower transaction costs, higher productivity of knowledge workers, and more rapid innovation, which will improve the overall efficiency of the economy (Moradi and Kebryaee, 2005).

1.2. STATEMENT OF PROBLEM

In Republic of Benin, provision of public infrastructure is grossly inadequate and poor. Necessary telecommunication services, as public infrastructure, needed for meaningful investment are lacking and, where found, are very costly. Teledensity in Republic of Benin is still very low.The introduction of the GSM in Republic of Benin was to expand the teledensity in the country and to make telephone services cheaper and accessible to the common person as it had been introduced in some African countries like South Africa, Ghana, and Nigeria among others. GSM is ICT based telecommunication that can contribute to the growth and development of any nation. These Telecommunication Networks have created significant effects on the gross domestic product (GDP) of Republic of Benin in terms of job creation, communication linkages, connectivity, security of lives, and reduced transport costs among other. Past studies on the developing economy have bothered on the challenges and roles of ICTs on economic growth (Carayamis and Popescu, 2005; Ndukwe, 2003, 2004; Igwe, 2005). Thus, this study examines the impact of ICT on the Republic of Benin economic growth and development.

1.3 AIMS OF THE STUDY

The major purpose of this study is to examine impact of ICT on the republic of Benin- economic growth. Other general objectives of the study are:

1. To examine the nature of ICT and the necessary technological infrastructure in Republic of Benin.

2. To identify ways by which ICT can contribute to economic growth and development of Republic of Benin.

3. To examine the impact of ICT on the Republic of Benin economic growth and development.

4. To examine ICT as a key driver of productivity growth.

5. To examine the relationship between ICT and economic growth and development of Republic of Benin.

6. To examine the factors limiting the use of ICT in all sectors of the Republic of Benin economy.

1.4 RESEARCH QUESTIONS

1. What is the nature of ICT and the necessary technological infrastructure in Republic of Benin?

2. What are the ways by which ICT can contribute to economic growth and development of Republic of Benin?

3. What are the impacts of ICT on the Republic of Benin economic growth and development?

4. To examine ICT as a key driver of productivity growth.

5. What is the relationship between ICT and economic growth and development of Republic of Benin?

6. What are the factors limiting the use of ICT in all sectors of the Republic of Benin economy?

1.5 RESEARCH HYPOTHESES

H01: There is no significant impact of ICT on the republic of Benin economic growth and development.

H02: There is no significant relationship between ICT and economic growth and development of Benin republic.

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1.  The outcome of this study will be a useful guide to the government of Republic of Benin, policy makers and the general public on how ICT can be used as a tool for economic growth and development of Republic of Benin.

2.  This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic

1.7    SCOPE OF THE STUDY 

The study is based impact of information communication technology (ICT) on the Republic of Benin-economic growth and development

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.