ECONOMY

Tackling the techno-lag

If convergence with EU living standards is the major goal of Greek economic policy in the medium term, then Greece should try to tackle «digital illiteracy,» which afflicts many of its citizens, in a more systematic and effective way and encourage the use of technology and the Internet to boost productivity. According to independent estimates, Greek per capita income – that is, GDP (gross domestic product) divided by population – has been hovering at under 67 percent of the EU-15 average in the last 30 years. In reality, this may be smaller since the underground economy constitutes a bigger portion of the GDP in Greece than in most other EU-15 countries. Still, the income gap is large enough to warrant many years, some say decades, of superior Greek labor productivity growth to boost incomes to the point of catching up with the EU-15 average. However, productivity cannot be sizable and/or sustained in the medium to long term to ensure fast convergence of living standards if Greece continues to lag behind its EU-15 partners in simple things such as Internet access and awareness and broadband telecommunications. It is noted that broadband refers to a type of data transmission in which a single medium, such as a fiberoptic cable or an electrical wire, can carry several channels at once at high speed as opposed to the typical transmission which allows only one signal at a time at much lower speed. Ignorance In a recent Citigroup report looking at the demographics in eight European telecommunications markets, Greece was cited as the country with the least technological awareness. Some 41 percent of the population, the highest among the countries under consideration, said it did not have Internet access because it had no idea of what it was all about. The youngsters, aged 15 to 24, which are considered in general to be the most receptive to new technologies, accounted for 12.9 percent of the total population but this portion has been shrinking at a cumulative average rate of 2.5 percent in the last few years. The country also appears to have one of the lowest PC (personal computer) penetration rates in Europe. During the 1994-2004 period, the penetration of PCs in Greek households increased by about 9 percent annually on average. It is obvious that the low penetration of PCs constitutes a hurdle to the expansion of Internet and broadband telecommunications in the country. The penetration of Internet increased by about 22.3 percent on average during the same period according to the same report but started from a very low level. As far as broadband is concerned – namely ADSL, which allows the transmission of voice and data at high speed, reaching 10,000 Kbit per second – the situation is even more miserable. OTE, the telecoms incumbent, announced in early August that its ADSL customers approached 100,000 at the time. Even if one takes into consideration the other ADSL providers, it is reasonable to say that less than 3 percent of the local population subscribes to these services at this point when it exceeds 22 percent in other European countries with Denmark, Norway, Switzerland and the Netherlands leading the pack and France coming along strong from behind. The penetration of PCs, Internet and broadband services is linked to productivity; therefore Greece’s inability to raise its output per capita to the average EU-15 level is hampered by its shortcomings in the technological arena. To this extent, the country needs to set out a national plan to tackle this problem so as to speed up the convergence process. For starters, the introduction of advanced technology in primary schools and the commencement of teacher training programs should be high on the agenda. Of course, the government has already announced its intention to introduce PCs in all schools but historical experience shows it takes more than just a declaration to make things happen in schools or other places where digital illiteracy among staff is widespread and resistance high at the beginning. So, this may require the personal involvement of high-level government figures, perhaps the prime minister, to move things forward. In addition, tax incentives for the purchase of PCs and related hardware and software should be put in place to encourage more households and businesses to buy them. As far as broadband services are concerned, everybody in telecommunications knows this is the future of the industry. To this extent, the state as the major shareholder of OTE should encourage the company to bring its pricing for ADSL packages much closer to the average EU-15 levels than it is today to boost demand for these services. Of course, there is a link between the number of subscribers and the pricing of a service and perhaps Greece is ahead of other EU countries if one compares the prices of Greek ADSL packages to others at the same year after the official commercial launch. Nevertheless, Greek households and businesses should not be penalized for the delay in the liberalization of the Greek telecommunications market compared to other EU countries. This means ADSL prices should soon converge with EU-15 norms to help encourage use of the Internet. Of course, ADSL pricing is a major issue but not the only one on the way to bringing Greece’s Internet and broadband penetration to EU levels to help boost productivity and incomes. The state should encourage private firms in various ways to help improve the content of educational and other programs and services they offer. More than anything else, the state should first give the example by providing generous incentives to companies and individuals to use the Internet in their communication and transactions with the wider public sector, including utilities. The benefits from such a success would more than surpass the short-term costs of things such as necessary generous tax incentives. All in all, the government has a major role to play to help attain its major medium-term policy goal of lifting Greek per capita income to average EU-15 levels. This means it should tackle digital illiteracy at the school level, make e-government a main priority, provide a generous set of incentives to household and companies to buy PCs and make the Internet and broadband more accessible and affordable as soon as possible. Greece cannot afford to be a laggard in technology issues if it aspires to join the rich club of its EU partners in a decade or so. Setting a binding timetable for achieving feasible, although demanding, PC, Internet and broadband penetration levels is a way to do so.