Confronting the Crisis

ICT Stimulus Plans for Economic Growth. Second edition, October 2009

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This Report examines the scope for public financing and the role that the ICT sector and economic stimulus plans can play in regenerating economic growth and promoting economic recovery. More than fifty countries have launched economic stimulus plans in an effort to boost aggregate demand (Insight 4) – the OECD records as many as 25 OECD countries as having announced stimulus plans, while major emerging and transition countries including Brazil, Chile, China and the Russian Federation have also launched similar initiatives to stimulate their economies. Investments in ICT can play a strong role in generating long-term economic growth, as they offer strong multiplier effects in returns on investment, strong externalities and reduced economic leakages (Section 3.1). These strong externalities to ICT infrastructure suggest that the social returns on investment in ICTs are likely to exceed the private returns significantly, implying that private sector activity alone is unlikely to generate socially optimal levels of investment.



Conclusions: Investing in the Future

The current crisis has revived major debates in economics about the role of government in infrastructure investment, the meaning of Keynesian demand management in a globalized era, and whether government investment ‘crowds out’ private sector investment. This Report has explored the relevance of these debates to the ICT industry, as it makes the transition to IP-based networks. The financial crisis has cut squarely across operators’ plans to upgrade their networks and roll out NGNs. Operators face greater challenges in accessing capital, more expensive financing and great uncertainty about future regulation and the revenue streams associated with NGNs. In the difficult economic climate, there have been calls for greater government involvement in the provision of telecommunications, reversing the trend towards greater private sector participation over the last three decades.


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