BCG and Telenor: Internet boosts economic growth and social welfare

A new study demonstrates that increased adoption of Internet can accelerate business productivity, thereby generating income, jobs and government revenues in emerging economies.

A 10 percentage point increase in Internet penetration could increase GDP by 1 to 2.5 percent, increase new business activities by approximately 1 percent, and boost total government revenues in some countries by as much as 8 to 9 percent.

These are some of the key findings of a new study conducted by the Boston Consulting Group (BCG) and Telenor Group, which analyses the social and economic impact of Internet in emerging economies. The analysis was conducted in Bangladesh, Thailand, and Serbia, covering three different stages of market maturity in the Telenor Group markets.

Internet an engine for growth

“This clearly shows that emerging economies have a lot to gain from the Internet, both economically and socially,” says Jon Fredrik Baksaas (photo), President & CEO, Telenor Group. We are expecting strong Internet growth in our markets in the years to come, and hope that this information will help emphasise the important ways in which the net can improve the social and economic conditions of a country,” says Baksaas.

The majority of the economic contribution from the Internet will come from the increased productivity that users enjoy across business sectors. The productivity benefits of Internet usage by businesses in emerging economies are expected to increase over time, driven by network externalities as a broader part of society becomes connected.

Baksaas launched the study at ITU Telecom World 2009 in Geneva this week. The event attracts top executives and all stakeholders from the global telecommunication and information communication sector.

Important role in rural development

The study also found that the Internet will generate widespread social benefits, for instance in critical areas like healthcare and education. By serving as an alternative to traditional infrastructure as e.g roads, the Internet will play a particularly important role in rural development. This can increase and diversify income, increase access to information and essential services, such as banking and government, and enhance lifestyle and entertainment options for people regardless of whether they are in urban or rural areas.

Growth driven by wireless access

In most emerging economies, the limitations of the fixed line infrastructure pose a challenge to continued Internet growth. Bangladesh, Thailand and Serbia are no exception.

“In view of the fixed line constraints in these countries, the next wave of Internet growth is likely to be driven by wireless access technologies,” says Knut Haanaes, Managing Partner of BCG in Oslo, who led the analysis.  “Although the download speeds are limited relative to fixed line technologies, wireless compensates for this with its lower construction costs and shorter timeline for rollout,” Haanaes adds.

Source: Telenor

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