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LONDON , January 9, 2008 – Rapid technological progress in developing countries has helped to raise incomes and reduce the share of people living in absolute poverty from 29 percent in 1990 to 18 percent in 2004. Despite these gains, the technology gap between rich and poor countries remains enormous, and the capacity of developing economies to adopt new technology remains weak, says Global Economic Prospects 2008.
“Technological progress increased 40 to 60 percent faster in developing countries than in rich countries between the early 1990s and early 2000s,” said Andrew Burns, Lead Economist and main author of the report. “Nevertheless, developing countries have a long way to go, given that the level of technology that they use is only one quarter of that employed in high-income countries.”
Subtitled “Technology Diffusion in the Developing World,” the World Bank report notes that recent progress reflects increased exposure to foreign technologies. As a share of GDP, high-tech imports and foreign direct investment levels have doubled since the early 1990s.
“Rising trade and investment contacts with high-income countries, often facilitated by migrant groups, have been central to technological progress in developing countries.” said Uri Dadush, Director, World Bank Development Prospects Group. “However, openness alone is not enough. To continue catching up, countries need to strengthen educational achievement, governance, basic infrastructures, and links to migrant groups.”
The report stresses that the weak diffusion of technology within countries holds back overall technological achievement in many countries. Thus, while major centers and leading firms in Brazil, India and China may operate close to the global technological frontier, most firms in these countries operate at less than a fifth of the top productivity level.
According to the report, improving capacity to absorb foreign technology is critical in low-income countries, as well as in those middle-income countries that have exploited low-wage comparative advantages rather than strengthened domestic competencies.
· Most developing countries participate minimally at the global technological frontier. Their rapid economic progress has been achieved by adapting and adopting already-existing technologies. This will likely persist, given the large technology divide.
· Technology now spreads much more quickly between countries. In the early 1900s, new technology took over 50 years to reach most countries; today it takes about 16 years.
· Technology tends to spread slowly within countries. Main cities and leading sectors use more sophisticated technologies than the rest of the economy. For example, the IT-enabled services sector in urban India employs world-class technologies, but less than 10 percent of the country’s rural households had telephone access in 2007.
· Use of some new technologies, such as mobile phones, has risen quickly. Nevertheless, some technologies have spread only slowly. Three-quarters of low-income countries have 15 or fewer personal computers per 1,000 people, and a quarter have fewer than five.
· Governments should strengthen domestic technology dissemination channels as a high priority. These include transport infrastructure and the capacity of applied R&D agencies to orient themselves to markets through improved outreach, testing, and marketing.
· Weak basic infrastructure systems limit the range of technologies that can be employed in many countries. Policies should ensure that critical enabling services such as roads and electricity are widely available, whether delivered by the private or public sector. In Sub-Saharan Africa, just 8 percent of the rural population has access to electricity.
· Ineffective or uneven access to quality education also restricts countries’ ability to exploit technologies. Even simple technologies can have big impacts. For example, relatively simple skills are needed to build rainwater collection systems, which improve access to clean drinking water and reduce infant mortality by lowering the incidence of diarrhea.