Riga 3rd June 2009

Is there a case for a Latvian version of the Obama broadband package?

Alf Vanags

Riga 3rd June 2009

The facts (1)

• Latvia is in deep recession

• Infrastructure spending is classical approach to boost demand and achieve useful improvements

• In Latvia we have programme improve heat insulation

Riga 3rd June 2009

The facts (2)

• Obama is spending 37 billion USD on digital related infrastructure

• UK: Digital Britain initiative

• France: France Numerique 2012

• What is the case for a Latvian programme?

Riga 3rd June 2009

The facts (3)

• Latvia has low productivity in many sectors

• Micro-level policy should be aimed at increasing productivity

• Arguably, LV policy of prioritising sectors is wrong

• Broadband development offers horizontal policy

Riga 3rd June 2009

Productivity in manufacturing relative to EU-27

0 50 100 150 200 250 300

ROBGLTLVEEPTPLSKCZCY

SIHUGRIT

DKFRSEES

UKDELUAT

FINLBEIE

Riga 3rd June 2009

Productivity in services relative to EU-27

0 50 100 150 200

LVLTEESKCZHUCY

DSIFI

DENLGRIT

FRBEIE

LU

Riga 3rd June 2009

0 20 40 60 80 100 120 140 160

CZLVSKSI

NLD

LTEEFIH

DEIT

LUFRGR

CIE

Productivity in real estate, renting and business activities in 2007, % of

EU-27 average

Riga 3rd June 2009

Productivity in financial intermediation sector in 2007, % of EU-27 average

0 50 100 150 200 250

HUCYLTDESI

CZEESKDKFRLVFI

NLGRIT

BEIE

LU

Riga 3rd June 2009

Studies on productivity impact of broadband

• Brookings in US

• Fornefeld, M, Delaunay G, and Elixmann D (2008) The impact of broadband on growth and productivity A study for the EU

• Composite indicators:– Infrastructure (13 indicators)– Readiness (7 indicators)– Use (14 indicators)

Riga 3rd June 2009

Broadband readinessIT skills, innovation, home equipment

Use of on-line servicesE-government, e-commerce, other

Economic impactGDP, productivity, employment

Broadband infrastructurePenetration, coverage, bandwidth

Theorising the economic impact of broadband development

Riga 3rd June 2009

Relative role of infrastructure and readiness

• 66% of change in use explained by change in infrastructure

• 34% explained by readiness

Riga 3rd June 2009

Development of broadband by country• DFE use cluster analysis to define 4 country

groups• Advanced knowledge societies Austria, Belgium,

Denmark, Finland, Luxembourg, the Netherlands, and Sweden.

• Large industrial countries: France, Germany, Italy, Spain and the UK.

• Quickly developing: Ireland, Czech Republic, Estonia, Hungary, Malta, Lithuania, Portugal and Slovenia..

• Less developed broadband: Bulgaria, Greece, Cyprus, Latvia, Poland, Romania, and Slovakia.

Riga 3rd June 2009

Broadband penetration rate: number of broadband access lines per 100 inhabitants

2002

2003

2004

2005

2006

2007

2008

EU-27 : : : : : 18.2 21.7

Denmark 7.4 10.4 15.6 22.0 29.6 37.2 37.4

Estonia : : 7.6 11.1 16.6 20.0 23.6

Latvia : : 1.5 3.7 6.8 11.6 16.3

Lithuania : : 2.5 5.0 8.4 12.7 16.1

Slovakia : : 0.4 1.5 4.0 6.9 9.6

Finland 3.0 6.6 11.0 18.7 24.9 28.8 30.7

Sweden 4.6 8.6 12.1 17.1 22.9 28.3 32.5

United Kingdom 1.6 3.7 7.4 13.5 19.2 23.8 27.5

Riga 3rd June 2009

% of households with broadband connection

2003 2004 2005 2006 2007 2008

EU-27 : 15 23 30 42 49

Denmark 25 36 51 63 70 74

Estonia : 20 30 37 48 54

Latvia : 5 14 23 32 40

Lithuania 2 4 12 19 34 43

Finland 12 21 36 53 63 66

Sweden : : 40 51 67 71

United Kingdom

11 16 32 44 57 62

Iceland : 45 63 72 76 83

United States

20 : : 55 :

Riga 3rd June 2009

% of enterprises with broadband connection

2003 2004 2005 2006 2007 2008

EU-27 : 46 62 73 77 81

Denmark 69 80 82 83 80 80

Estonia : 68 67 76 78 88

Latvia : 45 48 59 57 62

Lithuania : 50 57 57 53 56

Luxembourg 39 48 64 76 81 87

Poland : 28 43 46 53 59

Romania : 7 : 31 37 44

Finland 65 71 81 89 91 92

Sweden 62 : 83 89 87 89

United Kingdom 27 50 65 77 78 87

Iceland 20 : : 95 : 99

Riga 3rd June 2009

% of enterprises having received orders on-line

in previous 12 months

2003 2004 2005 2006 2007 2008

EU-27 : 13 12 14 15 16

Denmark 18 25 32 34 33 20

Estonia : 8 8 14 7 11

Latvia : : 1 2 2 6

Lithuania : 5 6 13 14 22

Portugal 3 6 9 7 9 19

Romania : : : 2 3 3

Finland 18 17 17 14 15 :

Sweden 13 20 23 24 27 19

United Kingdom 18 29 25 30 29 32

Iceland 12 : : 22 : 21

Norway 13 13 26 28 32 30

Riga 3rd June 2009

% of households with access to internet by regions of Latvia

2004 2005 2006 2007 2008

LATVIA 14.7 30.5 42.2 50.5 52.8

Riga region 21.2 42.3 52.6 60.4 60.4

Pieriga region 10 30.4 47.5 59.5 57.8

Vidzeme region 18.8 26.7 37.4 ... 43.6

Kurzeme region 13.4 23.8 41.6 48.1 52.8

Zemgale region 12.3 19.4 33.8 48.4 50.3

Latgale region 6 21.4 24.1 32.3 39.5

Riga 3rd June 2009

Possible programme

• Use the opportunity of the recession to create a 21st century digital infrastructure

• Increase broadband infrastructure, readiness, use to EU average levels or better

• eParvalde at RAPLM could be organising institution

• Finance – structural funds +public private parnership

Riga 3rd June 2009

Economic impact

• No Latvian research

• Cornwall programme: increase in SME broadband penetration fromless than 1% to 47% resulted in more than 10% increase in productivity in business services.