The financial crisis has forced governments in Central and Eastern
Europe (CEE) to make tough decisions about their information and
communications technology (ICT) spending priorities. According to a new
Economist Intelligence Unit study, To invest or not to invest: ICT
spending priorities in crisis-hit Central and Eastern Europe, sponsored
by Oracle, this is causing some uncertainty over whether the region can
maintain its lead over other emerging markets in international
e-readiness rankings.
Few CEE governments can afford to fund large ICT development projects,
and instead many are turning to programmes with lower up-front
investment requirements and shorter-term paybacks, such as improvements
in the way government agencies manage their information flows.
The study analyses the impact of the economic downturn on government
ICT investments in 17 CEE countries. It study builds on desk research
into countries’ ICT policies and a series of interviews with
government officials, NGOs and other ICT experts.
“The report reveals a divide between the handful of governments that
are able to continue working towards long-term ICT plans, and the
majority that are forced to cut back due to a combination of political
instability and economic difficulties,” says Delia Meth-Cohn,
editorial director for Continental Europe, Middle East and Africa for
the Economist Intelligence Unit. She adds, however, that in a few cases,
such as Estonia, strong public support for digitalisation can trump both
financial and political turbulence and cause governments to press
forward with ICT strategies.
“In recent years the region has made great strides in digital
development,” says Alfonso Di Ianni, Oracle’s senior vice president
for Eastern Europe and the CIS. "This paper shows that continued
investment in ICT programmes can provide the dual benefit of achieving
significant cost savings and efficiencies now while creating a strong
foundation for renewed prosperity in future."
The key findings are:
● The economic downturn has reduced CEE governments’ formal ICT
spending. Unlike large countries including the US, the UK and China,
most CEE countries have been unable to afford massive stimulus spending
packages. Where CEE stimulus programmes exist, they are unlikely to
include significant ICT elements.
● But CEE countries are finding other ways to move digitalisation
projects forward. Activity throughout the region has shifted more to
projects that do not necessarily require new budgetary allocations.
Instead, governments are using existing budgets to introduce ICT
upgrades that do not require massive spending, such as improvements in
the way agencies function. Government e-administration projects could in
future provide a basis for other electronically based government
services.
● The focus is on e-administration projects with near-term
paybacks. In addition to not requiring formal new budget
allocations, such projects have the advantage of offering cost savings
in the near term, by reducing government paperwork. Several governments
are looking into issuing electronic ID cards to enable online access to
government services, which would cut paperwork and other administrative
costs.
● Universal, and particularly rural, internet access is an
important current focus. Although budget funds are currently scarce,
governments are not losing sight of the long-term goal of making digital
access available universally, including to citizens in remote areas. The
funding for such projects tends to come from European Union (EU)
regional development funds rather than from national budgets. EU funding
is currently focussed on rural broadband access in a number of CEE
countries.
● CEE governments’ ICT reactions to the financial crisis fall
into three categories:
Go full steam ahead. Countries pressing ahead with ICT strategies
despite difficult economic times are: Bulgaria, Croatia, Estonia,
Poland, Romania, Russia, Slovakia, Slovenia, Turkey
Change tack. Countries changing the direction of ICT programmes,
generally shifting emphasis from high-cost, long-term projects to
administratively oriented projects with shorter-term paybacks, are:
Czech Republic, Greece, Hungary, Latvia, Lithuania
Throw out the anchor and wait out the storm. Countries reacting to the
crisis by dramatically reducing ICT funding are: Albania, Bosnia and
Herzegovina, Ukraine
To invest or not to invest: ICT spending priorities in crisis-hit
Central and Eastern Europe is available free of charge at
www.eiu.com/sponsor/oracle/ict_spending_cee