United Nations Conference on Trade and Development E-COMMERCE AND DEVELOPMENT REPORT 2005 UNITED NATIONS New York and Geneva, 2005 INFORMATION ECONOMY REPORT 2005 Note Symbols of United Nations documents are composed of capital letters with figures. Mention of such a symbol indicates a reference to a United Nations document. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Material in this publication may be freely quoted or reprinted, but full acknowledgement is requested, together with a reference to the document number. A copy of the publication containing the quotation or reprint should be sent to the UNCTAD secretariat at: Palais des Nations, CH-1211, Geneva 10, Switzerland. The English version of the full report and the English, French and Spanish versions of its Overview section are currently available on the Internet at the address indicated below. Versions in other languages will be posted as they become available. http://www.unctad.org/ecommerce/ UNITED NATIONS PUBLICATION Sales No. E.05.II.D.19 ISBN 92-1-112679-7 UNCTAD/SDTE/ECB/2005/1 Copyright © 2005, United Nations All rights reserved Foreword Information and communication technologies (ICTs) have the potential to profoundly change global trade, finance and production. By making businesses more competitive and economies more productive, and most of all by empowering people with knowledge, ICTs can support faster economic growth and thus strengthen the material basis for development. Our challenge is to ensure that this potential is used to generate real gains in the global struggle against poverty, disease and ignorance – and their offspring, fear, intolerance and war. This Information Economy Report 2005 is being published by the United Nations Conference on Trade and Development to coincide with the second phase of the World Summit on the Information Society, at which the international community is expected to agree on further steps to realize the full potential of ICTs. The Report highlights the extent to which developing countries are striving to close the gap that separates the “information haves and have-nots”. It also describes the enormous challenges the world still faces in key areas such as increasing access to the Internet and strengthening the security of the online environment. Most important, it shows that when there is awareness, political will and stakeholder involvement in national “e-strategies”, progress in the use of ICTs for development is already an exciting reality. New technologies and applications continue to emerge. Current technologies are maturing, and old ones are finding new uses. We must ensure that developing countries are not left further behind by all these dramatic changes, but can join in and benefit from them in their efforts to achieve the Millennium Development Goals. This Report is meant to contribute to that effort, and it is in that spirit that I commend its information, analysis and recommendations to participants in the Summit and to a wide global audience. Kofi A. Annan Secretary-General of the United Nations Acknowledgments The Information Economy Report 2005 was prepared under the overall direction of Peter Fröhler, Officer-in-Charge of UNCTAD’s Division for Services Infrastructure for Development and Trade Efficiency (SITE). It was written by a team led by Geneviève Féraud, Chief of the Electronic Commerce Branch, and consisting of the following UNCTAD staff members: Cécile Barayre, Dimo Calovski, Scarlett Fondeur Gil, Angel González Sanz, Muriel Guigue, Rouben Indjikian, Carlos Moreno, Marta Pérez Cusó and Susan Teltscher. Pilar Borque Fernández and Marie Kamara provided administrative support. Diego Oyarzun designed the cover and formatted the charts. The UNCTAD team acknowledges the contribution of Ian Walden, consultant. The team also wishes to thank the following individuals for the information, comments and feedback they provided regarding various aspects of the Report: Jean-François Baylocq, Nelly Berthault, Gunter Fischer, Henri Laurencin, Nayana Mahajan, Lamon Rutten, Joachim Bartels, François Bédard, Noah Elkin, Vanessa Gray, John Hutchison, Karin Kosina, Esperanza Magpantay, Margaret Miller, Eduardo Moreno Lopez, Jean-François Outreville and Mondher Sahli. Research assistance was provided by Wendy Hannan, Diana Korka and Arianna Rossi during their internship with UNCTAD. CONTENTS v INFORMATION ECONOMY REPORT 2005 Contents Foreword iii Acknowledgements iv List of Boxes viii List of Charts ix List of Abbreviations xi Explanatory notes xiv Overview xv 1. ICT indicators for development; Trends and measurement issues 1 A. Introduction 1 B. Global and regional trends in ICT uptake 1 C. Measuring ICT in developing countries 37 D. The road ahead 48 Annex I: Stastistical annex 51 Annex II: Distribution of countries 74 Annex III: Classification of ICT goods 75 Annex IV: Core list of ICT indicators 80 References 83 Notes 85 2. International Internet backbone connectivity: Issues for developing countries 89 A. Introduction 89 B. Economic aspects of backbone connectivity 90 C. The evolution of the global market for Internet backbone services 99 D. The international dimension 104 E. Policy options and proposals 106 References 111 Notes 113 vi CONTENTS INFORMATION ECONOMY REPORT 2005 3. E-credit information, trade finance and e-finance: Overcoming information asymmetries 117 A. Introduction 117 B. Information economy for accelerated development: The case for credit and e-credit B. information 118 C. Extensive use of credit and e-credit information: The case of credit insurance 129 D. Trade-related e-banking and other e-finance 132 E. Conclusions 141 Annex I: Discussing e-trade finance at UNCTAD XI 142 References and bibliography 144 Notes 147 4. Taking off: E-tourism opportunities for developing countries 149 A. Introduction 149 B. Global trends in the tourism industry 150 C. E-tourism: Learning from experience 161 D. Conclusions and recommendations 173 Annex I: Table 1 – Evolution of international tourism arrivals by region 176 Annex I: Table 2 – Distribution of international receipts by region 176 Annex II: Differences between developing countries/territories in international tourism arrivals in 2003 177 Annex III: International tourism arrivals (million) and receipts ($ billion) for top ten developed countries / top ten developing countries in 2003 177 Annex IV: Search engine optimization on Google and Yahoo! 178 Annex V: Evolution of travel distribution 178 References 180 Notes 182 5. Information technology and security: Risk management and policy implications 187 A. Introduction 187 B. Concepts and context 188 C. The information security industry 191 CONTENTS vii INFORMATION ECONOMY REPORT 2005 D. Development of security technologies 193 E. Information security and risk management 198 F. International and national policy developments and issues 211 G. Concluding remarks 215 Annex I: A simplified mathematical illustration of the Diffie-Hellman key exchange 217 References 218 Notes 221 6. Protecting the information society: Addressing the phenomenon of cybercrime 227 A. Introduction 227 B. Addressing the phenomenon 228 C. Reforming the criminal code 234 D. Addressing the data problem 237 E. Concluding remarks and policy recommendations 244 Notes 246 viii CONTENTS INFORMATION ECONOMY REPORT 2005 List of Boxes Box Page 1.1 Use of mobile phones by African businesses 15 1.2 Measuring the information society and the WSIS 39 1.3 Core ICT business indicators 40 2.1 A comparison between settlement mechanisms in telephony and Internet services 91 2.2 The Halfway Proposition 108 3.1 Basel II ratings and changes in capital requirements for a trade finance risk 122 3.2 E-credit information: The cases of Dun and Bradstreet (D&B), United States, and Serasa, Brazil 126 3.3 E-credit insurance: The cases of Coface Group, Atradius and Euler Hermes 130 3.4 Bank-based e-trade finance platforms: The cases of JPMorgan and Standard Chartered 134 3.5 Integrated e-trade finance platforms: Bolero, GTC, Tradecard and Visa Commerce 136 4.1 E-Tourism Initiative: A comprehensive capacity-building package for destinations in developing countries 160 4.2 The main challenges to the development of an effective DMS 163 4.3 www.tourismcambodia.com 164 5.1 Information security in developing countries: Mainstreaming Latin America? 193 5.2 Lessons learned from the past – Still valid half a century later? 195 5.3 A colourful public key exchange system analogy of Diffie-Hellman 196 5.4 Information security technologies 204 6.1 United Nations General Assembly Resolution 55/63, Combating the criminal misuse of information technologies 228 6.2 The impact on UK business 231 6.3 ACPO Good Practice for Computer Based Evidence 238 List of Charts Chart Page 1.1 Internet users by level of development, 2000–2004 3 1.2 Broadband subscribers in China and the United States, 2001–2004 9 1.3 Mobile phone subscribers by level of development, 2000–2004 12 1.4 Proportion of EU 15 enterprises with access to the Internet by size, 2002–2004 16 1.5 Proportion of EU 15 enterprises with the Internet having broadband access, by size, 2003–2004 17 1.6 Enterprises placing and receiving orders over the Internet, 2004 or latest available year (selected countries) 20 1.7 Proportion of enterprises carrying out e-business activities in selected European countries, 2003 21 1.8 Business processes linked to online orders in selected OECD countries, 2003 21 CONTENTS ix INFORMATION ECONOMY REPORT 2005 Chart Page 1.9 Proportion of Moroccan enterprises using intranets for different types of activity, by enterprise size, 2004 22 1.10 Evolution of ICT goods and total merchandise exports, 1996–2003 (1996 = 100) 24 1.11 Share of ICT goods in total merchandise exports, 1996–2003 25 1.12 Major exporters of ICT goods, 2003 27 1.13 Major importers of ICT goods, 2003 30 1.14 Exports of ICT goods by category of good, 2003 32 1.15 Imports of ICT goods by category of good, 2003 32 1.16 Evolution of ICT goods exports by category, 2000–2003 (2000 = 100) 32 1.17 Major exporters by category of ICT goods, 2003 (million USD) 34 1.18 Major importers by category of ICT goods, 2003 (million USD) 36 1.19 Global level of demand of ICT business indicators 42 2.1 Number of hosts advertised in the DNS 90 2.2 Three tiers of network/Internet service providers 92 2.3 Interconnection at IXPs 94 2.4a Traffic flows before NSP increases prices 97 2.4b Traffic flows after NSP increases prices 98 2.5 International bandwidth prices and growth 101 2.6 Number of IXPs per region, October 2004 108 4.1 Share of international tourism arrivals by region (1950–2004) 151 4.2 Distribution of international tourism receipts by region (1950–2002) 151 4.3 International tourism arrivals for top ten developed and developing countries territories (2003) 152 4.4 International tourism receipts for top ten developed and developing countries (2003) 153 4.5 Tourism distribution systems 154 4.6 Use of online search engines for tourism in the United States (2004) 155 4.7 US online travel market per segment in 2003 157 4.8 Online travel volume forecasts by travel category in the United States, 2001–2008E 157 4.9 Various levels of services provided by DMS 159 5.1 Risk management and information security 199 List of Tables Table Page 1. 1 Internet users by region and level of development, 2000–2004 2 1.2 Internet users by region, 2000–2004 (top 10 countries/territories) 4 1.3 Internet penetration by region and level of development, 2000–2004 5 1.4 Top 25 countries/territories in terms of broadband subscribers, 2001–2004 6 xCONTENTS INFORMATION ECONOMY REPORT 2005 Table Page 1.5 Broadband penetration, 2000–2004 (selected countries/territories) 7 1.6 Personal computer penetration by region and level of development, 2000–2004 10 1.7 Mobile phone subscribers by region and level of development, 2000–2004 11 1.8 Mobile phone penetration by region and level of development, 2000–2004 12 1.9 Mobile phone penetration, regional country/territory performance, 2000–2004 (top 10 countries) 13 1.10 Proportion of businesses using the Internet in Thailand, 2003 17 1.11 E-commerce sales in the United States, 2000–2003 (million USD) 18 1.12 Internet sales in Canada, 2000–2004 (million USD) 19 1.13 Different uses of the Internet by enterprises in Thailand by number of employees, 2003 22 1.14 Proportion of businesses with extranet and intranet, 2003 or latest available year selected countries) 23 1.15 ICT goods exports by region and level of development, 2000–2003 (million USD) 24 1.16 Major exporters of ICT goods, 2000–2003 26 1.17 WMS and RCA by country territory, 2000–2003 27 1.18 ICT goods imports by region and level of development, 2000–2003 (million USD) 28 1.19 Major importers of ICT goods, 2000–2003 29 1.20 Exports of ICT goods by category of good, 2000–2003 (million USD) 31 1.21 Imports of ICT goods by category of good, 2000–2003 (million USD) 31 1.22 Major exporters by category of ICT goods, 2003 (million USD) 33 1.23 Major importers by category of ICT goods, 2003 (million USD) 35 1.24 Direction of exports of ICT goods, 2003 37 1.25 Number of core indicators by classification 40 1.26 Number of countries collecting each indicator by region 43 1.27 Number of countries planning to collect each indicator 44 2.1 Largest NSPs by number of autonomous systems connections (2004 and 2000) 93 2.2 International bandwidth availability in selected developing countries (2000–2003) 102 4.1 Key services and functions of a DMS 160 4.2 DMO websites in LDCs (2005) Server location, website development and operating systems 162 5.1 Information security goals and activities 188 5.2 Selected vendors of information security technology 192 5.3 Security attacks by type of threat in 2003 201 [...]... Statistics United Nations Centre for Trade Facilitation and Electronic Business United Nations Conference on Trade and Development United Nations Department of Economic and Social Affairs United Nations Electronic Trade Documents United States dollars V VPN VSAT virtual private network very small aperture terminal W WAEMU WGIG WMS WPIIS WSIS WTO WTSA WTTC West African Economic and Monetary Union Working... INFORMATION ECONOMY REPORT 2005 xi xii CONTENTS ECD ECLAC ECOSOC EDB EDI ENISA ESCAP ESCWA ETI ETP EU EU15 EU25 Eurostat E-Commerce and Development Report Economic Commission for Latin America and the Caribbean Economic and Social Council Economic Development Bank electronic data interchange European Network and Information Security Agency Economic and Social Commission for Asia and the Pacific Economic... for information economy development International and national regulatory and standards bodies have also taken up this issue and are formulating and advising on minimum information security standards for international commercial partners The substantive engagement of the international community in providing guidelines and addressing particular issues that may need policy consideration and action should... including e-commerce (section 2) The section will present data from selected developed and developing countries, drawing primarily from data provided by the Organisation for Economic Co-operation and Development (OECD), Eurostat and UNCTAD Section 3 will focus on recent developments in the international trade of ICT goods, an important sector in the development of the information economy, and will use trade. .. commercial activities Information security and the resulting trusted technological environment are an essential component of digital development Trade, financial transactions, government administration and education are examples of activities that are increasingly dependent on technology infrastructures and therefore on information security In practice, information security is compromised on a daily basis... role of ICTs extends beyond e-commerce to embrace a broad range of social and economic consequences of the diffusion and use of ICTs, including the Internet and e-business In such an economy, ICT policy frameworks shape economic growth, productivity, employment and business performance The new name of this Report – Information Economy Report – previously called the E-Commerce and Development Report, is... of this evolution UNCTAD, in cooperation with the International Labour Organization, the International Trade Centre, and the Organisation for Economic Co-operation and Development, has been actively involved in supporting international dialogue on the economic and social implications of ICT through the WSIS Thematic Meeting on this subject.1 This meeting acknowledged that the adoption of ICTs by enterprises... ICT readiness, use and impact Such data are crucial for formulating policies and strategies concerning ICTdriven or ICT-enabled growth, for social inclusion and cohesion, and for monitoring and evaluating ICT-related economic and social developments They help companies take the right investment and business decisions and allow developing countries to benchmark their information economies against those... the development of ICT statistical data stems from recent advances in measuring the information society at the international and regional levels, the increasing demand by policymakers and the international community for quantitative assessment of the impact of ICT on development and growth, and the attention the subject has attracted in international forums such as the World Summit on the Information. .. financial institution Integrated Services Digital Network International Organization for Standardization Internet service provider information technology information- technology-enabled services/business process outsourcing International Telecommunication Union Internet exchange point K Kbps kilobits per second L LAN LDC local area network least developed country INFORMATION ECONOMY REPORT 2005 CONTENTS M Mbps . United Nations Conference on Trade and Development E-COMMERCE AND DEVELOPMENT REPORT 2005 UNITED NATIONS New York and Geneva, 2005 INFORMATION ECONOMY REPORT 2005 Note Symbols of United Nations. Statistics UN/CEFACT United Nations Centre for Trade Facilitation and Electronic Business UNCTAD United Nations Conference on Trade and Development UNDESA United Nations Department of Economic and Social. 111 Notes 113 vi CONTENTS INFORMATION ECONOMY REPORT 2005 3. E-credit information, trade finance and e-finance: Overcoming information asymmetries 117 A. Introduction 117 B. Information economy for accelerated