NÁRODNÁ KONFERENCIA : “MINERVA” Stratégia r oz voja konkurencieschopnosti Slovenska do roku 2010

1. NÁRODNÁ KONFERENCIA: “MINERVA”Stratégia rozvoja konkurencieschopnosti Slovenska do roku 2010 Previazanosť investícií do ICT a hospodárskeho rastu pri transformacií na Informačnú SpoločnosťPanelová Diskusia Robert Simoncic General Manager, Microsoft Slovakia Bratislava, 20. Január 2005

2. Lisbon Strategy: A Real Challenge eEurope is focused on the areas of: • eGovernment, to bring citizens, business and governments closer together, • eLearning, to enable people to benefit from new innovative approaches to education and training, • • eHealth, to provide access online health data and benefit from a range of improved patient care • • eBusiness, to stimulate the economy and provide a supportive environment for entrepreneurs. To make the European Union by 2010:“the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” Lisbon strategy statement, 2000 e-Europe 2005 Plan:“to provide a favourable environment for private investment and for the creation of new jobs, to boost productivity, to modernise public services, and to give everybody the opportunity to participate in the global information society.” To achieve Lisbon goals, governments should partner with the private sector: • Political and regulatory environment; • Infrastructural environment; • Investing in people; • The G2B relationship; • Nurturing entrepreneurship.

3. Drivers and Success Factors for Modernizing Government What are the real drivers for modernization: • Customer-centric service delivery • Internal efficiency and effectiveness • Good governance • Economic development Success factors include: • Leadership • Employee empowerment • Partnership working • Integration and process change • Public access and awareness • Enabling technologies

4. Economic Impact Study – Economic Development in Slovakia • The Impact of information technology (IT) on economic growth and employment • A 1 % increase in investment into IT will lead to a 0.11 % and 0.12 % increase in real GDP and real GDP per capita, respectively, controlling for other factors. • A 1 % increase in both investments into software and services will generate a 0.08 % and 0.09 % increase in real GDP and real GDP per capita, respectively, controlling for other factors. • The correlation analyses for the same countries also suggest that: • Investment into IT would not generate required returns without investment into human capital accumulation and IT infrastructures • Investment into IT leads to the expansion of other sectors, especially the service sector • Investment into IT increases multifactor productivity and leads to an increase in wages, a decrease in cost of production and eventually boosts firms‘ competitiveness. • What is the position of the Slovak IT sector in global and regional context? • The ratio of investment into IT to GDP in Slovakia is below average (2005 - $700M, 1:3.8 to Czech). • Today, over 31,000 people are employed in the IT sector in Slovakia. By 2006, more than 12,000 new IT jobs will be added tothe economy. • Slovakia’s per capita expenditure was about 161 USD in 2003 (70 % of Hungary) • The Slovak IT sector accounted for a 0.86 % of the total employment in 1995, which is estimated to have increased to about 1.6 % in 2003. • Positive progress in the Slovak IT sector. Compared to other countries and given the human potential this sector should receive a more serious attention in the future.

5. Steel Transport Posts Energy Telecoms Pharmas EU Accession - Economic Impact on Differentsectors and ICT Need for Restructuring Directly affected Indirectly affected High IT Drivers for Change Food Beverages Automotive Low Regulatory Changes Low High

6. Level D Level C Level B Level A US Swed. Den. Level Nor. Swi. Neth . Fin. 1 UK Germ. Aus. Belg. Ire. Ita. Fra. Spain development Czech Port. Level Greece Hung. 2 Slovak. ICT Pol. Bul. Rom. Russia Ukr. Level 3 ICT enablers ICT developments ICT enablers Level A = Well developed Level 1 = Highly developed, high quality infrastructure Level B = Improving Level 2 = Well developed, good quality infrastructure Level C = Under-developed Level 3 = Under-developed, poor quality infrastructure Level D = Poorly developed Europe’s ICT Effectiveness Matrix

7. ICT Development vs. GDP Per Head

8. Focusing on vibrant IT sector will provide clear opportunities for Slovakia • Growth potential • IT sector achieved average annual growth of over 10 percent – well above the growth rate realized by theglobal economy as a whole. • New jobs • The rapid growth of the IT industry has generated millions of high-wage, highly skilled jobs within the industry as well ascountless millions more jobs in a range of supporting industries. • Taxes • The IT industry has also emerged as a major source of tax revenues (corporate tax payments, income taxes paid by IT workers, and from VAT on sales of IT products and services. • Industry efficiency • Investments in IT help organizations becomemore efficient and productive. Thisallows firms to expand output and increase wageswithout raising prices. This helps to achieve higher levels of real, non-inflationary growth and rising standards of living • Business model • Partnering business model fuels local firms and economy

9. Conclusion: Bring the IT revolution to EU Accession countries to boost the economy • IT is a tool to achieve national competitiveness in this region • IT drives economic development, fosters national competitiveness, and accelerates the development of all industrial sectors. • Creates vital business efficiencies, high-waged skilled jobs, a significant contribution to GDP and higher governmental revenues • CEE is a very promising developing markets in the world. IT can play a major role in fostering these countries’ wealth and growth. • Commercial SW model is the key to success in fuelling the economy!

10. Appendix

11. EU accession enforces Competitiveness in a global environment • “Competitiveness is the ability to produce goods and services that meet the test of international competition, while the citizens enjoy a standard of living that is both rising and sustainable” (L.D’Andrea Tyson: Tyson 1993). • “Competitiveness should be understood as the ability of companies, industries, regions, nations and supranational regions to generate, while being and remaining exposed to international competition, relatively high factor income and factor employment levels on a sustainable basis” (OECD 1998). • To be successful they must also demonstrate a strong commitment to quality, flexibility, design, reliability, accessibility, and networking, not just pricing. Competitiveness depends on the way firms combine technology, managerial entrepreneurship, employee skills, business organization, and software to service markets and to interact with customers and suppliers (OECD 1998).

12. ITC Industry Roadmap development • Packaged Software - helps to use IT systems to perform specific tasks. It is extremely varied and includes operating systems and other office productivity applications • Israel – strong packaged SW industry; government subsidies, incentives • Ireland – SW testing, fulfillment, eLearning • India – Outsourcing; investment into IT education • IT Services - providers help organizations use their IT systems effectively. Like the packaged software industry, is very diverse • Software-Plus-Services – most common scenario is for growth in one sector to be accompanied by corresponding growth in the other, resulting in a mixed software-plus-services industry

13. Governmet Action (1)

14. Government Action (2)

15. Government Action (3) • Phase 1: First 6 months • Discuss focus of IT development efforts (software, IT services, software-plus-services) • Announce plan to create Commission • Select Commissioners • Phase 2: Next 12 months • Establish Commission and solicit industry input • Commission assesses existing IT industry dynamics • Based on findings, Commission makes regulatory proposals • Phase 3: Next 12 months • Draft plan for implementation of Commission proposals after consultation with appropriate Ministries • Determine budget for implementation • Commence implementation

16. Slovak IT Sector Statistics 1 Source: IDC 2002 * Compound Annual Growth Rate

17. Labor costs optimistically catch up with Spain in 15y; realistic 18y with Portugal

18. Eastern Europe IT Investment EE Total over $ 16B Slovakia – only $700M Slovakia to Czech 1:3.8!!

19. Sources of information and knowkedge • Austrian Institute for International Economic Studies. • The World Bank, Washington, D.C • IDC • Datamonitor • McKinsey & Co Quarterly; reports • Economist Corporate Network • OECD statistics and reports • Microsoft; selected reports • World Economic Forum

20. Also the business model of the SW industry is crucial to accelerated growth • Intellectual Property (IP) rights enable SW companies to keep the innovation cycle going • Packaged SW development in Commercial SW model where IP has a value creates economical incentives • Through licensing IP, SW companies create a vibrant IT eco-system • Partners, distributors, re-sellers, Independent SW Vendors (ISVs), IT services • Channel development • Commercial SW industry re-invests billions of $ into systematic Research and Development • Microsoft alone invests over $7 Billion into R&D every year • Commercial SW industry supports Standardization and enables Integrated innovation • Commercial SW industry accelerates economical growth • high-paid jobs • re-investments • taxes Commercial SW model is the key to success in fuelling the economy!

21. Need to create a vibrant ITC Sector • Creating a Vibrant Information Technology Sector: Growth, Opportunity and Partnership • Enacting and enforcing strong intellectual property laws; • Investing in IT education and training; • Encouraging the commercialization of publicly funded research; • Opening telecommunications markets to competition; • Promoting international trade in goods and services; • Promoting competitive, flexible capital markets; • Enacting balanced, pro-investment tax rules; and • Adhering to market-oriented regulatory principles