ERSİN ÖZİNCE General Manager of Türkiye İş Bankası Türkiye İş Bankası Genel Müdürü The Implications of the New or "Network" Economy Globalization and the revolution in information technology (IT), have combined to createa new age with a new business reality and brand-new challenges and opportunities. Knowledge is increasing at an unbelievably rapid pace. We can easily say that the information technology is transforming the way we communicate, work and shop. But is it really changing the economy? So far the "new economy" has largely been an American spectacle, with little sign of anincrease in productivity growth in Japan or the big European economies. But historically, the biggest economic gains from a new technology have not come from its invention and production, but from its exploitation. As yet, only 6% of the world's population is online, even in the advanced world, the figure is only 35%. Only a third of American manufacturing firms are using the Internet for procurement or sales. Over the coming years, as IT and business to business (B2B) e-commerce spread all over the globe, America's economic lead could narrow. As I just mentioned, it is the use of IT that will do most to lift productivity, not the making of IT products. Economies can be made more productive by simply adopting or imitating American technology and B2B e-commerce. There are plenty of archaic business practices left in Europe and Japan that keep prices high and productivity low. IT and the Internet will make in-roads into these by increasing transparency and competition. If consumers can buy much more cheaply from abroad- which the Internet will help them do- domestic producers and retailers will be forced to reduce their prices. On the other hand, inflexible labor and product markets could hinder the shift of labor and capital that is needed to unlock productivity gains. According to a survey made by the Goldman SACHS, savings provided by the B2B virtual trade is at a level which will affect the savings inclination of the whole economy. Supplying raw materials and intermediary goods through the internet provides 2% cost saving in the coal industry, 14% in the automobile industry and 40% in the electronic industry.According to the same survey, efficiency created through the internet is expected to increase output growth in industrialized countries Another benefit of the internet is to make price mechanism more transparent for all economic agents. Since consumers and producers will have the opportunity to compare prices easily, a commodity with the same characteristics can be provided with the same cost from a supplier far away. Transparency of the prices will make it possible to put the intermediaries out of the system, which take place at different stages of the commercial activities and create very little value added. Thus, producers and consumers will come closer. Together with the declining costs, competition will increase and this will enforce companies to restructure and review their marketing strategies. The internet will also affect demand along with the increasing real incomes. In the traditional economy, growth depended on capital and labor and the key to growthwas an individual sector. In the new economy, capital is less important for start-ups and the key to growth may be an economic web and the diversity that those webs both require and create. Again in the traditional economy, the value of a company was mostly in its buildings, machines and physical equipment. In the new economy, the value of a company derives more from its intangible assets, its human capital, intellectual property. The prosperity in the new economy depends on innovations. Thus, the new technologies and new businesses require new jobs and skills and the rapidly changing skills lead to shortages, and may require new learning along with the promotion of life-long learning. Who would have predicted 10 years ago that there would be an expanding market for jobs like: www image designers /artists electronic information managers internet marketing specialists IT specializing lawyers distance educators digital photographers telephone call center operators The digital world calls for a new state of mind and new behaviours. The internet opens up an era of intense creative thinking. The digital age thus calls for dynamic and flexibleminds, entrepreneurial and innovative flair. No wonder the Web is being run by 20-year-olds because they can afford to waste the 50 hours it takes to become proficient in exploring the Web. On the other hand, 40 -year-olds can't even take a vacation without thinking how they'll justify the trip as being productive in some sense! Internet access charges are generally still higher in Europe than in the U.S.A. because governments have been slow to liberalize and introduce competition into the "local loop", the final link between the telephone network and homes and offices. European countrieswhere the cost of access is low are generally heavier internet users. There is one sector, however, where many European countries lead America: in the useof mobile phones, which some think could one day become the main gateway to the internet. So mobile phone operators have an increasing focus on new technologies in all Europe and will foster internet penetration. As the network economy catches up to all manufactured items, inventing items faster than they are commoditized will be the solution. Each new invention placed in the economycreates the opportunity and desire for two or more. While plain old telephone service is headed towards the free, we will some day have a data line for every object in our houses and managing these lines will enlarge what we think as a phone and what we will paya premium for. In the coming era, doing the exactly right next thing is going to be far more productive than doing the same thing better. In the network economy, the question will be to seek opportunities. The situation in developing countries Many more economies are now part of the global market, and economies and multinationals are much more interconnected. A mobile phone might be designed in London andmade in China from parts produced in Canada, America and Sweden, on the orders ofa headquarters In Finland. IT itself has encouraged growth in international trade. Computers, modern telecommunications and the internet all reduce communications costs and break down geographical borders, so they are bound to speed up the global diffusion of knowledge. OECD figures show that IT spending in developing economies has been growing more than twice as fast as in developed ones over the past decade, although of course from a much lower base. IT also reduces the optimal size of a firm in most industries. Firms in emerging economies are typically smaller than in developed countries and the internet allows such small firms to sell direct into global markets at lower cost. Furthermore, the bringing down of thecost of communicating, IT makes it easier for multinational firms to move production to emerging economies to take advantage of low labor costs, but ensure close contact withhead office. That should help developing countries to attract more foreign direct investment. As an example, the increased demand for mobile phones in Turkey has encouraged theIşbank Group to form a consortium with a competent partner, Telecom Italia Mobile to bid for Turkey's third mobile licence rights. We have been awarded with the deal and will pay the state $ 3 billion. We expect that the new company will offer exciting synergies forbanking and coincide with our policy of reaching potential customers in every possible way. We are also determined to float the company on the stock exchange, which will alsosupport the further development of capital markets in Turkey. Although IT will increase the opportunities for emerging economies to narrow the income gap with advanced countries, it will not allow the governments to avoid doing the hard part, such as opening up markets to foreign trade and investment, liberalizing telecommunications, protecting property rights, improving education, and ensuring an effective legal system and efficient financial markets. Indeed, IT makes it even more important for governments to do all these things because it increases the rewards for doing so. Open markets help to speed up technology transfer and education increases a country's ability toabsorb knowledge. The internet has facilitated the distribution of information, and access to innovations became easier for developing countries. The comparative advantage of emerging economies lies in applying new technology developed in advanced economies, not trying to invent it. Although decades have passed to benefit from electricity, railways and even the telephone, at the beginning of the 21.century, the internet extended rapidly in Asia, Latin America and East Europe. Developing countries may have fewer computers and internetconnections than the advanced economies, but this does not automatically mean that they will grow more slowly. Perhaps the biggest risk is that governments and businesses in emerging economies will concentrate all their efforts on communications infrastructure, but fail to tackle deeper economic obstacles to development. Concluding Remarks The value of IT and the internet lies in their capacity to store, analyze and communicate information instantly, anywhere at negligible cost. The ultimate test is the impact of the new technology on productivity across the economy as a whole, either by allowing existing products to be made more efficiently or by creating entirely newproducts. Faster productivity growth is the key to higher living standards. As young European entrepreneurs, our mission is to seek opportunities for developing both new and traditional businesses and creating synergies among them, to increase productivity for the ultimate goal of higher growth in our countries. Higher living standards and further development of our societies means continuously investing in areas vital for the future of our countries. In conclusion, I can say that the network economy is not the end of history. Once networks have saturated every space in our lives, an entirely new set of rules will take hold and perhaps we will be talking about other "new economies". Besides, IT is only one of three technological revolutions currently under way. Together with fuel-cell technology, andgenetics and biotechnology, it could create a much more powerful "long wave" than some of its predecessors. We must not forget that many of the ideas behind the "new economy" are a reaction to the good economic news. If this changes, so will the theories. ERSİN ÖZİNCE: "YENİ EKONOMİNİN GETİRECEKLERİ" Bilgi ekonomiyi gerçekten değiştiriyor mu ? Yeni ekonominin 4 ana niteliği var: sayısal ekonomi, tırmanan AR-GE giderleri, küreselleşme ve insan kaynaklarındaki radikal değişim. Şimdiye kadar bu "yeni ekonomi" bir Amerikan gösterisi oldu. Ama geçmişe bakarsak, yeni teknolojilerin doğurduğu büyük kazançların, bu teknolojilerin keşfi değil, kullanımından kaynaklandığını görüyoruz. Amerika'nın bu alandaki öncülüğünün ona önümüzdeki yıllarda büyük yararlar sağlayacağı ileri sürülüyor. Avrupa'da Microsoft, Cisco veya Dell gibi dünya çapında teknoloji üretimcilerinin eksikliği olduğu doğrudur. Ancak, bu teknolojileri sadece kullanmak veya taklit etmek de ekonomileri canlandırmaya yetiyor. Internet maliyetleri düşürecektir. Ucuz hammadde ve yarı mamulleri bulmayı, şirketler arasında daha sağlıklı bir tedarikçi zinciri kurmayı ve envanter kontrolünü optimum düzeye çıkartmayı kolaylaştırdığından, şirketlerin giderleri şüphesiz azalacaktır. Düşen maliyetlerle birlikte, rekabet yoğunlaşacak ve bu da şirketleri pazarlama yöntemlerini kökten değiştirmeye zorlayacaktır. Böylece, bu yeni teknolojiler ve yarattıkları yeni iş alanları, yeni beceriler ve "yaşam boyu öğrenim kavramını" da işleyen yeni eğitimler gerektirecektir. Bilgi teknolojisi, gelişmekte olan ekonomilere, gelişmiş ülkelerle aralarındaki uçurumu daraltmak için yeni fırsatlar getirirken, hükümetlerin kendilerine düşen görevleri yapmaktankaçınmasına da izin vermeyecektir. Bu yeni ekonomi yaşamımızı kaplayınca, değişik kurallar ortaya çıkacak ve bu da belki bizi başka "yeni ekonomiler" den söz etmeye yöneltecek.