World Dialogue on Regulation

The World Economic Forum's 5th Global Information Technology Report 2005-2006 was released recently with updated Networked Readiness Index (NRI) rankings for 2005. The NRI is an assessment of a country’s preparedness and capacity to make use of and benefit from Information Communication Technologies (ICTs). In his review of the NRI, Divakar Goswami argues that a number of extraneous variables have been included that do not shed any light on ICT environment, readiness or usage, while others, that may have added greater robustness to the measure, are missing. Additionally, the credibility of the NRI is called into question by the non-transparent manner in which the authors report the sources of the data and the methodology that was followed to collect the raw data.

Among the available international composite ICT indices, the NRI has the most number of indicators and uses a combination of survey, quantitative and qualitative indicator data, making it particularly difficult for others to replicate this Index. The “hard” indicator data is obtained from international multilateral agencies like the World Bank and the International Telecommunications Union (ITU), and the “soft” data, i.e., opinion surveys are obtained from World Economic Forum as part of their research for the Global Competitiveness Report.

The current version of the Index is a collaborative effort between INSEAD, a leading business school in Europe and the World Economic Forum (WEF), an international business organization. Since ICTs are an important input into a number of industries and a significant sector by themselves, potential investors and businesses are interested to know a country’s current ICT infrastructure, the investment climate and regulatory environment, the ease with which businesses can obtain ICT access, the size of the human resource pool that businesses can tap into, the utilization of ICT in everyday life etc. The NRI captures data on all of these aspects and more. Although the focus of the NRI is on information that would be crucial for potential investors, it can be an important benchmarking tool for policymakers and researchers who would like to track a countries progress in developing its ICT sector over time and for comparing its performance with its peers.

Unbundling the NRI

Because the NRI can be disaggregated by its component indices, it is possible to evaluate a country’s ICT strengths and weaknesses on different aspects. As can be seen on Figure 1, the three main component indices are further subdivided into the following:

1. Environment- which is composed of market, political & regulatory and infrastructure environment. There are 20 individual indicators that measure the three dimensions of environment.
2. Readiness- which is composed of individual, business and government readiness to use ICTs. There are 18 individual indicators that measure the three dimensions of readiness.
3. Usage-which is composed of individual, business and government usage of ICTs. There are nine individual indicators that measure the three dimensions of usage by the various stakeholders.

Fig. 1 (Click here to see full size image)

The biggest drawback and strength of the NRI is the large number of indicators that it uses to assemble the composite index. Because the indicators cover a wide swathe of ICT related dimensions and other dimensions that are not directly related to ICTs but may impact ICT environment, usage and readiness, the NRI is comprehensive in its coverage. The NRI snapshot of a country is richer in colour and detail than an equivalent picture of ICT development from any other ICT composite index (For a review of different ICT indicators and indices, see the World Information Society Report 2006, page 15.2). However, whether the picture obtained from the NRI is an accurate representation of a country’s ICT development and readiness, is another issue altogether.