Just how big are the information and communications technology industries? The government's ICT Taskforce wants the country to build 100 x $100 million local ICT companies -- 84 more than at present -- and have ICT contributing 10% of the country's gross domestic product by 2012, up from 4.3% now.
An admirable aim, if we are to fully pursue the information economy scenario. But where do the numbers come from, and what's the real difference between IT and ICT?
The taskforce, one of several along with the biotech, design and screen production industries, was commissioned by technology minister Paul Swain in May to "identify ways in which the ICT sector can boost its already substantial contribution to the economy".
The ICT report says the 4.3% figure comes from Statistics NZ -- the minister's office confirms that it was specifically commissioned -- and was aggregated in terms of the OECD classification of ICT. The OECD defines the ICT sector as a "combination of manufacturing and services industries that capture, transmit and display data and information electronically".
There are several ways to calculate GDP, all beyond my ken, but according to Stats NZ, expenditure-based GDP -- which the report cites -- was about $109 billion as of June 2002 estimates. So ICT's contribution is $4.69 billion now. If it was to contribute 10% of GDP, on today's figures, that would amount to $10.9 billion. But the taskforce says without more trained employees, commercialisation skills and a big push by all concerned, ICT's contribution would likely languish at 6% -- $6.5 billion on today's GDP figures. The table given in the report indicates an ICT contribution to GDP of just over $4.6 billion.
If that doesn't seem like a very big industry, the size of a market and its contribution to GDP are not the same thing.
Researcher IDC, for instance, estimates the New Zealand IT sector -- which includes some communications -- at $4.4 billion in 2002, (a 13% slice of the $36 billion Australasian IT pie, IDC Directions 2002). The telecomms market is largely not included in this figure and is "definitely bigger" than the IT market, says IDC NZ head Dinesh Kumar. The total ICT market is more like $12 or $13 billion, he estimates.
Stats' own figures puts total IT sales in 2001 at $6.8 billion (IT Survey). The OECD, for its part, says in Measuring the Information Economy 2002 that New Zealand ICT manufacturing, telecomms, computer and related activities and other services equalled about $10.7 billion in 1999.
Calculating GDP involves taking out things like intermediate consumption -- goods and services provided by one producer purchased by another for use in subsequent production -- and measuring their value added -- the value of production free of duplication -- says Stats. ICT companies' contribution to GDP, the ICT report says, typically lies within the range of 30% to 50% of turnover.
So the size of the market depends on who you ask and exactly what you measure. How many does it employ?
The taskforce report says there are 7544 ICT firms with annual sales of less than $5 million and 171 with sales above. The OECD says there were 10,407 businesses in ICT in 2000.
The ICT report says there are 41,000 people employed in ICT now and an ambitious 125,000 expected in 2012. The report says the sector accounts for 2% of the total workforce. The OECD report says there were 54,600 in ICT in 2000. To throw in a few more oranges with the apples, Stats' Information Technology Use in New Zealand 2001 says there were 33,705 people employed in IT occupations in 2001.
Do the numbers matter? They do, says taskforce chair Murray McNae, as GDP growth is important to the country. But the intention and strategy to do better are also important. Taskforce members feel the country can do better, and has a "good chance" doing so, using strengths such as the Kiwi "can-do" attitude. The taskforce notes the huge gains of similar-sized economies such as Israel and Ireland, despite their obvious advantages of capital investment and proximity to large markets.
And what about our trade deficit? Are we going to monitor how much ICT we export compare to how much we import?
The Australian Financial Review last week cited an Australian Department of Foreign Affairs and Trade report, found that the ICT trade deficit for that country was $A14.4 billion for 2002, marginally down on 2001. But only seven countries showed a positive ICT trade balance in 2000/2001 (Ireland, Korea, Japan, etc), according to the OECD, with New Zealand just behind Australia. Australia is way ahead in ICT manufacturing, producing about 14% of total goods compared to our 9%. Though that is probably not a way for New Zealand to grow. The story suggested that Australia's specialised ICT equipment and software complemented east Asia's mass producers of ICT equipment.
Statistical and economist snarls to Broatch.