PIKOM ICT Strategic Review 2012/2013 Pt. 7: ICT Use Among Urban Poor and Broadband For Business Growth

The role of ICT in wealth creation has been well-documented. Even adoption of telecommunications has been shown to increase GDP of developing countries by 0.6%.ICT has reduced the cost of communication and increased access to information and knowledge as well.

In Malaysia, ICT connectivity has improved over the two decades, even its usage among marginalised communities and the ‘urban-poor.’ However, it still isn’t fully realised and this report discusses the key factors that still hinder ICT adoption among this community, as well as key strategies to connect the ‘urban-poor’ to the information economy which in turn will facilitate them to leapfrog to higher stages of socioeconomic development.

In 1965, Oscar Lewis’ book “Culture of Poverty” talked about how a poverty culture exists due to prolonged living in depressed condictions and reinforcement by other negative externalities such as lack of confidence and lack of motivation. This prevents marginalised communities from breaking away from the clutches of poverty and, in many societies, it is passed on to future generations. ICT is seen in many countries are an important enabler for breaking the cycle of poverty.

It can provide the poor access to education via various e-education platforms. It also can be an important source of information on market conditions, suppliers and other market intelligence, which enables the poor to make informed choices pertaining to investment and marketing strategies. For example, Bhatnager (2000) show that ICT initiatives such as the Warana Wired Village program in the state of Maharastra in India had provided the poor in several villages access to information on education and medical facilities to support socioeconomic development. The study also shows that ICT has been used to enhance the efficiency and productivity of milk farmers in the state of Gujarat in India.

In many localities where the poor live, the transportation system is often inadequate to support a vibrant business environment. New communication technologies can overcome this constraint by facilitating a home-based teleworking environment (Mitter, 2000).

The examples of ICT benefitting marginalised communities are many, for example in providing microfinance facilities like the Grameen Phone Program, telemedicine in hospitals in developed cities that can link with medical experts around the globe to collaborate, enabling access to public services like electronic tax filing, smart card for transactions, micro-credit facilities and registration of land titles.

Effective use of ICT can lead to “transparent smart e-governance with seamless access, secure and authentic flow of information crossing the inter-departmental barrier and providing a fair and unbiased service to the citizens” (Kalam, 2003). This in turn leads to an efficient delivery of public services to the poor which enables and empowers them to bypass intermediaries in order to access resources that improve their standard of living.

Malaysia, like all other developing countries, has put in place a number of strategies to reduce poverty. Since independence in 1957, medium term (the 5-year economic plans) and longer-term economic plans (the Outline Perspective Plans, OPPs) have given emphasis in transforming the ecology of the poor to ensure that they are able to improve their socioeconomic wellbeing and be globally competitive. These initiatives have systematically reduced absolute poverty from 49.3 per cent in 1970 to 3.6 percent in 2007 (NEAC, 2009). Further, hardcore poverty has been reduced to 0.7 per cent in 2009 (EPU, 2010).

In spite of the rapid progress in reducing absolute poverty, relative poverty is still a major concern for Malaysia. The Gini coefficient, which measures income  inequality, show that income disparity in Malaysia has not changed much from 1987 to 2007.

Compared to other countries in Asia, Malaysia is the second most unequally distributed country after China. A recent report from PEMANDU showed that around 200,000 households earn a meager RM750 per month (PEMANDU, 2010). A report from the National Economic Action Council (NEAC, 2009) show that the top 20 percent of the income earners experienced the highest increase in income. The concerning trend was that households in urban areas earning RM2,000 to RM3,000 find it difficult to cope with the increasing cost of living (PEMANDU, 2010a).

Uncertainties, low income and cheap migrant workers from neighbouring countries in the rural areas are forcing rural communities to migrate to urban areas. Migration of these low skilled workers to urban areas have resulted in the emergence of ‘urban-ghettos’ that cause a strain on various public facilities such as schools, police, sanitation and medical services. Increased social problems such as unemployment, gangsterism, anti-establishment behaviour and crime.


A Brief Review of ICT Policies and Poverty Eradication Initiatives
The Malaysian government recognised that the information revolution can be an important catalyst for assisting marginalised communities improve their socioeconomic wellbeing. In the middle of 1995 the government established the National Information Technology Council (NITC) to develop a strategic framework for diffusion of ICT across all segments of the population.

In the subsequent year, the National Information Technology Agenda (NITA) was launched. As part of the NITA, the Multimedia Super Corridor (MSC) plan was rolled-out to transform Malaysia into an information-driven society and power Malaysia’s vision of becoming a developed country by 2020. One of the major development thrust of the MSC plan was to develop the relevant ICT architecture and applications to assist marginalised communities migrate to a  knowledge-intensive society.

Among the initiatives introduced include making computers more accessible to the poor via schemes such as: One Home One PC, PC Gemilang 2 and PC Mesti Beli programs. Sales tax on PCs and related ICT components were also reduced so as to ensure that they were affordable to the poor.

Under the 8th, 9th and 10th Malaysia Plans, large allocations were provided to improve ICT connectivity for marginalised communities, especially people living in rural areas (EPU, 2001, EPU, 2006 and EPU, 2010). Among the key initiatives include the National Broadband Plan (NBP) and the MyICMS-886. Due to the low income level among the poor, several public facilities such as tele-centres were established to provide marginalised communities access to high quality ICT services using broadband.

These include the Gerakan Desa Wawasan, Medan InfoDesa and Pusat Internet Desa (EPU, 2001 and EPU, 2008).  To ensure future generations become citizens of the information age, ICT connectivity was intensified under the 9th Malaysian Plan. The use of ICT and multimedia in schools were boosted under the following programs: Smart School, MySchoolNet Portal and Program Pembestarian Sekolah.

Under the 9th Malaysia Plan, broadband coverage was increased from 2 per cent in 2004 to 32 per cent in 2009 (EPU, 2010). Under the 10th Malaysia Plan, strategies were outlined to ensure that ICT contributes to the national income, especially among the marginalised communities. Micro and small firms operated by the disadvantaged communities will be given fiscal and non-fiscal incentives in order to move them up the innovation value chain. The incentives include providing small and micro firms access to ICT services, including critical software, cloud computing services and systems that assist these firms to manage their financials, human capital, supply-chain andresources more effectively (EPU, 2010).

Leveraging on the 1Malaysia concept, ICT is seen as an important enabler for ensuring the poor have equitable and transparent access to high value-added services and opportunities to improve their socioeconomic status. The development of ICT infrastructure and content are classified as one of the National Key Economic Area (NKEA), with the objective of providing advanced communication services and networks for enabling a knowledge-based economy in localities where marginalised communities reside (PEMANDU, 2010b).

This includes providing the poor access to high quality ICT services and relevant content that will enable them to acquire education, healthcare, financial services and other government services. Advanced ICT services are also critical for the successful implementation the National Key Result Areas (NKRA), which include reducing crime, fighting corruption, improving student outcomes, raising the standard of low-income households, improving the rural basic infrastructure and improving public transport (PEMANDU, 2010a).

Under the 10th Malaysia Plan, the 1Malaysia Telecentres were introduced across the country in rural and poor neighborhoods. These telecentres play a key role in providing the local population access to advanced ICT skills to nurture creativity and innovative endeavors that will improve their quality of life. It is envisaged that access to the above-mentioned resources will increase the median household income from RM1,440 per month in 2009 to RM2,300 per month by 2015 (EPU, 2010).

Patterns of ICT Use among Urban-Poor Communities 
Urban-poor communities are defined as low-income communities residing in low-cost public housing in the urban areas. A sample size of 434 respondents was selected randomly from six urban poor localities around Klang Valley region in Malaysia, from July to November 2010. The localities included: Kampung Medan,Air-Panas, Pandamaran Jaya, Kapar– Taman Sentosa, Shah Alam – Seksyen 17 and Rimba Jaya.

Approximately 78 percent of those surveyed cite cost as the main factor for not using a mobile phone. The main factors hindering the use of computer include affordability (48.7 per cent) and the lack of computer skills (33.2 percent). In the case of the Internet, affordability (49.8 per cent) and lack of interest (21.4 percent) are the main reasons cited for not using it.

Results also imply that users of ICT have better employment opportunities and higher income profiles than non-users of ICT. A majority of the respondents using mobile phone use it for basic talk, short messaging service (SMS), taking photos and listening to music. However, the proportion of mobile phone users who used this medium of communication for higher order use such as for email communication, education, healthcare, banking & finance services and seeking information for products & services were below 50 percent.

In the case of the computer, 83.5 percent used it for education, 77.8 percent for entertainment & leisure and internet services and 62.4 percent for job related use. The empirical results for the Internet show that more than 80 percent use it for education and entertainment & leisure while more than 70 percent use it as part of their job and for information search (news and education). More than 60 percent report that they use the Internet for seeking information on products & services and  healthcare information.

The results suggests that the use of the three ICTs contribute positively to improving the socioeconomic status of the urban poor communities. Specifically, computers and the Internet provide higher socioeconomic benefit than mobile phones.

Discussions and Policy Implication
The Malaysian government has been  proactive in promoting the use of ICT among the poor through the various 5-year economic plans and, more recently, the government transformation programs. While these initiatives to some extent have increased the use of ICT among the poor and have improved their socioeconomic well being, there are segments of the population that have not fully benefited from the information revolution.

Though mobile phones are widely used by this segment of the population, its full potential has not been exploited via advanced applications that can add value to the urban poor’s standard of living. To encourage greater connectivity of this segment of the population to the digital economy, greater efforts should be in place to encourage them to use mobile phones in a more sophisticated way that will improve their quality of life. The use of this communication technology will help the poor transcend the language barrier, which have prevented them from connecting to the information economy.

In this paper, we argue that developing the mobile communication  ecology is critical for facilitating the poor to migrate to an information and knowledge driven economy. However, the transition to a higher socioeconomic trajectory will only be possible if the existing mobile communication ecosystem is strengthened. Four major challenges that hinder the use of this technology are outlined next.

First, the cost of mobile communication devices and broadband services are expensive for urban poor communities in Malaysia. Smart phones that connect to high speed broadband cost above RM500 in Malaysia. Further, the cost of fixed broadband with speeds of 20Mbps and 5Mbps cost RM249 and RM149 per month respectively (http://www.soyacincau.com). Mobile broadband with a speed of 7.2Mbps costs between RM58 and RM 248, with varying quality of service (http:// www.soyacincau.com).

The cost of Innovation for Digital Opportunities 188 ICT Strategic Review 2012/13 smartphones and broadband services are beyond the income levels of the urban poor, who earn below RM1300. A majority of them do not have permanent jobs and a stable income stream. Cost effective smartphones and affordable broadband service can change the way urban poor communities access advanced knowledge networks, which can enhance their productivity and wealth creation opportunities.

Second, the mobile Internet bandwidth is inadequate to support high quality audio and video streaming. The current mobile broadband speed of of up to 7.2Mbps is inadequate for powering the next generation mobile Internet applications such as visual networking, high-definition video streaming and high-definition IPTV. The new mobile applications require a download speed of at least 11.25 Mbps, upload speed of at least 5Mbps and a latency of not more than 60 milliseconds (California Broadband Taskforce 2008, cited in Vincente, Gil-de-Bernabe, 2010). Improved bandwidth will reduce intermittent disruptions in service that can frustrate users. Roll out of high speed mobile Internet services will be a key factor encouraging the poor to use mobile communication technologies for advanced services that will improve their socioeconomic wellbeing.

The third factor hindering the use of mobile devices for mobile commerce (m-commerce) and other online applications is security, especially in the context of transmission of financial and personal information across networks (Kao (2009) and Ajakaije and Krause (2011)). In a recent study by Vaithilingam et al. (2012), it was shown that trust among customers on the m-banking security system is an important consideration in the adoption of mobile banking (m-banking) and other online financial services among users in Malaysia.

The fourth factor hindering the take-up of mobile communication technology is the lack of applications that are simple to use, not time consuming and relevant in adding value to the lives of urban poor communities. Income levels of the urban poor communities are low – a large proportion of them have household income levels below RM1300. Cost effective ICTs such as mobile communication technologies can be an important source of socioeconomic capital development if appropriate user-friendly applications are developed for this segment of the population.

Mobile communication ecosystem for urban-poor communities

In summary, mobile communication technology provides tremendous opportunities for the urban poor communities to increase their reach for resources, knowledge and wealth creation opportunities. A prerequisite for them to leapfrog to a higher innovation and wealth trajectory is a viable mobile communication ecosystem that ensures the following (as shown in Figure 12): (i) affordability; (ii) adequate bandwidth for new generation applications; (iii) security of data transmission; and, (iv) applications that are relevant in improving the lives of urban poor communities.

Concluding Remarks
ICT is an important enabler for marginalised communities such as the urban poor communities to close the knowledge and income gaps with the more developed communities. The Malaysian government has been proactive in promoting the development of a sustainable information ecology that will assist it to become a knowledge intensive, globally competitive and high-income country by 2020. While these initiatives have reduced absolute poverty, relative poverty remains a major concern, especially with the increasing urban poor communities in the country.

The empirical analysis presented in this study showed that a majority of the urban poor communities have not fully gained from the national ICT initiatives. Many of them are working in employment sectors that are labour intensive and have low-income levels.

In summary, rapid transformation is taking place in the global economic architecture, which is powered by the rapid innovation in ICT. Communities who do not keep pace with the changing global economic landscape, risk falling behind in terms of competitiveness and socioeconomic development. Strategies and policies to connect the urban poor communities must be in place so that these marginalised communities are able to leapfrog to higher stages of development and contribute to Malaysia’s vision of becoming a developed and high-income economy.


B) BROADBAND FOR SCIENCE AND INNOVATION: IMPERATIVE FOR BUSINESS GROWTH By Ramachandran Ramasamy, Head of policy, capability and research


Broadband connectivity bein an integral of new-age information and communications technology, has been playing a significant role in stimulating changes in science and innovation research. Specifically, it has been a powerful tool in greatly accelerating the production, distribution and sharing of data, information and knowledge among researchers and user groups as well as other interest groups across the globe.

Indeed, the pace of change is happening at an unprecedented rate that the world has never experienced before. It can be assumed that such phenomenal changes are occurring not only in the scientific world, but also in all spheres of life, thus the impact and effect of broadband on science and other disciplines are mutually reinforcing.

Broadband Connectivity for Global Science & Innovation
With the dawn of the 21st Century, global spending on research and development (R&D) has doubled from US$790.3 billion in 2002 to US$1.15 trillion in 2007. Similarly, publications have grown by one-third from 1.09 million to 1.58 million over the same period. The number of researchers have also been continually on the rise,  increasing from 5.7million in 2002 to 7.1 million in 2007. Such phenomenal growth is partly attributed to global networks.

Scientific advancements are geographically widespread, occurring in many countries. Traditional dominance in science is held by the USA, United Kingdom, Germany, France and Japan.

Their dominance is measured in terms of production of innovative products and services as well as publication output. The Royal Society cited that these five countries alone have been responsible for 59% of all published works on science globally. Among them, the USA leads the world in research, contributing 20% of the total research papers published globally.

These five countries have put in place the requisite pull factors such as higher remuneration and perks, stateof- the-art research facilities, conducive work culture and environment, world class connectivity and connectedness, recognition and awards as well as freedom and democracy to attract world-class talents and researchers to their universities and research institutes.

In turn, the scientists and researchers from other parts of the world are highly motivated to be part of such universities and research institutions that have already gained global recognition as being world-class. With increasing global networks and connectedness, it won’t be surprising if these 5 countries command continued leadership.

But, new players are increasingly joining the global collaboration in research, science and innovation activities. Notably, the new entrants in the science and innovation race include China, India, South Korea and Brazil.

China has increased its research publications significantly and it is now ranked the second highest producer of research output in the world. In parallel, India as improved its global position by climbing from 13th in 1996 to 10th position between 2004 and 2008. In this race, India has overtaken countries like the Russian Federation that were once considered a research powerhouse. South Korea has been known for producing global brands such as Samsung, LG, Hyundai and Kia arising from their own advancements in science, research, innovation and commercialisation.

Other fast-emerging scientific nations that warrant due attention include Turkey, Austria, Greece and Portugal in Europe and Singapore, Thailand, and Malaysia in Southeast Asia. These nations have improved their standings in the global scientific league tables after their Governments had recognised that technology and innovation are key to long-term economic and social development, against the realisation that the alternative would be to remain an impoverished state in the global economy, as famously cited by Paul Kagame, President of Rwanda.

International collaboration is no longer driven solely by geographical proximity. There are numerous examples of regions that can be cited, indicating researchers coming together to share their resources and expertise. One such classic illustration is Vietnam. The Royal Society findings reported that countries like Vietnam have begun developing collaboration not only with its Southeast Asian neighbours, but also with distant economies, especially with those well-advanced in science and innovation like the United States, Japan, United Kingdom.

Despite heterogeneity of the groups and vastly differing economics, natural resources and human capital wealth, Vietnam is making great strides in science collaboration regionally and globally. In these new developments, Vietnam is an exception in developing inner and outer global networks. Generally speaking, science collaboration between developing countries is still at a minimal level.

Malaysia is one of them. Researchers and scientists in Malaysia are still inward-looking and their involvement in international collaboration is limited in scope and coverage. Unlike Vietnam, Malaysia lacks the requisite motivation, confidence and perhaps ability for intellectual discourse for international collaboration in science.

The most Malaysian scientists and researchers may have is some level of international science and research collaboration with English-speaking countries like the United Kingdom, USA and Australia with which the country has long-established trade, diplomatic and cultural ties. The country has to emerge from such a closet and be compelled to reckon with the growing global opportunities due to global connectivity. It is also observed that traditionally non-English-speaking countries in the learning of English has grown significantly especially among academics, thus paving the way for wider global opportunities that can address national problems and global challenges.

Large and often complex data are shared at the click of a button. More importantly, scientists are able to organise themselves or are being organised in tackling shared concerns and research questions. The Royal Society reported that the proportion of articles published in international journals arising from international collaboration has increased from 25% to 35% over the past 15 years.

It can be surmised that contemporary ICT and broadband enable scientists to work with the most-outstanding scientists in their fields across the globe. It helpsto build knowledge networks by providing access to complementary skills and knowledge, filling in knowledge gaps and resources, accessing high quality equipment and instruments and shaping research agendas. Collaboration brings with it the obvious benefit of scale. Notably, sharing the burden of research activity can play a significant role in breaking down complex tasks into manageable pieces. It facilitates joint authorship, capacity building, geopolitical linkages and global networks of science.


Part 6 of this report can be found here.