ROMANO PRODI Avrupa Komisyonu Başkanı President of the European Commission "Is There An E-Economy?" Opening address by Romano Prodi, President of the European Commission, to the conference on "The e-Economy in Europe: its potential impact on EU enterprises andpolicies", Brussels, 1st March 2001 Only a year ago, the new economic boom was hardly ever out of the headlines. Start-up founders became overnight millionaires as stock markets raced higher and higher.The promise seemed limitless. Today, the "e-euphoria" is distant memory - and in economic terms this is unfortunate. In terms of our goal for the next two days, however, it will enable us to leave aside share prices and focus on the true essence of the e-Economy: the digitisation of the entireeconomic fabric, the penetration of ICT into every area of our lives. The dotcoms are but one chapter of a very complex story, and it is that story as a whole that we need to look into. That is why today's event is a groundbreaker. This is the first time I and my fellow-Commissioners have gathered together such eminent experts from all fields - academics, economists, CEOs from a variety of companies, representatives of industry, of consumers and the public sector. We need the insight and input of all of you. The economic big picture What exactly is it that makes digital technologies so special? After all, invention and introduction of new technologies into the economy has been a feature of modern society at least since 1750. Invariably, they have raised productivity - this is why they crowded out their predecessors. But is there any particular reason why digital technologies should deserve more attention than any other? There is. Digital technologies have a pervasive influence. So much so, in fact, that the change they have been causing has been compared to the Industrial Revolution. They do not simply increase a company's productivity - although this is one of their effects. What is remarkable about digital technologies is the way they change markets and theway they change people's working methods. Firstly, they have the effect of integrating markets geographically. Producers are suddenly in competition with companies they have never heard of. For many products andservices, consumers now have a real rather than a theoretical choice of foreign suppliers. Secondly, they integrate product and services markets. The distinction between sectors is increasingly blurred. For example, telecommunications converge with broadcasting. Banking converges with ICT. If you pay something by dialling a phone number, is that a financial service or a telecommunication service? Digital technologies change existing markets beyond recognition. A B-to-B marketplace may cover the same products as its predecessor, but it is much faster, much more flexible and much more concentrated. It has more potential, both positive and negative.The old certainties and old boundaries seem to be dissolving. We still understand too little about the exact nature of the changes. But the way marketswork is clearly of concern to public policy makers, so we need to learn more about the impact of ICT on business Besides the effect on markets, there is a far-reaching effect on the way people work. ICT as a whole injects flexibility into the system, and in turn benefits from that flexibility. Where rigidity is a problem, as it is in most of Europe, ICT can be the catalyst for afully virtuous cycle. Has there been a miraculous US productivity increase? If we look at the US economy since the mid-1990s, we see what has been termeda "paradigm shift": sustained growth combined with low inflation, plus accelerating productivity and job-creation. At the root of this, so it is argued, lies a massive investment in ICT. The figures often quoted in support of the "paradigm shift" assertion are an increase in hourly labour productivity of about 2.5% per year, compared to about 1.4% in the first half of the 1990s and about 1.3% per year up to 1990. This investment boom has translated into higher productivity firstly via capital deepening - in other words, better equipment - and secondly via higher total factor productivity growth - in other words, more efficient, flexible and grass-roots driven organisation. The big US lead in the ICT sector is a challenge to us. The EU has undeniably invested later and less in ICT than the US, but our transition from an "industrial society" to an "information society" is accelerating. In the EU, expansion of the ICT market had brought total spending to 7% of GDP in 1999, compared to about 8% of GDP in the US. ICT production, too, has increased rapidly, exceeding 4% of GDP in 1999, compared to about 7% in the US. We are not starting from scratch in the ICT sector. We are not trying to build from the ground up. There are signs that the forces driving productivity growth in the US economy are also at work in the EU, though more strongly in some Member States than others. The EU's record - looking back - the 80s and 90s: the Internal market and the euro The same is true of the EU's general economic circumstances. We are not starting from zero: our recent achievements make me believe that we have a solid foundation o n which to build a European e-Economy. The last two decades of European integration have brought two major achievements: the completion of the internal market, and the birth of the single currency. By creating genuine free movement of goods, services, people and capital, the internal market has produced opportunity, growth and competition by removing barriers totrade. Of course there are areas where progress remains to be made. Public procurement. And the area which the Lamfalussy Committee identified as the major missing piece of the internal market - building an open environment for trading capital and financial services. However, despite these gaps, an economic "level playing field" now exists. The path to economic and monetary union, mapped out by the Maastricht Treaty, has led to macroeconomic stabilisation - which has laid the foundations of business expansion: the Union's GDP is forecast to grow by 3 percent this year, for the second year running. The euro is a reality, as can be seen from its widespread use in company accounts and the bond markets. In less than a year, it will be in circulation. In parallel, industry has taken the bull by the horns and modernised. Mergers and acquisitions since the end of the eighties have altered its appearance and structure and brought greater competitiveness. SMEs, too, have made vast progress in efficiency. The EU is facing the twenty-first century with a number of strengths to its credit: a favourable economic outlook brought about by a stability-oriented monetary policy; soundfiscal policies; low inflation, low interest rates and low public-sector deficits; the single market and single currency; and the prospect of a wider economy thanks to enlargement. The e-Economy can now build on these strengths. It can contribute to further economic integration, to further rapid job-creation, to creating more accessible work for more people, and to greater efficiency in all business activities. However, these great strengths are undermined by a number of substantial weaknesses. Unemployment - at an average of 8.1 percent - is still too high. Some parts of the EU suffer long-term structural unemployment and unemployment blackspots. Yet an increasing skills gap has left a number of existing ICT jobs unfilled. There is a therefore a lot of wasted potential. Seeking the conditions for a full takeoff of the e-Economy in Europe We need to do more than just look across the Atlantic to see where the challenge lies. The US offers some realistic goals. More start-ups in hi-tech industries. More people and more households connected to the Web. Faster takeup of e-commerce opportunities, both in the business-to-business and consumer fields. Higher spending on researchand development, and more patent registrations issued. The EU has to address these challenges. However, to do so, we have to look at our own economy to see where barriers to the takeup of these opportunities remain. It is a measure of how seriously the European Union takes the challenge of this new industrial revolution that it organised the Lisbon Summit, held almost exactly one yearago. Lisbon signalled a realisation that sound macroeconomic fundamentals were not enough. They could not by themselves create jobs in quantity. Lisbon also signalled a realisation that we needed structural reform. Markets - for goods, services, capital and labour - need greater flexibility to accommodate new forms of organisation. This situation can only be tackled if we move on from the two major achievementsof the recent past (the internal market and the single currency) to focus on the three major building projects of the future. · First, information and communications technology, which we need to exploit far better in our day-to-day lives and in production - improving business efficiency, opening up new business opportunities and improving the quality of working life. · Second, research and development, where we need a Community patent, wherewe need to spend more, and where we need to forge a much better link between the world of science and research and the world of industry. · ICT and RTD together give us a great opportunity to drive forward the enlargement process. The Internet sweeps away international barriers, allowing the technical and mathematical brains of Central and Eastern Europe to plug in immediately to Western European research. In May, under the chairmanship of Commissioner Busquin, we shall bring togetheruniversity lecturers, deans and top researchers from Central and Eastern Europe to discuss how we can best exploit this opportunity. · Our third priority is producing a skilled and mobile workforce in the EU to promote higher labour participation rates - people with the right skills, and with fully portable qualifications, pensions and social security schemes. From Lisbon to Stockholm and Gothenburg The aim set out at Lisbon was an ambitious one - producing, by 2010, a new economic and social agenda to enable the EU to become "the world's most competitive anddynamic knowledge-based economy, capable of sustained economic growth, with more jobs of better quality, and greater social cohesion". Lisbon marked a realisation that action was unavoidable on many fronts, becauseof the interdependence of creating employment, fostering a good climate for investmentand innovation, giving people suitable skills, providing affordable and easy access to new technologies and coping with an older population's demands on our health-care and welfare systems. The Lisbon Summit's aim was to harness the European Union's humanpotential, since failing to do so would have a cost in terms of economic growth. The European Commission has not stood idly by in the past year, and it remains committed to the aims set in Lisbon: they are firmly incorporated into the Commission's work programme for 2001 and Strategic Objectives for 2001 to 2005. In preparing for the Stockholm Summit, the Commission has contributed a communication entitled "Realising the European Union's potential: consolidating and extendingthe Lisbon strategy". It uses the indicators agreed on in Lisbon to measure how much has been achieved. Over 40 legislative and policy initiatives to translate the Lisbon aims into action have been produced, but there are also some areas where political will has been lacking and little or no progress has been made. Most of our successes stem from the E-Europe Action Plan, a centrepiece of the Lisbon agenda, which provides clear objectives and targets for expanding digital technologies - in terms of access and use, for individuals and businesses. E-Europe has produced measures to increase competition for local telecoms services, for example. Other achievements include establishing a general regulatory framework for e-commerce, and rules on cross-border legal disputes and who can issue "electronic money";laying down rules allowing businesses to operate as a European Company; introducingfaster networking for leading research centres, and taking action on the social agenda,social exclusion and discrimination. In industry, the "Go Digital" initiative seeks specifically to help SMEs exploit the potential of new technologies. The Commission made a proposal on the sixth Framework Programme for research and technological development, reflecting the higher priority given to these fields in the light of the goals set in Lisbon. But progress has been lacking in important policy areas including postal services,procurement rules, the Community patent, lifelong learning targets and liberalisation in some industries such as electricity, gas and rail transport. Most significantly, it has been lacking in the area of financial services, where we need modern methods of regulation, and where we must create an open and transparent European market with pan-European products, make it easier to raise capital across borders and ensure proper consumer protection. Such action is both a logical necessity in the light of the euro, and an essential step in unlocking investment potential to build a knowledge-based economy. The challenge for the Stockholm Summit is to continue and develop the structural reform process begun in Lisbon. An environmental dimension needs to be added to theeconomic and social agenda set in Lisbon, to help to shape a European strategy for sustainable development. This must be a strategy that promotes innovation and more investment, exploiting the opportunities offered by frontier technologies. A strategy which can draw on further market reforms - including targeted taxation - to pitch prices at a level which better reflects the costs of environmental degradation, and offers incentives for change. A strategy built on a strong analytical foundation. Defining this overall approach to sustainability will fall to the June 2001 Gothenburg Summit. One key target should be to return to the Spring European Council in 2002 having identified the decisions needed to adapt the Lisbon strategy to the objectives set out in Gothenburg. The missing parts of the equation The Commission does not claim to have all the answers to coping with the e-Economy and all its implications. We need your free and frank opinion of EU policies. We need to see whether the steps we have taken so far are on track, and whether the approaches we have chosen are the right ones. Are their substance and timing appropriate? This is why we have called on your expertise. This is why we need your views. This is why we want to draw you into the debate and enlist your support, especially in the run-up to the Stockholm Summit. We are interested in finding out what we can learn about the impact of digital technologies on everyday business. We need to debate what can be transferred from the USexperience and what cannot. The aim of the parallel working groups' discussions is to see how the e-Economy affects a wide range of industries and individuals, and to see how to exploit it to the full inthe EU. We hope to benefit from your knowledge and experience as insiders and observers. There are so many questions to address. First, we are currently faced with a majorparadox. On the one hand, we have huge economic expectations of the communications sector. On the other hand, the financial markets have given it a very rough ride. As a result, there has been a serious financial squeeze on telecoms operators, especially mobile operators entering the market for 3G services. As Mr LIIKANEN, the commissioner responsible for Information Society matters, explained to the European Parliament, the markets seem to be too pessimistic now, justas they were too enthusiastic a year ago. I fully agree with his analysis. The fact is that we have reason to be confident. 3G as platform for wireless internet applications offers the prospect of increased competition in a market in which Europe is already strong in world terms. It has interesting potential in terms of the development and delivery of new content services, with consequent prospects of new jobs. And there are other matters to discuss: · How can we collect reliable statistics? · How far can the "offline world" approach to regulation in areas such as competition, distribution, copyright and patents go before it cracks under the strain of operating in the "online world"? · Is it enough to take an existing body of legislation and add an "e-dimension"? Ordo we need complete legislative overhaul? · How do we guarantee online security and confidentiality? · How will the digital age alter the way local and central governments deal with their citizens? · The story of the e-Economy is complex, but it is one we need to understand. Theprosperity of the EU's 377 million citizens - or about half a billion if we include the candidate countries - depend on it. ROMANO PRODI: "E-EKONOMİ VAR MI?" Avrupa Komisyonu Başkanı Romano Prodi'nin 1 Mart 2001'de Brüksel'de "Avrupa'da e-Ekonomi: AB işletmeleri ve politikaları üzerinde potansiyel etkileri" konulu konferansta yaptığı açılış konuşmasında e-ekonomi ele alındı. "1750'den bu yana yeni teknolojik buluşlar ve bunların ekonomiye girmesi modern toplumların özelliklerinden biri olmuştur. Dijital teknolojileri daha da özel kılan boyut, etkilerinin çok yaygın oluşudur. Öyle ki meydana getirdikleri değişim Sanayi Devrimi ile karşılaştırılmaktadır. Bu teknolojiler, coğrafi sınırları ortadan kaldırıyor. Üretim ve hizmet pazarlarını biraraya getirerek, sektörler arasındaki kesin ayrılıkları azaltıyor. Internet iletişim teknolojileri (ICT) sisteme esneklik kazandırıyor ve bu esneklikten yararlanıyor. 1990'ların ortalarından bu yana ABD ekonomisinin gidişatına bakarsak, düşük enflasyonla birlikte sürdürülebilir büyüme ve üretkenlik ile istihdam yaratımında artış görürüz. Bu gelişmenin altında ICT'ye yapılan büyük yatırım yatar. AB bu konuya ABD'ye oranla daha az ve daha geç yatırım yapmasına karşılık, "sanayi toplumundan" "bilgi toplumuna" giden yolda hızımız artıyor. Bu durum Avrupa'nın genel ekonomisi için de geçerli. Avrupa'da e-ekonomiyi inşaedecek sağlam bir temele sahibiz. Bu temelde, hedefi istikrar olan para politikaları sonucu ortaya çıkan olumlu ekonomik şartlar, sağlam mali politikalar, düşük enflasyon, düşük faiz oranları, düşük kamu açığı, tek pazar ve tek para birimi, büyüme sayesinde daha geniş bir ekonomi var. E-ekonomi bu güçlü temeller üzerine kurulabilir ve ekonomik entegrasyonun gelişmesine, istihdam yaratımının hızla artmasına, daha fazla insan için daha fazla iş imkanı yaratmaya ve iş dünyasının bütün etkinliklerini daha verimli hale getirmeye katkıda bulunabilir. Lizbon Zirvesi'nde kararlaştırılan hedef kolay bir hedef değildi. 2010 yılına kadar AB'nin "dünyanın en rekabetçi ve dinamik, sürdürülebilir ekonomik büyümeyi başarmış, daha kalifiye ve daha fazla iş imkanı sağlamış ve sosyal uyumu yakalamış bilgi temelli ekonomisi" haline gelmesini sağlayacak yeni bir sosyal ve ekonomik gündem belirlendi. Stockholm Zirvesi'nde de bu yapısal reform sürecinin devam ettirilmesi ve geliştirilmesi gerekiyor."