Direct Effects of Telecommunications on

Economic Development
Diffusion of New Ideas and Knowledge

The flow of information plays an essential role in the diffusion of new technology
and ideas at the level of individual enterprises, the industrial sector and the
national economy. The importance of the new knowledge and new ideas as key
elements for stimulating growth rate has long been recognized by economists but is
receiving more attention in recent years among new growth theorists. The source of
knowledge and new ideas can be domestic or global. If knowledge is local,
telecommunications technology can be used to globalise that local knowledge and
this process is known as localisation, making a local idea global. In the case where
information or an idea is made known in various countries (and usually adopted in
those countries), this process is known as globalisation. ICTs then make both
localization and globalisation possible. Modern telecommunications provide a cost
effective and time efficient medium for accessing rapid development of computer
and communication technology.

Reduction of Regional Infrastructure and Development Gap

One of the reasons for the persistent gap between rural and urban areas in any
country is the telecommunications infrastructure gap, which results in the
information gap between rural and urban areas. Rural areas have little or no
telecommunications infrastructure (e.g. in terms of telephones, facsimile/fax,
computers, printers and the Internet, except in telecentres or community phone
shops where available), when compared with the urban areas. This difference in
telecommunications infrastructure is called the digital divide. Telecommunications
infrastructure should then be developed in rural areas in order to reduce this digital
divide, as Mbarika (2002) stated earlier in this study unit.

If rural people obtain more information about agricultural prices, markets and
economic opportunities beyond their geographical horizon they will be able to
increase their productivity. Availability of telecommunication services can help to
improve information flow between rural and urban regions and help reduce the gap
of economic development between developed and developing countries but here
other factors such as cultural, social and institutional factors can play important
roles. Information between rural and urban areas can only be transmitted if there
are communication technology links between these areas. Governments and other
financially able parties, such as in the private sector, should establish
communication technology links to facilitate information transmission.