To invest or not to invest: ICT spending priorities in crisis-hit Central and Eastern Europe

The financial crisis has forced governments in Central and Eastern Europe (CEE) to make tough decisions about their information and communications technology (ICT) spending priorities. According to a new Economist Intelligence Unit study, To invest or not to invest: ICT spending priorities in crisis-hit Central and Eastern Europe, sponsored by Oracle, this is causing some uncertainty over whether the region can maintain its lead over other emerging markets in international e-readiness rankings.

Few CEE governments can afford to fund large ICT development projects, and instead many are turning to programmes with lower up-front investment requirements and shorter-term paybacks, such as improvements in the way government agencies manage their information flows.

The study analyses the impact of the economic downturn on government ICT investments in 17 CEE countries. It study builds on desk research into countries’ ICT policies and a series of interviews with government officials, NGOs and other ICT experts.

“The report reveals a divide between the handful of governments that are able to continue working towards long-term ICT plans, and the majority that are forced to cut back due to a combination of political instability and economic difficulties,” says Delia Meth-Cohn, editorial director for Continental Europe, Middle East and Africa for the Economist Intelligence Unit. She adds, however, that in a few cases, such as Estonia, strong public support for digitalisation can trump both financial and political turbulence and cause governments to press forward with ICT strategies.

“In recent years the region has made great strides in digital development,” says Alfonso Di Ianni, Oracle’s senior vice president for Eastern Europe and the CIS. "This paper shows that continued investment in ICT programmes can provide the dual benefit of achieving significant cost savings and efficiencies now while creating a strong foundation for renewed prosperity in future."

The key findings are:

• The economic downturn has reduced CEE governments’ formal ICT spending. Unlike large countries including the US, the UK and China, most CEE countries have been unable to afford massive stimulus spending packages. Where CEE stimulus programmes exist, they are unlikely to include significant ICT elements.
• But CEE countries are finding other ways to move digitalisation projects forward. Activity throughout the region has shifted more to projects that do not necessarily require new budgetary allocations. Instead, governments are using existing budgets to introduce ICT upgrades that do not require massive spending, such as improvements in the way agencies function. Government e-administration projects could in future provide a basis for other electronically based government services.
• The focus is on e-administration projects with near-term paybacks. In addition to not requiring formal new budget allocations, such projects have the advantage of offering cost savings in the near term, by reducing government paperwork. Several governments are looking into issuing electronic ID cards to enable online access to government services, which would cut paperwork and other administrative costs.
• Universal, and particularly rural, internet access is an important current focus. Although budget funds are currently scarce, governments are not losing sight of the long-term goal of making digital access available universally, including to citizens in remote areas. The funding for such projects tends to come from European Union (EU) regional development funds rather than from national budgets. EU funding is currently focussed on rural broadband access in a number of CEE countries.
• CEE governments’ ICT reactions to the financial crisis fall into three categories:



Go full steam ahead. Countries pressing ahead with ICT strategies despite difficult economic times are: Bulgaria, Croatia, Estonia, Poland, Romania, Russia, Slovakia, Slovenia, Turkey




Change tack. Countries changing the direction of ICT programmes, generally shifting emphasis from high-cost, long-term projects to administratively oriented projects with shorter-term paybacks, are: Czech Republic, Greece, Hungary, Latvia, Lithuania




Throw out the anchor and wait out the storm. Countries reacting to the crisis by dramatically reducing ICT funding are: Albania, Bosnia and Herzegovina, Ukraine

To invest or not to invest: ICT spending priorities in crisis-hit Central and Eastern Europe
is available free of charge at
www.eiu.com/sponsor/oracle/ict_spending_cee

Press enquiries

Joanne McKenna: +44 (0)20 7576 8188, joannemckenna@eiu.com
Aviva Freudmann. Research Director CEMEA +49 (0)69 717188 162, avivafreudmann@economist.com

About the Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist group, which publishes The Economist newspaper. As the world’s leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information about the Economist Intelligence Unit can be found at www.eiu.com or follow us on www.twitter.com/theeiu.

About Oracle

Oracle is the world’s largest enterprise software company. More information is available at www.oracle.com.