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Constraints on developing countries’ capacity to absorb technology

Global Economic Prospects 2008: Technology Diffusion in the Developing World

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Successful adoption and adaptation of foreign technologies depends on each developing country’s capacity to absorb these technologies. Overall, technological absorptive capacity in the developing world is still weak, and needs to be strengthened.

According to a World Bank report, Global Economic Prospects 2008: Technology Diffusion in the Developing World, there has been considerable progress in the macroeconomic environment and financial structure and intermediation in developing countries—both critical for healthy technological absorption.

But the capacity of developing countries to absorb technologies has been largely limited by:

  • low technical literacy
  • the uneven spread of older technologies such as electricity and telephones
  • low penetration of technologies in rural areas

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There has been significant progress in developing countries in literacy rates over the past 15 years.

 

But too often, the quality of education being delivered in developing countries remains low.

 

Large proportions of students officially classified as literate in middle-income countries fail to meet OECD literacy standards.

 

In Sub-Saharan Africa, despite enrollment rates of close to 100 percent, fewer than half of grade six students in some countries are deemed literate.

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High enrollment rates

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Partly as a result of weak absorptive capacity, technology tends to spread more to urban areas and the most productive firms.
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Low diffusion in rural areas

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Technological absorptive capacity

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For example, in India, telephone penetration rates in urban centers are 8 times those in rural regions.

Within sectors, the most productive firms tend to have productivity levels that are five times those of the average firm.

This suggests that if their technologies were adopted by other firms (and their work force had adequate skills), GDP could be increased by between four and five times.

While many countries have improved technological achievement, relatively few countries have improved their technological absorptive capacityby more than 10 percent between 1990 and 2000.

The most negative score was by Zimbabwe, mainly reflecting the recent deterioration in macroeconomic and governance conditions.

Weak domestic absorptive capacity will probably hinder future technological progress in developing countries.

Unless steps are taken to raise basic competencies and invest in local technology dissemination networks, many developing countries may not be able to master anything but the simplest of future technologies.

Broad policy guidelines for developing countries 

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 Full text of the report>>