{"id":1632,"date":"2011-09-09T07:33:09","date_gmt":"2011-09-09T12:33:09","guid":{"rendered":"http:\/\/www.ict-pulse.com\/?p=1632"},"modified":"2011-09-09T07:33:09","modified_gmt":"2011-09-09T12:33:09","slug":"how-much-attention-do-we-give-our-intangible-capital","status":"publish","type":"post","link":"https:\/\/ict-pulse.com\/2011\/09\/how-much-attention-do-we-give-our-intangible-capital\/","title":{"rendered":"How much attention do we give our intangible capital?"},"content":{"rendered":"

This post discusses intangible capital, its impact on the wealth building of countries and what more Caribbean countries should be doing to improved their comparative advantage.<\/em><\/p>\n

\u201cIntangible capital\u201d, which is also termed \u201cintangible assets\u2019 in the financial world, is an area of growing importance as the value of information (as an asset) increases. Currently, emphasis worldwide is on developing Information Societies and knowledge-based economies, and critical to this transformation will be the ability to decisively measure and understand the impact of intangible capital on wealth creation.<\/p>\n

Over the last 20 years or so, Caribbean countries have been concentrating on increasing direct foreign investment, and with the region still recovering from the global financial crisis, the influx of capital and the take-up of labour would be highly welcomed. However, recent reports, most notably from the World Economic Forum (WEF), indicate that the region is losing ground with regard to global competitiveness.<\/p>\n

This post discusses intangible capital and its impact on the wealth building of countries. Thereafter, the topic will be considered within the Caribbean context, with a particular focus on ICT\/technology in the region.<\/p>\n

Country intangible capital<\/h3>\n

In a country context, intangible capital is generally considered a residual element. It captures all other factors that contribute to the total wealth of a country, but cannot be categorised as natural resources or produced capital (Figure 1).<\/p>\n

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Figure 1: The key components for determining a country\u2019s total wealth (Source: World Bank)<\/p><\/div>\n

According to the World Bank, in its report measuring the wealth of nations<\/a><\/em><\/strong>, intangible capital<\/p>\n

is the difference between total wealth and the sum of produced and natural capital. Since it includes all assets that are neither natural nor produced, the residual necessarily includes human capital\u2014the sum of knowledge, skills, and know-how possessed by the population. It also includes the institutional infrastructure of the country as well as the social capital\u2014the level of trust among people in a society and their ability to work together toward common goals. Finally, the residual includes net foreign financial assets through the returns generated by these assets\u2026<\/p><\/blockquote>\n

The World Bank produced estimated figures on per capita intangible capital for 120 developing and developed countries, excluding oil-producing nations, for the year 2000. It was noted that in 85% of the sample group, intangible capital contributed over 50% to the total national wealth, and in high-income\/OECD countries, on average, it contributed up to 80% of the total wealth. In middle-income and low-income countries, intangible capital accounted for a bit less of the overall wealth, 68% and 59% respectively, but still is a significant contributor. However, in highly resource-dependent countries, intangible capital accounted for less than 20% of total wealth, and was even a negative figure in some instances, highlighting the adverse effect of critical but often overlooked contributors to wealth building. Figure 2 presents the contributions of natural capital, produced capital and intangible capital to total wealth.<\/p>\n

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Figure 2: Average contribution as percentages of natural capital, produced capital and intangible capital to the total wealth of low-income (LI), middle-income (MI) and high-income (HI) countries (Source: World Bank)<\/p><\/div>\n

What does this mean for the Caribbean and the ICT sector in the region?<\/h3>\n

To varying degrees, countries in the Caribbean have been focussing on elements that contribute to intangible capital, particularly education and governance. However, those efforts are frequently overshadowed by political, financial and other priorities, which may mean that relative to other countries worldwide, and with regard to total wealth, the Caribbean might be any better positioned than it was over 10 years ago.<\/p>\n

This also appears to be the case in the telecoms and ICT sectors. Although many countries in the region have opened those markets to competition, which has resulted, to varying degrees, in lower prices, infrastructure development and wider choice, the world has changed considerably in the intervening years. No longer is affordable service desirable, it is expected. Further, to be internationally competitive in the ICT\/technology space, there is an increasing emphasis on features that are not directly related to infrastructure and affordability, e.g.:<\/p>\n