Costa Rica - Networked Economy

Networked Economy

ICT Employment Opportunities | B2C Electronic Commerce | B2B Electronic Commerce | E-Government

With only 50,660 sq km of landmass there are approximately 2 million people in the labor force from the 4 million in Costa Rica with an approximate 5.2% unemployment rate (CIA). In addition, 63.9% of the population is within the 15-64 age bracket (CIA), with the population density estimated at 78.4 inhabitants per square kilometer (Monge & Cespedes 5). By 2001, the GDP was estimated at $31.9 Billion (GDP-per capita: $8,500) (CIA) and the GNP-per capita was estimated at $4,009 (Monge & Cespedes 5). Additionally, Costa Rica ranked 41^st in the Human Development Index (HDI), which is a good position to be at internationally (Monge & Cespedes 5).

Costa Rica’s three strongest forms of industry are tourism, agriculture, and electronics (CIA). The 2002 workforce distribution in electronics incorporates many different industries throughout Costa Rica, as seen in the ‘Electronics Workforce 2002 figure’ according to the CINDE (Costa Rican Investment Board). This has become a strong focus of Costa Rica within the last decade as the information age has brought a new beginning to the economy through offshore outsourcing to Costa Rica. Several factors are playing a role in this trend. For example, the average annual income of a Costa Rican in 2002 was $3,960 (BBC News), which shows that the overall cost of labor is much cheaper in Costa Rica, even if you add in the additional costs associated with labor. In addition, Costa Rica’s time zone matches up nicely with the Midwest’s time zone (Isbister International, Inc.), which allows for U.S. companies to work and communicate on a traditional workday schedule. If not for these reasons, the trend of offshore outsourcing to Costa Rica would not be as prevalent as it is today.

The IT’s role within the economy is important as seen in the below figure—GNP per capita and the Knowledge-Based Economy (Monge & Cespedes 12). You will see that as the Knowledge-Based Economy Index increased, the GNP per capita has increased dramatically. This type of orientation for the country will have positive effects on decreasing poverty rates and increasing the services offered by Costa Rica. “Technology is like education—it allows people to rise out of poverty by themselves. As such, technology is a tool for growth and development and not just a price of the latter” (Monge & Cespedes 12). This quote points out that without technology, Costa Rica may be in a different situation as represented by neighbors of Costa Rica who have not leveraged technology to their advantage at this point. Though, with the rate of inflation of 12.1% in 2002, workers will need to make more money in order to afford the same life style they currently experience (CIA). By continuing to leverage technology, the Costa Rican government and businesses will experience fantastic future growth of the country.

In addition to the Digital Agenda that Costa Rica began, it was the first Latin American country to provide Internet services. Therefore, showing their dedication to leveraging technology. The Digital Agenda is what the Costa Rican program is called in order to modernize telecommunication infrastructures, provide universal Internet access (Communication without Boarder Program), provide a centralized Digital Government, digital business promotion (includes: finance for education, on-line resources for tourism, and the e-readiness program from CAATAC), and governmental reforms for laws and regulatory issues that deal with privacy, digital signatures, and intellectual property (Monge & Cespedes 14). This program is still in the early stages of implementation.

Using the Framework, Networked Economy would be categorized overall in Stage 3. Employment Opportunities and E-Government are more solid within Stage 3 but B2C and B2B Electronic Commerce are bordering Stage 2 and 3. The population, as a whole, has to embrace the Internet within the home in order to make E-Commerce transactions popular and common. Even though the individual categories vary a bit, businesses and people have an overall lack of commitment (Internet in the home) to its domestic advancement, through E-Government and E-Commerce, versus the advancement of offshore outsourcing companies.

ICT Employment Opportunities

The results of a recent study (seen in Table 35) show that “MHTEs in Costa Rica employ relatively high percentages of people in categories such as laborers (58%) and electronics (17%)…[and lesser amounts in] business administration (6%), accounting (3.2%), computing and computer engineering (3.2%), industrial engineering (2.6%), human resources (2.1%), mechanics (1.9%), and electrical engineering (1%)” (Monge & Cespedes 103). Overall, there are an adequate number of workers available in all different trade skills to not only meet the current demands of employers, but also meet the future demands of employers and companies that may invest or open additional offices in Costa Rica (Monge & Cespedes 119).

At the same time, the education levels that employers desire (seen on Table 37) for their employees are not being fully met. For example, current levels (seen on Table 36) of Computer Science Engineering technician are at 13.74 and the optimal level is 14.12, which is a 0.38 difference (seen on Table 38). These expectation deficits that employers are experiencing do not seem dramatic enough to cause any issues with attracting overseas business (Monge & Cespedes 118). Small adjustments to the supply of the different levels of education will need to be made for long-term stability (Monge & Cespedes 119). In addition to educational demands, other desired skills include problem solving, human

resource (people skills), computer programming, training and teaching, scientific and mathematical, financial administration, information management, foreign languages, and business administration. Overall, the attraction of plentiful skilled workers to companies that offshore outsource, make Costa Rica an ideal place to invest into.

B2C Electronic Commerce

Only about 5% of the small and medium businesses have a website, of which only 9.2% actively use the website to collect payments (Monge & Cespedes 188). Most businesses do not see the Internet as an advantage because the majority of Costa Rican’s only pay with cash (94%) or check (48.5%) when purchasing items, as seen in Table 55 (Monge & Cespedes 195). Additionally, less than 5% of the Costa Rican households have Internet access (Monge & Cespedes 196). Consequently, “less than half of…[the small and medium businesses] are interested in carrying out sales over the Internet in the near future” (Monge & Cespedes 195) because the demand is not high enough for the investment. Furthermore, some businesses do not see it as a needed aspect of their business because they consider themselves small or they are concerned with security (Monge & Cespedes 195).

Though, it is worth mentioning that 73.6% of the consumers that use the Internet do so to comparison shop and 89.8% use it for email (Monge & Cespedes 187). Therefore, you can count a percentage of the sales as a result of information located on the Internet or received through email even though there was no electronic transaction. By strategically placing key information on the Internet, businesses can increase their customer base.

Electronic commerce is not very prevalent in Costa Rica because of the lack of widespread acceptance of Internet access from the home, as discussed above. Most transactions are more likely to occur if you are at home or at work and you want to make a purchase. Going out to a public venue to shop on-line is not a common practice because you could just go shopping and come home with the product in-hand since you are already out and about. Although, the younger generations are using the Internet more than anyone, which is resulting in a greater demand for Internet purchased goods (Monge & Cespedes 196).

B2B Electronic Commerce

Over 59% of the small and medium businesses do not have computers and just about half of those 59% do not consider them necessary to operate their business (Monge & Cespedes 186). This is a barrier for Costa Rica because the more businesses that do not embrace technology the harder it will be to provide online services to Internet users and other businesses. Only 7.9% of the small and medium businesses use the Internet to sell their products to larger businesses and 12.6% use the Internet to sell their products to small or medium businesses (Monge & Cespedes 187). More commonly used Internet services, by small and medium business, in Costa Rica include client services (49.1%) and shipment monitoring (23.2%) (Monge & Cespedes 187).

Even though the government has passed bills that allow e-commerce transactions to take place with laws in place to protect both the consumer and business, businesses are not taking advantage of the efficiencies in B2B transactions as quickly as other countries, like the U.S., are doing. By looking at figure 63 you will see the growth of E-Commerce in the US over the last 4 years. This is showing that there are obvious efficiencies gained through B2B business because of the tremendous growth rate in B2B e-commerce. By looking at figure 61 and figure 62 you will notice that there is a relationship between the size of the business and the LER (Level of e-Readiness). “The larger the business the larger it’s LER.” The larger businesses are gaining more efficiencies through B2B by incorporating these technologies into their every-day business practices. With these observations, it is safe to say that trends seen in the US, in the area of IT, will eventually be seen in other countries as they catch-up. In particular, you will notice the exponential growth of B2B business, which has created tremendous efficiencies for US companies. As the government increases the amount of B2G (Business-to-Government) Internet transactions, businesses will begin to see the efficiencies gained. Overall, the IT trends that US companies are experiencing can also be experienced in Costa Rica with planning.

E-Government

E-Government is considered to be a driving factor in the progression to higher stages of a specific country’s readiness for the networked world. Costa Rica is on its way to improving the services of E-Government as seen in Table 44 and Appendix 4. Table 44 shows the different

institutions with outstanding web projects, which shows the dedication of some areas of government to provide streamlined procedures and access to Costa Rican’s. In appendix 4, the results of a recent study indicate that 62% of the institutions fall within a higher level of the matrix because they take advantage of ICT services that are available to them. Whereas, 38% of the institutions fall within the lower levels of the matrix and are not taking full advantage of the technology that is available to them (Monge & Cespedes 159).

One way to promote E-Government is to offer more access points to the Internet for only governmental services for Costa Rican’s to use along with more interactive government websites to enable ease of doing business. This will allow more of the masses to take advantage of the government procurement, transaction, and distribution systems that are used everyday by businesses and citizens through traditional in-person/paper methods. As you can see in figure 51, 100% of the institutions that have websites provide general information and only 31% of them use the website interactively for transactions like payment of services and on-line consulting (Monge & Cespedes 157). In addition, the Finance Ministry is working on a system to allow tax payments over the Internet (Monge & Cespedes 157).