The computer industry in the third world: Policy options and constraints

The paper examines the conditions for the development of an indigenous computer industry in Third World countries. It argues that, within the existing international division of labor in the industry, the opportunities for local computer production are limited for most developing countries. Increasing levels of automation are likely to result in diminished competitiveness for any but the largest manufacturers. Only countries with large internal markets can expect to sustain an integrated computer manufacturing base. For most countries, a niche-oriented approach concentrating on the development of software and the configuration of systems for local and possibly regional vertical markets is apt to be the most viable entry strategy. Selective backward integration into hardware manufacture may be possible, but the types of equipment manufactured locally must be carefully selected with a view not only to the potential domestic market, but also to the suitability of the existing infrastructure and supplier networks to support cost-effective manufacture. For the establishment of an industry which is at least semi-autonomous technologically, policymakers need to take measures to strengthen the R&D infrastructure, to upgrade scientific and technical education, and to induce those nationals working for computer multinationals, whether at home or abroad, to start up their own local computer ventures. Skilled and experienced computer specialists as well as a computer literate population are perhaps the two most valuable assets for the development of an indigenous computer industry.