Mysteries of the Network Readiness Index

Posted on April 24, 2014 / 3 Comments

I have never been a great fan of NRI type indices where the components are somewhat opaque and some are subjective.

Instead of going into the details of the method and weaknesses of components such as the mythical (for the most part) numbers of Internet users, I thought I’d check in against four countries that have launched major initiatives on broadband promotion using government subsidies: Australia, India, Indonesia and Malaysia. Australia’s plan is the winner in terms of public money committed and Malaysia is the winner in terms of households already connected. Case studies conducted with Ford Foundation support should be on the web shortly.

Australia is holding steady at 18th place. No change from 2013. Not difficult to understand since only minuscule numbers of households have been connected yet.

India declines 15 places, relative to 2013. I guess publicity about wanting to spend USD 4 billion and spending INR 27 billion in fees to government organizations is not enough, especially when no citizen has benefited, yet. But why the precipitous decline? In terms of results, India is not very different from Australia, which has held its position.

Indonesia has advanced 12 places to 64th rank in 2014. Indonesia has made such big jumps in the NRI in the past. But according to the author of our case study, implmentation has barely begun on the broadband plans.

And Malaysia is holding steady at 30. No change. No reward for having connected large numbers to broadband.

Go figure.

Report.

3 Comments

Pingback: Mysteries of the Network Readiness Index | සතුටු වැස්ස බ්ලොග් කියවනය
John Garrity
April 24, 2014, 6:47 pm
Hi Rohan – very interesting comments and yes indexes like the NRI are just but one tool to gauge overall connectivity and make comparisons between countries. And it is important to grasp their limitations (both conceptually and methodologically). In this case, the penetration indicators you highlight (as independent variables impacting NRI) are a very small subset of the 54 indicators that comprise the NRI.

You note your apprehension to indices — would you recommend a different approach? What about making the dependent variable a combination of broadband penetration, price and quality… and then comparing against independent variables found in indicators of the NRI (… to help explain the variations in the dependent variable)?
Rohan Samarajiva
April 24, 2014, 7:01 pm
Hi, thanks for the comment. I’ve spent far too much time on the WEF report today, so my detailed response will have to be on another day. But here is the basis:

The most common and internationally recognized indices used to compare overall ICT sector performance between countries are NRI (Networked Readiness Index), ERI (E-Readiness Index), KEI (Knowledge Economy Index) and IDI (ICT Development Index).

The NRI, ERI, and KEI are indices which assess the ability of a country to absorb ICT and use it for economic benefit. The IDI has been developed to monitor and compare developments in ICT across countries. Therefore while NRI, ERI, and KEI consider economic factors, policies, regulatory environment in their rankings, IDI consists of 11 sub-indices which measure ICT access (40%), usage (40%) and skills (20%) on a per capita basis in each of the countries. As a result the IDI disadvantages large countries as equal distribution of ICTs throughout each of the countries is assumed, which is not the case in reality.

For example India is ranked low in IDI despite having a great deal of ICT sector activities in Bangalore, Gurgaon, Hyderabad and elsewhere. The other disadvantage of using IDI over NRI, ERI and KEI is that IDI only considers ICT development in countries, but not the contribution to the economy, which is given greater weight in the NRI, ERI and KEI.

Ideally for the purpose of assessing the potential of ICT industry generating economic growth, NRI, ERI or KEI are more suitable.