Asian Countries Must Spur Domestic IT Consumption

Asian countries must take advantage of the economic downturn to spur domestic purchases of information and communications technology, according to an advisor to U.S. President Barack Obama's transition team.

"Asia leads in IT production and they lag way behind in IT use relative to where they should be," said Robert Atkinson, the founder and president of the Information Technology & Innovation Foundation, in a telephone interview. ITIF is a think tank in Washington, D.C., that advised Obama's transition team on the economic impact of new technology investments.

"This is the opportunity for Asia," he said.

Asia has long been home to the world's largest manufacturer of computing hardware, most of which is exported to developed countries in North America and Europe.

"The export model that has been partly responsible for the global crash is just simply not sustainable," Atkinson said.

That's not to say exports won't continue to be an important business for Asian countries, but they can't rely on U.S. consumers to drive their growth. "That model's dead, you've got to come up with a more sustainable model," he said.

Instead of focusing on exports, Asian countries should focus their efforts on helping companies to get more efficient relative to developed markets. One way to do that would be to change tax accounting rules to allow companies to fully expense the depreciation costs for new IT investments during the first year, instead of depreciating them over a longer period, Atkinson said.

"Right now in most countries you have to expense them by the average lifetime of the asset. Sometimes those asset depreciation lives simply don't reflect the current state of IT and the rapid depreciation of those assets," he said.

Atkinson cited a hypothesis laid out in a study by Larry Summers that showed equipment investments have spillover effects that create benefits for the wider economy, not just the company that pays for them.

"It's a very interesting hypothesis, which I think is even more true with IT and it suggests there's a logic there for better tax treatment," Atkinson said.

Increasing the amount that companies can expense for depreciation during the first year would help small and medium businesses, and encourage higher spending on IT, said John Davies, vice president general manager of Intel's World Ahead program, which focuses on emerging markets in Asia and elsewhere.

"The U.S. does it, Japan does it. You can actually see the impact on consumption," Davies said.

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