'Perfect storm' slashes Asian IT growth forecast

Growth estimates for the Asia-Pacific region information communication technology (ICT) market, which had taken a deep dive from 26 per cent in 2000 to 10 per cent in 2001, have been whittled down further in the wake of the September 11 attacks on the US, according to market analyst IDC.

And conditions in the already turbulent climate -- exacerbated by events following the September 11 incident -- will drag down business recovery for another two quarters, said Piyush Singh, managing director of IDC Asia-Pacific.

In other words: don't expect an economic rebound until the second half of 2002.

"We had a 'perfect storm' in the global ICT market in 2000 with the Internet stock crash in March 2000, economic downturn at the start of the fourth quarter, and a telecomms capacity glut in the US in 2001," Singh elaborated. "Then, there's the debt issue among telecomms companies in Europe, which invested in 3Glicences."

Asia, too, is not being spared from this global economic malaise, in spite of a strong gross domestic product (GDP) growth after its emergence from the Asian economic crisis back in 1997/1998.

IDC has since revised its Asia-Pacific (excluding Japan) ICT market growth estimate to just 8.5 per cent, said Singh during a teleconference held last Monday. "But if we factor in the currency depreciation, then the fall in the growth (of the IT market) in the region is really (from 26 per cent to) just 1.3 per cent in current US dollar terms," he added.

"We expect the growth in Asia's ICT market to be flat for 2001, with pickup to commence only in 2002. By 2003, business should be back to track with a spike in 2004."

Most of Asia's IT markets -- in particular, South Korea, Australia, Hong Kong and Taiwan -- shrank in 2001 compared to the previous year.

But China and India are still holding up. The two countries account for 45 per cent of the region's total gross domestic product, and 37 per cent of the region's IT market.

"China remains by far the most attractive market in the region," said Singh. "Its IT market is expected to grow by 25 per cent this year, and by the same percentage next year aided by its imminent entry in the World Trade Organisation."

When the global economy does rebound in 2002, IDC expects China -- with a domestic market worth $US25 billion in 2002 -- to contribute an additional $5 billion to the IT market, followed by India and Australia, at $1 billion each.

IDC's current research on IT budgets for next year indicates that though these budgets will increase in 2002, spending will be monitored until signs of economic recovery are clearly visible. A good portion of IT investments will go to Web-based initiatives, despite the excessive media hype on businesses getting back to basics, Singh said.

"The results of an IDC survey conducted early this year indicated that around a fifth of IS operational budgets are allocated to the creation of enterprise portals, enhancing Web presence, Web-integration of key applications, such as financial accounting, human resources and materials management, or facilitating information exchange through mobile devices."

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