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DIGITAL DIVIDE IN MALAYSIA: EXAMINING THE ISSUES OF INCOME, WORKPLACE

AND GEOGRAPHICAL DIFFERENCE IN DIFFUSING ICT TO THE MASS PUBLIC

所得、職場環境、地域格差がマレーシアにおける情報格差(デジタルディバイド)

および情報通信技術の普及に与える影響に関する研究

February, 2005

Tengku Mohamed Faziharudean bin Dato’ Tengku Feissal

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ABSTRACT

Digital Divide in Malaysia: Examining the Issues of Income, Workplace and Geographical Difference in Diffusing ICT to the Mass Public

Digital divide, the gap between those who have access to Information and Communication Technology (ICT) and those who do not, has become a major concern for Malaysia, as well as for many other developing countries, because it will further marginalize certain segments within the population, preventing them from benefiting from this technology. The existence of digital divide within the population can be easily found, with differences according to age, education, gender, geographical areas, income and workplace, creating social inequalities based on the individual's ability and use of ICT applications. From the economic perspective, digital divide will erode the nation's ability to compete with other countries that have superior ICT-based human resources and technical “know-how”, as most “value-added” products and services require the knowledge and use of ICT applications. Therefore, the use of ICT by the mass population is an imperative for the nation to achieve a knowledge-based society, leading to prosperity This research is centered on the issue of digital divide. The analytical framework explores and examines, from the users’ perspectives (the demand-side), factors that encourage the diffusion of ICT to the mass population. The focus has been upon how differences between geographical areas, income and workplace influence the individual in the use of ICT. These three dimensions are perceived to be the major influences upon the diffusion of ICT to the mass population. By using case studies and literature reviews, these three dimensions are proven empirically to have a significant effect contribution to the diffusion of ICT. Recommendations are also given based on the findings from the case studies on how to close the digital gap. This dissertation concludes by proposing sound public policy and programs, both in public or private sectors that are needed to overcome the digital divide, and suggesting future research that should be carried out at the macro level. The dissertation is divided into eight (8) chapters: Chapter 1: Introduction This chapter introduces the issues covered in this research. It includes an overview of the research, research questions and the significance of the study, the theoretical and operational framework for this research, and the scope and organization of the research. Chapter 2: Literature Review This chapter reviews the existing literature on diffusion of ICT, geographical effects on technology diffusion, and the issue of digital divide. The general principles and theories that are related to the diffusion of ICT and digital divide, as well as the previous studies that have been carried out in other countries related to these issues are the main focus of this chapter.

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Chapter 3: Overview of ICT Diffusion and Digital Divide in Malaysia This chapter reviews the current status of ICT diffusion and the issue of digital divide in Malaysia. It includes an analysis of the secondary data available that supports the assumption of the existence of digital divide in the country. It also explains the involvement of the government through ICT programs planned and implemented to bridge the digital divide among the population. Finally, this chapter reviews some issues of digital divide and the perspectives of bridging the digital divide in Malaysia. Chapter 4: Methodology This chapter explains the research methodology adopted, and includes the research design, modeling and analysis approaches used in this research. The hypotheses for the whole program of research are also presented in this chapter. Chapter 5: Factors that Influence the Diffusion of ICT to the Mass Population and a Comparison of Urban-Rural Differences in the Pattern of Diffusion This chapter examines the factors that encourage the mass population to use ICT. It emphasizes the dimension of the differences in geographical area. The chapter presents a case study into diffusion of ICT by investigating how senior High School students in Kelantan, Malaysia use the Internet. The case study also investigates whether there exist a digital divide between urban and rural teenagers. Chapter 6: Factors in the Workplace that Influence the Diffusion of ICT This chapter examines the issue of workplace (specifically the nature of job), in influencing the population to use ICT. A case study is presented, using the core urban service sector working population in Kuala Lumpur as the sample. The case study investigates how income factor, geographical effect and nature of job are influencing the urban working population to use ICT. The possible existence of a competency-based digital divide was investigated in the case study presented in this chapter. Chapter 7: Role of Income in the Diffusion of ICT in Urban and Rural Areas This chapter focuses on how income influences the diffusion of ICT to the mass population, specifically between the urban and rural population. The chapter presents a case study on how urban and rural population perceived the value of using ICT by indicating their Willingness to Pay (WTP) for the service. The samples were from the public servants in Kelantan. Chapter 8: Conclusion This chapter gives a summary of the results from analysis of the three case studies and literature survey, and provides concluding remarks based on the findings. The achievements of this research are also highlighted in this chapter and recommendations for future research in this area are also proposed.

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ACKNOWLEDGEMENTS

In the name of God, the most gracious and the most merciful. I thank Allah for giving me this opportunity to fulfill one of my goals, and thank him for giving me the courage and endurance to overcome this challenge in completing this manuscript. First of all, I wish to express my profound appreciation to my dissertation advisor, Professor Hitoshi Mitomo. This manuscript would not have been possible without his continuous guidance and encouragement. His patience and kindness in supporting my research is highly appreciated and invaluable to me. I also wish to thank the other members of my dissertation committees; Professor Urano, Professor Obi, Professor Kitamura, Professor Higuchi and Professor Tajiri for their valuable comments, advices and support that helped to improve this manuscript. Also, I would like to extend my deep gratitude to Dr Michael Huw Daniel for his unlimited valuable time in editing this manuscript and kindly making an effort on commenting on it, even within a short notice. As this dissertation was completed with the assistance of many kinds of people and organizations, I would also like to take this opportunity to thank all the people that have contributed towards completing this dissertation, especially the doctorate students in my seminar, and those who assisted and participated in the questionnaires back home. Special thanks go to my family back in Malaysia. Their love and support have been the source for this scholar undertaking. They are always special to me and motivated me to pursue my goal in completing this research. Finally, I would like to dedicate this valuable work in memory of my late grandfather, Haji Nik Jaafar bin Wan Awang who passed away 2 years ago. Watching him struggling to read a book or Quran when he was also battling cancer with bad eyesight has given me the courage and inspiration to complete this endeavor. He has made me realized the importance of learning and knowledge as a continuous process in life.

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LIST OF ACRONYMS AND ABBREVIATIONS

ASEAN : Association of Southeast Asian Nations CVM : Contingent Valuation Method EPU : Economic Planning Unit, Malaysia KEPU : Kelantan State Economic Planning Unit GFI : Goodness of Fit Index GITR : Global Information and Technology Report GPT : General Purpose Technologies ICT : Information and Communication Technology IT : Information Technology ISIS : Institute of Strategic and International Studies Malaysia ISP : Internet Service Provider ITU : International Telecommunication Unions MECM : Ministry of Energy, Communications and Multimedia, Malaysia MOE : Ministry of Education MSC : Multimedia Super-corridor NITC : National Information and Technology Council, Malaysia NITF : National Information and Technology Framework, Malaysia NOAA : National Oceanic and Atmospheric Administration, USA NTIA : National Telecommunications Information Administration, USA OECD : Organization for Economic Co-operation and Development PC : Personal Computer RM : Ringgit Malaysia RMSEA : Root Mean Square Error of Approximation SEM : Structural Equation Modeling S&E : Science and Engineering TLI : Tucker Lewis Index USA : United States of America USP : Universal Service Provision WTP : Willingness to Pay

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TABLE OF CONTENTS Page TITLE…………………………………………………………………………… i ABSTRACT…………………………………………………………………….. ii ACKNOWLEDGEMENTS………………………………………………….... iv LIST OF ACRONYMS AND ABBREVIATIONS…………………………… v TABLE OF CONTENTS………………………………………………………. vi LIST OF FIGURES……………………………………………………………. ix LIST OF TABLES……………………………………………………………… xi CHAPTER: 1. INTRODUCTION……………………………………………………………. 1 1.1 Overview…………………………………………………………………… 1 1.2 Research Objectives………………………………………………………. 4 1.3 Research Questions…………………………………………………….…. 4 1.4 Significance of Research………………………………………………….. 6 1.5 Overall Research Methodology…………………………………………… 7 1.6 Organization of Study……………………………………………………... 8 2. LITERATURE REVIEW……………………………………………………. 10 2.1 Introduction………………………………………………………………. 10 2.2 Diffusion of ICT………………………………………………………...... 11 2.3 Digital Divide…………………………………………………………….. 16 2.4 Research Approach………………………………………………………. 19 3. OVERVIEW OF ICT DIFFUSION AND OF DIGITAL DIVIDE IN MALAYSIA…………………………………….. 23 3.1 Brief Background…………………………………………………………. 23 3.2 Diffusion of ICT in Malaysia……………………………………………… 24 3.3 ICT Diffusion Status in Comparison with Other Countries………….... 26

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Page 3.4 Evidence of the Existence of Digital Divide……………………………... 29 3.5 ICT Programs that have been Planned and Implemented……………... 33 3.6 Issues Raised and Perspectives to Bridge the Digital Divide in Malaysia………………………………………………………………… 36 4. METHODOLOGY……………………………………………………………. 43 4.1 Introduction……………………………………………………………….. 43 4.2 Research Design…………………………………………………………… 44 4.3 Method of Data Collections and Analysis……………………………….. 52 4.4 Hypotheses………………………………………………………………… 57 5. FACTORS THAT INFLUENCE THE DIFFUSION OF ICT TO THE MASS POPULATION AND A COMPARISON OF URBAN-RURAL DIFFERENCES IN THE PATTERN OF DIFFUSION…………………..... 60 5.1 Introduction……………………………………………………………...... 60 5.2 ICT Diffusion to the Mass Population…………………………………… 61 5.3 Factors that Influence the Mass Population to Use ICT……………………………………….……………………….... 62 5.4 Case Study 1: The Factors that Influence the Senior High School Students to Use Internet……………………………………. 65 5.5 Conclusion…………………………………………………………………. 79 6. FACTORS IN THE WORKPLACE THAT INFLUENCE THE DIFFUSION OF ICT……………………………………………………. 81 6.1 Introduction………………………………………………………………… 81 6.2 Role of Workplace in ICT Diffusion……………………………………… 81 6.3 Factors that Influence the Working Population to Use ICT……………………………………………………………….. .. 82 6.4 Case Study 2: How Nature of Jobs Influences the Use of ICT…………………………………………………………….. .. 84 6.5 Implication and Conclusion……………………………………………….. 97

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Page 7. ROLE OF INCOME IN THE DIFFUSION OF ICT IN URBAN-RURAL AREAS………………………………………………… 99 7.1 Introduction………………………………………………………………. 99 7.2 Role of Income and the Comparison for the Diffusion of ICT among Urban-Rural Population…..……………………………….. 100 7.3 Methodology for Analysis………………………………………………... 101 7.4 Case Study 3: The Value of Using the Internet to the Urban and Rural Populations……………………………………….. 103 7.5 Discussion and Conclusion….……..…………………………………....... 117 8. CONCLUSION………………………………………………………………... 119

8.1 Summary and Interpretation of Overall Research Result………………………………………………….. 119 8.2 Overall Conclusion………………………………………………………... 120 8.3 Recommendations……………………………………………………….... 121 8.4 Limitations of the Research………………………………………………. 123 8.5 Future Research…………………………………………………………… 124 8.6 Concluding Remarks……………………………………………………… 125 APPENDICES: Appendix I: Operation and Technical Definitions……………………………. 127 Appendix II: Questionnaire for Case Study 1……………………………........ 129 Appendix III: Questionnaire for Case Study 2………………………………… 136 Appendix IV: Questionnaire for Case Study 3………………………………… 141 REFERENCES…………………………………………………………………... 145 LIST OF ACADEMIC ACHIEVEMENTS……………………………………. 152

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LIST OF FIGURES

Figure Page 1.1 Overall Research Framework……………………………………………… 7 3.1 Location Map of Malaysia…………………………………………………. 23 3.2 ICT Products and Services Penetration Rate in Malaysia (1998-2003)………………………………………………………………… 26

3.3 Teledensity between Urban-Rural Areas…………………………………… 30 3.4 Disposable Income Spent on Internet Usage Based by States (Year 2000) ……………………………………………….. 33 3.5 Malaysia Approach to Bridge Digital Divide: People First and Addressing People’s Need……………………………………………... 34 4.1 Research Framework……………………………………………………….. 48 4.2 Operational Framework……………………………………………………. 51 4.3 Example of a Structural Equation Modeling Path Diagram……………….. 53 5.1 Model of the Relationship among Variables that Influences the Use of ICT… …………………………………………….... 64 5.2 Location Map of Peninsular Malaysia and Kelantan……………………....... 65 5.3 Distribution of the Respondents Parent’s Income…………………………… 71 5.4 Locations Where the Respondents Frequently Used the Internet………………………………………………… 72 5.5 Number of Hours per Week the Respondents were Using the Internet……………………………………………………… 73 5.6 Percentage of the Respondents Who Have Attended ICT Classes……………………………………………………….. 74

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Figure Page 5.7 SEM for Factors that Encourage the Respondents Usage of Internet…………………………………………………………………….. 76 6.1 Model of Relationship among Variables that Influences the Use of ICT………………………………………………… 83 6.2 Respondents’ ICT Ability……………………………………………………. 88 6.3 Respondents’ Type of Occupation…………………………………………… 88 6.4 Monthly Income……………………………………………………………… 89 6.5 SEM for Factors that Influence the Urban Working Population in Service Sector in Kuala Lumpur to Use ICT……………………………........ 92 6.6 The Usage of Advanced ICT at Work with Respect to Monthly Income…………………………………………….. 96 7.1 Flow-Chart of the Questionnaire Asking the Willingness to Pay for having Internet Access……………. ……………………………………… 105 7.2 Percentage of Frequency of using the Internet between the Urban and Rural Respondents…………………………………………………. 109 7.3 Percentage of the Respondents Perception of the Importance of Internet…………………………………………………………. 110 7.4 Distribution of Income between the Urban and Rural Respondents…………... 111 7.5 Frequency of using the Internet versus Income in Urban-Rural Area…………………………………………………………… 115

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LIST OF TABLES

Table Page 2.1 Comparison of the Characteristics between Early Adopters and Early Majority in Adopting New Technology……………………………… 13 3.1 ASEAN-6: Information Technology Indicators (2003)…………………..... 26 3.2 ASEAN-6: E-Commerce Readiness Assessment…………………………... 29 3.3 Investment in Telecommunication in Malaysia between Largest City-Other Cities (1993 and 1998) ………….…………………….. 31 3.4 Household Income and Internet Subscribers in States in Malaysia (Year 2000)…………………………………………………..... 32 5.1 ICT Literacy Rates in Urban and Rural Area ……………………………… 69 5.2 Respondents Father’s Literacy, Parent’s Income and Ownership of PC ………..…………………………………………………. 70 5.3 Telephone Connections and Cyber Café in Survey Location………………. 71 5.4 Rank of the Factors the Respondents Indicate Need to Improve the School Internet Services…………………………………………………. 72 5.5 Rank of the Type of Internet Applications Frequently Used ……………………………………...................................... 73 5.6 Respondents Ranking of the Most Frequently Used Alternative Services…………………………………………………………. 75 6.1 Basic Characteristics of the Sample…………………………………………. 86 6.2 ICT Applications Used at Work…………………………………………….. 94 6.3 Frequency Usage of Advance ICT at the Workplace with Respect to Type of Occupation ……………………………………….. 95 6.4 Frequency of Usage of Different ICT Applications at the Workplace with Respect to Type of Occupation……………………………. 95

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Table Page 7.1 WTP Bidding Prices………………………………………………………….. 107 7.2 Descriptive Analysis of Selected Variables/Items…………………………… 108 7.3 Percentage of Initial Bidding “Yes” Vote for Internet Access at Home…….. 112 7.4 Percentage of Initial Bidding “Yes” Vote for Internet Access at Residential Community Center……………………………………. 112 7.5 Mean and Median Willingness to Pay for Internet Access…………………… 113

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CHAPTER 1

INTRODUCTION 1.1 OVERVIEW Digital divide, the gap between those with the access to Information and Communication Technology (ICT) and those who do not, has become a major concern for Malaysia, as well as for many other developing countries, because it will further marginalize certain segments within the population, preventing them from benefiting from this technology. Evidence for the existence of digital divide within the population can easily be found, with differences according to age, education, gender, geographical location, income and type of work. Those who are most likely to be marginalized include the older generation, less educated segments of the population, women, rural populations, lower income groups, and those who work in labor intensive environments. These divide has created social inequalities based on the individual’s ability and competence to use ICT applications. From the economic perspective, digital divide will erode the nation’s ability to compete against other countries with better educated human resources, as most “value-added” products and services require the understanding and use of ICT applications. Without addressing the issue and finding a solution to reduce the digital gap, socio-economic related problems that will threaten the stability of the nation socially, economical and politically might be created (ISIS, 2002). Therefore, the use of ICT by the mass population is an imperative if the nation is to become a prosperous, knowledge-based society. This research investigates the issue of digital divide in Malaysia. The analytical framework explores the divide from a user (i.e. demand-side) perspective and considers the factors that encourage the diffusion of ICT to the mass population. The focus is upon how the dimensions of geographical, income and workplace differences influence the individual to use ICT. These three dimensions, which are perceived to be the major influences upon the diffusion of ICT, are described below:- (1) Geographical differences, specifically the difference between the urban and rural population, is the primary area of interest in this study, given that Malaysia has a very large rural population, and that the rural area is still lacking in terms of physical telecommunication infrastructures and relevant ICT content when compared to the urban population. Geographical differences, without any intervention from the authority, will only allow the urban population to benefit from ICT diffusion to the exclusion of the rural population who will remain facing inequality in access and content. (2) Income dimension, in term of affordability of access to use ICT (both in urban and rural areas), is perceived to present an obstacle for low-income earners to use ICT because of the high access cost. The income dimension influences the diffusion of ICT because low income earners - a large percentage of the country's population - are less

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likely to use ICT than high income earners. Digital divide could therefore become a major issue as a consequence of inequality in income. (3) Workplace dimension also influences the diffusion of ICT because Malaysia has almost full employment, with an unemployment rate of 3.1% (2000 data, MSQ, 2002), and people spend much of their time in the workplace. The worker’s nature of job, whether he or she uses ICT applications in the workplace, and what type of ICT applications he or she uses, affects the overall pattern of ICT usage. There is a tendency for certain groups of workers to acquire superior skills in using ICT which can, in turn, lead to a digital gap based on competency in using ICT. Therefore, digital divide that is based on competence when using ICT will exist in Malaysian society as a consequence of inequalities of access to and use of ICT at the workplace. These three dimensions are also interrelated, especially when analyzed using a cause-effect relationship. For example, the rural population is typically less affluent than the urban population, and is less likely to use advanced ICT applications in its daily work. The approach adopted for this program of research is to examine the pattern of ICT diffusion in Malaysia through questionnaire surveys and case studies. A micro-level approach is used so that the cause-effect relationship between the three dimensions of geographical areas, income and workplace could clearly be identified since the use of a macro-level approach might have produced ambiguous results. The frequency and the complexity of using the applications are used as the proxy measure of the “diffusion of ICT”. The findings from the surveys are analyzed both empirically and descriptively. The primary objective of this research has been to derive a policy or action plan based on the three dimensions that would be able to reduce the digital divide in the Malaysian population. The factors that encourage the mass population to use ICT are investigated first. The objective is to identify those factors specifically related to the three dimensions of the research interest which have a significant positive influence on the mass population in its use of ICT. Also, the research investigates the patterns of diffusion of ICT that have taken place between the urban and rural populations. The organization of the surveys conducted in the three case studies is presented below:- The first case study is used to gauge, through a questionnaire survey, the use of the Internet by senior High School students in urban and rural schools. Among the research sub-objectives are to be able to recognize the significance and the types of relationships that exist between factors, such as “parent factor” - a proxy to leadership, ICT training/formal education, accessibility of the Internet and competition from other applications that might discourage students from using the Internet. The cause-effect relationships of the perceived factors are analyzed by Structural Equation Modeling

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(SEM). The findings from this case study are used as the basis for further investigation of workplace, income factors and the urban-rural differences in relation to the diffusion of ICT. This first case study reveals the significant influence of the “parent factor”, the proxy for leadership and income on ICT usage. It also proved descriptively the existence of the digital divide that is based on geographical differences. The research proceeds with a second case study that investigates the role of workplace in influencing the diffusion of ICT because the relative factor of leadership and income factors are closely related to the working population and the workplace. The survey sampled the service sector working population in the core urban area of Kuala Lumpur, where accessibility of the physical ICT infrastructure is not an issue. The objective of this study is to find out what are the significant factors in the workplace that influence the use of ICT. The cause-effect relationship between the factors (variables) is also analyzed by SEM. The findings from this case study are then compared to the findings from the first case study relating to how income affects the use of ICT in the mass population. A subsidiary objective of this study is to investigate competency-based digital divide in the working population - the so-called “second level digital divide” (Hargittai, E., 2002). Therefore, the factor “nature of work” is further analyzed to examine the pattern of ICT diffusion that has taken place at the workplace based on the type of work tasks. After analyzing the effect of the workplace in the diffusion process and its relationship with income, the research proceeds to investigate the role of income in the diffusion of ICT to the urban and rural populations. The objectives are to examine (a) how the urban and rural populations perceive the importance of using ICT, and (b) how income is affecting both urban and rural populations in their use of ICT. It is important to know whether there is a major difference in the perception of ICT use between the urban and rural populations because any such difference could then be taken into consideration when future programs and action plans are designed so that they are tailored to suit the target population's needs. A case study is also used for this part of the research. The samples are employees from the public sector in both urban and rural areas (thus extending the urban-rural comparison of Case Study 1). The Contingent Valuation Method (CVM) is used in the analysis, and the respondents indicated their Willingness to Pay (WTP) for access to and use of the Internet. The subsidiary objectives for this study are (a) to compare the monetary value placed on using ICT by both urban and rural populations, and (b) to determine how income is differentially affecting the use of ICT in the rural and urban areas. The final section of this dissertation presents:- (1) An overall conclusion derived from the three case studies and from the literature survey. (2) Recommendations for policy and action plans to reduce the digital divide in Malaysia or other developing countries with similar background as Malaysia (such as

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other ASEAN countries) based on differences in geographical area, income and the workplace. (3) Proposals for future research into the diffusion of ICT to the mass population in order to reduce the digital divide. (4) Social implications that could directly derived from the research. 1.2 RESEARCH OBJECTIVES The objectives of this research are:- (1) To explore and examine from the users’ perspective, or the demand-side, factors that influence the diffusion of ICT to the mass population, and further to investigate those factors that directly or indirectly encouraging the mass population to use ICT, to gain an understanding of its cause-effect relationship in the diffusion process. (2) To examine at the micro level how the differences associated with the dimensions of geographical areas, income and workplace are influencing individuals to use ICT – that is the differences is based on the urban and rural areas, level of monthly income earned by the individual, and the different nature of job in the workplace. Then, the research is to prove empirically, using a statistical approach, the significance of the three dimensions in influencing the use of ICT in the mass population. (3) To propose sound public policies and programs to be implemented that could address the problem of digital divide in Malaysia based on the dimensions of geographical difference, income and workplace. 1.3 RESEARCH QUESTIONS Given that (a) the pattern of ICT diffusion follows an “S-shaped” curve over time (Everett, R., 1995), and (b) the agglomeration effect theory predicts that the urban area will be the center for any technological change to take place (Capella, R. 2000), it follows that the rural areas are expected to be the last locations to adopt ICT. Similar scenarios will prevail to those who can not afford the technology or are from a low-income background, and for those in workplaces that do not require them to use ICT applications in their daily work. Since the adoption of new technology, specifically using ICT applications should benefit the population either socially or economically (Pippa, N. 2001; Servon, L. 2002), it is important that the mass population, irrespective of geographical, income and workplace differences, has an equal access to the technology and is able to use it. A widening inequality between those who have acquired the technology and skills and those who have not could undermine the social and political stability of the nation (ISIS, 2003). Hence, there is a need to find a way to encourage the mass population to use ICT applications.

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The research addresses the following questions:

(1) What are the factors that will encourage the mass population to use ICT?

(2) What kind of inter-relationship exists between the dimensions of income, workplace and geographical differences that influence the use of ICT? It is important for this research to be able to determine the relationships between the three dimensions and their contribution to the diffusion of ICT, as the factors contributing to the digital divide are interrelated. An understanding of the cause-effect relationships can be used as a guide in the preparation of a comprehensive plan to diffuse the technology across the three dimensions concerned. (3) Does digital divide exist between the urban and rural areas in Malaysia, as well as between different in income and workplace groups within the population? To what extent has the problem of digital divide affected the different segments of the Malaysian population? By proving statistically that a digital divide exists between urban and rural Malaysia, as well as between different income and workplace groups, reliable evidence will have been produced that digital divide is a “real” issue within Malaysian society. This research goes one step further by investigating the extent of digital divide, since this makes it possible to explain the degree of differences in digital gap among various segments of the population. As a consequence of addressing this research question, specific actions plan can be formulated and applied to the different segments of the population in order to reduce the digital gap. (4) Are there any differences in how the urban and rural populations are “valuing” the importance of ICT? This research question, by asking about the “value” placed on using ICT by both the urban and rural populations, allows comparisons to be made on the differences in perception of the importance of ICT applications by the urban and rural population. (5) How is the working population responding to the use of ICT in their daily lives? Furthermore, in what way is the nature of job affecting the pattern of ICT usage by the working population? This research question is intended to examine the level, frequency and types of ICT used in the workplace and to give a better understanding of what motivates the workforce to use ICT. By examining the role of nature of job, this research can determine whether skill or competence in using ICT has a significant impact on the mass population in its use of ICT.

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1.4 SIGNIFICANCE OF RESEARCH Although much research has been conducted on the issues of digital divide and ICT diffusion, almost all of it has been carried out in developed nations, mostly in the USA and Europe, and has been predicated upon the specific issues that these nations faced. Therefore, not all findings from such research are applicable in producing guidelines to be adopted by developing countries. The people of Malaysia, with its large rural population, multiple ethnicities, and cultural values which are different from those of Western countries, might have different perceptions of, and motivations to use, ICT applications. For example, the urban and rural demographic profiles between USA and Malaysia are dissimilar; in Malaysia the rural population is relatively poorer than the urban population, whereas the opposite is the case in the USA. There is also less evidence of the existence of digital divide in the inner city in Malaysia than in the USA (NTIA, 1995; Norris, P. 2001; Servon, L., 2002). Hence, this research attempts to examine the factors that influence the mass population to use ICT in order to produce primary and insight findings on the pattern of ICT diffusion in Malaysia. This research is significant in that, being based on the experiences of a developing country, comparison can be made between its findings and previous findings from developed nations. Digital divide based on geographical, income and workplace differences has been observed to exist within the Malaysian population. This is supported by (a) secondary data that shows how certain Malaysian states have higher Internet subscription rates than others and (b) comparison of teledensity rates in the urban and rural populations (NITC, 2000). Teledensity is defined as the number of main telephone lines per 100 people (ITU, 2002). Previous research on this subject in Malaysia has also descriptively shown the existence of a digital gap within Malaysia population (Rahmah, H. 1999). However, empirical analysis was not used in the previous research, so it was unable to show the cause-effect relationship between the variables concerned and the use of ICT. The methodology used in this research emphasizes the use of empirical analysis to establish the pattern of ICT usage, specifically considering the three dimensions of geographical difference, income and workplace. By using Structural Equation Modeling (SEM), the cause-effect relationships among the variables concerned and the use of ICT can be clearly identified. The use of the Contingent Valuation Method (CVM) through a stated Willingness to Pay (WTP) allows a monetary value to be produced that is statistically significant and can be used to compare the value placed on ICT by both urban and rural populations. Empirical analysis and the findings have produced a more reliable result than could be produced using only secondary data sources and literature survey. This research is therefore believed to contribute to the overall understanding of ICT diffusion in developing countries. As previously stated, this research investigates the diffusion of ICT from the demand-side perspective. The significance of this approach is that it allows subsequent policies and action plans to reduce the digital gap to be proposed based on the cause-effect relationships that have been derived from the data analyses reflecting what the consumers believe they need. By taking into account the case study findings, the mass population

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can be expected to respond positively to such policies and action plans. This is in line with the diffusion theory that recognizes the ultimate decision to use a new technology will be based on the value placed on it by the end users themselves (Rogers, E., 1995). 1.5 OVERALL RESEARCH METHODOLOGY The high level, overall research framework is shown in Figure 1.1.

Figure 1.1: Overall Research Framework

As shown in Figure 1.1, this research emphasizes investigation of:- (1) What are the factors that are influencing end users to use ICT? This research is using

the user perspective as the initial step to examine the dimension of geographical difference, income and workplace roles in diffusion of ICT in Malaysia.

(2) What are the patterns of diffusion that has taken place in Malaysia involving the

participation of the mass population? The research framework is intended to examine the existence of digital divide among the mass public.

The methodology to investigate the diffusion of ICT and the existence of digital divide is primarily based on data analysis using statistical and empirical techniques. Therefore, there is a need for primary data collection, as well as for secondary data. Finally, recommendations on what kind of policy and action plans Malaysia can adopt to bridge the digital divide can be proposed based on the data collected, analyzed and evaluated in this research. (The detailed research framework for this dissertation is presented in Chapter 4.)

Users-perspective

Proposed solutions

Diffusion of ICT: - Factors that influence? - Pattern?

Statistical and empirical analysis of the dimensions of geographical area, income and workplace

Methodology for data analysis

Recommendations on policy and action plan to reduce digital divide

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1.6 ORGANIZATION OF STUDY The remaining chapters of this dissertation are organized as follows:- Chapter 2: Literature Review This chapter reviews the existing literature on: diffusion of ICT, geographical effects on technology diffusion, and the issue of digital divide. The general principles and theories that are related to the diffusion of ICT and digital divide, as well as previous, related studies are the main focus of this chapter. Chapter 3: Overview of ICT Diffusion and Digital Divide in Malaysia This chapter reviews the current status of ICT diffusion and the issue of digital divide in Malaysia. It includes analysis of the secondary data available that supports the assumption of the existence of digital divide in the country. It also explains the involvement of the government through ICT programs, both planned and implemented, to bridge the digital divide among the population. Finally, this chapter reviews the issues raised and perspectives of digital divide in Malaysia. Chapter 4: Methodology This chapter explains the research methodology adopted and includes the research design, modeling and analysis approaches used. The hypotheses for the program of research are also presented in this chapter. Chapter 5: Factors that Influence the Diffusion of ICT to the Mass Population and a Comparison of Urban-Rural Differences in the Pattern of Diffusion This chapter examines the factors that encourage the mass population to use ICT. It emphasizes the dimension of the differences in geographical area. The chapter presents a case study into diffusion of ICT which investigates how senior High School students in Kelantan, Malaysia are using the Internet. Then, the case study also investigates if there is an existence of a digital divide between urban and rural teenagers in that state. Chapter 6: Factors in the Workplace that Influence the Diffusion of ICT This chapter examines the issue of workplace, specifically "nature of job", in influencing the population to use ICT. A case study is presented which used the core urban service sector working population in Kuala Lumpur as its sample. The case study investigates how income factor, geographical effect and nature of job are influencing the urban working population to use ICT. The existence of the competency-based digital divide is also investigated through the case study. Chapter 7: Role of Income in the Diffusion of ICT at the Urban and Rural Areas This chapter focuses on how income influences the diffusion of ICT to the mass population. Its case study looks at differences in attitude between the urban and rural population in their perceptions of the importance of using ICT. The samples are from the public servants in Kelantan.

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Chapter 8: Conclusion This chapter gives a summary of the result of analysis from the three case studies and literature survey, and provides concluding remarks based on the findings. The achievements of this research are also highlighted in this chapter. Recommendations for future research to be conducted on this subject are also proposed. Appendices There are four appendices for this dissertation. Appendix I contain a list of operational and technical terms used in this thesis and their definitions. The remaining Appendices II, III and IV contain the questionnaires from Case Studies 1, 2 and 3 respectively.

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CHAPTER 2

LITERATURE REVIEW 2.1 INTRODUCTION With its almost limitless applications, ICT has revolutionized communication and information processing globally. ICT has affected every aspect of human life, from the economy and medicine to social interactions; its use is a growing influence on everyday life. The perceived positive “added value” in human development that is achievable by using ICT applications has encouraged many governments globally to place a high priority on its diffusion to the mass population. It is their hope that with high rates of ICT diffusion (that is, more of the mass public in various backgrounds using ICT applications) there will be a reduction in the digital divide among the country’s population. Not only is ICT diffusion of interest to government, many academicians have also been involved in investigating the characteristics of ICT that have made it stand out from other new technology products and services that have been diffused and adopted by the mass population, such as, (1)The ICT products and services have been adopted at a very much faster rate in by the mass population (in many countries) as compared to other technology products, such as television or radio, which have taken few decades for those products to be adopted by the mass population (even in advanced technologies countries), (2) The unique feature of ICT products or services that they can be re-use by others without depleting in values, as opposed to other economic goods and services. Considering the importance of ICT, researchers are also interested to investigate the issues related to ICT diffusion, such as the digital divide, so that the mass population is able to participate in the “digital age”, without marginalizing certain groups of people within the population. Numerous studies in recent years have been conducted on the subject of ICT diffusion, but they were mainly based on the experiences of developed countries and the issues that these nations have been facing. These issues might not share the same cultural or insight characteristics that are directly applicable in producing policy or development guidelines to be adopted by the developing countries; only the general principles and theories from the previous studies can be adopted for these countries. The literature survey for this research has therefore reviewed the theoretical principles of previous studies and the universal issues that they have raised from those studies which are relevant to developing countries such as Malaysia. This chapter is divided into three sections, the two main issues that have been the focus of this research; the diffusion of ICT and digital divide, and also the methodology aspects of literature.

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The first section (Diffusion of ICT) considers the definition of diffusion of innovation, characteristics and other related theories on the diffusion process as well as its implications. The second section (Digital Divide) reviews previous studies on the issue of digital divide and examines their theoretical implications. The third section (Research Approach) explains the methodology literature of this research, based on the previous studies on diffusion of ICT and digital divide, as well as on the telecommunication methodology that have been used in this research. 2.2 DIFFUSION OF ICT 2.2.1 Definition of Diffusion Diffusion is defined as the process by which an innovation is communicated through certain channels over time among members of a social system (Rogers, E., 1995). According to Rogers, four main elements are present in the diffusion process. These elements are:-

(1) Innovation – the innovation itself as ideas, practices or objects that is perceived as new by an individual or other unit of adoption.

(2) Communication channels – the means by which messages about the innovation

are passed from one individual to another.

(3) Time – the time dimension is involved in of diffusion. Rogers considered three time factors:-

(i) Innovation Decision Process Theory – that states that there are five

distinct stages for diffusion, namely; (a) knowledge, (b) persuasion, (c) decision, (d) implementation, and (e) confirmation. The “knowledge” and “persuasion” stages in the case of ICT can be accelerated by the involvement of public and private sectors in informing and providing hard/soft info-structure for the mass public to use ICT. The “confirmation” stage involves the individual or groups own experienced in using ICT. The end users will either reject or continue using ICT if they perceived the quality and relevancy of the technology to be of sufficient benefit to them.

(ii) Individual Innovativeness Theory - that states that those individuals

who are predisposed to being innovative will adopt a new technology earlier than those who are less predisposed.

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(iii) Rate of Adoption – the innovations are diffused over time in a pattern resembles an “S-shaped” curve. It theorizes that an innovation goes through a period of slow, gradual growth before experiencing a period of relatively dramatic and rapid growth.

(4) Social system – a set of interrelated units that are engaged in joint problem

solving to accomplish a common goal.

The diffusion process in new technology products have two distinct characteristics, which are:-

(1) The diffusion process is time consuming - it takes a significant period for any new technology to reach the mass public.

(2) There are the wide variations in the rates of acceptance of different innovations.

(Rosenberg, N., 1972; Rogers, E., 1995) 2.2.2 Adoption of Technology Products and Services There are three important ways in which the adoption of interactive communications ICT differs from that of previous innovations (Rogers, E., 1986):-

(1) A critical mass of adopters is needed to convince the “mainstream” tutors/management of the technology’s efficacy.

(2) Regular and frequent use is necessary to ensure success of the diffusion effort.

(3) Internet technology is a tool that can be applied in different ways and for different

purposes and as such is part of a dynamic process system that can evolve through change, modification and reinvention by individual adopters.

A high rate of adoption for ICT at the "early adopters" and "early majority" stages is important because it is during these stages that a “critical mass” can be achieved. The success of ICT diffusion at these two stages will allow the diffusion process to continue to the remaining stages of diffusion, "late majority" and "laggards". The comparison of the typical characteristics of “early adopters” and “early majority” is shown in Table 2.1. There is a significant difference in term of how the “early adopters” and “early majority” adopt to the new technology, even though both groups are in the first 50% of users taking up a technology.

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Table 2.1: Comparison of the Characteristics between Early Adopters Early Majority in Adopting New Technology

Early Adopters Early Majority Technology focused Not technically focused Proponents of revolutionary change Proponents of evolutionary change Visionary users Pragmatic users Project oriented Process oriented Willing to take risks Averse to taking risk Willing to experiment Look for proven applications Individually self-sufficient May require support Tend to communicate horizontally (focus across discipline)

Tend to communicate vertically (focused within a discipline)

Source: Adapted from Geohegan, 1994, from V.H., Carl Jr. http://tlc.nlm.gov/resources/publications/sourcebook/adoptiondiffusion.html There are two leading models that explain the dispersion in adoption times using two different mechanisms (Hall, B. et al, 2003). These are:-

(1) Adopter heterogeneity which assumes that different individuals place different values on the innovation. “S-curve” adoption will be generated when:-

(i) The distribution of values placed on the new product by potential

adopters is normal or approximately normal. (ii) The cost of the new product is constant or declines monotonically over

time. (iii) Individuals adopt when the value they place on the product is greater

than its cost.

(2) Adopter learning which posits that consumers can have identical tastes and the cost for the new technology can be constant over time, but not all consumers are informed about the new technology at the same time. By learning about the new technology from other people (such as neighbors or friends) or other media, more people will adopt the new technology over time, leading to an increased rate of adoption. Eventually, the market becomes saturated, and the rate decrease again, thus generating an “S-shaped” diffusion curve.

Considering that the diffusion of ICT is theoretically thought to be a slow process that follows an “S-shaped” curve of dispersion over time and also the dominant role of core urban areas for new technology to initially diffuse as opposed to the rural areas, there is an argument whether there is a need to intervene to accelerate the rate of its diffusion to the mass population or to let the natural process of ICT diffusion to take its course. It is predicted that the early adopters will be the elite urban population with higher income, and that ICT will naturally diffuse to the broader population, including the rural population, at a later stage when the technology itself has become more familiar and common for the mass population (Compaine, B., 2000). Therefore, there is no need to act

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precipitately on the issue of digital divide; let the market settle the issue as what have been advocated by Compaine. It is also been argued that being latecomers to ICT development is not a necessarily a disadvantage at all, as such tardiness might create a “window of opportunity” for the latecomers to “leap-frog” into a new technological phase, and the Internet can be spread efficiently with less government intervention directly in the diffusion process (Sidorenko, A. et al., 2001). This could bring higher economic growth to the nation when the technology became sufficiently affordable to replace previously dominant technologies. On the other hand, the diffusion theory predicts that without successful state intervention (and if the spread of the Internet follows the trajectory established by many previous technologies), the initial adoption of Internet can be expected to exacerbate existing social divisions, at least in the early to middle stages of the “S-shaped” diffusion curve - and perhaps in long term as well if the new technology produces substantial productivity gains and continuing access barriers (Norris, P., 2001). This argument shows how important state intervention is to ensure the diffusion process to spread out evenly to the population, with minimalist exclusion. The continuous diffusion of ICT will eventually be able to reduce the problem of digital divide among the population (Servon, L., 1002). 2.2.3 Perceived Attributes Theory The “Perceived Attributes Theory” (Rogers, E., 1995) states that potential adopters judge an innovation based on their perception in regard to five attributes of the innovation. These attributes are:-

(1) Trialability – the innovation products or services can be tried on a limited basis before adoption.

(2) Observability – they offers observable results.

(3) Relative Advantage – they have an advantage relative as compared to other,

competing technologies.

(4) Complexity – they are not overly complex.

(5) Compatibility – the innovation or technology is compatible with existing practices and values.

Even though the ultimate decision for the diffusion is made by the demand side, the benefits and the cost can be influenced by the suppliers of the new technology (Hall, B. et al, 2003). From the demand-side or consumer point of view, the benefits are the increased utility of the new product (good), such benefit evaluation may take into account such non-economic factors as the skill level of the individual or worker in the working environment, commitment by the consumer and network effect (Rosenberg N., 1972).

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ICTs have been classified as general purpose technologies (GPTs) that can be used in a large number of sectors, leading to dramatic changes in their modes of operation (Helpman, 1998; Sidonrenko, A. et al., 2001). The essential features of GPTs include: their initial scope for improvement; variety of users and potential applications in other sectors of the economy; and strong complementarities with other technologies. The GPTs also shares common characteristics, as they begin with limited number of users. But, as the technologies diffuse throughout the economy, they evolve into much more complex technologies, with dramatic increases in efficiency (Lipsey, R., from Drysdale, P., 2001). Therefore, ICTs are essential for coordination of all economic activities (Sidonrenko, A. et al., 2001). From the supply point of view, Lipsey in its article also argued that the expectation that there will be productivity bonuses accompanying with the introduction of GPT may be unfounded because:- (1) Although new technology will be instituted whenever it promises to be profitable, there is no guarantee that each new GPT will have a larger (or even the same) effect on profit or productivity than the ones that preceded it. Integrated programs or changes will be the key to its success, but it will evolve and progress might be a slow. (2) Neoclassical growth model cannot distinguish in interpreting what is going on between changes in technology and the facilitating structure and productivity that are used. (3) Without further GPT invented to provide new research programs, the number of derivative technological development would eventually diminish. (4) When GPT is introduced, there are reasons why it may slow the growth of productivity below average over its lifetime, as GPT need time to evolve, and for changes to be made. It is predicted that technology change drives long-term growth. Technological advance not only raises income, but also transform the population's lives through the invention of other innovative products or services. In the long term, it will transform the people's standards of living, their social and political ways of life, and their value systems (Lipsey, R. from Drysdale, P., 2004). Therefore, it is important that every nation that adopted new technology, such as ICT, to target for a long-term goal for socio-economic prosperity, as the motivation to invest and encourage the diffusion of ICT to their population. They must expect that the benefit might not be visible in the short-term period, but should be realized in the long-term. 2.2.4 Geographical Differences Affecting the Diffusion Process The issue of geographical differences has always been the center of reference on how diffusion of technology is taking place. The spatial adoption potential theory predicts that technological developments follow a filtering down process from the urban hierarchy

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(core area) to the peripheral area (Capella, R., 1994). The agglomeration effect theory also agrees on how the adoption of a new technology is taking place: the core areas will be the center for further growth, including with improved or adopting to new technology. On the other hand, the peripheral or rural areas will be late in experiencing the changes. Forces that influencing the agglomeration can be divided into two: “centripetal forces” (those based on linkages, thick market, knowledge spillovers and other pure external economies); and “centrifugal forces” (based on immobile factors such as land rent/commuting, congestion and other pure diseconomies) (Fujita, M. et al, 1999). Previous studies has also confirmed that the rural populations are more likely to be reluctant to adopt new technology products/services that their urban counterparts who are more willing to be “trendsetters” (Feldman, M., 2001). To encourage the diffusion of ICT at the initial stages, it is argued that a “top-down” public policy is more appropriate, specifically in the telecommunications sector implementing “information highways” between metropolitan areas. A “bottom-up” development policy, focusing on network development in local areas, is at risk of generating a development model with few possible inter-linkages among “island of networks” and thus a percentage risk of failure in its local characteristics. On the other hand, the “top-down” approach could generate cumulative adoption processes. Geographical asymmetry need to be addressed in order to be efficient. Public policies should encourage the development of computer networks in areas with high potential demand density, for example in central region, where mechanism such as network externalities could generate positive cumulative effects and where critical mass could be achieved in shorter time (Capello, R. et al, from Nijkamp, P., 1994). Based on the regional science researchers’ point of view, as mentioned above, the rural population will be left out from participating actively in the diffusion process of ICT at the early adopter or early majority stages. This also implies that there is going to be a diffusion gap between the urban and rural population as they adopt ICT applications, because the rate of adoption favors the urban population. This scenario is one of the challenges for the public policy in its effort to reduce the digital divide between the urban and rural population. 2.3 DIGITAL DIVIDE

Digital divide is defined by the Organization of Economic Cooperation Development (OECD) as the gap between individuals, households, businesses and geographical areas with regards to their opportunities to access ICTs and their use of the Internet for a wide variety of activities (OECD, 2001). According to Wilson., the digital divide refers to an inequality of access, distribution and use of ICT between two or more populations (Wilson III, E., 2004).

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2.3.1 General Dimensions of the Divide

Digital divide generally exists along the following dimensions, based on observation of which segment of the population globally are online (Norris, P., 2001):- (1) Income: an OECD study in France, Japan and the USA confirmed the substantial disparity in the availability of personal computers in the home for different levels of household income, with the gap between the lowest and highest income groups widening from 1995-1998. (2) Occupation: professional and managerial groups are more likely to use Internet, and their companies are more likely to provide them with training in ICT. Those seeking job are more marginalized than those who have a job, proving that Internet access is important for the spread of Internet. (3) Education: can be expected to improve the general capacity for analytical reasoning and information filtering, which helps cope with the flow of information available online, as well as strengthening numeracy, literacy, English-language and keyboard skills. In Europe those with a college education are seven times more likely to be online than those who left school at fifteen years old. (4) Gender: There is a wide range of evidence suggesting that women are less likely to use computers because of early experiences within the classroom, reflecting long-standing gender differences in attitude towards science and technology, and towards the typical contents of computer games and websites for children. The position of women as caregivers in the home also plays a major role. (5) Generation: perhaps the most significant factor for the future diffusion of Internet, but yet the most taken for granted in policy circles. The older generation tends to be reluctant to use the new technology, and this group of people is expected to be marginalized from using ICT in the future. All the listed dimensions are interrelated. The inter-relation is most notable when comparing income and education; these are positively correlated. Typically, those who acquired higher education will earn a higher income. 2.3.2 Accessibility to ICT Accessibility to ICT is the main causes of digital divide, as those who do not have access to ICT are not be able to use it. However, it is argued that even amongst those with access to ICT, there are many who cannot fully benefiting in the information society because their skills allow them only to perform low-order tasks using ICT applications (Servon, L., 2002) as opposed to using high-order tasks that is more “meaningful” and will give “added-value” in the process of becoming knowledge-society. Evidence from the Philippines indicates that youngsters are using the Internet in cyber café only for gaming (Lallana, E. in Drysdale, P., 2001), instead of using it for “enlightenment” in

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enriching their knowledge. In the year 2000, the Global Knowledge Partnership, in its meeting in Kuala Lumpur, redefined access to include (Servon, L., 2002):- (1) Physical access to ICT – access to a computer and to the Internet. Physical access is usually measured through the distribution of ICT devices per capita or through the density of enabling infrastructures, such as the land lines per thousand (Wilson, E., 2004). (2) Training – education in ICT, or proportion of the people that are ICT literate. (3) Content - local content must be able to meet the needs and demand of disfranchised groups, and the content must also be created by these groups and address the issues of culture and language related to these group.

(4) Access to decision-making process – there is access to the process by which the telecommunications decisions are made. Some of the factors that explain the persistence of digital divide are:- (1) Market forces (cost factor). PC and Internet access is still expensive and unaffordable for many people.

(2) Unequal investment in infrastructure – for example, suburban districts and cities still get a higher priority in upgrading telecommunication infrastructure than the rural and the inner city areas. (3) Discrimination – for example according to race or physical disability. (4) Culture and content – the culture of the producer of the programs shapes the medium. The availability of physical access is arguably not enough, as it gives a passive connotation to using ICT. Participation and engagement is a more appropriate concept for access to ICT, as full access in a knowledge-based society requires full engagement by its citizens. Demographic access to consumer that includes every demographic characters of the society is also important in shaping access to ICT. The most determinative features are: income, education, age, gender, and urban-rural location (Wilson III, E., 2004), similar to what has been mentioned in section 2.3.1. Based on the dynamic nature of digital divide in society, the predictions for the alternative trends of future inequality differ. Optimists hypothesize that developing countries’ relative ICT status will converge with rich or developed countries. Therefore, digital divide issue shrinking with time. Pessimists, in contrast, believe digital divide will grow worse, no matter what is done. For example, the argument that competitive advantage between the developed nations and developing nations is so large, that it is impossible for the late adopters to catch up, significantly reducing the digital divide

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(Ferreira, F., 1999; Wilson III, E., 2004). It has also argued that the institutional, cultural and economic impediments to informatization are so great that poorer countries and communities will be permanently blocked from catching up with advanced countries (Wilson III, E., 2004). Structuralists, on the other hand, believe that ICT outcomes are more contingent. ICT will not transform society, as when ICTs are introduced into the social system, the resulting diffusion pattern will follow already prevalent patterns of economic and political distributions of power. Therefore, it is the society that transforms ICT. Once in place, ICTs become available to be used as a tool or resource by any group that can seize them. The result distribution outcome depends upon the material and social conditions, and upon the balances of power and influence within the system (Wilson III, E., 2004). 2.3.3 Rationale for Closing the Digital Gap The same arguments in favour of accelerating the diffusion of ICT address the need to bridge the digital gap. The rationale for closing the digital gap is summarized as follows:- (1) Economic rationale – the impact of ICT on the economy is significant, and this impact is expected to grow in the future. In the USA alone information technology companies' sales of about US$ 800 billion in year 2000, contributed about 10% of the country's GDP (NTIA, 2002). The global economic shift from manufacturing towards services and information-related industries, as is happening in Malaysia, is the reason why it is important to bridge the digital gap among the country's population.

(2) Sociopolitical rationale – information is a public good to which everyone in the society should have access. ICT is an important tool to strengthen the social networks and participation in low income communities. A group that shares common interests, but not necessarily share physical proximity, can also be brought together through ICT applications (Servon, L., 2002). Without having to intervene in the digital divide, the technology gap reinforces the existing patterns of social exclusion of communities. The above rationales predicate that, for a country like Malaysia that is dependent economically on the global market, and with its multi-ethnics background, the need to bridge the digital gap among the population is most urgent. 2.4 RESEARCH APPROACH 2.4.1 Method of Study This research is to study on the diffusion of ICT and the issue of digital divide that is based on three dimensions of geographical differences, income and workplace. As this research emphasized on the social-economic aspect of telecommunication network, the research should be conducted based on social science methodology. A social science research will be based on defining variables, looking for the association between them and to understand the cause and effect of the variables to one another (Bernard, R., 2000).

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By using quantitative and empirical approach, it indicates that the information, knowledge and understanding are gathered through experience and direct data collection (Black, T., 1999). The usage of conceptual definitions, that is the abstraction in words that facilitate understanding of the variables; and operational definitions, consists of a set of instructions on how to measure a variable that have been conceptually defined, will give an understanding on the variables that is investigated (Bernard, R., 2000). As the nature of investigating the human behavior is difficult to provide accurate result, the use of sound operational variables that are also measurable are very important in this research. 2.4.2 Data Collections By using social science research, these research need to gather primary and/or secondary data that could be used to prove the working hypotheses. There is a need to refer and examine previous studies on the similar subject of ICT diffusion and digital divide, which could be used as a reference in this research for how data were gathered and collected. Among the previous studies that have been conducted related to the issue of ICT diffusion and digital divide were:- (1) NTIA Reports that were conducted by the USA Government. These reports were using both secondary data and questionnaire surveys to investigate the situation on digital divide in the USA. The issues raised in the reports also changes from year to year when the reports were issued, showing the dynamic nature of the issue of digital divide (Servon, L., 2002). The ever changing issue that is related to digital divide must be closely paid into intention, as the current issue might improve in the following year, and not becoming an issue anymore. For example, in the first NTIA report, the issue of digital divide between the urban and rural Americans was the main issue that required immediate action by the government. However, the recent NTIA report indicated that the digital divide between urban and rural Americans was closing down, and other issues have appeared (NTIA, 2002). (2) Multimedia Malaysia: Internet Case Study, by ITU, was based on secondary data and interviewed. The dimensions researched, such as geographical differences or workplace effect was limited due to the dependence on limited secondary data in the study. However, the findings have discovered the existence of the digital divide problems within the Malaysian society that might slow-down the diffusion process, as a consequence of the inequality for telecommunication access in the rural area and affordability to use ICT (ITU, 2002). Based on the two examples above on digital divide and ICT diffusion, it is observed that the issue of digital divide must not be treated as a static issue, and the dynamic nature of the issue must be expected when this research is to proceed further. Another observation from the study on the diffusion of ICT and digital divide in Malaysia is that dependency for secondary data would not be able to give insight information of the variables concern to be studied, as data availability in developing countries, such as Malaysia is still limited. For example, the data to measure the level of

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ICT diffusion in Malaysia is still depending on the data on national monthly income, the diffusion of other previous new technology products such as television, radio or facsimile; as well as newspapers circulation as information rich products, and those products are not related to telecommunication nature of products or services directly (ITU, 2002; ISIS, 2002). Therefore, this will lead to ambiguous or less accurate result on the subject of ICT from the previous study. It is important to consider the characteristics of ICT, such as network effect and the importance of the diffusion process to reach critical mass in order to succeed in the data collection techniques. Interviewing and questionnaire survey are some of the techniques that are widely used in the socio-economic research related to telecommunication products and services. For example, the study on “Second-level Digital Divide” by Hargittai that in person observation and interviews to selected samples or case study (Hargittai, E., 2002) or by Norizan on the digital divide in education in Malaysia that used questionnaire survey (Norizan, M., 2002). Interview technique is time consuming and costly to be conducted, and might result in “interviewer’s bias”. However, it is flexible and will give a depth observation of the issue concerned. Questionnaire survey, on the other hand, as a method for data collection, has the advantages as it is convenient to be conducted and also will reduce the bias that is related when conducting personal interview (Uma Sekaran, 1992). The use of proxy or operational variables can also be measurable when using questionnaire survey, considering the research is using empirical approach and using hypothesis to draw conclusion. However, the questions are fixed and might not be getting an in depth result as the interview. For this research, questionnaire survey is considered to be the appropriate method for data collections, as it involves a large sample size which made interview not a practical method for data collections. 2.4.3 Data Analysis The previous studies on the issue of digital divide have emphasized on analyzing the data to draw its conclusion from descriptive statistics (Norizan, M., 2002, NTIA, 2002, ITU, 2002). The association and correlation of the dependant and independent variables as well as between the independent variables can be observed through descriptive analysis. However, the cause-effect relationship, advocating the direction of the inter-relationship cannot be determined by using only descriptive statistics (Bernard, R., 2000 & Black, T., 1999). Hence, it is important that if the cause-effect relationship of the variables that influence the use of ICT is to be studied, the data must be able to analyze beyond the association between them. The method of data analysis that advocates the cause-effect relationship includes the Structural Equation Modeling (SEM), which allows the covariance relationship among the variables (Arbuckle, J., 1999; Bernard, E., 2000). The use of path diagram in SEM give a clear visualized direction of the inter-relationship that exist between variables studied, as compared to other statistical model that is usually represented by a set of matrix equations (Hox, J.J., 2000).

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When analyzing the data that include a substantial percentage of non-users or passive users for the products or services, it is important that the data is analyzed using other type of statistical method, such as Contingent Valuation Method, that advocates the participation of non-users in its analysis. This type of method is relevant in analyzing the new technology products, as it is difficult to put a value to it, especially if the new technology product is at the initial stage of diffusion process (Freeman III, A. Myrick, 2003).

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CHAPTER 3

OVERVIEW OF ICT DIFFUSION AND DIGITAL DIVIDE IN MALAYSIA 3.1 BRIEF BACKGROUND

Malaysia is made up of eleven States in Peninsular Malaysia and the states of Sabah and Sarawak on the Borneo Island. The capital city (Kuala Lumpur) and Labuan Island (off the coast of Sabah) form an additional administrative district known as Federal Territories. The location map of Malaysia is as shown in Figure 3.1. Figure 3.1: Location Map of Malaysia

Source: The World Factbook, www.cia.gov/cia/publications/factbook/geos/my.html 3.1.1 Demographic Profile The population of Malaysia was estimated to be 23.26 million in the year 2000. With regard to ethnic contribution, Bumiputera (Malay and indigenous groups) represent 58 .5%, Chinese 24.1%, Indian 6.9%, and others about 3.0%. In term of age distribution, 33.0% of the population is under the age of fifteen, while almost 4.0% are sixty-five year old and older. The remaining 63.0%, the majority of the population, is within the working age population (DOS, 2002).

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3.1.2 Economic Background Since 1957, when Malaysia gained independence from Great Britain, Malaysia has made substantial economic progress. From the mid-1980s through to the mid-1990s, the country enjoyed an economic growth of more than 8.0% GDP growth annually. However, the Asian economic crisis in 1997 affected Malaysia and, in the following year, 1998, it experienced negative economic growth. From 1999, Malaysia again was experiencing positive economic growth. The country’s economic and social development was guided by the government’s medium range development plan, known as the “Five-Year Development Plan”. The present development plan for the country is a long term plan known as “Vision 2020”, which, it is envisaged, will transform Malaysia into a developed nation in the year 2020. Malaysia’s unemployment rate has decline from 5.1% in 1990 to 3.1% in 2000, where a rate of 2.0% to 4.0% is generally considered to indicate full employment (MQL, 2003). The largest employment sectors are production, agriculture and service industries (in decreasing order of number of workers). Based on sectors, the service sector is making the most use of ICT applications in the workplace, with significant budget allocated for ICT. 3.2 DIFFUSION OF ICT IN MALAYSIA

From 1998 to 2003, Malaysia experienced an increase in its population’s use of ICT products and services, particularly in the use of cellular telephones, as is shown in Figure 3.2 below. The penetration rate of cellular phones increased rapidly from 9.7% in 1998 to 43.9% in 2003 - a 34% increase. This increase was greater than that for any other telecommunication product or service. The great increase in the use of cellular phones is primarily because the wireless services’ area of coverage is much greater than that of fixed line connections; unlike fixed line services, wireless services comprehensively cover the hinterlands and rural areas. Other factors include: (1) The first time connection cost for cellular phones is cheaper than that for fixed line telephones. (2) The efficiency of the services provided by cellular phones providers is greater than that of regular fixed line telephone providers. For example, there is less waiting time in getting a cellular phone connected than a regular fixed line telephone. (3) Convenience of usage because of its portability. (4) Added features such as text messages or Short Message Services (SMS).

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The total number of telephones penetration rate increased significantly over the period, from 29.4% in 1998 to 61.99% in 2003 (refer to Figure 3.2). This can be explained by the improvement in the telecommunication infrastructures throughout the country and the improvement in the affluence of the Malaysian population throughout this period of time. A rapid increase in the penetration rate for telephones is a positive indicator of the mass population having access to the Internet, as most of the Internet services in Malaysia are accessed through regular telephone lines (ITU, 2002). As for the Internet dial-up service penetration rate, the increase from 1998 to 2003 was more than six fold, from 1.8% to 11.4%. The biggest jump in the penetration rate occurred at the end of the “Asian financial crisis”, between 1999 (2.9%) and 2000 (7.1%). There was only a gradual increase in the penetration rate for Internet dial-up services in 2003 as compared to the increase in the years 2001 (8.8%) and 2002 (10.5%). The Internet dial-up penetration rate is an important indicator for measuring the use of ICT for a developing country and is closely related to the population's ability to use the Internet. It is therefore very important that Malaysia continues to experience a positive increasing trend in this. The high-speed Internet access technology known as broadband has also experienced an increase in its penetration rate since the service was introduced to Malaysia in 2002, but its diffusion is still at an early stage. It should be noted that high-speed Internet connection is important for Malaysian society because only through this high-speed connection can Internet use be fully optimized; most of the “value added” services of the Internet itself, such as e-commerce, telemedicine and teleconferencing, can be used effectively if one has a high-speed Internet connection. Without a high-speed Internet connection, Internet use is primarily limited to entertainment and information retrieval. The penetration rate of personal computers (PCs) in Malaysia has also grown, from 6.1 (1998) to 16.6 (2003) PCs per 100 people. Although not all PC owners are Internet subscribers, these two factors are interrelated as PC ownership is a prerequisite (in most cases) for an individual or household to be connected to the Internet. Despite the implosion of the “Information Technology Bubble” in the year 2000, the demand for ICT products and services in Malaysia since then seems to have survived unaffected, and continues to increase. Being at the early stage of the “S” curve for the diffusion of ICT to take place, it is anticipated that the current trend of increasing use of ICT products and services will continue in the next few years.

26

Figure 3.2: ICT Products and Services Penetration Rate in Malaysia (1998-2003)

31.44

41.55

56.12

21.8

7.92.9

50.37

61.99

29.4 36.930.8

129.7

43.9

6.1

14.512.5

16.6

8.4

1.8

11.47.1 8.8 10.5

0.440.080

10

20

30

40

50

60

70

1998 1999 2000 2001 2002 2003

Year

Pene

trat

ion

Rat

eTotal num ber oftelephones

Cellular telephone

Personal Com puter

Internet Dial-up

Broadband

Source: Malaysia National Information Technology Committee 3.3 ICT DIFFUSION STATUS IN COMPARISON WITH OTHER COUNTRIES Malaysia has emerged as a very active country in the Asian region in pursuing its citizen to use ICT applications in their daily life. Malaysia’s status on Internet usage and PC penetration rate as compared to five other ASEAN countries is shown in Table 3.1. While the diffusion of Internet service is very impressive in Singapore (with 5,087.65 Internet users per 10,000 people), the rest of the ASEAN-6 countries Internet diffusion rate is less impressive. Even Malaysia, which has the second highest number of Internet users per 10,000 inhabitants among the ASEAN-6 countries, is still far behind Singapore (3,440.95 of Internet users per 10,000 inhabitants). On the other hand, Malaysia is far ahead than the other remaining ASEAN-6 countries in experiencing the number of Internet host, Internet users and PC per population. Table 3.1: ASEAN-6: Information Technology Indicators (2003) Country Internet Hosts per

10,000 peopleInternet Users per

10,000 peoplePC per 100

peopleIndonesia 2.88 375.65 1.19Malaysia 42.9 3,440.95 16.6Philippines 3.45 440.38 2.77Singapore 1,155.31 5,087.65 62.2Thailand 16.4 1,105.19 3.98Vietnam 0.04 430.10 0.98Source: ITU, 2004

27

All the ASEAN-6 countries are experiencing a growth in ICT diffusion to its population. The following (based on the studies conducted by ITU in 2001) summarizes the key features of each country's ICT growth:-

(1) Indonesia – demand for Internet has increased as a result of the open political environment and the profusion of Indonesian news-based portals. Internet growth has been primarily grass-roots driven with less government intervention. Cybercafés or “Warnets”, operated by the private sector, have played a significant role in the diffusion of the Internet to the mass population.

(2) The Philippines – the population's low income has inhibited access to ICT. On

the other hand, the fairly open and private Philippines telecom market has meant that the government has had little leverage to force operators to install ICT infrastructure where it is mostly needed. The extraordinarily high level of use of mobile SMS is a phenomenon in the country; the Philippines has the highest SMS usage rates in the world.

(3) Thailand – the language barrier and affordability have been the main problems

for the population to get connected to Internet.

(4) Vietnam – despite a late start, Vietnam has experienced a dramatic growth in its Internet use. During 2000 alone, the number of dial-up Internet subscribers grew by 150%. However, the lack of good “infostructures” has left the country to with the lowest rank for ICT diffusion among the ASEAN-6 countries.

Malaysia is ranked at number 26 globally for its “Readiness in ICT”, thus placing Malaysia among the top Asian countries, only behind Singapore, Japan, Taiwan, Hong Kong and South Korea; based on the ranking by the Global Information Technology (GITR) Report 2003-2004 in which GITR ranked 102 nations that participated in the study according to indices formulated by the World Economic Forum in collaboration with World Bank and INSEAD. For the “Government Readiness Index” (GRI), Malaysia is ranked at number 7 (third among Asian countries, behind Singapore and Taiwan), which is a recognition of the policies and actions taken by the government to promote ICT use within the government is on the right direction. These policies, advocating technology dynamism within the public sector (as have been adopted by Malaysia) to encourage the diffusion of ICT, is also agreed by many scholars could assist in having the mass population to be networked at a faster pace than by going through the slow natural process of adoption to new technology. E-commerce is considered to be one of the most “meaningful” ICT applications since e-commerce has a direct positive effect on a country’s economy. Table 3.2 shows that Malaysia is ranked second among ASEAN-6 countries for e-commerce readiness, behind Singapore. From Table 3.2 one can also see that:

(i) Malaysia is ranked fourth for “basic infrastructure” that covers access to basic infrastructure and speed and functionality of that infrastructure. Even though Malaysia’s basic infrastructure is better than most of the

28

ASEAN-6 countries, the low ranking might be the result of the infrastructure readiness exclusively for e-commerce, that was not well-developed during the time of the study.

(ii) Malaysia is ranked fourth for “access to services”, which is measured

by capacity of access to Internet services. The lower ranking for Malaysia is most likely due to the limited products and services available for e-commerce in the country as a result of censorship or sensitive products/services not allowed to be consumed in Malaysia.

(iii) Malaysia scores well at the second ranking for “Internet use”, which is

assessed by the use of Internet technologies by the public and private sectors.

(iv) As for “promotion and facilitation”, which include public awareness

and promotion and facilitation activities by the government, Malaysia score poorly, being in fourth position.

(v) Malaysia is ranked second for “skills and human resources”, which is

assessed on education system, skill formation and training. (vi) As for “positioning”, which covers an assessment of government

policies such as taxation, legal framework, security and encryption, the country has the highest score and ranks first.

Malaysia has the potential to be the leader among the ASEAN countries in

developing e-commerce, but there is a need:- (i) to improve the country’s basic infrastructure (especially in East

Malaysia and the rural areas) (ii) to replace dial-up networking with the a high-speed broadband service

(iii) to implement a more liberal policy for e-commerce Internet contents.

29

Table 3.2: ASEAN-6: E-Commerce Readiness Assessment (0.0 = least ready, 1.0 = most ready)

Country Basic Infra-

structure

Access to

Service

Internet use

Promotion and

facilitation

Skills & human

resources

Positioning Average

Indonesia 0.54 (5) 0.54 (3)

0.34 (6) 0.49 (5) 0.23 (5) 0.58 (5) 0.45 (5)

Malaysia 0.60 (4) 0.48 (5)

0.61 (2) 0.67 (4) 0.37 (2) 0.82 (1) 0.59 (2)

Philippines 0.63 (3) 0.64 (1)

0.59 (3) 0.70 (3) 0.33 (3) 0.61 (4) 0.58 (3)

Singapore 0.82 (1) 0.56 (2)

0.66 (1) 0.82 (1) 0.45 (1) 0.63 (2) 0.65 (1)

Thailand 0.68 (2) 0.53 (4)

0.51 (4) 0.72 (2) 0.29 (4) 0.62 (3) 0.56 (4)

Vietnam 0.45 (6) 0.37 (6)

0.38 (5) 0.39 (6) 0.23 (6) 0.42 (6) 0.37 (6)

Average of ASEAN-6 0.62 0.52 0.52 0.63 0.32 0.61 0.53

Source: Electronic Commerce Resource Center (2000, pg. 113), from Sakulrat Montreevat, 2002 Note: Figures within parentheses indicate the rankings scored by the countries on each factor 3.4 EVIDENCE OF THE EXISTENCE OF DIGITAL DIVIDE The following sections present evidence for the existence of digital divide in Malaysia based on the available indicators and data.

3.4.1 Urban versus Rural Areas Land-line Telephone Penetration Rate

Malaysia, as a developing country, is still facing the problem of uneven accessibility to telecommunication facilities, and thus to ICT – particularly in rural areas. Teledensity for rural and urban areas in Malaysia from 1990 to 2000 is shown in Figure 3.3, below. Over this time period there was an increase in teledensity from 2.2 to 11.7 in rural areas, whilst there was an increase from 16.6 to 28.6 in urban areas. The rural areas experienced a monotonic increase in teledensity, whereas there was a slight decrease in teledensity in urban areas between 1998 and 2000. This might be due to the increase in the use of cellular phones among the urban population. Previous studies on the diffusion of new technology products have shown that the urban population typically continues to lead the nation in having the highest use of such products. It is anticipated that a similar pattern will hold for access and connectivity to the land-line telephone service. However, it is worrying that the teledensity rate gap between the urban and rural areas did not show any sign of narrowing in the 10 period covered by the study; from 1990 to 2000 there was no narrowing of the gap in fixed line teledensity rates

30

between the urban and rural areas, and the trends remain parallel to each other (see Figure 3.3). The current trend based on the time series plot is an indication that there exists a digital divide between the urban and rural populations in Malaysia. Figure 3.3: Teledensity between Urban-Rural Areas

Teledensity Based on Geographical Area

16.6

24.8

29.5 28.6

2.2

5.5

10.7 11.79.3

16.6

22.521

0

5

10

15

20

25

30

35

1990 1995 1998 2000

Year

Tele

dens

ity (%

)

UrbanRuralOverall

Source: Malaysia National Information Technology Committee 3.4.2 Urban versus Rural Areas’ Investment in Telecommunication When observed from the supply perspective, the investment in telecommunications has been greater in Kuala Lumpur (which is located within the Multi-media Super-corridors (MSC)) than in other Malaysian cities and towns (see Table 3.3). From 1993 to 1998 the disparity between the capital and other cities and towns increased. Although total investment in the telecommunication sector rose from 0.73% of GDP (1987-1991) to 1.52% (1992-1995), the increase in the Kuala Lumpur area (from 13.6% in 1993 to 30.0% in 1998), was much greater than that in other cities (from 12.5% to 18.9% over the same period), thus widening the gap in telecommunications investment between the capital and other cities. The concentration of ICT development in the Kuala Lumpur area has primarily benefited the city’s residents as they have had been given good access to telecommunication infrastructure, products and services that have enabled them to optimize their ICT usage. On the other hand, the rural areas, with limited access to telecommunication infrastructures, products and services, have been less motivated to use ICT. A digital divide has been created because of the disparity in the level of investment in telecommunication products and services between the capital and other areas in Malaysia.

31

Table 3.3: Investment in Telecommunication in Malaysia between Largest City-Other Cities (1993 and 1998)

Year Largest City (%)

Other Cities (%)

National Average (%)

Investment in Telecom as % of GDP

1993 13.6 12.5 12.6 0.73 (’87-’91) 1998 30.0 18.9 19.5 1.52 (’92-’96)

Source: Norihiko Yamada (2002), Ohki (2000) and OECD (2000) 3.4.3 Income Inequality

Table 3.4 shows the mean monthly household income for each of the fourteen Malaysian states. For the purposes of the following discussion, the states have been divided into three groups: high, medium and low income level (as shown in Table 3.4). The Federal Territory of Kuala Lumpur and Selangor are the two richest high income level States. These areas include the nation core urban areas, and are also home to the heavily invested MSC area. Kuala Lumpur, with its mean monthly household income of RM 4,105, is the richest in the country. The city also has the country’s highest number of Internet subscribers (103.9 per 1,000 people). The other high income level states are Penang 9an industrial state, particularly known for it semi-conductor and ICT-based manufacturing industries), and Johor (an economically important state with well developed commercial agriculture and manufacturing sectors). The medium income level states include the smaller states of Negeri Sembilan and Melaka, that are close to the capital city, and Perak to the north, which borders Selangor. Any “spill-over” effect of technology would be experienced by these states. Sabah and Sarawak in East Malaysia are also in the medium level income category. However, these states have fewer Internet subscribers per 1,000 populations (21.5 and 16.6 per 1,000 people respectively) than other states in this group, including Perak (27.3 per 1,000 people) which has the lowest mean monthly household income among the medium income level states. The East Malaysian states have an inferior telecommunication infrastructure compared to West Malaysia, and the electricity penetration rate has not reached 100% in either of these two states. Among the low income states, Kelantan has the lowest mean monthly household income (RM 1,314), and also the lowest number of Internet subscribers (12.5 per 1,000 people) in Malaysia. The other low income states are Kedah and Perlis (in northern Malaysia) and Terengganu and Pahang (on the East Coast of West Malaysia). All the low income States have agriculture based economies. Even though Pahang is in the low income level category, the number of Internet subscribers in the State (27.0 per 1,000 people) is exceptionally high, and it is an outlier case. Most of the lower income level states with a small number of Internet subscribers are located in the East Coast and Northern parts of Peninsular Malaysia. These regions have an ethnic Malay majority, are primarily rural, and have an agriculture-based economy. The population also lacks in English proficiency which may partly be the reason for them

32

not subscribing to the Internet service, as about 90% of Malaysian Internet content is in English. Table 3.4: Household Income and Internet Subscribers in States in Malaysia* Income Level

State Mean Monthly Household Income

(RM)

No. of Internet

Subscribers

Internet Subscribers per

1000 PeopleFT Kuala Lumpur

4,105 134,870 103.9

Selangor 3,702 335,262 84.9Penang 3,128 63,648 51.9

High

Johor 2,646 77,747 30.3Negeri Sembilan

2,335 22,373 27.0

Melaka 2,260 17,234 28.6Sarawak 2,276 43,219 21.5Sabah 1,905 40,692 16.6

Medium

Perak 1,743 55,345 27.3Kedah 1,612 28,494 18.1Terengganu 1,599 15,041 17.1Pahang 1,482 21,682 27.0Perlis 1,431 3,710 18.7

Low

Kelantan 1,314 16,101 12.5* Data for the year 2000 Source: Malaysia National Information Technology Committee Table 3.4 provides evidence of a digital divide between those living in higher income states and those in lower income states. The divide also shows a divide based on geographical areas area; those living in the rural areas still lack telecommunications infrastructure and good accessibility to ICT, and are thus marginalized. By using the assumption for “affordability”, as used by the National Information Technology Council of Malaysia (NITC) at Infosoc Malaysia 2000 (NITC, 2000), an average Malaysian household has, according to the National Information Technology Council of Malaysia (NITC), a disposable income per month of 17.0% of the monthly mean household income (NITC, 2000). This disposable income can be spent on the optional needs of the household, such as televisions, radio, computers and the Internet. Figure 3.4 shows, by state, the percentage of the notional disposable income that a household needs to spend in order to buy a PC and connect to the Internet.

33

Figure 3.4: Disposable Income Spent on Internet Usage Based by States (Year 2000)

Percentage of disposable incom e spent on Internet usage

47.0

102.8

111.9

35.8

0.0

20.0

40.0

60.0

80.0

100.0

120.0

FT Kuala

Lumpur

Selang

or

Penang

Johor

Negeri

Sem

bilan

Melaka

Saraw

akSabah

Perak

Kedah

Terenggan

uPahan

gPer

lis

Kelantan

State

% o

f dis

posa

ble

inco

me

spen

t

Source: Malaysia National Information Technology Committee As shown in Figure 3.4, only the people of Kuala Lumpur, Selangor and Penang, with their high mean monthly incomes, would need to spend less than 50% of their disposable income to have Internet access; the low income states’ (see Table 3.2) populations have to spend more than 90% of their disposable income for Internet usage. For Perlis and Kelantan, with the current level of mean household monthly income, “theoretically” the population could not afford to use the Internet at all, as their disposable income could not cover the cost of having a home PC and Internet connection. This strengthens the argument for the existence of the digital divide based on ‘income factor” across the states in Malaysia. Unfortunately, those who would be marginalized from having access to the ICT as a consequence of the inequality in income are from the rural population and the less developed East Coast region. 3.5 ICT PROGRAMS THAT HAVE BEEN PLANNED AND IMPLEMENTED The National IT Framework (NITF) views ICT development as a strategic and interconnected triangle consisting of three key elements, namely “People”, “Infostructure” and “Applications” (as shown in Figure 3.5).

34

Figure 3.5: Malaysia Approach to Bridge Digital Divide: People First and Addressing People’s Need

NITF is premised on the concept that, given the necessary skills, appropriate hard and soft infrastructure and applications, people will be able to use ICT as a tool to transform society (ITU, 2002). In Figure 3.5, the “People” element is at the apex of the triangle reflecting the primary importance given to the human factor as Malaysia becomes a knowledge society. The figure also identifies the key issues surrounding the triangle: “access and equity”, “creating value” and “qualitative transformation”. The current research has emphasized that aspect upon which the Malaysian government has invested and focused the most: “access and equity”. The issue of “access and equity” addresses the following:-

(1) Connectivity of ICT for all citizens (2) Equitability in access to ICT

(3) Providing society with a positive environment and a culture of learning that will

lead to the information literacy of every citizen.

In the Eighth Malaysian Plan (2001-2005), the government emphasized measures to raise income and re-address income imbalances - measures that could have a direct,

PPEEOOPPLLEE CCoommpprreehheennssiivvee

hhuummaann

ACCESS AND EQUITY

QUALITATIVE TRANSFORMATION

CREATING VALUE

VALUES BASED

KNOWLEDGE SOCIETY by

2020

INFOSTRUCTURE Info. Age development foundation

APPLICATIONS Solutions for Info. Age work and life Source: NITC, 2000

35

positive effect in reducing ICT accessibility and affordability problems. This strategy was also intended to help in closing the digital divide, specifically the digital gap that is based on inequalities based upon the “income factor” and geographical differences. Among the government programs in the Eighth Malaysian Plan are:-

(1) The Universal Service Provision Program, which is based on the three basic principles of availability, accessibility and affordability. A special fund under this program was created with the main telecommunication provider (or the supply side) involved in funding. The program emphasized providing telecommunication infrastructure to the rural areas. The target goal was to increase the fixed-line teledensity in the rural area from 11.7 telephones per 100 people in the year 2000 to 17.5 telephones per 100 people by the year 2005. RM 119.8 million was budgeted for this program over the 5 year period.

(2) The “Infodesa” and “Internet Desa” programs have also been targeting the rural

population. The “Infodesa” program involves providing ICT facilities in the rural areas. There have been eight pilot projects under the “Infodesa” program, under which ICT courses to the communities, local applications and information on government services have been developed and made available online. The centers have also been used as a reference for teleworking and distance learning. The “Internet Desa” involves providing ICT infrastructures at post offices and the launch of the “Rural Portal” that provide information regarding the government services, important events and local activities, free e-mail and Internet access. The program was launched in year 2000, and interim evaluation indicated that a large proportion of the users for this program were schoolchildren. Another project under this program is the E-Bario that was introduced by University Malaysia Sarawak, where the schools in Bario were given computers with Internet access. RM30.3 million is budgeted for the “Infodesa” program and RM 3.0 million is budgeted for “Internet Desa”.

(3) Computer Infrastructure for Rural Schools that is helping schoolchildren in less-

developed rural schools to become computer- and Internet-literate by providing PCs and access to ICT. The budget for this program was RM 945.0 million.

(4) The formulation of comprehensive and integrated policy, as well as framework

for action, to address the problem of the digital divide, covering four important aspects, namely: ICT infrastructure for universal access; local content development; equitable access to affordable ICT products and services; and access to lifelong learning opportunities.

Besides the above programs, the government has also encourage the use of ICT through its “PC Ownership Campaign” that allowed citizens with children over ten years old to withdraw their retirement contributions (Employment Provident Fund) to purchase computers. More than 200,000 individuals had taken advantage of this program by the end of year 2000. Another related activity has been the government-ICT industry project

36

with the motto “One home, One PC”, offering low-priced PCs at special fairs. Internet service providers (ISP) have also launched programs offering low-priced PCs when signing up for Internet services. 3.6 ISSUES RAISED AND PERSPECTIVES TO BRIDGE THE DIGITAL DIVIDE IN MALAYSIA 3.6.1 Imbalanced Regional Development Malaysian government programs, such as those to be implemented in the Eighth Malaysian Development Plan, have emphasized the diffusion of ICT to the rural population. The diffusion theory predicts that, without successful state intervention, the initial adoption of networked computing can be expected to exacerbate existing social divisions - at least in the early and middle stages of the “S” shaped diffusion curve (Norris, P., 2001). By the government’s adopting a proactive approach, the rural population need not go through the slow “natural” process of technology diffusion, and therefore need not remain the “laggard” among Malaysian society. Rural population would have the chance to experience the “leapfrogging” benefit in adopting the technology at a faster pace, even before some segments within the urban population have adopted it. However, programs such as “Internet Desa” and “Infodesa” that are focusing on hard infrastructure for Internet use by villagers at community centers and post offices might not be sufficient in encouraging the rural population to use the Internet. The Internet, as a new technology product (or service), has unique use characteristics which, when compared to previous technology products such as television or radio, require more than just hard infrastructure for the diffusion to take place. The Ministry of Energy, Communications & Multimedia has recognized that in order for the village ICT program to be a success, it must have the following critical factors:- 1) Benefit to users 2) Ease of use 3) Management support 4) Community leader support 5) Local community support 6) Project sustainability 7) Coordination with other agencies (Shafie, H., 2001). Imbalance in the regional development of ICT has created a digital divide based on regional differences in Malaysia. This divide goes beyond “accessibility” as discussed above. Other factors must also be considered, such as the mass population’s perception of the relevance of ICT.

37

3.6.2 Relevance of ICT Applications to the Mass Population

Factors which affect the relevance of ICT applications to the mass population include: (1) the issue of language barrier when using ICT (2) availability of local content, and (3) the type and ease of use. These are discussed in the following sections:-

(1) Language Barrier

Most web pages developed for Malaysian Internet users are written in English. However, the majority of the people living in the rural areas, the East Coast, and Northern Malaysia, are from an ethnic Malay background. Such pages only benefit those who can read English. Consider the circulation of the English newspapers in Malaysia for the year 1997 as an indicator of the population’s ability to understand English. In the Federal Territory of Kuala Lumpur there was an English newspaper circulation of 136.3 per 1,000 people - the highest in the country. In Kelantan, however, the circulation was only 6.2 per 1,000 people, the lowest in the country (NITC, 2000). All the East Coast States and also Kedah have a very low circulation of English language newspapers, at less than 25 per 1,000 people (NITC, 2000). Therefore, the (predominantly English) Internet service might not be as attractive for people in those particular regions. In order to encourage the rural population to use ICT, it is important that more local websites and other ICT applications be made available in the Malay language – the language that most of the rural population uses in their daily communication. The teaching of mathematics and science using English as the language of instruction in all elementary public schools in Malaysia started in 2003. This can be seen as a positive step in overcoming the issue of language barrier in ICT usage. Knowledge of English is critical as the language dominates the world of computing (Norris, P., 2001). Making the younger generation familiar with the English language (irrespective of where they live) may help them to develop ICT skills in the future. This is particularly important given that most of the instructions, applications and contents of ICT products and services are in English.

(2) Local Content

Apart from the language barrier, the lack of local content is another reason why Internet services have not appealed to the rural population. A study of Internet use in the USA has proven that the culture of the producers of Internet content shapes the medium (Servon, L., 2002). Unfortunately, this culture has mostly suited the lifestyles of the privileged few - the middle and upper middle class segments within the population with a certain level of educational background. The lack of varied content on the web is because of the commercialized nature of the web (Lallana, E., 2001).

38

In Malaysia the same situation prevails as most Malaysian websites have also been designed to cater for the middle and upper income groups, and for urban intellectual circle of society which usually lives in the urban areas. The rural communities have not been able to relate to existing Internet content, as the local content has not represented their needs. Therefore, more local content which addresses the needs of the local populations needs to be produced. The government has addressed the development of local content and applications which meet the needs of the rural population through the “Infodesa” program and the “Rural Portal”. However, the “Infodesa” program has been very limited in scope. The local content that has been developed by these government programs also seems only to target certain segments within the rural community, and not the whole population. For example, much of the rural Internet local content have targeted youth; the older generation in the rural areas might have been marginalized from using ICT applications as there is little content that matches their interests. The not-for-profit and community based initiatives’ content also might be facing sustainability problems, especially relating to human skills, and to maintenance and upgrade costs. The ideal way to develop the content of the Internet is by having meaningful, up-to-date information, which is inexpensive and accessible to all, including illiterates (Lallana, E., 2001). However, it is also important that the content be tailored to a variety of specific target groups, so that the targeted segment of the population can optimize its use of ICT.

(3) Type and Ease of Use

ICT use can be divided into two categories:-

a) Low order tasks that require basic skills, such as using ICT for word processing, e-mailing and information retrieval from the websites.

b) High order task that require advance skills in ICT, such as using ICT for graphic

works, programming, e-banking and e-commerce.

As many of those who are ICT illiterate are located in the rural areas, the focus of many digital divide programs has been to enable the rural population to perform low order ICT tasks. Of course, what can be categorized as a “basic skill” in ICT can still be considered complicated by the many rural users who have only a modest educational background and goods or services that must be available to citizen of the nation)are typically working in the agricultural sector. Training that is based on life-long education is one of the approaches to overcoming the problem of digital divide, as the dynamic nature of telecommunication products and services means that the technology might experience another major change in a very short period of time. However, there is a dilemma of life-long learning because of (a) the complexity in individualized nature of lifelong education; and (b) the importance of changing the role of instructor in the teaching method, towards tutoring and supported

39

learning (OECD, 2001). Re-training ICT users with updated versions of a technology is as important as educating them in the first place. Another approach is to design ICT applications that are user-friendly, taking into account the likelihood that users might be ICT-illiterate. Considering that 4.4% of Malaysians - or nearly a million people – have no formal education (NITC, 2000), websites or ICT applications that are designed for the mass population must be easy to use. 3.6.3 Inequality in Income

“Affordability” is one of the main reasons why most of the rural population is not connected to and using the Internet. Figure 3.4 showed that in most states with a large rural population, users would need to spend more than half the average disposable income just to get connected to the Internet and use it from home. Inequality in income, especially between the urban-rich population and the rural-poor populations, serves to deprive the rural population of ICT access. There is a need to prevent a situation where the rural populations are left out from using ICT purely because of the cost constraint, rather than because they don’t want to use it, or lack access to the telecommunication infrastructure. This situation has happened to the inner city population in the USA (NTIA, 2002). Issues related to the digital divide based on “income factor” are discussed as follows:-

(1) Coordination between Development Programs

The Malaysian government, through its Five Year Development Programs, has implemented many rural development programs designed to raise income levels. Many of these programs have succeeded in improving the quality of life of rural Malaysians. Rural poverty has decreased significantly in the last decade, from 21.1% of the rural population living below the poverty line in 1990, to 12.4% in 1999 (EPU, 2002). However, there seems to have been a lack of coordination between these development programs and other programs designed to bridge the digital divide by targeting inequality of income.

(2) Competence in Using ICT versus Income Level

The digital gap that is based on the individual’s ability to use ICT (or competence) is also known as “second level digital-divide” (Hargittai, E., 2002). For a developing country like Malaysia, second-level digital divide has become a prominent issue within the urban community. The urban population is heterogeneous, with individuals working in a range of different types of job and, most importantly, earning different levels of income. The problem of competence of use needs to be tackled at the workplace; the lower income workers need to be exposed to training and re-training that will give them “added-knowledge” and improve their skill in using ICT.

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(3) Gender Implication to Boost Income within Community

Almost 70% of the 3.3 million Malaysians outside the labor force are female, and about half of these have received secondary and tertiary education (NITC, 2000). The gender implication that can affect the population quality of life by increasing the household income must be exploited. Previous studies have shown that Asian men, on average, spent 14.5 hours per month on the Internet, as compared to 12.0 hours for Asian women. Lallana demonstrated that female Internet users are more efficient than men in their use of the Internet; when women go online they typically have a specific objective in mind and log off once this objective is met (Lallana, E., 2001). Women, especially those in rural areas with conservative Islamic values, should be encouraged to get involved in e-commerce or teleworking, since this will improve the economic status of the local community, whilst not conflicting with traditional beliefs.

(4) Universal Service for ICT Usage

One of the positive factors enabling Malaysia’s growth in Internet use has been the cost of dial-up Internet access. Malaysia’s rate is the second lowest in South East Asia (only Singapore has cheaper access). The major reason is that the government has regulated that dial-up Internet access be charged at a lower rate than voice telephone calls. For example, TMNet (the largest Malaysian Internet service provider), charges 2.5 cents per minute for dial-up Internet access (consisting of 1.5 cent for dial-up charge to “Telecom Malaysia” and 1.0 cent for Internet access charge) as compared to 3.0 cent per minute for local voice calls. (ITU, 2001). Critics have argued the need to price Internet access below the actual cost in order to attract the subscribers to exploit externalities. The demand for access itself is relatively insensitive, and most of the households will subscribe at a competitive, cost based price (Crandall, R., 2004), suggesting that subsidized pricing is not necessary. The lower Internet access rate is criticized since it is at the expense of higher rates for local and long distance voice calls. As many Malaysians’ use of the Internet is charged per minute, a higher dial-up Internet access rate would discourage these users from using the Internet for applications with long holding times, such as downloading large files (such as animated graphics) from web-sites. Monthly flat rate Internet access is now available, but is not currently widely used. With the existing telecommunication infrastructure, there is also a potential problem that there may be arbitrage of voice traffic through IP telephony (Crandall, R., 2004). The Malaysian government’s strategy of having a low dial-up rate to encourage people to use the Internet apparently fails to recognizing the income constraints for most

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of the population who consider home PCs an expensive luxury item; the discounted dial-up rate has no meaning to the mass population who have no PC. The NITC study showed that the mass population is willing to spend 50% of its disposable income on ICT. However, to be able to afford to access the Internet, one requires a mean monthly household income of about RM 2,950. That level of mean monthly household income is a 124.0% increase from the year 2000 The mean monthly household income in Malaysia’s poorest state, Kelantan, is only RM 1,314 – less than half that required to afford a computer and Internet access. In the absence of a universal service provision to give the disadvantage population a lower cost for being networked, few people in the low income states will have the ability to access the Internet at home. 3.6.4 Alternative ICT Tools, Modes and Venues for Networked Connectivity (1) Tools In order to reduce the burden of extending the telephone network into high cost rural areas, developing countries like Malaysia can encourage the deployment of various wireless technologies (Crandall, R., 2004). The development of 3G cellular wireless services can, in the near future, be used as a substitute mechanism for delivering ICT applications to the mass population. Japan is one of the countries where the mass population has widely been using ICT applications through its cellular phones such as i-Modes. With the growing popularity of cellular phone use in Malaysian society - especially in rural areas and among the younger population - the cellular phone can be developed into a cheap, portable and effective tool for Internet access. (2) Modes

The use of a dial-up connection hinders optimal ICT use since it is normally charged at per minute rates that discourage the users from using it for long periods. Broadband is considered to be an effective ICT mode since it allows the user to use it 24 hours per day, and is therefore suitable for downloading large files, telemedicine, VoIP telephony, e-commerce etc.. However, a few studies have indicated that broadband use is price sensitive: a reduction in subscription price, through direct subsidies or other policies, could help its diffusion. However, any subsidy should be designed only to help cover the (substantial) initial costs of enrolling new subscribers, and not the continuing cost of providing the service (Crandall, R., 2004). (3) Venues The price of PCs is the major obstacle for the Malaysian mass population to have access to the Internet from their homes as it is considered expensive, and many people simply can not afford it. As for the rural population, there’s an additional problem with the lack of telecommunication infrastructure for them to get networked using home PCs. With the assumption there will not be any significant reduction in the price of PCs,

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alternative venues must be considered to satisfy the need for the use of ICT by the general population.

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CHAPTER 4

METHODOLOGY

4.1 INTRODUCTION The methodologies used in this research were designed to provide an understanding of the issue of digital divide as experienced by the Malaysian population, emphasizing the inter-relationships between the dimensions of geographical differences, income and workplace. The methodologies used in this research were also intended to address the issue of how to reduce the digital divide among the Malaysian mass public. The research methodology adopted was influenced by the literature survey (as reviewed in Chapter 2) and by the status of and issues regarding the diffusion of ICT in Malaysia (as reviewed in Chapter 3). The motivation and justification for the approaches used for this research are presented in this chapter. The organization of the chapter is as follows:-

(1) Research Design – this section presents: - (a) why the scope of research dimensions was limited only to differences in the geographical area, income and workplace dimensions (b) the research and operational frameworks that were used as the guidelines for conducting the research (c) the reasons why the methods selected for this research were preferred over alternatives (d) the proceedings that were taken in this research, so that it could be operationalized, in order to reach its objectives.

(2) Methods of Data Collections and Analysis – this section describes the types of

statistical and empirical analyses that were used in this research, and reviews the analyses of the fit of the data to the given models. This section also explains the choice of research samples and why certain methods were preferred over others.

(3) Hypotheses – the hypotheses upon which this research is predicated are presented

in this section.

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4.2 RESEARCH DESIGN 4.2.1 Research Purpose The main purpose of the research was to be able to make recommendations on how to reduce the digital divides based on geographical area, income and nature of job in the Malaysian population. The research recommendations are presented in the form of proposed policies and action plans derived from the research findings. 4.2.2 Scope of Research Dimensions There are many dimensions of digital divide, most prominently those based on geographical differences, income, level of education, workplace, age and gender. These dimensions are closely inter-related, and there is a direct or indirect correlation between them. For example, an individual who is a low income earner, middle-age (or older) and with a low education level is more likely to be ICT illiterate than an individual who is a high income earner, young and with a college education. With many dimensions contributing to digital divide as mentioned above, it would be time consuming and costly to investigate all of them in this research, especially considering the difficulty in obtaining secondary data on the relevant dimensions in Malaysia and the interrelationships between these dimensions. Therefore, this survey narrowed the scope of analysis by considering in detail only the most significant dimensions, as identified in the literature survey (see Chapter 2), taking into account the status of ICT diffusion in Malaysia (Chapter 3). These dimensions are geographical differences, income and workplace. Other significant dimensions include:- (1) Level of education - this dimension is important in influencing the diffusion of ICT. With approximately 4.4% of the Malaysian’s population having no formal education (2000 data, Infosoc 2000) and therefore being effectively marginalized from using ICT, the issue is of concern. However, level of education is directly correlated to income dimension, which has been included in this scope of research. (2) Age - this dimension, specifically "generation divide", is still not a serious problem in Malaysia as those who are over 65 years old represent only 3.8% of the population, as compared to a third of the Malaysia population which is under 14 years old (2000 data, Infosoc, 2000). The same situation also exists in many other developing countries, where it is more beneficial to concentrate in bridging the digital divide for the younger generation. However, the importance of the older generation should be taken into consideration - especially as life expectancy is likely to increase in near future for these developing countries. (3) Gender - this dimension needs to be examined further because females represent almost 70% of the 3.3 million of the population outside the labor force, and almost half of them have attended High School and tertiary education. Therefore, there is a potential for this segment of the population - approximately 1.0 million people - to be

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employed using ICT, such as in teleworking (2000 data, Infosoc, 2000). However, the gender issue might be a particularly complex situation to investigate because a substantial portion of females might be “volunteer non-users” or choose not to use the technology. It is also correlated with the lack of females in high income jobs that require them to use ICT. As the samples used in the case studies in this research already include both male and female indiscriminately, the gender dimension has been included in the research scope when analyzing the three dimensions indirectly. The justifications to focus on the three dimensions for further investigation in this research were:-

(1) Geographical Differences Geographical differences, or the differences in how the urban and rural areas have access to ICT services and applications, are the central issue of digital divide in Malaysia and also in many other developing countries. In contrast to the USA and other developed countries, which typically have small but affluent rural populations, Malaysia has a large, relatively poor rural population. The rural population in Malaysia is disadvantaged by earning a lower income and by having inferior access to the basic infrastructures than their urban counterparts (as described in detail in Chapter 3). Based on the World Bank statistical figure for the year 2002, the rural population constitutes 41.3% of the total population of Malaysia, whereas among the upper middle-income nations (including Malaysia), the mean percentage is 24.9%. Given the significance of the rural population to society, Malaysia will not be able to achieve its goal to be a knowledge-society by the year 2020 if there is a widening gap in the digital divide between the urban and rural populations. It should also be noted that there is a significant different in term of accessibility to ICT between West Malaysia (Peninsular Malaysia) and East Malaysia (Sabah and Sarawak). While West Malaysia generally is connected with good infostructure, the East Malaysia does not have good infostructure, except in the main cities and towns. Meanwhile, Malaysia’s core urban area, Kuala Lumpur, that is located within the MSC, is connected with a world class infostructure as compared to the rest of the country. That’s explained why the number of Internet subscribers is also the highest in Kuala Lumpur area as compared to other States (see Chapter 3). Besides the inequality in access to ICT that has disadvantaged the rural area, there is also a lack of ICT content that is tailored towards rural needs and lifestyles. This is perceived to alienate further the rural population from using ICT. On the other hand, the urban population will be motivated to use the existing ICT applications, as the applications and services suit their lifestyle and are practical for them to use in their daily life. This is in line with the rate of adoption theory (Rogers, E., 1995) and the spatial adoption potential theory (Capella, R., 1994) that predict that the urban areas will further develop with the diffusion of new technology products (see Chapter 2). By investigating the effects of the geographical differences dimension on the diffusion of ICT, the research will be able to recognize the differences and/or

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similarities in how the diffusion has taken place in urban and rural areas. The result of this investigation can then be used to help bridge the digital divide between the urban and large rural population.

(2) Income

The disparity in income between those with high and those with low incomes is also a matter of concern, as affordability of access to ICT is a universal challenge facing the people in both developing and developed countries. Table 3.4 in Chapter 3 shows that there is a positive correlation between income and Internet penetration rate for the states in Malaysia; high income states have high levels of Internet use, whilst the low-income states are experiencing low Internet penetration rates. With the assumption that all Malaysian households will be using their disposable income to buy a PC with Internet access, people in the low-income states such as Kelantan and Perlis, theoretically, could not afford to use the Internet, as the cost of a PC and Internet access already exceeds the disposable income of those states' populations (see Figure 3.4). This situation suggests that the income dimension plays a significant role in contributing to the digital divide in Malaysia. The government realized the importance of affordability in influencing the use of ICT, and affordability is included as one of the three basis principles that will be emphasized for action in the country's USP programs (ISIS, 2002). Internet subscriptions, as well as on-going usage charges, involve relatively significant cost which poorer income groups find unaffordable. The problem also extends beyond access, because low-income groups are less able to afford ICT tuition for their children. Low wage workers are similarly disadvantaged when they seek to upgrade their ICT skills (ISIS, 2002). Therefore, the role of income in terms of affordability is also an important dimension in getting the mass population to use ICT that needs further investigation. Besides, income dimension has a strong correlation with other dimensions, such as level of education and gender. By investigating the income dimension, this research also will be able to find the inter-relation of income to other dimensions or factors in influencing the diffusion process to take place. (3) Workplace The workplace is perceived to be an influential venue for the working population to access and use ICT as people are spending a considerable amount of time each day at work, and the majority of Malaysians is in the work force. It is therefore important to investigate how ICT diffusion is taking place among the working population in Malaysia. The difference in the nature of job (whether the workers are using ICT to perform their work tasks, and the different type of ICT applications the workers are using at the workplace), is the major concern of this research as it may lead to a digital divide that is based on differences in skills or competency, among the workers. Clearly, agricultural workers will have different ICT needs, skills and competencies from those working in the service sectors. Therefore, by studying the nature of job and its

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relatedness to the pattern of ICT use among the workers, the digital divide that is based on the workers level of skills or competency when using ICT can be observed, and the results can be used to promote life-long learning, or the continuous upgrading of ICT skills, to the general population that starts from the workplace. It is also easier to tackle the digital divide that is based on skill at the workplace than to reach out to the mass public in other venues, because a substantial percentage of working age adult population spends a considerable amount of its time in work related activities. Another reason why it is important to investigate the workplace dimension is based on the human development point of view. Even though Malaysia has the best telecommunication infrastructure in Southeast Asia (excluding Singapore), it is still lacking in term of a Science and Engineering (S&E) workforce (which is, in turn, an indicator for a knowledge-society), as compared to other, less developed, Southeast Asia countries, such as Thailand and Indonesia (Rasiah, R., 2002). Therefore, the availability of access to ICT in Malaysia is not consistent with its ICT human resources development, which is likely to be an obstacle for Malaysia becoming a knowledge-society nation by the year 2020. Understanding how the workplace dimension, in term of nature of job, is influencing workers to use ICT, would allow the relevant authorities to implement programs that could improve the competency of Malaysians’ workforce when using ICT, helping Malaysia remain competitive at the international level. Hence, workplace dimension was considered an important dimension that needed to be investigated in this research since it affects the mass public in Malaysia pattern of diffusion, but also in providing the information on the nation's “meaningful” use of ICT.

4.2.3 Research Framework This research framework is shown in Figure 4.1.

(1) Diffusion of ICT: Initially, this research investigated the state of ICT diffusion in Malaysia by examining what are the factors that influence the mass population to use ICT. The research intended to explore the pattern of ICT diffusion that has taken place from the demand perspective or users point of view, as opposed to from the supplier perspective. The demand perspective was sought by this research because previous studies on digital divide have shown that it is difficult to engage the mass population to use ICT if no consideration is given in the planning processes to engaging the end users (Norris, P., 2001; Servon, L., 2002). The end users are the ones that made the final decision to adopt the technology (Rosenberg, N., 1972), therefore it was a major motivation for this research framework to examine and investigate the demand perspective for ICT diffusion.

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(2) Dimensions of Diffusion to be Examined:

This research investigated the diffusion of ICT that has taken place: in the urban and rural areas (or the geographical difference dimension); in the low-income and high-income groups (or income dimension); and in the working population with different natures of job (or workplace dimension). The interrelationship between income and workplace, as well as between the dimensions of income or workplace with relation to the urban-rural populations, was also investigated. The kind of interrelationships that are perceived to exist between the three dimensions, as explained above, are represented in Figure 4.1 where “income” and “workplace” are included within the “geographical areas”. The geographical difference, specifically the differences between urban and rural areas, is the central dimension of concern for investigation in this research.

Figure 4.1: Research Framework

INCOME WORKPLACE

GEOGRAPHICAL AREAS

DIFFUSION OF ICT

DIGITAL DIVIDE

POLICY AND ACTION PLAN

Empirical Literature survey

BRIDGING THE DIGITAL GAP

(3) Digital Divide:

The issue of digital divide was examined in relation to the three dimensions of geographical difference, income and workplace differences. The existence of digital divide on the three dimensions were based on the observed pattern of ICT diffusion that

49

have taken place, that is through (a) the previous literature survey; and (b) using the empirical analysis (that is influenced by the literature survey).

(4) Policy and Action Plan:

From the empirical and statistical analysis on the three dimensions, this research gives recommendations on the proposed policies and action plans that should be taken by the Malaysian authorities.

(5) Bridging the Digital Divide

Finally, the proposed policies and action plans that should be implemented to bridge the digital gap based on the three dimensions concern, thus accelerating the diffusion of ICT to the mass population in Malaysia, are presented. 4.2.4 Operational Framework The operational framework for this research was as shown in Figure 4.2. The steps and design are explained in the following paragraphs. Firstly, the research started by identifying the factors that influence the population to use ICT. These factors are the relative factor to leadership; training or formal education in ICT; accessibility of ICT; and competition from other (rival) applications that might discourage the use of ICT. The issue of urban and rural population patterns for ICT diffusion was also examined. A case study was used at this stage with the objective of identifying the significant factors that influence the use of ICT. Its sub-goals were:- (a) To identify the pattern of diffusion that has taken place in the urban and rural areas (b) To determine whether there exists a digital divide based on geographical differences. The case study investigated the factors that encourage urban and rural senior High School students in Kelantan, Malaysia, to use ICT. A questionnaire survey was conducted in Kelantan, Malaysia in year 2002. SEM and descriptive statistics were used for the data analysis to find the cause-effect relationships between the studied variables. In particular, the use of SEM allowed the inter-relationship between the variables to be clearly identified. The results from the data analysis, i.e. which of the factors analyzed are significant to influence the mass population to use ICT, were further investigated in the follow-up case studies.

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By identifying the significant factors that influence the use of ICT in the mass population, and by relating them to the three dimensions of geographical differences, income and workplace, the research then proceeded by focusing on the dimension of workplace in influencing the use of ICT. The goal was to examine the role of workplace, specifically the nature of job in influencing the use of ICT among the working population. A case study was also used at this stage to identify the significant factors that influence the use of ICT by the working population where accessibility to ICT is not an issue. For this case study, the service sector working population in the core urban area of Kuala Lumpur was chosen as the sample, and a questionnaire survey was conducted there in 2003. This case study's sub-objective was to be able to examine the existence of “second level” digital divide (Hargittai, E. 2002) among the working population. In order to find the cause-effect relationship between the dependant variable (the use of ICT) and its independent variables (factors that encourage the working population to use ICT), SEM and descriptive statistics were used for data analysis. The results from the data analysis were compared with the previous case study to determine whether there is a similarity in terms of the pattern of diffusion or existence of digital divide. The significant factors that influence the use of ICT by the working population were also further investigated in the final case study for further confirmation of the significance of their contribution to the diffusion of ICT. The findings from the survey were then used to give recommendations on how to address the issue of “second-level” digital divide. By using the results and findings from the previous two case studies (which investigated the issues of geographical differences and workplace in the diffusion of ICT), the research finally examined further the role of income in diffusing ICT to the mass population, both in the urban and rural areas. For this part of the research, income factor were examined in order to find their role in encouraging the mass population to use ICT in urban and rural areas. A case study was also used to investigate the role of income to find out if there is a difference in terms of how the urban and rural population value using ICT, and what role income has in this. A questionnaire survey was also conducted for this case study using public servants in both urban and rural areas in Kelantan as the samples. The sub-objectives for this case study included examining the effects of (a) venue or location for accessibility to ICT, and (b) nature of job in encouraging people to use ICT. The questionnaire asked the respondents to value the importance of using ICT by eliciting their Willingness to Pay (WTP) for having access to use Internet at specific venues (locations). The data was analyzed using descriptive statistics, cross-tabulation analysis and Contingent Valuation Method (CVM), as explained in the following section. The results from this survey were intended to confirm the differences in perception of the importance of using ICT between the urban and rural populations, and, from the cross-tabulation analysis, to identify the role of income in influencing the urban and rural population to use ICT. On completion of the three case studies, the results or findings were compared with the literature survey on the subject of digital divide and diffusion theory. Recommendations and conclusion were drawn from this final analysis that is aimed to reduce the digital divide among the Malaysian mass population based on the three dimensions reviewed and analyzed.

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Figure 4.2: Operational Framework

RECOMMENDATIONS ON HOW TO REDUCE DIGITAL GAP

To find the factors that encourage the use of ICT

Case Study 1, Analysis: SEM & Descriptive stats.

ROLE OF WORKPLACE

ROLE OF INCOME

To find the factors that encourage the use of ICT

at work Case Study 2, Analysis: SEM & Descriptive stats.

To investigate the monetary value for having access to ICT

Case Study 3, Analysis: CVM & Descriptive stats.

To interpret the results from the Case Studies &

Literature survey

Dimension Dimension

Nature of job Difference in Income

Urban-Rural Difference

Result Result Result

DIFFUSION OF ICT

GEOGRAPHICALAREA

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4.3 METHODS OF DATA COLLECTIONS AND ANALYSIS 4.3.1 Methods for Statistical and Empirical Analyses

A. Descriptive Statistics Descriptive statistics serves two purposes: (a) to explore the characteristics of the data, and (b) to summarize and describe the observations (Coakes, S. et al., 2003). The use of descriptive statistics is appropriate for this entire study because the core research is based on questionnaire surveys, and analysis is based mostly upon the primary data. By analyzing the data using descriptive analysis, the findings are easily and clearly explained, especially when making comparison between the variables.

B. Structural Equation Modeling (SEM)

Two of the case studies in this research have been analyzed using SEM to find the cause-effect relationship between the use of ICT (dependant variable) and the perceived factors that encourage the use of ICT by the mass population (independent variables). Conceptually, SEM is a very general - and yet very powerful - multivariate analysis technique for determining whether variables are interrelated through a set of linear relationships by examining the variances and covariances of the variables (StatSoft, 2002). In the research case studies, the SEM software used was Amos 4.0 (Analysis of Moment Structures). The software allows SEMs to be visualized by a graphical path diagram. The path diagrams show the following:- (1) Independent variables (which are assumed to be measured without error), referred

to as “exogenous” or “upstream” variables. In the path diagram, the independent variables are represented by oval shapes, the same as dependant variables (see (2), below) and unobserved variables (see (4), below).

(2) Dependant (or mediating) variables are also referred to as “endogenous” or

“downstream” variables. In the path diagram, the dependant variables are also represented by oval shapes.

(3) Observed (or manifest) variables are those directly measured by researchers. In

this research, these are derived from the questionnaire surveys. Rectangles or squares represent such variables in the path diagram.

(4) Unobserved (or latent) variables are not directly measured but are inferred by the

relationships or correlations between the measured variables. Latent variables normally represent a theoretical construct or a factor. Their statistical estimation is accomplished in much the same way as an exploratory factor analysis infers the

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presence of latent factors from shared variance among observed variables. Latent variables are represented by ovals or circles in the path diagram. Any unexplained residual is also represented in the same way.

(5) Correlations and covariances are represented by bidirectional arrows, which

represent relationships without an explicitly defined causal direction (Arbuckle, J., 2001).

(6) Single headed arrows or “paths” are used to represent causal relationships in the model, with the variable at the tail of the arrow causing the variable at the point (Hox, J., 2000).

A sample of the shapes and labeling of a path diagram is shown in Figure 4.3. Figure 4.3: Example of a Structural Equation Modeling Path Diagram

Latent (Potential)Variable

ObservedVariable

ObservedVariable

E1 E2

Effect

Covariance

Residual

There are many available measures of fit to test an SEM that has been constructed. The model fit tests that have been used in the two case studies were as follows:-

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(i) Chi-square (χ2) Test

The chi-square fit index tests the hypothesis that an unconstrained model fits the covariance or correlation matrix as well as the given model. Chi-square is not a good measure of fit for larger models as it will often be statistically significant with large samples size. As the chi-square test of absolute model fit is sensitive to sample size and non-normality in the underlying distribution of the input variables (Arbuckle, J, 2001), other descriptive fit statistics were also used to assess the overall fit of the model to the data.

(ii) Tucker Lewis Index (TLI)

TLI, also known as the Bentler-Bonett non-normed fit index, is calculated as shown below:-

1mod

2mod

2

mod

2

−

−

elnull

elproposedelnull

df

dfdfχ

χχ

where df is the degrees of freedom . A TLI value that is close to 1.0 is considered to be a good fit (Kenny, D., 2002).

(iii) Root Mean Square Error of Approximation (RMSEA) This measure is based on non-centrality parameter, with the formula as shown below:-

11

2

−−

Ndf

χ

where N is the sample size and df is degrees of freedom. Good models had a value of 0.05 or less. Models with RMSEA of 0.10 or more are considered to have poor fit. The model is considered a fair fit if the value is from 0.05 to 0.08 (Kenny, D., 2002).

(iv) Goodness of Fit Index (GFI) GFI varies from 0 to 1, but conventionally the value must be equal to or greater than 0.90 for the model to be accepted (Hox, J, 2000). The advantages of using SEM in the analysis of data from two of the case studies were:-

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(i) SEM allows covariance to exist in its model and to produce a cause-effect relationship not only between the dependant and independent variables but also between the observed and unobserved variables.

(ii) The relationships between the various variables are clearly presented using the

SEM path diagram which shows the causal flow, allowing for easier interpretation of the results of the analysis.

(iii) SEM (as mentioned earlier) is a very powerful multivariate analysis technique,

and as such allows the researcher simultaneously to test a set of regression equations.

C. Contingent Valuation Method (CVM)

The CVM is used to estimate economic values, and has extensively been used in the areas of ecosystem and environmental services. The method has flexibility as it can be used to estimate both "use" and "non-use" values. Indeed, it is the most widely used technique for estimating non-use values. The CVM is referred to as a “stated preference” method because it ask people directly to state their values, usually monetary values, rather than (as the “revealed preference” methods do) inferring values from actual choices. Even though CVM has been widely used in environment studies to estimate economic values for many environmental and public services, in this research CVM has been used to estimate the value of using the Internet service. Case Study 3 used the CVM for data analysis, making the assumption that “accessibility to the Internet service” is considered a public good, in line with the Malaysian Government's USP statement that includes the use of Internet as one of the services that must be equally accessible to all Malaysians. Open-ended value questions are unlikely to produce a reliable valuation because the respondents' responses are typically erratic and biased (NOAA, 1993). This research therefore used dichotomous-choice contingent valuation questions in its questionnaire. In using a dichotomous-choice approach, the respondents were asked whether they would vote to have Internet access at his/her house and at the community center at a given cost. Therefore, the approach is based on "Willingness to Pay" (WTP). The respondents answer “Yes” or “No”. And for those who answer “Yes” (i.e. are notionally willing to pay the given cost), a follow-up bidding is asked, with a higher price. Conversely, if the respondent responds “No” to the initial bidding, he/she is then asked to indicate their agreement or disagreement to a follow-up bidding that is at lower price. If the respondents still disagree on the follow-up bidding price, they are asked to indicate the reason for rejecting the bidding. Before the WTP question was asked to the respondents, hypothetical scenarios about the importance of using the Internet service, the cost effect of being networked, and the negative implications from the abusive use of the Internet were explained. This was to ensure that the respondents were provided with a sufficient

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amount of information from the questionnaire for them to respond to the WTP question, regardless of whether the respondents were users or non-users of the Internet service. Components of WTP are as the equation below:-

Total Economic Value = Use Value + Non-use Value The non-use values are generally classified into three categories (Albeirini, A. et. al., 2004):-

a. existence value (the value placed on the very existence of the resource by individuals that do not use it and do not plan to do so in the future);

b. bequest value (the value placed on the resource by individuals who

are not users yet wish to preserve the resource for future generations to use and enjoy)

c. option value (the amount an individual is prepared to pay for a

commodity to be available in case, in the future, he/she wishes to use it).

The mean WTP obtained can be compared with the actual cost of a service – in this case, the actual cost for access to and use of the Internet. A comparison between the monetary values that have been given by the urban and rural populations can also be made to observe the differences in “value” placed on the service by people from different geographical backgrounds. The advantages of using CVM in this research are:-

(i) CVM's flexibility means that the method can be used to estimate the economic value of virtually anything. Note, however, that it is best suited to estimating values for goods and services that are easily identified and understood by users and that are consumed in discrete units.

(ii) The nature of, and results from, CVM studies are not difficult to analyze and

describe, although the survey needs to be well-designed and conducted competently.

(iii) The inclusion of non-user value, as is recognized in CVM, means that

"existence", "option" and "bequest" values can be estimated, as well as "use" values. As a significant portion of the Malaysian population, especially in the rural areas, is still ICT-illiterate, it is appropriate for the research analysis to measure the value placed on the service by these individuals.

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(iv) CVM is both well established and widely used. In recent years, there has been a great deal of research into improving the methodology to produce more valid and reliable results. Therefore, the use of CVM is preferable as it is predicted to be useful for future research in the same area of interest.

4.3.2 Samples Each of the three case studies in this research sampled different populations. The justification for this is as follows:-

(1) Each of the population sampled (senior High School students, service sector workers and public servants) represents a group that is particularly likely to use ICT applications in their daily life, or to recognize the importance of ICT. Hence, the samples represent those who have a positive attitude towards ICT applications, and who are perceived to be in the categories of "innovators", "early adopters", "early majority" and "late majority", (i.e. not in the "laggards" segment of the population) (see Chapter 2).

(2) The three samples represented the majority of the Malaysian population.

Therefore, this research was able to cover the pattern for diffusion of ICT that is representative of the general mass population in Malaysia; it didn't use “outliers” samples.

The total sample size of over 500 respondents meant that the research was sufficiently diversified to allow identification of differences that may have taken place within different segments of the population. 4.4 HYPOTHESES After the research and operational frameworks for this study had been laid out, and the choice of methodologies made, the research working hypotheses were formulated. They were as follows:-

(1) There is a significant difference in the pattern of diffusion of ICT between the urban and rural populations in Malaysia.

The diffusion theory predicts that the rural population will be a later adopter for General Products Technologies than the urban population. This includes the diffusion process of adopting ICT (Norris, P., 2002). This hypothesis was tested in Chapters 5 and 7, where the Case Studies were both conducted in urban and rural areas.

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(2) There is a significant difference in the diffusion of ICT based on

differences of income earned by the Malaysian population.

“Affordability” is one of the main obstacles for the diffusion of ICT in the Malaysian population (see Chapter 3). The differences between the segment of the population which earns a high-income and that which earns a low income are believed to shape the pattern of ICT diffusion. The rate of ICT diffusion and type of ICT applications used are believed to favor the high-income segment of the population. This hypothesis was tested in Chapter 7, to show how frequency of using ICT varies based on level of income earned by the survey respondents.

(3) There is a significant difference in the diffusion of ICT as a result of nature of job at the workplace.

Among the working population, job tasks affect how they use ICT applications. There are those for whom there is only a requirement to use basic ICT applications to complete their work, and there are those whose work requires them to use advanced ICT. Therefore, the diffusion of ICT varies across the nature of job. The hypothesis was tested in Chapter 6, to show how nature of job influences workers to use different types of ICT applications.

(4) There is a difference between urban and rural populations in how they “value” the use of ICT.

As the local contents targeting the rural population are very limited in Malaysia, it is expected that the rural population will perceive ICT usage as less important than the urban population. The hypothesis was tested in Chapter 7, to show the differences between the rural and urban respondents in indicating their willingness to pay to get access to ICT.

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(5) Income is not the most significant factor in influencing the urban population to use ICT, but the opposite is the case for the rural population.

Since the urban population realizes the importance and practicality of using ICT applications in their daily life, they are perceived as more willing to use ICT, even though there might be an increase in the cost to be networked. This hypothesis is closely related to hypothesis (4) above.

This hypothesis was tested in Chapter 7, to show the differences in the effect of income on the urban and rural populations' readiness to be networked.

These working hypotheses are scrutinized in the following three chapters where they are subject to some revisions and modifications.

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CHAPTER 5

FACTORS THAT INFLUENCE THE DIFFUSION OF ICT TO THE MASS POPULATION AND A COMPARISON OF URBAN-RURAL DIFFERENCES IN

THE PATTERN OF DIFFUSION

5.1 INTRODUCTION In order to investigate the diffusion of ICT to the mass population in Malaysia, it is important to understand what will encourage the mass population to use ICT applications. This research investigated this from the users’ perspective using the operational framework described in Chapter 4. There are many factors that are perceived to encourage the mass population to use new technology, such as ICT, and these factors are inter-related. One of the most influential factors is the difference in geographical area, specifically the issue of urban versus rural areas. The urban population is expected to take the lead in adopting ICT ahead of the rural population, thus leading to a digital divide between the different geographical areas. It should also be noted that with more than 40.0% of Malaysian population are living in the rural areas, the issues of such a digital gap between the urban and the rural population is a major concern. Digital divide might mean that many ICT applications that are intended to be used by the mass public might only be accessible to the minority and used by small urban elite. In this examination of how to improve the situation of the uneven digital opportunities for the rural population, the first step was to find out from the demand perspective the factors that will encourage the diffusion of ICT to the mass population. Then, the factors that encourage the rural population over the urban population to use ICT were to be identified. These factors could be used as guidelines for future research on the diffusion of ICT between different geographical areas or can be applied to other situations that involve the mass population. This chapter presents a case study based on a questionnaire survey conducted on senior High School students in the State of Kelantan, Malaysia. Kelantan is the least developed state in Malaysia in term of ICT penetration rate for use of the Internet. The study shows the cause-effect relationship between factors that are perceived to encourage teenagers in using the Internet using a Structural Equation Modeling (SEM) analysis. A comparison of the levels and patterns of ICT use and an initial assessment of what factors influence the urban and rural population to use ICT applications in their daily life are also presented. Finally, recommendations on how to tackle the issue of digital divide are made, based on the case study analysis and upon literature survey.

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This chapter is organized and divided into the following sections:- (1) ICT Diffusion to the Mass Population (2) Factors that Influence the Mass Population to Use ICT

(3) Case Study 1: The Factors that Influence the Senior High School Students to Use

the Internet

(4) Conclusion 5.2 ICT DIFFUSION TO THE MASS POPULATION The "Vision 2020 NIT Agenda" holds that by the year 2020 all Malaysians will get access to ICT and related applications. This is considered an ambitious goal considering that the country’s telecommunication infrastructure is still not fully accessible in the rural areas, and that, in 2003, the national penetration rate for Internet usage was still low, at 11.4% (NITC, 2004). There is also an argument that ICT diffusion follows the “S-shaped” curve, that early adopters will be the elite urban population with higher incomes, and that ICT will subsequently naturally diffuse to a larger segment of the population (including the rural population) when the technology itself became more familiar to and available for the mass of population (Compaine, B., 2001). Therefore, it can be argued there is no need to intervene in the diffusion process as the issue of digital divide is expected gradually to become narrower with time; allow the digital divide to persist at the early and middle stage of the diffusion process. Spatial adoption potential theory further predicts that the urban population naturally leads in the adoption of any new technology, including ICT (Capella, R., 2001). Being latecomers to ICT development is not necessarily a disadvantage since there is possibility for “leap-frogging” into a new technological phase, so the individual or nation is able to acquire superior ICT applications and technology which have been refined based on the experienced of the early adopters. If these viewpoints are accepted, then it follows that the Internet can be spread efficiently with less government intervention in the diffusion process (Sidorenko, A., 2001), and it could bring higher economic growth to the nation when the technology became sufficiently affordable to replace previously dominant techniques. Existing literature and research on digital divide suggest that the rate of adoption of ICT will be much faster than of previous technologies (Compaine, B., 2001; Siderenko, A., 2001). However, without any reliable research to support the presumption that ICT adoption can take place in a relatively short period of time (especially in developing nations), and given the time-consuming nature of the diffusion of new technology (Rosenberg, N., 1972; Rogers, E., 1995), the digital divide between the urban and rural populations in Malaysia is expected to continue to exist at a parallel trend and not diminish (see Chapter 3, Figure 3.3). It is therefore important for the Malaysian authorities to take a proactive approach to accelerate the diffusion process of ICT to the

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mass public. In order for Malaysia to achieve its goal that all Malaysians are ICT literate by the year 2020, the diffusion process must be accelerated beyond its natural rates. To do this, the early adopter phase must be kept very short, so that critical mass is quickly achieved, thus progressing rapidly to the early majority stage (Rogers, E., 1995). At the same time, to ensure the diffusion process itself includes the majority of the Malaysian population, the diffusion must take place without the exclusion of the country’s predominantly large rural population. The first step in investigating the pattern of ICT diffusion in Malaysia is to examine from the demand perspective the factors that influence the mass population to use ICT. It is important that these significant factors are identified as they can be used further as guidelines when proposing policy or action plans to be implemented by the authority, in order to encourage the people to use ICT. These factors from the findings have been proven to be a good guideline or indicator that will persuade the mass population to use ICT (Rogers, E., 1995). 5.3 FACTORS THAT INFLUENCE THE MASS POPULATION TO USE ICT This research limited its detailed examination of factors that influence the mass population to use ICT to the following dimensions: geographical differences, income and workplace. Other factors, such as age, gender and education differences were not investigated (see Chapter 4). Even within the limited scope, these three dimensions are inter-related in the cause-effect relationship. However, for a developing country like Malaysia, the difference between urban and rural areas is perceived to be the main determiner of ICT usage among the population. This is due to the fact that in developing countries, the rural population is associated with a lower standard of living. The rural area also lacks the physical telecommunications infrastructure that is needed for the diffusion of ICT to take place. This is a different situation from that in developed countries with large urban populations. According to a previous study on digital divide conducted in the USA, the digital gap based on geographical difference is almost insignificant. In the USA, the overall national percentage of the population using the Internet in the year 2001 was 54%, compared with 53% for rural areas (NTIA, 2002). This research investigate the cause-effect relationship of the factors that are influencing the mass population to use ICT by a case study, as it is difficult to find significant factors if analyzed using macro level approach (that might result in ambiguous findings and time consuming). Since there was no secondary data to support the research in understanding the pattern of ICT diffusion that has taken place in Malaysia, the most practical approach in investigating the progress of ICT diffusion in the Malaysian society is by studying the use of Internet by Malaysians as a proxy to ICT usage. The use of Internet applications is considered to be the most “meaningful” proxy for the use of ICT in Malaysia or many other countries because Internet usage enables the individual to communicate interactively with another person in either voice or data format, allowing for information retrieval and business transactions, etc. From this case study, variables that have been identified to influence the mass population to use ICT

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were compared based on their usage patterns and the inter-relationship between variables was determined. Then, it is easier to examine if digital divides do prevail based on geographical difference between the urban and rural populations. The most basic and practical approach to investigate how far ICT use has diffused in the Malaysian society is by studying the use of Internet by Malaysians as a proxy. The use of Internet applications is considered to be the most “meaningful” proxy for use of ICT in the case of Malaysia and of many other countries around the world, even though there are many other ICT products and services available (such as cellular and fixed line telephones). Internet use enables the individual to communicate interactively with another person in either voice or data format, allowing for information retrieval and business transactions, etc. Therefore, “use of Internet” through “dial-up connection” (i.e. telephone line) was used as a proxy for the use of ICT in this research, as the majority of Malaysians who are getting networked use dial-up-connection as the mode of network access. This case study is an initial attempt to investigate the variables that influence the mass population to use ICT. From identifying these variables, comparison can be made between usage patterns, and the inter-relationship between the variables determined. This gives an understanding how the users view their experience of using or not using ICT. From this understanding, it is easier to examine if digital divides do prevail based on geographical location, specifically the differences between the urban and rural populations. The data from this research were analyzed descriptively and statistically, thus allowing definitive conclusions to be drawn on the pattern of ICT diffusion. The analysis of the cause-effect relationship used a structural equation method (SEM). SEM allows the covariances and correlations of the variables to be clearly identified and labeled. It is a superior method of analysis for such purposes because of its flexibility in analyzing the inter-relationship in behavior science analysis, such as this particular research. Teenagers are used as the sample for this case study, as younger people are perceived to comprise the largest segment of the population currently using ICT (90% of Internet users in Malaysia are teenagers). In order to accelerate the diffusion of ICT to the Malaysian society, the Malaysian Government program for ICT diffusion has targeted schoolchildren, as the success of the Malaysian ICT policy depends on whether the younger generations will be able to use ICT in their future daily lives. Therefore, the Ministry of Education (MOE) had a RM 13.0 billion budget in the year 2001, which represents some 20% of the total government budget (ITU, 2002). Among its high priority programs are to connect about 230 rural schools to the Internet and to implement its “Smart Schools” programs. One critical component of the Smart Schools program is that all schools in the program will have at least one computer lab for students to share. Special classes and applications will help students to become ICT literate. It has also been identified that a key failure of most of the World Links IT programs in the developing countries have been caused by the lack of involvement by the community (Hawkins, R. GITR, 2002). Consequently, the teachers in Smart Schools will also be required to attend special training session to become competent in ICT (ITU, 2002). As most of the Internet content in Malaysia is in English, the MOE has taken a major step by having the first grade elementary students study Mathematics and Science in English instead of Malay starting from 2003. However, for young people in rural areas, school or

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public Internet facilities are still inadequate and necessary supporting infrastructures are not available. It has also been identified that other key causes of failure of most of the World Links IT programs are: the lack of support for trained teachers in ICT, the national ICT education policy or the lack of involvement by the community (Hawkins, R, GITR, 2002). The hypothesis for this study was derived and tested, based on the motivations described above on the issue of ICT usage by the teenagers. The factors related to “income” and “leadership” that are viewed to be an influence for the diffusion of ICT to the mass population were also to be analyzed. However, for this case study using the teenagers, this factor is labeled “parent factor”, as a relative comparison to “leadership” or “income”. The case study hypotheses were as follows:- (1) The use of Internet by the teenagers is influenced by “parent factor”, “accessibility to the Internet service”, “tutorial available to support study of ICT” and “the availability of alternative services that rival the Internet”. (2) “Parent factor” is the most significant variable in influencing the teenagers to use the Internet.

(3) There is a significant difference between the urban and rural teenagers’ patterns of Internet use. The approach adopted to find the reasons why the teenagers are using the Internet was to study the factors that encourage them to use this technology, using the model as shown below (Figure 5.1). Figure 5.1: Model of the Relationship among Variables that Influences the Use of ICT

Use of the Internet

Access to the Internet

Tutorial Available to Study ICT

Parent Factor

Alternative Services That Rival the

Internet

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The following section describes the case study in detail. 5.4 CASE STUDY 1: THE FACTORS THAT INFLUENCE THE SENIOR HIGH SCHOOL STUDENTS TO USE INTERNET This case study is based on an article published in the Journal of Studies in Regional Science (Tengku Mohamed Faziharudean & Hitoshi Mitomo, 2002). 5.4.1 Study Location The study was conducted in the State of Kelantan which is located in the northeast of Peninsular Malaysia (see Figure 5.2). Kelantan has the lowest penetration of the Internet use in Malaysia, with 12.5 users per 1,000 people (MECM, 2000). Therefore, a conservative estimate of the digital divide can be found by using the State as the case study. Figure 5.2: Location Map of Peninsular Malaysia and Kelantan

(Source: Malaysian Tourism Development Corporation)

Kelantan has a population of 1,313,014 (2000), and more than 70.0% of the population live in the fertile Kelantan Delta plain on the north, where most of the major

Kota Bharu

Tanah Merah

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towns are also located (KSEPU, 2002). Southern Kelantan is sparsely populated but it has potential for economic growth as it is rich in mineral, timber and agricultural resources. Kelantan’s Gross Domestic Product (GDP) in 2001 - RM 5,289 million (based on 1987 prices) - was one of the lowest in Malaysia (KSEPU, 2002). The primary economic activity is agriculture. Other major economic activities include logging, light industry, mining and the services sector. There are about 370,056 (KSEPU, 2002) students studying in the public elementary and High Schools in the State, representing 28% of the entire population. (This figure does not include students studying in private and religious schools under the State Government administration). Kota Bharu is demographically a typical urban area in Malaysia, whilst Tanah Merah is a typical rural environment, with regards to the population, infrastructure and education facilities that are available. (Categories for urban and rural areas are defined based on the guidelines used by Malaysian government departments and agencies when applying for Federal Government loans and grants for development projects. Based on these guidelines, in Kelantan, only Kota Bharu is defined as the urban area.) Kota Bharu is not only the capital city of Kelantan but also the largest city on the East Coast of Peninsular Malaysia. It has a population of 406,662 (year 2000) (KSEPU, 2002). The city serves as the administrative and business center of the State. Tanah Merah is one of the districts administrative and a business center in Kelantan and has a population of 30,000 (year 2000) (KSEPU, 2002). With its strategic location at the junction of the East-West Highway (connecting the East Coast and the West coast of Peninsular Malaysia) and the main highway to Kota Bharu, and with its proximity to the southern region of Kelantan, Tanah Merah has become an important growth center in the state. The study did not use the southern region of Kelantan as the subject of study, as there are certain areas in the hinterland that have no access to the telecommunication infrastructures. Therefore, the southern region would not be a representative example of typical rural Malaysia environments that have both basic electricity and telecommunication infrastructures. 5.4.2 Sample The respondents for this study are the senior High School students (17 years old). The reason for using a sample of senior High School students to represent the teenagers was because they are perceived to be more likely to be Internet literate than younger students. A high percentage of Internet literate senior High School students would reflect the effectiveness of the public schools as a location for ICT diffusion to take place. As many students (especially in the rural area) will enter the workforce after graduating from High School, the sample is more representative of the public usage of ICT. The total sample size for this study was 300. It comprised students from two high schools in Kota Bharu (200 samples, representing the urban environment) and from two high schools in Tanah Merah (100 samples, representing the rural environment).

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5.4.3 Measurement Indicator and Variables It has been argued that the Internet is not a useful tool for measuring the full potential use of ICT by teenagers. Findings from previous surveys shows that the popular services used on the Internet were chat, e-mail and games (not limited to teenagers but also adults), forms of entertainment that could not contribute significantly to improve the academic performance of the teenagers. If more information services (including e-library) were available online, there may be a shift in Internet use from entertainment to dissemination of knowledge and commercial purposes. Therefore, teenager use of the Internet and other networks is an important element in measuring the responsiveness of the younger population to ICT. This study itself is more concerned with understanding the willingness of the teenagers to adopt network services. As mentioned above, the purpose of use of the network will be expanded as more services are available online in the future, as happened in the early days of the Internet use in the USA by the mass population, which was also initially for entertainment, but now has expanded to include other activities such as banking and financial services. After all, Internet literacy is the most accurate benchmark to date to measure the ability of Malaysians to get connected to the ICT network, as other indicators are too vague or still misleading for empirical analysis. For example, the ability to use a computer is mostly related to the use of word processing or playing computer games. In contrast, use of the Internet is wider in scope and includes e-mail, chatting, information retrieval, etc. Therefore, Internet use is still the best metric to use as an indicator of the use of ICT in Malaysia and in developing nations. Based on the perceived model of relationships among the variables that could influences the use of ICT, as shown in Figure 5.1, the independent variables for this case study are the “factors that will influence the use of the Internet service by the senior High School students in Kelantan”. By understanding the causal relationship between those factors and Internet use, a public action plan can be worked out that specifically targets those factors that would accelerate the diffusion of the Internet to the teenagers. Although there are many perceivable factors for the teenagers to use the Internet, this study has been limited to four very important factors (as in Figure 5.1) that potentially affect the teenagers’ everyday life. These perceivable factors or independent variables and their definitions are as explained below:- (1) Parent factor – defined in this study as the factor that has direct/indirect influence from the parent in encouraging the respondents to use the Internet service. This includes the background of respondents’ families such as income or ability to use ICT, and an availability of a PC at home. (2) Accessibility to the Internet service in the area – defined in this study as the location where the respondents can get access to the telecommunication infrastructure, specifically fixed line telephone connections, the main indicator of the Internet accessibility in Malaysia in order to use the Internet service. The observable variables are the number of hours per week the respondents used the Internet at home and in schools, cyber cafés, community centers, etc.

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(3) Tutorial availability for studying ICT – defined in this study as the availability of formal education for the respondents to learn about ICT, including the availability of Internet classes or courses to learn the ICT in schools, private institutions and community centers. (4) The availability of alternative services that rival the use of the Internet service – defined in this study as the availability of other services, such as television, music, sport activities, libraries for reading and information retrieval, etc. These alternative services will have a negative effect on the amount of time the respondents use the Internet. For example, the more time the respondents spend watching television or being involved in sport activities, the less time they are likely to spend using the Internet. This survey has some limitations as the students used as samples have limited experience in using ICT applications, and the questionnaire was designed mostly in nominal and ordinal format. 5.4.4 Scenario of the Internet Usage by High School Students in Malaysia Although ICT is not formally taught as a subject in the public schools in Malaysia, for those schools that have computers, the subject is taught informally. The Malaysian government had a target that every school in Malaysia be equipped with a computer lab by the year 2002. As for the year 2000, 31.0% of primary schools and 54.0% of High Schools (secondary schools) had PC facilities (Infosoc, 2000). The High School students in Malaysia are currently using the Internet as a supplementary resource for obtaining information for their school assignments. Other resources include gathering information from reading text books and library-based research. It is also estimated that in the year 2000, about 250 schools, primary as well as secondary, have their own websites out of total of 8,858 schools (Infosoc, 2000). It shows that while some Malaysian schoolchildren do not have access to the Internet, others have acquired skills that go well beyond the basic level. The samples in this study consist of schools that have both computers and Internet facilities, and all the four schools indicated that they have given school assignments that require the students to use the Internet to get the information needed to complete the task. The development of the use of the Internet by High School students in Malaysia is considered to be at an early stage. There are still problems regarding the basic telecommunication infrastructures to enable schools in the rural areas to have access to the Internet service, as wireless services for Internet connection are not currently popular. Accessibility to the Internet services outside the schools, either at home (if the student’s family has a PC), or at cyber cafes, is therefore quite limited. This is different from Japan where the High Schools in both urban and rural areas are equally well equipped with computers and Internet access. The Japanese teenagers are also well exposed to ICT education provided in schools. They can also access Internet services through their mobile phones (for example, i-Mode), and as much of the Internet contents is in the Japanese language, the Internet is considered to be both attractive and accessible.

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5.4.5 Data Analysis and Discussion (1) Descriptive Finding from the Sample The data obtained from the questionnaires were analyzed using SPSS 10.0 for Windows. The descriptive findings from the samples were as follows: A. Demographics The respondents comprised 129 (43.0%) male and 171 (57.0%) female students. The ICT literacy rates among the respondents are as shown in Table 5.1 below. Table 5.1: ICT Literacy Rates in Urban and Rural Area Item Urban RuralComputer literacy 91% 71%Internet literacy 83% 55% 87.7% of the respondents had known how to use the computer for 6 years or less, indicating many of the schoolchildren became computer literate while in secondary school or high school. Even though computer literacy is very high among the respondents, the Internet literacy is lower, as the Internet is still a relatively new technology and will take more time to be diffused to the public. Urban respondents are far in the lead in term of Internet literacy as compare to the rural respondents, with a rate difference of 28%, proving that there is a digital divide between urban and rural respondents in term of the ability to use the Internet. When tested using Spearmans’ “rho” correlations test, it is shown that there is a correlation of 0.30 between geographical location and Internet literacy. This situation is consistent with the early adopter theory that new technology diffuses first to the urban population. In term of gender, 75.4% male respondents and 73.7% female respondents were Internet literate, indicating no gender based digital gap. This is contrary to the popular belief that religion (in this case Islam) is the main obstacle for females to get access to the Internet as was indicated in a previous study in certain Africa countries with majority Moslem populations (GTS, 2000). The previous study might have failed to recognize that the obstacle for the female students in those countries was traditional African cultural values, not religion. There is no evidence for gender-based discrimination for ICT access at public schools in Kelantan. B. Parent factor More than 90% of the respondents reported that their parents encouraged their children to use the Internet irrespective of where they lived (showing that there is a significant agreement on attitude of the respondents’ parents based on the Chi-squared test for goodness of fit). This indicates that most of the parents in Kelantan appreciate the importance of ICT knowledge acquisition for their children.

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In this study, literacy of the respondents’ fathers was used as an indicator to show the parent influence for them to use the Internet. Almost all of the fathers were currently working, and 47.3% of the respondents’ fathers were ICT literate. Table 5.2 below shows the respondents’ father’s ICT literacy in the urban and rural area. There is a significant difference based on ICT literacy of the respondents’ father (Chi-Squared test for goodness of Fit) based on the geographical area where they live. However, the gap narrows with respect to the respondents who are Internet literate; more rural respondents who are Internet literate have fathers who are also ICT literate. Table 5.2: Respondents Father’s Literacy, Parent’s Income and Ownership of PC Item Urban RuralFather’s ICT Literacy - Overall Sample - Internet Literate Respondents

52.0% 56.0%

38.0%45.5%

Parent’s Income above RM 600 per month - Overall Sample - Internet Literate Respondents

77.0% 81.3%

60.0%76.4%

Own Personal Computer - Overall Sample - Internet Literate Respondents

64.5% 73.8%

46.0%67.3%

The fact that 71.3% of the respondents’ parent income is more than RM 600 per month indicates that the respondents are mainly from the average and above average family income groups in Kelantan (as shown in Figure 5.3). 35.1% of the respondents who were Internet literate were from families with incomes of more than RM 1,500 per month, although they represented only 29.3% (shown in Figure 5.3) of the total number of respondents. Only 20.0% of the respondents who were Internet literate came from parent with incomes of below RM 600 per month (shown in Figure 5.3), indicating wealth plays an important determinant factor in High School students becoming Internet literate. In term of urban-rural comparison, Table 5.2 shows that there is a significant difference in respondents’ parent income between urban (77.0%) and rural (60.0%) areas (Pearson Chi-square test) for income above RM 600 per month. Among the respondents who are Internet literate, the gap in term of parent income is narrower as the majority of the respondents who are Internet literate come from average to above average family backgrounds. Digital divide between the urban and rural respondents based on parent income does prevail. PC ownership is an indication of the seriousness of the parent to encourage their children to use ICT or their own ability and enthusiasm to use ICT. PC ownership seems to correlate positively with the parent income. Table 5.2 shows that there is a rate difference of 18.0% between urban and rural respondents who own a PC. However, the gap closes to about 6.0% among the urban-rural respondents who are Internet literate, indicating again that the respondents who are Internet literate are also most likely to own a PC.

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Figure 5.3: Distribution of the Respondents Parent’s Income

Parent's Income

29.3%

22.0%20.0%

17.3%

11.3%

>RM 1,501/m o

RM 1,001-RM1,500/mo RM601-RM 1,000/m o

RM301-RM 600/m o

RM 300/m o or less

C. Accessibility of the Internet service at the area Both Kota Bharu and Tanah Merah have good access to telecommunication services. Table 5.3 below gives the number of telephone connections for residential purposes and cyber cafés in both locations. From the survey, it is found that the most popular locations where the respondents are accessing the Internet service are at home, followed by cyber cafes and schools as shown in Figure 5.4 for both the urban and rural respondents who are Internet literate. Table 5.3: Telephone Connections and Cyber Cafés in Survey Location Item Location Quantity

Kota Bharu 27,140Telephone connections (residential) Tanah Merah More than 4,000Kota Bharu 57Cyber cafés Tanah Merah 3

The pattern of use of the Internet service between the rural and the urban respondents shows some differences. Although the urban and rural respondents use the Internet service more at home, a larger percentage of the rural respondents (38.2% as compared to the urban respondents of 33.1%) is using the service at cyber cafés, and almost all of them do not use the Internet at schools (3.6% for the rural respondents as compared to 16.9% for the urban respondents).

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Figure 5.4: Locations Where the Respondents Frequently Used the Internet

Location Frequently Used Internet

Cyber cafeSchoolHouse

No.

of R

espo

nden

ts

100

80

60

40

20

0

Geographical Area

Rural

Urban

55

28

83

21

32

Schools are not a popular location for the respondents to use the Internet service, as the mean ratio for the students per Internet-accessed PC in the surveyed schools was 45 students per an Internet-accessed PC. The ratio reflects there are not enough PCs with Internet access to be used by the public High School students. The mean time per week the respondents use the Internet in school is only 48.0 minutes. 58.0% of the respondents were unsatisfied with the Internet service available in their schools, or expressed no opinion. The respondents were asked to rank (among five given choices) of what needed to be done to improve their school’s Internet services. The results are shown in Table 5.4. (Note that the lower the mean rank, the more important the factor is perceived to be). Table 5.4: Rank of the Factors the Respondents Indicate Need to Improve the School Internet Services Factor Mean Rank Increase the number of PCs with Internet access 2.10 More ICT class/courses to be taught in school 2.52 Improve the quality of Internet access in school 2.54 Increase the number of ICT trained teachers 3.18 Other reason 4.66 The Friedmen test indicated (at significance level, p=0.05) that there were significant differences in what the respondents perceived to be the most important factors in need of improvement. As shown in Table 5.4, the respondents indicated that the most important factor in improving the school Internet service is increasing the number of PCs with

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Internet access. In other words, the respondents attached a high priority to the provision of hard infostructure. However, the soft infostructure was also perceived to be important, as the respondents gave a high rank for more ICT classes/courses to be taught in school. From Figure 5.5 (below), it can also be seen that the number of hours per week the respondents are using the Internet is still low, with the majority of the respondents in both rural and urban areas uses the Internet for less than 7.0 hour per week. Figure 5.5: No. of Hours per Week the Respondents Were Using the Internet

No. of Hours of Internet Usage Per W eek

>14.07.0 - 14.0>3.0 but <7.01.0 - 3.0< 1.0

No.

of R

espo

nden

ts

120

100

80

60

40

20

0

Location

Urban

Rural

The most popular use of the Internet by the respondents is information retrieval, followed by e-mail, chat and “entertainment” (such as listening to music or playing games). Table 5.5 shows the mean ranking based on the type of Internet use by the respondents. The type of Internet applications with the lowest mean ranking represent the most frequent service that the respondents use. Information retrieval, specifically through the World Wide Web (WWW), was the most frequently used Internet application because all the respondents were required to use the Internet to complete some school assignments. Table 5.5: Rank of the Type of Internet Applications Frequently Used

Type of Internet Application Mean Rank Information retrieval 2.21 E-mailing 2.41 Chatting 2.75 Entertainment purposes 3.07 Other purposes 4.56

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D. Tutorial available for the respondents to study ICT More than half of the respondents (177 respondents) have not had formal education on how to use the Internet, and 82.1% of Internet literate respondents who have attended ICT classes or courses are urban respondents. Figure 5.6 below shows the percentage of the urban and rural respondents (who are Internet literate) that have previously attended ICT classes. 60.0% of the rural respondents never have a chance to attend ICT classes as compared to 61.0% of the urban respondents who have attended ICT classes. Figure 5.6: Percentage of the Respondents Who Have Attended ICT Classes

IT Class Attended

Never attendAttendedNo respond

Per

cent

age

of R

espo

nden

ts In

tern

et L

itera

te

70

60

50

40

30

20

10

0

Location

Rural

Urban

37

61 60

40

Among those urban respondents, 88.7% had attended formal education for ICT in schools. However, many of the rural respondents attended ICT classes/courses through community centers or private tutorials, showing that schools played a lesser role in the diffusion of ICT education for these rural teenagers. It can be concluded from this analysis that the rural respondents still fall behind in formal education in ICT. It should also be noted that 87.3% of the respondents agreed that it is important that the Internet be taught in schools. It shows the enthusiasm in the respondents’ attitude to learning ICT, and their desire for the Internet to be one of the subjects studied in schools. E. Alternative services that rival the Internet Among the rival activities that have been used in this survey, such as watching television, listening to music, spending time in the library and sports, the most popular is watching television, as shown by the rankings based on the median of the frequency of the use of those services by the respondents (as shown in Table 5.6). Surprisingly, the school library is not a popular place for the respondents to spend time, even though it is

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the main location for information retrieval. There are also no differences between the urban or rural respondents with regard to the number of hours they spent on these activities. Table 5.6: Respondents Ranking of the Most Frequently Used Alternative Services Type of Services No. of Hours per weekWatching television 7.0Listening to music 6.5Involved in sport activities 3.0Spending times in the library 1.5 (2) SEM Modeling and Analysis from the Study Figure 5.7 shows the Structural Equation Modeling (SEM) that have been established from this survey, and which demonstrates the causal relationship between some variables and the use of the Internet by the senior high school students in Kelantan. The final model consists of 4 latent variables, with each latent variable having at least two observable variables that were derived from the questionnaire survey, and are assumed to reflect the underlying latent variables. E1 to E14 are the residuals or unique factors, as any variable predicted by another variable must have a residual value. E1 through E11 are the unobservable variables unique to the latent variables they are affecting, whereas E12 through E13 are the unique unobserved variables affecting the manifest variables to the dependant variable. E14 represents the unique variable affecting the dependant variable. A. Parent Factor

“Parent factor” is the most influential independent variable that can encourage the senior High School students in Kelantan to use the Internet (standardized regression coefficient of 0.55). From the model, the observable variables used to measure parent factor are “parent income”, “respondents’ fathers Internet literacy” and “ownership of PC”. Among the observable variables, the ownership of PC (standardized regression weight of 0.72) is the most contributing factor. This is not surprising as more than 40% of the respondents who are Internet literate in the survey first learned how to use the Internet at home as opposed to in school or other places. Home also the most popular location among the respondents to use the Internet. The residual or error variances for the “respondents’ father ICT literacy” and “parent income” have a significant positive correlation of 0.36.

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Figure 5.7: SEM for Factors that Encourage the Respondents Usage of the Internet

Usage of Internet

Alternative servicesrival Internet Parent Factor

Access to InternetTutorial

available tostudy IT

0.64

0.36

Hrs listeningto musicper wk

Hrs watchingTV per wk

Owned PC

Father's ITLiteracy

Parent'sincome

IT ClassAttended

Hrs learnedIT

Hrs usageat school

Hrs usageat community

center

Hrs usageat other

locations

Hrs usageat cyber

cafe

0.37

E1

E2

E14

0.66

0.20

0.81

0.45

0.85

E11

E10

E9

0.55

No. of yearof Internet

literacy

Hrs ofInternetusage

0.610.32

0.26

0.06

E7

E8

E13

E12

E3

E4

E5E6

0.16

0.57

0.62

0.36

0.99

0.01

0.25

0.64

0.65

0.00

0.98

0.060.00

0.100.37

0.43

0.40

0.39

0.32

0.72

B. Alternative Services that Rival the Usage of the Internet The observable variables used for this model (based on the most popular activities that respondents like to do) are the number of hours per week the respondents spent watching television and listening to music. Surprisingly, use of these rival services is positively correlated with Internet use (standardized regression coefficient of 0.37), not negatively correlated as had been expected. The positive correlation found from this analysis can be explained by two factors:- (1) In the case of Malaysia, with its traditionally conservative media (newspapers, television, etc), information on new trends and teenage culture does not spread fast enough through the traditional channels. The Internet therefore would be the main source for the adventurous younger generation to search for information about their favorite music, fashions, sports, etc. Therefore, the alternative services actually complement the Internet service, and are not rival services as had initially been thought. (2) The average number of hour senior high school students’ use of the Internet is less than two hours per day. The Internet facilities in public places or schools are limited, and

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cyber cafés are still costly for long duration usage. Furthermore, to be online at home also requires parental approval and has cost considerations, etc. Therefore, “alternative services that rival the Internet” did not play a significant role in rivaling the use of the Internet. C. Accessibility to the Internet service in the area Access to the Internet service is available in the respondents’ homes, schools, cyber cafés or community centers, and in other places such as in houses of friends/relatives. For the purpose of this study modeling, “access available at home” was not used as an observed variable in order to avoid possible multi-colinearity. Accessibility of the Internet service also has a significant effect on the use of the Internet by the respondents (standardized regression coefficient of 0.36), meaning that the respondents will be encouraged to use the Internet service if access to the service is within their “reach”. The use of the Internet at cyber cafés (besides at home) is the most influential factor (standardized regression weight of 0.99), showing the major role played by cyber cafés in Internet diffusion for teenagers. In contrast, use at schools was much less significant (standardized regression weight of 0.06). This might be because of the limited number of computers available and the lack of privacy when sending e-mail or chatting (the two popular uses of the Internet among the teenagers). D. Tutorial Available to Study ICT The observable variables to measure if the respondents have access to tutorial or formal education in ICT are: (1) the time spent by the respondents to learn ICT in classes/courses, and (2) the question whether the respondents had ever received formal education on ICT. This factor does not have a significant effect on the use of the Internet, unlike the other three potential variables (standardized regression weight of 0.26), as almost half of the respondents did not have formal education in ICT. However, as the majority of the respondents thinks that ICT classes or courses should be taught in school, we perceived that the respondents would be motivated to use the Internet service if there were tutorial available to them. The residual variances for “hours learned ICT” and “hours usage at schools” (from the factor “accessibility to the Internet”) have a positive correlation of 0.16, as a significant minority of the respondents received formal ICT education in schools. E. Fitness of the SEM The square multiple correlation for the model is 0.64. Therefore, the four independent variables together explained 64.0% of the variance of the dependent variable (i.e. use of the Internet service by the senior High School students in Kelantan). When the model is tested by the Chi-Squared test, the Chi-Squared value is 94.938 with a probability level of 0.002. Therefore, at the 95.0% confidence interval, the null hypothesis can be rejected, and conclude that the model is statistically significant. Further testing indicates that as the

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Tucker-Lewis index is 0.979, the model is considered to have a good fit; and that as the RMSEA is 0.053, the model is considered to be fairly fits on RMSEA measurement. (3) Recommendations Based on the Result of Analysis from Case Study 1 Internet use by the senior High School students in Kelantan, Malaysia is proven from the survey SEM to be influenced positively by the factors “parent factor”, “accessibility to use the Internet service, “the availability of alternative services that rival the use of Internet” and “tutorial available to study ICT”. From the descriptive analysis, it is found there is a digital divide in the use of the Internet between the urban and rural senior High School students in Kelantan. However, the respondents shared the same cause-effect relationship, as “parent factor” is found to be the most influencing factor for Internet diffusion among teenagers. Active parental participation in ICT, in both urban and rural areas, will have direct and indirect effects on the students in their use of the Internet. As has been proven by this study, Internet literacy among the respondents is highly correlated with having a PC at home. Therefore, the Malaysian government should tailor its ICT programs to engaging the active participation of parents instead of simply concentrating on the students. Further improvement is needed to equip schools better throughout the country with more Internet-enabled computers and to provide better technical support. Schools have played a major role in initially making students computer literate (as proven from this survey); therefore, they should continue to play an active role to ensure that students are also Internet literate when they leave High School. The policy of improvement in ICT availability in schools will benefit the lower income members of the population which normally lives in rural areas and typically does not have a PC at home. School’s role in getting students from diversified backgrounds to use the Internet must be strengthen, especially in the rural areas, to bridge the digital gap among the urban and rural students, and most importantly to provide support for rural students from lower income background. The important role of cyber cafés in the diffusion of the Internet among the teenagers in Malaysia cannot be denied, especially when it comes to bridging the digital gap between the rural and the urban teenager. A local government initiative is needed to encourage the opening of more cyber cafés. It is also important to have cooperation between the major telecommunication company and the owners of cyber cafés to ensure the charging rate to be networked is affordable for the students. This study proved that when the authority could not provide the Internet service at an affordable price to the population (in this case the teenagers) or effectively (measured by the convenience for the users, such as the issue of privacy), the cyber café played a significant and effective role in diffusing the technology to the rural teenagers. Therefore, cyber café roles in the diffusion of Internet use among the teenagers should be fully optimized.

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5.5 CONCLUSION Based on Case Study 1, the following findings can be concluded:- (1) Leadership – “parent factor”, as a proxy variable to “leadership” is an important factor that could encourage the mass population to use ICT, and accelerate the diffusion of ICT to the population. In Malaysia or other developing countries, this factor can be related to the influential figures in the local communities who show great enthusiasm to use or encourage others in their communities to use ICT in their daily lives. Leadership also can come in the form of people who have the legitimate power to ask their subordinates to use ICT, such as in the workplace. Therefore, a “top-down” management approach could be used to initiate the early diffusion of ICT to the mass population through the workplace. Further study is needed to explore of the effect of workplace and its influence in the diffusion of ICT to the mass population.

(2) Income – based on the Case Study above, “income” is found to be an important contributing observable variable for “parent factor”. As ICT is often associated with an urban and expensive lifestyle, affordability also is an important issue that needs to be addressed properly in order for the mass public to participate in using ICT; the high cost of using ICT applications (particularly for the rural population which has a lower level of income than the more affluent urban population) is preventing the mass public from using ICT applications. The need for assistance from the public or private sectors to ease the monetary burden of the mass population to get networked should be considered in order to increase the level of use of ICT by the urban and rural populations. It is important that in future research, the role of income in encouraging the mass population to use ICT, and how the urban and rural populations’ view of “affordability” influences their use of ICT applications be examined.

(3) Accessibility of ICT – the lack of basic telecommunication infrastructure in the rural areas is a significant factor preventing the diffusion of ICT to these areas. Therefore, hard infostructure, such as a reliable fixed telephone lines is needed throughout the country so that ICT products and services can be accessed by the mass public. The establishment of community Internet centers, providing the Internet service at libraries or post offices, as is currently being implemented in Malaysia will provide alternative locations for the mass population to access the Internet. However, access to ICT through having the hard infostructure alone is not enough to make the mass population use ICT such as the Internet, as skills are also needed to use the ICT applications. The respondents from this Case Study give high priority to having ICT class or courses taught in schools, indicating the importance of soft infostructure, such as education in getting the mass population to get networked. Government investment in ICT must have a balance between providing the hard and soft infostructures so that programs implemented to bridge the digital gap can be more effective.

(4) Creating the demand for using ICT – it is also important that available Internet content meets local needs, so that it will give the incentive for the mass public to use the available applications. Case Study 1 showed that school children are using the basic

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Internet applications, such as World Wide Web (for information retrieval), e-mail and chat. Although these ICT applications might not be as commercially “meaningful” as e-commerce or e-banking, it is important at the initial stage of ICT diffusion to create a “need” or “demand” for the technology, so that people are interested in using it. The diffusion of more “meaningful” Internet applications is likely only to occur after the mass population has become familiar with the basic applications. Government encouragement for the population to use ICT, such as by continuous campaigning, providing incentives for purchasing PCs, etc. will raise awareness in the mass population and encourage them to use ICT applications. Therefore, a “bottom-up” approach is also needed to diffuse ICT to the mass population. In other words, individuals need to have enthusiasm to use ICT in order for the diffusion to take place. In this Case Study, the respondents showed their enthusiasm to use ICT applications, which suggests the success of the Malaysian government's ICT policy in arousing “awareness” of the importance of ICT. (5) The role of cyber café in the diffusion of ICT should be optimized – Case Study 1 showed the importance role of cyber café in encouraging the diffusion of Internet service to the teenagers in Malaysia, unexpectedly to the rural respondents. Cyber cafés have also played significant roles in Indonesia and Philippines in accelerating the growth of Internet use in both of these countries (see Chapter 3) when there is minimal government intervention to increase the accessibility of ICT to the mass public, and affordability is a major obstacle for the mass population to get networked. For Malaysia, the local government or authority should find an initiative to encourage the opening of more cyber cafes by the private operators that allow more people to use ICT. Among the steps that could have been taken include in assisting to facilitate the issuing of permit for the cyber café operators and/or cooperation with the national telecommunication company to give a lower rate for the use of the Internet in cyber cafés, thus encouraging the operators to bring down their charge rate to the users.

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CHAPTER 6

FACTORS IN THE WORKPLACE THAT INFLUENCE THE DIFFUSION OF ICT

6.1 INTRODUCTION This chapter examines the role of the workplace in influencing the Malaysian working population to use ICT. As a large portion of the Malaysian adult population is in the workforce, it is important to examine how the workplace can be used to diffuse ICT to the working population. The “nature of job” - how the working population uses different ICT applications to perform its work tasks - is perceived to have played an important role in creating the digital gap within the working population that is based on competency. Not only are those who only infrequently use ICT applications at work at a disadvantage, those who use only basic ICT applications are disadvantaged, too. The issue of nature of job is therefore the focus of this chapter. The case study presented in this chapter examines, at a micro-level perspective, how, why and when the working population is using ICT. It also investigates whether those who are using ICT applications in the workplace are also using ICT applications outside the work environment. A finding from the case study that reveals that the use of ICT extends beyond the working environment shows that the workplace does play a positive role in assisting the diffusion of ICT to the working population. The pattern of use among the working population, according to differences in income, nature of job and/or geographical dimension could reflect the preferences of the working population in using ICT applications. By knowing the factors that encourage the working population to use ICT, certain action plans can be formulated to support those preferences, leading to optimum use of ICT by the working population. The subjects of the case study were service sector workers in the core urban area of Kuala Lumpur. This sector was chosen because it has one of the largest percentages of its workforce using ICT applications in their day-to-day jobs (only the manufacturing sector has more). This chapter is divided into the following sections:- (1) Role of Workplace in ICT Diffusion (2) Factors that Influence the Working Population to Use ICT (3) Case Study 2: How Nature of Job Influences the Use of ICT (4) Implication and Conclusion 6.2 ROLE OF WORKPLACE IN ICT DIFFUSION Malaysia had an unemployment rate of 3.1% in the year 2000, a reduction from 5.1% in the year 1990; this rate is considered to be “full employment” (MQL Report, 2002). As the majority of Malaysian adults who are in the workforce spend a considerable amount

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of its time in the workplace, it is important to examine how the workplace could influence the mass population to use ICT. It is perceived that workers who use ICT applications to perform their daily work tasks are more likely to use ICT applications for other purposes outside the working environment. Therefore, the frequent use of ICT applications has a persuasive effect on the individual in the workforce to adopt ICT, as has been advocated by many diffusion theorist researchers (Rogers, E., 1986). However, it is widely viewed that ICT applications are only relevant for certain types of job, such as for those associated with the service and manufacturing sectors. ICT applications are viewed as irrelevant to some other sectors, such as agriculture. For example, there is a misconception that farmers need not use ICT applications in their daily work. Even for those who don’t own a PC or work in a typical office setting, the potential of ICT is great, and its applications can readily benefit such workers. In the case of farmers, ICT can be used to retrieve essential information such as the weather forecast and data about what type of soils or fertilizers should be used for their crops. It can also be used in marketing their products beyond the local market. In the developed countries, farmers are using ICT to retrieve information on the future prices of their products from agricultural future markets, which gives them time to plan strategic marketing of their products. The level of use of ICT applications in the workplace also varies. Depending on the nature of work, certain ICT services will be more relevant to certain types of jobs than others. For example, a typist will typically use a word processor and spreadsheet in his/her daily work, whilst a business analyst will use ICT for information retrieval. There is a tendency that those who are in the lower levels of a firm’s organization will mostly be using basic ICT applications, such as word processors and/or spreadsheets, in contrast to those at the top levels of a firm’s organization who may be using more advanced applications. One important reason behind this difference is education level; those who are in top management positions are more likely to be well-educated that than those who are doing labor jobs, and as such can more easily adapt to new technologies. However, this divide, if it is persists within the working population, could create an inequality in term of competency in using ICT based upon different natures of job. There is a need to reduce this digital gap to a level that will give the chance for those who are using less “meaningful” ICT applications to catch up. In the next section, the issue of nature of job and other factors that influence the working population to use ICT are further examined. 6.2 FACTORS THAT INFLUENCE THE WORKING POPULATION TO USE ICT Based on the previous study (Case Study 1), workplace has a significant influence in diffusing ICT to the mass population. Income factor in particular has proven to be positively correlated with the use of ICT. Therefore, it is further examined in this chapter in the context of the workplace.

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As discussed in the previous section, nature of job is perceived to be a significant factor that has created the digital divide based on the different levels of ICT competency or skill among the working population (Hargittai, E, 2002). Investigating how the top management and lower level worker in the same organization are using ICT will reveal how this factor is (or is not) affecting the pattern of ICT use in the working population. Geographical difference is also an important factor that is perceived to influence the working population in its use of ICT. However, it is perceived that individuals in urban and rural areas in Malaysia performing the same working task will not differ significantly in their use of ICT. For example, typists in urban and rural areas will both use a word processor or spreadsheet. The difference might only be that the version of the word processor used by the urban typist is the latest available in the market as compared to the rural typist. Therefore, instead of investigating the “geographical difference” at the workplace, this chapter determines the influence of “geographical effect” (see below), such as the mobility of the workers, in diffusing ICT to the working population. A case study was used to analyze the factors that influence the working population to use ICT. In this case study, the urban service sector working population in core urban area was used as the sample. Malaysian urban areas with good telecommunication infrastructures have an advantage over the rural areas in the diffusion of new ICT technology. This is particularly observable in Kuala Lumpur as it is located within the MSC area which has state of the art ICT technology. The approach to identifying the elements of digital divide was by studying the factors that will encourage the working population to use ICT, using a model as shown Figure 6.1. Although there are many factors that can influence the working population to use ICT, this survey was limited to three aspects. These three factors were chosen based on the findings from the previous survey on the diffusion of ICT among the schoolchildren in Malaysia, as well as on a previous study conducted in the USA that reported a shifting on the issue of digital divide based on the level of competency when using ICT (NTIA, 2002). Figure 6.1: Model of Relationship between Variables that Influences the Use of ICT

These factors and their definitions are further explained as follow:-

Use of ICT Geographical effect

Income effect Nature of job

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(1) “Nature of job”is defined as what kind of task the respondents have to do in their daily job. This includes the requirement to use various types of ICT services/applications at the workplace and the amount of time spent on ICT at work. (2) “Income effect” is defined as how the respondents’ income directly affects their use of ICT. Also included are income-related effects such as the actual spend on ICT, the enthusiasm of the respondents to keep up-to-date with new ICT products/services (products and services that are normally charged for at a premium), and the frequency of use of a home PC (which reflects the respondents’ wealth and readiness to pay for ICT services). (3) “Geographical effect is defined as how geographical aspects such as the respondents living environment (type of residence in which they live, neighborhood characteristics, etc.) and the distance of their residential area from the city center influences their use of ICT. It also includes how job flexibility with respect to any requirement to remain in one location at work influences use of ICT (for example, the mobility of the respondents at work and the need for them to have face-to-face communication with their co-workers on different sites). A previous study in the USA (NTIA, 2002) showed that even within the same city geographical factor has a direct influence on the community’s use of ICT. The method chosen for this study was a questionnaire survey, based on the five points Likert scale. The study was conducted in March 2003. As “nature of job” was perceived to be a major factor influencing the usage of ICT among the urban working population, it was further explored whether there is a wide gap between those with basic and advanced level skill in ICT use. Basic skill is considered in this study to be the ability to use ICT for word processing, e-mailing and browsing the World Wide Web (i.e. low-order work tasks). Advanced skill is considered to be the ability to use ICT for graphic work, programming and other advanced applications (high-order work tasks) (Servon, L., 2002). The hypotheses for this study are as follows:- (1) The use of ICT is influenced by “nature of job”, “income/wealth effect” and “geographical effect’.

(2) “Income effect” is positively influenced by “nature of job”. (3) “Geographical effect” is positively influenced by “income/wealth” and “nature of job”.

The case study is presented in the following section. 6.4 CASE STUDY 2: HOW NATURE OF JOB INFLUENCES THE USE OF ICT Case Study 2, on how nature of job influences the use of ICT in the service sector working population in Kuala Lumpur was first presented in the Journal of Studies in

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Regional Science, The Japan Section of Regional Science Association International (Tengku Mohamed Faziharudean and Hitoshi Mitomo, 2003). 6.4.1 Overview A questionnaire survey was conducted using the urban working population in the service sector in Kuala Lumpur, Malaysia to find out if there exists a digital divide within this segment of the population. The emphasis was to investigate whether the “nature of job” factor, as well as “income” and “geographical” factors plays a significant role in determining the urban working population’s use of ICT applications. At the same time, further investigation was conducted to examine the factor “nature of job” in contributing to the digital gap that is based on competency in using ICT among the urban working population. 6.4.2 Background The urban population in Malaysia (core areas) was the first to have access to, and receive benefit from, using ICT, as predicted by the agglomeration effect theory. However, in the USA, an NTIA study in the year 2000 revealed the existence of digital divide among its urban population. This digital gap is closely related to income factor and race (NTIA, 2002). Therefore, access to ICT infrastructures is not the sole criterion determining level of ICT use; other crucial factors exist, such as income level (Cooper, M., 1996), education and geography (ISIS, 2002). It is easier for the people of Kuala Lumpur to be involved directly with ICT than people in other urban areas of Malaysia. The Malaysian Government has invested about RM 4.0 billion in the implementation of the MSC, with the intention of the MSC becoming the best science and technology hub in the world for a wide variety of ICT products and services (MECM, 2002). However, the concentration of ICT investment and development in the MSC has widened the digital gap between this metropolitan area and other parts of the country, as is demonstrated by the number of telephone sets per 1,000 people, which in the Kuala Lumpur area is 239.8, as compared with the rest of the country at 172.7 (Yamada, N., 2002). It has also been uncertain whether the Kuala Lumpur population, including the MSC population, is actively participating in the usage of ICT applications. According to the Ministry of Energy, Communication and Multimedia, there were 876,773 Internet users in Malaysia in the year 2000, with 15.4% of Internet users located in Kuala Lumpur area. This represents only about 10% of the population of Kuala Lumpur. It is therefore also necessary to consider the existence of the so-called “second level" digital divide (Hargittai, E., 2001) among the networked population, especially if ICT accessibility is not an issue for them. Use of ICT that is limited to basic applications or low-order tasks such as word processing (typing), sending and receiving e-mails and browsing the World Wide Web would not give as much benefit as that gained by those who are using ICT for high-order tasks such as graphic works, programming, etc.. The case of Singapore shows that high penetration rates of ICT do not mean that users are sophisticated (Yamada, N., 2002), or that high rates will automatically lead to “meaningful” use of ICT by the population. Therefore, a certain

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level of online skill is required in order to reach the target of establishing a knowledge based society. 6.4.3 Sample The samples used in this survey were the urban working population in the service sector (including banking, publishing, trading, advertising and ICT related companies) at various locations within the Kuala Lumpur area. This approach reduced any bias associated with the ethnic backgrounds and income levels of the sample. Companies that participated in this survey are all noted to have top management support for and/or a positive attitude towards the use of ICT in the workplace. The sample size was 150, with respondents representing all levels of job in the organizations (from the top management to clerical workers). The reasons why the service sector working population was chosen as the sample for this study are: (1) the service sector has the largest percentage of its workforce using ICT applications their daily work task, and (2) a large percentage of Kuala Lumpur residents who are in the workforce work in the service sector. 6.4.4 Descriptive Findings from the Survey The data obtained from the questionnaire survey were analyzed using the SPSS 10.0 for Windows. The descriptive findings from the survey samples are summarized in Table 6.1. Table 6.1: Basic Characteristics of the Sample Item Item Breakdown Survey Result (%) Population (%)* Gender Male 55.3% 53.0% Female 44.7% 50.0% Ethnicity Malay 80.0% 45.6% Chinese 8.0% 43.5% Indian 10.0% 11.4% Native Borneo 2.0% N/A Age (survey data) 35 years or below 81.3% N/A 35 to 45 years 14.0% N/A 46 to 55 years 4.0% N/A Age (national data)**

0-14 years N/A 33.5%

15-64 years N/A 62.7% more than 65 years N/A 3.8% Education level Lower secondary 3.3% N/A Higher secondary 14.0% N/A * % Population: Percentage of the Kuala Lumpur population, Source: Department of Statistics Malaysia ** Based on national population, Source: Department of Statistics Malaysia Gender: The sample gender is considered well balanced between male and female.

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Ethnicity: Although Malays were over-represented in the respondents (80.0% of the respondents were Malay, yet only 46.0% of the city population is Malay), this bias is not considered significant for the following reasons:- (a) Samples were taken at different locations within the city, various places where the majority of the residents was known to be Malay, Chinese, Indian or mixed to prevent the dominance of a particular racial background according to where people live in the survey sample. (b) In the working environment, there is no bias related to race in the employees' using ICT; employees will use ICT if their jobs require them to do so and they have the necessary skill. (c) Urban workers with similar educational background and working positions tend to share similar living conditions and lifestyles, regardless of their ethnic background. Age: The majority of the respondents was below 35 years old, and came from the most ICT-literate age segment of the urban population. It should be noted that less than 4.0% of Malaysians are over 65 years old, and the population is predominantly young (see Table 6.1). Therefore, our survey, with the majority of the respondents from the younger workforce, is representative of the actual situation in urban Malaysia, with a growing, young population. Education level: 82.7% of the respondents had college/university qualifications, reflecting the academic qualifications demanded by employers in urban Kuala Lumpur. The younger workforce is better educated in the service sector even though it might not hold management position in the firms where it works. Even though the respondents' educational background might be over-presented in this survey, there is no bias in term of the types of job in which they are employed. Figure 6.3 shows that the type of occupation is quite evenly distributed among the respondents regardless the majority of them had college or university degrees. In the next section, the findings relating to the perceived factors will be presented and examined:-

A. ICT Literacy among Respondents

Figure 6.2 shows the respondents' self-reported ICT ability. The “average” knowledge in ICT is defined as the respondents having basic ICT skills, such as word processing, e-mailing, World Wide Web browsing and information retrieval. Figure 6.2 shows that 62.7% of the respondents indicated that they considered their knowledge average, and that only 2.0% of the respondents considered themselves ICT-illiterate. This suggests that digital divide is almost negligible among the urban working population, and access to ICT infrastructures helps to diffuse ICT to the urban working population. In term of ICT use per day, 83.3% of the respondents are using ICT up to 6.0 hours per day, with 44.0% using ICT from 1.0 to 3.0 hour per day. Only 16.3% of the respondents can be considered as “heavy users”, using ICT more than 6.0 hour per day.

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Figure 6.2: Respondents' ICT Ability

ICT ability

Advanced know legeAbove average

AverageLittle

Don't know at all

Per

cent

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.06.7

19.3

62.7

9.3

B. Nature of Job Figure 6.3 shows that the respondents’ occupations range from clerical workers (9.3%) to the management and professional roles (35.3%). Although more than 82.0% of the respondents have a college/university qualification, not all of them hold management positions in their workplace (the common Malaysian stereotyped of the job positions held by graduates). Figure 6.3: Respondents' Type of Occupation

Type of occupation

OthersManagement/Prof .

Semi-professionalAdmins./supportive

Clerical

Per

cent

40.0

30.0

20.0

10.0

0.0

10.0

35.3

21.3

24.0

9.3

The reported use of ICT at the workplace was also very high, with 20.7% of the respondents using ICT for more than 6.0 hour per day. An overwhelming 81.4% of the respondents “agree” and “strongly agree” that ICT applications in their workplace have increased productivity.

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C. Income Effect The distribution of monthly income among the respondents is shown below in Figure 6.4. Only 2.7% of the respondents can be considered to be below the poverty line (RM 500 or below per month), whereas 28.7% of the respondents are considered to have above average incomes (above RM 2,000 per month). 61.3% of the respondents spent less than RM 50 per month on ICT, and 47.3% of the respondents were only willing to spend less than RM 50 per month on ICT. Only 1.3% of the respondents actually spend in excess of RM 200 per month on ICT. However, 2.7% of them are willing to spend more than RM 200 per month on ICT. The actual spending and the willingness of the respondents to spend on ICT are also closely affected by the proportion of the respondents income that they value should be spent for being networked. 61.3% of the respondents either “agree” to “strongly agree” that the cost for using ICT is the reason why they limit the use of the technology which indicates that the majority of the respondents are concerned about ICT pricing. Figure 6.4: Monthly Income

Monthly income

Above RM2,000RM1,501-RM2,000

RM1,001-RM1,500RM501-RM1,000

RM500 or below

Per

cent

40.0

30.0

20.0

10.0

0.0

28.7

35.3

24.7

8.7

2.7

D. Geographical Effect The majority of the respondents lives in the suburb area, with only 3.3% of the respondents living within 5 kilometers of the city center or in the downtown area. There has been a migration of Malaysian urban dwellers from the downtown area to the suburbs, with their better housing and living conditions. However, our survey found that only 6.0% of the respondents had a broadband ADSL service at their home, whereas 88.0% indicates they use a dial-up-connection for Internet access. Therefore, high speed Internet access is still a luxury for most urban dwellers, even though Kuala Lumpur is located within the MSC. 96.0% of the respondents also live in residential areas that have multi-ethnics residents or from the same ethnicity as them. 19.3% of the respondents live in high rise flats and another 16.0% live in condominiums. 46.0% of the respondents live either in terrace or Semi Detached type of housing. More than half of the respondents

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reported an “average” satisfaction with ICT service in the area where they live. Given that the advancement of ICT that should reduce the importance of location, it is perhaps surprising that 36.7% of the respondents reported that they would “always” need to have face-to face interaction with their subordinates, peers and superiors. Only 16.0% of the respondents said they were not required to have a face-to-face interaction. 12.0% of the respondents mentioned that their jobs were very mobile, while 23.3% stated their jobs were not at all mobile. Overall, the mobility of the respondents is moderate, with 68.0% of the respondents at least “occasionally” needing to be mobile.

6.4.5 Structural Equation Modeling Data Analysis and Discussion The SEM was used further to analyze the causal relationship between the identified potential variables and the use of ICT among the urban working population in the service sector in Kuala Lumpur. The final SEM model used in this research is as shown in Figure 6.5. The SEM model has four latent variables, with each latent variable having at least four observable variables from our questionnaire survey, with the exception of “Usage of ICT” with two observable variables, and which is assumed to reflect the underlying latent variables. E1 to E20 are the residual or unique factors.

A. Income Effect

“Income/wealth effect” is an influential potential variable that encourages the use of ICT among the respondents, with a standardized regression coefficient of 0.19. The variables to measure the “income/wealth effect” factor are: the respondents’ monthly income, actual spending on ICT per month, frequency of use of home PC (respondents have to pay themselves), and the respondents' frequency of updating their use of ICT products/services. The survey indicates that the respondents are very sensitive to the cost of being networked and are unwilling to pay a premium price for ICT services. The “income effect” factor is very much influenced by the “nature of job” factor with a standardized regression coefficient of 0.74. Those respondents with higher incomes are from management or professional levels that are making more use of ICT applications in their daily work. They are also more likely to be using the latest ICT applications and services, as is indicated by the higher standardized regression weight values for the respondents “frequency usage of home PC” and “up-to-date with the latest ICT technology”.

B. Geographical Effect

This factor, with a standardized regression coefficient of 0.03, is found not to have a major influence among the respondents, as most of the respondents from the survey live in the suburb area. At the same time, the trend towards suburbanization in Kuala Lumpur has resulting in a rapid decrease in the “original” inner city population. Therefore, no significant difference can be found between inner city literacy and that of the suburb population. This study might produce a different result if it was conducted more than 20 years ago when the inner city population is large enough. Unlike Western countries, the

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replacement of the inner city population in Kuala Lumpur is most likely to arise from the higher income group regardless of race, who move into high rise condominiums. The variables used to measure “geographical effect” include: what type of ICT service is available in the respondents’ neighborhood, type of residential area where the respondents live, neighborhood environment, the distance from the respondents’ house to the city center, the requirement for face-to-face interaction at the workplace, and the mobility the respondents have with regards to work. All these variables are considered to have a direct influence on encouraging the respondents to use ICT applications. The mobility the respondents with respect to work is the most influential variable, with a standardized regression weight of 0.72. It is proven that the respondents are encouraged to use ICT if they are not obliged to go into the office and can do their work elsewhere. The respondents are more likely to use ICT for communications if they are not required to have face-to-face interaction at the workplace. The least the respondents are required to interact face-to-face at work, the more likely they are willing to use ICT for communication. The “geographical effect” factor is also positively influenced by the “income/wealth effect” (0.17). In this survey, many respondents are living in the suburb because they can afford to live in suburban neighborhood and commuting to the city center. C. Nature of Job “Nature of job” factor is the most influential independent variable in encouraging the respondents to use ICT, with a standardized regression coefficient of 0.78. The observable variables for this factor are:- (1)“Type of services” the respondents are using at the workplace are e-mail, browsing or information retrieval from the World Wide Web, programming and graphic work. Although the use of graphics at work is the most contributing observable, with a standardized regression weight of 0.44, further analysis reveals that the most frequent services used at the workplace are e-mail and followed by the World Wide Web. This explains why there exists a strong covariance of 0.53 between using e-mail and web browsing at work. (2) “Frequency of ICT usage at office per day” is how frequently the respondents are using ICT at their workplace or offices. The frequency of use of ICT per day at work is the most influential variable that contributes to the use of ICT, with a standardized regression weight of 0.54. The majority of the respondents is using ICT at its offices as opposed to other locations (as has been demonstrated from our previous descriptive analysis). D. Fitness of the SEM The square multiple correlation for this model is 0.88. Therefore, the three independent variables together explained 88.0% of the variance of the dependant variable. The GFI index is 0.904 (that is greater than 0.90), and the RMSEA is 0.047 (below 0.050

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that is consider a good fit on the RMSEA measurement). In summary, it is concluded that the model is a reasonable fit, with some limitations. The limitations of the model are due to the following:-

(1) Sample size of 150 respondents to the questionnaire survey is too small for advance analysis without problems with the normality and linearity of the model.

(2) The majority of the respondents are from the same level of education background and age group that has a higher than average ICT literacy rate.

Figure 6.5: SEM for Factors that Influence the Urban Working Population in Service Sector in Kuala Lumpur to Use ICT

.88

Usage of ICT

E1.66

ICT ability

.18

ICT usageper day

E2

E3

Nature of job

.30

Freq. usageat officeper day

.08

E-mail atwork

.09

www atwork

.19

Graphicat work

E4

E5

E6

E8

.08

Programmingat work

E7

.03

Geographical effect

.55

Income/Wealth effect

.16

Freq. usageof home PC

.10

Act. monthspendingon ICT

.05

Monthlyincome

E9 E10

E11

.01

ICT serviceavailable

in the area

.00

Type ofresidential

.01

Neighbourhoodenvironment

E16

E18

E17

E13

.22

Up-to-datew/ ICTtech.

E12

E20

E14

.21

Required forface-to-face

comm.

.52

Mobililityto work

E19

.01

Distancefrom residence

to city E15

.72

.40

.46

.81

.28

.08

.12

.31

.03

.54

.78

.19

.74

.42

.41

.21

.29

.29

.53

.44

.07

.11

.10

.31

.47

.07

.17

.21

.08

.15

.24

.07

.05

.24 6.4.6 Nature of Job and Skills Contributing to the Digital Divide (1) General Scenario As has been demonstrated from the SEM, “nature of job” is the most influencing factor for the working population to use ICT. How nature of job, based on individual skill

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in ICT, can contribute to digital divide among the urban working population, is now considered. It was found from the survey data that 80.0% of the respondents are able to perform low-order working tasks in ICT, especially word-processing (more than 90.0%). However, less than half of the respondents have ever performed high-order tasks (such as programming or video teleconferencing) in the workplace, with the sole exception of graphic work (see Table 6.2). Therefore, there is an evidence of the existence of digital divide with respect to the individual level of competency in using ICT applications. It should also be noted that frequent use of ICT is quite meaningless in the development of advanced ICT capabilities if such use is merely for very low order working tasks, such as word processing. ICT should be used in a “meaningful” way when the users can gain “added value” or knowledge when using the technology, such as by retrieving and interpreting information from the Internet or using applications that result in time saving and/or reduce the cost for physical interaction. This survey indicated that the majority of the respondents has competency in using basic ICT applications, but few have competency in advanced ICT applications. It is also recognized that there are differences between professions in the service sector itself in their use of ICT. As the samples represent various types of services (for example, banking firms that are using financial software packages, and printing companies that are using a lot of graphic applications), there is variation in ICT use according to the firms' “nature of job” and the employees’ professions, even within the same service industry. This study was only concerned with observing whether the workers were using low-order or high-order task ICT applications, regardless of the type of service the firms/companies provide. Even though the higher order use of ICT will not necessarily lead to an increase in the workers' capabilities, familiarization with ICT will at least encourage the workers to use other ICT applications in their daily life, which may lead to a more “meaningful” usage of ICT the future. As for higher capability workers, they will most likely be using ICT applications in order to improve their skills and to gain added knowledge in the new technology. Higher capability workers will be aware of the benefits of using ICT, even if their profession or nature of job does not required them to use such ICT applications. Table 6.2 also reflects the real challenge facing Malaysia: the nation still lags behind Thailand, Philippines and Indonesia in term of human capital endowment in Science and Engineering (S&E) for ICT, despite Malaysia’s having the best ICT infrastructure in the Southeast Asia (excluding Singapore) (Rasiah, R., 2002). Malaysia’s competitiveness as a nation will be severely eroded in the near future if the trend for human capital endowment does not improve to meet the ever changing demands of a versatile skilled workforce. A specific long term plan to tackle the problem of human capital endowment in Malaysia that is geared towards the needs of future ICT-based industries should therefore be implemented to create a sufficient pool of ICT-capable workers. This would most likely need to include the human capital endowment in S&E and creative disciplines, in both the service and the manufacturing sectors. Simultaneously, with more of the working population having a certain standard of knowledge in ICT, the “second level” digital divide can be reduced.

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Table 6.2: ICT Applications Used at Work

(2) Organizational Hierarchy and ICT Usage 34.0% of the management and professional staff respondents ‘frequently” or ‘always” use advanced ICT applications in their work tasks, compared with only 14.3% of clerical workers (Table 6.3). Analysis based on five types of ICT applications used in the workplace shows that clerical workers are primarily performing only low-order task using ICT, and not performing the high-order task that would be of more benefit to them outside the workplace (Table 6.4). Only the semi-professional and the top management respondents perform high-order task work in graphics and programming. This wide gap is of concern, as this type of digital gap will further distance those who are lack of skill (and who are at the bottom end of the organizational structure) from those who are at the top end of the organization. The problem of “second level” digital divide will become more prominent as government facilities/services and the private sectors in Malaysia increasingly offer more services that require a certain level of ICT competency. Those at the bottom end of the organizational hierarchy (clerical workers) will be disenfranchised from participating in these “value-added” services. Therefore, the implementers of Malaysian National IT Policy, which stresses the importance of having universal access to ICT applications, have to be cautious that certain groups within the population are not excluded from participation – not because they are ICT illiterate or not interested in the services offered, but because they lack the necessary level of skill to use the services. An encouraging finding from this survey is that 36.1% of the administrative/supportive staffs are “frequently” or “always” performing high-order tasks in their work, which substantially exceeds the corresponding percentage for management or professional workers. This implies that the ability to use advanced ICT applications is not exclusively present at the top end of the organization. High-order working tasks in ICT can be diffused to the support staff or to those not involved in decision making in the traditional organizational structure. As most of the firms/companies in developing countries such as Malaysia still use traditional organizational structures (i.e. based on the “pyramid” model, in which all the important decisions in such organizations are made by the top management and lateral decision making within the organization is weak). The “top-down” approach is suitable for the diffusion of advanced ICT applications because top management can use their authority as a “push factor” encouraging administrative and supporting staff to perform high-order ICT work tasks in their daily job. The high percentage of administrative/supporting staff using advanced ICT applications in the workplace is explained by the higher percentage of younger workforce members in this survey; younger workers are typically more motivated and adventurous in their use of

Type of ICT Applications Used at Work Frequency of Usage Never Use (%) Have Used (%) Word-processing 8.7% 91.3% E-Mailing 11.3% 88.7% Browsing the world-wide web 16.0% 84.0% Graphics 39.3% 60.7% Programming 61.3% 38.7% Video teleconferencing 71.3% 28.7%

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new technology, so the element of “bottom-up” diffusion is also significant. Therefore, good leadership in the organization – leadership that gives the opportunity for the workforce, irrespective of their position in the organization, to perform high-order task in their daily job (“top-down” approach), and continuous improving the competency in ICT by proper training (“top-down” and “bottom-up” approaches) - will help to bridge the digital skills gap based on level within the organizational structure. Table 6.3: Frequency of Usage of Advance ICT at the Workplace with Respect to Type of Occupation

Type of Occupation Frequency of Use of Advanced ICT (%) Never Use Frequent or Always Clerical 21.4% 14.3% Administrative/Supporting Staffs 25.0% 36.1% Semi-professional 9.4% 28.1% Professional/Management 9.4% 34.0% Table 6.4: Frequency of Usage of Different ICT Applications at the Workplace with Respect to Type of Occupation Occupation Frequency of Use Typing E-mailing WWW Graphics Programming Never

Use Freq./

Always Use

Never Use

Freq./Always

Use

Never Use

Freq./Always

Use

Never Use

Freq./ Always

Use

Never Use

Freq./Always

UseClerical

21.4 50.0 46.2 30.8 46.2 *23.1 50.0 - 69.2 -

Administrative/ Supporting

2.9 61.7 3.0 45.5 14.7 35.3 48.5 - 65.7 *2.9

Semi-professional

19.4 45.2 10.0 60.0 6.9 51.7 41.4 6.9 58.6 *3.4

Management/ Professional

3.8 57.7 11.5 50.0 13.5 44.2 28.3 17.0 65.4 5.7

Note: (*) indicate only frequently using the application (3) Income Effect versus the Use of High-Order Task of ICT Applications As “nature of job” has a significant, direct influence on “income/wealth effect”, as proven in the SEM analysis, those respondents who are in the lowest income groups are also the least likely frequently to perform high-order ICT tasks (as shown in Table 6.4). Among the respondents with monthly incomes above RM 1,000, 30.8% are either “frequent” or “always” users of advanced ICT applications as compared to only 17.6% among respondents with monthly incomes “less” than or equal to” RM 1,000. There is a considerable disparity between levels of income and the frequency of the use of advanced ICT applications in the workplace. This indicates that those with the least skill in ICT will probably end up having the lowest income. However, as shown in Figure 6.6, the respondents in the median income range (RM 1,001 to RM 1,500) are the most frequent performers of high-order ICT tasks; high earners (with monthly income in excess of RM 2,000) perform such tasks less frequently. Therefore, level of income by itself is not the single factor determining an individual’s performance of high-order ICT tasks. Other

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factors include age and the individual’s own desire (interest) to upgrade his or her ICT skills. Figure 6.6: The Usage of Advanced ICT at Work with Respect to Monthly Income

-25

-30.6

-8.1

-13.2

-16.3 20.9

26.4

0

23.1

48.6

-40 -20 0 20 40 60

RM 500 orbe low

RM 501-1,000

RM 1,001-1,500

RM 1,501-2,000

Above RM 2,000

Mon

thly

inco

me

Pe rcentage

NeverFrequent & Always

However, it is important that a minimum level of income is met for the diffusion of ICT to take place within the population at large. As shown by this survey, more than 30.0% of the respondents with an income of RM 1,000 or less have never perform high-order ICT work, but the percentage drops significantly to less than 20.0% for respondents with incomes above RM 1,000. People are willing to use ICT applications when they have surplus income, after their individual basic needs have been satisfied. Since skill to perform high-order ICT tasks is (a) proven to be related to higher monthly income, and (b) a major criterion for career advancement, the issue of digital divide between income groups should be tackled so that those in the lower income groups can have access to and the opportunity to use high-order ICT task in their daily work. An improvement in competence of this segment of population ICT will make them more competitive in the job market. This in turn might also lead them to higher incomes. This would help to create a more balanced information society in Malaysia.

(4) Bridging the Digital Gap Based on Level of Skill It is important to bridge the digital gap that is based on the differences in the skills level of the population as “nature of job” (or level of skill) is proven from this survey to be a very important factor that can further contribute to digital divide. Life-long learning is the most relevant approach to training the working population to participate in the knowledge-based economy as the workers need continuously to update their technical skills to meet the ever changing demands of technology (Servon, L., 2002). Improvement in workforce skill will have a direct effect that goes beyond the workplace. Those with a

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certain level of competence will be able to leverage their knowledge and skills to use other ICT applications provided by public or private bodies outside the workplace. This, in return, will expand the number of users using those ICT applications and reduce the exclusiveness that has always been associated with the use of high-order ICT task and services. “Nature of job” does contribute to the digital gap since it benefits those who have the skills and opportunity (mostly those with higher incomes or hold decision making position within the organizations) to use high-order ICT. However, bridging the digital divide is possible as the improving ICT skill of the population will help to diffuse such competency to the overall population. The goal for having a balance society with equal access to ICT facilities can be realized sooner when the digital divide is closing.

6.4.7 Recommendations Based on the Result of Data Analysis from Case Study 2 (1) The importance of “nature of job” in influencing the urban working population to use ICT indicates the need for government policy and programs in ICT diffusion directly to target the working population to get them involved in ICT in their daily work. As the working population is most likely to use ICT at work for related purposes, the program itself must be able directly to benefit the disparate groups of workers in term of content.

(2) Work position plays an important role in influencing workers’ use of high-order ICT. A “top-down” approach, with top management commitment to ensuring all workers (irrespective of their working position) have both access to, and the ability to use, high-order ICT will diffuse “value-added” ICT applications to the workforce and reduce the skills-based digital gap. An important objective for any organization is to have in place a retraining program which targets all levels of workers to perform high-order ICT tasks. The training must emphasize life-long ICT learning as opposed to an immediate, problem solving approach, so that the workers can develop their careers through the acquisition of a more versatile skill set. They will then be able to participate actively to other ICT applications/services offer by the public and private sectors outside their working environment. (3) The survey showed that the majority of the respondents is very sensitive to the cost of being networked and most of them are only willing to pay a minimal cost for such services. Therefore, it is necessary for the government to continuing supporting the cost of telecommunications, so that it remains sufficiently low not to act as a barrier to the mass public's being networked. This step will accelerate the advance of ICT services as they move towards achieving critical mass. Continued public spending in urban Malaysian telecommunication infrastructure (such as broadband networking) remains crucial to encouraging the use of more advanced ICT applications.

6.5 IMPLICATION AND CONCLUSION

There are some differences between the diffusion pattern of ICT in Case Study 1 (Chapter 5) and Case Study 2 (this chapter). The two major differences are based on the

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study design. Firstly, the respondents for Case Study 2 (the working population) have had the opportunity to use a broader range of ICT applications than students. The working population also has independent purchasing power, unlike students that depends on their parents’ income. Secondly, accessibility to ICT is not an issue for the core urban areas working population that was sampled; the Kuala Lumpur area has the best telecommunication infrastructure in the country, including broadband services. However, as proven from the Case Study 2, even with accessibility to use ICT is not an issue, there are still a small segments of the population who can not get access to ICT. “Nature of job” is the most important factor in encouraging the use of ICT among the urban working population in the service sector, as proven by the SEM analysis. As “nature of job” is dependant upon the type of work and the working environment rather of location, this factor may also apply to the working population in the service sector in rural areas. In order to accelerate the diffusion of ICT to the mass public, targeting the working population to use ICT is proven (from Case Study 2) to reduce the digital divide among the Malaysian population. As more of the working population, from laborers to top-management, is required to use ICT applications in their daily work, more of them will probably use ICT applications beyond their workplace, as familiarity with the technology will have been established. Meanwhile, bridging the digital divide at the workplace by having the workers use ICT will also create a new problem: a digital gap based on differential levels of competence or skill in using ICT. As proven from the Case Study, this problem will be prominent in the urban working environment with the firms using advanced technology in their daily operation. Unfortunately, those who will be left out from having access to advanced ICT applications will be those who are at the bottom of the organization hierarchically, such as laborers or clerical staff. Case Study 2 demonstrates the dynamic nature of the issue on digital divide, where the urban working population is experiencing a digital divide that is based on different level of competency. It is most likely that the issue of competency when using ICT will be more prominent when Malaysia's infostructure improves in the coming years and more ICT applications are available for public use. In order to reduce the digital divide based on different level of ICT competency, it is important for the corporate leadership to encourage their workers to get involved in lifelong learning, and to offer all ICT courses to all workers (not excluding those at the lowest end of the organization hierarchy structure). This will help to reduce the digital gap in the use of advanced ICT applications between top management and those at the lower end of the organization structure. Income effect, although less effective than “nature of job” in influencing the urban working population in their use of ICT, still plays a significant indirect role, as it is highly influenced by “nature of job”. As evidence from Case Study 2 reveals, there exists a digital divide across different level of income, and with those in the lowest income groups having the lowest level of ICT competency.

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CHAPTER 7

ROLE OF INCOME IN THE DIFFUSION OF ICT IN URBAN AND RURAL AREAS

7.1 INTRODUCTION Income dimension, in term of “affordability”, has been proven from Case Study 1 to be an important issue facing the lower-income segment of the population in getting access to ICT in both urban and rural areas, as such access involves (in most cases) a significant monetary cost. From Case Study 2, it has been proven there is a relationship between “income effect” and “nature of job”, with an individual whose work tasks requires frequent use of ICT applications being more likely to earn a higher income. At the workplace, the digital divide related to the different level of competency or skill when using ICT applications is readily observable, though – unlike the issue of digital divide based upon the income dimension - here the difference between urban and rural areas is less significant. The urban population typically earns a higher income than the rural population, and will naturally continue to lead in having more of its population using ICT - especially as ICT applications are also more readily available in urban areas. In this chapter, the effect of income and its influence on the diffusion of ICT to the urban and rural populations is examined. By observing the differences in term of how the urban and rural populations view the use of ICT and the relationship to income, an indication of why the mass public (either in urban or rural areas) is using ICT applications can be derived. A case study is used to examine the role of income in the diffusion of ICT at the urban and rural areas. This case study was designed to find out how the mass population indicates the importance of using ICT applications by giving a monetary value of their Willingness to Pay (WTP) for the service. A questionnaire survey was conducted in the State of Kelantan using the public services employees as the samples. A comparison was made between the pattern of ICT usage and the stated WTP by the respondents in both urban and rural areas. Conclusions were then made from the comparison analysis of the data findings. This chapter is divided into the following sections:-

(1) Role of Income and the Comparison for the Diffusion of ICT among Urban-Rural Population

(2) Methodology for Analysis

(3) Case Study 3: The Value of Using Internet by the Urban and Rural Population

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(4) Implication and Conclusion 7.2 ROLE OF INCOME AND THE COMPARISON FOR THE DIFFUSION OF ICT AMONG URBAN-RURAL POPULATION Income dimension (as proven from Case Studies 1 and 2) is a significant factor that influences the use of ICT by the mass population. Those studies also showed there was a correlation between the income dimension and the differences between urban and rural area. In a developing country like Malaysia, the rural population usually earns a lower income than the urban population. Therefore, the problem of Internet access and “affordability” faced by most of the Malaysian rural population has made a digital divide based on urban-rural population a serious problem which needs to be tackled by the government when promoting equal access to ICT for all of its citizens. Figure 3.4 in Chapter 3 shows that only the high income states with a large percentage of urban populations, such as the Kuala Lumpur area, require their population to spend 50% or less of their disposable monthly income to pay for Internet access from home; for low income states with a primarily rural population it is almost impossible for most of the people to get connected to the Internet by using a home PC, as they can neither afford to buy a PC nor pay for the connection fee with their current level of income. Therefore there should be other, alternative tools, modes and venues for the rural population and others with low incomes to get networked. The Malaysian Government has adopted a policy of Universal Service Provision (USP) so that every citizen should be able to get access to the Internet (see Chapter 3). With the USP in place, it is very important for the Malaysian Government to have action plans and programs that will promote the accessibility of the Internet service to its mass population. However, the current programs under USP that have been implemented are limited in scope and coverage. The current programs might have a major impact in getting the mass population, irrespective of where they live, fair access to ICT. Another issue of concern is that the content of Malaysian websites is mostly in English (more than 90% of the total contents). Rural people who use only their native language might not find the Internet (as a proxy for ICT) to be very appealing. Moreover, those who designed these websites are also largely from the middle to higher income groups and, as the producer of the medium usually influence the audience (Servon, L., 2002), the Internet service itself has attracted more of those in the middle or upper income segments of the population, most notably in the urban areas. This segment of the population is using the Internet because the content suits their lifestyle and relates to their needs. Therefore, the rural population with its lower income will be left out further from participating in using ICT in its daily life. The differences in how the urban and rural population views the importance of using ICT are the focus of the current research. By understanding how significant the differences are between these two segments of the population, further steps could be taken to reduce these differences. Strategy or action plans could be implemented to

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narrow down the differences taking into account the end users' stated preferences for using ICT, instead of imposing the technology upon them. Furthermore, by knowing the differences in the influence of income dimension (both in rural and urban areas), this study can determine the sensitivity of the end users to monetary value (or, specifically, income factor) in encouraging their use of ICT. Economic consideration is a major determining factor for the mass population in developing country like Malaysia to decide whether to adopt to the new technology; end users will adopt a technology if they perceive its use will give them a benefit greater than the cost. 7.3 METHODOLOGY FOR ANALYSIS A case study was used to examine the differences in how the urban and rural population perceives the importance of using ICT. Internet usage is used in this case study to represent the use of ICT, as the Internet is considered to be the most significant and widely used ICT application in Malaysia. The Internet in Malaysia is mainly used for information retrieval from websites (Norizan, M., 2002). Therefore, the Internet service is reasonably considered to be a “public good”. This study makes an assumption for the Internet access to be treated as a “public good” based on two main reasons:- (1) The USP policy that has been adopted by the Malaysian Government asserts that

every Malaysian citizen must have access to the Internet service in the same spirit that telephone and Internet use are services that every citizen should have access to and be able to use because they are an essential good that is useful in every citizen's daily life; there must not be any disadvantaged population group created by exclusion from access.

(2) “Non users” would be able to participate in giving their opinion or referendum on the

importance of Internet service only by treating Internet as “public goods”. The “non-users” currently represent the majority of the Malaysian mass public. Secondary data have shown that the penetration rate for Internet service in Malaysia is only 11.4%, which suggests that the majority of the Malaysian people are the “non-users” of the service.

The income factor, specifically the difference in monthly income earned between the urban and rural population, is also an important area of investigation so that there can be an understanding of how income can be a motivating factor for the urban and rural population in its use of ICT. Discovery of a difference in how income factor affects the urban and rural population to use Internet would be significant, because if the urban population does not view income as the most important factor for them to use ICT, there is a possibility for the Malaysian government to introduce a discriminatory pricing strategy for Internet connection between the urban and rural areas. It would also show that the urban population has appreciated the benefit of using the Internet, where the benefit exceeds the current cost of being connected. These findings can be used to assist

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in further research in encouraging more of ICT diffusion to take place, both in urban and rural populations. From the arguments presented above, the hypotheses for the study are derived to be tested. These hypotheses are as follows:-

(1) There are differences between the urban and rural population's valuing the importance of using the Internet.

(2) Income factor is a significant factor in influencing the urban and rural population

to use the Internet. This case study used the Contingent Valuation Method (CVM), eliciting the respondents of their Willingness to Pay (WTP) for using the Internet service. The approach was based on a questionnaire survey, and the survey was designed following the CVM guidelines proposed by the National Oceanic and Atmospheric Administration (NOAA) Proposed Rules (NOAA, 1993). CVM was used to find the monetary “value” the urban and rural respondents indicate through their WTP. CVM was chosen to analyze the data in this study because this study was specifically designed to allow non-ICT users to participate in giving their perceived value of using the Internet. Other statistical analyses, such as the multivariate regression analysis, might not be able to recognize the contribution of the non-users' “value” as proxy for the importance in using Internet, though they represent a significant portion (if not the majority) of the Malaysian population. The use of questionnaire survey was chosen over direct interview to avoid the biased responses given to interviewers when face-to-face contact is established during a survey. Questionnaire surveys give a neutral environment setting for the respondents to answer the questions freely, with minimal supervision. The questionnaire for this Case Study is as attached in Appendix IV. The main characteristics of the questionnaire were:- (1) The respondents, both from urban or rural areas and from different job position received the same information to answer the questionnaire. (2) Information was provided to allow the respondents to answer questionnaire.

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7.4 CASE STUDY 3: THE VALUE OF USING THE INTERNET TO THE URBAN AND RURAL POPULATIONS 7.4.1 Overview The purpose of this case study was to find out from a questionnaire survey how the Malaysian population, in both urban and rural areas, indicates the monetary value of using the Internet by reflecting it in their willingness to pay (WTP) for the services. A large difference between the urban and rural populations' WTP for the Internet services would show a division between the urban and rural population in their valuation of the importance of the Internet service. At the same time, this case study was designed to investigate to what degree the “income factor” is contributing to the differences in the perception of using the Internet in both populations, and how USP should be applied to reduce the digital gap based on geographical difference. Finally, this case study also showed the pattern of preferences between the urban and rural population for the location to get access to and using the Internet. 7.4.2 Study Location This study was conducted in the State of Kelantan (see the location map in Chapter 5, Figure 5.2). This state was chosen as the study location because it has not only the lowest Internet penetration rate but also the lowest mean monthly household income in Malaysia. It was expected that the respondents in Kelantan would provide a more conservative estimate WTP for having Internet access than the nation-wide mean WTP for Malaysia. The conservative estimate provided by this study would then be eminently suitable as a benchmark for reviewing the national minimum charge rate for Internet access. The Kota Bharu area, with a population of over 300,000 people, was used as the urban samples in this study. The city is also the capital city Kelantan, and the largest in that state. Indeed, it is the only city in Kelantan with a population over 100,000 people and which is categorized as an urban area when applying for Federal Government loans for development projects. The rural samples consist of respondents from other districts in Kelantan, notably the Tanah Merah, Kuala Krai and Gua Musang areas. All these districts are located in southern Kelantan which is less developed in term of physical infrastructure and is more sparsely populated than the northern region. 7.4.3 Sample The samples used in this survey were public sectors employees. They were from all level of hierarchy in the organizations, from laborers to top management. The nature of job in the organizations also varies, from technical to administrative. 500 questionnaires were distributed, 250 each to both the urban and rural areas. 206 responses were received from respondents in the rural areas, and 205 from the urban areas. This is considered to be a high response rate as more than 80% of the distributed questionnaires were answered and returned. The high response rate was achieved because the questionnaires were

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distributed and then monitored for collection within a certain period of time with the assistance of the respondents' superiors in the organizations participating in this study. 7.4.4 Structure of Questionnaire The approach to find the monetary value of the importance of using the Internet is by asking the respondents their WTP for using the Internet service in two scenarios. The scenarios given were:- (1) "How much are you willing to pay for having the Internet access at the comfort of

their home?" (2) "How much are you willing to pay for having the Internet access at a hypothetical

Internet community center in their neighborhood?" The WTP question was phrased as a referendum dichotomous choice using split samples since, based on the NOAA guidelines, open-ended questions will produce erratic and biased results. The referendum format has the advantage of being realistic, as referendums on the provision of the public goods are not uncommon in real life (NOAA, 1993). The overall structure of the questionnaire to find the WTP is summarized in Figure 7.1, and the structures explained below:- (1) Information of Internet Usage: Firstly, the respondents were given information on the benefits of using the Internet, and a comparison between what can be expected from using Internet applications and from not using such applications. This was to create awareness and to convince the respondent of the benefit of using the Internet. Then, the respondents were also given information on the negative impact of the Internet when it is used abusively. This was to expose the respondents to counter information regarding Internet usage. In order to be realistic, the respondents were also informed of the cost implication if they chose to access the Internet at home. This raised the respondents’ awareness of the cost issues they face if they are interested in having Internet access at home or community center, given that their income or source of financing might be limited. Irrespective of whether the respondents were active users or non-users of Internet services, they were provided with the same information. (2) Question: WTP for Internet Access at Initial Bidding Price After all the information had been given to the respondents, they answered the question on WTP. The WTP price was given in the questionnaire which was the initial bidding price (i.e. RM X) as shown in Figure 7.1. The bidding prices from the questionnaires were assigned randomly to the respondents, and the number of questionnaires assigned to each level of bidding was in equal proportion.

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Figure 7.1: Flow-Chart of the Questionnaire Asking the Willingness to Pay for having Internet Access

The respondents either agreed by given a “Yes” answer, or disagreed by given a “No” answer, to the initial bidding price as indicated in the questionnaire. (3) Question: WTP for Internet Access at Higher Follow-up Bidding Price Those respondents who answered “Yes” to the initial bidding price question then answered the question on WTP at a higher follow-up bidding price (i.e. RM Y, Y>X). The respondents again answered "Yes" or "No".

INFORMATION ON INTERNET USAGE

QUESTION: WTP for Internet Access at

Initial Bidding RM X

Agree

Disagree

Yes No

QUESTION: WTP at Higher Follow-up

Bidding RM Y

QUESTION: WTP at Lower Follow-up

Bidding RM Z

Agree

Disagree

Yes No

REASON FOR REJECTING

BIDDING

Agree

Disagree

Yes No

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(4) Reason for Rejecting Bidding The respondents who answered “No” were asked to give the reason for rejecting the bidding for the higher follow-up bidding price of RM Y based on the choice of reasons given in the questionnaire, or by indicating their personal reason if their reason was not provided in the questionnaire.

(5) Question: WTP for Internet Access at Lower Follow-up Bidding Price The respondents who answered “No” to the initial bidding price question as described in (2), then answered the question on WTP at a lower follow-up bidding price (i.e. RM Z, Z<X). The respondents again answered "Yes" or "No". There were five levels of bidding from the WTP questions for both the Home Internet and the Internet Community Center access options. These bidding prices were based on the rates of using the Internet service, according to the length of time being connected to the networked. For example, RM 10 (the lowest bidding price at Level 1 to get access to the hypothetical Internet Community Center) is actually the monthly rate of payment for using the Internet service for about 4 minutes per day. However, the respondents were not informed the reasoning behind the bidding prices in order not to influence their decision in accepting or rejecting the bid. The bidding prices in both scenarios were based on the results of a preliminary survey for this study that was carried out earlier in June 2004. The initial bidding prices for this preliminary survey were higher than the actual survey initial bidding prices, resulting in higher rejection rates for the bidding. The preliminary survey initial bidding prices for the home Internet access were from RM 50 to RM 250 at five levels of bidding. For the hypothetical Internet community center, the preliminary survey initial bidding prices were from RM 30 to RM 150, also at five levels of bidding. More than half of the respondents from the preliminary survey rejected the initial biddings, many citing that the stated WTP was too high as the main reason for rejecting the initial bidding. Therefore, after the pricing for the “initial bidding” used in the current case study were adjusted to reflect the preliminary survey respondents' concerns about affordability. the actual survey was conducted in August 2004. The level of bidding for the two scenarios WTP questions was as follows:- (1) WTP for the Internet service at home: Starting bidding price was from RM 30 to RM 110, as shown in Table 7.1. RM 30 per month corresponds to using the Internet service about 15 minutes per day, and RM 110 per month corresponds to about 55 minutes per day.

Follow-up bids were from the immediately higher or lower price bands as appropriate. There was an additional RM 130 band for those who accepted the initial bidding at the highest level (RM 110), and a RM 10 band for those who rejected the initial bid at the lowest level (RM 30). Table 7.1 summarizes the initial bids and the possible follow-up bids:-

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Table 7.1: WTP Bidding Prices Service Type Initial Bid (RM) Follow-up Bid (RM) Lower Higher

30 10 50 50 30 70 70 50 90 90 70 110

At home

110 90 130 10 5 20 20 10 30 30 20 40 40 30 50

At community center

50 40 60 (2) WTP for the Internet service at the neighborhood Internet Community Center: Starting bidding price is from RM 10 to RM 50, as shown in Table 7.1. RM 10 per month is based on using the Internet service for about 4 minutes per day, and RM 50 per month is based on about 25 minutes per day. The procedure of bidding was the same as described in section (1). From the questionnaire, the relationship between “income factor” and the WTP value, as well as other factors such as the perceive importance of the Internet and frequency of use of the Internet by the respondents were also examined. The operational definition for “income factor” for the purpose of this study is the respondents’ monthly household income. From the cross-tabulation analysis, the types of relationships that exist between “income factor” and other variables that reflect the respondents’ tendency to use the Internet service were established. The survey was conducted in August 2004. 7.4.5 Data Analysis A. Descriptive Findings The descriptive findings from the data collected are as shown in Table 7.2.

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Table 7.2: Descriptive Analysis of Selected Variables/Items Variable/Item Urban RuralGender: Male 53.2% 64.1%Age 36.7 years 36.1 yearsNumber in household 5.9 5.1Fixed line telephone subscribers 75.1% 53.9%Home Internet subscribers 44.4% 16.0%Ability to use Internet

- Internet illiterate 21.0% 56.8%- Basic skills 61.9% 39.4%- Advanced skills 17.1% 3.8%

Gender – there were more male respondents in this survey, both in urban and rural area. However, there were a higher percentage of male respondents in the rural area than in the urban area. Age – The mean age was about 36 years old for both urban and rural respondents. Number in household - The mean number people in the households of urban respondents was 5.9 but it was slightly lower for the rural respondents at 5.1. The national average household size is about 5.0. Fixed line telephone subscribers - The urban respondents fixed line telephone subscribers’ rate of 75.1% as compared to the rural respondents of 53.9% shows a considerable difference in percentage between the two groups of respondents. Home Internet subscribers – The urban home Internet subscribers’ rate of 44.4% was more than twice of the rural subscribers’ rate. Less than 20.0% of the rural respondents had access to the Internet service at home. Ability to use the Internet – With a very low percentage of rural respondents using the Internet at home, it is not a surprising fact that there were more than twice as many of the rural respondents who are Internet illiterate (56.8%) as compared to the urban respondents (21.0%). It was also found that only a very small percentage of the rural respondents were able to use advanced applications relating to the Internet. As previously, "advanced skills" was defined as the ability to make e-transactions, the ability to use ICT for graphic designing and programming. Most of the rural respondents who were able to use the Internet had only acquired basic skills. The operational definition of basic skills for the purpose of this study was (as previously): using the Internet for writing/receiving emails, chatting and browsing the World Wide Web. The percentage frequency of the urban and rural respondents’ use of Internet was as shown in Figure 7.2. It shows that more than half of the rural respondents never use the Internet, or are “non-users”. The majority of the urban respondents use the Internet

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service; 38.8% of the urban respondents are either "frequent" or "always" users of the Internet as compared to only 10.4% among the rural respondents. Figure 7.2: Percentage of Frequency of using the Internet between the Urban and Rural Respondents

19.4

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14.49.9

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As shown in Figure 7.3, more than half of the respondents in both the urban and rural areas perceived the Internet as important in daily life. Only 1.0% of the respondents from the urban area and 2.1% of the respondents from the rural area think that Internet is not important at all. Malaysian populations in general have a positive attitude towards ICT applications. A similar pattern of enthusiasm was shown in the previous Case Study 1 on the schoolchildren in Kelantan. Therefore, any government programs or projects that involve the participation of the mass public in ICT can expect to be well-received.

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Figure 7.3: Percentage of the Respondents Perception of the Importance of Internet

1 2.1 4.5

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26

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Not at all Slightly No opinion Important Veryimportant

Im portance of InternetUrban

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As for income, Figure 7.4 shows that more than half of the rural respondents have a monthly income of RM 1,300 or less. This corresponds well with the State's mean monthly household income of RM 1,314 (see Table 3.4, Chapter 3). On the other hand, more than half the urban respondents had an income greater than RM 1,300. This situation, where the urban population earns a higher income than the rural population, is expected to exist in other cities and towns throughout Malaysia too. The urban population is almost always associated with a more affluent lifestyle and more openness to adopting new ideas and technologies, than a rural population with its lower purchasing power.

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Figure 7.4: Distribution of Monthly Income between the Urban and Rural Respondents

9.3

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UrbanRural

B. Willingness to Pay (WTP) Table 7.3 shows the percentage of “Yes” responses to the payment question for different levels of initial bid for having Internet access at home. This percentage varies considerably among both the urban or rural respondents. 68.5% of the urban respondents who received the lowest amount bidding, RM 30 said they are willing to pay as compared to only 26.3% of the respondents who received the highest bidding price of RM 110. The percentages who are willing to pay with the lowest amount of bidding is even lower for the rural respondents (51.0%), but about the same at 26.8% for the highest amount of bidding as compared to the urban respondents. Both the urban and rural respondents WTP do not show a steady decline in percentage of “Yes” responses to the payment question when the bidding prices become higher as had been expected,. In overall, more than half of the urban respondents gave a “Yes” response to the payment question as compared to only a third among the rural respondents, showing the different attitude in giving value to the Internet access at home

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Table 7.3: Percentage of Initial Bidding “Yes” Vote for Internet Access at Home Initial Bid Urban samples Rural samples Sample Size % “Yes” bid Sample size % “Yes” bidRM 30 54 68.5% 49 51.0%RM 50 43 72.1% 38 34.2%RM 70 39 38.5% 38 34.2%RM 90 31 41.9% 40 17.5%RM 110 38 26.3% 41 26.8%Total 205 51.7% 206 33.5% Table 7.4 shows the percentage of “Yes” response to the initial bid question for Internet access at a hypothetical residential community center. Again there is considerable variation among the urban and rural respondents' responses. However, the pattern of decline of “Yes” response between the lowest to highest amount of bidding is not as clear as in the case of having Internet access at home - especially among the urban respondents. Table 7.4 shows there are higher “Yes” response among those who received initial bidding of RM 20 and RM 40 than among those who received the lowest amount bidding payment (RM10) for the urban respondents. In overall, less than half of the urban and rural respondents gave a “Yes” response to the payment question for having Internet access at a hypothetical residential community center. Table 7.4: Percentage of Initial Bidding “Yes” Vote for Internet Access at Residential Community Center Initial Bid Urban samples Rural samples Sample Size % “Yes” bid Sample size % “Yes” bidRM 10 54 46.2% 49 55.1%RM 20 46 52.2% 41 43.9%RM 30 38 31.6% 37 32.4%RM 40 30 46.7% 38 18.4%RM 50 37 29.7% 41 29.3%Total 205 42.0% 206 36.9% Tables 7.3 and 7.4 show there is a declining trend in the percentage of total “Yes” response to the payment question by the urban respondents; from making payment for having Internet access at home (51.7%) to having Internet access at residential community center (42.0%). This indicates that even though the cost of using the Internet at the hypothetical community center is much cheaper than the cost for having the Internet access at home, the lower cost did not have a significant influence to the urban respondents. In fact, the urban respondents are more inclined to use the Internet service at the comfort of their home, as proven from the comparison shown in Table 7.3 and 7.4. However, the converse is true for the rural respondents. For them there is an inclination towards having Internet access at a residential community center, with lower monthly payment or monetary contribution. In overall, the result of the “Yes” response from this survey also shows that more of the respondents expressed their willingness to pay for

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having Internet access than in our preliminary survey, when much higher initial bidding prices were used. To obtain mean and median WTPs for the proposed scenarios, the WTP was assumed to be distributed as a Weibull with scale “sigma” and shape parameter “theta” at a default value. The respondents do not report their exact WTP amount but their responses to the initial and follow-up payment questions can be combined to form interval around the respondent’s WTP. Using the CVM 2002 Version 1.0 software, the following mean and median WTP are obtained as shown in Table 7.5. Both the urban and rural respondents in this survey have a median WTP values that are smaller than the mean WTP. As the probability values obtained from this survey (p = 0.000) are less than the significant level of 0.05, the mean WTP obtained are significant at 95% level. The mean WTP for having home Internet access for the urban respondents of RM 64.12 per month as compared to the mean WTP for the rural respondents of RM 47.96 per month shows a considerable different in the way the urban and rural respondents are valuing the importance of having Internet access at home. The urban respondents are more willing to make payment at a higher price to get access to the Internet at home as compared to the rural respondents. The mean WTP of RM 64.12 per month is an equivalent to the cost that the respondent would need to pay to get access to the Internet at home for about 32 minutes per day. With mean WTP of RM 47.96 per month, the respondents can get access to the Internet service for about 23 minutes per day. The mean WTP for Internet access at the residential community center for the urban respondents is RM 26.20 per month as compared to the mean WTP for the rural respondents of RM 21.91 per month. Although, as expected, the urban mean WTP is higher than the rural mean WTP, there is only a slight difference in the mean WTP for having Internet access at a neighborhood community center between the urban and rural respondents. The slight difference indicates that the urban respondents are more willing to pay for having the Internet at home as compared to having Internet access at a residential community center. With the mean WTP of RM 26.20 per month, the respondent is able to have Internet access at home for about 13 minutes per day. As for mean WTP of RM 21.91 per month, the respondent is able to get Internet access at home for about 10 minutes per day. Table 7.5: Mean and Median Willingness to Pay for Internet Access

Internet Access Urban Rural Home: Mean Median

RM 64.12 RM 59.11

RM 47.96 RM 38.27

Residential Community Center: Mean Median

RM 26.20 RM 19.12

RM 21.91 RM 15.94

(Actual value, p=0.000 < significance level, 0.05)

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The WTP was also assumed to be distributed as a Weibull in order to find the relationship between WTP and the “income factor”. The findings, analyzed using CVM2002 Version 1.0 software, showed that, for the urban respondents, there was a significant relationship between “income factor” and WTP for having Internet access at home. This implies that the urban respondent with higher income is willing to pay more in order to get the Internet service at his/her house. However, there was no significant relationship between “income factor” and WTP for having Internet access at the community center. This confirmed the earlier prediction that the urban respondents (regardless of income level) are not very keen to pay for Internet access at a residential community center. As for the rural respondents, it was found that there is no relationship between WTP and “income factor”, either for having Internet access at home or at the residential community center. This implies that even with higher income, the rural respondent is most likely to be indifferent in his/her willingness to pay for having Internet access either at home or the neighborhood community center. Unlike the case of the urban respondents, the rural respondents with higher income are not motivated to pay more to get access to the Internet at home. This result is contrary to the earlier prediction that “income factor” might give a significant contribution in influencing the rural population to make payment for having access to the Internet service. However, the survey result reveals that income factor by itself is not the only reason that will motivate the rural population to “value” the importance of having Internet access. In the case of Malaysia, the lack of the Internet contents that suit the rural population's lifestyle is one of the reasons that make them feel indifferent to paying for Internet access at home or community center, even amongst higher earners. By using a cross-tabulation analysis, a comparison can be made on the influence of “income factor” on the frequency of the urban and rural respondents' use of the Internet. Figure 7.5 shows that the majority of the rural respondents in the lower income groups never uses the Internet (75% for those with income of RM 500 or less), and more of higher income groups are using the Internet on a “sometimes” basis rather than "frequently". At the same time, there is no clear pattern on the influence of income in encouraging the urban respondents to use the Internet frequently. When the relationship was checked using the Spearman correlation, it was found that there is a significant weak relationship of 0.318 between “income factor” and frequency of using the Internet for the rural respondents. However, there was no discernible relationship between “income factor” and frequency of using the Internet for the urban respondents. Therefore, it proved to us that “income factor” has a significant role in encouraging the rural population to use the Internet, but its role is not significant for the urban population which has other reasons, besides “income factor”, for using the Internet, such as: there are more contents that are relevant to the urban lifestyle, inquisitiveness or having an interest in the technology.

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Figure 7.5: Frequency of using the Internet vs Income In Urban-Rural Area

7.4.6 Discussion and Recommendations Based on the Result of Data Analysis from Case Study 3 Based on the data analysis above, the following recommendations can be derived:- (1) Urban respondents value the use of the Internet more highly than the rural respondents, by showing that they are willing to pay for a higher payment to get access to the Internet service, especially at home. With the majority of urban population less sensitive to the cost for being networked than the rural population, it is recommended that further study be carried out by the relevant authorities to investigate the possibility of applying discrimination pricing between the urban and rural areas for access to the Internet. The other options would be for the government to provide subsidy, either to the telecommunication companies to lower the cost for Internet connection charged to the public or subsidizing the cost for networking the rural areas. However, Malaysians already have one of the lowest Internet connection pricing in Asia, and by further subsidizing the Internet charge rate, even though it might encourage more rural population to be networked, it will give the perception that accessibility to ICT is a purely social obligation that must be fulfilled by

27.8

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AlwaysFrequentlySometimesSeldomNever use

URBAN RURAL

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the government. Therefore, the government should emphasize that the use of Internet by the mass public is out of economic concern, where the nation will be at the disadvantage compared to other nations if a majority of its population could not use ICT application in the near future. With this justification, a discriminating pricing that is in favor of the rural area is a better option in encouraging the rural population to be networked. From the demand perspective, by having a more affordable Internet pricing, the cost conscious rural population will not be discouraged from using ICT. At the same time, the urban population would not find the increase in the Internet pricing a burden for them to use ICT applications.

(2) “Income factor” has a significant influence in encouraging the rural respondents to use the Internet. Those with higher incomes in the rural areas are most likely to be frequent users of the Internet than those with lower incomes. However, “income factor” does not have a significant role in influencing the urban respondents to use the Internet. Regardless of the difference in income, the majority of the urban respondents is using the Internet service. In relation to section (1) above, the urban population is more likely to realize the benefits of using the Internet than the rural population because the Internet contents are more suitable to their daily needs. They perceived that using the Internet is worth it as compared to the cost for being networked. Furthermore, with more of the urban population in Malaysia have better educational qualifications than the rural population that lead to better paying jobs, the Internet contents are mostly produced by these segment of population too, catering for urban populations and lifestyle, typically in English. The rural population, with lower income, does not find a need to use the Internet. In order to encourage the rural population to participate further in using the Internet, it is suggested that the relevant authority provide or encourage more local content. The content should be in native language and provide services that suit the local communities.

(3) Income is significantly related to the mean WTP for having Internet access at home for the urban respondents. However, income has no significant relationship with mean WTP for having Internet access with the rural respondents. Therefore, the difference in income among the urban respondents will influence the perceived value they have on the use of Internet. The higher income group within the urban population views the importance of using the Internet more highly than the lower income group. Again, the main reason might be the lack of content that appeals to the lower income segment of the urban population. The other reason is the issue of affordability of being networked, as compared to the benefit of using Internet itself as perceived by the more informed urban population with lower income. It is recommended that the Malaysian government continue with its program of giving incentives for lower income group in the population, irrespective of geographical area, to own a PC and maintains the low Internet connection rate.

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7.5 DISCUSSION AND CONCLUSION The income dimension has different influences on the diffusion of ICT in urban and rural populations. The urban population that has been exposed to the new technologies products and services in their daily lives, as well as having been living an affluent lifestyle as compared to the rural population, is more open to the idea of using ICT products and services (Feldman, M. 2001). Therefore, the urban population is indifferent towards the income dimension in their choice to use ICT applications. Regardless of their income level, they perceived the use of ICT to be important and practical for their daily lives. This is supported by the fact that most of the Internet content in Malaysia is designed to cater to the urban lifestyle or the educated segment within the country population. With more than half of the Internet contents in Malaysia in English, the urban population (who are most likely to be fluent in English) will gain the most benefit when using the Internet service. The survey reveals that the majority of the urban respondents have been using the Internet and over 80% of them view the Internet as either “important” or “very important”. This implies that the diffusion of ICT to the urban population is more related to the practicality of ICT applications that have been used and perceived important by the urban population. Income plays a secondary role in encouraging them directly to use ICT. The opposite situation is experienced by the rural population. Income does play a significant role in influencing the rural population to use ICT applications. In the rural areas where accessibility to ICT applications, particularly Internet connections, is still under developed, there will be less incentive to use the Internet. The limited availability of Internet contents that suit the rural lifestyle and the lack of content in native languages have further discouraged the rural population from using ICT applications. Case Study 3 has discovered that more than half of the rural respondents never use the Internet as opposed to less than 20% of urban respondents. The rural population in general could not gain the optimum benefit from using ICT applications. However, those who earn higher incomes in the rural areas are more likely to be encouraged to use ICT applications than those who earn lower incomes. This fact is supported by Case Study 3, as shown in the Figure 7.5 of the relationship between income and frequency of Internet usage. The rural population, with its higher income, can afford to get access to ICT either at home or by using ICT applications at cyber cafés. Both locations involve monetary cost. Besides that, it is also more likely that those who earn higher incomes also work in a working environment that requires them to use ICT applications in their daily works. Hence, high income indirectly influences the use of ICT among the rural working population. The content of the Internet that tends to cater for the affluent and educated segment within the population might also attract the high income earner in the rural areas as opposed to those who earn lower income. Therefore, the difference in income has influence the diffusion of ICT among the rural population in Malaysia. Both the urban and rural population in Malaysia generally views the use of ICT as important. However, their view differs when assessing the level of importance in using ICT applications. The urban population viewed the use of ICT as more important than the rural population, and shown by their much higher mean WTP for Internet access at home

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than the rural respondents. When “income factor” is taken into consideration, the urban respondents with higher income are also willing to commit to higher monetary cost to get networked at home. However, for the rural population, even when they earn higher incomes, there is indifferences to paying a higher amount for home Internet access. As have been explained in the previous paragraph, the limited ICT contents that are available to cater for the rural population is one of the main reasons that the rural population is indifferent to paying for having Internet access either at home or other locations.

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CHAPTER 8

CONCLUSION

8.1 SUMMARY AND INTERPRETATION OF OVERALL RESEARCH RESULTS This chapter interprets and summarizes the overall research results. The interpretation is based on the findings from the case studies in Chapters 5, 6 and 7, and on surveys of the literature. The chapter also explains the implications of the research and presents conclusions that can be drawn from it. Detailed recommendations are also provided on what action plans and policies should be adopted by the Malaysian government in order to reduce the digital divide within Malaysia, specifically addressing the three dimensions of geographical difference, income and workplace. The limitations of this research are also explained and suggestions for future research on the diffusion of ICT and digital divide are provided. Finally, the concluding remarks for this research, which highlight its social implications for the development of society, are given. This research's main objective is to derive policies or action plans to reduce the digital gap in Malaysia based upon the dimension of geographical difference, income and workplace. From the literature surveys, the natural diffusion of ICT (as advocated by the adoption theory (Rogers, E. 1995) and by the agglomeration effect theory (Capella, R., 2002)) will leave the rural population disadvantaged by being “laggards” in adopting the new technology. Those people with lower incomes or working at the bottom of the organization job hierarchy also will find themselves disadvantaged. From the pattern of diffusion of ICT that has taken place in Malaysia (based on time series data, NITC, 2001), it is clear that digital divisions exist in Malaysia, particularly based on geographical differences and income.

The three case studies presented in this research are conducted using different types of samples and study locations in order to observe variation in how the general population is using ICT. The study initially examines what are the factors that influence the use of ICT in Malaysia, specifically related to the three dimensions as mentioned above. This exploratory study approach is important as there has been no empirical study on this subject in Malaysia. Case Study 1 (using High School students in urban and rural Kelantan as samples) demonstrates (through SEM analysis) that “parent factor” (as a proxy for “leadership”) is the most important contributing factor in encouraging senior High School students to use the Internet. When the observable variables of “parent factor” are analyzed further, it is found that “income” is also a relatively significant factor that contributes to the use of ICT (see Chapter 5). Other factors, notably “alternative services that rival the use of Internet” and “accessibility to Internet" are also significant factors in encouraging the use of the Internet. By comparing descriptively the diffusion of the Internet in the urban and rural teenagers, it is found that there exists a digital divide with respect to geographical differences. This research's sub-goal, which is derived from Case Study 1, has recognized the significant contribution of the relative factor, the

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“workplace” to the use of ICT. Hence, the research proceeds by examining the issue of digital divide at the workplace.

The role of workplace in the diffusion of ICT is the subject of Case Study 2. By using the already known factors; geographical effect, income effect and nature of job, as the variables that influence the use of ICT by the urban working population, the data obtained is also analyzed using SEM. Case Study 2 (using service sectors workers in Kuala Lumpur as samples) find that the use of ICT by the working population is significantly influenced by nature of job and income. At the same time, income effect is highly influenced by nature of job. The findings also show that working people who are using ICT applications in their daily work are more likely to use ICT outside the workplace. Another sub-goal of this part of the research is to find whether there exists a digital divide based on level of competency in using ICT. Case Study 2 confirms there does exists a second level competency-based digital divide; those who are in management position and earn higher income are most likely to be skilled in performing high-order tasks in ICT than those who are working in lower positions within the organization and who earn low income.

Finally, the research proceeds, through Case Study 3, to examine the role of income in the diffusion of ICT to the mass population. From the findings of Case Study 1 and Case Study 2, it is evident that income is a significant factor that is influencing the population to use ICT. In referring again to the result of Case Study 1 on the existence of digital divide between urban and rural area, the issue of geographical difference in the diffusion processes also need to be explored further, especially for its relationship with income factor. Case Study 3 (that investigates the difference in “value” placed by the urban and rural population to get access and use the Internet), by using CVM, shows that the urban population perceives the use of ICT as more important than the rural population. This finding is also the research sub-goal. Meanwhile, the research also reveals that whilst income does play a significant role in influencing the urban population's willingness to contribute monetary expenses (cost), it doesn't do so for the rural population.

8.2 OVERALL CONCLUSION When the results from the data analysis and the literature survey are considered, the following conclusions can be drawn:-

(1) Geographical differences, income and workplace are proven empirically to

influence the diffusion of ICT to the mass population.

(2) There is a digital divide based on differences in income, in term of affordability. A digital gap also exists based on competence in using ICT which positively correlates with income.

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(3) There is also a digital divide based on the nature of job, notably upon the differences in competency or skill in using ICT.

(4) There exists a digital divide between the urban and rural populations, with the

urban population valuing access to, and use of, ICT more highly than the rural population.

8.3 RECOMMENDATIONS One of the main objectives for this research was to recommend policies and action plans. These recommendations are:-

(1) Public investment on ICT in Malaysia should emphasize providing both soft and hard infostructures, especially in the rural areas. The existence of digital divide based on geographical difference is proven to be an issue in Malaysia that might prevent the country achieving its “Vision 2020” goal as a knowledge-based society. However, the enthusiasm of the Malaysian population (irrespective of geographical area) towards using ICT applications (as proven in Case Studies 1 and 3) shows that it is possible to accelerate the diffusion process beyond its “natural” “S-curve”. Historically there have been mixed results in the success of public investment in ICT hard infostructures. For examples, wiring schools with Internet access through the Smart Schools Program (see Chapter 5) provided physical access for students to use the Internet, but with the lack of trained teachers or supporting infrastructures, Internet use could not be optimized by the students in their schools. This is attributed to the failure to provide soft infostructure support. For the diffusion of ICT to be successfully accelerated, it is necessary for public investment to take into account the importance of providing soft infostructure, as well as hard infostructure - especially in the rural areas. Soft infostructure, such as providing lifelong learning or getting the mass public to learn how to use ICT, enables the rural population to be proactive in its use of ICT. Currently, most of the Internet-literate rural population in Malaysia is only able to use basic skills when online (see Case Study 3). Most of this population does not use Internet for e-commerce, graphic designing, banking or other more “meaningful” applications.

(2) A “top-down” management approach would be preferred in the workplace to get the working population to use ICT applications at the initial stage of the diffusion process, thus reduce the digital gap irrespective of the job position in the organization. A “bottom-up” management approach is appropriate only when the ICT adoption process is well established. Case Study 2 proved that "nature of job" is the most important factors for the working population to use ICT. Therefore, the commitment of top management is needed for subordinates to use ICT applications in their daily work, thus reducing the digital gap

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based on job position. Employers must be made aware that their competitiveness in future business practices is dependent upon their ability to transform the existing workforce into knowledge workers, through continuous retraining or "life-long education" that is versatile and adapts to changes in the workplace and technological environments. (3) There is a need to maintain the lower price rate for data telecommunication in Malaysia, specifically for Internet connections. Such measures include the government providing subsidy to the telecommunication industry to maintain a lower price rate or by having a discriminating pricing between the urban and rural area. The majority of Malaysians, especially in the rural areas, is sensitive to the cost for being networked. It is therefore important for the Malaysian Government to continue to impose lower rates for telecommunication connections, specifically for Internet dial-up-connections which are most commonly used by Malaysians. The results from Case Study 3 have confirmed that, in Malaysia, a lower Internet access rate will attract the mass population to get networked and to accelerate the diffusion process. Therefore, if the government is providing subsidy directly to the telecommunication companies to lower the price rate for data telecommunication, it will most likely increase the ICT penetration rate for Malaysia. The subsidy can be in the formed of assisting the local telecommunication company to maintain or lower the price rate below the market price; or by subsidizing the cost of telecommunication to the less profitable rural areas. An alternative recommendation is to impose discriminatory pricing between urban and rural areas. As the urban population has a higher standard of living, and places a higher importance on using ICT (as expressed by WTP) than its rural counterpart, a higher telecommunication rate for urban areas would not be as significant an issue for these areas as for the price sensitive rural population. It also implies that the government is acting to encourage the diffusion of ICT for economic reason, not for social obligation (see Chapter 7). (4) Government policy should encourage the participation of the private sectors in providing ICT access to the mass population through incentives and specific programs. As mentioned in Chapter 3, there are programs that have been implemented in Malaysia that involve the participation of the private sectors in the diffusion of ICT. However, these projects have been on a small scale, providing limited benefit to the population. Therefore, there is a need for a nationwide program that involved joint-ventures between the public and private sectors in active participation to provide access to ICT in both the urban and rural areas. Other type of initiatives should also be encouraged, such as the opening of more cyber cafés or private facilities at which the public can get access to ICT, in particular the Internet. Case Study 1 has proven the importance of cyber cafés in getting the younger generation to use and become familiar with the Internet service. Case Study 3 also showed that the rural population is willing to pay for an Internet service at public places, provided the charge for being connected is low. Other developing countries, notably Indonesia and the Philipines are also finding

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that the more of the mass populations are using the Internet at the privately run cyber cafés. (5) Government policy should be oriented to encourage the ownership of PCs through incentives and price reduction, either for individual usage or at the workplace. Two factors make the ownership of PCs an important factor in encouraging the mass population to use ICT: (a) the pattern of diffusion of ICT is highly correlated with the ownership of PCs (as shown in Case Study 1), and (b) there is substantial preference for using the Internet at home (as shown by the WTP in Case Study 3), especially for the urban population. Therefore, government policy must aim to get more of the mass population owning PCs, by giving incentives that will ease the burden of affordability (the main obstacle for most Malaysians to get access to the Internet at home). The use of computers at the workplace also directly influences the working population to use ICT. Again, government policy must also encourage the working population to use computers at the workplace. 8.4 LIMITATIONS OF THE RESEARCH The use of ICT in Malaysia is at an early stage of diffusion, so there are few previous studies, and secondary data is limited. Therefore, the scope of the study has some limitations:- (1) The use of micro-level samples to represent the general pattern of diffusion of the population. The micro-level approach used in this research has the advantage of allowing one to conduct a more thorough investigation of the issues concerned, leading to a clear result for the issues under consideration, as opposed to the macro-level approach which is less personal and is more likely to produce ambiguous results. However, the micro-level approach has some limitations when making generalization about the issues examined. For example, in specific case studies, the samples might not be sufficiently representative to reflect the general pattern of diffusion in the population, thus making it difficult to draw broadly generalized conclusions. (2) The use of only limited number of factors with SEM, with certain factors have to be eliminated in the final modeling. This research might have lost some factors in the process to produce the final modeling, as certain factors thought to contribute to the problem of multicolinearity have been eliminated. These eliminated factors might have significant cause-effect relationships with the use of ICT by the mass population.

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(3) The difficulty in making a broad generalization of the issues that have been raised from the three case studies, because each case study used different groups of respondents. With the use of different samples in the three separate case studies (senior High School students, urban service sector workers and public servants), the research is able to gain a broader understanding of the issue of ICT diffusion and digital divide across various segments of the population. However, the use of different samples also makes it difficult to make comparison of the issues raised between the case studies. (4) The Willingness to Pay (WTP) question asked in the case study might result in a lower value than the “actual value” of using the Internet service Many of the respondents are non-users of ICT services, and Internet use is at an early stage of diffusion in Malaysia. Therefore many of the respondents may not fully realize the merits (and demerits) of such services. (5) The research might overstate the extent of the digital divide by using the State of Kelantan as the research location. The use of the State of Kelantan as the research location has given a conservative representation of the state of ICT diffusion in Malaysia. Conversely, the use of Kuala Lumpur to represent the working population's use of ICT might over represent the working population's use of ICT, since the capital city is located within Malaysia's Multimedia Super-corridor (MSC) and as such has superior telecommunications capabilities. 8.5 FUTURE RESEARCH Given the limitations of the current research, the following programs of research are recommended to address the deficiencies:-

(1) Considering the limited sample size and variations, the micro-level analysis of the current research has only be able to discover limited differences in the diffusion of ICT between the three dimensions studied, in term of scope and applications (even though the differences discovered in the case studies were clear and specific). A mix of macro-level and micro-level analyses covering the same dimensions should be conducted at a national level, covering each Malaysian state, and using different sample groups, so that more secure generalizations about the diffusion of ICT and digital divide in Malaysia can be made. (2) There is a need to examine further the “second-level” digital divide based on differences in competency in using ICT, especially among the working population. The existence of this type of divide has been proven from this research, and it is predicted that the problems associated with it will become more observable when more of the mass population has become ICT literate, at which time the issue of digital divide will shift

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from simply being an issue of accessibility to ICT to being a more complex, competence-based one. This issue will also become more prominent in the future when more public and private services require the use of sophisticated ICT applications. Those with limited and basic skills in ICT will be marginalized in the future, ever-changing digital age. (3) The use of CVM by eliciting the respondents WTP to find the monetary value for the use of Internet should be further explored as this method allows non-user values to be included in the survey and data analysis. Further research needs to be carried out to investigate the relationship of WTP to income, as well as to other demographic factors, so that there is a deeper understanding of what is perceived to be the importance of access to the Internet by the various segments of the population. (4) There is a need to conduct more research that advocates the users’ perspective in the diffusion of ICT. The current research has shown that there are different - sometimes conflicting - views held by the supply-side and the demand-side. For example, not many of the rural schoolchildren are using the Internet at school, even though there is Internet access available there. This kind of problem might have been prevented if the demand-side perspective had been taken into account at the planning stage. Another example is the lack of Internet content that is in the Malay language and relates to the rural lifestyle, making the use of the Internet not very appealing for the rural population. 8.6 CONCLUDING REMARKS Despite the limitations that have been listed above, this research has been able to prove that digital divide is an issue that has a significant influence on the way ICT diffusion is taking place in the mass population in Malaysia. The social implications that can be derived directly from this research are:-

(1) Most Malaysians, irrespective of where they live, level of income or type of job, shows great enthusiasm for using ICT. This enthusiasm represents an opportunity that must be taken into account by the authorities as they implement programs that will accelerate the ICT diffusion process.

(2) Continuing government support in providing soft and hard infostructure is still at

the core in reducing the digital gap in Malaysia and in allowing more of the mass population to get networked. At the same time, it is important to have participation and assistance from the private sectors to help accelerate the diffusion process.

(3) ICT contents in Malaysia must be a reflection of the multi-cultural values of

Malaysian society. There must be more local content make available in the Malay language, and the content itself must be viewed as practical, appealing and relevant by the mass population, since most of the rural population does not

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communicate in English, and most of the content of Malaysian websites is irrelevant to the lifestyle of the rural population.

(4) There is also a need to have a strategy for overcoming the issue of second level

digital divide based on competency or skills. The dynamic nature of digital divide means that there could be a trend shifting from a divide that is based on access to the divide that is based on skill when using ICT among Malaysians in the near future. This divide is predicted to become a mainstream issue as Malaysia is enters the next phase of the diffusion process in adopting new technology.

Through the continued support from the government, private enterprise and the enthusiastic mass public of Malaysia for ICT, digital divide can be narrowed down, and Malaysia can become a successful, knowledge-based country by the targeted year 2020.

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APPENDIX I

Operation and Technical Definitions

(1) Added value – the incremental benefit to the user gained from use of ICT applications - not merely the benefit gained from a single use. For example, through using e-banking, the user can also benefit from using other banking-related applications; he or she could benefit from using the services in term of time and transportation cost. Conversely, the use of ICT for most entertainment purposes only results in cost, either monetary or time; there is no incremental benefit from such ICT use.

(2) Affordability – the ability of users to incur monetary cost to get access to ICT

services. Affordability is positively correlated with disposable income. (3) Bottom-up approach – decisions are made by the people who are affected by the

decisions, rather than by a few people in authority. (4) Disposable income – a portion of an individual or family's income remaining after

deduction of compulsory household expenditure that the individual or family can spend as they wish. Such disposable income could potentially be used to purchase ICT products or services.

(5) Equitability – fairness to all parties concerned. (6) Generation divide – the digital divide that is based on difference in age,

specifically between the older and younger generations. (7) Geographical area – urban and rural areas or districts (8) Geographical differences – the differences between the urban and rural areas. (9) Geographical effect – how geographical dimension (such as the person's living

environment or neighborhood characteristics and their work mobility) affect their use of ICT.

(10) Heavy users – the respondents who are the frequent users of ICT, using ICT more

than 6 hours per day. (11) Income factor – the respondents’ monthly household income. (12) Info-density – the concentration of information related application in the area

concern.

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(13) Infostructures – Information Technology-related infrastructure elements including newspapers, radios, television, fixed line telephones, cellular phones, broadband Internet, etc.

(14) Knowledge-based economy – an economy where knowledge, creativity and

innovation play an important role in generating and sustaining economic growth. (15) Lifelong education – a process of accomplishing personal, social and professional

development throughout the life-span of individuals in order to enhance the quality of life of both individuals and their collectives. It is a comprehensive and unifying idea which includes formal, non-formal and informal learning for acquiring and enhancing enlightenment so as to attain the fullest possible development in different stages and domains of life.

(16) Meaningful usage – any usage of ICT applications that can give a positive benefit

to the users and enriched their knowledge. It excludes basic usage such as chat and Email and most entertainment-oriented applications.

(17) Non-user – an individual who does not use ICT, either through lack of access to

ICT or through personal choice. (18) Public goods – goods and services that must be available to citizen of a nation. (19) Push factor – the advocating factor for action. (20) Real – a genuine issue, not imaginary or hypothetical. (21) Teledensity - number of main telephone lines per 100 people. (22) Top-down approach – decisions are made by a few people in authority rather than

by the people who are affected by the decisions. See also bottom-up approach. (23) Universal Service Provision (USP) – a regulatory mandate of the Malaysian

Government to ensure that every citizen is able to get access to ICT. (24) Value – a relative worth of products or services, specifically in term of monetary

worth. (25) Volunteer non-user – an individual who has the opportunity to use ICT, but

choose not to use the technology. (26) Warnets – “warung” or café in Indonesian, plus “net” for Internet, cybercafés

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APPENDIX II

QUESTIONNAIRE FOR CASE STUDY 1 QUESTIONNAIRES FOR THE FIELD SURVEY ON THE USAGE OF INTERNET BY HIGH SCHOOL STUDENTS IN KELANTAN, MALAYSIA Personal Information: 1) Age: 17 year 2) Sex: (0) Male / (1) Female 3) Town/village where you live:

Kota Bharu or Tanah Merah 4) Parent/Guardian occupations:

(A) Father (1) Not working (2) Farmer/Laborer or equivalent (3) Clerical worker/Clerk/Assistant Administration/Small Business Owner or

equivalent (4) Professional/Business Owner/Manager/Teacher or equivalent (B) Mother (1) Not working (2) Farmer/Laborer or equivalent (3) Clerical worker/Clerk/Assistant Administration/Small Business Owner or

equivalent (4) Professional/Business Owner/Manager/Teacher or equivalent (C) Guardian (1) Not working (2) Farmer/Laborer or equivalent

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(3) Clerical worker/Clerk/Assistant Administration/Small Business Owner or equivalent

(4) Professional/Business Owner/Manager/Teacher or equivalent

5) Parent/Guardian income: (for respondent living with guardian, please answer this question by treating the guardian as “father” or “mother” based on his/her gender)

(A) Father (1) Less or equal to RM 300 per month (2) RM301 – RM 600 per month (3) RM601 – RM 1,000 per month (4) RM1,001 – RM1,500 per month (5) Above RM1,501 per month

(B) Mother

(1) Less or equal to RM 300 per month (2) RM301 – RM 600 per month (3) RM601 – RM 1,000 per month (4) RM1,001 – RM1,500 per month

(5) Above RM1,501 per month Respondent knowledge of internet: 6) Do you know how to use computer?

(0)Yes / (1) No If your answer to question number 6 is “Yes”, please answer question number 7 and number 8. If your answer to question number 6 is “No”, please skip answering question number 7 and number 8; and answer question number 9. 7) How many years have you learn how to use computer? ____ years 8) Where did you first learn how to use computer? (1) Home (2) School (3) Cyber Café (4) Community center (5) Others (please specify)

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9) Do you have personal computer at home? (0)Yes / (1) No

Parent factor for respondent knowledge of internet: 10) Do your parent/guardian know how to use computer? (for respondent living with guardian, please answer the question by treating guardian as “father” or “mother” based on his/her gender) (A) Father (0) Yes / (1) No (B) Mother (0) Yes / (1) No 11) Do your parent/guardian encourage you to use the computer/internet?

(0) Yes / (1) No Respondent knowledge of internet: 12) Do you know how to use internet?

(0) Yes / (1) No If you answer “Yes” to question number 12, please answer question number 13 to question number 21. If you answer “No” to question number 12, please skip answering question number 13 to question number 23, and answer question number 24. 13) How many years have you been using internet? ___ years 14) Where did you first learn how to use internet? (1) Home (2) School (3) Cyber Café (4) Community center (5) Others (please specify) Respondent usage of internet service: 15) How many hours do you spend on internet every week? (1) less than 1 hr (2) between 1 to 3 hr (3) >3 hr but <7 hr

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(4) 7 hr to 14 hr (5) >14 hr Respondent accessibility to internet service: 16) Where do you frequently use the internet service? (1) Home (2) School (3) Cyber Café (4) Community center (5) Others (please specify) 17) Please specify how many hours did you spend of using the internet service on those

location:- (A) Home: __ hr (B) School: __hr (C) Cyber Café:__hr (D) Community center: _hr (E) Others: __hr (please specify the location) 18) Where do you prefer to use the internet service? (1) Home (2) School (3) Cyber Café (4) Community center (5) Others (please specify the location) 19) Referring to the question number 18, what is the main reason why you like to use the

internet service at that specific location? (Subjective respond) (1) Privacy (2) Interaction with others (3) Convinient and easy access (4) Cost factor (5) Other reasons

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Daily usage of internet by respondent 20) What are the purposes of you using the internet? Please rank the order of your purpose of using the internet from 1 (frequent used category) to 5 (least used category). (A) __Chatting (B) __E-mail (C) __Information searching (D) __Entertainment (playing games, music) (E) __Other purpose (please name the activity): __ Tutorial available to respondent: 21) Have you ever attended a computer/internet class before?

(0) Yes / (1) No If your answer to question number 21 is “Yes”, please answer question number 22 to question number 23. If your answer to question number 21 is “No”, please skip question number 22 to question number 23. Please answer from question number 24. 22) Where did you attend the course? (1) School (2) Private tutorial (3) Community center (4) Others (please specify) 23) How many hours per week did you attend the computer/internet class? (1) 1 hr (2) >1hr to 3hr (3) >3hr but <7hr (4) 7 hr to 14 hr (5) >14 hr Government investment in local informatization is effective or not: 24) Do you agree with the statement that “the facility in my school for internet service is

very satisfactory for me to learn and use internet service”. (1) Strongly disagree (2) Disagree (3) Neutral (4) Agree (5) Strongly agree

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25) Please specify from each area given below, the need for improvement to the internet

service in your school. Please rank in order of what you think is most important as number 1, to the least important as number 5.

(A) __Increase the number of computers with internet connection in school (B) __More teachers with IT background to teach the usage of internet (C) __Having more classes on internet usage (D) __The need for faster connection to internet service (E) __Other reason: please specify 26) Do you think internet is important to be learned in school?

(0) Yes / (1) No / (2) No opinion If your answer to question number 26 is “Yes”, please answer question number 27. If your answer to question number 26 is “No” or “No opinion”, please skip answering question number 27, and answer question number 28. 27) Why is it important for students to learn how to use internet in school? (Subjective respond) (1) It will increase the number of students that are I.T. literate (2) In line with the country’s development objective (3) More information and knowledge can be obtained from the internet 28) Do you think you will be using more of internet service in the future?

(0) Yes / (1) No / (2) No opinion

29) What do you think will be your usage of internet service in the future? (Subjective respond)

(1) Chatting (2) E-mail (3) Information (4) Entertainment (5) Others

30) Did your school has a good library facility? (0) Yes / (1) No / (2) No opinion

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31) How many hours per week do you spend on the following activities:- (A) Library: (B) Sport: (C) Watching Television: (D) Listening to music: 32) Do you think it is easy for you to respond to this questionnaire? (0) Yes / (1) No / (2) No opinion

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APPENDIX III

QUESTIONNAIRE FOR CASE STUDY 2

QUESTIONNAIRE: THE USAGE OF ICT AMONG URBAN WORKING POPULATION

INSTRUCTIONS

The questionnaire is designed to gather information and data about the diffusion of ICT among the urban working population, specifically in Klang Valley area. Complete confidentiality is assured with this survey. The information provided will be used in aggregate form only, and individual identity or profile will be completely anonymous. All the information supplied in this Questionnaire will NOT be used for any other purposes except those of this research project. The Questionnaire is divided into five (5) parts as follows:- Part 1: Basic Information Part 2: ICT Literacy and Usage Part 3: Occupation/Nature of Job Part 4: Income Effect Part 5: Location of Residence Most of the questions in this survey simply require you to rank or rate by circling the appropriate number of answer. Please be free to make additional comments anywhere in the Questionnaire that you think it is necessary, as your candid personal opinion will greatly enhance the success of this study. Your cooperation and assistance in answering all the questions in this survey is very much appreciated. TENGKU MOHAMED FAZIHARUDEAN BIN DATO’ TENGKU FEISSAL Doctoral Candidate Graduate School of Global Information and Telecommunication Studies Waseda University Tokyo JAPAN

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PART 1: BASIC INFORMATION Please circle one (1) of the answer given 1. Gender: Male Female 2. Age: ……… year (Please indicate your age) 3. Race: Malay Chinese Indian Native Sabah/Sarawak Others: ……… 4. Marital status: Single Married Divorced 5. Education level: a) No formal education b) Primary education c) Lower Secondary d) Higher Secondary e) College/University PART 2: ICT LITERACY AND USAGE Please circle one (1) of the answer 6. Please indicate your ability to use ICT (include using the computer and Internet service)? a) Did not know how to use b) Little knowledge c) Average d) Above average e) Very advance knowledge 7. How many hour(s) do you use ICT service per day? a) Less than 1 hour per day b) Between 1 hour to 3 hour per day c) More than 3 hour to 6 hour per day d) More than 6 hour to 9 hour per day e) More than 9 hour per day 8. Where did you frequently use the computer? Please rank the location from 1 to 5, from seldom (1) to the most frequently (5) Home: ………. Friend’s house: ……….. Office: …………. Cyber café: ………. Others: …………. 9. How would you rate the usage of ICT in your daily life? 1 – Never use 2 – Seldom use 3 – Sometimes 4 – Frequently 5 – Always E-mail 1 2 3 4 5 Chatting 1 2 3 4 5 Information searching from webs 1 2 3 4 5 Creating & upgrading own/corporate web pages 1 2 3 4 5

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Graphic works 1 2 3 4 5 Other applications 1 2 3 4 5 Overall usage: 1 2 3 4 5 10. Do you perceive the usage of ICT to be important in your daily life? a) Not important at all b) Slightly important c) Neutral d) Important e) Very important PART 3: OCCUPATION AND NATURE OF JOB Please circle one (1) of the answer 11. Type of occupation: a) Clerical b) Administrative and supporting staffs c) Semi-professional d) Management/Professional e) Others 12. What are the number of hours per day you are required to use ICT at the workplace? a) Less than 1 hour per day b) Between 1 hour to 3 hour per day c) More than 3 hour to 6 hour per day d) More than 6 hour to 9 hour per day e) More than 9 hour per day 13. What type of ICT services do you normally use in the office or at the workplace? Please circle your rank based on the frequency of usage, from:- 1 – Never use 2 – Seldom 3 – Sometimes 4 – Frequent 5 – Always Typing (word processing) 1 2 3 4 5 E-mailing 1 2 3 4 5 Information searching on www 1 2 3 4 5 Graphic works 1 2 3 4 5 Programming and 1 2 3 4 5 Creating/maintaining websites Video teleconferences 1 2 3 4 5 Other applications 1 2 3 4 5 14. Base on the above ICT services used, what is the overall usage of ICT at your workplace? Please rank from 1 (the most seldom used service) to 7 (the most frequently used service). 15. Did your job require face-to-face interaction with subordinate or superior or peers? Please circle the rank of the level of required face-to-face interaction, from 1 (the least required) to 5 (the most required face-to-face interaction). 1 2 3 4 5

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16. Do you always have to be in the office or mobile (including outstation) during the working hours? Please circle the rank of the level of mobility at work, from 1 (the least mobile) to 5 (the most mobile). 1 2 3 4 5 17. Do you have to use an advance application of ICT at the workplace? (other than typing, e-mail, video conferencing and information searching on webpages) a) Not require at all b) Rarely use c) Use sometimes d) Frequently use e) Always require to use 18. ICT application in the workplace has help to improve the productivity of your daily work. Do you agree with that statement? a) Strongly disagree b) Disagree c) No comment d) Agree e) Strongly agree PART 4: INCOME EFFECT Please circle one (1) of the answer 19. How much is your monthly salary? a) RM 500.00 per month or below b) RM 501.00 per month to RM 1,000.00 per month c) RM 1,001.00 per month to RM 1,500.00 per month d) RM 1,501.00 per month to RM 2,000.00 per month e) Above RM 2,000.00 per month 20. How much is your actual spending on ICT per month? a) Below RM 50.00 per month b) RM 51.00 to RM 100.00 per month c) RM 101.00 to RM 200.00 per month d) RM 201.00 to 500.00 per month e) Above RM 500.00 per month 21. How much do you think you are willing to spend per month on ICT related services? a) Below RM 50.00 per month b) RM 51.00 to RM 100.00 per month c) RM 101.00 to RM 200.00 per month d) RM 201.00 to RM 500.00 per month e) Above RM 500.00 per month 22. Did you always acquire the latest ICT technology available in the market? Please circle one 1 – Never acquire 2 – Seldom acquire 3 – Sometimes 4 – Frequently 5 - Always

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23. How frequent do you use the home PC to be connected to Internet? 1 – Never use 2 – Seldom use 3 – Sometimes 4 – Frequently 5 – Always 24. Do you honestly think the current rate charged by the telecom company for the usage of ICT is reasonable? a) Too cheap b) Cheap c) Reasonable d) Expensive d) Very expensive 25. Is cost an important factor for you to limit your usage of ICT? a) Strongly agree b) Disagree c) No comment d) Agree e) Strongly agree PART 5: LOCATION OF RESIDENCE Please circle one (1) of the answer 26. What type of ICT services available in your neighborhood? a) Dial-up-connection b) ISDN c) Broadband ADSL d) Fiber optics e) Others: …….. 27. How far is your house approximately from the city center of Kuala Lumpur? a) More than 20 km from the city center b) Between 15 km to 19 km from the city center c) Between 10 km to 14 km from the city center d) Between 5 km to 9 km from the city center e) Less than 5 km from the city center 28. Can you describe the race polarization at your neighborhood? a) All single-race neighborhoods similar to me b) Almost all single-race neighborhoods similar to me c) Multiracial d) Almost single-race neighborhoods that are different from me e) All single-race neighborhoods that are different race from me 29. What type of house do you live? a) High rise flat b) Terrace house/Semi-detached c) Condominium d) Bungalow e) Others: ……………. 30. What type of industry or environment is your neighborhood consists of? a) Inner city b) Industrial area c) Semi industrial/satellite township d) Suburb residential area e) Others: …………. 31. What level of satisfaction will you describe of the accessibility of ICT service in your residential area? a) Very dissatisfy b) Dissatisfy c) Average d) Satisfy e) Very satisfy

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APPENDIX IV QUESTIONNAIRE FOR CASE STUDY 3

QUESTIONNAIRE:

THE VALUE OF USING THE INTERNET

PART 1: DEMOGRAPHIC INFORMATION 1 Gender: 1. Male 2. Female (Please circle one of the answer) 2 Age: years old (Please indicate your age in years) 3 Number of people in your household: (Please indicate how many?) 4 Educational level: 1. No formal education 2. Primary education 3. Secondary education 4. College/First degree 5. Master/PhD 5 Type of occupation: 1. Laborer 2. Clerical 3. Supervisory/semi professional 4. Management/Professional 5. Head/top management 6 Household monthly income (including your spouse’s income): 1. RM 500.00 or less 2. >RM500.00 to RM1,300.00 3. >RM1,300.00 to RM 2,200.00 4. >RM2,200.00 to RM4,200.00 5. >4,200.00 PART 2: EXPOSURE TO INTERNET SERVICES 7 Are your house connected to the fixed-line telephone service? 1. No 2. Yes 8 Are you using the Internet service at home? 1. No 2. Yes 9 If your answer to Question 8 is “Yes”, please indicate what type of Internet service? 1. Dial-up connection 2. ISDN 3. Broadband ADSL 4. Wireless 10 Please indicate your ability to use the Internet service? 1. Do not know how to use at all 2. Able to write and receive email 3. Able to write/receive email and browsing www 4. As in (3) plus making e-transactions 5. As (4) plus programming/graphic works

INSTRUCTIONS

The questionnaire is designed to gather information of the “monetary value” for the usage of Internet that both the urban and rural populations in Malaysia have valued. Complete confidentiality is assured with this survey. The information provided will be used in aggregate form only, and individual identity or profile will be completely anonymous. All the information supplied in this Questionnaire will NOT be used for any purposes except those of this research project. The Questionnaire is divided into:- Part 1: Demographic Information Part 2: Exposure to Internet Services Part 3: Willingness to Pay for Internet Service Most of the questions in this survey simply require you to rank or rate by circling the appropriate number or answer. Please be free to make additional comments anywhere in the Questionnaire that you think necessary, as your candid personal opinion will greatly enhance the success of this study. Your cooperation and assistance in answering all the questions in this survey is very much appreciated. Tengku Mohamed Faziharudean bin Dato’ Tengku Feissal Doctoral Candidate Graduate School of Global Information and Telecommunications Studies, Waseda University, Tokyo, JAPAN

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11 For those who have been using the Internet service, please circle the type of services you have used.(You may circle more than one answers)1. E-mailing/Chatting 2. Information retrieval from www 3. News 4. Web applications 5. Performed government transactions 6. Financial services 7. Online shopping 8. Library services 9. Distance learning 10. Teleworking 12 How frequent do you use the Internet service? 1. Never use 2. Seldom use 3. Sometimes 4. Frequently 5. Always 13 Do you think that the Internet service is important to be used in your daily life? 1. Not important at all 2. Slightly important 3. No opinion 4. Important 5. Very important 14 How do you rate the Internet service provided by the local telecommunication company? 1. Very bad 2. Bad 3. No comment 4. Good 5. Excellent PART 3: WILLINGNESS TO PAY FOR INTERNET SERVICE

The importance of the usage of Internet in our daily life cannot be ignored. One simple example is that we can just fill in and submitted many forms from the government departments just through the Internet, without having to make a physical trip to the government offices. We presented some examples below how the Internet service could make our life easier, and thus

improving our quality of life as compared to NOT using the services: Without using the Intenet Using the Internet service

We have to wait in line for services, such

…..the problem with traffic jam…couldn’t be avoided, especially traveling to the cities or towns Physical trip….could require physical strength. A trip either to work, schools, shopping or just to buy a newspaper not only incur transportation cost, but also cost us time and energy…………………..

We could exchange letters or information by emailing that is free and fast. Receiver can either respond immediately or at his/her conveniences. We could also have on-line chatting with friends or any E-mailing Chatting

E-commerce….you can buy almost anything from using the Internet, and at the comfort in your own house.

through the Internet by selling goods to a larger range of potential customers. You could also adopt “teleworking….. working at home without making a trip to “physical office”. E-banking…banking transactions as well as paying your telephone bill could also be made just by using Internet

Information retrieval…you can get news, listening to music, watching video or anything that interest you from just a click away………….

person who share our interest no matter where he/she lives. Our social circles could be broaden

At the same time, you would also have the opportunity to earn money

as in government offices, banks etc. How much time is wasted just to wait for receiving these services ???????

The problem with physical distance is we need to make a physical trip

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The usage of the Internet is NOT limited to what has been described above. Other usage include in the healthcare, such as recording the patients medical history or as a tool in education or distance learning. There are also negatives implications out of the Internet, but mostly if the Internet is used without proper guidance or by people who are abusing the service. For examples, there are websites that encourage racism, hatred and violence etc. There are also porno websites that are not suitable for the Malaysian society. Internet service is accessible not limited to private homes, but also at cyber cafes, public places such as libraries, community centers or some post offices and at work (for offices that have Internet connections). In order to get connected to the Internet at your house, the basic but most important items you need to buy or have are the P.C., modem and a fixed telephone line. You need to pay for the following items:- It should be noted too that special attention need to be emphasized on your disposable income. The disposable income is the portion of your income that you might consider to spend for getting connected to the networked or buying other products/serives such as televisions, radios, new sofa etc. The disposable income is assumed to be 17.0% of your household expenditure (based on the assumption used in Infosoc 2000, NITC). There will be a reduction in your disposable income if you opt to get connected to the Internet. Question 15 and 16 are based on scenarios that have been presented. Please circle the answer of your choice, and follow the direction of the arrow for subsequent questions. 15 Scenario 1: An Internet connection in your own house. The minimum payment that a household need to pay for the Internet connection is RM8.30 per month (considering a usage of 2 minutes per day). The assumption is that the household has a P.C., telephone line and modem. Registration fee is also assumed to be exempted for easier calculation.

Registration fee = RM 10.00 (one time charge only) Annual subscription = RM 24.00Access fee & call charges = RM 0.025 per minute (2.5 cents per minute) Local calls charge (using Dial-up connection) = RM 0.08 for the first 2 minutes, then RM0.04 per minute for every additional minute

Are you willing to pay for having an Internet service at RM ________per month using the dial-up Internet connection with a speed of 56.6kbps, and be able to use the Internet at home?

2. Yes1. No

Are you also willing to pay for the Internet service at RM________ per mo., for the usage of the service at home? 1. No 2. Yes

Are you willing to pay for the Internet service at RM___per mo. for the usage of the service at home?

Please states the reason why you are not willing to pay for the Internet service at that value? 1. Not interested in using Internet at all 2. The cost is still considered expensive. The most I’m willing to pay is RM_______ 3. Difficult to decide on “No” and “Yes” answer with limited choice given in questionnaire 4. I prefer to use Internet service at other location, such as____________(please indicate the preferred location to use the Internet service) 5. I prefer to use other modes of the Internet service, not Dial-up-connection 6. Other: (Please indicate what is the reason?)

1. No 2. Yes

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16 Scenario 2: An Internet service center to be operated in your neighborhood. The Center will be equipped with P.C.s and Internet connection. The construction cost of the Center as well as the equipments will be bear by the public funding or other sources.

For Question No. 17 to 20, please circle one of the choices given with regards to the statements. 1. – Disagree , 2. – Somewhat disagree, 3. – No opinion, 4. – Somewhat agree, 5. - Agree 17 The scenarios given in Questions 15 and 16 of the importance Internet usage reflect the “real” situation of what is happening now in Malaysia : 1. 2. 3. 4. 5. 18 The task given in Questions 15 and 16 above is easy to understand: 1. 2. 3. 4. 5. 19 I fully understand how to evaluate the importance of using the Internet service in monetary value as being asked in Questions 15 and 16 above: 1. 2. 3. 4. 5. 20 I am very enthusiastic in having the Internet connection in my house, given the benefits as described by the scenarios in Questions 15 above: 1. 2. 3. 4. 5.

Thank you for your cooperation in answering this Questionnaire

If the community center or public place in your residential area will be offering the Internet service for your community to use, but, you (as part of the community) are required to make a contribution of RM______ per month in order to pay parts of the Internet charge and maintenance of the center. Are you willing to contribute the amount as requested?

1. No 2. Yes

Are you still willing to pay a contribution for the Internet service charge and maintenance of the center for RM _______ per month? 1. No 2. Yes

Are you willing to contribute for the usage of Internet service and maintenance of the center for RM ________per month?

2. Yes1. No

Please states the reason why you are not willing to pay for the Internet service and maintenance at the center for that value? 1. Not interested in using Internet at all 2. The cost is still considered expensive. The most I’m willing to pay is RM_____/month 3. Difficult to decide on “No” and “Yes” answer with limited choice given in questionnaire 4. I prefer to use Internet service at other location, such as____________(please indicate the preferred location to use the Internet service) 5. I prefer to use other modes of the Internet service, and the Internet center is meaningless for me 6. Other:___________(Please indicate what is the reason?)

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V.H. Carr Jr., 2004, Technology Adoption and Diffusion, http://www.au.af.mil./au/awc/awcgate/innovation/adoptiondiffusion.htm

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Wiseman, Alan E., 2000, The Internet Economy: Access, Taxes and Market Structure, Brookings Institution Press, USA.

World Economic Forum, 2004, Global Information Technology Report (GITR) 2003-2004, http://www.weforum.org/pdf/Gcr/GITR_2003_2004/Framework_Chapter.pdf Yamada, Norihiko, 2001, IT Movement in Southeast Asia: Case of Singapore, Malaysia and Thailand, from Mitsuhiro Kagami & Masatsugu Tsuji (edited), 2001, The ‘IT’ Revolution and Developing Countries: Late-Comer Advantage? Yates, Jo A. & Maanen, John V. (editors), 2001, Information Technology and Organizational Transformation: History, Rhetoric, and Practice, Sage Publications, Inc., USA Yun-Hwan Kim, 2002, Financing Information Technology Diffusion in Low-Income Asian Developing Countries, Singapore.

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LIST OF ACHIEVEMENTS

1. Refereed Published Papers:

YEAR ACHIEVEMENT 2004 Title: The Diffusion of ICT in Urban Malaysia: How Nature of Job

Influencing the Usage of ICT among the Urban Working Population Publication: Studies in Regional Science Journal, Volume 34, Number 1, December 2004, Japan Section of Regional Science Association International

2004 Title: Examining the Issue of Digital divide in Malaysia: Challenges in Closing the Digital Gap Based on Geographical Area and Income Factor Publication: INTAN Management Journal 2004 Publication, by the National Institute of Public Administration (INTAN)

2003 Title: Explaining Digital Divide as a Consequence of Uneven Digital Opportunities between Urban and Rural Areas: A Case of Internet Usage among Senior High School Students in Kelantan Publication: Studies in Regional Science Journal, Volume 33, Number 3, December 2003, Japan Section of Regional Science Association International

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2. Presentation at Academic Conferences and Workshops:

YEAR ACHIEVEMENT 2004 Title: Digital Divide in Malaysia: The Value of Using the Internet by

the Urban and Rural Population Conference Name: 41st Annual Meeting of the Japan Section of Regional Science Association International at Waseda University, 12th September, 2004.

2003 Title: The Existence of Digital Divide in Malaysia: How Skills and Nature of Job Contributing to the Digital Gap among the Urban Working Population Conference Name: 40th Annual Meeting of the Japan Section of Regional Science Association International at Ryukyu University, Okinawa, 2nd November, 2003.

2003 Title: Examining the Issue of Digital Divide in Malaysia Conference Name: 3rd ITU-Waseda Workshop for Policy Makers and Regulators at Waseda University, 31st October, 2003

2003 Title: The Existence of Digital Divide in Urban Malaysia: What Factors Would Encourage the Urban Working Population to be Networked Conference Name: 18th Pacific Regional Science Conference and the 8th Annual Meetings of Regional Development in Acapulco, Mexico, July 2nd, 2003.

2002 Title: Digital Divide as a Consequence of Uneven Digital Opportunities between Urban and Rural Areas: A Case of Internet Usage Among Teenagers in Malaysia Conference Name: 39th Annual Meeting of the Japan Section of Regional Science Association International in Sapporo, 5th October, 2002.

2002 Title: Bringing Internet to the Mass Public in Malaysia: A Study on the Factors that Influence the Usage of Internet by Senior High School Students in State of Kelantan, Malaysia Conference Name: Pacific Regional Science Conference and the 8th Annual Meetings of Regional Development in Bali, Indonesia, June 20th, 2002.

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3. Internal Presentations:

YEAR ACHIEVEMENT 2004 Title: Digital Divide in Malaysia: Examining the Issues of Income,

Workplace and Geographical Differences in Diffusion of ICT to the Mass Public Event: Preliminary Doctoral Dissertation Hearing for the Graduate School of Global Information & Telecommunications Studies, Waseda University, 13th October, 2004.

2003 Title: The Existence of Digital divide in Malaysia: How to Bridge the Digital Gap by the Diffusion of ICT Irrespective of the Geographical Area Event: Seminar for Doctoral Students of the Graduate School of Global Information & Telecommunications Studies, Waseda University, July, 2003.

4. Discussant:

YEAR ACHIEVEMENT 2003 Paper presented at the 18th Pacific Regional Science Conference and

the 8th Annual Meetings of Regional Development in Acapulco, Mexico, July 2nd, 2003.