Bright Stove

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Why standards matter

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I was at the SPRING Singapore’s Quality and Standards 2008 (QS2008) conference on Aug 20, 2008 and at the keynote was Mr John Wilson, Lead Economist of the World Bank. Mr Wilson spoke about the importance and benefits of standards, in terms of its contributions to the economy. The talk provides new insights on the importance of standards and why countries, in particular, developing economies should pay attention. I think some of the points mentioned are worth reiterating (and documenting) here as such.
 
Mr Wilson’s main assertion is that "standards contribute to productivity, and productivity contributes to economic growth". From the perspective of deveoping the economy, standards also play a critical role in enhancing human development. How this happens is that standards result in increasing in trades (in particuar, export), which helps to bring about growth in the nation’s GDP, and this helps to improve peoples’ livelihood and standard of living. The correlation between standards and trade is such that trade, in particular, export, depends on among other things quality of products [and services], and standards are fundamental for improving product quality.
 
However, poorly institutionalized or ineffective standard implementation, in particular, non-transparent technical regulation and misuse of standards could also impact on the economy’s efficency and increase the cost of production. According to Mr Wilson, the results of studies conducted in Europe showed that in general, the implementation of standards would incur a one-time setup cost that is approximately 2.2% of the total sales involved, and tightening standards by 1% would result in 0.06% increase in production cost. Duplicative testing procedures cut export by as high as 9%, and multiple testing procedures reduce likelihood of exporting to multiple market by 3%. This shows the importance of harmonization of standards. Similarly, productivity of firms in developing countries entering export market is 52.3% higher if Mutual Recognition Agreement (MRA) is in place.
 
Mr Wilson’s conclusion was that "standards do matter to trade and development, and growth, wealth creation, and proverty reduction are all tied to standards". He added that Asia’s economic future depends on trade expansion, economies therefore should adopt international standards to lower their barriers for trade.
 
In Asia, in particular South East Asia, not many economies are however giving much attention (or perhaps I should say high priority) to standards. In the area of IT security, only Singapore and Malaysia are active participants of ISO/IEC JTC 1/SC 27 ("Security Techniques"), even though the RAISE Forum have been established since 2004 to promote such efforts purely from the information security perspective. With a clearer view of the economic implications, it could perhaps help to drive the participation of security standards activities and adoption of related ISO/IEC and ITU-T security standards in the region. With so many technical committees developing IT related standards in ISO/IEC, the participation rate across the South-East Asia region is even worst, and potential impact could be even greater should they be involved. This is perhaps something that ASEAN and/or APEC ministers should think about improving as part of their agenda for the region, especially given the clear link that Mr Wilson has presented between standards and economy growth.
 
 
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Written by mengchow

August 24, 2008 at 7:23 am

Posted in Security Standards

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