The report indicates that this move aims to incubate local businesses and to create high-value jobs by developing a services-based economy.
However, these efforts have also created a monopoly and are distorting the market’s natural forces of supply and demand.
“In a bid to protect their domestic industries, some governments have turned to protectionism. Opposite to their policy objectives, standards of living decrease as a direct consequence since the move will inevitably lead the way to subpar quality of products and services at higher prices,” said Bash Badawi, director of IDC Government Insights Asia Pacific. “Protectionism also stifles the growth of the IT sector. Governments should instead focus their energies on technology and knowledge transfer.”
The report also shows how governments can leverage expenditure in the public sector to accelerate the process in reaching market maturity levels that facilitate the creation of a sustainable local software market.
IDC Government Insights advises governments to promote fair and open competition among IT players in the market in order to avoid creation of a monopoly.
Governments should also refrain from mandating that services are delivered by designated entities and focus on knowledge transfer between MNCs and local firms.
Commenting on the event when international vendors tender for government projects through local partners, the research firm says government oversight of the project is required to ensure the local firm is more than just a mere broker.
IDC Government Insights also advises mandatory disclosures of local versus international resources to deliver a project in order to allow policy makers to assess the country’s resource pool.