35924 v2 2006 Overview Information and Communications for Development 2006 Overview Information and Communications for Development Global Trends and Policies THE WORLD BANK Washington, D.C. ©2006 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 09 08 07 06 This document summarizes Information and Communications for Development 2006. It is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of the Board of Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this publication. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street, NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Cover photo credits (clockwise from top left): Bill Lyons; Eric Miller; Bruno Lanvin; Alan Gignoux. ISBN-10: 0-8213-6452-9 ISBN-13: 978-0-8213-6452-9 Contents of Information and Communications for Development 2006 Foreword Preface Acknowledgments Abbreviations and Acronyms PART I Chapter 1 Overview Pierre Guislain, Christine Zhen-Wei Qiang, Bruno Lanvin, Michael Minges, and Eric Swanson Chapter 2 Foreign Direct Investment in Telecommunications in Developing Countries Pierre Guislain and Christine Zhen-Wei Qiang Chapter 3 Extending Communication and Information Services: Principles and Practical Solutions Björn Wellenius Chapter 4 The Role of ICT in Doing Business Christine Zhen-Wei Qiang, George R. Clarke, and Naomi Halewood Chapter 5 Trends in National E-Strategies: A Review of 40 Countries Aref Adamali, John Oliver Coffey, and Zaid Safdar Chapter 6 Tracking ICTs: World Summit on the Information Society Targets Michael Minges v PART II User’s Guide to ICT At-a-Glance Country Tables ICT At-a-Glance Country Tables Key ICT Indicators for Other Economies Definitions and Data Sources Contributors vi Contents Foreword Information and communication technology (ICT) has a measurement of the actual effects of ICT in development critical role to play in development efforts around the remains an important challenge going forward, especially in world. There was a time when the benefits of applying ICT light of the rapid pace of change in the sector and the dearth in fighting poverty and promoting economic growth were of concrete, long-term data across countries. not widely understood. Many in the development commu- In this context, Information and Communications for nity questioned how high-tech (and often expensive) Development 2006: Global Trends and Policies offers a realis- communication technology could be used to alleviate such tic assessment of experiences, trends, and outlook on the dire challenges as starvation, homelessness, and lack of ICT sector, with a focus on actual results and justified basic education and health services. Lately, however, this expectations. It attempts to track and analyze global ICT view has given way to an understanding of ICT as an essen- development trends and to provide empirical evidence of tial component of broader efforts to harness the free flow of the benefits that ICT is providing in terms of economic information to increase voice, accountability, and economic growth and poverty reduction. Indicators for the MDG development. targets, among others, have been incorporated into the ICT In recent years, developing countries and the international At-a-Glance tables compiled for this report. development community have started taking concrete It is our hope that this report will contribute to the actions to incorporate ICT into their economic policies and creation of a basis for more systematic monitoring and eval- development agendas. Many countries are preparing and uation of the progress and impact of ICT, as well as provide implementing national e-strategies that emphasize the ubiq- useful insights on ICT for development in general. uity of connectivity as well as new applications in areas such as e-government and e-business. The Millennium Develop- ment Goals (MDGs), drawn from the United Nations Millennium Declaration and adopted in September 2000, Katherine Sierra have several specific targets involving ICT as a tool for reduc- Vice President, Infrastructure ing poverty. Nevertheless, improving the identification and The World Bank vii Preface The international community is increasingly committed to “At-a-Glance” tables, found in Part II of this volume, provide the monitoring and evaluation (M&E) of development an overview of ICT sector growth as it relates to the general programs. The World Bank Group has sharpened its focus economic status of particular countries. on results in its own strategies, operations, diagnostic work, The purpose of Information and Communications for and instruments. It has put a premium on better measure- Development 2006: Global Trends and Policies is to consoli- ment of outputs and outcomes in order to assess progress date all these M&E efforts and share the findings with toward well-defined goals, increase accountability, and the development community. In addition to ICT At-a- better understand the Bank’s contribution to sector Glance tables for 144 economies, this report includes performance—ultimately supporting policy advice and analytical work that applies these data to a range of topics: decision making. investment trends, principles and practical solutions to The Global Information and Communication Technolo- extending ICT services, the role of ICT in doing business, gies Department (GICT) is the World Bank Group depart- trends in national e-strategies, and approaches to tracking ment that focuses on the ICT sector. In response to the call ICT globally. for increased M&E efforts for ICT by the development Further efforts are needed to coordinate and make M&E community, most notably during the World Summits on the analysis fully operational in the arena of ICT for develop- Information Society held in Geneva in 2003 and Tunis in ment. The World Bank Group stands ready to work with 2005, GICT is undertaking several initiatives to advance countries and the international community to determine methods of monitoring results in ICT for development how best to use ICT for poverty reduction and economic projects. growth in the developing world. It is hoped that this report GICT’s results measurement agenda aims to strengthen will play a positive role in these efforts. the availability of ICT sector indicators at country, micro, and project levels. Consolidating data from many different Mohsen Khalil sources, GICT has defined a core set of information-and- Director, Global Information and Communication communication-related indicators to create tables that Technologies Department present a snapshot of country-specific ICT issues. These The World Bank Group viii Acknowledgments This report was prepared by the Global Information and Inputs, comments, guidance, and support at various Communication Technologies Department (GICT) and the stages of the report’s preparation were received from Development Economics Data Group (DECDG) of the Magdi Amin, Seth Ayers, Shaida Badiee, Antonio Estache, World Bank Group. Richard Fix, Juan Manuel Galarza Tohen, Rachele Preparation of this report was led by an Editorial Gianfranchi, Carlos Gomez, Clive Harris, Timothy Irwin, Committee consisting of Pierre Guislain (Chair), Christine Ada Karina Izaguirre, Charles Kenny, Anat Lewin, Michel Zhen-Wei Qiang (Team Leader), Bruno Lanvin, Michael Maechler, Kayoko Shibata Medlin, Marisela Montoliu Minges, and Eric Swanson. The principal authors include Munoz, Juan Navas-Sabater, Isabel Neto, Cecile Thioro Aref Adamali, David A. Cieslikowski, George Clarke, John Niang, Vincent Palmade, Marta Priftis, Anwar Ravat, Robert Coffey, Pierre Guislain, Naomi Halewood, Kaoru Kimura, Stephens, David Townsend, Hien Thu Tu, Lee Tuthill, and Michael Minges, William Prince, Christine Zhen-Wei Qiang, Subramaniyam Venkatraman. Zaid Safdar, and Björn Wellenius. Debra Naylor, Hope Steele, Paul Holtz, and Mark Wahl The ICT At-a-Glance tables were prepared by David provided overall design direction, editing, and layout. A. Cieslikowski, Naomi Halewood, Kaoru Kimura, Michael Special thanks are due to Nancy A. Lammers, Stephen Minges, William Prince, and Christine Zhen-Wei Qiang. McGroarty, Santiago Pombo-Bejarano, and Janet H. Sasser The systems development team included Reza Farivari, from the World Bank Office of the Publisher for supervision Saurabh Gupta, Shahin Outadi, and William Prince of DECDG. of the production and dissemination of the report. ix Overview Pierre Guislain, Christine Zhen-Wei Qiang, Bruno Lanvin, Michael Minges, and Eric Swanson n the past few decades, information and communica- access (chapter 3), diffusion and use (chapter 4), country I tion technology (ICT) has transformed the world. Its potential for reducing poverty and fostering growth in developing countries has increased rapidly. Mobile tele- policies and strategies (chapter 5), and targets, monitor- ing, and evaluation (chapter 6). Each chapter provides a theoretical and qualitative framework supported by phones provide market links for farmers and entrepreneurs. quantitative evidence. Where limited data impede The Internet delivers vital knowledge to schools and hospi- comprehensive economic analysis, a case study approach tals. Computers improve public and private services, and is used. increase productivity and participation. By connecting people Part II presents the new World Bank ICT At-a-Glance and places, ICT has played a vital role in national, regional, tables for 144 economies, which show the most recent and global development, and holds enormous promise for national data on key indicators of ICT development, the future. including access, quality, affordability, efficiency, sustain- It has been over 20 years since the first telephone ability, and applications. The data enable assessments and company was privatized, 10 since the World Wide Web comparisons both over time and across economies, so they emerged, and 5 since the telecommunications bubble burst. help gauge ICT capacity, performance, and progress, as well How has ICT driven—and evolved in response to—these as suggest areas for future interventions. The tables also and other events? What has been learned about ICT trends include detailed snapshots of the economic context and ICT and the policies that shape an information society? And how sector structure in each economy. can further advances be fostered and facilitated? Experience over the past decade has shown that a vibrant Information and Communications for Development 2006: and competitive information and communication sector is Global Trends and Policies, prepared jointly by the World a prerequisite for developing information societies. Lessons Bank Group’s Global ICT Department and Development can be drawn that may be particularly valuable for coun- Economics Data Group, analyzes ICT in light of lessons from tries launching new policies and programs to increase ICT’s both developing and developed countries. It examines the contribution to economic and social development and roles of the public and private sectors, identifying the chal- extend its reach to a greater part of the population. lenges involved in adopting and expanding ICT use as well as Additional and complementary efforts are also needed to the benefits (direct and indirect) of doing so. ensure the success of such programs, particularly increased Part I of the report assesses topics essential to develop- monitoring and evaluation, based on appropriate goals, ing ICT. It contains chapters on investment (chapter 2), targets, and indicators. 1 When tailored to needs, ICT has the potential to raise demand growth, made ICT critical to competitiveness and growth in businesses of any size and countries at any stage growth. of development. Related, but even more important, is ICT’s In recent years the world’s policy makers have recognized role in reducing poverty and inequality, both within and that ICT provides key inputs for economic development, across countries. Thus it is crucial that ICT move closer to contributes to global integration, and enhances public the mainstream of development economics and policies— sector effectiveness, efficiency, and transparency. There is nationally, regionally, and globally. Given ICT’s far-reaching also growing consensus that countries seeking to strengthen payoffs—and the many efforts required to achieve them— their investment climates (for foreign as well as domestic this report is aimed not only at ICT experts but also at the investors) should make it a priority to improve ICT access broader development community. and quality. Moreover, country conditions that bolster ICT investment—including sound economic policies, strong property rights, liberalized markets, limited restrictions Recent Progress and Lessons on entry and ownership, and predictable regulation— ICT plays a vital role in advancing economic growth and contribute to a healthy overall business environment and so reducing poverty. Research in the 1960s and 1970s to growth throughout the economy. showed how telecommunications strengthens economic Firms that use ICT grow faster, invest more, and are more production and distribution, public service delivery, and productive and profitable than those that do not (box 1). For government administration. In the 1980s information example, sales growth is 3.4 percentage points higher and became recognized as a crucial factor of production, along value added per employee $3,400 more among developing with capital and labor. And in the 1990s globalization country firms that use e-mail to communicate with clients and the increasing information intensity of economic and suppliers (table 1). Profits are substantially higher activity, coupled with rapid technological change and among firms using ICT. Box 1 Information and Communication Technology—Essential to Productivity Growth and Private Sector Development A vibrant private sector—one where firms invest, create jobs, and increase their competitive- ness—promotes growth and expands opportunities for poor people in developing countries. ICT is an essential part of national infrastructure and private sector potential. It can create busi- ness opportunities, especially for companies located far from urban centers, and improve links among firms, suppliers, and clients. When used well, ICT can also make management and operations more efficient. The Internet can be especially valuable for firms in developing countries because it provides opportunities to connect to markets and participate in trade, domestic and foreign. A recent survey of 56 developed and developing countries found a significant link between Internet access and trade growth—with the greatest benefits accruing to developing countries with the weakest trade links. As with other factors of production, such as capital and labor, ICT use differs based on busi- nesses’ size, ownership, and export orientation. In developing countries Web site and computer (though not necessarily e-mail) use are more common among service firms than firms engaged in manufacturing, agroindustry, and construction. Web site and e-mail use are especially high in the telecommunications, information technology, real estate, and hotel and restaurant industries, and among exporters and foreign-owned firms. Among regions, firms in Central and Eastern Europe use such technology the most, reflect- ing its correlation with national income. But Web sites and e-mail are also widely used in some low-income countries—Bangladesh, Kenya, Moldova, and Tanzania—suggesting that ICT is not a luxury. 2 Information and Communications for Development 2006 Table 1 Effect of ICT Use on Enterprise Performance in Developing Countries Enterprises that Enterprises Indicator do not use ICT that use ICT Difference Sales growth (percent) 0.4 3.8 3.4 Employment growth (percent) 4.5 5.6 1.2 Profitability (percent) 4.2 9.3 5.1 Investment rate (percent)a n.a. n.a. 2.5 Re-investment rate (percent)a n.a. n.a. 6.0 Labor productivity (value added per worker, dollars) 5,288 8,712 3,423 Total factor productivity (percent) 78.2 79.2 1.0 Note: n.a. Not applicable. a. Because the investment and re-investment rates are limited dependent variables (that is, they are truncated below at zero), their marginal changes are not equal to their coefficients. For that reason their average rates are not calculated. The unconditional mean for investment is 6 percent and for re-investment, 44 percent. Source: Authors' analysis based on data from the World Bank Investment Climate Surveys 2000–2003. ICT is also crucial to sustainable poverty reduction, the world’s telephone lines (fixed and mobile) in 2005, up because it makes a country’s economy more efficient and from less than 20 percent in 1980 (table 2). During this globally competitive, improves health and education period, population increased by half and real GDP more than services, and creates new sources of income and employ- doubled in these countries—while the number of telephone ment for poor people. In addition, ICT enhances social subscribers rose 28-fold. inclusion and promotes more effective, accountable, demo- Recent growth has been especially striking. Although the cratic government, especially when combined with effective proportion of subscribers to total population in developing freedom of information and expression. countries did not even double between 1980 and 1990, over the next decade it nearly quintupled, from 27 to 129 per Over the past 25 years, developing countries have consider- 1,000 people. And between 2000 and the end of 2005, it is ably increased ICT access, especially for telephone services. estimated to have tripled, reaching almost 400 subscribers Developing countries accounted for more than 60 percent of per 1,000 people. Table 2 Population, GDP, and Telephone and Internet Access in Developing Countries, 1980–2005 Indicator 1980 1990 2000 2005a Population (billions) 3.6 4.4 5.1 5.4 81 83 84 84 GDP (US$ trillions)b 3.1 4.2 5.9 7.5 18 18 19 21 Total telephones (per 1,000 people) 14 27 129 393 17 22 38 61 Fixed telephones (per 1,000 people) 14 27 83 135 17 23 43 57 Mobile telephones (per 1,000 people) n.a. 0.09 46 258 4 32 63 Internet users (per 1,000 people) n.a. n.a. 15 67 20 41 Note: Numbers in italics are percentages of the world total. n.a. Not applicable. a. Projected. b. In constant 2000 U.S. dollars. Source: Authors’ analysis based on data from World Bank 2005 and ITU 2003. Overview 3 Most of the recent growth has involved mobile phones, the fastest growth, 370 percent, occurred in the Middle East which now outnumber fixed ones. In Nigeria the number of and North Africa. mobile subscribers jumped from 370,000 in 2001 to 16.8 million in September 2005, making its mobile market the Liberalization and competition—and the resulting increase second largest in Africa. In the Philippines, which has had in private investment—have driven the development of more mobile than fixed telephone subscribers since 2000, telecommunications infrastructure and ICT in general. mobile subscribers continue to multiply. By the end of 2005, Capital is crucial to the development and expansion of robust the country had about 40 million mobile subscribers—six telecommunications networks. Because developing countries times more than in 2000. often lack the capital—as well as the technology and manage- Mobile phones have an especially dramatic impact in rial know-how—needed to develop such networks, many developing countries—substituting for scarce fixed connec- have turned to private investors, domestic and foreign. tions, increasing mobility, reducing transaction costs, By opening their telecommunications markets through broadening trade networks, and facilitating searches for well-designed reforms, governments can create competitive employment. With prepaid services and calling cards, even markets that grow faster, lower costs, facilitate innovation, poor households have been able to benefit from increased and respond better to user needs. As a result, the traditional telephone access. monopoly model of telecommunications services—based Telephone services now reach many small cities and on extensive state control and protected national markets— towns, and by 2005 half of the world’s households had has eroded, in concert with rapid technological advances in telephones. Among developing regions the telephone the sector and fundamental changes in economic policy in subscription rate is highest in Europe and Central Asia, developing countries. where between 2000 and 2004 it more than doubled to 730 Over the past two decades telecommunications markets per 1,000 people (figure 1). But growth was highest in Sub- have undergone unprecedented liberalization in every Saharan Africa, with the rate tripling—albeit to a still-low region—though the pace and scale of reform have varied, 103 subscribers per 1,000 people. and markets for fixed local and international telephone Other types of ICT have also expanded rapidly in recent services remain closed or barely open in about half of years. The latest estimates indicate that worldwide, Internet developing countries. Effective competition between use more than quadrupled between 2000 and 2005. Again, multiple providers helps expand access and results in cheaper, Europe and Central Asia is in the lead among developing more modern services. regions, with 117 Internet users per 1,000 people in 2004— In 2003, 130 of 164 countries with available data had at four times as many as in 2000 and six to eight times as many least three competing providers of mobile services. The as in South Asia and Sub-Saharan Africa. During this period Democratic Republic of Congo has six competing mobile Figure 1 Telephone and Internet Access by Region, 2000 and 2004 (per 1,000 people) Fixed and Mobile Subscribers Internet Users 800 140 730 2004 2004 700 117 120 2000 2000 104 600 100 507 500 450 80 76 400 315 60 300 267 47 206 40 34 200 148 29 119 103 18 21 87 20 15 100 10 31 32 5 5 0 0 East Asia Europe and Latin America and Middle East South Sub-Saharan East Asia Europe and Latin America and Middle East South Sub-Saharan and Pacific Central Asia the Caribbean and North Africa Asia Africa and Pacific Central Asia the Caribbean and North Africa Asia Africa Source: Authors’ analysis based on World Bank data. 4 Information and Communications for Development 2006 telephone operators, giving it a mobile phone density 13 of FDI in telecommunications, up from 7 percent a decade times that of Ethiopia—which has a similar income per earlier. capita but just one operator. In Algeria almost no one had a During both waves, foreign investors were seeking new mobile subscription in 2000. But in 2003, after a second markets, higher returns, and diversified exposure. Many operator began providing services, nearly 5 percent of governments welcomed FDI as a way to expand networks, people did—and when a third operator entered the market develop new services, and generate revenue through license in 2004, that share leapt to more than 15 percent by the end fees. FDI also brought stronger, longer commitments than of the year and to 32 percent by September 2005. Similarly, did other types of foreign investment, as well as new skills, Grenada issued new licenses in 2002, and between 2000 and technology, and management approaches. Between 1990 2004 the number of mobile subscribers soared from 45 to and 2003, 122 of 154 developing countries received foreign 860 per 1,000 people. investment in telecommunications. In markets for international telephone services, full FDI in telecommunications jumped from $2 billion in competition leads to prices about half those in countries 1990 to $33 billion in 1998—but gradually fell to about $13 with limited competition. Among 30 African and Latin billion in 2002 and 2003. Still, the decline in FDI has been American countries that undertook telecommunications smaller for telecommunications than for other infrastruc- reforms in the 1980s and 1990s, those that introduced ture sectors. And although FDI to acquire government assets competition saw the sector grow and costs fall faster than dropped significantly after 2000, flows for sector expansion those that delayed competition. stayed at the same level as during the boom years. The Internet has also spurred a growing wave of innova- During 1990–2003, telecommunications projects tion, ushering in new services and more cost-effective accounted for 12 percent of FDI in developing countries. network solutions—especially in countries where service Latin America and the Caribbean attracted more than half of providers are allowed to build their own networks and gate- FDI in telecommunications, while Europe and Central Asia ways. New wireless technology is resulting in innovative received about a quarter. These large shares reflect the business models and holds the promise of connecting poor prominence of middle-income countries in telecommunica- users, extending competition to all market segments, and tions FDI: during 1990-2003 low-income countries received accelerating development of broadband infrastructure and just 6 percent of such investment. access. Such technology is affordably priced and commer- cially viable in a number of countries, in both urban and Developing countries are home to a growing number of rural areas. For example, a single broadband Internet FDI providers. Although the largest foreign direct investors connection in a village can provide access for numerous in telecommunications are multinational corporations from institutional programs (such as e-government and computers Europe and the United States, in recent years FDI originat- in schools) and private users. ing in developing countries has become a fast-growing trend. By 2003 these South-South investments accounted for Privatization and technological advances have boosted more than a quarter of telecommunications FDI in develop- foreign direct investment (FDI)—a major source of ICT ing countries, up from a negligible share in the early 1990s financing. In 1988 Chile privatized its incumbent operator, (figure 2). Most such investment came from countries that triggering the first wave of telecommunications-related FDI were among the early liberalizers in their regions. in developing countries, typically through divestitures of Some investors from developed countries have reduced state companies to foreign investors. Since then more than FDI due to the bursting of the telecommunications bubble 80 developing countries have privatized their incumbent in 2000, compromised balance sheets following major telecommunications providers. investments or acquisitions, disappointing returns on some A second wave of telecommunications FDI started in the projects (both at home and abroad), and pessimism about mid-1990s as governments, aiming to increase access to and emerging markets. For example, many global players revenue from communication services, awarded new invested in the developing markets of Latin America and licenses for mobile telephony and encouraged foreign invest- East Asia during the 1990s, but have since withdrawn. ment. In 2000–03 mobile projects accounted for 51 percent Global operators have also pulled out of Sub-Saharan Overview 5 Figure 2 Telecommunications FDI in Developing Countries, 1990–2003 Total Telecommunications FDI Telecommunications FDI by Source 40 100 35 30 25 US$ billions North to Percent South 20 50 15 10 5 South to South 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Authors’ analysis based on data from World Bank 2004. Africa, creating a bigger role for financial and regional The regulatory improvements needed to achieve investors. The region’s three largest mobile phone opera- that goal often include opening markets to new entrants tors, accounting for nearly half of telecommunications FDI, (including small domestic entrepreneurs), rebalancing are all regional firms. retail tariffs, establishing an effective cost-based intercon- But growing South-South investment is also due to grow- nection regime, securing reasonable access to existing infra- ing wealth and capital account liberalization in some emerg- structure, and making radio spectrum available to a wider ing market economies—trends that have increased the range of service providers (box 2). Consistent and transpar- supply of capital in these countries and enabled their ent processes—for legal, regulatory, and administrative companies to invest abroad. By 2002, 4 of the 30 largest procedures and institutions—are the main requirements. international telecommunications corporations were from Some traditional regulatory provisions may stand in the developing countries. Other factors favoring South-South way of new technologies, decentralized supply, and other investment include geographic proximity and ethnic and innovations. In addition, high taxation can discourage invest- cultural ties. ment by telecommunications operators and suppress demand Most South-South telecommunications investors stick to from users. And as the cost of manufacturing cell phones their home or neighboring regions: during 1990–2003 more continues to fall, government taxes and duties on their import, than 85 percent of such FDI stayed in the same region. Coun- sale, and use remain a binding constraint on extending infor- tries that avoid imposing unnecessary requirements that mation and communication services to poor people. might exclude otherwise qualified bidders, and create a level playing field that provides fair opportunities to new entrants Future Challenges—and Options for regardless of size or origin, are more likely to attract South- Addressing Them South and regional FDI. Gaps in access to ICT remain large, as do differences in Consistent, predictable, and transparent sector policies and adoption of ICT applications. Access to ICT is highly un- regulation are essential to remove market impediments. equal across and within countries. In particular, developing Obstacles to well-functioning markets often remain even countries still have far to go to make ICT commonplace in after extensive sector reforms. In Peru all segments of the governments, schools, and businesses. Moreover, fast telecommunications market have been open since 1995, but growth in large emerging markets—especially Brazil, telephone services in provincial towns and marginal areas of China, and India—masks slower development elsewhere. big cities remain well below the levels achieved in other Although progress has been made reaching out to rural developing countries with comparably open markets. The areas and the urban poor, in many countries these groups challenge everywhere is to enable operators to tailor their still lag behind. And the advanced information and service offerings and technical choices as effectively and effi- communication services available through the Internet ciently as possible. initially reach mainly better-off groups. 6 Information and Communications for Development 2006 Box 2 Regulatory Measures That Help Markets Work Better Open entry. Lifting restrictions on the entry of new service providers accelerates expansion to underserved and unserved areas. Replacing individual licensing with a regime of general authorization facilitates entry, eases the regulatory burden on companies and authorities, and enhances transparency. Cost-based pricing. To minimize market distortions, retail prices must reflect differences in the costs of providing services. Geographically averaged prices discourage investment in high-cost areas. Tariff policy should be reviewed on a regular basis and prices rebalanced when necessary. Cost-based interconnection. An effective interconnection regime is essential. High-cost areas should receive larger than average shares of revenues for completing outgoing calls and larger than average payments for incoming calls. Access to infrastructure. New entrants must have reasonable access to the network infrastructure of incumbent operators. Unbundling the local loop, sharing physical infrastruc- ture, and co-locating the equipment of different operators lowers barriers to competitive entry, increases revenues of incumbents, and reduces public inconvenience. Access to the radio spectrum. Making radio spectrum available promptly and at low cost encourages the use of new wireless technology. Specific measures include increasing the allocation of spectrum for license-exempt use and mobile service. A United Nations index measuring the availability and The public and private sectors both have important sophistication of e-government applications shows that roles. In market economies the private sector is primarily developed countries score much higher than developing responsible for providing ICT services, and competitive, ones (UNPAN and UNDESA 2004). And whereas most private sector–led markets go a long way toward making developed nations have connected nearly all their primary these services widely available. The public sector’s and secondary schools to the Internet, just 38 percent of main role is to provide a sound policy framework, developing countries have done so—and less than 1 percent regulate markets where they do not work well enough on of many African countries (table 3). Differences in the their own, and support additional service provision number of secure Internet servers, a proxy for the availabil- where markets do not achieve economic and social ity of e-commerce, are similarly stark. While developed objectives. The public sector is also an increasingly nations have more than 300 such servers per 1 million important user of ICT, particularly in the context of people, developing nations have fewer than 2. Canada has e-government, making it a major actor in fostering ICT more secure servers than all developing countries combined. uptake. Table 3 Measures of Electronic Government, Education, and Commerce in Developing and Developed Countries, 2004 E-education (% primary E-commerce (secure and secondary schools Internet servers per 1 Country group E-government index connected to Internet) million people) Developing 0.27 38 1.9 Developed 0.68 94 319 Ratio of developed to developing n.a. 2.5 165 Note: Based on incomplete data, with 142 countries for e-government, 68 for e-education, and 122 for e-commerce. n.a. Not applicable. Source: World Bank 2004; Netcraft 2004; UNPAN and UNDESA 2004. Overview 7 Targeted public intervention to expand services can maxi- as output objectives are met. In addition, subsidies can be mize social returns. Governments must play a leading role targeted to desired beneficiaries. Capital contributions and in promoting the modernization and extension of ICT infra- risk guarantees may also be appropriate in some cases. structure and services. Even in well-performing markets Demand aggregation can be used to increase access to ICT there is typically a divide between what service providers are services, particularly advanced ones such as the Internet. For willing or able to do on commercial grounds and what example, by combining the demand for connectivity among governments consider necessary from a development or public agencies, schools, and hospitals, then seeking compet- broader economic perspective. itive bids, governments can help finance and expedite the Thus, most developing countries continue to face ICT expansion of broadband networks, particularly in rural areas. challenges, including service gaps among poor households Government commitment to buying broadband capacity and in rural areas (figure 3). Especially if such gaps persist reduces commercial risks for investors asked to build infra- after steps have been taken to make markets work, public structure with high upfront costs and untested market resources can be used to narrow them and to develop demand. This approach also fosters competition in this sustainable markets for the private provision of the desired market segment by creating opportunities for new entrants. services. Many governments have made bridging gaps in Determining proper levels of public support for fledgling access to ICT services an explicit public policy goal, as with markets can be difficult, and requires the examination of universal service programs for telephones. costs and benefits from the viewpoint of the economy as a One successful approach has been to use competitive whole. Such support involves tradeoffs between various bidding to award subsidies to ICT providers. Subsidies can development goals and limited public resources, and even catalyze private investment by offsetting political constraints with the best policies it can take years for a market to on prices, reflecting external benefits that would not develop. Moreover, not all unprofitable services merit public contribute to operating revenues, and helping providers support: only projects that require support to become viable overcome entry barriers resulting from front-loaded and yield economic benefits at least equal to their costs investment requirements or financial market failures. Subsi- should be eligible for it. In addition, using public resources dies are transparent in that they have known costs, are to help develop new markets is not always justified, espe- subject to the discipline of public budgets, and can be paid cially if services are not in high demand and widely and Figure 3 Household Access to Telephones in Europe and Central Asia, by Country and Year 100 Total population Poorest 20% of households 90 80 Households with telephone access (percent) 70 60 50 40 30 20 10 0 Albania Armenia Azerbaijan Bosnia and Belarus Bulgaria Georgia Hungary Kazakhstan Kosovo Kyrgyz Rep. Lithuania Moldova Poland Russian Serbia and Tajikistan Turkmenistan Uzbekistan 2002 2001 2001 Herzegovina 2001 2001 2001 2000 2001 2000 2001 2000 2001 2001 Federation Montenegro 1999 1998 2000 2001 2001 2002 Source: World Bank staff estimates based on household surveys 1998–2002. 8 Information and Communications for Development 2006 equitably shared. Any public support for private businesses To foster investment and use of ICT, governments must should also have a clear exit strategy. implement policies and regulations that remove such barriers and help businesses identify and exploit its potential. Steps The private sector should play a critical role as an early should be taken to provide a supportive legal and regulatory adopter and significant beneficiary of ICT, yet businesses environment for e-business (including e-security policies often face obstacles to ICT adoption. The potential benefits and programs), enhance technological diffusion, and over- of ICT—for growth, investment, profitability, and come market failures in areas such as demand aggregation productivity—provide a sound basis for promoting its use (for example, by launching e-government services of interest by businesses in developing countries. This is especially to businesses) and skill development (by providing and important because firms play a significant role as early supporting ICT training). Although income is a major adopters of new technology. But businesses in developing constraint on demand, businesses and people everywhere are countries often face obstacles to adopting and using ICT willing to spend a significant share of their income on infor- applications, including the following: mation and communication if given the chance. • Slow, unreliable, insufficient, and expensive telecommu- Another policy priority is to increase liberalization and nications services. Corruption is part of the problem: competition in ICT markets—to stimulate investment in many firms have to pay bribes for service licenses or bandwidth, raise demand through lower prices, and boost telephone connections. efficiency and innovation in the provision of services. Poli- • Limited incentives to change business models and cies should also promote neutrality among competing and operating structures when the costs of adopting ICT are emerging technologies to encourage interoperability, inno- significant and returns uncertain (figure 4). Many firms— vation, and choice among services. especially those that are small, domestically owned, or E-strategies can prioritize and guide national ICT devel- nonexporting—do not recognize the value of ICT strate- opment. The World Summits on the Information Society gies or applications for their activities, and do not feel that (WSIS), held in Geneva in December 2003 and in Tunis in they need ICT beyond a basic level of connectivity. November 2005, encouraged developing countries to adopt • Lack of trust in online business activities and related legal e-strategies. Such strategies, tied to a country’s overall devel- impediments. opment goals, are intended to promote and coordinate ICT • Shortages of workers skilled in ICT. investments and extend their benefits to larger segments of Figure 4 The Most Significant Costs that Obstruct E-Business (percentage of survey respondents) Gaining technological expertise There are no cost barriers to the 3% growth of electronic commerce Don't know 2% 5% Changing business processes Running dual systems or 23% hybrid operations 10% Finding and/or training workers 10% Changing corporate culture 22% Building new systems and buying new products and services 11% Adapting existing systems 14% Source: WITSA 2000. Overview 9 these countries’ populations. E-strategies are being devel- • implementation mechanisms, including institutions, oped and implemented by governments around the world, processes, and resources; and in both developing and developed countries. • monitoring and evaluation mechanisms, especially the A review of 40 of these strategies conducted for this responsibilities and budgets for these efforts. report finds that more than 85 percent aim to expand ICT use in governments and schools, expand telecommunica- The e-strategies reviewed were strong in establishing devel- tions infrastructure, and provide an adequate legal and opment links (especially the strategies produced by middle- regulatory framework (figure 5). But the actions identified income countries) and providing implementation details, to achieve these goals vary considerably, partly because of and many were effective at setting targets (figure 6). But the income differences across countries. Other common strategies were much weaker when it came to monitoring themes include ICT industry development, information and evaluation, with most saying little or nothing about technology skill development, and e-business growth. institutions or structures for doing so. When formulating e- strategies, governments should make plans for monitoring Although many countries have made significant and evaluation and commit resources to implement them. progress on e-strategies, more work is needed to Such plans would help make e-strategy design and imple- make them effective tools for development. E-strategies mentation more effective and relevant—without monitor- need to better address the obstacles identified above by ing and evaluation it is impossible to measure the results providing stronger links to broader development goals— and assess the impact of ICT initiatives. particularly in low-income countries—and increasing their focus on monitoring and evaluation. The likely WSIS provided the first globally agreed targets for ICT development impact of an e-strategy can be assessed by development. These targets now need to be linked to evaluating its action-oriented indicators. Measuring the impact of ICT on development and evaluating the outputs of e-strategy • links to the country’s overall development goals—political, implementation are essential for making e-strategies economic, and social; relevant and holding governments accountable for their • use of indicators to benchmark analysis and formulate implementation. WSIS set 10 far-reaching targets for ICT clear and realistic goals and targets; and information society development, to be achieved by Figure 5 Thematic Areas of Focus for E-Strategies, Figure 6 Strengths and Weaknesses of by Number of Countries E-Strategies 3 E-government 38 Infrastructure 36 E-education 35 2 1.66 1.53 Score Legal / regulatory 34 1.39 ICT industry 28 1 0.61 IT HR development 25 E-business 23 0 Development Use of Implementation Monitoring and Content 17 links indicators mechanisms evaluation E-health 14 Note: Explanation of scoring—development links: none (0), mention 0 20 40 general development goals (1), reference national programs (2), specify national and sectoral programs (3). Use of indicators: none (0), sporadic (1), Number of countries common (2), extensive (3). Implementation mechanisms and monitoring Note: HR = human resources and evaluation: none (0), vague (1), specific (2), no ambiguities (3). Source: World Bank staff analysis. Source: World Bank staff analysis based on a review of 40 e-strategies. 10 Information and Communications for Development 2006 2015. These targets look beyond traditional measures of performance in developing an information society. But telecommunications development and include goals such many do not. For example, many governments cite school as connectivity for governments, schools, hospitals, and connectivity as an important ICT goal. Yet data on ICT rural areas. prevalence in schools are lacking in many countries, Because these targets are broad—and, in some cases, making it difficult to measure progress or evaluate ICT’s poorly defined or difficult to measure or apply—this report contribution to education. A lot of the data needed to proposes discrete, concrete, comparable indicators to help compile the indicators should not be difficult to collect, individual countries as well as the international community and can be gathered as part of normal administrative monitor progress and benchmark performance. reporting. Although the targets provide a good starting point for Some countries with good monitoring data, such as quantifying ICT development, most countries will be Chile and Thailand, can demonstrate solid evidence of the unable or unwilling to pursue all 10 with equal vigor. success of their policies (figure 7). To foster progress toward Accordingly, monitoring and evaluation efforts should take the development of a global information society, all govern- into account the priorities that governments place on each ments need to collect and maintain data for key ICT target. A recent survey of policy makers found that indicators. connecting schools to ICT is the top international priority, The international community can facilitate more followed by connecting scientific and research centers. effective coordination of efforts to compile global informa- Monitoring and evaluation should focus on targets that are tion, establish a database for benchmarking, and provide clear, for which action can make a difference, and on which technical assistance to interested countries. ICT data progress can be tracked between now and 2015. Finally, collected by national and regional authorities are often parallel activities are needed to identify policies that cumbersome to locate. These data need to be standardized accelerate achievement of the targets, such as improving and put in a central, global repository. In addition, agree- regulations and identifying appropriate financing and ment is needed on which data should be compiled and business models. benchmarked internationally and which organizations should be responsible for various indicators. To support Countries should increase efforts to collect and dissemi- such efforts, this report compiles nearly 30 ICT indicators nate ICT data. The availability of current data in most for 144 economies, which offer data on access, quality, developing countries is limited, which does not allow for affordability, efficiency and sustainability, and applications. policy making based on timely and relevant benchmarking. They allow countries to compare themselves with other Some developing countries compile measurable, compara- countries and to assess their progress in different ICT areas ble indicators to track their progress and benchmark their over a five-year period (2000 to 2004). Figure 7 Internet Access in Thai Schools and Computers in Chilean Schools Thailand Chile Number of computers in schools provided 5,000 60,000 Number of schools with Internet access 4,500 by government (cumulative) 4,000 50,000 (SchoolNet subscribers) 3,500 40,000 3,000 2,500 30,000 2,000 1,500 20,000 1,000 10,000 500 0 0 1998 1999 2000 2001 2002 2003 1995 1998 2000 2003 Source: Enlaces 2005; NECTEC 2003. Overview 11 Recognizing—and Seizing— References Opportunities Enlaces. 2005. Data from Enlaces Web site of Chile’s Ministry of This report assesses what has worked well and what has not Education. http://www.enlaces.cl/index.php (accessed September 11, 2005). worked as well in developing ICT around the world. The digital divide between countries is not insurmountable, as ITU (International Telecommunication Union). 2003. World Telecommunication Development Report. Geneva: ITU. shown by the phenomenal success of new technology— such as mobile telephony—in bridging the access gap, as NECTEC (National Electronics and Computer Technology Center). 2003. Thailand ICT Indicators. Bangkok, Thailand. well as the positive impact of efforts to stimulate competi- tion and develop independent regulation of telecommuni- Netcraft. 2004. “Netcraft Secure Server Survey.” Bath, United Kingdom. http://news.netcraft.com/archives/2003/04/09/net cations markets. But many developing countries still require craft_ssl_survey.html. improvements in their ICT policies and strategies. Among UNPAN (United Nations Online Network in Public Administra- the biggest challenges facing these countries are weak policy tion and Finance) and UNDESA (United Nations Department and implementation capacity, opposition from vested inter- of Economic and Social Affairs). 2004. UN Global E- ests, and persistent obstacles to adoption of ICT. Many also Government Readiness Report 2004: Towards Access for Oppor- lack adequate tools to monitor, evaluate, and guide invest- tunity. New York. http://www.unpan.org/egovernment4.asp. ments in ICT and connectivity in underserved areas. WITSA (World Information Technology and Services Alliance). The World Bank hopes to make this report a regular 2000. International Survey of E-commerce 2000. Arlington, publication. Doing so would contribute to continuity in Va. benchmarking of ICT data and in monitoring and World Bank. 2004. “Private Participation in Infrastructure (PPI) assessment of trends, themes, and programs supporting ICT Project Database 2004.” Washington, D.C. http://ppi.world- bank.org/. in developing countries. _______. Various years. “Investment Climate Surveys.” This report will have achieved its purpose if the views, Washington, D.C. http://rru.worldbank.org/Investment analyses, data, and indicators it contains help stakeholders Climate/. determine how their separate and collective efforts can yield _______. 2005. World Development Indicators database, World the highest returns and contribute to inclusive information Bank. societies around the world. 12 Information and Communications for Development 2006