One of our main areas of focus is the enabling environment – helping governments foster digital development by putting in place the right policies and regulations.
Now, what are some of the main issues?
First, across the world, but especially in developing countries, competitiveness continues to be dragged down by ‘red tape’, including numerous procedures, authorizations and delays to start a business or launch a service, costly and unreliable property registration, or stifling labor regulations. I am sure you are all familiar with the Doing Business report and the World Bank’s many programs to support business reforms worldwide.
While the digital industry also faces these regulatory hurdles, it is confronted with additional challenges.
Let me give you an example. With your phone in hand, you are about to send a text message to a friend. Your phone offers you a choice: to send the text message through your mobile operator, or to send it via the internet through an app. Depending on what platform you use, your text message will be taxed differently. All text messages are not created equal: different digital services are treated differently from a regulatory and fiscal point of view, with no real level playing field.
Rapidly evolving technology are bypassing policymakers and regulators. The frontiers between market segments, such as telecommunications and information technology, are increasingly blurred. Systems, platforms, and services are converging to provide comprehensive offerings: your smartphone is now your TV, your radio, your phone, your camera, your newspaper… At the same time, similar services are offered on different platforms, often regulated under different laws.
Operating in the same digital space – both in collaboration and in competition with each other – are traditional telecom operators, software producers, and over-the-top (OTT) content providers delivering audio, video, and other media over the internet. Traditional businesses use the internet to sell their products and services, cars have become computers and communication machines on wheels, and a myriad of start-ups create new digital services, often cutting across traditional sectors.
Policymakers have to move beyond their traditional way of looking at telecom, IT and related markets as they converge into a dynamic digital sphere. This has some important implications. First, policies and regulations have to be technology neutral. To ensure countries can reap the benefits of fast-evolving technology, they must keep markets dynamic and competitive. Second, they must encourage investor confidence by providing balance and predictability in the regulatory environment while encouraging innovation.
In many emerging and developing markets, taxation of the telecommunications sector has reached unreasonable proportions. Affordability is a major barrier preventing uptake of mobile services; it is not helped by taxes and fees that are around 50% of revenues or higher as is the case in Turkey, Jamaica, Nepal, Brazil and Bangladesh, for example. The price of mobile phone services in the most expensive country was 50 times higher in 2013 than in the least expensive one. This cannot stand in the way of digital inclusion.
The new realities of digital development also mean that old style top-down regulation no longer works. In a rapidly changing digital ecosystem where 5G, the Internet of things (IoT), and clouds are driving transformative smart solutions, next generation regulation calls for unprecedented levels of collaboration between all stakeholders. The private sector can contribute positively to the development of new policy and regulatory frameworks. Synergies between public and private sector must be found to leverage rapidly developing technologies in ways that ensure market growth and public revenue, while addressing citizens’ needs.
Furthermore, as digital technologies are global and don’t know borders, policies and regulations cannot remain local. It is too expensive for companies to do business in small emerging markets. Countries should adhere to emerging global digital standards and open up their borders, developing regional markets that foster interoperability and the emergence of a single market, thus enabling companies to reduce the cost of doing business in each country and benefit from economies of scale that integrated markets offer.
Under the Digital Development Partnership (DDP), which brings together public and private partners, and through its ongoing lending and advisory activities, the World Bank is providing support to digital development in emerging and developing markets.
On the occasion of the World Bank-IMF Annual Meetings, we are hosting a seminar on the topic of “Ensuring an Enabling Environment for Digital Development.” We will hear from governments and from the private sector how to go about creating that enabling environment. Join us for this interesting conversation!