The industry representatives, government officials, and other participants in Barcelona are all convinced of the importance of the internet and mobile to improve the lives and prospects of people around the world. But many outside our technophile world do not share this view. They do not see how phone or internet connections relate to poverty reduction.
In developing countries, the typical challenge is not to convince the Minister of ICT, but rather the Ministers of Economy and Finance and the development partners of the importance of a technology strategy. Few international financial institutions or donor agencies focus their resources on the digital economy or ICT. Over the last ten years official development assistance from OECD members (ODA) to the communication technologies sector has hovered around a low 0.5% of total ODA.
A widely held view is that the private sector can take care of financing needs. Yet, the ITU has estimated the bill to bring the entire world online by the year 2020 at around US$500 billion. And the private sector is unable, or unwilling, to provide, unassisted, these huge sums of investment.
In many developing countries, especially small countries, landlocked and fragile states, as well as rural areas, the private sector views financial and operating risks as too high, in particular in view of market size. In these frontier markets, the private sector will only take the lead in expanding connectivity if governments establishes a conducive investment climate and offers risk sharing, investment sharing and other innovative business models. One such business model is the guaranteed prepurchase by government of connectivity capacity to meet the future needs of public services, including as local government, citizen outreach, school, health and agricultural extension services.
Competitive subsidy or cost-sharing public-private partnerships (PPP) are a model that has been used to encourage the rollout of voice networks into underserved areas and more recently for the rollout of broadband infrastructure. Key to the success of these projects is to ensure that public investment ‘crowds in’ and does not substitute for private investment, and that the private sector has sufficient incentives to invest and operate networks efficiently.
While many governments claim to want to expand internet and broadband access, many at the same time treat the mobile and ICT industries as cash cows. Excessive taxation of mobile services by governments is becoming one of the most significant barriers to greater investments in connectivity. This includes a variety of taxes, fees and levies on mobile operators and consumers, that amount to close to 50% of sector revenue in countries like Bangladesh, Brazil, Nepal and Jamaica and even more in Turkey. The World Bank has set up a working group with the GSM Association and the IMF to investigate this issue further with a view to come up with guidance and parameters on what constitutes a reasonable taxation level.
And while taxation is an issue, the regulatory environment is arguably an even bigger barrier. Many of our clients still have a 1990s telecom framework. Telecommunications, IT, broadcasting, media and entertainment have converged, innovation is happening all over, but that old framework is impeding the growth of the digital economy. A new enabling environment is needed to foster innovation, based on competition, private sector participation, and public private partnerships.
To support governments in making this happen, the World Bank launched on January 14 (at the same time as the WDR 2016), a Digital Development Partnership. In partnership with Microsoft, the Estonian government and other private companies, foundations and donors, the DDP will offer developing country governments support in the development of a digital economy. The DDP focuses on four priorities: enabling environment for a digital economy; internet access for all; digital platforms for public service delivery; and mainstreaming digital innovation. Our hope is that other partners will soon join us in the DDP to help governments gain a better understanding of how to reap the digital dividends that new technologies are offering.