ICT for Development Carlos A. Primo Braga Senior Adviser, International Trade Department The World Bank WITSA Public Policy Meeting Athens May 18, 2004

Outline ICT and Development The Regulatory Environment Reality check Concluding remarks

Rep. of Korea Ghana Thousands of constant 1995 US dollars Difference attributed to knowledge Difference due to physical and human capital Knowledge makes the difference between poverty and wealth Source: World Development Report, 98/99

Knowledge Changes the Development Process  Creation and effective use of knowledge are key to rapid economic growth  ICT is changing the terms under which knowledge can be created and disseminated: - ICT facilitates the process of codification and transmission of knowledge about technology; - ICT enhances the positive learning externalities of knowledge generation by magnifying the possibilities for recombination of ideas and information; - ICT dilutes the “tyranny” of geography by providing new ways for researchers to escape national boundaries. The rate of international co-authorship of scientific and technical papers, for example, has increased significantly over the last decade; - ICT increases the “distribution power” of innovation systems, diminishing the time to market of new products and services, while enhancing the dissemination, application, and use of “mature” technologies.

But can ICT be of any help in LDCs?

ICT and development  ICT and Economic Growth - enhanced competitiveness - increased business opportunities - access to market for rural communities  ICT and Improved Delivery of Social Services - health/education/environmental/microfinance services - reducing vulnerability to natural disasters  ICT for Greater Transparency - improved efficiency on government procurement - reduced corruption - increased civil society participation  ICT for Empowerment of the Poor - allowing the poor to better communicate their concerns

The concept of sustainable development Economic Sustainability (productivity) Social Sustainability (equity) Environmental Sustainability (protect/enhance natural resources) Intergeneration Concerns

ICT and sustainable development Direct Impact Production - Toxic components such as lithium and cadmium (batteries), lead (cathode ray tubes)...; Operation - Energy use …; Disposal - Short lifetime cycle, growing challenge of managing electronic waste… Indirect Impact Effects on transportation of e-commerce and telework - Growth vs. more efficient logistics vs. leisure choices; Dematerialization - e-books; MP3 files vs. CDs; vs. “snail mail”…; Acceleration of life-cycle of products - Incentives for agglomeration vs. dispersion Network Effects Opportunities for more knowledge sharing, improved coordination, transparency and monitoring

Virtualization of material products: myths and reality

Digital divide Infrastructure (income levels, rural vs. urban) Digital literacy (barriers to absorption of IT) Content Gender Large companies vs SMEs… E-business practices

The network explosion

Income Divide Digital divide/infrastructure Source: ITU World Telecommunication Indicators Database User distribution, by income group, 2001 High Income Upper-mid Income Lower-mid Income Low Income 6.1 billion 986 million 741 million 361 million Population Telephone lines Mobile users Internet users 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Telecoms and Internet: the cost of being connected 278% 191% 80% 60% 1.20%0.135% 0% 50% 100% 150% 200% 250% 300% Sri Lanka Monthly internet access charge as a percent of monthly average income Sri Lanka Nepal Bangladesh Bhutan United States Denmark Source: Human Development Report Office calculations based on data ITU 2000 and World Bank 2001

Secure servers and e-commerce OECD 95% Non-OECD 5% Secure Servers, OECD and non OECD (October 2000) Share of Secure Servers in non OECD countries (October 2000) Central and South America Non-OECD Asia Non-OECD Europe 0.4 % Oceania Africa Source : OECD, 2001

Facilitating trade in less efficient countries would bring significant gains: services/e-business are key in promoting trade facilitation Source: Calculations based on table 4 in Wilson, Mann, and Otsuki, “Trade Facilitation and Capacity Building: Global Perspective,” 2003, mimeo. and Otsuki, “Trade Facilitation and Capacity Building: Global Perspective,” 2003, mimeo.

The regulation maze Layers of communication systems Layer characteristics Relevant regulations and policies Relevant fora for international negotiation/coordi nation/debate Content layerServices, images, and applications transmitted by the network Cyberlaws, taxation, IPRs, consumer, privacy and data protection, competition law, content regulation, trade policies WTO, OECD, WIPO… Code layerProtocols and software that make the network run Internet governance, competition policy, IPRs, standards ICANN, ISOC, ITU, WIPO… Physical infrastructure layer Wires, cables, computers, satellites… across which bits of information travel Telecom regulation, competition policy, IPRs, trade policies, standards WTO (BTA, ITA), ITU, WIPO…

Reality check: implications for developing countries Infrastructure: rapid improvement but major gaps in coverage/affordability Regulatory environment: progress + complexity (cyberlaws, security, PKI, IPRs, content regulation, e-payment infrastructure, privacy…) Digital literacy: institutional constraints in the educational sector + IT HR development at firm level Content: localization/relevance/IPRs

Concluding remarks E-business and ICT use will continue to expand on a global basis and their benefits can be substantial not only at firm level, but also in promoting trade and enhancing productivity at a macro level; Convergence in e-business practices can happen (developing countries and industrialized countries, SMEs and large enterprises), but … Unless governments provide the proper regulatory environment for private action and support efforts to expand digital literacy, with special attention to the needs of SMEs, the digital divide between the developed and the developing world, at the level of business practices, will widen.

Concluding remarks (cont.) More evolution than revolution, but potential for significant distribution impacts (within nations and internationally), particularly, as e-commerce practices spread. Importance of keeping in focus the implications of the regulatory environment for innovation Cross-border disputes will also expand in the absence of regulatory convergence (no hope for advancing this agenda in a significant manner in the WTO in the near future ).

More information The World Bank Development Gateway Portal