ICT in development

UNCTAD Information Economy Report 2011

ICT in Development The United Nations Conference on Trade and Development has just released its Information Economy Report 2011. The report, with the theme, ICTs as an Enabler of Private Sector Development makes certain policy recommendations to seize the untapped potential of ICT use to enable and accelerate private sector development (PSD) in developing economies.

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ere is an extract from the recommendations—

Strengthening the ICT Infrastructure Promote affordable access to relevant ICTs. When setting priorities for strengthening the investment climate, carefully consider what improvements in the ICT infrastructure are required in order to support various private-sector activities. Micro-enterprises in rural areas may, first and foremost, need to ensure basic connectivity, which now means access to mobile voice networks. Mobile penetration has greatly improved, but large parts of the rural population in LDCs still lack access to a mobile signal.

Meanwhile, enterprises seeking to engage in e-commerce or exports, or to become part of global value chains, increasingly require access to affordable and reliable broadband connectivity. In developing countries with limited fixed telecommunications infrastructure, mobile broadband is likely to offer the most cost-effective solution to bridging connectivity gaps. In order to speed up the rollout of mobile broadband, countries need to allocate spectrum and to license operators to provide the service. Indeed, almost 50 developing and transition economies have yet to launch mobile broadband services.

Enhancing ICT Use in Enterprises Enhance investment in and use of ICTs by private firms.

Further efforts are needed to support the adoption of ICTs by private enterprises.

There is growing evidence that firms (including MSEs) that invest in and apply ICTs are in a better position to become more productive, competitive and profitable.

This is because ICTs can reduce the costs of business transactions, provide tools for better business management, and enhance the capacity to get goods and services to the market. However the benefits from the different uses of ICTs are not distributed 54 | October 31, 2011

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uniformly. The value to an enterprise of having access to a certain technology depends on its size, industry, and market orientation.

Many MSEs, including in the informal sector, are hesitant about investing in some ICTs; this may reflect educational, literacy and cost barriers, or simply that they do not see the relevance of using such tools in their business. The major exception to this is mobile phones. Most MSE owners and managers in developing countries already own and frequently use a mobile phone–increasingly for business purposes.

Obtaining market information and building customer relations appear to be the prime business needs that are catered for through mobile phone use.

While much benefit from enhanced affordable access to relevant ICTs will be the result of appropriation by the private sector itself, independent of any particular government or donor intervention, the chances for such gains increase when the regulatory environment is conducive to the use of ICTs by enterprises. Governments and development actors need to learn from private sector experience and intervene in ways that help enterprises and civil society to seize opportunities created by developments in technology. Moreover care should be taken not to crowd out private-sector service providers when launching government initiatives, and rather work with the market.

Include ICT modules in business training programs. Many entrepreneurs in developing countries, and especially in LDCs, lack the necessary capacity or awareness to take full advantage of ICTs. Thus, even if they have access to mobile phones or the internet, they may not know how best to leverage them for their business operations. One way to address this issue is to integrate ICT skills development into general business-management training curriculums.

Depending on the beneficiaries targeted, such training may range from providing advice on how to use mobile phones as a business tool to more advanced training in how to use various technologies and applications to improve operational management, customer relationship management, or resource planning.

Adopt regulatory frameworks that help to enhance confidence in the use of new technology or the new application of known technology. A prerequisite for more widespread uptake of ICTs for commercial purposes is that enterprises and consumers trust the systems.

In many countries, adequate legal frameworks still need to be adopted and enforced in order to unleash DATAQUEST | A CyberMedia Publication

the full potential of electronic transactions. The need to act is accentuated by the increased use of mobile devices for commercial transactions, which raises new regulatory issues. As this is particularly relevant for low-income countries–where mobile platforms are the main enabler of electronic transactions for businesses, governments and consumers– support from the international community is highly desirable.

Promoting the ICT Producing Sector Facilitate the expansion of the ICT sector.

A thriving ICT sector services local markets and is often a source of local innovation and dynamic entrepreneurship. Thanks to technological change and new business models, many more employment opportunities are emerging in the ICT sector of low-income countries.

As part of their efforts to promote PSD, governments should carefully consider how best to tap into the new opportunities presented, for example by social outsourcing, micro-work, and mobile-sector microenterprises.

While the liberalization of ICT markets and increased competition have contributed to an expansion of this sector in most countries, faster ICT growth and employment creation can be facilitated through policy interventions aimed at: • Improving the availability of the skills needed in the ICT sector; • Stimulating ICT uptake among local firms, including MSEs; • Providing appropriate ICT infrastructure and regulatory frameworks that help create confidence among enterprises and consumers; • Promoting and clustering entrepreneurship and innovations through incubation and ICT parks; and, • Using government procurement to create demand among local ICT enterprises.

Leveraging ICT Use to Make PSD Interventions More Effective Make ICT use an integral part of business environment reforms.

ICTs have been found to play a useful role in enhancing, extending, and contributing to the sustainability of business environment reforms. The core of this effort is around improving the governance of the economy, and the interactions between the government and the private sector. Chapter IV showed how ICTs contribute to improving the legal and regulatory governance of the private sector, by simplifying and codifying rules and regulations, reducing compliance costs and promoting transparency. In order for the in-

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UNCTAD Information Economy Report 2011 troduction of ICTs into business environment reforms to have the greatest impact, however, there is a need to shift from passive government information systems to more interactive ones.

If ICTs are used simply to scan or digitize paperbased systems or to place basic information on the internet, the beneficial effect may be minimal. Such approaches can be taken further by creating more interactive systems in which business owners and managers are enabled to use online facilities to register a business, file tax reports, and pay fees.

When applied effectively, ICT-based solutions have led to major reductions in the time it takes to register a company or obtain a licence, and to increases in government revenue and greater transparency. Examine the relationship between ICTs and enterprise formality.

In many developing countries, informal- sector enterprises account for a very large part of the private-sector activity. Better regulations, and better access to regulations, can be effective ways of empowering informal-sector enterprises. Lowering the bar (making it easier, less costly and less time consuming to register companies) may enhance the willingness of companies to formalize. However, there appears to be value in better understanding how informal enterprises can be made aware of the process and benefits of formalization–especially through ICTs that they are already using, such as mobile phones.

Since ICTs have been able to connect formal and informal businesses to market opportunities, it should also be possible to use these technologies to connect them to government programs and services.

Leverage ICTs in the delivery of business development services.

Chapter IV showed how ICT use can extend the reach of business development services (BDS) to new and growing enterprises, partly by overcoming the “tyranny of distance”, and by reducing the cost of service delivery. Some BDS providers have used the internet to provide information and guidance to clients.

However, few such initiatives have drawn on the potential of the internet as a more dynamic and interactive mechanism for information, training and advisory services. Although innovative practices are more widespread in the agricultural sector, even in that sector there is still potential for further expansion in ICT use. Greater use of mobile phones by MSE owners and smallholder farmers in developing economies offers scope for novel ways of providing BDS. While the use of mobile phones offers great scope for extending BDS 56 | October 31, 2011

to enterprises that are typically unaware of service providers, or are too far away from them, few conventional BDS providers have so far integrated the use of such technology into their programs. At the same time, rather than opting for any single technical solution, BDS providers may leverage the power of using a combination of different ICT tools. Leverage mobile money services to create more inclusive financial markets.

Mobile money services hold great promise to enable cost reductions in the provision of financial services, especially to MSEs that are currently poorly catered for. In some developing countries, including LDCs, mobile money systems have quickly been embraced by small-scale business owners and managers as a more accessible, secure and affordable way of making financial transactions. However, there is a large untapped potential for mobile money services, and mobile provision of micro-finance and other financial services to be leveraged for PSD. The level of uptake and the impact on enterprises varies from country to country. In this context, attention should be paid to the extent to which various mobile money services–most of which were launched as person-to-person services–can be adapted to the situation and specific needs of MSEs. States and their central banks should take the opportunity to explore ways of absorbing these enterprises into the financial system through mobile transactions. Developing country governments (including in several LDCs) will be expected to pioneer new legislation and regulations to make sure that maximum gains for society are reaped from the use of mobile money.

In order to capture the full potential in this area, dedicated research is needed to extract lessons from the early adopters. The international community should play an important role in supporting the development of sound regulatory frameworks and relevant institutions.

Recognize the gender dimension. To date, little program or policy attention has been given in existing or new initiatives to the application of ICT tools to support women entrepreneurs.

This is an untapped potential. While ICTs may do little to redress underlying societal structures that hamper opportunities for women entrepreneurs, they can contribute with regard to several practical gender-related issues. As stressed earlier, some barriers to enterprise growth and development are particularly pertinent to women entrepreneurs.

Four specific challenges, which the use of ICTs can help to address to some extent, are access to finance;

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limited skills and training; lack of time due to family commitments; and limited physical mobility. ICTs should be used as an enabler to overcome these challenges and to enhance the effectiveness of existing initiatives. For example, organizations supporting women entrepreneurs should explore ICT based solutions as an additional strategy, to complement faceto-face meetings for trade promotion.

Moreover lessons from the field highlight the need for training programs to be developed that take into account the limited skills and training, and even the basic level of education, of most women who own MSEs. In addition, women entrepreneurs should be invited to participate at the content-development stage of relevant initiatives.

Overall Recommendations Reflect ICTs better in PSD strategies. To date, most national PSD strategies, as well as those developed by donor agencies, make relatively few references to the role of ICTs. While there is a general view that ICTs contribute to business productivity and competitiveness, the details on how this can be promoted are typically scant.

PSD strategies should explicitly recognize that ICTs can contribute to the development of the private sector through interventions at micro, meso, and macro levels. Interventions should also acknowledge the importance of a multi-level response to this topic and not treat ICTs in isolation, thus acknowledging the four ICT–PSD interfaces.

Develop guidelines for donors. In collaboration with UNCTAD and other relevant organizations, the Donor Committee for Enterprise Development could develop guidelines for donor and development agencies, and their program partners (ie, developing-country governments and business membership organizations), on how to integrate the ICT dimension in future PSD strategies.

Such guidelines would help to establish a bridge between the donor assistance which relates to PSD and that which relates to ICT for development.

Interventions need to be demand-driven. In order to enhance the likelihood that the spread of ICTs will contribute to the development of the private sector, the design and implementation of policies must be grounded in a solid understanding of the specific needs and situations of a range of different enterprises. In this context, attention should also be paid to MSEs, as these face particular barriers and challenges. Moreover, as has been shown in earlier chapters, even within the group of MSEs, there are DATAQUEST | A CyberMedia Publication

wide differences in needs and capabilities. Thus, the diversity of the private sector as well as that of ICTs must be carefully factored in when governments, donors and other stakeholders develop policies, strategies and specific interventions aimed at leveraging ICTs for PSD. In this context, policymakers and practitioners should actively seek the input and engagement of enterprises in program design and implementation.

Their direct involvement brings relevant experience to the fore, and helps to focus interventions on outcomes that are of higher value to end-users.

Leverage partnerships. A more demand-driven approach to policy interventions adds importance to the development of effective partnerships between governments, donors, the private sector and civil society.

Lessons should be learned from the experience to date with regard to partnership implementation in the field of ICT for development. Five success factors have been identified for such partnerships (Geldof et al, 2011), namely, paying detailed attention to the local context and ensuring the involvement of the local community in the implementation; setting clear and agreed development outcomes; building sustainability and scalability into the design of the partnership; creating a foundation of trust, honesty, openness, mutual understanding and respect; and having a supportive wider ICT environment in place, both in terms of policy and infrastructure.

Devote adequate resources to measurement and impact assessment. An absence of systematic, evidence based impact evaluation has been observed in current initiatives using ICTs to promote PSD. A lack of data and of resources to undertake rigorous assessments has led to excessive reliance on “success stories” and anecdotal evidence.

There is a need to accelerate the production of reliable and internationally comparable statistics that examine ICT use by both enterprise and government.

In this area, the international community can support the existing efforts being undertaken by the Partnership on Measuring ICT for Development.

With a view to developing a richer base of knowledge, it can also finance more comprehensive project and policy evaluations based on empirical evidence conducted through independent research. Such initiatives are needed to provide a more realistic picture of possible impacts and to generate valuable knowledge for future policymaking and interventions. n

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Source: UNCTAD October 31, 2011 | 57