Fighting the Digital Divide Carlos A. P. Braga Senior Manager, Informatics Program Information...

Fighting the Digital Divide

Carlos A. P. BragaCarlos A. P. BragaSenior Manager, Informatics ProgramSenior Manager, Informatics Program

Information Solutions GroupInformation Solutions Group The World Bank The World Bank

February 2002February 2002

The New Economy The New Economy

The Threat of a Digital DivideThe Threat of a Digital Divide

Embracing the New Economy: An Agenda Embracing the New Economy: An Agenda for Actionfor Action

The WBG Agenda on Knowledge and ICT The WBG Agenda on Knowledge and ICT

Outline

The concept and its implications for economic development

New Economy: New Economy:

– Association of non-inflationary sustained growth with high Association of non-inflationary sustained growth with high investment in ICTinvestment in ICT

Claims:Claims:

– ICT are at the core of the productivity revival in industrialized ICT are at the core of the productivity revival in industrialized countriescountries

– Higher sustained economic trend growthHigher sustained economic trend growth

– Affect short-term trade-off between inflation and unemployment Affect short-term trade-off between inflation and unemployment (affect business cycle…)(affect business cycle…)

– New business models applyNew business models apply

What do we mean by ‘new economy’?

Even Solow has declared obsolete his 1987 assertion (we can see Even Solow has declared obsolete his 1987 assertion (we can see the computer age everywhere but in productivity statistics…)the computer age everywhere but in productivity statistics…)

Labor productivity growth rate in the US non-farm business sector: Labor productivity growth rate in the US non-farm business sector: from 1.37 (74-90) to 1.53 (91-95) to 2.57 (96-99) from 1.37 (74-90) to 1.53 (91-95) to 2.57 (96-99)

ICT contribution: 0.44 (74-90) to 0.62 (91-95) to 1.10 (96-99). ICT contribution: 0.44 (74-90) to 0.62 (91-95) to 1.10 (96-99). (Source: Oliner and Sichel, 2000)(Source: Oliner and Sichel, 2000)

The ICT-related contribution to productivity growth is expected to The ICT-related contribution to productivity growth is expected to continue in the future even though the overall growth trend has continue in the future even though the overall growth trend has slowed down significantly in 2001.slowed down significantly in 2001.

Hype vs. Reality: Good News

P-E ratios typically soar and then collapse in periods of significant P-E ratios typically soar and then collapse in periods of significant technological changetechnological change

Share prices in early 2000 assumed not-sustainable rates-of-profits Share prices in early 2000 assumed not-sustainable rates-of-profits (from dot com euphoria to dot coma…)(from dot com euphoria to dot coma…)

Consolidation is the typical pattern after periods of hyper-Consolidation is the typical pattern after periods of hyper-investment in technology-driven industriesinvestment in technology-driven industries

Macroeconomic variables (e.g., consumer confidence after Macroeconomic variables (e.g., consumer confidence after September 11) continue to influence short-term economic trendsSeptember 11) continue to influence short-term economic trends

In short, the business cycle is alive and well…In short, the business cycle is alive and well…

Hype vs. Reality: Bad News

Conventional wisdom:Conventional wisdom: Distance matters (geography, economic distance: regulatory, Distance matters (geography, economic distance: regulatory,

trade barriers…)trade barriers…)

Knowledge-based development (building upon human capital) Knowledge-based development (building upon human capital) is more rewarding over the long-term than resource-based is more rewarding over the long-term than resource-based developmentdevelopment

There is a natural sequence in stages of development There is a natural sequence in stages of development

E-Development: Challenging Development Theory

Impact of ICTImpact of ICT Economic distance becomes even more relevant, but Economic distance becomes even more relevant, but

the role of geography diminishesthe role of geography diminishes

Additional advantage for human-resources rich Additional advantage for human-resources rich societiessocieties

Opportunities for “leapfrogging” expandOpportunities for “leapfrogging” expand

E-Development: Challenging Development Theory

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1995 1996 1997 1998 1999 March Now

Last 5 Years

Bil

lion

US$ DJIA Mkt. Cap

NASDAQ Mkt. Cap

Total Mkt. Cap

More Wealth Created0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Fixed+Mobile -- OECD Fixed+Mobile -- Non-OECD

Internet Subs -- OECD Internet Subs -- Non-OECD

Source: Pyramid Research, 2000

Defining the Digital Divide: How serious an issue is it ?

Divergence in wealth creation is a major concern

The situation in terms of Aggregate Connectivity level has been improving…

Connectivity isonly part of the story

0

20

40

60

80

100

120

140

160

Mob

ile a

nd F

ixed

Tel

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ny p

er 1

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habi

tant

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000

Nig

eria

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man

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land

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way

Net

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ted

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Mobile & Fixed Telephony, 2000Mobile & Fixed Telephony, 2000

mobilefixed

-200.00%

0.00%

200.00%

400.00%

600.00%

800.00%

1000.00%

1200.00%

1400.00%

1600.00%

1800.00%

2000.00%

Gro

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e, 1

998-

2000

%

Fin

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fixed growthmobile growth

Mobile & Fixed Growth Rate 1998-2000

Mobile & Fixed Growth Rate 1998-2000

Source: International Telecommunication Union Yearbook of Statistics (2001)

Internet Hosts, 2000Internet Hosts, 2000

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

100,000,000U

gand

a

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Nig

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Nic

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ua

Sen

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ts, 2

000

Upper Middle IncomeLow Income

High IncomeLower Middle Income

Internet Hosts Growth Rate 1995-2000Internet Hosts Growth Rate 1995-2000


100%

1000%

10000%

100000%

1000000%

Gro

wth

Rat

e 19

95-2

000

%

Fin

land

Uga

nda

Uni

ted

Kin

gdom

Sou

th A

fric

a

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pt, A

rab

Rep

.

Sw

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Ger

man

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Aus

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ia

Nor

way

Can

ada

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Fra

nce

Mor

occo

Chi

le

Net

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Indo

nesi

a

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key

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Rep

ublic

Per

u

Uni

ted

Sta

tes

Italy

Kor

ea, R

ep.

Ven

ezue

la, R

B

Rus

sian

Fed

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ion

Tha

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Mal

aysi

a

Japa

n

Col

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a

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Chi

na

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Bra

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Arg

entin

a

Bot

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a

Pan

ama

Sen

egal

Ken

ya

Sri

Lank

a

Pak

ista

n

Nig

eria




Internet Users, 2000 (as a share of total population)

Internet Users, 2000 (as a share of total population)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Inte

rnet

Use

rs a

s a

shar

e of

tota

l pop

ulat

ion,

200

0

Uga

nda

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egal

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Indo

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Rep

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Ken

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Per

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Fed

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la, R

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th A

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ted

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Aus

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ia

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n

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land

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ea, R

ep.

Can

ada

Sw

eden

Nor

way




Internet Users Growth Rate 1995-2000Internet Users Growth Rate 1995-2000



100%

1000%

10000%

100000%

Gro

wth

Rat

e 19

95-2

000

%

Fin

land

Uni

ted

Sta

tes

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erat

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iland

Ven

ezue

la, R

B

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le

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nda

Tur

key

Per

u

Rom

ania

Kor

ea, R

ep.

Arg

entin

a

Mal

aysi

a

Tun

isia

Chi

na

Sen

egal

Ken

ya


Secure Internet Servers, 2000Secure Internet Servers, 2000

1

10

100

1,000

10,000

100,000

Sec

ure

Inte

rne

t S

erv

ers

, 2

000

Mor

occo

Sri

Lank

a

Pak

ista

n

Egy

pt, A

rab

Rep

.

Pan

ama

Per

u

Ukr

aine

Rom

ania

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nesi

a

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Rep

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B

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Tha

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le

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erat

ion

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ea, R

ep.

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way

Fin

land

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th A

fric

a

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gapo

re

Net

herla

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Italy

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nce

Aus

tral

ia

Japa

n

Can

ada

Ger

man

y

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ted

Kin

gdom

Uni

ted

Sta

tes




Secure Internet Servers Growth Rate 1997-2000

Secure Internet Servers Growth Rate 1997-2000



100%

1000%

10000%

100000%

1000000%

Gro

wth

Rat

e 19

97-2

000

%

Mor

occo

Sou

th A

fric

a

Can

ada

Italy

Net

herla

nds

Uni

ted

Sta

tes

Bra

zil

Nor

way

Aus

tral

ia

Mex

ico

Indo

nesi

a

Slo

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Rep

ublic

Chi

le

Mal

aysi

a

Sin

gapo

re

Sw

eden

Kor

ea, R

ep.

Uni

ted

Kin

gdom

Ukr

aine

Per

u

Fra

nce

Rus

sian

Fed

erat

ion

Cro

atia

Fin

land

Arg

entin

a

Japa

n

Ger

man

y

Tur

key

Col

ombi

a

Rom

ania

Sri

Lank

a

Pak

ista

n

Chi

na

Egy

pt, A

rab

Rep

.

Tha

iland

Pan

ama

Ven

ezue

la, R

B

Indi

a

Total Investment: OECD - $129 per capita; SSA - $9 per capita.

Investment in Telecommunications Projects with Private Participation in Developping

Countries by Region, 1990-99

Data Source: PPI Database, World Bank, 2000

0

10

20

30

40

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

1998

US

$ B

illio

n Latin America and the Caribbean

East Asiaand the Pacific

Europe andCentral Asia

South Asia

Middle East

Sub-Saharan Africa

Concentrated Investment

Information Infrstructure Investments, 1991 - 1998

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1991-1994 1995-1998

US

$ M

illio

ns

OECD

Sub-Saharan Africa

Middle East/North Africa

Latin America

Eastern Europe

Asia Pacific

Cross-Country Inequality: Information Infrastructure Investments

Skewed toward Rich Countries


The US broadband revolution

Adopter Countries’ broadband revolution

National In

form

ation Infrastructu

re

(scope a

nd q

ualit

y)

Time

Latecomers


The Promise and Peril of the Networking Revolution

Within-Country Inequality

In Cambodia, by end of 2000, 85% of the country’s fixed telephone lines were in Phnom Penh even though it accounted for less than 10% of the country’s population.

0 0.5 1 1.5 2 2.5

overall fixeddensity

fixed density inPhnom Penh The density in Phnom Penh is

60 times greater than provinces

Vietnam, by 2000, Hanoi and HCMC accounted for 86% for all Internet subscribers and all the leased line accounts even though they only make up 10% of the population. (ITU, 2000)

I. Urban vs. Rural Divide

Source: ITU, 2000

In China, the least connected provinces, with 600 million people, have only 4 million Internet users, while Shanghai and Beijing, with 27 million people, have 5 million users. (UNDP, 2001)

Within-Country Inequality

III. Income Divide

II. Gender Divide By 2001, in Ethiopia, men made up 86% of Internet users, 83% in Senegal , 70% in China, 67% in France.

Some of these disparities are lessening. In Brazil, women account for 47% of Internet users, and in the United States for 51% of users. (UNDP, 2001)

Source: Boston Consulting Group

Internet Penetration in Upper & Middle Classes

32%

14%

12%

11%

0% 5% 10% 15% 20% 25% 30% 35%

Brazil

Mexico

Argentina

Chile

2.1

2.6

2.7

2.5

Penetration in total population

Connectivity is a requirementConnectivity is a requirement

It is next to impossible to envision markets with less than 5% It is next to impossible to envision markets with less than 5% voice penetration leapfrogging into Internet connectivity voice penetration leapfrogging into Internet connectivity

Competition is the VehicleCompetition is the Vehicle

Competition leads to decreased prices, subscriber growth & Competition leads to decreased prices, subscriber growth & new technology development. We must promote new technology development. We must promote competition, while supporting universal access via innovative competition, while supporting universal access via innovative government support, focusing on convergence issuesgovernment support, focusing on convergence issues

Infrastructure Support Systems Are Critical Infrastructure Support Systems Are Critical

Systems and services that support and deliver information Systems and services that support and deliver information such as postal and financial services, are a vital component such as postal and financial services, are a vital component of public actionof public action

Education is the EnablerEducation is the Enabler

Internet has higher social entry barriers than voice, requiring Internet has higher social entry barriers than voice, requiring literacy and ICT exposure at a minimum. literacy and ICT exposure at a minimum.

Strategies

Support Competition and Privatization Policies (e.g., regulatory reform)

Facilitate Infrastructure Financing by the Private Sector

Invest in Digital Literacy

Explore Digital Opportunities (e-government, support development of relevant content, public-private partnerships to expand access)

Closing the Digital Divide:A Four-Part Program

ICT and Economic Growth - enhanced competitiveness- increased business opportunities - access to market for rural communities

ICT and Improved Delivery of Social Services- better health/education/environmental 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

ICT and Poverty Reduction

Sustainable Growth

Financial Intermediation

SectoralPolicy

Knowledge Intermediation“Knowledge Bank”

Capacity Building

Poverty Reduction

Role of the World Bank Group

Sovereign Loans

Advisory Services

Partial risk guarantees

infoDev Grants

Direct project loans

Loan syndications

Mezzanine financing

Equity participation

GovernmentRole

PrivateSectorRole

Global ICT Instruments

Development Gateway

Global Development Learning Network

infoDev

Global Development

Network

Global Knowledge

Partnership

African Virtual University

WorldLinks

http://www.worldbank.org/knowledgebank/

The Knowledge Initiatives

Development Gateway Foundation Development Gateway Foundation

http://www.dgfoundation.org

The Development GatewayThe Development Gateway — using the power of the Internet to — using the power of the Internet to connect people, knowledge, and poverty reductionconnect people, knowledge, and poverty reduction

ICT Development ForumICT Development Forum – bringing people and ideas together for – bringing people and ideas together for discussiondiscussion

Research and Training NetworkResearch and Training Network – creating opportunities in the – creating opportunities in the developing world for good ideas and people to advancedeveloping world for good ideas and people to advance

Grants and InvestmentsGrants and Investments – funding initiatives that narrow the – funding initiatives that narrow the Digital DivideDigital Divide

The Foundation’s Four Major Initiatives

The Foundation’s Four Major Initiatives

Development Gateway FoundationDevelopment Gateway Foundation

www.developmentgateway.org

Development Gateway

Value Proposition of the PortalValue Proposition of the Portal

Helping solve development problems by sharing high-Helping solve development problems by sharing high-quality information from local, national and global quality information from local, national and global sources, tailored to users’ needs.sources, tailored to users’ needs.

Providing a platform for establishing common standards Providing a platform for establishing common standards for the exchange of information within the development for the exchange of information within the development communitycommunity

Supporting an electronic marketplace for government Supporting an electronic marketplace for government procurement information related to development procurement information related to development agenciesagencies

Leveraging capacity building and knowledge sharing via Leveraging capacity building and knowledge sharing via a network of Country Gatewaysa network of Country Gateways

Thank youThank [email protected]@worldbank.orgwww.developmentgateway.orgwww.developmentgateway.org

Fighting the Digital Divide Carlos A. P. Braga Senior Manager, Informatics Program Information...

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