IDA at Work Information and Communication Technologies in IDA Countries: New Opportunities for Connecting People, Transforming Service Delivery, and Fostering Innovation The International Development Association (IDA) committed US$101 million in support to stand-alone projects in the Information and Communication Technologies (ICT) sector in fiscal year 2010, bringing its total commitment to US$1 billion since 1997. These investments have supported the dramatic improvement in access to telecommunications services in IDA countries. Between 1998 and 2008, the number of subscribers in IDA countries has risen from around 1 percent to 30 percent of the population, or more than 300 million subscribers. Mobile phones are boosting economic productivity, raising incomes of families and small businesses, and providing an important source of government revenue. Key remaining challenges include (i) improving affordability in order to reach one-third of the population of IDA countries who currently lives beyond the ICT networks, (ii) widening access to more advanced, affordable ICT services such as broadband for high-speed internet, and (iii) leveraging the new ICT infrastructure to improve the delivery of services and to build on it as a source of economic growth. Challenge ICTs have a positive impact on economic growth. It is estimated that a 10 percent increase in telephone subscriptions per 100 people contributes to 0.6 percent GDP growth around the world, and every ten percentage point increase in broadband subscriptions per 100 people is associated with 1.38 percentage points additional GDPgrowth in developing countries. Access to information and communications technology in IDA countries is boosting economic 91587
productivity, raising incomes of families and small businesses, and providing an important source of government revenue. Many IDA countries are also using ICTs to improve the quality and efficiency of public service delivery. This underscores the importance of access to ICTs, not only as a Millennium Development Goal (MDG) target in itself, but also as an enabler for reaching the other MDG goals. There are now over 300 million telephone subscribers in IDA countries, with a further 619 million in countries borrowing from both IDA and the International Bank for Reconstruction and Development (IBRD). Mobile networks have expanded rapidly and now cover 63 percent of IDA s population. The average price of mobile calls has fallen 15 percent per year between 2001 and 2008 and in some cases, such as Bangladesh, mobile tariffs have dropped by nearly 90 percent since 2000. Currently, the average price of a mobile call in Bangladesh lies between 1 and 2 US cents per minute, bringing pre-paid telephone services within financial reach of the majority of the population. The success of the mobile market is beginning to be replicated in other segments of the ICTindustry. The number of internet users in IDA countries has risen from less than 0.1 percent of the population to 5 percent in the last decade, and prices began to fall; the average price for 20 hours per month of Internet service in IDA countries has fallen by 37 percent over the same period. Despite these successes, major challenges remain for the sector. One-third of the population in IDA countries currently lives beyond the reach of these networks - a major infrastructure gap that needs to be filled. Although prices have fallen over the last few years, they remain high in many IDA countries, putting ICT beyond the economic reach of the poor. Advanced ICT services such as broadband need to be more affordable and access needs to be widened. At the same time, the IDA countries face the challenge of leveraging the new ICT infrastructure to improve the delivery of public services and to build on it as a source of economic growth. Approach IDA has worked with many countries to reform their telecommunications sectors. It has provided extensive technical assistance to support privatization and liberalization and continues to support capacity-building for governments and regulatory institutions. In Afghanistan, for example, IDA-supported sector reform has resulted in a competitive telecommunications market that has attracted over US$1.2 billion in private investments, improving access to ICT services and reducing prices. IDA support is evolving to reflect the new challenges faced by the sector. Technical assistance and investment operations are increasingly focusing on closing the rural infrastructure gap, investing in broadband infrastructure, using ICT to improve the delivery of public services and supporting the growth of the information technology (IT) and IT-enabled services industry. In East Africa, IDA funded the development of the Eastern African Submarine System (EASSy), a submarine fiber-optic cable connecting the countries of eastern Africa to the global communications networks. The project was subsequently financed by the International Finance Corporation (IFC), together with other Development Finance Institutions 2
(DFIs) and the private sector. Prior to the launch of this high-speed cable infrastructure, the whole of the central and eastern side of Africa was dependent on expensive satellite connections for its regional and international communications. IDA is also increasingly supporting governments to use ICT infrastructure to deliver public services and to develop the IT industry as a source of economic growth and development. The eghana (US$84.7 million), erwanda (US$10 million), and ebenin (US$15 million) projects are all recent examples of such support. Results Achieved with IDA Support Following reforms that introduced competition, over US$42 billion of private funds were invested in the information and communication technology (ICT) sectors of IDA countries between 1997 and 2008. Annually, the sector generates revenue equivalent to around 4 percent of gross domestic product (GDP) of which 20-30 percent is returned to government in the form of tax and licensefee revenues World Bank support in the ICT sector spans a wide range of activities and includes many notable successes. In Afghanistan, the sector reforms supported by IDA contributed to an increase in the number of telephone subscribers from 57,000 in 2002 to almost 13.4 million by 2010, raising total telephone penetration (fixed plus mobile) of 0.2 percent in 2002 to over 27 percent in 2008. The Afghan telecommunications sector now contributes an estimated US$75 million in taxes annually. In 2002, it cost about US$400 to own a mobile phone and US$2 for every minute of talk time. Today, people there can own a mobile phone for less than US$50 and spend less than 10 cents per minute for talk time. The total project cost was financed by a US$22 million IDA credit. An additional US$6.1 million came from the Afghanistan Reconstruction Trust Fund (ARTF), and the Public Private Infrastructure Advisory Facility (PPIAF) provided a grant of US$480,000. In Nicaragua, the privatization of the incumbent telephone operator in 2001 and the introduction of full competition in the sector in 2005 helped bring about a ten-fold increase in mobile subscriptions by 2010. Total telephone penetration (fixed plus mobile) increased from 6 percent in 2001 to 25 percent in 2005, and ultimately to over 60 percent in 2008. However, many parts of rural Nicaragua still do not have telephone service, especially areas in which a majority of the poor live. The current Rural Telecommunications Project helped increase access in these areas. More than 350,000 people in 350 rural communities now have access to telephone services for the first time. More than 860,000 people in 104 rural towns have Internet connection for the first time and over 3,000 houses, small businesses and government offices have been connected in these towns at the same price as customers in the capital, Managua. The total project cost was US$10 million, of which IDA contributed US$7 million and the Government of Nicaragua contributed US$3 million. These funds leveraged private sector resources, on an output-based aid approach, to invest in the telecommunications infrastructure in rural Nicaragua. In Ghana, the government s proactive policies, combined with support from IDA and 3
other development partners, contributed to a competitive and vibrant industry with a telephone penetration of over 60 percent. The US$84.7 million World Bank-funded eghana project is building on the IT-enabled services industry, including support to develop a Business Process Outsourcing center. Over 1,000 jobs have been created in the industry during the last two years. Already the 2009 AT Kearney Global Services Location Index has ranked Ghana 15th out of 50 countries in terms of location attractiveness, and first in terms of financial attractiveness. The additional partnership between the public and private sector to train some 50 training institutions and 6,000 business process outsourcing agents is expected to further strengthen Ghana s position as one of the most attractive locations for IT-enabled services business in Africa. In Rwanda, the erwanda project (US$10 million IDA grant) is supporting the government s efforts to use ICT for improving service delivery. The project has funded networks in government ministries and district offices around the country, and supported the development of a government portal linking government information and websites. By establishing telecenters and four ICT busses that travel throughout the country and train villagers in using ICTs, the project is providing services to populations that currently do not have ICT access. IDA Financing and Other Support The World Bank has provided a broad range of support to governments in the ICT sector from small standalone technical assistance assignments of under $200,000 to large regional investment programs such as the Regional Communications Infrastructure Program in East Africa. Many of the investment projects also include technical assistance components. IDA committed US$101 million in support to the ICT sector in FY2010, bringing its total sector commitment for investment and technical assistance to US$1 billion since 1997. The Regional Communications Infrastructure Program has approval for a total funding envelope of US$424 million. It is organized in phases with Burundi, Kenya and Madagascar in the first phase (US$165 million) in 2007 followed by Rwanda (US$24 million) in 2008 and then by Malawi, Mozambique, and Tanzania (US$151 million) in 2009. A forthcoming phase for Uganda and Zambia is estimated at US$85 million. The project in each country is tailored to suit its specific needs. In most countries, the projects support the development of regional backhaul infrastructure and finance the purchase of capacity on the submarine cables for targeted users (rural and underserved areas, governments, universities, and hospitals). In Africa, under the umbrella of the Regional Communications Infrastructure Program, IDA is working with other development partners to develop broadband connectivity both within the region and by connecting it to the global communications network. The program is also helping countries utilize these improvements in connectivity to improve the transparency of government administration and public service delivery. In Nicaragua, the total project cost was US$10 million, of which IDA contributed US$7 million and the Government of Nicaragua contributed US$3 million. These funds leveraged private sector resources, on an output-based aid approach, to invest in the telecommunications infrastructure in rural Nicaragua. 4
In Afghanistan, IDA financed a US$22 million IDA credit (an additional US$6.1 million came from the ARTF, and a further US$480,000 from PPIAF that has been catalytic in establishing the policy and regulatory framework for a sector that is largely private sector driven. In addition, IDA is providing US$18 million to support e-government services in Ethiopia, US$10 million for e-development in Rwanda and US$93 million for similar activities in Vietnam. Partners The Bank has worked extensively with other partners in the ICT sector. The preparatory work on EASSy was done in partnership with other donors and the funding was done jointly by the IFC and four other DFIs: the French Société de Promotion et de Participation pour la Coopération Economique (PROPARCO), European Investment Bank, African Development Bank (AfDB), and Kreditanstalt für Wiederaufbau Bankengruppe (KfW) of Germany. IDA and AfDB are also working together on the Central Africa Backbone program. Moving Forward The reform of the telecommunications sector in IDA countries has been a major success, driving economic growth, creating opportunities and providing a platform for growth across the economy. This process of private investment and competition will continue to expand network coverage in IDA countries. However, many challenges remain and these form the center of IDA s strategy for the sector. Improving broadband infrastructure is an increasingly important part of many countries economic strategy. IDA is supporting countries through a combination of technical assistance and investments. The focus of these investments is the core area of the broadband value-chain: submarine fiberoptic cables, landing stations and terrestrial broadband infrastructure. The growth of low-cost connectivity provides a major opportunity for countries to improve their public service delivery. Countries like Rwanda and India are already leading the way in this by using ICTs to improve the management of rural health centers and introducing IT to the management of the land title administration system. These initiatives have improved the quality of service delivery and reduced opportunities for corruption. The World Bank is supporting this trend, working across sector departments to introduce modern technology into the public sector. IDA will also see more support for governments to develop their IT and IT-enabled business sectors, following the lead of countries like India and the Philippines. In a recent study by the World Bank, it is estimated that the potential market for offshoring of IT and ITenabled services is US$500 billion, of which only about 20 percent has been realized. One of the main constraints for developing countries to benefit from this opportunity is the lack of skilled manpower. The World Bank is helping developing countries in growing their talent pool through programs like the New Economy Skills for Africa Program that leverages IDA funding for launching skill assessments, training and certification programs. Last updated September 2010. http://www.worldbank.org/ida 5