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Financing ICT for Development
World Bank Group
8 October 2009
Investment in ICT has a major impact on economic development and this impact is
increasing as ICT technology becomes more widely used. A recent study published by the World
Bank1 found that, in developing countries, for every additional 10 percentage points in
broadband penetration that a country achieves, GDP growth increases by 1.4 percentage points.
Given this key role that ICT plays in countries’ economic development strategies, the financing
of investment in the sector is a key issue for policy-makers.
Developing countries have undergone an ICT revolution over the last 15 years. Market
reforms, institutional development and competition have generated very high levels of
investment (mainly private) in developing countries. This investment has translated into rapidly
expanding voice network coverage, increased availability of basic ICT services and lower prices.
Around US$30 billion was committed to investments in telecommunications networks in lowincome countries between 1997 and 2007 and over 53 percent of the population now live within
reach of wireless networks. By 2007 there were over 250 million telephone subscribers (fixed
and mobile) in these countries and this number has since continued to grow rapidly as prices fall
and networks expand.
Despite the success of sector policy reform in stimulating network roll-out, many
developing countries lag behind their peers. The reform agenda in the ICT sector is far from
complete. Much remains to be done, particularly in the field of stimulating competition and
rolling-out networks into rural areas. The agenda is also rapidly evolving, moving beyond access
to basic voice services to high-speed internet services. Broadband penetration rates are rising
quickly in many countries, providing access to advanced ICT services which are changing the
way people do business and live their lives. We are only just beginning to see the impact of
broadband on economic and social development. We expect to see the same positive impact in
developing countries, as broadband networks grow and penetration rates increase. The major
new policy challenge facing developing country governments is therefore how to stimulate
investment for the roll-out of broadband networks and the provision of broadband services at
affordable prices.
Market reform and competition is likely to continue to be a major driver of broadband
network growth in developing countries. Operators throughout the developing world are already
investing in upgrading their networks to be able to provide broadband services and, in some
countries such as China and India, we are beginning to see rapid increases in the number of
broadband subscribers.
In many developing countries, the primary means of customer access to broadband will
be through wireless technologies. The flexibility of wireless networks has been a key driver of
1
Economic Impacts of Broadband, Christine Zhen-Wei Qiang and Caro Rossotto, with Kaoru Kimura; in 2009
Information and Communications for Development; World Bank
success in the voice network revolution and the same factors are likely to play a role in
broadband roll-out in developing countries. By providing access to radio-spectrum and creating a
competitive retail market for broadband services, governments will trigger private investment
into broadband networks. There has been, and continues to be, major private investment into
submarine fiber-optic cables and competition between them is improving access to low-cost
international connectivity. Finally, the emergence of broadband standards such as 3G, WiMax
and LTE combined with global competition between network equipment and handset
manufacturers will drive down costs, thereby making it more profitable to roll-out broadband
networks in developing countries.
High-capacity fiber-optic backbone networks are essential for carrying broadband
communications traffic, reducing costs and improving the quality of broadband services. In
countries where the infrastructure market has been fully liberalized, we are seeing investment
into fiber-optic networks and the emergence of competition. However, many countries retain
regulatory restrictions on the development of fiber-optic networks and operators find it difficult
to obtain access to the necessary regulatory and planning permissions to develop them.
Governments can therefore stimulate network investment by removing these regulatory
restrictions and by giving operators access to public network infrastructure such as railways,
pipelines and electricity transmission lines.
Even if these measures are implemented, private investment into broadband networks is
still likely to focus on the most profitable routes, usually between major population centres.
Smaller towns and rural areas are not attracting enough private investment into networks to
provide mass market broadband services to these markets. Consequently, bottlenecks do remain
and retail broadband services are either not available or too expensive for mass market lowincome consumers. In this context, governments have a key role to play in supporting the
financing of fiber-optic networks in these areas. There are many different models for doing this
but the ones that are most likely to succeed are those in which the private sector, in partnership
with government, is closely involved in the design, construction and operation of the networks.
The World Bank, together with other international partners such as the African
Development Bank, is playing a role in expanding networks through financing of strategic
public-private partnership investments to support the development of key parts of the
infrastructure. International submarine cables, cross-border connectivity and high-capacity
domestic backbone networks are all examples of areas in which World Bank investments play a
catalytic role, crowding-in private sector investment and improving service delivery. Examples
of such programs include the EASSy cable along the East coast of Africa, the Regional
Communications Infrastructure Program ($424m) throughout Eastern and Southern Africa and
the recently approved Central Africa Backbone project ($215m). In these programs, the World
Bank and its partners are supporting governments in overcoming these key infrastructure
bottlenecks. Similar programs are under development with World Bank support in West Africa,
as well as in the Caribbean and Pacific regions. Approximately US$1 billion of World Bank
funds was committed for activities related to information and communications technology in
low-income countries around the world between 1997 and 2009.