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Information Economy Report 2011: ICTs as an Enabler for Private Sector Development - Overview

Report by UNCTAD, 2011

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Subtitled, ICTs as an Enabler for Private Sector Development (PSD), this is the sixth in the flagship series published by the United Nations Conference on Trade and Development (UNCTAD). The Report shows that the potential of leveraging information and communication technologies (ICTs) to develop the private sector is far from fully exploited. It finds that many national and donor strategies related to PSD currently fail to take adequate account of the ICT potential, which has greatly expanded thanks to changes in the global ICT landscape. The Report then makes policy recommendations on how to remedy this situation.



xiiiEXECUTIVE SUMMARY


The Information Economy Report 2011 demonstrates
that effective use of information and communication
technologies (ICTs) in both the private and the public
sector can significantly contribute to and accelerate
progress in private sector development (PSD).


Governments and their development partners should
take a holistic and comprehensive approach to lever-
aging ICTs in PSD, although a review of PSD strategies
indicates that this is often not the practice. Similarly,
donor strategies often refer to the use of ICTs in PSD
in a peripheral manner only, if at all. On its own, new
technology will have limited effects on PSD. However,
when carefully integrated into policies and processes,
ICTs can reduce business costs, promote transpar-
ent, rules-based systems, and improve communica-
tion between the public and private sector. Govern-
ments need to work with the private sector to create
an investment climate and a business environment
that encourage the use of ICTs within private firms as
well as in government. The potential of ICTs can then
be realized, through adequate infrastructure and skills,
and a commitment by governments to making mar-
kets work effectively. In some areas, there is already
considerable experience and evidence to guide policy
initiatives. In other areas, where opportunities for ICTs
to contribute to PSD have emerged only in the past
few years (as in the case of mobile money services),
more analysis and testing of different business models
is needed to assess potential and identify best prac-
tices.


Enterprises face many challenges which reflect the
need to make markets work better, to make internal
management and production systems more efficient,
to facilitate improved access to information, knowl-
edge, financial services and other resources, and to
make business environments more transparent and
enabling. The effective use of ICTs can help to im-
prove all of these areas and thereby pave the way for
more enterprise creation and expansion. The Informa-
tion Economy Report 2011 identifies four facets of
the ICT–PSD interface, which serve as a basis for its
policy recommendations.


Firstly, the quality of the ICT infrastructure is an increas-
ingly vital determinant of the overall investment climate
of a country. Governments and their development
partners need to ensure that the ICT infrastructure


meets the needs of different kinds of enterprises, from
micro- and small enterprises (MSEs) to larger, transna-
tional corporations. Leveraging the opportunities cre-
ated by mobile telephony and its related services and
applications is particularly important for smaller enter-
prises in low-income countries. Mobile broadband will
require more attention in the coming years as a new
way for the private sector in developing countries to
leverage the Internet. In order to speed up the roll-out
of mobile broadband, Governments need to allocate
spectrum, and license operators to provide the ser-
vice. Indeed, at the end of 2010, some 50 developing
and transition economies were yet to launch mobile
broadband services.


Secondly, enterprises must be able to make the best
use possible of ICTs, as they positively affect produc-
tivity in both large and small enterprises. Different kinds
of ICTs help enterprises to manage their resources
more efficiently, access the information needed for
better business decision-making, reduce transaction
costs, and enhance their ability to bring products and
services to customers. Governments should play a
key role in enhancing business use of ICTs in PSD by
– for example – ensuring that relevant ICT tools and
services are available and affordable, and providing a
legal and regulatory framework that supports the up-
take and productive use of ICTs.


Thirdly, supporting the ICT sector itself is important.
The production of ICT goods and services is provid-
ing new opportunities for private firms to start up and
grow, create jobs, and spur innovation, thereby con-
tributing to overall economic growth. Governments
can create an enabling framework for the ICT sector to
expand by liberalizing the sector, enhancing competi-
tion in all segments, providing adequate regulations,
increasing trust in the use of ICT services, providing
training in ICT skills, nurturing ICT enterprises through
incubation and by establishing technology parks, and
using public procurement to create demand among
local ICT enterprises.


Fourthly, Governments and other institutions can ap-
ply ICTs to make PSD interventions more effective –
both in business environment reforms, and in the pro-
vision of business development, business information
and financial services. ICTs can reduce the cost of de-
livering such services, extend their reach, and improve


EXECUTIVE SUMMARY




xiv INFORMATION ECONOMY REPORT 2011


the functioning of markets. The Information Economy
Report 2011 gives some examples: agricultural exten-
sion services, providing business development train-
ing material online, establishing business helplines,
crowd-sourcing to detect and fight pests and dis-
eases, and ICT-related initiatives aimed at helping
small-scale producers to meet certification standards
and acquire the skills needed to boost exports. To be
successful, ICT–PSD solutions need to factor in both
user needs (in terms of what information and other
inputs are needed), and possible constraints (e.g. il-
literacy, aversion to using new tools, scarce electricity,
and unaffordable user charges and prices). Involving
the private sector in designing and providing training
and advisory services can help ensure that the ser-
vices offered are demand-driven. At the same time,
more research and rigorous impact assessments are
needed in order to identify best practices in this area.


The introduction of new mobile money systems is one
of the most promising opportunities for leveraging
ICTs for PSD. Mobile money systems have provided
increased access to finance for MSEs, which have tra-
ditionally had greater difficulty than larger enterprises
in benefiting from existing financial services. The sys-
tems allow for real-time transfer and receipt of small
amounts of funds at low cost, and can also reduce
the costs of processing and administering small loans,
thereby alleviating a significant disincentive for lend-
ers to extend credit to micro- and small enterprises.
At the same time, they raise important policy issues
and challenges for Governments, and deserve atten-
tion from policymakers and the research community in
order to ensure positive outcomes.


It is still too soon to fully assess the impact of mo-
bile money solutions on access by MSEs to financial
services. Uptake will accelerate as more enterprises
become active users of the systems, and when ser-
vices are well adapted to their needs. Key policy areas
requiring consideration are the institutional and regula-
tory framework, user issues, crime and security con-
siderations, and infrastructure. Many Governments
will have to pioneer new legislation and regulations,
and the international community should actively sup-
port the development of sound regulatory frameworks
and relevant institutions, as well as supporting the ex-
change of practice and expertise.


Another distinct area of PSD that can be better ad-
dressed by the use of ICTs is women’s entrepreneur-
ship. While ICTs do little to redress underlying societal
structures and economic systems that hamper oppor-


tunities for women entrepreneurs, they may be used
to overcome some of the challenges that women face,
including access to finance, limited skills and training,
lack of time due to family commitments, and limited
physical mobility. Initiatives and training programmes
must be developed bearing in mind these constraints,
and with the active participation of the women entre-
preneurs that they are to assist.


Finally, the Information Economy Report 2011 makes
a series of policy recommendations:


(a) Promote affordable access to relevant ICTs,
taking into consideration what improvements
in the ICT infrastructure are required to support
private sector activities.


(b) Enhance investment in, and the use of ICTs by,
private firms to reduce the costs of business
transactions, improve business management,
and enhance the capacity to get goods and
services to the market.


(c) Include ICT modules in business skills training
programmes. Such training may range from
providing advice on using mobile phones as
a business tool to more advanced training
in using technologies and applications to
improve operational management, customer
relationship management or resource planning.


(d) Adopt regulatory frameworks that help
to enhance confidence in the use of new
technology or new applications of known
technology. In many countries, adequate legal
and regulatory frameworks are still needed in
order to fully realize the potential of electronic
transactions.


(e) Facilitate the expansion of the ICT sector.
Governments should consider how best
to tap into new opportunities presented by
the production of ICT goods and services.
Governments could facilitate ICT growth and
employment creation through policy that is
aimed at improving the availability of skills,
stimulating demand for ICT uptake among local
firms, providing appropriate ICT infrastructure
and regulatory frameworks, promoting and
clustering entrepreneurship and innovations
through incubation and ICT parks, and using
government procurement.


(f) Make ICT use an integral part of business
environment reforms. When applied effectively,
ICT-based solutions have reduced the time and
cost of registering companies and obtaining
licences, and have increased government




xvEXECUTIVE SUMMARY


revenue and transparency. A simplified
company registration process may also
encourage informal enterprises to formalize
– another key PSD objective. ICTs have been
able to connect formal and informal businesses
to market opportunities, and it should also
be possible to connect them to government
programmes and services.


(g) Leverage different ICT tools in the delivery
of business development and information
services. Better use of ICTs could extend the
reach of BDS to new and growing enterprises,
by overcoming the tyranny of distance and
reducing the cost of service delivery.


(h) Leverage mobile money services to create
more inclusive financial markets. Mobile
money services hold great promise in
reducing the costs of providing financial
services, especially to MSEs. The international
community should support the development
of regulatory frameworks and institutions.


(i) Recognize the ICT potential in existing or new
initiatives to support women entrepreneurs.
More programme and policy attention should
be given to the use of ICTs in addressing the
specific needs of women entrepreneurs.


(j) Better reflect ICTs in donor PSD strategies.
Strategies should address the ICT–PSD
interface in a comprehensive way and explicitly
recognize the importance of multi-level use of
ICTs.


(k) 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
programmatic partners, on how to best
integrate ICTs into PSD strategies. Such
guidelines would help to establish a bridge
between donor assistance related to PSD
and donor assistance related to ICT for
development.


(l) Make interventions more demand-driven,
and leverage partnerships. To enhance ICTs’
contribution to PSD, policies must be designed
and implemented with a solid understanding
of the specific needs and situation of diverse
enterprises. The input and engagement
of enterprises in programme design and
implementation should be sought. Such a
demand-driven approach will require effective


partnerships between Governments, donors,
the private sector and civil society.


(m) Devote adequate resources to the measurement
of ICT use and impact assessments. There is
an absence of systematic, evidence-based
impact evaluation regarding the use of ICTs to
promote PSD, resulting in reliance on anecdotal
evidence. There is a need for reliable and
internationally comparable statistics related to
both enterprise and government use of ICTs,
and for more comprehensive project and
policy evaluations based on empirical evidence
conducted through independent research.


A vibrant private sector contributes to building the
foundations in an economy to generate the resourc-
es needed to address the Millennium Development
Goals. It is time for Governments and their develop-
ment partners to start integrating ICT solutions in a
systematic and comprehensive way when designing
and implementing interventions aimed at nurturing the
private sector. It is hoped that the analysis and rec-
ommendations presented in the Information Economy
Report 2011 will provide valuable input into this pro-
cess.


Supachai Panitchpakdi
Secretary-General, UNCTAD




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