unctad.org | INTERNET GAP HAMSTRINGING BUSINESSES IN DEVELOPING COUNTRIES, UNCTAD INFORMATION ECONOMY REPORT 2005 FINDS
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INTERNET GAP HAMSTRINGING BUSINESSES IN DEVELOPING COUNTRIES, UNCTAD INFORMATION ECONOMY REPORT 2005 FINDS

UNCTAD/PRESS/PR/2005/045
10 November 2005

Practice of e-business, broadband links are scarce in poorer nations, survey determines, but mobile telephone use is surging and playing a significant role in development


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Africa and other non-industrialized regions - which already face numerous obstacles in the areas of commerce and trade - are facing a competitive disadvantage as businesses around the world increasingly use the Internet, a new UNCTAD report finds. But mobile telephones are proving to have great advantages for development in the world´s poorer nations.

The Information Economy Report 2005(1) (IER 2005) points out that use of the Internet for obtaining and providing business information, carrying out financial transactions, setting up deals, and finding and nurturing customers, is growing rapidly in a limited number of developing countries that have succeeded in participating in the wired economy. The Internet is a tool that can help firms find contracts and clients in ways never before possible - but only 3.1% of Africans had access to the Internet in 2004, and less than 1% had access to the broadband connections that are most useful for business and related financial activities. Although use in South-East Asia and other developing regions is higher, even in China - the world´s second-largest Internet market - there is an Internet penetration rate of only 7.2% inhabitants.

The gap in business use between the developed and non-developed world appears to be vast, the report states. Some 89% of enterprises in European Union nations are connected to the Internet. Figures are scarce for developing countries, but while Trinidad and Tobago, where 77% of firms are connected, and Singapore (76%), have high rates of business use, connections in Mauritius (5%) and Thailand (9%) are much lower. Many developing countries cannot even provide statistics on the topic. It also appears that the small and medium-sized enterprises that are considered essential for economic growth and employment in developing countries - and which can benefit greatly from e-business - are much less likely to be Internet-connected than larger firms, and are extremely unlikely to have broadband links.

By speeding up all Internet-related business activities, such as using interactive web pages and data files, handling customer requests, or automating supply-chain management, broadband enables companies to work more efficiently and respond quickly to customers´ needs. The report states that broadband is spreading quickly in developed countries and in a few Asian developing nations, but most of the world´s poorer countries lag far behind. Broadband penetration rates of less than 1% were found even in nations relatively advanced in information and communication technology, such as South Africa, Mauritius, Egypt and Tunisia. Similarly, while e banking and other financial services are used by 68% of enterprises in the EU, almost no developing economies covered by the UNCTAD survey report are employing the Internet for these purposes.

The survey found that use of the Internet continues to grow in all regions and that some of the most rapid increases are in the developing world. The highest growth rates have been in Africa. But the gap between haves and have-nots is closing only slowly. Complicating the picture is that Internet use is relatively costly in poorer nations, the apparent result of limited and less efficient technology, fragmented bargaining by service providers in developing countries with the firms that provide international linkages, and a general lack of telecommunications skills and market knowledge. The report recommends that international support be provided to help overcome these obstacles. It also recommends ways for service providers in poorer nations to cooperate so that they have greater clout when negotiating deals for international connections. (See UNCTAD/PRESS/PR/2005/046)

Concern in previous decades over a computer shortfall in developing countries emphasized the role played in business competitiveness by computerized statistical applications, record keeping, and telecommunications. But the IER notes that practical business use of the Internet - with its increasing capacities for financial transfers, credit assessments, self-advertisement far afield, and rapid exchange of records and statistics - poses a completely different level of challenge for less developed nations. These countries not only have to extend Internet access widely to businesses but need to modernize and bring up to standard their banking, credit, accounting and cyber security systems to enable domestically based firms to play on a level field with international competitors.

One technological breakthrough that has had more rapid and positive results for developing countries is the mobile telephone. Developing countries have now overtaken industrialized nations in the absolute number of cellular phone subscribers, and growth has been surging. (For example, mobile phone penetration in Tunisia went from 6% in 2002 to 36 % in 2004.) Moreover, per capita rates understate actual use: in developing countries a single mobile phone is frequently shared by several people, especially in poor or rural communities. In addition, people at all income levels are able to take advantage of mobile services either through owning a phone or using someone else´s.

According to the IER, among all forms of information and communication technology, mobile telephones appear to have the most significant impact on development in poorer nations. They are used for more than simple communication - often they are a business tool by which producers and buyers shop around for prices and vendors can be paid; commercial networks can be set up quickly and higher profits won for products because the phones expand the information base and geographical reach of small businesses. The importance accorded to these benefits is reflected in the larger share of income that developing country users spend on telecommunications as compared with users in industrialized countries - and in the rapid growth of cell-phone use. The number of mobile subscribers in Africa increased from 15 million in 2000 to over 80 million in 2004, a rise of 433%.

A shortage of data and comparable statistics on e-business has to be overcome if governments are to close the gap between richer and poorer nations, the report states. Improving the production of data and statistics on information and communications technology (ICT) is important not only for analysing trends and monitoring impact, but for designing government policies and strategies. For example, ICT data collection allowed Trinidad and Tobago to identify a series of obstacles to the use of the Internet by domestic firms; these included low general Internet penetration, low availability of business and government online services, no definitive bandwidth policy, a weak telecommunications sector, and a high incidence of "brain drain" in which computer-savvy citizens have left for employment elsewhere. The country is now developing a national ICT plan.

UNCTAD is participating in a global Partnership on Measuring ICT for Development to coordinate work on ICT statistics and to help developing countries collect comparable data.

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Endnotes

1. The Information Economy Report 2005 (Sales No. E.05.II.D.19, ISBN 92-1-112679-7) may be obtained from UN sales offices at the addresses below or from UN sales agents in many countries. Price: US$ 45.00. Customers wishing to obtain quotations for large quantities should contact the sales offices. Please send orders or enquiries for Europe, Africa and Western Asia to United Nations Publication/Sales Section, Palais des Nations, CH-1211 Geneva 10, Switzerland, fax: +41 22 917 0027, e-mail: unpubli@un.org ; and for the Americas and Eastern Asia, to United Nations Publications, Two UN Plaza, DC2-853, New York, NY 10017, USA, tel: +1 212 963 8302 or +1 800 253 9646, fax: +1 212 963 3489, e-mail: publications@un.org, Internet: http://www.un.org/publications






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