Week 3 Discussion: FINANCING ICT4D IN UGANDA

1. Introduction

The third week of the WSIS online forum focuses on financing mechanisms for ICT4D in Uganda. The Plan of Action adopted at the World Summit on the Information Society in Geneva 2003 requested the Secretary General of the United Nations to create a Task Force to study the issue of financial mechanisms for ICT for Development (ICT4D) and present a report to facilitate discussions in the second phase of WSIS:

While all existing financial mechanisms should be fully exploited, a thorough review of their adequacy in meeting the challenges of ICT for Development should be completed by the end of December 2004. This review shall be conducted by a Task Force under the auspices of the Secretary General of the United Nations and submitted for consideration to the second phase of this summit. Based on the conclusion of the review, improvements and innovations of financing mechanisms will be considered including the effectiveness, the feasibility and the creation of a voluntary Digital Solidarity Fund, as mentioned in the Declaration of Principles.

The Secretary General asked the United Nations Development Programme (UNDP) to lead the Task Force in conjunction with the World Bank and UN DESA. The Task Force’s report was released in January 2005, and is available online at http://www.itu.int/wsis/tffm/final-report.pdf.

This online forum will focus on the three position that arose from the issue of financing ICT for Development (ICT4D). The three positions are outlined here as rough and ready arguments for the purpose of stimulating discussion on the issue rather than as fully developed arguments.

2. Proposals for financing ICT4D

2.1 Position One: Market solutions based on creating Enabling Policy Environments

The first position makes the following argument:

1. There are existing financial mechanisms for financing ICT4D, which are not being fully exploited by developing countries.
2. They are not fully exploited because many developing countries lack an enabling ICT policy and regulatory environment to attract investment for ICT4D.
3. Therefore, the solution to the problem of financing ICT4D is not the creation of new funds but the more effective utilisation of existing financial mechanisms.
4. If developing countries create enabling policy environments, they would be able to access finance for their ICT requirements.[i]

2.2 Position Two: A voluntary Digital Solidarity Fund

The second position makes the following arguments:

1. There is a growing digital divide between developed and developing countries, which threatens to exclude vast numbers of people, particularly in Africa, from access to the information society.
2. The digital divide is a function of a financing gap for ICT4D in developing countries and could be resolved by an act of digital solidarity.
3. Therefore, a Digital Solidarity Fund (DSF) is needed to bridge the digital divide by raising new sources of finance for ICT4D from the developed world.
4. The DSF could be funded by voluntary contributions from the private sector in developed countries and small amounts collected on the sale of digital equipment and software. [ii]

2.3 Position Three: Mandatory global taxation for a Global ICT Fund

The third position makes the following argument:

1. Extending access to the Information Society in developing countries is a global public good[iii] that benefits everyone because of the value of network externalities. The value of the global information network increases in value as more national networks and business and individual users are added.
2. The global economy runs on global information networks to create a global marketplace. The private sector in developed countries stands to benefit from the extension of ICTs in developing countries and should help pay for ICT4D as a global public good.
3. Therefore, a Global ICT Fund should be established, similar to the Global Environmental Facility, which could raise funds through a global tax on microchips, for example.[iv]
4. The proceeds of the Global Fund would be directed towards building information societies and economies in developing countries.

Linked to the global public good argument is a case for greater coordination:

• Existing financial mechanisms for ICT4D do not extend beyond the borders of the market.
• The lack of enabling policy and regulatory environments in developing countries is a barrier to attracting ICT investment from existing financial mechanisms.
• A dual strategy needs to be developed for financing ICT4D:
  1. Where existing mechanisms are not being fully exploited, greater coordination is needed to align sources of finance with enabling policy environments.
  2. Where existing financial mechanisms are unable to go beyond the borders of the market, then new sources of finance should be mobilised, domestic and international public finance should be utilised and innovative policy models for bridging the digital divide should be created.

3. A New Policy Paradigm for ICT4D

A new policy paradigm could be considered for ICT4D. Non-profit network operators could be licensed to provide open access networks to service providers. The service providers would offer a range of services to small businesses and consumers, particularly in areas under-served by the market. Governments could support the emergence of these open access networks by:

• Including them as priorities in their country strategies and Poverty Reduction Strategy Papers (PRSPs), so as to enable the non-profit network operators to access finance from a range of financial mechanisms;
• Creating policy and legislation governing their licensing and operations by the regulatory authority, such as licence conditions specifying their non-profit status and limitation from competing with service providers, the waiver of licence fees and universal service obligations, the right to cost-based interconnection with other networks and wholesale tariffs for leasing facilities from other networks, the right to provide VoIP and the right of service providers to resell bandwidth, the right to obtain frequency spectrum, etc.
• Creating competition rules that allow non-profit organisations to operate networks under favourable conditions in compensation for the extension of network facilities into under-served areas. This should have a pro-competitive effect on private sector operators where oligopolies tend to form that keep prices high and exploit consumers and business users.

Next Generation Networks based on IP as well as new wireless technologies such as Wi-Fi and Wi-Max make the provision of open access networks a real possibility. Perhaps it is asking too much to expect the private sector to shoulder the burden of ICT4D. So why not create a space for non-profit organisations, who are interested in the goals of ICT4D and the use of ICTs to enable the Millennium Development Goals (MDGs), to take on the task.

4. Discussion Questions

Here are some questions related to these three positions. What is the case for Uganda? As applicable, do indicate examples and/or best practices of what we have in Uganda today.

• What are the advantages and disadvantages of each position?
  
  
• What is involved in creating an enabling policy environment and what are the roles of the various actor
  
  
• Is creating enabling policy environments alone adequate for bridging the digital divide? Is it adequate for enabling equitable access by men and women in Uganda?
  
  
• Should Uganda establish a national ‘Digital Solidarity Fund’. What are the reasons for this? In what proportions should this DSF, if setup, be distributed among urban and rural initiatives?
  
  
• Is there sufficient political support for a new national tax even as a national public good?
  
  
• Is there sufficient political will to establish a new multi-stakeholder body for coordinating ICT4D policy and finance? Are there already too many ICT-related coordinating bodies in Uganda?
  
  
• Are non-profit open access networks viable and could they help bridge the digital divide in Uganda?
  
  
• What are Uganda’s priorities with regard to financing ICT4D? Infrastructure, access, content and applications, capacity building?
  
  
• A peer review mechanism involves an assessment undertaken by one’s peers on the performance of a country with regard to an issue, such as good governance, which is currently being undertaken within NEPAD. Could NEPAD introduce a peer review mechanism that assesses the extent to which an African country has created an enabling policy environment for ICTs?
  
  
• Could the Africa Union consider establishing a multi-stakeholder regional financial mechanism that would coordinate existing sources of finance with enabling policy environments to boost ICT4D across the continent?
  
  
• What innovative ideas for financing ICT4D from a Ugandan civil society perspective are there?

5. Resources

[i] World Bank: Doing Business in 2005: Removing Obstacles to Growth, 2004; UN ICT Task Force: Global Forum on creating an Enabling Policy Environment, Berlin, November 2004

[ii] Digital Solidarity Fund Foundation: Digital Solidarity Fund intervention policy, http://www.dsf-fsn.org/en/09-en.htm

See also the civil society statement on the Digital Solidarity Fund adopted at WSIS Geneva, 2003: http://www.worldsummit2003.de/en/web/472.htm

[iii] A public good is one whose consumption is non-rival in that its use by one does not prevent its use by all.

[iv] Pablo Accuosto & Niki Johnson: Financing the Information Society in the South: A Global Public Goods Perspective, prepared for the Association for Progressive Communications (APC), 2004

This discussion paper has been adapted from an Africa Civil Society in the Information Society (ACSIS) discussion paper on the topic “Financing ICT4D in Africa”.

For further information about the WSIS 2005 online forum, please send e-mail to ictpolicy@wougnet.org. For more information about WSIS preparations in Uganda click here.

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Last update: July-1, 2005