ICTs As Enablers of Development:

A Microsoft White Paper

December 2004

Executive Summary

Information and communications technologies (ICTs) are transforming societies and fueling the growth of the global economy. Yet despite the broad potential of ICTs, their benefits have not been spread evenly. Indeed, using ICTs effectively to foster social inclusion and economic growth is among the key challenges facing policymakers today.

As one of the world’s leading ICT firms, Microsoft brings a unique perspective to this issue, one informed by years of collaboration with the international development community. Microsoft firmly believes that ICTs hold tremendous promise as an enabler of social and economic development. ICTs can help underserved populations obtain, manage and disseminate knowledge and to tap into global networks of information and services. And rapid innovations in technology – the fruits of intensive R&D efforts by Microsoft and others – are making ICTs less expensive and easier to use, bringing the power of ICTs within the reach of ever more people.

ICTs promote development across many dimensions. At their most fundamental level, ICTs enable organizations to be more productive, thereby spurring economic growth and helping firms be more competitive. ICTs can also expand the reach and effectiveness of social development projects and have already yielded important benefits in such areas as healthcare, education, and environmental preservation. Public-sector uptake of ICTs is also making governments more efficient and their decision-making more transparent. Finally, many developing countries have achieved important economic gains in nurturing the development of domestic ICT industries.

It is not enough, however, to place ICTs onto the development agenda without also addressing other critical elements of the development equation. A nation’s regulatory environment in particular can have a profound impact on ICT utilization and ICT industry growth. Microsoft actively engages with policymakers on a range of ICT policy issues that affect users and the industry, including such issues as property rights, international trade and investment, competition, publicly funded research, online security and privacy, technology standards, e-Government, education and digital literacy, ICT skills development, affordable financing, incentives for private-sector ICT investment, and telecommunications infrastructure and access.

Microsoft also recognizes, however, that public-sector leadership must be combined with private-sector investment and commitment. For its part, Microsoft’s proposition for promoting social inclusion and economic growth is reflected not only in the company’s many development initiatives, but also in its fundamental goal as a company – to provide products and services that help people be more productive and to unlock their full potential. The final section of this paper describes Microsoft’s value proposition for development and explains our various initiatives and programs in this area in more detail.

Microsoft hopes that this paper will help readers obtain a greater appreciation for the potential that ICTs hold for social and economic development, and of the important benefits that can accrue to developing nations that fully exploit these benefits. We also look forward to engaging in a broader dialogue with policymakers and thought leaders on how governments, industry, and users can work most effectively to unlock the full potential of ICTs for the developing world.

I.Introduction

Over the past several years, a broad international consensus has emerged that information and communications technologies (ICTs) offer a potentially powerful mechanism for promoting social and economic growth. Several recent studies have described remarkable success in using ICTs to help underserved communities and to create new opportunities in developing countries. Yet these same studies often also cite other examples of squandered resources and unfulfilled expectations, of costly ICT investments that did little to improve the lives of the target community.

As a result, the early, unbridled enthusiasm for ICTs in developing countries and the international development community is being replaced by a more pragmatic realism, one that seeks to look beyond the hype and to analyze how ICTs can be used sensibly and cost-effectively to promote development. While debate on these issues continues, several analyses have concluded that the social, economic, and regulatory environment in which an ICT-based development project takes place can be as important as the ICTs themselves to the project’s ultimate success.

This Microsoft paper seeks to contribute to this discussion. Microsoft is active in more than 90 countries around the world, each of which is at a different stage of development and has adopted unique strategies in applying ICTs to its own development goals. Through these experiences, Microsoft has gathered important insights into the types of policies that are more or less effective in promoting ICT-based development.

Although the challenges facing developing countries are many, Microsoft firmly believes that computing technologies and other ICTs hold tremendous potential to help overcome these challenges. Microsoft also recognizes that unlocking this potential requires not only public-sector leadership, but also private-sector commitment. Microsoft, for its part, is dedicated to working closely with underserved peoples, developing countries, and the broader international development community to realize the full potential of ICTs for human development.

Microsoft understands that there is no technological silver bullet that can “solve” illiteracy, eradicate extreme poverty and hunger, or eliminate high child mortality rates or poor maternal health. Microsoft does believe, however, that as new ICTs continue to drive rapid globalization, developing countries have a unique opportunity to harness the power of ICTs to address these and other urgent development challenges more effectively.

Part II of this paper examines those characteristics of ICTs that lend themselves to development challenges, while Part III describes the role of the ICT industry as a potential driver of economic growth in the developing world. Part IV sketches the key elements of a regulatory framework that is conducive to ICT-based development and ICT industrial growth. Part V concludes with a review of areas in which ICTs have been applied to advance development goals and briefly describes Microsoft’s contributions to these efforts.

II.ICT as an Enabler

In one sense, ICTs are simply tools. Like any tools, they can be either well-suited or not to the task at hand. Just as a hammer is ideal for pounding a nail, but less useful in changing a light bulb, the value of a specific ICT to development cannot be answered in the abstract, but depends on whether it is suited to the project at hand, whether the project provides sustainable incentives for those involved, and whether the people implementing the project have the skills necessary to exploit the ICT effectively.

In another sense, however, ICTs are tools unlike any the world has ever seen. Because ICTs can be applied to a tremendously diverse range of human experience, they are transforming virtually every sector of society and the economy. Digital breakthroughs are creating new possibilities for improving health and nutrition, expanding knowledge, stimulating economic growth and empowering people to participate in their communities.

ICTs are also multifunctional and increasingly interoperable, which allows users to combine and implement them in almost infinite ways. Also, rapid innovations in technology are making ICTs both less expensive and easier to use, thereby bringing the power of ICTs within the reach of a greater number of people. Finally, today’s technological transformations are intertwined with globalization, and together they are creating the new realities of the global economy

These qualities make ICTs highly relevant to the developing world. As many developing nations have recognized, ICTs have the potential to spur local economic growth and to expand the reach and effectiveness of development initiatives. Upon closer analysis, other key attributes of ICTs also make them of critical importance to the development agenda:

Knowledge management. The defining feature of ICTs is their ability to help people collect, manage, store, retrieve, and distribute knowledge. Knowledge management is critical in the global economy, where success often depends on the ability to acquire knowledge quickly, use it effectively, and disperse it to the right people rapidly and inexpensively. ICTs can help level the playing field in this regard between firms in the developing and developed world, thereby enabling developing nations to compete more effectively in the global economy. Furthermore, because many non-economic development challenges have their roots in barriers to information, ICTs can help overcome these barriers.

Efficiency. ICTs enable public administration and private enterprises in developing countries to operate more efficiently and productively at reduced cost. Tapping into these efficiency gains can make enterprises in developing countries more competitive and also increase the viability of development projects by making them more cost-effective. ICT-driven efficiency likewise opens opportunities to small and medium enterprises (SMEs) in developing countries to exploit their competitive strengths – e.g., by leveraging lower labor costs to provide cost-effective online services to distant markets, or by supplying goods directly to customers, rather than through intermediaries, and thereby retaining a greater share of profits.

Networks. People increasingly use ICTs to tap into networks of people and information. The Internet is perhaps the quintessential global ICT network, which itself runs on a multitude of physical networks (e.g., the traditional telecommunications network, satellite- and cable-based networks, etc). ICT networks are an indispensable element of the development equation, as they can provide users in developing countries with effectively equivalent access to information, resources, distribution mechanisms, and potential customers as users and firms in developed countries. Providing the infrastructure necessary to access ICT networks can, however, be expensive and complex. One of the challenges for developing countries is to select the technology that is most appropriate to their needs and that local populations have the capacity to use effectively.

Multipurpose. Many firms (Microsoft prominent among them) are increasingly focused on ensuring that their ICT products are easy to use and can be adapted to an almost infinite variety of uses. These efforts mean that ICTs are accessible to more users and that users can tailor even sophisticated ICTs more easily to their own needs. And the rapid pace of ICT innovation means that the time between invention and commercial application is typically measured in months or even weeks, rather than years. Thus, in contrast to many products and services, ICTs used in the developed world will often be equally effective when applied to developing-world problems.

These attributes make ICTs an essential enabler of development. ICTs play this role in several respects: As enablers of cross-sectoral productivity and economic growth; as enablers of specific social development goals; and as enablers of political participation and good governance. The following sections explore these issues in greater detail.

A.ICTs as Drivers of Economic and Productivity Growth

An economy’s ability to increase productivity is a powerful measure of its economic well-being. Gains in productivity allow firms to raise wages without raising prices, thereby creating real, non-inflationary income growth (wage increases funded solely by higher prices, by contrast, provide no net gain in consumer purchasing power and no real economic growth). Thus, the surest path to sustainable economic growth is for organizations to invest in assets that increase productivity.

Although economists have long debated the relationship between ICTs and productivity, a growing body of data suggests that ICT investments – particularly when linked to fundamental organizational change – can have a substantial, positive impact on productivity. This impact goes beyond a direct return on investment. A recent study by the U.S. Department of Commerce, for instance, concluded that information technology investments by U.S. firms in recent years had a widespread and lasting impact on the revival of U.S. productivity growth,[1] suggesting that ICTs, when used effectively, can help organizations use resources more efficiently and become more competitive.

A recent OECD study likewise concluded that while there are good grounds for believing that the use of ICTs are positively correlated to productivity growth, acquiring ICTs is not enough for countries to derive economic benefits.[2] Other factors, such as the regulatory environment, the availability of appropriate skills, and the ability to spur organizational change, often have a substantial influence on the ability of firms to exploit the benefits of ICT.

While most economic studies to date on the linkage between ICT and productivity have focused on developed economies, there are good reasons to believe that ICTs are equally vital to economic growth in developing countries. Information and knowledge are the bedrock of the Knowledge Economy – the “currency” of modern societies, to paraphrase a recent leading development paper.[3] In today’s increasingly integrated global economy, firms across the economic landscape, including those in developing countries, will need to learn how to acquire and use information effectively if they hope to succeed.

While the utilization of ICTs in developing countries remains below expectations, case study evidence suggests that ICTs are beginning to provide a basis for productivity and economic growth in developing nations. For instance, ICTs are being used in Africa, India, and other nations to create rural trading networks that connect local craftspeople directly with their customers. For instance, the PEOPLink project links over 100,000 artisans from various developing nations to potential customers through its online trading portal, FairTradeDirect.com. At a business-to-business level, Utilities Afrique Exchange provides an e-trading platform for utilities companies in Africa to simplify procurement and reduce costs.

B.ICTs as Enablers of Social Development

Perhaps the most impressive examples of ICT’s potential to promote development have occurred in the context of development projects targeting social inclusion and cohesion – projects that provide excluded communities with greater opportunities to participate in community life. Because many of the challenges facing traditionally underserved communities result at least in part from inadequate access to knowledge and information, ICTs can help surmount these challenges by making it easier and less expensive to collect, analyze, and disseminate information to the people who need it. The Internet in particular is creating nearly endless opportunities for individuals and communities in developing countries to obtain knowledge and communicate with others.

At the same time, it is particularly in the area of ICT-based social development that a healthy dose of pragmatic realism is critical. Particularly when dealing with cutting-edge or novel ICT products, there is always a risk that the choice of technology will drive the proposed solution, rather than the sought-after solution determining the choice of technology. Selecting a “suitable” ICT solution – including, critically, not only one that is affordable, but one with regard to which the surrounding social, economic, and legal context provides sustainable incentives for use on an ongoing basis – must be a principal factor in judging a project’s viability. Failure to do so will undermine not only the project’s own goals, but may leave the targeted community disillusioned with ICTs generally and less likely to embrace ICTs in the future.

With that cautionary note in mind, ICTs nevertheless have tremendous potential as enablers of social development. Although the multifunctional, flexible nature of ICTs means that they can be applied to virtually any development goal, areas in which ICT has already proven effective include the following:

  • Healthcare. ICTs are increasingly being used to deliver health care services in the developing world, especially to patients in remote areas where healthcare services are scarce. Examples include using ICTs for remote consultations between patients and physicians as well as remote diagnosis and even treatment; data collection for both research and diagnostic purposes; “real-time” collaboration between physicians and health researchers in different parts of the world; improving the speed and effectiveness with which nations and organizations respond to epidemics; and streamlining and improving health care services generally. ICTs are also being used to deliver healthcare services to in remote rural areas where more traditional healthcare services are scarce. ICTs are playing a central role in programmes to combat HIV/AIDS, tuberculosis, malaria and other diseases.
  • Education. Although ICTs cannot replace the vital teacher-student relationship or supplant in-person instruction, ICTs are increasingly being used as a tool to supplement traditional curricula and teaching methods and to open new opportunities for skills training. For instance, ICTs are being used to provide low-cost access to online curricula and other resources; enable distance education for students in remote areas or who for various reasons cannot physically attend school; support research networks; provide technical and vocational training, including “lifelong” training opportunities; and improve and streamline education administration.
  • Environment / sustainable development. Many environmental challenges in the developing world are the result of failures to alert policymakers of risks and the inability to quantify the seriousness of environmental hazards until it is too late. ICTs allow researchers and environmental agencies in developing countries to tap into global data networks and information resources, which enables policymakers in these countries to make better and more informed choices. ICTs are being used to monitor environmental conditions and collect and analyze data; coordinate responses to ecological threats; identify polluters who might otherwise go undetected; and help policymakers understand threats and formulate less intrusive agricultural and industrial processes.

Concrete examples of how ICTs are being used to address these and other social development goals are described in greater detail in Part V.