Back to all highlights

Ministerial Roundtable: Financing digital development

TELECOM WORLD 2018 Daily Highlights Day 2

Opening the third and final Ministerial Roundtable at ITU Telecom World 2018 on the topic of Financing Digital Development, moderator and ITU Deputy Secretary-General Malcolm Johnson welcomed high-level representatives from public and private sectors to exchange views, good practices and ideas on funding connectivity and the digital transformation it enables.

Johnson reminded the panel that almost half of the world’s population remains unconnected, the vast majority of whom are in rural, remote and isolated communities where distance, terrain and market conditions make universal connectivity challenging. But given that some 80% of the world’s population is already covered by 2G or 3G services, “it is clearly not just a matter of connectivity.  It also means that we have to ensure that the services and equipment offered are affordable to people, that the content is relevant to them in the local language, and that they have the necessary digital literacy to take advantage of these services.”

Connecting the next billion world citizens comes at a high price – USD450bn is a conservative estimate, according to ITU Secretary-General Houlin Zhao. This level of funding cannot be left to governments alone, he noted: “We need to encourage more investment in the ICT infrastructure.  We need to mobilize the private sector and the public authorities, who are also responsible for creating a good environment to attract investment, because you cannot force people to do business.  You have to create a good environment to attract investment.”

Partnerships are critical at all levels: between government and industry, within government ministries, between different industry sectors and within the telecommunications industry itself. And cross-sector sharing of physical infrastructure, such as between the postal service and telecoms, is important to save costs and extend reach efficiently, noted Bishar Hussein, Director General of the Universal Postal Union, reminding the panel that ”Telecommunication is a critical infrastructure for the social and economic development of societies.  There is no doubt about that.”

Outlining a number of initiatives aimed at increasing connectivity, digital inclusion and the growth of the digital economy in South Africa, Siyabonga Cyprian Cwele, Minister of Telecommunications and Postal Services, focused on the central role of government in bringing infrastructure to the people.

“Our aim was to connect every government office in every locality, and then to create demand by providing these government services and infrastructure closer to poor people, because in every village there is a school, a police station, and other government offices and postal offices.”

Given the current fiscal climate and the limited revenue available within the Universal Service Fund, this has only proved possible within a public private partnership. “But the key thing is that we should have a sustainable and affordable financing model where we can liberate you on the private sector to expedite the delivery of this service, which will still meet demand.”

Echoing Johnson’s earlier comments, Minister Cwele stressed the need to focus on demand, including affordability, local language content and localization. “Content is going to be the biggest driver of demand for these services,” he said, emphasizing the growing trend to digitize oral history and local content throughout Africa.

There is, however, no one-size-fits-all model for government in stimulating digital development, either in terms of funding, partnerships or content creation. Every country has its own context, highlighted Ange Maxime Kazagui, Minister for Communications and Media within the Ministry of Posts and Telecommunications of the Central African Republic.

“We are here because we don’t want to miss out on this revolution.  It is imperative that we come up with financial resources, new models that are going to support the development of the digital revolution” he said, describing how his country is tackling the issue through a bilateral funding agreement with China and its international banks. “Every country is different and, therefore, you have to come up with models that are suitable to the situation on the ground,” he concluded.

Leon Just Ibombo, Minister of Posts, Telecommunications and the Digital Economy, Republic of Congo (Brazzaville) echoed the importance of attending this event: “When coming here, we thought we would come and learn from you so that we see how we can be enriched through this experience and in turn how we can enrich yours because this is a cross-cutting sector…and I think it is the only revolution that Africa has got absolutely no right to miss out on.”

He spoke of the need for a model using digital technology throughout the entire economy, diversifying to cover all sectors, but based on the three principal pillars of e government, e citizens and e business. This will depend on regional partnerships on backbone connectivity with neighbours such as Central African Republic, Cameroon and Gabon, as well as private sector partners, financial mobile banking and international financial institutions such as the Bank for African Development, in order to enable as many people as possible to be connected and benefit from digital transformation and the value it adds. Trust in the digital revolution is key, he added, focusing on the need for cybersecurity in e business in particular.

Hungarian State Secretary for Security Policy in the Ministry of Foreign Affairs and Trade Péter Sztáray outlined the central role of the ICT sector in the national economy, where ICT accounts for some 20% of Hungarian GDP and 22% -24% of the entire economy: ”The ICT sector is one of the strongest sectors in this growing economy, and my government is putting great emphasis on how we can build this kind of progress further, not only in the country, but also in the wider region, and with other geographic regions including Africa.”

The role of government is paramount, he said, in driving digital transformation and the partnerships supporting it: “There is no global access and global connectivity without the engagement of the government,” but “it has to work together with the private sector. It has to work together with NGOs and focus on the demand of the people, the consumers, the trends of development in the IT sector.” And at the same time, “the state has to be cautious not to overshadow the role of the other players.”

Government initiatives in Hungary include the Digital Success Programme to extend literacy, education, child support and cooperation between different sectors in the economy; the 5G Coalition aiming to position the country as one of the front-runners in introducing 5G; a super-fast internet programme; and the development of SME expertise, capability, funding and partnerships with larger companies. “The digital revolution is an extremely big opportunity to bring connectivity and access all over the world… and if we work on that together, we can close a lot of development gaps and have a better world.”

Re-emphasising the role of events such as ITU Telecom World 2018, Cooper W. Kruah, Minister of Posts and Telecommunications, spoke of the importance of participating, particularly following the immense difficulties in Liberia in the wake of civil war and the ebola epidemic: “This is why we’d like to participate in most of these meetings, international organizations now, so that we can also begin to put the pieces together.”

He agreed on the central role of government in encouraging investment, even it cannot directly provide funding: “There are many ways that the government can be a partner in the development of the digital world even without giving money directly to some of the institutions that are involved. Government should be able to develop programmes that will help the investors in the country to encourage them to invest more money”, such as sharing infrastructure with power utilities, and encouraging infrastructure sharing between private sector players to reduce costs and expand programmes.

Nepal’s Minister of Communications and Information Technology, Mahendra Man Gurung, highlighted the difficulties in providing easy access to the internet to all Nepalese citizens, difficulties which are familiar to many developing nations around the world: “There are challenges because of limited resources and difficult geographical terrain.  And there are different priorities which we have to focus on, such as health, infrastructure and digital connectivity. We have to prioritize our resources.”

Alternative financing models include differential tax incentives to encourage operators to invest in remote and rural areas, and licencing conditions stipulating a percentage spend on rural areas.  Increasing digital literacy to empower people, create jobs and boost the economy calls for government intervention at policy level, as well as partnerships with private sector telcos to provide funding and ensure inclusivity, in particular reaching women, start-ups and innovators:  “There is a need to have more policy level interventions from the government.”

Representing the African Union as Commissioner for Infrastructure and Energy, Amani Abou Zeid focused on “the ICT infrastructure gap. And the task is enormous in trying to bridge this gap and get the investment needed for the continent in this very important sector.” It is key to create an environment favourable to investment in terms of laws and strategies for dealing with local and foreign investment: “The rules of the game have to be very clear at the outset in order for any private investment to be attracted to our countries and operate in an effective way.“ Leading reforms to create a healthy investment environment will see “Africa more and more being positioned on the world stage as an attractive destination for investments.”

Her second priority is creating a market big enough for large-scale investment to make sense, in the form of an African Union free market area, as well as regional and sub-regional agreements: “We also know that profitability and the size of the market is important for investment.  By leading continental and regional initiatives, we are creating a huge space for the private sector and other international investments in general to come to our continent.” This harmonization of policies across the region will facilitate not only international investment, but also cross-country relations, policies and investments.

Once the market has been created, the pressing concern is creating demand – and here, e government is key to ensure inclusivity, addressing in particular women, girls and remote regions. The continental Business Network of global and continental private sector players can help to mobilize private investments

Government must also regulate the industry to drive inclusive digital access, Sihle Zikala, MEC for Economic Development, Tourism and Enrivonmental Affairs in the KwaZulu-Natal Provincial Government, South Africa, pointed out: “What causes the problem in terms of access to digitalization is firstly because of monopoly.  Very few companies are involved, and those companies are at a global level and, therefore, they move from one country to another.  This means of self-regulation…and thinking that the private sector will regulate itself without the voice of government is not going to help address the problem we are facing.”

“The problem we are facing is a lack of skills, and access, especially for poor people, to ICT. So we cannot pretend private sector can solve it on its own,” he continued, outlining projects in the KwaZulu province such as providing community facilities in townships with free wi-fi, computers in schools and tertiary institutions, training programmes and bursaries to reach students in rural areas.

The roundtable continued with highly relevant counterpoint voices from leading private sector players. Vodacom CEO Shameel Joosub started with the fundamentals: “In telco, the biggest thing that you need to do to be successful is to put the level of investment in.”

The market opportunities of making access and data available to everyone are enormous, he said, with ensuing benefits in areas such as financial inclusivity, social development and education.

“One of the biggest challenges we see globally is where do the next 1 billion customers come from?” he asked, looking at how to increase rural coverage and access. “The only way we are going to be successful is if there is a harmonious relationship between policymakers, regulators, the private sector and civil society. But how do we foster better partnerships to be able to do more?”

These partnerships could range from working with communities to protect base stations and ensure fuel supplies to open source software and technology to create lower-cost base stations, or partnering with new internet players, handset manufacturers, or new connectivity providers  to create a new value chain throughout the ecosystem and drive down costs.

It is also critical to reduce wastage, by governments being very specific about where the private sector should operate and better coordination in terms of where spending goes.

Of all new technological developments, he highlighted the power of 5G: “5G gives a real opportunity in Africa. We have large countries which makes it very difficult to deploy at scale. There will be a certain number of households covered by fibre, but we are going to need mobile technologies to be really able to do it.” 5G can emulate what fibre currently does, transform industries in conjunction with IoT, and reduce the costs of communication very quickly because of the ample bandwidth it makes available. 5G may well “have more meaning in Africa than in Europe, where fibre is deployed.”

“We share the same ambition and dream, which is to give access to new technologies and development on a quasi-universal basis, in particular to poorer populations and most remote areas,” affirmed Thomas Chalumeau, Chief Strategy & Development Officer, Orange MEA.

This can only be achieved by private and public sectors, international donors and financial markets working closely together in a number of fields, he said, calling for “better articulation between tax, regulatory and sectoral policies” such as stimuli for rural electrification such as pay as you go solar models.

The momentum provided by large-scale solutions in network and connectivity, including smart city programmes and e-government, is important, with “new areas of cooperation to be built between the private sector and the governments and institutions around e-government from public payments to common developments in agricultural and educational programmes.” We need to take more risks globally and reinforce our collective imagination, he argued, outlining initiatives such as the digitization of educational content, rural mobile financial services, energy and agriculture.

“For me, there are four main key players,” he concluded. “Everything starts with governments and regulators. Industrial institutions need to take more into consideration the needs of large private sector companies in digitization. And the financial markets will see tremendous growth in alternative financing solutions, to come and work with governments in Africa and to advance.

Jacques Bughin, Director and Senior Partner at MGI, McKinsey & Company, focused on the need to create new markets, redirecting funding currently spent on competing for existing customers: “It’s a question, then, of demand, and it’s a question of how we can prove the case in developed countries, of where the money will be come and be reimbursed from.”

Given the value arising from that investment, with AI technologies reliant on digital infrastructure likely to be responsible for up to 20% of global GDP in the future, the amounts involved are not that large, he argued. It is important to produce creative financial models based on innovative cross-sector partnerships: “We have to make sure that most of the industries start to cooperate in the ecosystem, whether it’s telecoms or energy, I think there are synergies as has been discussed, but…we need to think as well about retail, media, multiple industry stakeholders.”

James H. Poisant, Secretary General of the World Information Technology and Services Alliance (WITSA), encouraged government to understand the enormous pay-off to investing in ICT development. Identifying the key factors to success in creating a digital economy, he urged full, long-term government commitment, driven by dedicated individuals or champions: “It’s important to make the point on long-term plans, because otherwise, when there’s a changeover in government, the new government typically throws away investment made by its predecessor or does not realize it. “One country made a constitutional amendment to make sure that these long-term digital agendas are not touched when there is political change.”

One size may not fit all, but if digital plans are in place, money and the private sector will follow so long as the country is stable and there is long-term commitment and planning. It is also important to review digital agendas every year or so, updating to meet changes in technology and society.

Wrapping up the session, Malcolm Johnson highlighted the clear agreement on the need for partnerships throughout and across public, private and civic sectors, calling for “my three Cs – collaboration, cooperation and coordination.”

All countries are different and will require different models to fund digital development, but issues common to all include creating compelling content, including the digitization of oral content; the use of new technologies from 5G to IoT, and high-altitude platform satellites; infrastructure sharing, in particular in tandem with the energy sector; involving new internet players; and fiscal measures including tax incentives and regulation to create attractive investment conditions.

The single most important factor, as agreed on by both public and private sector representatives, is government engagement:”You can’t get anywhere if you haven’t got the political will at the highest level in the country. You need champions then to drive things forward –and you need a long-term plan to really achieve these objectives.”