ICTs in developing countries: Booklet III - The basis for a national policy framework

Introduction

This is the third of a series of four booklets published by the International Institute for Communication and Development (IICD) on the significance of information and communication technologies (ICTs) for sustainable development. Earlier booklets in this series discussed the nature of ICTs and their importance for sustainable development and examined the gaps in the provision of ICTs in developing countries. The series aims at decision-makers in developed and developing countries who are interested in benefiting from what already has been learned about ICTs in developing countries.

The booklets are based on the results of work developed by a special working group on IT and Development established by the United Nations Commission on Science and Technolgy for Development (UNCSTD) in 1995. It has produced policy documents on issues concerned with the contribution of ICTs to sustainable development goals. On the results, the UNCSTD commissioned a source book entitled Knowledge Societies: Information Technology for Sustainable Development (Robin Mansell and Uta Wehn (eds.), Oxford University Press, 1998).

This booklet is divided into five chapters:
1 Establishing a national ICT policy framework: Countries need to set up a policy framework that optimizes the ICT development. In particular, the framework needs to address the regulation of services, standards and trade and investment;
2 Policies for learning: In addition to the general policy framework particular policies need to be developed to strengthen technical and social capabilities;
3 Funding policies: New partnerships are required which will bring together key stakeholders including governments, the private sector, financial institutions, aid donor agencies, and NGOs as well as regional groupings;
4 Specific policy issues: Policy issues also involve other critical areas such as intellectual property rights, security of information, privacy and trade and taxation of electronic information;
5 Concluding comments.
1 Establishing the policy framework

Markets are social institutions and should not be seen to have an existence beyond the complex web of reciprocal agreements that underlie them. Markets need to be seen as complex institutions that can be designed and modified to meet specific agenda. Regulation has an important role to play in ensuring that markets are not subjected to abuses of power and that inter-country trade and investment is conducted according to certain agreed standards. In addition, the specific characteristics of ICTs demand that there is careful consideration of technical standards as well as the characteristics of large telecommunication networks.

1.1 Why policy matters
All markets require a complex set of mutually agreed rules and standards of behaviour from those participating. Otherwise, they will not be able to function. Some form of policy underlies the functioning of all markets. The essential policy objective is generally to retain market dynamism and to counter bureaucratic inertia while recognising that the co-ordinating capabilities of markets in themselves will always be limited.

Some models of development primarily emphasise the need for market-led development. In these models, the market provides the primary means of co-ordination. The role for governments is seen to be much more limited and the interests of other stakeholders including citizens groups and non-governmental organisations are mainly accommodated through their representation in the political processes. The degree of their involvement varies and generally occurs after most of the significant technical design decisions have been made. Entrepreneurial activity is expected to mobilise the necessary resources for growth, and growth is expected to improve economic and social conditions.

Markets often suffer from imperfections arising from the uneven distribution of resources, and from the different capacities of market players to exploit market power or mobilise government policy in their own interests. In addition, in the highly uncertain environment of rapid technical change, markets may deliver co-ordination solutions that do not address important social objectives. Therefore, market-led development cannot always be relied upon to deliver the financial, technical, and social resources necessary for building innovative knowledge societies.

As the market for products and services incorporating ICTs has become more international in scope, there have been increasing pressures for individual countries to open up their national markets. In the past there were some advantages in protecting domestic companies from foreign competition and/or restricting the levels of domestic ownership. However, since the late 1980s, the emphasis has been on opening up markets in order to enjoy the benefits of new types of service provision and to bring about an overall improvement in efficiency. The increasing demands associated with obtaining financing for new investment have placed further pressures on any attempt to keep markets closed.

1.2 Regulation of ICT infrastructure and services
For a period of more than fifty years, the accepted wisdom was that ICT infrastructure and services required some form of state ownership or controlled monopoly. This viewpoint arose from the fact that these services are characterised by substantial economies of scale and scope. Recent years have seen a dramatic change in this respect. A significant number of monopoly providers have been privatised and are now subject to relatively more open market competition. There is now frequently market competition between service providers operating within a given national regulatory framework. Supervision is generally placed within the hands of a quasi-independent regulator. This agency is generally mandated to ensure that abuses of market power are constrained and that social objectives concerned with ensuring widespread service provision are met.

In the area of infrastructure provision there is an ongoing requirement to ensure that the market power of dominant network operators is not abused. In many countries, the former state monopoly supplier continues to dominate provision in key segments. Frequently it will control the main domestic trunk elements of the network. It will also be the main provider of local access to telecommunication services. Under such circumstances, anti-competitive activity such as charging excessive rates for inter-connection or preventing the transfer of existing telephone numbers has the capacity to flourish.

The benefits of competition will be reduced if such activities cannot be minimised. In many cases, the former monopolist is in a stronger position to exploit economies of scale and/or scope, and regulations are needed to prevent abuse of market power. Granting new investors short-term privileges may offer an opportunity to accelerate existing investment programmes and to extend network provision more quickly than if competition is encouraged.

Where services are concerned there is a requirement to encourage the widest possible availability of services. This is often referred to as a universal service policy and is most likely to apply to telephony services. Some types of service provision are more profitable, while other types of service are loss making. Generally, providing services for commercial users is more attractive than linking up geographically dispersed low volume users. Policies and regulatory measures are needed to avoid a situation where only the most profitable users are served.

Regulation can take many different forms:
- The emphasis may be on encouraging competition between a number of different telecommunications and Internet service providers. In many countries, both mobile telecommunication and Internet services are opened up to competition by licensing more than one provider;
- Equally, the emphasis may be on preventing anti-competitive practices on the part of a recently privatised state monopoly. This can be achieved by requiring that key commercial rates, such as inter-connection tariffs, be published and by subjecting existing service tariffs to pricing formulae. Certain short-term monopoly privileges may be granted in exchange for a requirement to make extensive investments, thereby extending the existing network.

Regulation of telecommunication service provision requires certain checks and balances. Overall, the regulatory process is quite complex. It is very important that the regulation of telecommunication services is carefully co-ordinated within a broader national strategy for ICTs, including telecommunications, information technology, Internet and broadcasting.

1.3 Regulation of trade
The world has changed enormously with respect to the availability and diversity of ICTs. ICTs have become pervasive with an increasing range of applications. The increasing volume of ICT-related trade has focused the attention of the world's major trading nations on the need to reduce tariff barriers and other constraints on trade. This has been a dominant theme of recent rounds of trade negotiations under the umbrella of the General Agreement on Tariffs and Trade (GATT) leading to the establishment of the World Trade Organisation (WTO).

Choices made regarding the trade regime for ICTs are complicated by the trade-off between encouraging production of the underlying goods and encouraging their use in a wide range of industries and services. While there are some advantages in having local design and production capacity for ICT products this is not necessarily essential.

The ICT trade needs to be the subject of a clear medium- to long-term vision. This vision needs to focus on the areas where indigenous capabilities are important and on the hardware and software components and skills that must be imported. A failure to define national strengths and weaknesses in ICT production, maintenance, and development can result in overly import-dependent development. It can lead to lost opportunities to generate economic growth, export earnings, and jobs. For example, the Brazilian government has provided a range of tax and export incentives to local ICT producers. This is at a time when the competitive environment in Brazil as well as in international markets is forcing firms to reduce costs and improve quality.

In a similar vein, many developing countries that are presently accumulating capabilities to apply ICTs with great effectiveness have been able to do so without developing a significant local production capacity in ICTs. In an increasingly global trading environment, local manufacturing that does not enjoy the necessary economies of scale and/or scope may well be inappropriate for creating sustainable knowledge societies. The world is increasingly becoming a global marketplace. Individual firms are forming alliances and often co-operating on an international basis. In this environment, access to ICTs and specifically the skills that are required to put them to effective use are the more important development priorities.

Industrial development in developing countries has often depended on having high import tariff barriers that minimised competition with international suppliers. In an increasingly global economy where there are more open trading conditions, these protected industries are potentially at a strong disadvantage. Under these conditions they will often lack the deeper supply chains which are available to their internationally based competitors.

National polices and ICT strategies will need to consider the trade-offs between retaining previously protected industries or paying the short-term cost of exposing these companies to both the threats and opportunities of a more open trading environment.

1.4 Regulation of technical standards
Technical standards play a very important role in defining the market for ICT based products.

Firstly, there are basic safety and operational considerations. Technical standards are required to ensure that operators will not be at risk during normal operation of the equipment and that even under special circumstances any unnecessary danger is avoided. Technical standards also ensure that equipment does not interfere with other systems, for example, by emitting radio signals that can interfere with existing broadcasting or telephony applications.

Similarly, issues associated with the integrity of the electrical generating system also have to be addressed. Technical standards are generally agreed by supranational bodies; for example, the ITU provides the fora for deciding key standards for telecommunication equipment. Many industrial consortia also play an increasing role in establishing standards for telecommunication and computing equipment that is in use around the world. Individual countries then find that they must incorporate these technical standards into equipment that they produce or that they buy to incorporate in their ICT based systems.

Secondly, technical standards define the functionality of ICT systems. A specific technical standard will determine what a particular item of equipment can do and for what tasks it is ultimately suitable. For example, some of the older personal computers (PCs) are not suitable for accessing the Internet because they are not sufficiently powerful to run the appropriate software. In many cases private firms will set these standards.

The technical standards will also frequently depend on the rate of technical advance. For example, the ability to produce microchips, which incorporate higher degrees of functionality, requires sophisticated semi-conductor fabrication equipment that is able to produce densely populated microcircuits. New standards for increased functionality then become possible.

Thirdly, technical standards define the degree to which there is inter-operability of ICT components. This is often the most contested area for standards setting. Defining the type of operating system for a computer will dictate what types of software will run on the machine. Competitors may be placed at a competitive disadvantage if one or a limited number of companies dominate the standard. Similarly, specific data communication protocols will determine whether the same supplier must provide the equipment at each end of the connection or whether different equipment types can be used interchangeably.

Overseeing the process and if necessary intervening in the setting of technical standards forms an integral part of a regulatory system for communication networks. The technical development of standards means that the diffusion and use of ICTs can become locked into position and this can have a major social and economic impact. The technological path set by a particular group of ICTs may prove very resistant to subsequent change or direction due to institutional factors that include embedded investment in training. There will always be some opportunity to make changes.

However, the longer strategies are delayed, the more likely it is that particular system designs will become fixed. This will make it more difficult to tailor ICT products and services to the specific needs of developing countries. It is important to face this challenge and to formulate co-ordinated ICT strategies in order that some of the costs inherent in shifting the course of ICT development within a developing country can be avoided.
2 Policies for development human capabilities

ICTs offer significant opportunities for sustainable development. Their potential in both social and economic terms is enormous. However, as discussed in booklet 1, human capabilities, defined in a very broad sense of technical and social capabilities, are a pre-requisite for this potential to be realised. ICT policies should be designed to ensure that education and training is developed at both basic and levels.

2.1 Policies for higher education and training
Development has always been associated with knowledge production and use. Improving education and skill levels forms a very important part of development strategies. Different models focus on different aspects. For some it is on improving general educational levels within the population, in others the emphasis is on technology transfer while another approach concentrates on building the science and technology base.

It has been observed that the way in which scientific knowledge is being produced is undergoing a radical change. The principal change is that it is no longer such a self-contained activity. In research a number of different skills are required to develop solutions to investigate leading-edge problems. Specialised scientific knowledge production is increasingly no longer an activity which is exclusive to research institutes or universities where it is expected to transfer, diffuse and spill over to benefit of the rest of the economy and society. It is now carried out in a wide range of different institutions. These include small consultancy companies, high technology start-ups and co-operative think tanks. The number of sites is growing and individuals are using electronic networks to make contact and remain connected.

There are no fixed patterns of connectivity. The common factors bringing individuals together on a collaborative basis are more likely to be common problems rather than shared academic disciplines. With these developments come a complex web of inter-connections that is growing in complexity. Knowledge production becomes increasingly centred on smaller, less vertically structured organisations which have developed competencies in collaborative problem solving.

If this view is correct then this will eventually lead to major changes in the way in which research and development, and technological innovation are organised. It could present problems for some developing countries that have modelled their institutions on older concepts of knowledge production which emphasise a separation between the production of scientific knowledge and its use by firms, public bodies and government ministries.

In addition, as the number of knowledge-producing institutions proliferates, there is likely to be less emphasis on open disclosure and more on retaining knowledge for commercial purposes. The new mode of knowledge production is closely associated with the availability and growth of electronic networks. Building the necessary network infrastructures which can link knowledge producers in individual developing countries with those in the rest of the world is coming to assume even greater importance.

2.2 Policies for basic education and training
ICTs have a pervasive quality that makes them unique compared to other major technological systems. They have the ability to affect all areas of commerce and industrial production. However, in order to be used, ICTs require an initial set of skills plus, more importantly, the ability to continually learn and adapt in response to the opportunities on offer. In effect, learning ceases to be just one stage of adult life but becomes a life long process. Individuals will increasingly seek to move in and out of formal educational institutions and other kinds of informal learning environments.

Lifelong learning has important policy implications. Educational institutions in most countries in both the industrialised and the developing world are geared towards training children and young adults. Facilities that would encourage more mature students, particularly women with family commitments, are still either absent or in limited supply. There is a need to review policies in this respect and to re-orientate entry requirements and course content so that the needs of lifelong learners can be better accommodated.

Similarly, 'lifelong' learning requires changes to the formal process of assessment. The existing focus which is on obtaining a degree and post-graduate qualifications needs to be reviewed so that new types of qualification which are accepted by firms and by society at large can be introduced. Establishing new forms of accreditation permits a more innovative solution to the problem of certifying skills and learning.

Although there are attractions in using technology-led solutions, using ICTs in formal learning institutions should be approached with caution. The associated costs of the technology may be high in comparison to using existing paper-based materials. There is also often pressure from vendors keen to promote particular solutions.

Remote learning using networks like the Internet requires highly individualised learning techniques. These may often not be suitable for cultural reasons, particularly when group-based learning techniques can be more effective. Remote learning using the Internet or other electronic networks can only extend so far. There is a need to develop communication skills that appear to occur best when people are in close proximity to each other, in other words in the traditional confines of a school or university. Furthermore, remote learning depends on the preparation of materials. These involve costs and depend upon specific skills that may be culture and/or gender bound. On balance, ICTs are likely to be at their most effective when they complement existing teaching methods and institutions rather than when they replace them in some fundamental way.

World population growth presents a major challenge to providing full educational opportunities to the majority of children and young adults. It is estimated that by the Year 2025, 100 million school age children will not actually be attending school. Developing countries have a much more youthful population distribution than is the case for industrialised countries. The proportion of the population that is under working age and is dependent on other income earners is typically more than 50 %. This creates budgetary strains on raising the funds required for investment in education. It also makes it more difficult to recruit the number of teachers required to meet the demand for schooling. Unfortunately, these pressures are contributing to a deepening divide between the richest and the poorest countries.

According to figures published by UNESCO, in the least developed countries expenditure is less than US$ 50 per pupil per year and has been steadily declining. In industrialised countries, the comparable figure is US$ 2,900 per pupil per year and the amount is increasing in real terms.

National ICT policies need to focus on the requirements of providing formal training in ICTs throughout schooling. These policies need to be co-ordinated so that there is a sharing of experiences and the creation of effective management for key programmes. Adequate funding provision has to be made in order that there is both suitable equipment and sufficient numbers of trained staff.

There should be active policies designed to create training materials that are suited for local needs. If training materials are imported, care needs to be taken in how they are used in order to minimise any clash with local cultural values. Distance learning has been successfully implemented in a number of countries for higher level courses. The oldest distance learning institution is the Open University in the United Kingdom, which has been responsible for several thousand new degree level graduates. However, the Open University, in common with its counterparts around the world, is still largely based on printed materials and regular discussion groups. Broadcast media provide the other key component and the use of the Internet is at an early stage.

The increasing use of ICTs in all areas of the economy requires that certain basic skills associated with computer hardware and communication are created within the workforce. These include essential keyboards skills, word processing, number manipulation using spreadsheets, basic familiarity with the structure and operation of computer databases as well as an understanding of data transmission. These skills are particularly important for individuals being trained to occupy professional and managerial posts.

ICTs can be used in a number of different learning modes. The key categories are as follows:
- Use of ICTs in a support mode in order to improve the presentation of material, e.g. using word processing, desktop publishing, graphics and computer-aided design;
- Use of ICTs in a control mode where the emphasis is on exploring relationships and experimenting with data, e.g. using spreadsheets, databases and statistical packages;
- Use of ICTs in tutorial mode where they are employed to teach or train with appropriate feedback e.g. various individual learning packages often based on CD-ROM;
- Use of ICTs in link mode where they are effectively providing remote communication links between individuals, e.g. e-mail, video-conferencing.

2.3 Policies for development of learning on the job
The capacity for learning in a given society is linked to making global stocks of knowledge more accessible. However, ICTs should not be regarded as a potential substitute for human skills or tacit knowledge. The use of ICTs can offer an important complementary component for helping to enhance learning throughout the economy. Several writers have suggested that individuals, firms and even countries will be able to create wealth and obtain access to wealth in proportion to their capacity to learn. Making learning and knowledge creation the point of focus can be a way of providing the most effective means for achieving economic prosperity and for achieving development goals.

The emphasis is increasingly on learning in its widest possible sense. Learning ceases to be restricted to formal types of learning in schools and universities. There are other active forms of learning which occur within commercial organisations as well as government departments and agencies. Much of this is given the name of learning-by-doing. Individuals are learning and acquiring new skills through direct personal contact with others. Unlike formal teaching, which depends on conveying codified knowledge, these forms of learning are more tacit. The important point to emphasise is that with the increasingly widespread use of ICTs, new skills are required. Many elements of these new skills can be acquired simply by having direct contact with the technologies, for example, by working with PC networks. In formulating national ICT strategies it is important to emphasise the need to create an environment where these skills can be acquired.

Getting the benefits from ICTs involves an interactive process of learning-by-doing and learning-by-using. ICTs are one of the main factors involved in a change from an energy intensive to a knowledge-intensive economy. Associated with this change is the move from an economy based on the mass production model to one which is based on more customised production and which depends on a closer integration of service and products. Users have to find out what can be done with the technology and, in turn, influence the producers or suppliers.

Tacit knowledge may be seen as being of equal or even greater value than formal knowledge which is conveyed in its codified, structured and explicit form. The learning processes that are necessary to acquire tacit knowledge occur within all economic activities. These include research and development as well as marketing, production and product development.
Given the important role of tacit knowledge, ICTs may be used most effectively to reinforce human interaction and interactive learning.

In an environment where new skills have to be created and old ones updated, there is inevitably a potential mismatch between those skills which are in demand and those which are being developed. A national ICT strategy needs to focus both on creating new capabilities and ensuring that existing skills are upgraded. At the same time there is a danger in focusing too narrowly on certain ICT skills like computer programming which are in strong demand globally. The US, for example, has benefited from a constant flow of Indian trained programmers moving into jobs in the US. It has been estimated that the value of these exported skills over the past 10 years is equivalent to the amount that the US has spent on bilateral aid for India in the same period.
3 Partnership policies

In order to build effective national ICT strategies it is necessary to involve many different stakeholders from both the public and the business sectors. These include governments, multinational companies, financial institutions, aid donor agencies, and NGOs as well as regional groupings. National policies should facilitate partners for several functions:
- Funding;
- Expertise;
- Content exchange and creation.

Funding will always be an important issue in partnering. Yet, in many cases it is more difficult to mobilise the expertise that is required in order to successfully develop and use ICTs. Partnerships can help in identifying expertise. Finally, partnerships are important to ensure effective and continuous content exchange and creation.

3.1 Why partnering matters
The ICT industry is one of the most important economic sectors world-wide. In 1996 the telecommunication services industry alone had combined revenues of US$ 670 billion. The industry has seen a massive expansion on a global scale in the past 10 years. By the end of 1998, the industry is expected to be worth more than US$ 1 trillion. Globalisation has been accompanied by increasing variety in the types of service that are becoming available. These include new mobile and data transmission services as well as a reconfiguring of international services for multinational companies which permit them to streamline their communication services. The industry has also seen a range of new entrants that were previously involved in other sectors. Examples include power companies using the power distribution network as the basis for new fibre optic links and Japanese trading companies as well as financial institutions.

The ICT sector has seen many changes. In the 1980s, most local communication services were handled by state owned public telephone operators. International traffic was shared between these carriers, and new investments in global infrastructure such as fibre optic sub-sea cables were undertaken on the basis of pre-commitments for the new capacity. Arrangements for international services were agreed on a bilateral basis. Multinational companies were often forced to create their own global networks by leasing capacity from a variety of different national operators. There was a steady, but non-spectacular, growth in the size of networks and an incremental application of new technologies. The requirements for funding new capital investment were significant but were largely met from internally generated cash flow. Foreign investment opportunities were virtually non-existent.

In the 1990s, this picture has been transformed in a variety of ways. The world has changed from a model dominated by bilateral relations to one of global oligopolistic competition. The period has seen the emergence of major private service providers who, in turn, are forming large scale alliances that provide them with the facilities to service customers on a global basis. Once formed these international carriers are increasingly competing with each other for the influential group of multinational companies that is seeking to have global telecommunication solutions rather than piecemeal national approaches. International telecommunication traffic has grown rapidly at a significantly higher rate than has applied to domestic markets. A growing part of telecommunication traffic is in the form of digital data rather than voice traffic.

Responding effectively to the new global service environment will form an important element of any national ICT strategy. Global service companies often have wide-ranging expertise in equipment procurement and in the construction as well as the operation of networks. There will be opportunities to create effective partnerships for the development of national information infrastructures.

3.2 National partnerships
Investment in ICTs competes with other investments necessary for addressing development goals. For policy makers or private sector investors in developing countries, there are often apparently intractable conflicts over investment in ICTs versus investment in other sectors. Policy makers operate in a political world in which their capacity for action is highly constrained both by established practices and by the urgent development problems that need to be addressed.

This competition between differing objectives has sometimes suggested that there has to be an initial selection process before substantial investments in ICTs or related capabilities can be decided upon. Since the use of ICTs is directly linked to issues concerned with the production of knowledge, it is more constructive to view the use of ICTs as an enabler of development and a source of skills. Investment in ICTs should always be seen as complementary, rather than as an alternative, to other development goals.

ICTs need to be considered in combination with the existing social and technical capabilities in each country. Rather than being an isolated sector for investment they are likely to produce a wide range of spin-offs both in terms of social and economic value. There will always be tensions created by competing investment priorities. However, the capabilities generated by ICTs can contribute significantly in many different development contexts. Investments in ICTs, particularly in communication networks, will often require long-term planning and investment horizons that extend over many years. Together these factors point to a need for careful policy formulation that will maximise investment in the immediate term without placing constraints on sustainable development in the future.

3.3 International partnerships
Up until the 1980s, most ICT service revenues were handled by national, state-owned operators. The investments were largely co-ordinated by government ministries and the requirements for new funding were primarily met from internally generated cash flow. As the pressures to place public infrastructure on more commercial principles have increased, financing sources have become more diversified. Initially this has involved privatisation of existing providers. A significant number of public telecom operators have already been transferred to the foreign multinational telecom companies. By 1996, the ITU estimated that some 44 operators had been sold by individual member governments raising an estimated US$ 159 billion through the sale of shares to both international and domestic investors.

In most developing countries, the Internet Service Providers (ISPs) were set up as part of the public operator. But a result of the state policy of privatisation, the ISPs have subsequently become private. They teamed up with both national and foreign partners. Lately, we see this market opening up in many developing countries. This has had the effect of a rapid increase in the number of competing ISPs.

Accompanying these developments has been the significant growth in foreign investments source for ICT. Most sources re concentrated in a relatively small number of centres. Markets that deal in international bonds, equities, foreign exchange and investment management are largely located in London, New York, Tokyo, Hong Kong, Singapore and Frankfurt. While there are other important national financial markets, these centres together account for most of international financial flows from savings to ICT.

This high degree of concentration has both benefits and disadvantages. It permits large sums to be raised quickly and efficiently. The pool of world savings is becoming increasingly accessible to investors that are able to offer the right financial terms and levels of security. At the same time, in creates the risk of exclusion. If the political risks are considered unacceptable, or if other terms and conditions cannot be agreed, then financing can often not be obtained at any price.

The financing requirements for building new communication infrastructures are substantial. The World Bank estimates that US$ 60 billion per year will be required world-wide in order to close the gap in provision. Raising these large sums will not be easy. Many very poor developing countries do not have an official rating from the major agencies such as Standard & Poors or Moody's. This restricts the types of commercial lending. For some countries this may imply that funding is limited to multilateral institutions such as the World Bank and regional development banks, and that the private commercial lending and equity markets are not accessible.

In order to be successful, innovative financing techniques will need to be applied to meet the large capital investment requirements associated with building new national information infrastructures. This will involve partnerships between national and foreign financiers, equipment suppliers, governments and local companies in order to create the credit standing which is necessary to attract funding.

Investment capital is an essential element of the partnerships that have to be formed to successfully develop the national information infrastructures required for sustainable development. However, the process of procuring funds will in itself require prior mobilisation of partners to provide the specific construction, operational and financing expertise that a particular project needs. Increasingly, financing has to be viewed as an integral component of each development project rather than something that can be added at the end. Sources of finance are also becoming linked to major equipment suppliers who have identified the need to provide complete turnkey packages including financing facilities as a source of competitive advantage.

3.4 Partnering with global equipment suppliers
The supply of equipment is becoming more concentrated and global in scale. A small number of major companies is responsible for a large proportion of the world's supply of ICT equipment. Similar to the telecommunication services sector, equipment supply has undergone significant changes in recent years. Under an earlier model, local monopoly service providers with their favoured suppliers handled all aspects of design, procurement, financing and operation. Equipment supply was generally in the hands of captive national suppliers. Trade in ICT equipment was limited. Many developing countries were locked into sources of supply, which owed their origins to old colonial ties.

Recent years have seen the emergence of a new regime in equipment supply. A small group of global companies is increasingly dominant. According to figures published by the ITU, international exports of ICT equipment have more than doubled in the period since 1990. In 1995, total telecommunication exports alone were worth US$ 58 billion, an increase of 20 % over the previous year. Exports have garnered an increasing share of the total global ICT market. They already account for more than a third of the total.

The ICT market is becoming increasingly concentrated. Already, according to figures published by the ITU, the top five companies account for over half of all equipment sales. A large proportion of these sales represents exports rather than domestic sales. Similar export concentration is found when the top 10 equipment suppliers are examined. Collectively these ten companies sell more than 60 % of their output overseas.

Equipment suppliers are becoming a critical element in establishing effective partnerships for new projects involved in ICT. Their expertise is a function of large research budgets and the practical experience obtained while implementing large-scale projects on an international basis. Major suppliers like IBM, Microsoft, Ericsson, Nokia and Lucent have become established as major companies that have very little debt and which are increasing their turnover by as much as 50 % per annum. As a result they enjoy large cash flows from their operations, which makes them attractive to international banks as potential customers. With the benefit of strong financial backing, global equipment suppliers are able to take innovative approaches to financing the equipment purchases associated with new telecommunication projects.

3.5 Partnering with multilateral agencies
Multilateral agencies have played a major role in funding investment in infrastructure in developing countries for 50 years. Although ICT operations have enjoyed a high level of internally generated funding, the growing investment needs have brought about an increasing requirement to seek outside funding support. Major multilateral funding agencies like the World Bank and associated entities such as the International Finance Corporation have developed specific expertise in arranging financing facilities for ICT projects.

Despite their important ongoing role, the overall funding position of multilateral agencies has declined. In a number of countries, specifically Latin America, external private sources of finance have become more predominant. During a number of years in the 1990s, net repayments of multilateral debt was actually positive; that is, repayments exceeded the drawings on new funds. In addition to funding, a number of agencies associated with the United Nations have played an important role in supporting new development projects. They remain an important component of future partnerships for sustainable development.

4 Governance policies

ICTs require a broad set of governance principles to be accepted in order for them to be able to operate in a stable environment. This is increasingly the case when ICTs take on an international dimension with the construction of global networks that link companies, countries and individuals.

There are a growing number of organisations operating at the international or regional levels whose role it is to set the 'rules of the game'. Some of these organisations, like the ITU, have been in existence for some time. Others are of a more recent vintage and reflect the growing private sector involvement in establishing the governance regime for ICTs. The key issues which have to be addressed include intellectual property, making information secure when it has to be confidential, and preserving the right to privacy.

4.1 Intellectual property
Laws governing intellectual property provide the same levels of protection to individuals in respect to their creative works as would apply if these took the form of physical assets. Intellectual property laws govern the use of literary as well as artistic works but also include inventions and trademarks.

Intellectual property protection has become increasingly important. The role of these laws has grown in line with the ability to reproduce original work at little or no incremental cost. In the period before printing was invented, a book could only be reproduced by having it copied by hand. The introduction of printing technology in the 16th century made it possible to reproduce works of writing at a significantly lower cost. Progressively, other new technologies have extended similar capabilities for reproducing original artistic and scholarly works. Books and documents can be copied in their electronic form at a cost equivalent to the particular electronic medium that has been selected to hold the electronic file, i.e. computer disk or CD-ROM. Films can be copied very cheaply using video-tapes. Musical performances have been copied for some time using cassette tapes. It is now increasingly possible to store music in a digital file and to send this at minimal cost to others using the Internet. Similarly, photographs and paintings can be digitised and reproduced using high-resolution colour printers.

The ability to make copies that are increasingly true to the original at a very low incremental cost and to be able to send these copies over digital networks has triggered major reviews of the existing laws governing intellectual property. The majority of the underlying laws date back to the pre-digital era. It is therefore not surprising to find that there have been more changes to intellectual property conventions internationally in the past five years than occurred in the previous 200 years.

International conventions have been established to ensure that the protection of an individual's intellectual property rights is respected across international borders. The majority of United Nations members are signatories to all the essential conventions. The Berne Copyright Convention was signed in 1886 and was subsequently extended through various further treaties and amendments. In 1883, the Paris Convention for the Protection of Industrial Property was agreed governing the use of trademarks.

The United Nations has played a growing role in administering these international agreements. In 1952 it was responsible for the signing of the Universal Copyright Convention which UNESCO now administers. Similarly in 1967, the World Intellectual Property Organisation (WIPO) was established with its permanent location in Geneva. WIPO is responsible for the administration of the various conventions governing trademarks and copyright. It is specifically mandated to assist convention signatories with intellectual property issues.

Intellectual property laws have to balance the rights of the individual or organisation responsible for creating a written work, film, picture, or photograph, etc., with the interests of the rest of society. The need for disclosure and dissemination of ideas has to be balanced with the rights which originators seek to profit from their creations. Attempts to maximise the use of electronic sources of information are constrained by the rights sought by the owners of information.

In an international context, the equation is complicated by the imbalance that exists in the trade in intellectual property between a select number of advanced industrialised nations and many developing countries. Failure either to sign specific conventions or to ensure proper enforcement has been a frequent source of trade tension. This is particularly the case for countries trading with the US which is dominant in the origination of new original works, whether they are computer software, films, musical composition, or books.

Although intellectual property rights are becoming increasingly important, there are alternative ways of ensuring that the efforts of authorship and origination are rewarded. The dramatically reduced costs of distributing information on the Internet or using cost-effective storage media makes it attractive to encourage the dissemination of original works for its own sake. The Internet has created a large body of 'public-domain' information. This information is freely available to interested parties providing the source is properly attributed and respected. This serves the interests of those who wish to exchange and distribute ideas rather than extracting financial gains from more restricted circulation. Free distribution can also enhance reputational standing and expose new theories or discussion papers to a wider range of critical comments.

Other forms of information may also be distributed without any direct payment in order to increase revenues in the future. For example, attracting new investors will require the production of a prospectus that can then be made freely available without cost. The Internet is only just beginning to be used in creative ways by the investment community in order to enhance the more traditional methods of investment distribution.

Enforcement of international conventions is the responsibility of each nation that becomes a signatory. However, many developing countries currently have no specific institutional structures or legal bodies with responsibility for policing protection of intellectual property rights. This is likely to change as a result of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which formed part of the Uruguay Round in 1995. TRIPS sought to provide minimum standards for the protection of intellectual property that would be conducive to increased trade. It reflects a general change in emphasis towards protecting the rights of investors in intellectual property as opposed to preserving the rights of individual creators. The change reflects the strong commercial interests that have been created in the trading in intellectual property on a global scale.

As ICTs become increasingly significant in all areas of the economy, protecting the results of intellectual and artistic enterprise assumes a growing significance for many information producers. Giving sufficient consideration to how intellectual property rights can be upheld will become of increasing importance in defining the governance frameworks for ICTs.

Intellectual property rights also have a broader dimension in that they send signals concerning the wider environment in which commerce is conducted. In particular, studies have shown that foreign investors will scrutinise levels of intellectual property protection carefully before committing new funds. Enforcement will also signal the extent to which domestic producers of creative works can expect to receive reciprocal treatment when they start to actively market their works internationally.

On the other hand, there is very little empirical evidence of the impact of the growing pressure to update existing conventions and laws in the intellectual property rights area. Stronger enforcement regimes may disadvantage developing countries that are unable to acquire much needed information products because of costs imposed as a result of an increasingly stringent governance regime in this area.

4.2 Security of information
The new electronic networks which are developing into a global information infrastructure offer dramatic possibilities for reducing the costs associated with establishing new business contacts, negotiating contracts, and managing the flow of goods and services between buyer and seller. Information that is communicated over data networks like the Internet with extensive public access, inevitably raises concerns regarding the ability of unauthorised third parties to access the messages and misuse them in some way. If the electronic mediation of business transactions is to be successful, both the sender and receiver of a confidential electronic message need to be confident that it has not been interfered with in any way.

Cryptography, the technology required to ensure that electronic messages are secure, has been under development for some time. Although advances in cryptography in principle permit all electronic messages to be made secure, there are key national and international policy issues that need to be considered.

Governments have enjoyed the right to read and intercept all communications in order to preserve national security. If messages can be made so secure that they are only intelligible to the holder of the decryption key, this could prevent any form of interception by government security organisations. The commercial needs to send secure messages and the priorities of national security organisations are therefore likely to be in conflict. Policies need to be formulated which determine how cryptography is to be used to secure electronic networks and to determine who has ultimate control. This requires nationally as well as internationally agreed policies that can provide the necessary framework.

4.3 Privacy
Any forms of social interaction are inextricably bound up with culture. Agreed norms and values define how business is conducted as well as other non-commercial activities. Sharing knowledge and information is an essential element but this will be governed by different sets of unwritten rules that individuals expect to be respected. In one cultural context, information will be considered confidential while, in another, it may be freely shared on a reciprocal basis.

Confidentiality and privacy have to be considered as being culturally bound concepts rather than absolutes. The types of information that can be shared informally will vary significantly according to each business culture. ICTs complicate these differences by introducing mediated communication into the equation. New routines for communication need to be defined that incorporate the specific characteristics of the technologies involved. New ways of creating trust have to be established.

Electronic commerce is an important example of mediated communication. Although it offers potential advantages in terms of cost and efficiency, buyers and sellers have to establish routines that will reinforce trust and confidence in each other. In a business environment that is unmediated by electronic communication, simple measures such as a sealed letter, a recorded signature, a recognised letterhead or company logo will generate the confidence and support that is required for business to proceed. These devices can convey confidence that a particular communication is secure as well as private, that it involves an individual who is authorised to enter into the transaction, and that it involves the named counter-party.

In an electronic environment, many of these cues are not available. Substitutes are required in order to establish a similar level of confidence. Nevertheless, there is an increasing array of electronic tools including encryption and authentication by both the receiver and sender of the message as well as electronic forms of signature that permit many of these concerns to be addressed.

Establishing a policy framework that addresses some of these issues is likely to be of critical importance for developing countries. The creation of electronic networks opens up significant opportunities including being able to overcome some of the obstacles to engaging in international trade where initial price discovery is very costly. At the same time, new institutional conventions will be necessary to ensure that information made available over networks is properly respected and not abused.

4.4 Trade and taxation of electronic information
One of the important prerogatives which national governments enjoy is the ability to levy taxation on their subjects. Taxes can be raised in a variety of ways including taxing consumption as well as production. Global electronic networks like the Internet pose a challenge to existing trading systems where the rights and mechanisms for levying taxes are already well established. The emerging new trading systems will require agreements on the way taxation systems should be applied. The initial position taken by the US government is that the Internet should operate as a tax free zone. This approach also has some measure of support within the European Commission but remains a controversial issue under discussion and negotiation.

Some of the poorest countries in the world rely heavily on receipts obtained from customs payments. In some cases the figures are as high as 80 %. New trading networks pose the threat that some of these revenues will cease to be available. In practice, it will be very difficult to control the increasing flow of electronic services that can be located on any server, anywhere. This issue has already been highlighted by the illegal distribution of digital recordings. When a particular Internet Web site responsible for illegal activity is located and closed down, the illegal site is often simply moved to another jurisdiction where the authorities are less willing or able to prevent its operations.

Much existing international trade is governed by the Uniform Commercial Code (UCC) which has established methods for negotiating trade finance and documenting the delivery and receipt of goods. In an electronic marketplace many of these arrangements cannot operate in the same way or to the satisfaction of the parties involved. The United Nations Commission on International Trade Law (UNCITRAL) has carried out work that is aimed at establishing a 'model law on electronic commerce'.

UNCITRAL's objective has been to establish basic rules and standards for electronic contract performance including definitions on what make a document an original as opposed to an electronic copy. In addition, UNCITRAL has developed an approach to verifying electronic signatures and ensuring that there is a way in which computer generated documents can be used as evidence in a court of law. UNCITRAL's work has been welcomed. However, it will require acceptance by a large majority of United Nations members before it can provide a common basis for electronic trading in a global environment.

A number of other international organisations have taken initiatives in developing institutional mechanisms intended to provide the basis for secure electronic trading. The OECD has completed a number of studies that have considered many of the key issues. It has recommended that member countries should focus on a number of areas including:
- Facilitating the convergence of electronic service infrastructures to support electronic commerce;
- Ensuring that proprietary standards do not act as entry barriers;
- Encouraging the co-ordination of physical transportation systems with electronic networks, thereby maximising the resulting efficiencies;
- Ensuring that encryption policies are harmonised;
- Creating principles for a harmonised tax system that focuses on the origins and destination of traded goods rather than on the underlying electronic networks.

There is an increasing array of international organisations involved in defining the 'rules of the game' as they apply to ICT development and use. In each case, there is a process to be followed. Representation is required from interested parties, and the industrialised countries generally have large committees supported by individual secretariats that carry out the work involved in defining the rules that make up new frameworks. The interests of developing countries will not necessarily coincide with those nations that are already highly industrialised. Some of the least developed nations may even be vulnerable to certain developments that expose them to paying significantly higher licence fees and royalties for goods and services with a high intellectual property content.

National ICT strategies need to be implemented which actively work on building a governance system enabling national information infrastructures to be used effectively. Individual developing countries often face a shortage of resources when attempting to be represented at all the different conferences and meetings. One of the issues to be addressed is the extent to which there should be regional co-operation and joint representation on key issues, which can also lead to joint policy initiatives. A number of United Nations agencies have the resources to support participation in the creation of a more equitable and effective global governance system.

5 Concluding comments

Given the nature of ICTs, policy frameworks and national strategies are essential to co-ordinate the various aspects of regulation and governance that are required. Policies need to focus on the creation of coherent ICT framework strategies. The formation of strong partnerships for funding, exchange of expertise and content exchange and creation involves a wide range of stakeholders. In this way it will be possible to realise the possibilities available when ICTs are harnessed for sustainable development.