for the joint meeting of the
United Nations ICT Task Force,
G-8 Group of Nations DOT Force, and
World Economic Forum
New York, February 4, 2002
Economies Project at Harvard Law School
In cooperation with
This paper has been
prepared by the Open Economies Project at Harvard Law School, affiliated with
the Berkman Center for Internet and Society. Special thanks to Finnbar Livesey,
Dianne Cabell, Justin Chan, Sarah Guerrero, Sarah Hsia, Kristin Hughes, and
Rohan Kariyawasan. Correspondence on the paper should be addressed to the
Principal Investigator Dr. James Moore by mail at Open Economies, Berkman Center
for Internet and Society, Harvard Law School, Pound Hall 511, 1563 Massachusetts
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Economic growth is achieved largely through innovation. Until a nation can innovate it will consistently fall further behind other societies. Information and communication technologies (“ICT”) are central to economic innovation, and may provide the opportunity for nations to leap ahead. We believe that the rewards can be great for nations possessing the vision and will to embrace the twin goals of economic innovation and ICT for development.
The shorthand for ICT has become the ubiquitous term “digital”—as in “digital business” and “digital development”. In this paper we adopt this language as fitting the spirit of adventure and boldness appropriate to the digital opportunity. The Open Economies project at Harvard Law School seeks to work with leaders in developing nations, from government, business, and non-profit organizations, to promote digital development, digital entrepreneurship, digital transformation of local sectors such as manufacturing and agriculture, and trade in digital goods and services.
Open Economies is working in close cooperation with the G-8 Group of Nations’ Digital Opportunity Task Force (the DOT Force), the United Nations Information and Communication Technology Task Force, and the World Economic Forum Global Digital Divide Initiative.
Open Economies is able to draw on the technical skills of a variety of partners. These include staff and faculty at the Harvard schools of law, computer science, public policy and business, as well as those at other universities. We also draw on pro bono contributions of attorneys and other professionals who are generously giving of their time. Our goal is to promote economically, environmentally, and socially sustainable development for people in the least developed nations in the world—as indeed in all the nations of the world.
II. The Open Economies Approach
III. From Strategy to Action
A. Balance ICT Investment with Non-ICT Spending for Basic Needs
B. Build Political & Administrative Capacity to Lead
C. Support New Local Business Formation
D. Enable Trans-National Involvement in Local Industry
E. Strengthen Developing Countries International Negotiation Capacity
F. Develop Local Production Capacity for Digital Goods & Services
G. Reduce the Costs of Being a Global Digital Business
H. Pilot Programs & Technologies for Entrepreneurship & Trade
I. Encourage Education for Entrepreneurship
Over the past year, several international efforts have emerged that focus on bridging the global digital divide and how information and communication technologies (ICT) can help address inequities in economic development. The G-8 Group of Nations’ Digital Opportunity Task Force (the DOT Force), the United Nations Information and Communication Technology Task Force, and the World Economic Forum Global Digital Divide Initiative have been particularly effective in forging an international coalition of representatives from the public, private and not-for-profit sectors whose principal objective has been to take action plan on these issues. The current worldwide focus on the problems of development, combined with the potential for new technologies to be able to radically change the process of development, has generated tremendous momentum for action – a momentum we must nurture and grow.
The Open Economies Project at the Berkman Center for Internet & Society, Harvard Law School, in conjunction with its partners, seeks to promote economically, environmentally, and socially sustainable development for people in the least developed nations in the world. Working closely with the G-8 DOT Force, UN ICT Task Force, and WEF Global Digital Divide Initiative, we have focused on identifying specific policy, regulatory, and legal initiatives that promote successful incorporation of information and communication technologies in economic development. We work with a broad systemic model based on the proposition that economic growth is generated through innovation and entrepreneurship. In order to ensure that the overall goals are kept in focus, the approach is defined with an overarching goal of triple sustainability in society, the economy, and the environment.
Our focus is on digital goods and services as they provide the greatest potential for rapid economic growth in developing countries. In the coming year, the comparative advantage of developing countries will expand beyond low labor costs. Greater and cheaper bandwidth will be available at a scale more representative of the developed world. This will mean that the combined cost of production and dissemination of digital goods and services from developing countries will make them competitive on an international level.
This white paper identifies critical actions to support a
sustainable digital economy. These actions include the initial assessment of the
innovation capacity of developing countries. We also outline policies and
programs that will support and encourage entrepreneurship and innovation within
The Open Economies project promotes economically, socially, and environmentally sustainable development for people in the least developed nations and regions of the world. The project is not designed to produce merely reports. We wish to see significant advances made in policy, regulation, and law in developing countries.
We focus the attention of policy makers on entrepreneurs who drive forward technological and economic innovation. We share with other policy observers the conviction that business must lead. On the other hand, business must be provided with an attractive climate for investment and risk, and to do this, government must employ a variety of means., as emphasized by long-time students of policy, Branscomb and Keller, in the text box at right. We draw on an extensive body of economic research on how innovation occurs in societies—research that focuses on understanding and promoting innovation as means to economic development.
We also draw on the experience of high technology business leadership, and studies of competitiveness in the most innovative industrial nations, to help understand how ICT-based innovation in particular might be promoted. We have been particularly inspired by work on “economic clusters” “business ecosystems” and the role of social conditions in high technology innovation.
We have taken these ideas and sought to use them as
inspiration for actionable recommendations, accessible to any nation that wishes
to adopt them. At the highest
level, our ideas can be summarized in the following principles:
1. Innovation is the key to economic growth. By promoting policies and actions that develop innovation economies in the developing world, these countries will be able to catch up rather than continually lag behind developed economies.
2. Economic expansion based on digital products and services will bring special benefits to developing countries, and may accelerate economic evolution in these nations. Therefore, our focus will be on encouraging such ‘digital businesses’. These businesses emphasize knowledge, information and technology. The impact of the application of knowledge and information technology to traditional businesses is central to our argument. ICT applications will make developing economies more internally efficient, and provide opportunities to trade in information-technology rich goods and services produced in the developing world. In addition, we believe that, in general, digital businesses are the best means of approaching the three goals for sustainability—that such businesses are not only fast growing, but can be more environmentally sound, and more supportive of human rights and human options, than traditional industries such as textiles or consumer goods manufacturing.
3. Some of the most difficult barriers to overcome are not technological, cultural, or even inherently economic, but rather have to do with a lack of government policies (both national and trans-national) and rule of law to support digital entrepreneurship and investment. Our project concentrates on the policy environment for digital business in the developing world, providing advice on government policies affecting funding, laws and regulation, and enforcement. Our project is based at Harvard Law School, and draws on extensive specialized expertise in legal matters. We are mobilizing a network among law schools and professional services firms around the world. We provide policy support to other organizations with a complementary strategy, including the DOT Force and the United Nations.
4. In our work we will balance the role of facilitating discussion and providing objective, non-partisan advice, with advocacy for a limited set of policies that we believe are important for our partners to consider—and/or that we and our partners have agreed warrant support. Development based on ICT, in short timescales and respecting the goals of triple sustainability, will require the input and support of many actors from the public sector, the private sector, and civil society. We believe that the key to creating and implementing digital policies is direct cross-sector conversation among leaders. Thus we are working closely with leaders of governments, businesses, non-profit organizations, multilateral organizations and international financial institutions.
Currently, there are many high level strategy statements that developing countries can use, but there is less support for concrete actions that can be instituted immediately on the ground. The Open Economies project will promote specific policies and actions that it believes will spur economic development, supported by the use of ICT and aimed at the goal of triple sustainability. The Open Economies project will provide concrete actions and steps that countries can implement so that there is integration between setting goals and strategies and moving forward with new policies.
Our current advocacy embraces the following policy initiatives. These initiatives go beyond the normal trade opening, to empowering developing countries to compete on a near-equal footing with businesses in the advanced world.
Each of the action sections is laid out in the following manner –
· Introductory paragraph to explain the focus of the section
· List of action points that can be applied
· List of outstanding research questions within the focus of the area
There is a continuing debate in the development community about whether ICT investments make sense when basic human needs such as food, water and shelter are not met. In general, we believe that ICT can greatly help in the provision for such needs—and that wise investments in ICT do not “take food from people’s mouths” but in practice make it more likely that food gets to those who need it. Moreover, digital entrepreneurs will often contribute to such solutions, and thus a vigorous ICT industry sector can be helpful even in countries with serious shortages of basic goods. We wish to recognize the need to focus on achieving the proper combination of basic goods, ICT for provision of basic goods, and ICT industry development. Moreover, while our project is focused on helping a nation operate as an innovation economy focused on digital goods and services, we recognize that countries will take different paths to development, and will decide individually how to evolve their social and political institutions, and so the balance of these types of investments will need to be contextualized for each country.
i. Basic services such as water, electricity, sanitation, and healthcare.
ii. ICT infrastructure and services in support of basic needs and improving societal outcomes.
iii. ICT as part of supporting innovation and entrepreneurship within the economy.
· To what extent must a society meet a certain level of basic need provision in order to support, and benefit from, digital entrepreneurship, applications, and trade?
· In societies where “islands’ of digital entrepreneurship have flourished, such as India, what is the relationship of these successes the rest of the country?
· To what extent can a local ICT industry gain its start working for development projects and with NGO and government funding, and then subsequently become an engine of trade and a basis for creating a strong middle class?
· Are the environmental standards developed through industrialization in the West appropriate for developing countries going through the same changes? Can ICT-based development help countries advance while also substantially conserving energy and other resources?
The structure and operation of an innovation economy requires government commitment and understanding, as well as the commitment of the private sector and civil society within a country. The action points below focus on providing developing countries with assistance if they decide to pursue a “national innovation” plan for economic development.
This section is grouped under three headings: the first is “Ministerial Actions” and relates to changes to be made within the government; the second is “Policy Network Formation” and is where connections are formed between the government, the private sector, and civil society in bringing about the changes required to support the innovation economy; and the final section is “Industrial Policy” which includes legislative actions that can be taken to support specific digital business within the innovation economy.
· What are the most successful models of innovation – local, regional, national, or global?
· How can we develop new innovation models for developing countries?
· Can we use models of entrepreneurship developed in G-8 countries, or do we need to rediscover what entrepreneurship means for developing countries?
· How can policy be developed in a multi-actor way that preserves openness, but is relatively fast and inclusive?
· Is modern liberal democracy a prerequisite for an innovation economy?
· Can model legislation from one country be imported into another?
Entrepreneurs face many difficulties in both developed and developing countries when forming new companies. However, new company formation is especially difficult in developing countries where a number of the protections and resources that the developed world takes for granted do not exist.
While culture will play a significant part in how the private sector of a country operates, studies suggest there are be policies which are of help to companies in all developing countries, such as labor mobility, stability of procedures and reduction of expense for redress in courts.
The power of foreign direct investment, technology transfer, and the cooperation of foreign companies in local development are some of the significant methods for bringing needed capital into a developing country. However, investors from outside of the country need to be able to predict and when possible minimize their investment risk, and need a stable fabric of laws and regulations within which to operate.
· What are the barriers currently experienced by investors from developed countries seeking to invest in specific developing countries and regions, specific industries—especially digital businesses—and a particular scale enterprises, especially small and medium-sized.
· Given the above, what general ways can private funds be encouraged to invest in developing countries?
· What combination of factors can enable developing countries’ markets to provide a return that will be attractive to international investors, while also creating wealth in the developing areas themselves?
As developing countries continue to expand and develop their economies, there are elements of their relationships to other nations that must be negotiated. Part of convincing developing nations to open their economies to the world, is critical to be able to support them in international venues where key decisions will be made that will affect their economic development.
· Redrafting of the TRIPS agreement
· Continuing discussion of trade commitments in telecommunications
· ICANN, both for the transition to IPV6 and for continued support of IPV4 as long as developing countries need to maintain the address space.
· IETF meetings (to which the Center for Democracy and Technology has started to send students to track activity for developing countries).
5. Publish triple sustainability metrics each year. A key issue is whether development based on innovation in digital goods and services is sustainable. In order to be able to monitor the development of the economy, and to engage the international community, triple sustainability data should be collected. This data may be part of the countries reporting to the UNDP Human Development Report or a similar report. These metrics will include but will not be restricted to –
· GDP growth
· Change in per capita income
· Number of new companies created
· Number of new jobs created
· Number of patents filed within the country and abroad
· Change in foreign investment flows
· Level of national private equity
Without these targets it will be very difficult to hold the minister of innovation, and others involved inside and outside of government, responsible for the changes that are needed. The setting of such metrics will also engage large NGOs who wish to have a method of accountability and impact assessment for their programs in developing countries.
· How do developing countries make better use of trade commitments in telecommunications made at the level of the WTO, regionally, and in bilateral trade agreements to better promote trade in developing-country originated knowledge-based services?
· How are the different metrics related, and can we define a leading set of indicators for triple sustainability?
While working on the high-level structuring of national policy and international negotiations, we must also support the capability of developing countries to produce digital goods and services. In this section, we outline some of the actions that will help increase the production capacity of the developing countries for digital goods and services. This includes the knowledge base and skill base of the country, and the human capital that exists within the country.
Knowledge for digital industry
Local industrial base
Local human capital
· How has the movement of the most technically skilled away from developing countries impacted their ability to develop digital markets now?
· Has the movement of skilled people stopped, and is there anything that we can do to stop the shifting of these people away from developing countries?
One of the most significant comparative advantages for developing countries has historically been low production costs. However, this advantage has not been achieved in the digital markets as the cost to access Internet and telecommunications services in developing countries has been extremely high, and there is a lack of bandwidth into and out of countries. The physical connectivity situation is changing rapidly (for example, the SAFE project will connect from Malaysia to many points in southern and western Africa and up to Europe), however access costs for digital businesses, especially small and medium-sized enterprises, remain in question.
· How much more bandwidth will be available to developing countries in the next year? How can we further reduce the cost of international bandwidth and make it available to all entrepreneurs in the region?
· What is required to reduce the cost of domestic internet access in developing countries to facilitate innovation?
The transfer of technologies from one country to another without any customization has traditionally failed. Part of the DOT Force responsibility is to ensure that appropriate technology is deployed within developing countries according to the needs and the goals of the countries themselves.
In terms of producing goods for developing countries, the developing countries themselves must be leaders in the innovation process from the outset. On the other hand, companies and individuals in the more developed world may have much to offer. Thus we see potential in alliances between individuals in developing and more developed countries to promote the innovation process which will lead to new digital goods and services produced in the developing world for export or use in the local economy.
Examples of projects and programs in this category include the following.
· E-Inclusion - World e-Inclusion is a business initiative with a clear social mission. Working with a range of local and global partners, HP is developing and delivering sustainable information solutions in partnership with people with very low incomes in the developing world. Involved regions include Africa, Asia, Central and Eastern Europe, Latin America and the Middle East. See www.hp.com/e-inclusion/.
· DigitalDividend.org - Digital Dividend is a Web site dedicated to exploring creative business approaches, public-private partnerships, and other sustainable ways to bridge the global digital divide and create lasting economic, social, and environmental benefits. See www.digitaldividend.org.
· BusyInternet - BusyInternet is an initiative to develop large-scale Internet development centers throughout Africa. The centers comprise a mixture of training facilities, office space and public internet access. See www.busyinternet.com.
1. Study the experience of pilot programs promoting digital innovation, and identify legal and regulatory issues that present hurdles to such initiatives. Open Economies is working closely with other centers of digital experimentation to stay in touch with and promising experiments. By working as legal advocates and legal researchers to help those in pilots solve their legal and regulatory issues, we are able to catalogue issues and develop both legal support materials plus policy recommendations for nations.
· What are the legal and regulatory issues of most importance to innovative pilot projects and technologies? How can these be addressed in specific cases, and how can we generalize from these issues to make policy recommendations to governments?
Entrepreneurship may not yet be part of the culture of some developing countries, thus support should be provided to develop entrepreneurial skills in these emerging markets.
· Will the education of individuals in developing countries take a generation, or are there ways to speed up the development of needed skills?
· Can a world-class innovation economy develop without a world-class science and technology university base within a country? If not, how can one best create both at the same time?
· How are culture, education and entrepreneurship intertwined?
 Branscomb, Lewis M., and James H. Keller. "Towards a Research and Innovation Policy." Chap. 18 in Investing in Innovation: Creating a Research and Innovation Policy That Works, edited by Lewis M. Branscomb and James H. Keller. Cambridge, MA: MIT Press, 1998.
 Porter, Michael E., The Competitive Advantage of Nations. New York: The Free Press, 1990. Republished with a new introduction, 1998.
 Moore, James F., The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems. New York: HarperBusiness, 1996.
 Fountain, Jane E. "Social Capital: A Key Enabler of Innovation." Chap. 4 in Investing in Innovation: Creating a Research and Innovation Policy That Works, edited by Lewis M. Branscomb and James H. Keller. Cambridge, MA: MIT Press, 1998.
 We will use the term digital business to refer to those that make extensive use of ICT or are involved in the production of digital goods and services.
 Normally including an element of “revenue sharing”, that is, the telephone company passing a percentage of the relevant call revenues on to the ISP, via a terminating operator where that is distinct from itself.