ICT, Trade and Economic Growth ICT policy, regulation and diffusion

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ICT, Trade and Economic GrowthICT policy,
regulation and diffusion

• Dr. Meoli Kashorda, MIEEE MIET
• Strathmore University
• Professor and ICT Expert
• Dr. Mbui Wagacha
• ADB Consultant and Economic Expert

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Agenda

• Background and terminology
• ICT and E-commerce/E-government terminology
• Kenyas Knowledge Economy Index and Network
  Readiness Index
• What implications for ICT growth and
  opportunities?
• Trends and impacts of ICT policy, legislation,
  and regulation
• Telephony and Internet growth
• E-government strategy
• E-government strategy and Emerging national ICT
  Strategy/Master plan
• ICT facilitated domestic and international trade
• Findings for large and medium sized enterprises
• Findings for small and micro-enterprises
• Conclusions and Recommendations

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What are Information and Communications
Technologies?

• Use ICT as an umbrella term to mean
• Computing (software and hardware),
  telecommunications (mobile, fixed, Internet), and
  broadcasting
• Convergence of computing and telecommunications
  has already happened
• Convergence of industry
• Convergence of services
• Convergence of regulation

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E-government interactionsSource IICD Research
Brief
Central Govt.
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Gartners Phases of E-government
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B2B, B2C and C2C interactions
Consumer - Enterprise
Enterprise - Enterprise
Consumer - Consumer
Department - Department
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Types of payments

• In the physical world payments made by
• Cash, credit cards, debit cards and personal
  checks (in some countries)
• In the on-line world payments by
• Credit cards and debit cards (B2C)
• Electronic funds transfer (B2B)
• Appropriate authentication and confidentiality

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Electronic payments the players
Consumer
Merchant
Financial institutions
Physical tokens representing value
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IT Business Value Framework
Primary
Support
Short-term
Long-term
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What is the firm-level motivation for using IT
systems?

• Business or organizational strategy
• Leadership believes IT matters!
• IT business value framework
• Study has a special focus on firm-level ICT
  diffusion and usage

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Why the focus on ICT at the national level?

• Knowledge economy basis for competitiveness is
  knowledge and innovations
• Four pillars Institutional, educational,
  innovation, and informational infrastructure
• Knowledge Economy Index (KEI) and the Knowledge
  Assessment Methodology (KAM)
• Networked readiness index (NRI)
• What happens if trading partner has higher KEI or
  NRI?

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KEI comparisons
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Knowledge Economy Index
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E-readiness and Networked Readiness Index

• E-readiness is the degree to which a community is
  prepared to participate in the networked world
• Indicators of e-readiness include network access,
  networked society, networked economy, and network
  policy indicators
• Networked Readiness Index (NRI) is defined as a
  nations or communitys degree of preparation to
  participate in and benefit from ICT developments
• World Economic Forum / INSEAD

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Networked readiness index (2002-2005)-
INSEAD/WEF/WB

• NRI depends on
• Environment sub-index
• Infrastructure, regulatory regime, market
• Readiness sub-index
• Individual, business and government
• Usage
• Individual, business and government
• Calculate NRI from hard facts and perceptions of
  business, govt., society

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Network readiness index framework
Market environment
Environment
Pol. Regulatory env
Infrastructure env.
Individual readiness
NRI
Readiness
Business readiness
Govt readiness
Individual usage
Usage
Business usage
Govt. usage
Source GIT report 2003-2004
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Environment component index

• Market environment
• Brain drain, ICT service exports, venture capital
  availability, Availability of ICT human capacity
• Political and regulatory environment
• Quality of legal system, Competition in the ISP
  sector, Efficiency of tax system, Foreign
  ownership restrictions
• Infrastructure environment
• Internet servers, teledensity, mobidensity,
  overall quality of infrastructure

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Networked Readiness Index (2003-2004) Score/Rank
Source World Economic Forum ICT Reports
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Networked Readiness Index 2004 and 2005 Ranks
Source World Economic Forum ICT Reports
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How should Kenya respond to KEI, NRI or HDI?

• Ignore them
• Deliberate or ignorance?
• Denial
• Data is not accurate, Kenya is way ahead of
  neighbors!
• Inform National and Enterprise ICT strategies
• Basis for competitive analysis or SWOT analysis
• Drive the ICT facilitated trade strategy

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Components of ICT infrastructure required to
facilitate trade
Consumer - Enterprise
LANs, ERPs Internet, Phones
PC, Internet Software, Phones
Enterprise - Enterprise
Consumer - Consumer
PC, Internet Software, Phones
LANs, ERPs Internet, Phones
Department - Department
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ICT regulatory environment

• Kenya Communications Act 1998
• Current legislation
• All liberalization and regulation under this law
• Institutions created by KCA 1998
• CCK (Communications Regulator), Appeals Tribunal,
  National Communications Secretariat (Policy arm),
  Telkom, Posta
• Kenya Regulations 2001
• Rules for regulation derived from KCA 1998
• Interconnection agreements

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Implementation of KCA 1998
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Implementation of Kenya Regulations 2001
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What is new in the ICT Policy 2006 and proposed
bill

• KIC 2006 addresses the following additional
  issues
• Broadcasting legislation
• Legal framework for E-commerce and E-government
  (none existed)
• Establishment of universal Service Fund
• ICT policy 2006 already published

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ICT Tax regime

• No duty or VAT on PCs in Kenya
• No duty or VAT on PC parts (2006)
• Expected reduction in PC prices
• Mobile usage excise duty 10
• Mobile usage VAT 16
• Are these the barriers to usage?

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Does Kenya have an national ICT strategy?

• ICT policy published January 2006
• Associated convergence ICT bill still in
  Parliament
• Kenya Communication Act 1998 not fully
  operationalized!
• E-government strategy 2004
• Implementation at this time focuses on
  infrastructure (the easy part!)
• ICT in Education strategy being developed
• National university strategy under development
  and includes ICT
• ICT Master Plan
• ICT policy analysis studies?
• Areas of strength or competitive/comparative
  advantage?
• Outsourcing destination? Export software
  industry? ICT parks?

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Does the current ICT policy and regulatory
framework support trade?

• Effect of policy on telephones
• Availability and affordability
• Effect on Internet
• Availability, speed, and affordability
• Effect on firm-level or organizational ICT
  infrastructure?
• LANs, PCs, networked applications?

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Availability - Growth of Kenya Fixed and Mobile
Services
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Growth in Internet Infrastructure in Kenya

• No E-commerce platform or legislation
• Do we need an e-commerce platform or change of
  culture?
• KENIC and KIXP examples of successful Public
  Private Partnerships
• Time Server and F-root name servers installed
• KENET a national research and education network
• Challenge Internet bandwidth in Kenya very
  expensive!
• Economies of scale problem?

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Growth in international Internet Bandwidth
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But is Internet affordable?

• Backbone optical fiber cables are empty!
• Usage is low, adoption of ICT by SMEs,
  universities, society still very low!
• Communications Commission of Kenya (CCK) the ICT
  regulator has issued an Internet Market Analysis
  contract to study reason for slow growth!
• Telecom and Internet Services Tariffs
• 1 Mb/s of Internet Bandwidth cost 3,000 per
  month!
• Only SMS affordable
• Is it possible Kenyans find communications
  affordable? Or more pressing and expensive
  problems?

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Growth in PCs per 100 inhabitants
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Affordability Trends in Tariffs
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Trends in mobile tariffs since 1999
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Business Internet Usage (2003)
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Usage of ICT by SMMEs (2005)
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IT Business Value Framework
Primary
Support
Short-term
Long-term
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What applications will promote usage of ICT by
business and government?

• Mobile SMS applications
• Banking, information access, content
• ERPs, retail and business applications for small
  business?
• Networked business applications need much lower
  tariff to be sustainable
• Is there any policy to promote software
  development?
• Cheap software required by business
• Business and IT education

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ICT applications in Government

• Is Government using the Internet?
• What E-government applications have been
  deployed?
• ICT infrastructure without applications is
  useless!
• Implementation of E-government strategy will
  create many opportunities for large software
  companies
• Winners will be Enterprise Resource Planning
  software and database system companies (e.g.,
  SAP, Oracle, Consultants)

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E-government applications and trade

• What would the significant e-government
  applications
• ICT in the State Law office
• Business registration and filing returns
• On-line economic and trade data
• Implementation of Statistics Act 2006
• ICT in Trade Industry
• Trade portal
• ICT in Agriculture
• Commodity prices in domestic and intl markets
• E-procurement
• Import/export and customs (Kenya Revenue
  Authority)
• E-port (Kenya Ports Authority)

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ICT in medium and large business organizations

• ICT deployment driven by business applications
• Financial institutions intense users of imported
  IT solutions
• Retail industry dependent on imported IT
  solutions
• Bidco (manufacturer) uses Mobile networks to
  connect to ERP
• Kenya Ports Authority implementing the ICT
  waterfront (Contract awarded to a South Korean
  firm)

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ICT applications small businesses

• In Kenya, limited to telephones
• Majority have no fixed lines
• All have mobile lines
• Many do not use computers or the Internet
• Small businesses ready to use ICT applications
• But availability, affordability and access
  barriers
• No baseline survey data of ICT usage in SME
  available

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Mobile and wireless applications

• Innovations in mobile applications in high demand
  in Africa
• Pre-paid service innovations
• Emerging SMS applications
• Mobile Internet applications
• Mobile e-commerce and e-learning applications
• Applications in tourism and agriculture?
• High level of software development proficiency
  required
• Certification of software developers and software
  houses!
• Incubate software development companies

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Key Recommendations

• Communications Regulation
• Feedback based on data analysis on a regular
  basis very important
• Telecommunications cost study and Internet market
  analysis excellent examples
• Local database of tariffs, users, infrastructure
  maintained by regulator to ensure effective
  policy analysis
• Avoid partial regulation or conduct detailed
  impact analysis of decisions using data
• Is there competition among ISPs? Internet gateway
  providers? PDNO? Dominant operator?
• Demand-side data analysis necessary for effective
  regulation
• Are services affordable? How about quality?
• Focus on enforcement of rules now NOT licensing
• Ensure fair competition and prices will drop

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IT regulation

• KIC 2006 bill needs to become law now
• Content regulation
• Align regulation to important sectors of economy

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National ICT leadership and strategy

• Implementation of policy and strategy depends on
  leadership capacity of businesses, government,
  and educational institutions
• Focus on change management and project management
• Training business schools?
• Performance management

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Firm-level ICT strategies

• Companies listed in NSE are effective users of
  ICT
• Large and Medium-sized also effective users of
  ICT
• It is stronger leadership
• Business and management education for small and
  micro-enterprises very important
• Analysis of affordability issues necessary
• It is NOT just the PC the applications are more
  important for diffusion

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Leadership and change management is ALL we need

• Focus on leadership and management NOT technology
• Management skills
• Data analysis skills
• Kenyan businesses and government needs to be
  ready for KIC 2006
• No regulator or government has been stopping us
  from interacting using ICT

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END
Thank You!