APC REPORT: Finance of information and communication technologies for development (ICTD) at Prepcom 2

“Internet Governance is Important…it would have been more so, if people HAD the Internet…LET’S TALK FINANCING FIRST!” proclaimed a t-shirt produced by Bangalore activists, IT for Change.

Finance of information and communication technologies for development (ICTD) is usually an opaque matter. It is also an intensely ideological issue.

WSIS phase 1 (culminating in a summit at Geneva, December 2003) produced a stand-off between developed and developing countries on the issue of who should finance the information society. Two opposing perspectives on how this should be done emerged with developing countries insisting that a “digital solidarity fund” be established to do this, while developed countries were essentially of the view that existing financial mechanisms were largely adequate if developing countries utilised them more effectively.

WSIS 1 established a Task Force on Financial Mechanisms to break the deadlock and to make recommendations for WSIS 2 to adopt.¹ At the WSIS 2 second preparatory meeting held in Geneva between 17-25 February 2005, the final report of the Task Force on Financial Mechanisms for ICTD² was presented for discussion and negotiation. The final language decided on forms the basis of the final WSIS declaration that will be signed by governments in Tunis at the end of the year.

Presentation of Task Force Report

Mr Shoji Nishimoto, Assistant Administrator and Director, UNDP, in presenting the report, made it clear that ‘the assignment at hand for the Task Force was a difficult one. Development finance is a complex issue in the best of circumstances. The needs for development finance are rising so that the question of the “adequacy” of the existing financial mechanisms for ICTD had to be viewed in the context of available financing for the broader set of development goals.’ He indicated that a range of complementary financial mechanisms was needed to effectively address the financing of ICTD, which needed to be more effectively utilized:

o domestic and foreign private sector investment;

o ODA and multi-lateral development bank assistance;

o public resources and development initiatives;

o dedicated universal access funding;

o a range of public-private and multi-stakeholder partnerships and emerging initiatives.

Mr Nishimoto highlighted two critical gaps that need urgent attention – regional backbone issues in Africa that had been raised at the Accra preparatory conference in the context of NEPAD and the connectivity needs of small islands which had been dramatically revealed by the tragic Tsunami.

He emphasized that while there is a diverse range of existing financial mechanisms for ICTD, ‘most developing countries have not yet been able to leverage the full benefits of these existing mechanisms’

In addressing the issue of the adequacy of existing finance mechanisms, Mr Nishimoto noted the Task Force’s identification of a number of areas where finance had been insufficient but indicated that the issue of ‘adequacy’ was complex and needed to be situated within the broader development context of PRSPs and the goals of the Millennium Declaration. He noted the Millennium Project’s finding that investment in public social and economic infrastructure is essential for meeting development goals and that national ownership and priorities highlighted through a process of multi-stakeholder participation should determine the role that ICT can play such as linking investment in ICTs with development goals.

Mr Nishimoto also focused on the Task Force’s suggestions with regard to possible improvements and innovations for existing mechanisms, in particular greater cross-sectoral and cross-institutional coordination of financing programs and ICT development initiatives. The report also identified new multi-stakeholder approaches which include:

o the establishment of a ‘virtual’ financing facility to leverage multiple sources of finance in support of identified investment objectives in key locations;

o the creation of a mechanism for coordinating research and analysis into enabling policy environments;

o the development of a ‘rapid response’ policy and regulatory support mechanism;

o coordinated programs to mitigate investment risks and transaction costs for operators entering less attractive rural and low income market segments;

o consideration of new paradigms for network and service development involving a separation of an ‘open access’ backbone and diverse service provision;

o collective initiatives to create incentives for building regional infrastructure capacity;

o capacity development and mainstreaming costs to facilitate the effective integration of ICT in health and education to permit more cost-effective and broader delivery of public services;

o continued exploration by donors and Multi-lateral Development Banks of new modalities including re-engaging in public sector infrastructure investments.

Mr Nishimoto also noted that the Task Force had welcomed the voluntary Digital Solidarity Fund, particularly in drawing on the strengths of cities and local authorities.

Public/private finance in intergovernmental discussions

The inter-governmental debate on the findings and conclusions of the Task Force report was intense. One of the key issues was the relative weight of private and public sector finance in financing ICTD.

Four aspects of this are reflected in the sections of the text agreed by the end of the PrepCom:

“24. In the past, financing of ICT infrastructure in most developing countries has been based on public investment. Lately, a significant influx of investment has taken place where private sector participation has been encouraged, based on a sound regulatory framework, and where public policies aimed at bridging the digital divide have been implemented.

28. We underline that market forces alone cannot guarantee the full participation of developing countries in the global market for ICT-enabled services.

30. We recognise that, as a result of the growing impact of sustainable private sector investment in infrastructure, multilateral and bilateral public donors are redirecting public resources to other development objectives, including Poverty Reduction Strategy Programmes, policy reforms and mainstreaming of ICTs and capacity development. We encourage all governments to give appropriate priority to ICTs, including traditional ICTs such as broadcast radio and TV, in their national development strategies. We also encourage multilateral institutions as well as bilateral public donors to consider also providing more financial support for regional and large-scale national ICT infrastructure projects and related capacity development.

31. We recognise that public finance plays a crucial role in providing ICT access and services to rural areas and disadvantaged populations.” [3]

This may constitute a reconfiguration of the relationship between private and public finance for ICTD that in effect shifts the previous expectation that private sector finance would alone be adequate to address the ICTD infrastructure needs of developing countries to a position where public finance is recognised as having a role to play in financing ICT infrastructure, in the new economic context following the telecoms downturn, where private finance is not as freely available for large-scale ICT infrastructure projects as it has during the heyday of the telecoms boom in the 90s.

Civil society approaches and priorities

Within civil society a difference of viewpoints occurred between a WSIS Finance Caucus that did not make any formal input prior to PrepCom 2 and a number of civil society groups that were working on finance issues in different spaces – Africa, Latin America and the Caribbean, and South Asia.

A number of civil society groups, which included APC, Bread for All, CRIS, Digital Divide Data, IT for Change and the Third World Institute (ITeM) organised a pre-PrepCom event in which a range of inputs on the financing issue were presented. Together with the Finance Caucus, these organisations worked on a joint statement to present to the government plenary conference. At the last minute, the Finance Caucus refused to support the statement and the remaining organisations went ahead and presented it to the assembled delegates.⁴ They also formed an informal finance coalition and proceeded to make specific proposals to amend the Chapter Two on Finance that was before the government plenary. These proposals were reflected in the next version of Chapter Two, the WSIS documentation chapter on financing, alongside government amendments.

The coalition spent the rest of the PrepCom monitoring the government debates and lobbying government delegations to retain their amendments in Chapter Two. Revisions of official documents can often throw out what specific groups and even governments have worked hard to previously get included.

The informal finance coalition supported a new role for public finance in ICD and the role of community-driven and –owned ICD initiatives and networks to contribute to social empowerment and sustainable development. In these two respects, the coalition’s advocacy work was successful and both aspects were successfully placed and defended in the text of Chapter Two with support from the government delegations of both developed and developing countries.

The work the coalition was able to achieve within the limited space provided by government delegations highlights a number of issues relating to civil society organisation:

1. Monitoring the government process at UN meetings is time-consuming work. It requires close attention, and often has to be conducted at the expense of attending other civil society events or the social networking after hours. The government meetings often ran through to 10 p.m. at night;

2. The submission of actual written text can have more impact than any speech made to the assembled governments. Oral input from civil society even in plenary is often simply ignored;

3. Lobbying government delegations is also painstaking work that requires focus. The daily civil society meetings often took place while governments were still meeting, making it difficult for the finance coalition to feedback into the broader civil society space. Activists monitoring and influencing government processes are hard pressed to find the energy or time to contribute to the parallel civil society processes at the same time.

A re-configuration of ICD policy and finance mechanisms

How the new relationship between public and private and the inclusion of community-driven roles and financing translates into practice will be of critical importance to the future of the information society and the role of ICTs in supporting the achievement of national development goals and the Millennium Development Goals (MDGs).

In a sense this is the key trade-off of the WSIS process on finance. In return for dropping the pressure on developed countries and donors to establish a new dedicated global ICT fund to finance the extension of the information society into developing countries, it is almost as if this new configuration of public and private finance has been agreed and a greater willingness expressed in various quarters to more effectively align existing financing mechanisms to national development priorities in terms of the Monterrey Consensus and the Millennium Declaration. This is of the utmost importance in the work ahead of extending ICT infrastructure, access, capacity to utilise ICTs and appropriate content and applications into rural and under-served areas of the developing world.

It also helps to place the way in which governments from developed countries welcomed the launch of the Digital Solidarity Fund (DSF) into perspective.

The agreement to welcome the DSF as a voluntary fund open to interested stakeholders makes it a complementary financial mechanism to the reconfigured range of finance mechanisms available for ICTD. It is up to those interested to make a success of the DSF.

At the same time the new recognition of public finance’s role in ICTD opens up a new space for taking rural and other under-served areas seriously and introducing new policy and financial models for ICTD, based on public good, public finance and “open access” to infrastructure approaches.

It also draws attention to the important shift occurring with respect to Official Development Assistance (ODA) in particular within the context of the MDGs – namely, that it is up to developing country governments to prioritise ICTD within their national development strategies, including what are progressively being referred to as MDG-based poverty reduction strategies.

For ICT to be prioritized within these kinds of more general development strategies, not only will the case for ICTD mainstreaming have to be more effectively made, but in many instances, this will have to be done in situations where the physical infrastructure, policy processes and awareness on the part of the broader development community have not yet been realized. Not only is the space to rethink ICTD policy and to draw on the development enabler role of ICT with the new technologies at hand, so too is the imperative to do so if an inclusive development agenda is to be realized.

So, in short, what is in the process of happening as a result of WSIS and other changes in the development environment is a fundamental change in the approach to financing ICTD, and the attendant challenges and opportunities that this reconfiguration poses.

Private sector financing of infrastructure while important is no longer considered the sole source of finance for ICT infrastructure, ODA for ICTD activities will be linked to a developing country’s prioritisation of ICTD within its development policies and MDG-based poverty reduction strategies, while there is new space for public financing of ICTD from multilateral banks and donors. And the DSF is likely to raise and disburse funds for ICTD at the local level.

What remains to be addressed is the extent to which developing countries are willing to commit to:

creating enabling policy environments for ICTs,

recognising the importance of freedom of expression with regard to human rights, democratic political processes, anti-corruption campaigns, transparency in the conduct of government and business and good governance.

This is the policy side of the financing ICD equation – that one can have all the finance in the world but if it is not correlated to policies that open up the ICT environment and remove barriers to the internet, broadcasting and telecom dissemination, then the value of such finance is diminished and not likely to have much impact on the role of ICTs in enabling development to take place more effectively.

It is noteworthy that the governments of developing countries were much happier demanding a digital solidarity fund than examining their own poor record in removing barriers both to community-driven (e.g. community radio and networks) and private sector-driven efforts.

Looking forward – unfinished business and work in the interim

The discussion of issues relating to the cost of software and the potential to harness alternatives provided by free and open source software (FOSS) was less successful at PrepCom 2.

The Indian delegation made a strong case for FOSS as a way of reducing the costs of ICTD but consensus could not be reached. The relationship between FOSS and financing ICTD is an issue that will need further attention as part of the reconfiguration of financial mechanisms: FOSS as a financial mechanism to enable ICTs to play an effective role in mainstreaming development in the MDGs. This is perhaps an issue for the MDG + 5 Conference in September 2005.

Another issue that needs further exploration is the relationship between internet governance, global public goods and financing ICTD. The civil society coalition raised the issue of a new financial mechanism to support ICTD in the form of a global tax on commercial internet domain name holders on the argument that information and communications networks are a global public good.

Perhaps related to this is an opportunity to place a global tax on spam which, as a global public good, would have the positive value of both reducing spam on the internet for the benefit of all as well as contribute to connecting developing countries to the internet and building their capacity to do so.

The issue of the Virtual Financing Facility (VFF), which had previously been mooted by the Task Force as a possible means of co-ordination between different financial mechanisms, may be removed from the final text at Prepcom 3 and be reduced to ‘providing the financial support to leverage multiple levels of support of programmes oriented to digital inclusion’. This text was not finalised and further work is needed to refine the concept of a VFF in the months ahead.

There was much criticism of the terms of reference that were tabled indicating how the DSF would allocate funds. The issue of equitable access to the fund by all regions was raised by Latin Americans (GRULAC), while the Indian delegation pointed out that under the DSF’s current funding formula (60% Less Developed Countries, 30% Transitional economies, 10% Developed countries), many developing countries would be excluded from accessing the fund while developed countries could do so. There is clearly a need to tighten up the DSF’s focus and terms of reference.

Finally, the connection between developing a new ICD policy framework, financial mechanisms for ICD and the MDGs needs to be explored and developed before the MDG+5 Conference and WSIS Prepcom 3 in September and the second WSIS in Tunis in November 2005.

This report was produced for APCNews by Willie Currie, APC’s Communication and Information Policy Programme (CIPP) manager, and alternate member of the Task Force on Financing Mechanisms.