Cassandra Colbert, IFC Regional Manager in Central Asia told about IFC, its work in information and communications technology, barriers to digital transformation, impact of the COVID-19 pandemic on the ICT sector.
- Could you tell us a bit about IFC?
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. IFC provides investment, advice, and asset management. These complementary services offer clients in developing countries access to finance as well as global knowledge and exposure.
In the Kyrgyz Republic, we are interested in investing in the financial sector, telecommunication, agriculture, and the processing industry. In addition, our advisory programs across sectors aim to help improve the country’s investment climate, strengthen the financial sector, and enable private-sector participation in infrastructure including health and education, among others.
- What are the priorities of IFC's work in information and communications technology (ICT) sector?
The advancement of digital technology offers emerging economies a rare opportunity—unimaginable a decade ago—to create the foundations for economic growth, social inclusion, innovation, job creation, and access to high-quality services.
IFC focuses on financing digital infrastructure development, including broadband, telecoms, and data centers, which are essential tools in a digital economy. IFC also supports mobile network operators in developing countries. Moreover, we invest in venture and growth-stage businesses and companies that offer innovative technologies or business models in areas, including health care, educational technology, e-commerce, and green technologies. In the past decade, IFC committed and mobilized more than $4.9 billion for the Telecoms, Media, and Technology (or “TMT”) projects in emerging markets.
One of IFC’s strategic priorities in the Kyrgyz Republic is to improve digital infrastructure, which will enable better digital integration. I am pleased to note that we are providing $3 million to Elcat LLC, the nation’s largest private wholesale broadband operator, to provide fiber connections for telecommunications towers and households—half of them in underserved areas with no access to fixed broadband. The funding will further help the company improve its existing network infrastructure. This is IFC's first investment in the country's telecommunication sector.
This project has emerged out of cooperation within the framework of the ongoing project of the World Bank, "Digital CASA - Kyrgyz Republic.” The aim is to integrate the country into the global digital economy by expanding access to affordable high-speed Internet services and to develop a regionally integrated, market-led broadband digital infrastructure network.
In addition to investing directly in select telecommunications providers, IFC is funding an analysis on ways to strengthen the Kyrgyz Republic’s regulatory framework to improve access to shared digital infrastructure. We are also working with the World Bank on a global study on cloud and data infrastructure. The study will assess how these facilities can be used effectively in markets such as the Kyrgyz Republic and also identify the underlying conditions needed to support viable investments in this space.
Through our advisory services, IFC plans to assist the Kyrgyz government with removing regulatory bottlenecks for more private sector investments in digital infrastructure and larger penetration of high-speed fiber optics and broadband in the country. The focus will be on last mile access, deployment of digital infrastructure, and construction permit, among others.
We recently launched DigiLab Finance—an innovative accelerator program—in Europe and Central Asia to boost the digital transformation of financial institutions in the region. In the Kyrgyz Republic, we have approached a number of key financial institutions to start the roll out of the program.
- Let us compare the level of Internet penetration in the Kyrgyz Republic and in Central Asia. Who is the leader, who is among the laggards?
In Central Asia, high-speed Internet access is still limited. Fixed-line broadband internet coverage of households in the region ranges from 3.1 percent in Tajikistan to 35 percent in Kazakhstan, according to TeleGeography. In the Kyrgyz Republic, the coverage is 15.7 percent, and in Uzbekistan 9.8 percent. Further, both in fixed and mobile communication networks, the speed of broadband Internet access for all Central Asian countries is significantly lower than the world average.
As it is landlocked, Central Asia does not have access to the world's oceans, where most of the world’s internet traffic is transported using submarine fiber optic cables. This makes it more difficult for the region to obtain international bandwidth, especially in mountainous countries such as the Kyrgyz Republic and Tajikistan. As a result, the region has low levels of digital skills; difficulties accessing affordable, reliable, high-speed Internet connections, especially in rural areas; and undeveloped digital infrastructure networks. These factors are an impediment to the transition to the digital economy and constrain the roll-out of e-government, ecommerce, and other digital services.
- What are the most common barriers to digital transformation?
In Central Asia, including the Kyrgyz Republic, access is an issue mainly due to limited digital infrastructure, lack of regionally integrated digital networks; a need to modernize the regulatory framework for the ICT sector; limited ICT skills; and low levels of private investment in this sector.
Global studies indicate that the digital economy is a catalyst for accelerating economic development, increasing productivity, and creating new markets and industries. It also opens up new opportunities for inclusive and sustainable growth. For example, according to studies, a 10 percent increase in broadband penetration translates into at least 1 percent increase in GDP (gross domestic product) growth, and a 1 percent increase in Internet penetration is correlated with a 4.3 percent increase in exports.
However, ICT-enabled growth is most pronounced in countries that systematically lay solid foundations for a digital economy. Providing citizens, entrepreneurs, and companies with the opportunity to thrive in a digital economy depends on the country's ability to deploy a robust, domestic and international digital infrastructure network; develop a regulatory framework that supports the digitalization of economic activities by attracting private investment into the sector, and encouraging innovation.
- What impact has the COVID-19 pandemic had on the ICT sector?
The COVID-19 pandemic has demonstrated the importance of the telecommunications infrastructure in keeping businesses, governments, and societies connected and running. In May 2020, IFC conducted a study on the impact of the COVID-19 pandemic on the global telecommunications industry.
A survey of our clients in the industry showed that many telecom players experienced a surge in the volume of data and voice traffic. In sharp contrast to many other industries, the telecommunication sector has been generally exempted from major COVID-19-related restrictions, such as stay-at-home orders and quarantine requirements, as it is recognized as an essential service. Some telecom companies benefited from the spike in data traffic and broadband services as more people worked from home and used video conferencing for meetings.
However, the TMT sector is not immune to the effects of short- or medium-term economic disruptions. Broad-based macroeconomic slowdowns, restrictions on the distribution of airtime, and demand shocks from people at the bottom of the pyramid are beginning to have an impact. For example, the lockdown affects the movement of salespeople and distributors, significantly preventing new business development. As points of sale for prepaid services are shut down, some operators are reporting a drop in retail revenue, even though some of these losses were recovered through online channels.
In general, most companies are confident they will be able to cope with the impact of the pandemic, while some are concerned about the medium term and have approached IFC for support. In response, IFC will continue to work with ICT companies globally to find solutions to ensure regular operations of the telecommunications industry, support expansion and growth, and bridge working capital financing.
International Finance Corporation
March 10, 2021
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