UNCTAD sees new opportunities in the ICT sector for the poor

On the back of the ever-wider diffusion of information and communications technologies (ICTs) — especially mobile telephones — new micro-enterprises are mushrooming in developing countries, sometimes creating new livelihoods for the poor. In Kenya, there are now more than 18,000 agents for the M-PESA mobile-based transaction service, and Bangladesh has some 350,000 “village phone ladies”.

UNCTAD´s Information Economy Report 2010: ICTs, Enterprises and Poverty Alleviation, released last week, finds that ICT goods and services are providing important opportunities for the poor, but that these opportunities are unevenly distributed and not always sustainable.

The Information Economy Report 2010 urges policymakers in developing countries to make the ICT sector a more important component in their poverty-reduction strategies. It says that more benefits can be secured for the grassroots creation of small-scale enterprises if enlightened government support is added.

The manufacture of ICT equipment presents a more mixed picture — only a few low-income countries are extensively involved in such industries. The report calls for more studies of the effects of manufacturing mobile phones, computers and related equipment where it occurs, to assess the benefits and drawbacks for the poor. The Information Economy Report 2010 also notes that extensive offshoring of services such as programming, and clerical tasks and processes — which are jobs based on global ICT networks — is still limited to a few developing countries, and tends to employ relatively highly skilled workers. However, several socially conscious enterprises have recently had some success in expanding ICT services work to rural communities (in India, for example), resulting in new income-earning opportunities for some poor people in rural areas. The report recommends that governments consider policies that could encourage this trend.

ICT micro-enterprises are creating jobs for the poor

ICT-related micro-enterprises are spreading rapidly in many low-income countries and can offer work of real value to populations with little education and scant resources. This activity includes selling airtime on the streets, refurbishing mobile phones, repairing personal computers, and running cybercafés. Such commercial undertakings have relatively low barriers to entry: the costs and the skills required are often modest, and the poor are taking advantage of this. In Gambia, former street beggars have been hired as sales representatives for Gamcel, one of the country´s major mobile telecom operators. Other examples cited in the report are the selling of airtime in Bangladesh, Ghana, and Uganda; the running of cyber centres in Nigeria and the Bolivarian Republic of Venezuela; and the creation of ICT-based enterprises in the slums of Mumbai, India.

However, UNCTAD also stresses that ICT micro-enterprises typically operate in a volatile and risky sector, and that returns on investment are often low. Micro-entrepreneurs must have the capacity to adapt and respond to change. The report notes that the opportunities for ICT micro-enterprises to survive and grow are greater in urban settings, where it is easier to establish essential relationships with other enterprises, both formal and informal. The scope for creating long-term jobs around such activities in rural areas appears to be more limited.

Few low-income countries involved in ICT manufacturing

The manufacture of ICT goods, such as mobile phones and computers, is characterised by large economies of scale and global production systems. The rapid expansion of this industrial sector has created opportunities for the poor, but only in a few countries. Exports of ICT goods are highly concentrated geographically: the top 10 exporters accounted for over three quarters of world exports of ICT goods in 2008. In China — by far the single largest exporter of such items — ICT manufacturing has made a significant contribution to the incomes of the poor. UNCTAD estimates that it has created 25 million manufacturing jobs for workers migrating to cities from the Chinese countryside. Moreover, up to $18 billion of their annual incomes may be remitted to their rural villages. On the other hand, these migrant workers are often vulnerable to layoffs and may suffer difficult working conditions. The Information Economy Report 2010 calls for more research so that a better picture can be obtained of the impact of ICT manufacturing on poverty reduction.

Outsourcing beginning to reach rural areas

The Information Economy Report 2010 also analyses the potential contribution to poverty reduction of information technology (IT) and ICT-enabled service-sector work, such as outsourced computer programming and various business processes. Many developing countries view the outsourcing and offshoring of such services as potential sources of employment and export revenue. For example, Kenya hopes that the number of domestic business-process-outsourcing (BPO) jobs will grow from the current 8,000 to 120,000 by 2020. And Ghana aims to create 40,000 such jobs by 2015.

While outsourcing and offshoring may contribute to poverty reduction, that outcome is not necessarily automatic. Few developing countries — other than India and the Philippines — have successfully built offshoring industries. Jobs created in these economies tend to be centred in urban areas and require relatively high skill levels. Their main potential contributions to the poor may arise through second-order effects, such as increased demand for domestic or other low-skill services.

However, the report says that a new phenomenon known as “social outsourcing” — the outsourcing of services to poor communities in developing countries with the explicit aim of poverty alleviation or the achievement of other development objectives — can contribute to reducing rural poverty. “Source for Change”, for example, is a socially responsible enterprise that employs poor women in rural Rajasthan, in India. It carries out BPO services for clients in other parts of India and abroad. For the women concerned, this has led to higher incomes and improved social standing within their communities. The enterprise aims to employ 5,000 women in rural India by the end of 2012.

A role for policies

The Information Economy Report 2010 urges policymakers in developing countries to give the ICT sector more attention when designing poverty-reduction strategies. As a minimum, a vibrant ICT sector is important for facilitating and sustaining more widespread use of ICTs in enterprises across sectors and industries. Governments need to adjust their interventions and pay greater attention to enterprises at the lowest economic levels, since these are most likely to be constrained by their environments. For policy initiatives to reach micro-enterprises among the poor, they must be delivered in ways that are accessible to the informal sector, since these firms are rarely registered.

Enterprise-related ICT policies also need to be better integrated into national development strategies, and into agreements such as United Nations Development Assistance Frameworks (UNDAFs), which governments enter into with donors and international financial institutions. A review of 20 UNDAFs in Africa, carried out in 2009 by the United Nations Economic Commission for Africa, found only two that had ICT-related projects.