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II. INTERNET AND THE DEVELOPMENT PROCESS

Guest post by: OECD Development Centre

Article Overview: The Internet and ICT more generally are new tools for information acquisition, processing, analysis, and transmission, but information is the underlying resource of value to entrepreneurs. Based on surveys of small- or medium-sized enterprises (SMEs) in developing countries, four types of information appear to be especially valuable:

II. INTERNET AND THE DEVELOPMENT PROCESS

The Internet and ICT more generally are new tools for information acquisition,
processing, analysis, and transmission, but information is the underlying resource of value
to entrepreneurs. Based on surveys of small- or medium-sized enterprises (SMEs) in
developing countries6, four types of information appear to be especially valuable:
— on customers and markets;
— on product design;
— on process technology — operation, maintenance and repair of existing equipment,
as well as new technology developments; and
— on financing sources and terms.
ICTs may also benefit entrepreneurs by improving information available to their
transaction partners, whether customers, financiers, or others. Besides reducing information
search costs, the Internet or mobile telephony can improve the efficiency of the working of
product and factor markets directly, e.g. by reducing time for payments clearance, credit
processing, etc. (Leff, 1984 and Garbade and Silber, 1978).
Far and away the most important use of the Internet to date in developing countries
has been for e-mail services. In Bangladesh, about 82 per cent of Internet traffic consists
of e-mail, while in the United States the Web accounts for 70 per cent and e-mail only
5 per cent (ITU, 1999). This is a result of the rather high access costs in many developing
countries compared, notably, with the United States. As a mode of information management,
the Internet competes with, but also complements, other modes. Depending on access
costs, it can be a cheap if imperfect substitute for telephone and fax services: cheap
because of the higher transmission speed of a given information bundle or, viewed
differently, the large quantities of information that can be transmitted per unit time; imperfect
because, unlike telephone at least, i) it does not readily permit two-way communication in
real time7, and ii) it presumes basic literacy or the ability to hire a literate message transcriber.
In any event, it makes use of the telecommunications infrastructure, whose inadequacy in
many parts of the developing world (notably in rural areas, where most of the developing
world’s population, and a disproportionate share of its poor people, still lives8) precludes
either telephone, fax, or Internet use. Wireless (or mobile) telephony has emerged as a
potential solution to the rural telephone deficit and as a possible “bridging” technology
from an unwired world to an Internet-accessible one9. While state-of-the-art mobile
telephones already offer the potential of direct Internet access, even without this capability
in many low-income countries mobile phones are diffusing rapidly, in some cases even in
rural areas (e.g. the Grameen village phone network in Bangladesh).
As an instrument for acquiring timely information by otherwise isolated rural
communities, there are certainly parallels between the current uses of wireless telephones
and the potential uses of the Internet in developing countries. One difference is that the
latter potentially makes available with a single call (or dial-up connection) a much larger
set of databases and information sources. Moreover, the Internet makes possible the
automatic packaging and distribution of information to targeted user groups on a repeated
basis, and even the distribution of fully customised information packets for each individual user. The question remains whether there is sufficient information on the Web of value to
the average developing country entrepreneur to warrant the investment in Internet access.
Most SMEs in developing countries serve local markets and rely mostly on locally generated
information. In Botswana, for example, Duncombe and Heeks (1999) find that Internet
use remains in its infancy and argue that its benefits to most SME users are unlikely to
outweigh the costs until the amount and quality of local content is substantially increased.
For low-income entrepreneurs in much of the developing world, this also means locallanguage
content.

OECD DEVELOPMENT CENTRE
Working Paper No. 164
E-COMMERCE FOR DEVELOPMENT: PROSPECTS AND POLICY ISSUES
by
Andrea Goldstein and David O’Connor

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Article Tags: e mail services, existing equipment, factor markets, fax services, financiers, information acquisition, internet traffic, leff, medium sized enterprises, mobile telephony, new tools, operation maintenance, process technology, search costs, technology developments, transaction partners, transcriber, transmission speed, unit time, web accounts



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