Kalman Mizsei Issue: Europe I 2002
Article no.: 8
Topic: Information and communication Technology – Policy Reform in Eastern Europe and The CIS – A UNDP Perspective
Author: Kalman Mizsei
Title: Assistant Administrator and the Director Assistant Secretary-General
Organisation: United Nations., United Nations Development Programme (UNDP)
PDF size: 48KB

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Article abstract

Information and communications technology (ICT) offers an opportunity to leapfrog development steps. Eastern Europe and the Commonwealth of Independent States (CIS) inherited an obsolete infrastructure inherited from the USSR. Adequate policies can facilitate the region’s development, as the policy and regulatory upheaval in US telecommunications proved in the 1980s. The UNDP’s direct involvement in the formulation of Information and Communication Technologies for Development (ICTD) strategies for many countries uniquely positions it to help EE and CIS countries find their way forward.

 

Full Article

To the development professional, the information and communications technology (ICT) offers an opportunity to leapfrog countries’ development. This is particularly important for Eastern Europe and the Commonwealth of Independent States (CIS). During their socialist past, these countries maintained an obsolete physical infrastructure (including telecommunications) relative to the potential of their human resources. Adequate policies, accommodating rapid ICT development, would be helpful and facilitate catching up with West Europe. This article looks at the determinants of this success-oriented policy-set and the United Nations Development Programme’s potential to help shape a better future for the information society in Eastern Europe and The CIS. Policy reform in telecommunications is relatively new even in the most developed countries. The ICT – revolution has not been solely the product of technological advances and the rapid explosion of Internet use. It was also the result of the dramatic policy and regulatory upheaval in U.S. telecommunications with the break-up in the 1980s of AT&T and spread reluctantly and slowly to Europe. This regulatory change, Internet technology and mobile telephony influenced one another and shaped the information revolution. The collapse of communism in Eastern Europe and the CIS and the possibility of opening up their telecom monopolies to competition and private investment, promise to bring genuine developmental leapfrogging of these countries if they embrace the information revolution. Some patience will be needed with Eastern European governments that hesitate to open their telecom markets to international market competition. Lack of reform, though, has increased “the digital divide” between the EU-accession countries and the rest of Eastern Europe. Indeed, the correlation between the quality of overall economic transition and the spread of the use of telephone services are striking and how the latter is related to telecommunication policy reforms. When examining the data on the spread of fixed line telephone subscribers in the region between 1995 and 2001 (see Table) a picture of three distinguishable groups of countries emerges. The first group comprised of the ten countries that will join the European Union in the first round of accession (Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia) have in general increased their advantage over the rest of the countries in the region. Poland, for instance, despite a delayed privatisation of its fixed line monopoly TPSA, has increased fixed-line telephone density spectacularly at a rate of 12.1% during the 1995-2001 period. The success of Poland, Hungary and the Czech Republic in making fixed-line telephone available to so many people in the last decade has overall been a result of privatisation of the fixed-line telephone monopoly. In addition, in the case of Hungary and the Czech Republic, a factor contributing to the success has been the introduction of elements of competition (mainly by mobile telephone providers, but also by other alternative systems), as well as the introduction of meaningful regulatory bodies and practices. Slovenia has already achieved the European average of 40 fixed lines per 100 inhabitants, while Hungary, the Czech Republic and Croatia are very close to it. Cellular phone density in many of these countries has already exceeded the European average. Again, the Czech Republic, Hungary, Estonia, Slovenia and Slovakia have achieved great success through, primarily, erecting private, competitive markets. Although mobile telephony, since it does not provide. Internet access, matters less than fixed-line telephony for access to global knowledge, it does contribute to a “mobile” lifestyle, essential to modernization and integration into the global system. It has an indirect impact on knowledge and technology spread. Regarding the groups, which have lagged in ICT development, note that an historical chain of events has widened the intra-regional “digital divide”. Central European frontrunners had the good fortune of privatising telecomm before the collapse of the high-tech markets in 2000; other less developed countries in the region did not. This, and less-than-transparent privatisation efforts, attracted less competitive investors when privatisation did happen. Moreover, regulatory obstacles to competing international service providers also impeded the development of the mobile market in these countries. Despite these flaws, telephone access in the Balkans is increasing, although more slowly than in Central Europe even in the conflict-torn successors to Yugoslavia. In the Balkans, policy and regulatory obstacles slow development of the telecommunications sector (except in Albania where fixed and mobile telephone density has increased spectacularly, albeit from the lowest level in Europe). The real problem, though, is the third group consisting of the poorer ex-Soviet Union nations. The lack of competition and regulatory reform in the telecommunication sector (particularly that of fixed-line telephony) coupled with the poor financial health of the state-owned telecom makes for a both outdated and inadequate infrastructure. In Armenia, Kazakhstan, Kyrgyz Stan, Tajikistan and Uzbekistan, fixed telephone lines decreased during the 1995-2001 period He correlation between sound policy, regulatory reform, free market and telecommunications growth is further evidenced when one compares the development of generally government-owned fixed-line telephony with the private mobile operators in the CIS countries. Although mobile technology started operating just a few years ago, its growth is continuing at an accelerated pace, not the least because most governments have issued at least two licences for major mobile operators. An example is Kazakhstan’s – 1% rate of growth in fixed telephone lines compared to its 124% increase in cellular mobile subscribers. Nonetheless, because of its Internet capabilities, growth of the fixed- line telephone industry remains crucial to the narrowing of the technological divide. Akin to the telephony experience, Internet development provides us with examples of where sound policy and regulatory reform has led to outstanding results. Estonia’s tiger leap in ICT is a vivid example of why policy matters. In Estonia, politicians, government officials and the private sector formulated a policy designed to give Estonia an ICT advantage. The parliament passed a law defining the principles of an Estonian information society. The United Nations Development Programme (UNDP) supported this initiative and helped establish the country’s first Public Internet Access points and its first public mail server. As a result, in less than a decade, Estonia managed to surpass the European average for use of information technologies. The partnership of all stakeholders led by the pro-active, intelligent, financial and moral support of the country’s leaders created the Estonian miracle. Estonia demonstrates that ICT and developmental leaps are possible when advancement becomes a national priority and is supported with adequate policy. The leapfrogging of development stages can also be seen in Estonia’s banking sector. Private banks – almost non-existent during communism – have done away with checks and rely increasingly on wire and electronic transactions. Early foreign investment in the banking sector facilitates the technology revolution by investing heavily in technology, by lobbying for telecom reform (banking needs reliable telephone services) and by financing capital investments in the country’s international telecom firms. Estonia shows that policy not only matters, it comes first. Good policy results from consultation between, and direct involvement of, all the stakeholders. Enabling laws and regulatory frameworks, national coordination of financial resources, effective internal coordination and public administration reforms must support policy. Finally, good national policy needs to take into account regional and global cooperative policies and explore innovative partnerships with the private sector. The region needs to unite the telecom industry, governments, relevant international organizations and international financial institutions and to focus on the following areas: —Making a connectivity breakthrough, expanding networks outside big urban areas by creating Internet access points —Developing web-based on-line public and private services for the general public —Providing large-scale Internet and on-line service training for the general public Identifying information and content needs of various end-users and generating local content for specific social groups, minorities, regions, entrepreneurs, farmers and communities —Encouraging development of national ICT strategies within this framework, making telecom sector development a national priority —Reforming telecommunications’ legal and regulatory frameworks to facilitate network expansion, lower tariffs, affordable Internet access, higher teledensity, faster application of advanced technologies (broadband and wireless), increased openness and competitiveness of telecommunication and information markets. Having been directly involved in the formulation of Information and Communication Technologies for Development (ICTD) strategies in many countries, UNDP is uniquely positioned to help others. UNDP is one of the authors of the Digital Opportunity Initiative 2001 report, which provides a clear roadmap for ICT advancement. UNDP has a strong interest in participating in the policy formulation process and is now assisting a number of countries to develop and implement their ICT strategies. UNDP provides useful operational and development services for investors through its know-how in working with communities, authorities and NGOs. UNDP’s network of field offices throughout the region allows it to take full advantage of the region’s qualified human resources. These factors and the organization’s neutrality towards technology create limitless opportunities for networking and knowledge exchange. UNDP stands ready to collaborate with all parties and play an active role in achieving development goals. Benefiting from the Estonian experience, UNDP and OSI, with support of the Government of Estonia, is establishing an e-Governance Training and Research Academy in Tallinn that should become a regional knowledge hub in a broad area of e-governance. Time has come to help these countries advance through a coordinated effort of the telecommunications industry. In addition to the Eastern Europe and CIS countries’ need to close the digital, information and development gap, there are other reasons for the developed world’s interest in narrowing or eliminating this gap. The growing demand of the Caspian region oil and gas sector for reliable communications, the expectation of continued economic growth, and today’s low levels of ICT penetration have led major telecom companies to establish a presence in the region to expand their activities. The challenge remains of creating an enabling regulatory environment. There is growing interest, but the poor countries in this region tend to be political risk here, too, UNDP can play a positive role. As Scott Wallsten shows, establishing a regulatory authority prior to privatization can effectively mitigate political risk. Empirical evidence shows this actually improves revenues from the sales of the state-owned telecom companies. Developing countries would benefit greatly if credit and investment risk agencies in the developed world extend partial political risk coverage for the foreign investments of their telecommunication companies. The task of UNDP is to assist – in partnership with all parties concerned – in translating these challenges into opportunities and broader development progress. The first meeting of the World Summit on the Information Society (WSIS), December 2003 – Geneva, provides an excellent opportunity to address all the accumulated problems and find workable solutions for the Declaration and Action Plan. UNDP is prepared to work very closely with all the parties – UN agencies, governments, private sector, and civil society to help shape a better vision of the information society in Central Eastern Europe and the CIS and release the enormous potential of the telecom industry to build an information society.