|Issue:||Latin America 2002|
|Topic:||The Inter American Development bank Steps In to Support ICT Applications for Small Businesses|
|Author:||Antonio Ca’ Zorzi|
|Organisation:||ICT 4 BUS, Inter-American Development Bank|
Knowledge-driven innovation is a decisive factor in the competitiveness of both nations and firms. ICT and e-business are key elements for strengthening the competitiveness; they improve the productivity of private firms. Access to ICTs remains extremely uneven. The Inter-American Development Bank (IADB), to foster the region’s development, is sponsoring the “ICT Innovation Program for E-Business and SME Development (ICT-4-BUS)” to promote the use of ICT as a keyver of social and economic development and growth of the region.
Prior to working for the IADB, he held various posts at executive level with the San-Paolo IMI Bank in Brussels and Luxemburg. Until 1999 he also was Managing Director of Coopération Bancaire pour l’Europe-GEIE, a service company set up by Italian Banks in Brussels. Between 1985 and 1987 he worked with the Commission of the European Union in the area of culture and technology. Throughout his career he has been involved in ICT- based services aimed at medium and small sized business customers of Italian Banks. Background In the past few decades, knowledge-driven innovation has become a decisive factor in the competitiveness of both nations and firms. This trend is particularly pronounced in developed countries, where, by 1999, knowledge-based industries represented more than 50 percent of GDP. “Information and Communication Technologies (ICT) are the backbone of knowledge-based economies.” Information and Communication Technologies (ICT) are the backbone of knowledge-based economies. ICT solutions and services improve efficiency in the value chain by providing better and faster communication between trading partners, integrating transactions with logistics functions, reducing intermediation costs, facilitating the search for new markets, and allowing better pricing policies. ICT also serves as important tool for other corporate functions such as strategic planning, business operations, customer services and the decision-making process through the provision of rapid and strategic information. Consequently, SMEs (small and medium enterprises) can become more competitive and productive. This is a result of expanding their capacity to deploy ICT. The ICTs create new wealth by adding value (increasing the information content) to business processes and local resources in order to offer new products and services. “E-business has revolutionized the business sector in a way unprecedented in past centuries.” In particular, e-business, one of the ICT applications with the highest impact upon the global economy, is creating a new business environment. As a growing number of companies launch new Internet-based business lines, many of the new technology advances occur as a result of their using the Internet to improve business processes. This often involves using the Internet to carry out business transactions. E-business has revolutionized the business sector in a way unprecedented in past centuries. It has fostered a new set of economic and social relationships. A critical use of the Internet is to develop and experiment with new business models. It is not technology by itself that makes or breaks an Internet venture, but the underlying innovation and adequacy of the adopted business approach . ICT and e-business have now become the key elements for strengthening the competitiveness of the national economy and improving the productivity and efficiency of private firms. However, access to and use of these technologies remain extremely uneven. This disparity, the so-called “digital divide”, is a reflection of deeper social and economic inequalities. “ICT and e-business contribute to the future of developing countries; underestimating their importance may ultimately increase the gap with industrialized countries.” Less developed economies are being left behind in the expansion of a global economy where knowledge is a key factor driving productivity growth. ICT and e-business contribute to the future of developing countries; underestimating their importance may ultimately increase the gap with industrialized countries. Smaller businesses and companies based in developing countries look towards opportunities arising from the new marketplace. They also hope to benefit from the more pervasive and enduing effects of e-business upon their business organizations. They are adopting Internet- based technologies to craft lean production systems and improve their distribution efficiency. In this way, the competitiveness of smaller enterprises in developing countries can be greatly enhanced. The introduction of electronic commerce is of great potential benefit to developing countries as it allows their economies to integrate themselves into the global economy and to compete with more developed countries. The economies of Latin American and the Caribbean countries are typically characterized by a predominance of small businesses. This predominance is not reflected yet in today’s digital economy, which is characterized by a significant presence of larger national and foreign corporations. The lack of financial, human and technical resources prevent small and medium- sized enterprises (SMEs) from swiftly adopting new technology to compete in national and international markets. Even more, limited access to ICT increasingly strains the capacity of countries in Latin America and the Caribbean to initiate and maintain efficient and effective development programmes. On the supply side, during the year from 1999 to 2000 an incipient industry for ICT emerged in Latin America and the Caribbean. This confirms the potential for a small, but vibrant, information sector that can count on a reservoir of local technology and business talent. The subsequent downturn in the fortunes of the sector led, in 2001, to a swift reduction of resources for the development of ICT applications. Innovation by tech-firms has been reduced and marketing efforts have been concentrated on providing IT services to large corporations. This is a market that is traditionally controlled by large consulting and/or IT firms. Moreover, investment in new ICT technologies tailored to the need of hitherto marginalized medium and small- sized business users have become much more risky. This represents a potential setback for the access of regional users to ICT technologies either for increased efficiency and competitiveness or for market penetration. The ICT-4-BUS Programme The Inter-American Development Bank (IADB) is committed to fostering the Latin American and Caribbean countries’ potential for development in an open global economy. To reinforce this commitment, the IADB and the Multilateral Investment Fund (MIF) are sponsoring the “ICT Innovation Program for E-Business and SME Development (ICT-4-BUS)” to promote the use of ICT as a key driver of the future social and economic development and growth of the region. ICT-4-BUS aims to improve the competitiveness, productivity and efficiency of the SMEs in Latin America and the Caribbean through the implementation of innovative ICT and e-business solutions. It will make available ICT solutions, once limited to larger companies and international corporations, to SMEs that strive for market penetration and business efficiency. In so doing, this initiative will lend a truly global dimension to the multitude of efforts to bridge the global digital divide, foster digital opportunity and thus firmly put ICT at the service of development for all. In this context, ICT-4-BUS will provide non-reimbursable matching funds for the development and implementation of pilot projects. The pilot projects will test innovative ICT services and solutions for SMEs, primarily in the areas of value chain integration, workplace productivity and efficiency and market penetration. Overall cost of the projects to be funded is estimated at US$8 million, of which the ICT-4-BUS programme will provide US$4.5 million. Over 450 SMEs will participate in the pilot projects. It is expected that a large number of SMEs will benefit from the new services and solutions through the dissemination and replication of the “best practices” and “lessons learned” from the pilot projects. The pilot projects will be selected through an exhaustive project proposal evaluation will receive between $75,000 and $500,000 from the fund. The proponents should cover no less than 40% of costs and provide at least 50% in cash. Potential ICT solutions and services that could be used by the projects include: o e-commerce and e-business applications; o e-productivity applications for individuals and organizations; o Infrastructure and access enhancing systems; o Knowledge management and distribution systems; o Mobile (including satellite-based) applications and services for businesses; The proposed pilot projects must also meet the following requirements: Innovation: They must introduce effective new methods to promote SME development. Demonstration effect: Projects should have the potential to be replicated in other sectors and / or other countries of the region. Sustainability: Projects should have a credible plan and strong potential financial sustainability, i.e. commercial viability, once they are in-place. Non-profit institutions in the region that are involved in promoting SME development and/or have proven experience in the development of ICT solutions or services will present the projects. Examples of these institutions are trade associations, universities, foundations, NGOs, chambers of commerce, business development centres and research centres. These non-profit institutions will act as the executing agencies responsible for administering and managing the operation of the approved pilot projects, ensuring the active participation of SMEs in testing ICT solutions and services and hiring the ICT service providers. Conclusion This scheme will guarantee that the ICT solutions and applications developed will be relevant to the needs of SMEs and easily disseminated for the benefit of a large number of SMEs in the region. The programme will be managed by the Information Technology for Development Division (SDS/ICT), the I DB technical division that provides support to the Bank and Latin American and Caribbean countries in ICT- related areas. The Division’s specific responsibilities include providing technical and financial backstopping for projects to be funded by the Bank and offering strategic and technical advice to governments on how to make better use of available information technologies.