The Digital Road From Poverty

COPENHAGEN – Where should the global community focus its attention over the next 15 years? Health, nutrition, and education may seem like obvious choices; more surprisingly, there is a strong case for making broadband access a top priority.

Consider this simple fact: Tripling mobile Internet access over the next 15 years could make the developing world $22 trillion richer. Such improvement in the lives and earning potential of poor people could indirectly help with the other challenges; after all, more prosperous people tend to be healthier, better fed, and more highly educated.

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This discussion matters, because the world’s 193 national governments will meet at the United Nations in September to finalize a list of development targets for the world to meet by 2030. My think tank, the Copenhagen Consensus, has asked 60 teams of economists, including several Nobel laureates, to investigate which targets would do the most good for every dollar spent, to help this meeting make the best choices.

In a new analysis, Emmanuelle Auriol and Alexia Lee González Fanfalone of the Toulouse School of Economics suggest that broadband could be one of the best investments for the future. Clearly, the rapid rollout of broadband services has transformed the lives of people in the industrialized world; there is every reason to expect that developing countries could benefit at least as much.

Access to market information, for example, can ensure that farmers selling their surplus crops are not cheated by unscrupulous traders, and that fishermen can land their catch at the port offering the best price. A McKinsey report estimates that bringing mobile broadband in the developing world to the levels of the industrial world could add $400 billion annually to global GDP and create more than ten million jobs.

Similarly, the World Bank has shown that a 10% increase in broadband penetration increased GDP growth by 1.4% in low- to medium-income countries. This implies that closing the persistent digital divide between the world’s developed and developing regions could give a big boost to development. For example, mobile broadband penetration stands at 83% in the former, but only 21% in the latter.

While governments in Europe and elsewhere continue to invest in faster and better broadband, the biggest benefits will always come from providing Internet access to people who do not already have it, most of whom live in developing and emerging countries. In fact, developing countries can leap-frog the developed world by going straight to mobile broadband, thereby avoiding the need for expensive fiber-optic cables for the “last mile” – or access point – of the network.

Mobile phone use is already spreading rapidly in developing countries, making old-style fixed infrastructure unnecessary; data services can use the same system. In China, three-quarters of Internet users get online via mobile phones already; in Ethiopia and Uganda, four out of five do. Thus, given the pervasiveness of mobile telephony and recent technological advances in mobile networks, rolling out mobile broadband seems a cost-effective solution.

The study by Auriol and Fanfalone shows that increasing mobile broadband about three-fold in developing regions – from 21% to 60% – will cost a substantial $1.3 trillion, as a significant amount of extra infrastructure is needed to establish about three billion more Internet connections. But it will also increase GDP growth. By 2020, the benefits would be almost $500 billion annually, and would continue to rise each year. Over the coming decades, the total benefit would reach about $22 trillion. As a result, every dollar spent on mobile broadband in the developing world would yield an estimated gain of $17. That looks like a really smart investment.

Of course, broadband is such an important enabling technology that it is difficult to predict its full economic impact, which will vary with local circumstances. What the Auriol-Fanfalone study does show, though, is that rolling out Internet access is money very well spent. Jobs are created directly in the organization providing the network and indirectly in the supply chain. Once in place, broadband helps create more jobs in the wider economy. Companies become more efficient and innovative. All of these factors increase the pace of economic growth.

Apart from the direct effects on economic growth and job creation, broadband can have some other very important benefits for Least Developed Countries. Nine hundred million people live in LDCs, and, as Pantelis Koutroumpis of Imperial College London points out, only 6.7% are Internet users. On the other hand, almost 60% of these people use a mobile phone. They could profit from smartphones with simple adaptations that can be used in a range of health-screening tests (for example, for cardiovascular disease, HIV and other pathogens, or malaria), with the results being sent straight to hospitals for an immediate response.

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The potential benefits of mobile broadband for LDCs extend even further. Internet access could provide educational material and improve schooling. And it could enable real time, on-demand transport services for remote areas.

With the Internet now such an important resource in the modern world, broadband has become a vital technology, promising to boost economic growth, lift people out of poverty, and improve their health, nutrition, and education. When governments finalize the next set of global development targets, there is now a strong case for broadband access to be among them.