Task Force on Financial Mechanisms

Mr. President, Mr. Utsumi, Excellences, Distinguished Delegates, participants from international organizations, the private sector and civil society, ladies and gentlemen.

Information and communication technologies have a vital and critical role to play in addressing development challenges and in fostering inclusion. Hence the financing of ICT infrastructure, capacities, applications, content and use are emerging as key issues for decision-makers at the national, regional and global levels including most recently at the Geneva-phase of WSIS.

It gives me pleasure to offer a few remarks on the report of the independent Task Force on Financial Mechanisms that this body recommended be setup to review the adequacy of existing financial mechanisms for ICTD.

I would like to point out that the assignment at hand for the Task Force was a difficult one for many reasons. Development finance is a complex issue in the best of circumstances. The needs for development finance are rising so that the question of the "adequacy" of the existing financial mechanisms for ICTD also had to be viewed the context of available financing for the broader set of development goals. The Task Force had a very short period of time to deal with these complicated issues and to consider a range of mechanisms which over the ordinary course would be treated quite separately.

The report of the task force brings together a lot of valuable material, data and contributions in one place. In this context, I would like to take the opportunity to thank the individual Task Force members for their dedication and contributions and to thank organizations, such as the ITU, OECD/DCD and DAC members, governments and organizations from developing countries, civil society private sector and the Multilateral Development Banks including the World Bank Group who contributed detailed and consolidated information, and in some instances new reports and analysis of the issues. These separate reports and resources will be made available on the TFFM website, as well as a very detailed and useful discussion of options to address infrastructure issues in Africa which was conducted by DFID with Balancing Act. We hope that the report of the Task Force and the additional resources will provide a good foundation for all stakeholders to engage in a constructive dialogue on the issues.

Let me begin by saying that as a first step, the report of the Task Force attempted to provide a diagnostic of the situation. Given the nature of the field and differing perspectives on some issues, it was not always able to offer black and white answers to all the questions. The report does offer strong findings, and various options and recommendations for improvement and innovation that can be considered collectively by all the different stakeholders as it deliberates on the effectiveness and adequacy of existing mechanisms and considers whether any new mechanisms are needed. The report also looks forward to consider approaches that at various levels can ensure that financing results in high impact and addresses identified needs as well as being able to leverage the creative energies and capacities of different stakeholders that the new technologies facilitate.

In a field such as ICT and its financing, it is difficult to provide a definitive picture. The technology field is extremely dynamic. New choices are emerging and the cost of technology has been falling dramatically in many instances. This permits completely new ways of connecting cities and rural areas, producing content and providing for the delivery of services. The range of actors that can be involved also changes, and this brings with it additional dimensions to the question of what needs to be financed, by whom and through what mechanisms.

The Task Force made good attempts to identify priorities and to provide some indications of how they might be addressed. To the Task Force members it became quickly clear that a range of complementary mechanisms was needed to effectively address the financing of ICTD. These included a variety of domestic and international mechanisms such as domestic and foreign private sector investment, financing and re-investment; ODA and multi-lateral development bank assistance; public resources and development initiatives, dedicated universal access funding, and a range of public-private & multi-stakeholder partnerships & emerging initiatives.

In many instances, the Task Force found that we have the means at hand to bring about dramatic change for currently underserved areas and populations. In other instances there are critical gaps that require our immediate and concerted attention. The latter includes regional backbone issues in Africa and addressing special situations such as those faced by small island states, to name just two. The critical role of ICT in the context of the island developing states was also brought home to us dramatically in the context of the recent and tragic Tsunami. Much remains to be done here. Reports of the proceedings of the recent preparatory meeting in Accra, and a reading of the subsequent Accra Commitments, indicated that there were discussions on the key priorities for the region and how these might be addressed through complementary mechanisms, including on how to move forward to urgently address the backbone infrastructure issues highlighted by NEPAD and others.

A Brief Summary of Findings & Conclusions

Before moving to some of the recommendations and options to address issues of insufficient exploitation, inadequacies and areas for improvement, I would like to take a few minutes to briefly summarize the findings of the Task Force, which are described in more detail in the my written statement and of course the report itself.

Finding 1 points to the dynamism of the ICT sector. Finding 2 points to the fact that ICT are rapidly emerging as a vital factor in economic and social development to facilitate innovative and scalable solutions for achieving major development objectives. Findings 3-5 address issues of the enabling environment for private sector investment, e-strategies and policy and regulatory approaches to enable community networks and local private sector to be effective in reaching bottom of the pyramid populations. Finding 6-11 focus on financing of ICT infrastructure and access. Findings 12-17 focus on the financing of Content, ICTD Applications and Capacity Development.

Section on Conclusions: The conclusions section of the report is organized into three sub-sections which consider whether the existing mechanisms are being fully exploited, considers the question of adequacy of the existing mechanisms and then moves to consider improvements and innovations. Many of the conclusions in these areas are inter-related.

The Task Force found that while the scope and diversity of the existing financial mechanisms to support ICTD investments is quite extensive it appears that nevertheless, most developing countries have not yet been able to leverage the full benefits of these existing mechanisms.

In the case of ICTD, most of the major financing mechanisms are primarily designed to promote the ongoing expansion of ICT infrastructure by assisting private companies to leverage public and private capital. As barriers to such investments are eliminated, new entrepreneurs and additional funds have been found to be quick to rush into newly opened markets. However there appear to be gaps, particularly where country risks are perceived to be unacceptably high and/or the enabling environment is weak. In such instances where investors may hesitate, development financial institutions and donor support can assist by stepping in to provide technical support and financing to facilitate risk-sharing and stimulate additional financing and investment.

The report also points to the need for efficient implementation of targeted public finance mechanisms such as loan guarantees, Universal Access Funds, and partnership investments and continued support and promotion of domestic, regional and South-South investment as well as increased sub-regional and regional cooperation to address current infrastructure and last mile gaps; it also suggests the possible exploration of tax, tariff, import, and business regulation policies designed to reduce risks and financial burdens for and provide incentives to ICT investors and financiers.

The Task Force also found that stakeholders are also often confronted by a number of "process" challenges ranging from a lack of easily accessible information about available resources and mechanisms to tap, to high transaction costs and time lags in finalizing requests for ODA support.

The Task Force report suggests various actions to address these issues, including the specification of the key role of ICT in national poverty reduction strategies (PRS) and/or other development strategies, designating the specific key areas of policy initiatives and investment needs, coordination of cross-sectoral infrastructure and service development plans; peer-partner reviews to assess blockages as well as to collectively identify priorities, design effective approaches to support mainstreaming and learn from participant and action-oriented research; encouragement to pool proposals on similar themes or from same region to enhance synergies and to reduce transaction costs and ensuring that initiatives proposed for funding explicitly build capacity. Such proposals should also ensure a concrete focus on business/development models to maximize efficiency and scalability; and commissioning shared e-government application frameworks for common e-government applications which can be collected in a global or regional resource and used by most developing countries.

As far as the question of adequacy of existing mechanisms is concerned, Task Force Findings indicate, that there are a number of areas in which current approaches to ICTD financing, by both the public and private sectors, have not devoted sufficient attention to date, and which represent fundamental challenges to the financial and development communities.

These include: 1) ICT capacity-building programs, and specialized training initiatives, especially for regulators and other public sector employees and organizations; 2) Communications access and connectivity in remote rural areas, isolated islands, and other locations presenting unique technological and market challenges. 3) Regional backbone infrastructure to link networks across borders in economically disadvantaged regions requiring coordinated legal, regulatory, and financial frameworks and seed financing. 4) Capacity to facilitate the delivery of services, catalyze investment and provide Internet access at affordable prices to both existing and new users. 5) Coordinated assistance for small islands and countries, in order to lower otherwise prohibitive transaction costs in access to international donor support. 6) ICT applications and content aimed at facilitating the integration of ICT into the implementation of development sector programmes and content relevant to the needs of the developing world, including material in indigenous languages, information accessible to non-literate audiences, user-friendly and affordable software.

In looking into the adequacy of domestic financial mechanisms, the Task Force found that their question of "adequacy" is a complicated one. At one level, the "adequacy" of the existing financial mechanisms for ICTD needs to be situated in the context of available financing for the broader set of development agendas and goals. Financing of ICTD at the national level needs to be framed within the context of priorities for PRS and PRSP processes where relevant and with regard to achieving the goals outlined in the Millennium Declaration. Adequacy of the existing mechanisms is in many instances also a function of their degree of experience, which will increase with more time, effort, and resources.

As the report of the Millennium Project also points out investment in public social and economic infrastructure are key for meeting development goals. For best results, national ownership and priorities highlighted through a process of multi-stakeholder participation should determine the role that ICT can play in this overall process. The conclusions of the report suggest that ICT as a tool can not only enhance the role of developing countries in the global economy but also help them achieve important development goals. Appropriate ODA, IFI/MDB and private investment should be ready to contribute.

The Task Force report points to a number of possible improvements and innovations for existing mechanisms. These include greater cross-sectoral and cross-institutional coordination of financing programs and ICT development initiatives which would improve effectiveness and make better use of resources. The report also includes some specific options for new multi-stakeholder approaches on an international or regional levels which could include: the establishment of a "virtual" financing facility to leverage multiple sources in support of identified investment objectives in key locations; the creation of a mechanism for coordinating research and analysis into enabling policy environments, to identify best practices and priority needs for shared action by financial actors; the development of a "rapid response" policy and regulatory support mechanism to intervene in support of short-term ICT sector policy initiatives; coordinated programs by governments and major financial players to mitigate investment risks and transaction costs for operators entering less attractive rural and low income market segments; consideration of new paradigms for network and service development involving a separation of an ‘open-access’ backbone and diverse service provision; coordinated programs by governments of small countries and major financial players to address otherwise prohibitive transaction costs in access to international donor support; collective initiatives to engage regional, inter-governmental organizations together with diverse financial institutions and investors to create incentives for building regional infrastructure capacity; the creation of jointly financed international and regional programs for public sector capacity building and e-government applications development; public-public and public-private approaches to support the upfront investment, capacity development and mainstreaming costs to facilitate the effective integration of ICT in health, education and other development sectors to permit the more cost-effective and broader delivery of public services; and the continued exploration by donors and MDBs of new modalities – including the consideration of re-engaging in public sector infrastructure investments particularly when they have the potential to leverage additional private resources.

On the question of the Voluntary Digital Solidarity Fund, the Task Force welcomed and highlighted its innovative financing mechanisms, particularly its reaching out to and drawing on the strengths of new development constituencies in cities and local authorities. It also welcomed the focus on voluntary solidarity contributions of the kind that we have also witnessed in all of its potential in the context of the recent Tsunami.

The Task Force saw the Digital Solidarity Fund that was launched at Geneva at the time of WSIS as one of the range of mechanisms and public private partnerships that could be used in complementarity to address gaps and leverage digital opportunities. While the fund and its proposed modalities are described in some detail in the report, the Task Force felt that it could not undertake a full assessment of the role of the fund, which was in many ways still evolving as a financing mechanism.

We hope that the report will be useful to this body as it begins its deliberations on the financing issue in the week ahead.

Thank you Mr. President.