Ever since the success of Grameen Bank and its affiliate GrameenPhone in Bangladesh, two truths about developing countries have become clear. First, microcredit is a vital financing tool for emerging markets. Second, cellular technology is a critical tool in improving lagging economies and minimizing the divide between the rich and poor.
GrameenPhone is a cellular provider whose clients include rural Bangladeshis. Low prices spread over numerous customers have resulted in extraordinary profits.
There is much more to the story, though, than GrameenPhone's profits. The new technology has made it possible for the rural poor to text message and send money between phones. Markets that had barely existed have become "wired" as they started receiving international remittances right through their phones.
The development of the information and communication technology (ICT) industry has leapfrogged through several stages of development, promising much more than what was once expected. Studies have shown that companies have increased profits while adding new jobs since they began employing ICT. Simply put, investment in the digital world has propelled growth rates and raised productivity in developing countries.
However, these new trends do not come without risk. ICT's effectiveness has not been tested over the long haul in developing countries. When governments have to make decisions that involve tradeoffs such as increasing water supply or installing electricity cables, it is only logical for investment in ICT to be pushed aside.
Also, the ICT industry does not operate cheaply. New technology cuts into the national budget very quickly. Consequently, it is import for developing economies to learn how to integrate technological advances along with more traditional developmental goals.
Additionally, not only do ICT-related industries require large amounts of investment with uncertain returns, they also demand an updated rule of law and effective governance. It must not be forgotten that many developing countries still have very rudimentary market systems in which the government must often push market forces in certain directions for the economy to reach its capabilities.
ICT exemplifies how some countries that have the resources but lack effective governance still have not been able to generate adequate results. Even though many people are connected to the web and have digital technology at their disposal, the tendency to pay online and engage in transactions is still not seen as much as one would expect.
One way for the implementation of ICT to be truly effective would be to integrate ICT into traditional developmental projects. Alienating ICT and treating the entire concept as something that will evolve in the future will only create a bigger conceptual rift between technological and traditional developments for the public.
Additionally, the government will also find it hard to come out on top with its policy agenda, as ICT alone would not command a lot of attention when the government is facing trade-offs between updating technology and building more traditional infrastructure.
In order to make the public see ICT as essential, the government should lead by example. Customs and tax offices are good places to start. Chile implemented ICT into its revenue departments and now has a more effective tax collection system, with reduced corruption.
ICT promises a great deal for the skilled labor force. Workers would not have to face stringent visa regulations, the high cost of a western education and high travel and living costs, yet they would also not be required to leave their current jobs as the technology would be integrated into what they are currently doing.
Technological development is crucially dependent on many other areas of the economy. If developing economies can continue to develop once they realize the benefits of ICT, other important issues like the rule of law and transparency in the government are bound to follow. Governments may have to contribute more by providing the seed capital for this money-intensive industry, but the positive effects of new technology are undeniable.
