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- 1. Rural ICT Solutions for “Feed the Future” Eric White INTEGRA LLC 15 December 2010
- 2. What is “Feed the Future”? “The US Global Hunger and Food Security Initiative” So… “ICT for Feed the Future” becomes… “ICT for Food Security”
- 3. What do we mean by “Food Security”? Availability Access Utilization Stability Source: Feed the Future Guide, May 2010, feedthefuture.gov
- 4. Food Security = Agricultural Development = Rural Economic Growth The Components of Food Security Agricultural Development Rural Economic Growth Food Security Trade Facilitation
- 5. The importance of ICT infrastructure to Economic Growth Controlling for all else, access to voice and broadband is associated with big increase in GDP (10% to 1%)
- 6. How ICT causes growth in rural areas Income = f(productivity, human capital, investment) Lowers search costs and transaction costs, making labor more productive. Increases the rate of social learning (better workers = increased human capital) Reduces risk (increasing investment)
- 7. LowersSearch Costs– costs associated with obtaining, analyzing, and storing necessary information How ICT increases rural productivity Lowers Search Costs Voice, the killer app Market information systems
- 8. LowersSearch Costs– costs associated with obtaining, analyzing, and storing necessary information How ICT increases rural productivity Lowers Search Costs Lowers Transaction Costs Voice, the killer app Market information systems Warehouse receipt systems Commodity Exchange
- 12. Logistics Management Systems (more efficient trucking)
- 14. Busting myths about ICT Infrastructure The fastest growth rate in mobile adoption is in the developing world. BOP has shown a huge willingness to pay for ICT as a share of total income Myth #2 Poor people can’t afford ICTs, don’t want them, and don’t think that they need them.
- 15. Willingness of Poor to Pay for ICT “In richer economies, households spend on average 1.5-2% of their income on communications. In emerging markets, it’s not unusual for this number to reach as high as 8-10%” -Pyramid Research To the astonishment of the industry, people living on a few dollars a day have proven avid mobile phone users” -Business Week, Sep. 2007
- 16. Low capital cost coupled with high customer willingness-to-pay, means that the private sector is willing to play. 15 ICT – The best way to leverage private sector funds for infrastructure Source: World Bank Private Participation in Infrastructure Database, in billions of 2008 US$
- 17. 16 Private ICT investment is overwhelmingly in Mobile Infrastructure Investment commitments to telecom projects with private participation in Sub-Saharan Africa, by segment, 1990–2008 2008 US$ billions Source: World Bank and PPIAF, PPI Project Database.
- 18. The “Gap” Model of Telecoms Access True Access Gap OPEX*Users > ARPU Smart Subsidy Zone ARPU*Users > OPEX ARPU*Users < (OPEX+CAPEX) Market efficiency gap ARPU*Users > (OPEX+CAPEX) High income households Low income households Current network reach & access Geographical Reach
- 19. Covering the “Smart Subsidy” zone Most countries already have a mechanism in place to institute a state-managed subsidy. In most countries, these Universal Service and Access Funds (USAFs) do not function well On average only disperse 13% of the amount they take in. Multiple reasons for this, not just corruption
- 20. Getting to Universal Service To reach households beyond the Sustainability Frontier we must FUNDAMENTALY ALTER the economics of the situation. Since we can’t instantaneously raise ability to pay, our only choice is to lower costs. How? The private sector is in the early stages of experimenting with a new technology and a new architecture that has the potential to reach everyone.
- 21. Low Cost Base Stations Sat. Receiver/ Router Satellite Service Provider Uplink Sub. Management Femtocell Femtocell Sat. Receiver/ Router Sub. Management Sat. Receiver/ Router Femtocell Internet Backbone Sub. Management
- 22. Base Station Specifications Low-cost base stations require a capital expenditure of <$20,000 as opposed to $100,000 for standard cell sites They are solar powered and completely stand-alone Operational costs approach 0. Standard cell sites cost $2000/month in generators alone Profitable at an ARPU of around $3, which is within the “willingness-to-pay” of many rural poor. Signal range of up to 10 miles = >1 base station per village.
- 23. Issues and scope for USAID Technical Assistance Reaching the Market Efficiency Gap – standard legal/regulatory/competitiveness issues. Room for Technical Assistance in these areas. Reaching the Sustainability Frontier with Smart Subsidies USFs, on average only distribute 13% of money taken in Achieving universal service Working with technology companies to help demonstrate the business model and to link them to Universal Service Funds
- 24. USAID contracting vehicles ready for this work Global Broadband and Innovations (GBI) Meets the market efficiency gap Provides Legal/Regulatory/Competitiveness TA Runs a Program on Universal Service Fund Administration, with a specific focus on Africa Partnering with Intel Connectivity on the Rural Edge (CORE) program Works with Micro-Femto companies, network operators, and USAFs to achieve universal access. Altobridge (Ireland) VNL (India) iDirect and Ubiquisys (USA)
- 25. Summary ICT accelerates rural economic growth through better access to information. Rural Economic Growth means more (and more reliable) agricultural output. Combined with better trade outcomes, this is Food Security. To expand rural connectivity USAID should engage in legal/regulatory/competitiveness work, provide Technical Assistance to Universal Service Funds, and push for the adoption of new, low-cost technologies. The GBI program provides an avenue within USAID to engage in each of these activities
- 26. Points of Contact Joe Duncan GBI Program Manager, USAID jduncan@usaid.gov Eric White Managing Associate, INTEGRA LLC ewhite@integrallc.com
Hinweis der Redaktion
- Availability - reliable and consistent sources of quality foodAccess – people must be able to afford to their food needsUtilization – knowledge and basic conditions to make healthy and sanitary food choices.Stability – Availability and Access must not fluctuate substantially over time.
- There are only two possible ways of achieving food security – growing your own food or importing food. Most countries will rely on a combination of the two, and I’ll talk about how ICT can affect each on in turn.2) I would suggest that the goal of increasing your own ability to grown more food, agricultural development, is really the same thing as rural economic growth. Why? In rural areas in the developing world, a World Bank study has shown that about 80% of rural households have a farm plot. Of those that don’t many either work on another farm or in a processing plant that deals with farm output. Incomes in rural areas are inexorably linked to farm output.
- Now that we’ve made the point this presentation is really about how ICT is important for rural economic growth, let me show you a study the illustrates how ICT access affects economic growth in general.The 2009 World Bank WDR included a study that said, when we hold constant all the things that economists usually think cause growth, a 10% increase is ICT penetration is associated with on average a 1% increase in GDP growth.This is different for different types of technologies. But the amazing thing is that this large macro picture can not only be explained on a micro level, but the 10-1 ratio seems to hold in studies done on the micro level as well.
- So – how does ICT improve incomes on the micro level?We generally agree that income is a some function of (i.e. results from) productivity, human capital, and investment. The presence of ICT infrastructure improves all three.
- How does ICT increase productivity in rural areas? Voice by itself is extremely important. Remember, ICT is primarily about information. It is secondarily about connectivity, because voice and broadband are very good, effective, responsive ways to obtain and distribute information. You will hear lots about mobile apps. ICT is only thirdly (or potentially not even thirdly) about apps. Apps are simply an interface used with connectivity to deliver information. Voice alone has been documented to have huge success in lowering search costs and increasing inefficiency. In the famous study of fishermen in Kerala in 2007, mobile phone coverage alone was found to raise profits by 9% and significantly decrease price fluctuations between markets. Another study found that cell coverage increased profits of banana farmers in Uganda by 10%, due to the fact that they could participate in more markets. So this 10-1 thing tends to hold. A recent paper by Jenny Aker of Tufts has found that when mobile coverage was extended to a particular region of Niger, grain price dispersion across markets fell by 10% and traders, using their phones to make more contacts across more markets, had profits increase by 29%. But on top of voice, lot’s of other information systems have sprung up to contribute to lowering search costs. This is the cutting edge of ICT use for Feed the Future. It’s an exciting area whose benefits are just beginning to be understood, but one that clearly holds mass potential. Esoko (formerly TradeNet) is a market information system that originated in Ghana and has spread to other parts of Africa. It offers three types of services. At the most basic level, it offers crop price alerts via SMS. Another level offers users the ability to to relay information on prices, transport, etc via SMS, and at the highest tier Esoko offers the ability to develop web-based MIS systems for users operations. No rigid impact assessments have been conducted, but informal surveys conducted by the company show farmers use it to negotiate better crop prices and to sell in different markets. Further, the company makes money, so people are paying for the service, indicating that they find it useful.E-Choupl is a service of ITC in India. It started in 2000 and provides transparant price information to farmers, as well as education. It works on a kiosk system. ITC installs an internet terminal in villages and trains an operator/manager there. ITC offers to buy farmers commodities if the villager cannot sell it at an appropriate price to the local marketplace (for which it offers a price quote). They also offer the ability to grade and document the quality of produce at the kiosk location. E-choupal is wildly popular and expanding rapidly.
- In addition to providing farmers with information that improves productivity, ICTs can streamline the delivery of the farmer’s product to the final consumer. It can cut out middle men, it can free up capital that would otherwise have been tied up in commodity storage, it can streamline delivery to places that are willing to pay more for it. E-Choupal is the champion of cutting out middle men. ITC vertically integrates the entire value chain when it buys from villages, and thereby lowers significantly transaction costs. Warehouse receipt systems turn commodities into a tradable asset – increasing the liquidity of the asset without sacrificing any amount of return. Commodity exchanges can be set up on top of these systems to involve more players in the market and better distribute food.
- Mobile Extension Services are filling in a market gap that was left when a lot of marketing boards, etc were privatized. In many countries the government is either out of the extension business, or no longer has the resources to do it widely enough. And without the ability to privately appropriate gains the private secotor has not filled in the gap. ICT holds the potential to change this.Again, voice alone can be a good thing too. But on top of voice…Grameen’s App Lab program employees “CKWs” in rural Uganda and equips them with a smartphone. The CKW will visit villages and answer questions that local farmers may have. Though this can be about weather, price information, etc. the questions they receive are mostly about crop diseases and how to cure them. The CKW provides this extremely valuable information to farmers, and in return the farmers fill out a survey. The survey is simple, name, age, schooling, location (GPS), crops grown, land size, etc. Grameen aggregates this information into regional HH surveys and sells it, using the profits to pay the CKWs, who earn about $2 a day.Google SMS farmers friend is a different model. It doesn’t require a smartphone or an intermediary. It’s completely text based but provides the same information.
- Farmers don’t invest for generally one of two reasons (or a combination of the two). First – they have no spare income because they are forced to consume everything, so they have nothing to invest. Second – there is a big risk involved and they don’t know that an investment will pay out, given uncertainties regarding planting, supplies, and opportunities for commercialization.First let’s examine income. Well, we’ve already shown a number of ways ICTs can increase incomes (productivity and human capital). There are other more direct ways to do so as well through. One is Mpesa, safaricom’s mobile banking system in Kenya. It is not just a system to safely and quickly transfer money, perhaps from a family member that has migrated to a city, but it can store money too. Keeping cash in a coffee can under a bed means HHs are vulnerable to theft. Mpesa reduces that risk, while also providing better access to remittance income – none is lost in transport.Now risk – On when to plant:Reuters Market Light (RML) provides lot’s of information, not just weather, but we’ll use it as the example here. Why weather info? Seeds need rain. Fertilizer does not. New initiatives are emerging to increase trust in the value chain (ratings, verification) and to guarantee payments for a crop (insurance, forward contracts.)
- Commercialization is about trade – internal trade. But external trade is also important to food security, especially in places with large populations and poor climates that are not able to produce enough food on their own, and likely won’t in the foreseeable future. Trade based food security is about moving food from surplus areas to deficit areas.The USAID West Africa Trade hub is working with ECOWAS to increase the food security of its members by reducing border inefficiencies. A study they are producing has found one good way to do this is by using ICT. Internet access at border posts allows quicker processing of goods and more effective monitoring of border personnel in anti-corruption efforts.
- Now that we have a basic understanding of how ICT is good for rural growth and therefore essential for food security, let’s look at some myths that surround ICT.Some people may argue that we are getting ahead of ourselves. Don’t people need roads/irrigation/sanitation infrastructure more than ICT infrastructure?In the 21st century the answer is no. All of these pieces of infrastructure complement each other, and no one is more important that another. Roads are important, but will anyone drive on them into remote rural areas without knowing what’s there first? Conversely, what good is knowing about price dispersion between rural markets if it’s too costly to travel between them and correct the dispersion? Both transport and ICT are important, and they are complements. I could make similar arguments for electricity, irrigation, and sanitation infrastructure.
- While we’re referring to ICT broadly in the presentation, I’ll address this myth by looking specifically at mobile phones. The next slide has numbers on this.
- The chart on the left shows that the growth rate of mobile subscriptions in the developing world matches or exceed that in the developed world, especially now that the developed world has achieved, or is close to achieving, saturation. So – yes – the fastest growth rate of mobile is in the developing world. There are now 56.8 mobile phone subscriptions for 100 people in the developing world, and that is still growing.Secondly, and perhaps shocklings, the poor are very willing to pay for mobile services. 10% of someone’s income on $1 a day is $3 a month. The poor have demonstrated an ability to pay that for mobile service – and we’ll need to remember that in the next slides.
- So we now know that ICT is good for rural growth, and that old myths about jumping ahead are not valid. We now need to ask, “how?” How do we expand the reach of ICT infrastructure in the developing world. The first thing to notice is that donor agencies do not have to do this on their own. ICT is the easiest infrastructure sector to work with the private sector. Private capital is there and ready to be invested in ICT, and USAID can therefore achieve very positive food security outcomes simply by working to unlock these funds.
- The private sector is especially interested in Mobile Infrastructure. This is the key to delivery of ICT services to rural populations. There are no existing fibers to co-opt, and the cost of laying them is huge. As they populations get richer, and as mobile technology gets more advanced, broadband will eventually be delivered to poor rural populations wirelessly.So the question now is how do we work with the private sector and leverage their proven willingness to invest in ICT to achieve our Feed the Future goals???
- First – this assumes that the lowest income HHs are in the highest cost areas. This is generally true. High cost in telecoms mean remote and low population density (i.e. rural). On average in developing world, rural households are significantly poorer than urban ones (cite this).Market Gap: Difference between coverage that could be achieved by Telcom companies in an ideal legal/regulatory environment and what is currently being achieved.Access Gap – difference between what could be achieved under ideal conditions and universal access. This gap is due to fundamental issues of costs and ability to pay.Within Access Gap – Sustainability Frontier – this is divides areas where projects can expect to eventually recover their operating costs and remain profitable from areas where they are not likely to do so. Within the sustainability frontier subsidies can be good policy as a way of “jump starting” telecoms growth.Will not discuss how USAID can assist countries in reaching the market efficiency frontier. This stuff you already know. The best-practice principles of telecoms regulation and governance, and the processes through which a country achieves them, are the same as for every other type of infrastructure. Principles include independent, transparent and competent regulatory bodies, sufficient competition in the sector, and lack of overly-onerous taxation, among others. Processes include advocacy, legal assistance, training regulators, etc.We will, however, discuss how to achieve the sustainability frontier and how to achieve universal service.
- Describe what a universal service fund is here, and why it’s a good way to meet the smart subsidy zoneUnder “multiple reasons” talk about lack of legal mechanisms for dispersment, lack of the human capital required to run an effective tendering process, issues of coordination between ministries, political issues about where funds are spent, etc. Check with David about the best way to present this.
- Note, each of these three base stations represented here correspond to one village.
- So it sounds like there is reason to be optimistic. The private sector and national governments have the means to provide universal access to telecoms to their population. What’s USAID’s room for involvement?Legs/Regs need helpUSFs need even more helpThe issue with the new technology is as follows. It will, at least initially, need to be subsidized to some degree. Even though by itself it is profitable, the return on capital invested there is not as high as the return on capital invested in high end technologies (LTE, 4G, etc). So MNOs will need universal service fund money to close this gap. Universal Service Funds don’t want to invest in a financial black hole, so companies that make the technology need to prove that the spillover effects of telecoms access in rural areas will have enough of an economic growth effect to warrant supporting it. So USAID steps in – it finds test sights where good work is happening that will be greatly benefited by improved telecoms access. It brings the tech companies there. It gets the tech companies into dialogue with Universal Service funds. It uses its connections to make sure that the network operators are listening. It uses its role as a large bilateral donor to solve coordination issues between parties and facilitate the private sector’s filling of this universal access gap.