Koutroumpis - Infrastructure

1. Digitizing Haiti
Dr Pantelis Koutroumpis
Imperial College London

2. Digitization elsewhere
Does it matter for the economy?
• Fixed Line – the impact of adoption:
• World Bank (66-countries for 1980-2002): “an increase of 10 lines in 100 inhabitants in high-income economies can increase (GDP) per capita
by 1.21 percentage points”.
• Koutroumpis (22 OECD countries for 2002-2007) found a 0.24% average annual effect from broadband adoption. Identified that a critical mass
of users needs to be in place before the larger effects begin to emerge. This level of adoption practically translates into half of the population
being connected to the Internet.
• Czernich et al (OECD panel for 1996-2007) and found an equivalent effect of “0.9-1.5% for the addition of 10 more broadband lines in 100
people”.
• Mobile lines – the impact of adoption by generation:
• Gruber and Koutroumpis (192 countries for 1990-2007) estimated a 0.2% annual GDP effect from mobile communications and a direct
increase in productivity.
• Koutroumpis and Cave (49 countries for the period 2000-2015) estimated the mobile broadband effect for various generations of mobile
access. “The transition from 2G to 4G for a country with 100% penetration increases the annual GDP effect by 1%”. A similar effect is
achieved if the same country grows from 75% adoption to 100% in the case of 2G networks.
• Users also value a “good connection”:
• Ahlfeldt et al (2016) linked willingness to pay for broadband speeds with property prices in the UK and found a strong effect that increases with
speed at a decreasing rate. They analyzed a large micro-dataset of millions of properties for the period 1995-2010 and reported a 2.8%
increase in property price for an ADSL connection (up to 8MBps) and this grows to 3.8% in case a house is connected to an ADSL2+
connection (up to 24MBps).
• Rosston et al. (2010) estimate the demand from an online US survey for various levels of broadband speed and report that the representative
household is willing to pay 48$ a month for an improving from slow to very fast connection speeds.

3. Digitization in Haiti
ITU 2016/GSMA 2017
• Fixed Line – the impact of adoption:
• 0% Fixed-telephone subscriptions per 100 inhabitants
• 0% Fixed (wired)-broadband subscriptions per 100 inhabitants
• 9.4% Households with a computer (%)
• 4.4% Households with Internet access at home (%)
• Mobile lines:
• 79.6% Mobile-cellular subscriptions per 100 inhabitants
• 13.5% Mobile-broadband (3G & 4G) subs per 100 inhabitants
• 12.2% Individuals using the Internet

7. Get 50% of Haitians on broadband
• Why not with fixed line?
• A fixed broadband connection (FTTx) from Digicel costs from 55$/month ~80% of the average annual income just for Internet access. Higher speeds
cost even more reaching up to 220$/month a cost more than three times the average income and almost 100 times higher than the income of the
majority of Haitians.
• The cost of a basic computer ranges from 500$-600$ which is prohibitive for many people in the country.
• Increase mobile broadband penetration to 50% in 5 years and install an undersea cable to support the increased traffic
• Currently the most popular plans in the country include 50MB or 100MB of data use from mobile phones and these are predominantly prepaid
(99%).
Steps to achieve this target:
1. Install an additional undersea cable to increase international
connectivity (to allow for higher speeds in fixed and mobile
connections)
2. Build or upgrade infrastructure to increase 4G broadband coverage
and capacity to 50% population for specific usage baskets (from
100Mb to 1Gb per subscriber per month) prioritise the major cities
like Port au Prince to reduce initial adoption risks)
The benefits from the use of the services will stem from the adoption process.
For this purpose I envisage a gradual transition of existing subscribers to 4G and
a 50% penetration rate for mobile broadband by 2021. The adoption path
presented is relatively insensitive to the actual growth rate until 2021 as long as
the adoption target is reached within the specified timeframe.

8. Cost and benefit assumptions
Three levels of costs:
• Infrastructure (undersea cable)
• International peering (transit costs)
• Local traffic (transmission costs)
Two levels of benefits:
• User fee/month
• GDP impact from adoption
Further assumptions:
• Contention ratios at 1:200
• Evolution of speeds from 1Mbps – 10 Mbps (over investment period)
• Data usage from 100Mb/user/month to 1 Gb/user/month
Notes:
• Cable installation can be postponed by 5-10 years (BCR largely insensitive to the
installation timing, cost and details)
• Estimates very sensitive on usage, increasing the highest levels to
10Gb/user/month drops BCR to 1.8 (5%)
0
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0
200
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2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050
4G take-up assumptions
Data usage (MB/month/subscriber) Average connection speed (Mbits) - Second Y axis

9. Total costs, benefits and BCRs
Intervention Discount
Benefit (billion
gourdes)
Cost (billion
gourdes)
BCR
Increase mobile
broadband penetration to
50% in 5 years &
install an undersea
cable to support the
increased traffic
3% 1,097.7 80.1 13.70
5% 685.7 56.1 12.22
12% 166.9 20.3 8.22
In 2050 due to this interventions:
• the average citizen will get 14,895 gourdes due to
this intervention – of course large heterogeneity in
the distribution of these benefits.
• The GDP will be 16% higher compared to the
baseline scenario
• Haiti will have a reliable telecom infrastructure
covering different types of use (agriculture, services,
health, education, etc.)

10. Beyond access: Government and process digitization
• Starting a business
• Getting credit
• Property registration
• Government digitization
Technical note: 20-year horizon (not up to 2050). The main reason is that computing equipment and
software have much shorter amortization periods compared to large-scale infrastructures. Also the
trend towards cloud-based solutions may necessitate substantial investments for these facilities in the
future.

11. Why bother?
Reducing the time to start a business will cost $1.3mn for the initial setup (hardware, software, training) with operational costs of
$1.3mn per year. The transcription process will take 1-3 years and require an additional $12 mn to become fully operational. After the
implementation the whole process will be much quicker and from 97 days it will drop to 11. For every 9,000 business registrations
the country will benefit $4.9 mn due to increased efficiency, lower costs and higher transparency throughout the process.
Increasing access to finance will cost $1.6mn for the initial setup (hardware, software, training) with operational costs of $0.6mn per
year. The data collection effort from existing resources (banks, suppliers, etc) will take 3-5 years and require an additional $4.4 mn to
become fully operational. After the implementation there will be 20% of Haitians and businesses covered with updated credit data
compared to 1.6% today. Access to finance will increase to 7.4% for medium, small and micro businesses and boost their potential by
an average 10% annually. The overall benefit from this change will reach $9.1 mn annually when fully operation and can increase
further to cover a higher proportion of the economy.
Digitizing the property registration will cost $1.2mn for the initial setup (hardware, software, training) with operational costs of
$2.9mn per year. The transcription process will take 5-10 years and require an additional $26.6 mn to become fully operational. Given
the lack of titles in many cases and the lengthy or uncertain dispute resolution the intervenetion should also include a legal
underpinning with specified deadlines for this process to materialize. After the implementation the whole process will be much
quicker and from 312 days it will drop to 14. For every 10,000 transactions or registrations the country will benefit $19 mn due to
increased efficiency, lower costs and higher transparency throughout the process.
Digitizing the Haitian government activities will cost $148mn for the initial setup (hardware, software, training) with operational
costs of $85.6mn per year. The digitization process will take 5-10 years and require an additional $664 mn to become fully
operational. The different elements of the government activities that will be digitized will generate various benefits ranging from
possibly negative returns to highly positive ones. In order to analyze this variation further we look into three separate types of
interventions. In most cases the revenues and benefits accrue from increased efficiency and transparency

12. Costs & benefits of improved “doing business”
Starting a business in Haiti takes 97 days in two-stages (ranking 188th/190 countries, ~31 days in Latin America and ~8 days for OECD)
• The first stage registration with Commercial Registry (~20 days) and
• the second stage to obtain authorization of operations (~77 days)
Goal: Start a business in 12 days in a fully digitized environment
Costs
• ~900,000 businesses in Haiti – although only a third of them are formally registered**.
• The registration of all firms requires ~5 hours of a data-entry employee to update and correct any missing information.
• Employees undergo ~100 hours of training & 500 employees with new computer facilities and software budgeted.
Benefits
• 20% of the saved time is considered to “count” for increased productivity (i.e. employees did not work on an application for 97 days)
• Other management and processing bottlenecks that will be addressed in a digital context are responsible for these vast delays.
*Previous attempts on this front have been published in 2012 (a business registry by the local ministry : www.mci.gouv.ht.) and in 2014 (http://lenouvelliste.com/lenouvelliste/article/130728/Le-ministere-du-Commerce-
devoile-son-programme-dappui-aux-PME). Other attempts include the Investment Facilitation Center, CFI (see http://www.cfihaiti.com/) that provides services to foreign and domestic investors.
**The Enterprise Finance Gap Database compiled by the International Finance Corporation (IFC, the World Bank's private-sector financing arm) estimates the total number of micro, very small, small and medium-sized formal
and informal enterprises at around 900,000, of which slightly fewer than 60,000 are small and medium-sized enterprises, or SMEs (small enterprises employing between 10 and 49 people and medium-sized firms with 50 250
employees). The great majority (around 95%) of companies in Haiti are informal.

13. Costs & benefits of improved “access to credit”
1.6% of firms and adults have updated credit records (currently 175th /190 countries, Latin America 41% and OECD
67%). Improvements require:
1. the digitization of all formal entities and
2. an initiative to formalize the informal ones.
Goal: Getting 20% of firms and adults to accurate credit records
Costs
• Collecting this information requires ~10 hours for each firm
• Purchase of equipment and software for 1,000 employees.
Benefits
• >165,000 firms will have credit records available for use by lenders and this will allow them to gain access to credit.
• benefits calculated at the lowest level of business entities, i.e. the micro-enterprises with expected annual revenues
on average at 0.5 million gourdes
• every 1% increase in credit coverage the total credit in the economy increased by 0.4%.

14. Costs & benefits of improved “property records”
Registering a property transaction takes 312 days in Haiti (ranks 180th /190 countries, ~68 days in Latin America and ~22 in the OECD). Three main
stages need to improve:
• the processing of a transaction
• the transcription of the transaction
• sale confirmation
Goal: register properties in 14 days
Costs
• ~10 million property titles* (or rights) that need to be digitized
• The time to transcribe a record is expected to take up to two hours for ministerial employees and the training required ~30 hours per person (to
account for the possible GIS training too).
• The three main stages in property registration, i.e. the processing of a transaction, the transcription of the transaction and the sale confirmation
is expected to take 11 in total – in fact the first two steps will be completed in less than one day.
Benefits
• The time required to register a property follows the business registration practice and does not assume full commitment from the employees
but only a fraction of this time (at 20%) will be considered for the increased productivity.
*estimate based on the country’s population and comparing with more than 50 other property registries versus local population

15. Costs & benefits improved “government
digitization”
Costs
• Includes all 73,954 employees
• training will take <100 hours for people without any previous experience in using computers.
• Similarly the computing equipment and software that will be purchased will count in the cost of this process.
Benefits
• The expected returns from this investment are based on the average benefit-cost ratios found in the #2 case
studies.
• This is an oversimplification of the process but it has been suggested by the local officials and Copenhagen
Consensus to help create a measurable target.

16. Total costs, benefits and BCRs
Intervention Discount Benefit (billion gourdes) Cost (billion gourdes) BCR
Digitization of government processes
3% 675.383 134.818 5.01
5% 558.982 120.080 4.66
12% 319.396 88.518 3.61
Case Studies Discount Benefit (billion gourdes) Cost (billion gourdes) BCR
Reduce property registration from 312
days to 11 days
3% 17.612 4.559 3.86
5% 14.577 4.061 3.59
12% 8.329 2.993 2.78
Create a credit bureau & increase access
to financing from 1.6% to 20% of
MSMEs
3% 8.474 0.944 8.97
5% 7.014 0.841 8.34
12% 4.007 0.620 6.46
Reduce the days to start a business from
97 days to 12 days
3% 4.574 2.086 2.19
5% 3.786 1.858 2.04
12% 2.163 1.369 1.58

17. Backup #1 intervention
• Major operators in the country suggest that they already cover the entire population:
• NATCOM: “Pour 3 trimestres consécutifs de Q3 2015, nous avons continuellement travaillé dur pour faire en sorte que nos clients
bénéficient d'une couverture 4G uniforme tout autour d’Haïti.”
• Using third party data (OpenSignal, GSMA) this is not confirmed for either. In any case the increased demand for data will require upgrades
and a more dense network to support the intervention. Based on this increased adoption and used I make all calculations.