Enterprise Development and Information and Communication Technologies in Developing Countries

Executive Summary

The report illustrates how adoption of information and communication technologies (ICTs) within small enterprise development (SED) can further international development targets.

The emphasis of the study is to identify areas of direct ICT application. The focus, therefore, is on those enterprises (flyers) that already have access to ICTs or have the potential for direct access and application (potential flyers).

Background and Approach to Study

This report considers four functional ‘action areas' for ICTs and SME development:

1. ICTs as an enterprise output - SMEs producing hardware, software and telecommunications products.
2. ICTs as a primary, processing technology - SMEs providing data entry services, ICT-based business services, software customisation, distance learning, etc.
3. ICT-related support activities - computer training, consultancy, content provision and other services.
4. ICTs as a secondary processing technology - covering communication (email/Internet/mobile), data processing (small business information systems) and ICT-based manufacturing systems (NC/CNC production systems, for example).

The first three of these categories encompass the ‘ICT-sector' and are primarily concerned with the production of ICT goods and services. The fourth category includes all other SME sectors that are ICT consumers.

Main Research Findings

ICTs are providing their most direct benefit (employment, growth and local capacity) within the ICT sector itself (Action Areas 1-3). Action to support the local ICT sector should, therefore, be prioritised. Raising local ICT-sector capacity will ‘enable' all other sectors - government, private and NGOs - particularly those concerned with implementing ICTs within wider poverty alleviation programmes - in health, education, environment, and governance.

• In most low-income DCs, ICT-sector support should focus on Action Area 2 and 3 - primarily digital products, software customisation, ICT-based services, training and consultancy, but also other ICT-based business services.
• In large and/or industrialising DCs there will be more scope to focus on Action Area 1 - manufacturing computer hardware /telecoms products and computer software.

Support for nascent local ICT-sectors should be prioritised for the following reasons - they contribute positively to ....

• Building local ICT industry capacity and building a skills-base.
• Substituting imports of (expensive) imported ICT goods (but particularly) services.
• Stimulating local economic development, and providing information and management tools for the wider business sector.
• Providing local ICT applications capacity - that NGOs, and other providers of welfare services, can draw upon.
• Providing increased formal employment opportunities, particularly for women.
• Assisting more traditional (rural) industries (such as artisans or foodstuff producer groups) connect to regional/ global markets via ICT-assisted (fair) trade.
• Providing sub-contracting opportunities to large businesses and government sectors.
• Fostering ‘learning by doing' and ‘diffusion of knowledge', through enterprise clustering, labour mobility, employee spin-off, and the creation of ‘new economy' businesses.

ICTs also are providing considerable indirect benefit to other ‘flyer' sectors (Action Area 4) by improving the efficiency of business processes and through enabling SMEs to develop new products and services. These ‘secondary' ICT sectors should also be identified for support focussing on ‘communications' as a secondary priority area. Sectors will vary between countries, but in most low-income DCs they will be service-based - business, financial and technical services, the tourist sector, importers - but also manufacturing exporters.

• Possible applications within secondary ICT sectors will vary, depending upon the state of ‘business readiness' and ‘e-readiness' of individual sectors, countries and regions.
• In most low-income DCs, applications should focus on using ICTs to improve domestic business communications and networking, and to facilitate access to external (regional and global) networks - such as through e-commerce.

Support for ICT-based internal business management systems and ICT-based manufacturing systems (Action Area 4) will be facilitated most effectively through private sector provision and encouraging collaborative arrangements - within enterprise clusters, for example - overseen by sector-led business associations, suppliers and other market/technical intermediaries.

Mechanisms for support will be country specific. There is little experience amongst donors in project support, either in the ICT-sector itself or amongst secondary users. However, the literature suggests some general requirements for policy/project support.

Enterprise level support. Flyers have little need for direct business assistance. They can, however, be assisted through policy measures that facilitate access to finance, reduces the cost of access to infrastructure, supports skills and technology, and creates market access (through linkages and vendor development programmes, for example).

Intermediary level support. Commercially-based organisations will be the most effective intermediaries: sector-based trade associations and chambers of commerce at the local level, and umbrella and employers associations at the national level. In the ICT-sector it is important that intermediaries are supported that represent the local industry, and not other academic or governmental/NGO interests. Other critical intermediaries for flyers will offer technical support - such as suppliers and other institutions facilitating technology/ management development.

Policy level support. Most low-income DCs have no strategic ICT policy. There needs to be support for strategic policy development that includes the ICT sector and secondary users. Overall, national policy should be directed at improving technical and data infrastructure, facilitating access to technology and networks and the enhancement of ICT skills.

This study also suggests that the debate surrounding the ‘digital-divide' needs to be re-focussed more centrally on issues of ownership and transfer of knowledge and know-how. ICTs are merely a technology-based means of transmitting information, enhancing knowledge, increasing productivity or creating new products and services. The success of ICT development in DCs, will be critically dependent on know-how and skills capacity - technical, managerial and developmental - both within the local ICT sector and amongst secondary ICT-users.

Suggestions for Further Research

Overall, little is known about the ‘ICT-flyers' sector in DCs: the jobs and income they create, their links back to poorer communities, the role of education and training in their growth, and their capacity to forge forward linkages. The following areas may benefit from further study:

• Understanding the ICT-sector in more detail - focusing on country case studies.
• ICT-based micro/ small enterprises - focusing on backward linkages into non-urban/urban poorer business communities.
• Employment opportunities for women in ICT-based service sectors
• Sector case studies of secondary users focussing on linkages/ networks /clusters.