Prepared for the
World Economic Forum Annual Meeting 2002
New York, 31 January - 4 February
Open Economies Project at Harvard Law School
In cooperation with
The Digital Opportunity Task Force
of the G8 Group of Nations
Opportunity Task Force of the G8 Group of Nations
The United Nations Development Program
The United Nations Development Program
This paper has been prepared by the Open Economies Project at Harvard Law School, affiliated with the Berkman Center for Internet and Society. Special thanks to Finnbar Livesey, Diane Cabell, Justin Chan, Sarah Guerrero, Sarah Hsia, Kristin Hughes, and Rohan Kariyawasan. Correspondence on the paper should be addressed to the Principal Investigator Dr. James Moore by mail at Open Economies, Berkman Center for Internet and Society, Harvard Law School, Pound Hall 511, 1563 Massachusetts Avenue, Cambridge MA 02138, or via email email@example.com.
Innovation is a major impetus to economic growth. A nation that can innovate will be a consistentlleader among nations.(dc note—Singapore doesn’t innovate; is it falling further behind other societies?) Information and communication technologies (“ICT”) are central to economic innovation, and may provide the opportunity for nations to leap ahead. We believe that the rewards can be great for nations possessing the vision and the will to embrace the twin goals of economic innovation and ICT for development.
The shorthand for ICT has become the ubiquitous term “digital”—as in “digital business” and “digital development”. In this paper we adopt this language as fitting the spirit of adventure and boldness appropriate to the digital opportunity. The Open Economies project at Harvard Law School seeks to work with leaders in developing nations, from government, business, and non-profit organizations, to promote digital development, digital entrepreneurship, digital transformation of local sectors such as manufacturing and agriculture, and trade in digital goods and services.
Open Economies is working in close cooperation with the G-8 Group of Nations’ Digital Opportunity Task Force (the DOT Force), the United Nations Information and Communication Technology Task Force, and the World Economic Forum Digital Divide Task Force.
Open Economies is able to draw on the expertise of
a variety of partners. These include
staff and faculty at the Harvard schools of law, computer science, public
policy and business, as well as those at other universities. We also draw on pro bono contributions of
attorneys and other professionals who are generously giving of their time. Our
goal is to promote economically, environmentally, and socially sustainable
development for people in the least developed nations in the world—as indeed in
all the nations of the world.
Over the past year, several international efforts have emerged that focus on bridging the global digital divide and how information and communication technologies (ICT) can help address inequities in economic development. The G-8 Group of Nations’ Digital Opportunity Task Force (the DOT Force), the United Nations Information and Communication Technology Task Force, and the World Economic Forum Digital Divide Task Force have been particularly effective in forging an international coalition of representatives from the public, private and not-for-profit sectors whose principal objective has been to take action plan on these issues. The current worldwide focus on the problems of development, combined with the potential for new technologies to be able to radically change the process of development, has generated tremendous momentum for action – a momentum we must nurture and grow.
The Open Economies Project at the Berkman Center for Internet & Society, Harvard Law School, in conjunction with its partners, seeks to promote economically, environmentally, and socially sustainable development for people in the least developed nations in the world. Working closely with the G-8 DOT Force, UN ICT Task Force, and WEF Digital Divide Task Force, we have focused on identifying specific policy, regulatory, and legal initiatives that promote successful incorporation of information and communication technologies in economic development. We work with a broad systemic model based on the proposition that economic growth is generated through innovation and entrepreneurship. In order to ensure that the overall goals are kept in focus, the approach is defined with an overarching goal of triple sustainability in society, the economy, and the environment.
Our focus is on digital goods and services as they provide the greatest potential for rapid economic growth in developing countries. In the coming year, the comparative advantage of developing countries will expand beyond low labor costs. Greater and cheaper bandwidth will be available at a scale more representative of the developed world. This will mean that the combined cost of production and dissemination of digital goods and services from developing countries will make them competitive on an international level.
This white paper identifies critical actions to support a sustainable digital economy. These actions include the initial assessment of the innovation capacity of developing countries. We also outline policies and programs that will support and encourage entrepreneurship and innovation within developing countries.
The Open Economies project promotes economically, socially, and environmentally sustainable development for people in the least developed nations and regions of the world. The project is not designed to produce merely reports. We wish to see significant advances made in policy, regulation, and law in developing countries.
We focus the attention of policy makers on entrepreneurs who drive forward technological and economic innovation. We share with other policy observers the conviction that business must lead. On the other hand, business must be provided with an attractive climate for investment and risk, and to do this, government must employ a variety of means., as emphasized by long-time students of policy, Branscomb and Keller, in the text box at right. We draw on an extensive body of economic research on how innovation occurs in societies—research that focuses on understanding and promoting innovation as means to economic development.
We also draw on the experience of high technology business leadership, and studies of competitiveness in the most innovative industrial nations, to help understand how ICT-based innovation in particular might be promoted. We have been particularly inspired by work on “economic clusters” “business ecosystems” and the role of social conditions in high technology innovation.
We have taken these ideas and sought to use them as inspiration for actionable recommendations, accessible to any nation that wishes to adopt them. At the highest level, our ideas can be summarized in the following principles:
1. Innovation is the key to economic growth. By promoting policies and actions that develop innovation economies in the developing world, these countries will be able to catch up rather than continually lag behind developed economies.
2. Economic expansion based on digital products and services will bring special benefits to developing countries, and may accelerate economic evolution in these nations. Therefore, our focus will be on encouraging such ‘digital businesses’. These businesses emphasize knowledge, information and technology. The impact of the application of knowledge and information technology to traditional businesses is central to our argument. ICT applications will make developing economies more internally efficient, and provide opportunities to trade in information-technology rich goods and services produced in the developing world. In addition, we believe that, in general, digital businesses are the best means of approaching the three goals for sustainability—that such businesses are not only fast growing, but can be more environmentally sound, and more supportive of human rights and human options, than traditional industries such as textiles or consumer goods manufacturing.
3. Some of the most difficult barriers to overcome are not technological, cultural, or even inherently economic, but rather have to do with a lack of government policies (both national and trans-national) and rule of law to support digital entrepreneurship and investment. Our project concentrates on the policy environment for digital business in the developing world, providing advice on government policies affecting funding, laws and regulation, and enforcement. Our project is based at Harvard Law School, and draws on extensive specialized expertise in legal matters. We are mobilizing a network among law schools and professional services firms around the world. We provide policy support to other organizations with a complementary strategy, including the DOT Force and the United Nations.
4. In our work we will balance the role of facilitating discussion and providing objective, non-partisan advice, with advocacy for a limited set of policies that we believe are important for our partners to consider—and/or that we and our partners have agreed warrant support. Development based on ICT, in short timescales and respecting the goals of triple sustainability, will require the input and support of many actors from the public sector, the private sector, and civil society. We believe that the key to creating and implementing digital policies is direct cross-sector conversation among leaders. Thus we are working closely with leaders of governments, businesses, non-profit organizations, multilateral organizations and international financial institutions.
Currently, there are many high level strategy statements that developing countries can use, but there is less support for concrete actions that can be instituted immediately on the ground. The Open Economies project will promote specific policies and actions that it believes will spur economic development, supported by the use of ICT and aimed at the goal of triple sustainability. The Open Economies project will provide concrete actions and steps that countries can implement so that there is integration between setting goals and strategies and moving forward with new policies.
Our current advocacy embraces the following policy initiatives. These initiatives go beyond the normal trade opening, to empowering developing countries to compete on a near-equal footing with businesses in the advanced world.
Each of the action sections is laid out in the following manner –
· Introductory paragraph to explain the focus of the section
· List of action points that can be applied
· List of outstanding research questions within the focus of the area
· Deliverables from this section within 12 months
There is a continuing debate in the development community about whether ICT investments make sense when basic human needs such as food, water and shelter are not met. In general, we believe that ICT can greatly help in the provision for such needs—and that wise investments in ICT do not “take food from people’s mouths” but in practice make it more likely that food gets to those who need it. Moreover, digital entrepreneurs will often contribute to such solutions, and thus a vigorous ICT industry sector can be helpful even in countries with serious shortages of basic goods. We wish to recognize the need to focus on achieving the proper combination of basic goods, ICT for provision of basic goods, and ICT industry development. Moreover, while our project is focused on helping a nation operate as an innovation economy focused on digital goods and services, we recognize that countries will take different paths to development, and will decide individually how to evolve their social and political institutions, and so the balance of these types of investments will need to be contextualized for each country.
1. Make the strategic combination of the three types of investments a focus of immediate and continuing study and policy making by relevant government agencies. Each country will have different immediate needs, and some will not be ready to pursue an innovative digital sector. Each country should clarify where it should focus immediate efforts of development in the three following categories.
i. Basic services such as water, electricity, sanitation, and healthcare.
ii. ICT infrastructure and services in support of basic needs and improving societal outcomes.
iii. ICT as part of supporting innovation and entrepreneurship within the economy.
2. Examine the infrastructure needs for an innovation economy. Each country has to understand the strengths and the limitations that it may have in producing digital goods and services. As part of a country's overall economic planning, the manner in which utilities are structured should be revisited with the needs of digital producers in mind. The assessment should be done as a partnership between external agencies that have an understanding of innovation economies in developed countries and local representatives of the private and public sectors and civil society in the developing countries.
3. Support projects which make available critical intellectual property necessary for using ICT to meet basic needs. Basic information on such topics as health and health care, nutrition and agriculture can have a large impact in developing countries and may be made widely available through ICT. However, restrictive application of intellectual property rights to this information can sometimes erect barriers to its use. Governments, NGOs and companies need to support initiatives that open access to such information. For example, by providing a shared resource of such information, issues of ownership and physical access might be resolved simultaneously for a number of countries. Such shared access would then make way for subsequent localization of the information in terms of language and culture and other specific features of local application.
· To what extent must a society meet a certain level of basic need provision in order to support, and benefit from, digital entrepreneurship, applications, and trade?
· In societies where “islands’ of digital entrepreneurship have flourished, such as India, what is the relationship of these successes the rest of the country?
· To what extent can a local ICT industry gain its start working for development projects and with NGO and government funding, and then subsequently become an engine of trade and a basis for creating a strong middle class?
· Are the environmental standards developed through industrialization in the West appropriate for developing countries going through the same changes? Can ICT-based development help countries advance while also substantially conserving energy and other resources?
12 month deliverables:
The structure and operation of an innovation economy requires government commitment and understanding, as well as the commitment of the private sector and civil society within a country. The action points below focus on providing developing countries with assistance if they decide to pursue a “national innovation” plan for economic development.
This section is grouped under three headings: the first is “Ministerial Actions” and relates to changes to be made within the government; the second is “Policy Network Formation” and is where connections are formed between the government, the private sector, and civil society in bringing about the changes required to support the innovation economy; and the final section is “Industrial Policy” which includes legislative actions that can be taken to support specific digital business within the innovation economy.
1. Establish an Innovation Board which will be tasked with creating, maintaining and protecting national incentives for innovation. This Board can be independent of the government or be a semi-state body. Membership of the Board will be drawn from the public and private sectors and from civil society in order to generate cross-sectoral support in the actions of the Board. The Chairman of the Board will report to the Ministers of Trade, Finance, and Post and Communications (or similar ministries as they exist in different countries). The Board should be appointed in an open and transparent manner, and should have a longer term than that of the government.
2. Prepare a national innovation strategy. A crucial first step for the Innovation Board will be to draft a strategic plan for innovation in the country. Such a strategy will have to outline the overarching goals for development within the country, the sectors that the country will focus on, and the main tools that will be employed to bring about economic development. Because the impact of ICT can be immense in creating new market opportunities and in improving the efficiency and productivity of traditional industries, an eStrategy will be a key input into this national innovation strategic plan.
3. Increase the fiscal incentives for innovation. Developing countries should provide targeted new businesses with tax subsidies, exemptions and deductions to assist in their incubation for fixed periods of time. Fiscal policy should create incentives for investment in development-critical types of new businesses, both by nationals and foreigners.
4. Implement measures designed to maintain and protect incentives for innovation. The Innovation Board, in conjunction with the government, should be responsible for proposing policies and implementing measures designed to maintain and protect incentives for innovation. A key focus for this initiative is the support of nation-wide anti-corruption measures, especially those that would have positive effects on the formation and incubation of new businesses in targeted sectors. This may include creating police or governmental task forces dedicated to monitoring corruption, embezzlement and other white-collar crime, imposing stiff sentences for those convicted, and empowering citizens by providing them with information on how to pursue such a case. Developing countries should include a review of the local intellectual property regime and make revisions that are favorable to innovation (such as sui generis protection for software).
5. Promote Inclusive Policy Formation. In order to engage the private sector and civil society in the development of the innovation economy, the Innovation Board should promote conferences and other interactive events at least semi-annually to bring together the key actors from public, private and civil society. The conferences should be used to develop legislation with broad support from those attending, and to enable the various actors to meet and develop relationships that will support the networking that is key to a thriving innovation economy. (Links to governance and the formation of policy networks)
6. Train key officials. Ministers and civil service officials must understand and gain expertise on the issues of innovation and incentives to bring together the network of actors from the private and public sectors. A series of seminars (provided locally, through distance learning, or by bringing officials to other countries for executive sessions) should be provided by leaders in the field.
7. Promote policy networks between private sector, public sector, and civil society actors within the country. As we have stated previously, many of the actions that will enable the economy to be innovative and expand into this new digital sector will require the input and agreement of multiple actors spanning all sectors. These networks can be promoted through conferences and through legal incentives that allow different actors to work together.
8. Monitor private sector groups that influence international standards and regulations within individual industries. By understanding how such groups form, and sending delegates where possible, developing countries can participate in decisions that impact their region and/or move to preempt adverse action through engagement with the relevant groups.
9. Expedite new business formation procedures. A strong incentive for new businesses in certain sectors is an expedited path to obtain permissions, certifications and other necessary approvals for their formation. It may help to centralize these formalities in a single office or department within the government. Furthermore, the existence of a single office in charge of new business formation could facilitate the gathering of data related to innovation initiatives, which could be used in evaluating and measuring effectiveness. Streamlined government procedures can also help anti-corruption measures, as studies have shown that opportunities for corruption and the number of steps in bureaucratic processes are positively correlated.
10. Revise tax structure. Developing countries should reform tax legislation to promote capital-intensive industries focused on high technology by allowing loss carryovers, adjusting rules on the depreciation of machine capital and modifying the expensing rules on capital investments.
11. Secure proprietary rights in other economies. Provide economic assistance for developing countries to secure patents in developed countries, covering the costs of filing in multiple expensive jurisdictions, and accessing expert advice in order to file properly.
12. Develop effective privatization strategies. Developed and developing countries should work together to distinguish between those strategies that are most successful if implemented through private ownership and those where nationalization would be more effective and develop appropriate strategies.
13. Provide new businesses whose major products or services are digital with tax incentives to assist in their incubation. These companies will range from remote call processing centers to companies developing digital content.
· What are the most successful models of innovation – local, regional, national, or global?
· How can we develop new innovation models for developing countries?
· Can we use models of entrepreneurship developed in G-8 countries, or do we need to rediscover what entrepreneurship means for developing countries?
· How can policy be developed in a multi-actor way that preserves openness, but is relatively fast and inclusive?
· Is modern liberal democracy a prerequisite for an innovation economy?
· Are current intellectual property treaty regimes favorable to developing digital economies?
· Can model legislation from one country be imported into another?
12 month deliverables:
Entrepreneurs face many difficulties in both developed and developing countries when forming new companies. However, new company formation is especially difficult in developing countries where a number of the protections and resources that the developed world takes for granted do not exist.
While culture will play a significant part in how the private sector of a country operates, studies suggest there are policies which are of help to companies in all developing countries, such as labor mobility, stability of procedures and reduction of expense for redress in courts.
1. Expedite commercial justice. Developing countries should establish special courts with streamlined procedures and expert personnel to handle business claims quickly and efficiently. Initiatives should include (a) processes for swift action on crimes that discourage entrepreneurship and innovation, (b) special protections for businesses whose credit flows are at risk due to non-paying debtors, (c) promoting inexpensive dispute resolution alternatives such as arbitration, mediation or small claims tribunals that cater to small businesses, and (d) training and empanelling expert judges and blue-ribbon juries to handle complex intellectual property claims.
2. Establish registration information centers. Developing countries should provide easy access to intellectual and physical property registration data by setting up publicly accessible, digitized databases of ownership and registration. Innovation builds on prior art and is accelerated by access to such information, as seen in the use of patent databases and other archives of innovative techniques. Such databases are also the foundation upon which the business claims courts will operate, and thus the two policy initiatives must be completed in parallel.
3. Protect incentives and minimize risks for entrepreneurship. The legal protections of corporate ownership must be strengthened so that companies can operate in a stable and predictable environment. This implies strong communication between the private sector and governments so that changes to legislation and regulation are announced and agreed upon with sufficient time for businesses to respond positively. It also includes bankruptcy laws and arrangements, such as Chapter 11 in the United States, to reduce the downsides of failure for entrepreneurs.
4. Promote government regulation and self-regulation through disclosure. A regulatory environment must be in place that requires companies and their officers to disclose detailed information about the companies' finances, corporate history, material agreements, stock and the like. This type of disclosure reduces transaction costs, promotes self-regulation and helps regulatory authorities monitor for violations.
5. Reduce barriers to job mobility. The digital economy and digital businesses move faster than their traditional counterparts. Two years out of a field for an ICT-trained worker can mean a complete loss of marketable skills. Laws should thus be in place restricting the length of time ICT workers can be forced not to compete in non-competition agreements and restrictive labor contracts. Mobility brings knowledge from group to group and provides a competitive wage market for workers with high-tech skills, raising wages and encouraging more people to become technically capable.
12 month deliverables:
Develop a model fast-track business court to settle legal issues quickly and inexpensively.
Identify and develop database applications, online interface and training program for registry services and personnel including those identified in Section F, below. (dc notes: Is this possible?)
The power of foreign direct investment, technology transfer, and the cooperation of foreign companies in local development are some of the significant methods for bringing needed capital into a developing country. However, investors from outside of the country need to be able to predict and when possible minimize their investment risk, and need a stable fabric of laws and regulations within which to operate.
1. Clarify rules for foreign companies entering the country. Developing countries should focus on the mechanisms through which foreign companies can invest and repatriate their profits and returns, and they should clarify the rules of foreign ownership of companies within the country.
2. Set up legal structures that support international investment vehicles. Work with business, government, and NGOs to establish transnational legal structures will ensure that investment from abroad can be brought into the country and profits can be repatriated. For example, establish company forms that can be set up in developed nations, for investors in those countries, that are in turn able to invest in, help to shape, and profit from entities in developing countries.
3. Establish an independent review board that has regulatory and oversight powers over investment agencies to ensure openness and the security of investment flows.
4. Establish mechanisms for investors, from the developing country or from abroad, to achieve liquidity or exit investments after creating economic value. Any broad policy that does not allow for repatriation of profits or which restricts the exit options of investors will raise their risk and lower the amount of investment capital available to entrepreneurs.
· What are the barriers currently experienced by investors from developed countries seeking to invest in specific developing countries and regions, specific industries—especially digital businesses—and a particular scale enterprises, especially small and medium-sized.
· Given the above, what general ways can private funds be encouraged to invest in developing countries?
· What combination of factors can enable developing countries’ markets to provide a return that will be attractive to international investors, while also creating wealth in the developing areas themselves?
12 month deliverables:
As developing countries continue to expand and develop their economies, there are elements of their relationships to other nations that must be negotiated. Part of convincing developing nations to open their economies to the world, is critical to be able to support them in international venues where key decisions will be made that will affect their economic development.
1. Form regional delegations to ensure effective representation at international negotiations. By pooling national resources, LDCs will have enhanced capability to negotiate favorable permissions for use of protected technology, coordinate national intellectual property policies that will encourage easy exchanges of such material, and effect international treaties that enable the free exchange of critical information. The most important upcoming negotiations include –
· Redrafting of the TRIPS agreement
· Continuing discussion of trade commitments in telecommunications
2. Overcome barriers to foreign markets. Clarify the regulatory barriers that developing countries face on entering the US and other developed markets, specifically in the area of the classification of materials as pharmaceuticals versus dietary supplements.
3. Use the international technical standards bodies to promote developing county policies. There are a number of technical standards making processes that have implicit policy implications for developing countries. Countries and their supporters should find ways to become actively involved in these venues, to make transparent not only their processes but also their broader policy implications, and to take action accordingly. Such venues include –
· ICANN, both for the transition to IPV6 and for continued support of IPV4 as long as developing countries need to maintain the address space.
· IETF meetings (to which the Center for Democracy and Technology has started to send students to track activity for developing countries).
4. Make better use of the WTO special appropriations for developing countries. Under WTO rules there are a variety of special provisions that may be evoked by developing countries to their benefit. Create NGO/national partnerships to better understand these provisions and their potential for supporting digital development and trade. For example, use trade commitments in telecommunications made at the level of the WTO, regionally, and in bilateral trade agreements to promote trade in developing-country originated knowledge-based services.
5. Publish triple sustainability metrics each year. A key issue is whether development based on innovation in digital goods and services is sustainable. In order to be able to monitor the development of the economy, and to engage the international community, triple sustainability data should be collected. This data may be part of the countries reporting to the UNDP Human Development Report or a similar report. These metrics will include but will not be restricted to –
· GDP growth
· Change in per capita income
· Number of new companies created
· Number of new jobs created
· Number of patents filed within the country and abroad
· Change in foreign investment flows
· Level of national private equity
Without these targets it will be very difficult to hold the minister of innovation, and others involved inside and outside of government, responsible for the changes that are needed. The setting of such metrics will also engage large NGOs who wish to have a method of accountability and impact assessment for their programs in developing countries.
· How do developing countries make better use of trade commitments in telecommunications made at the level of the WTO, regionally, and in bilateral trade agreements to better promote trade in developing-country originated knowledge-based services?
· How are the different metrics related, and can we define a leading set of indicators for triple sustainability?
12 month deliverables:
Develop an online Treaty Consultation Portal for ministry and other officials in developing nations. In addition to providing alerts, information and analysis on looming treaty issues, this virtual policy center should include a discussion forum for participants and methods for Q&A interaction with experts in related fields.
While working on the high-level structuring of national policy and international negotiations, we must also support the capability of developing countries to produce digital goods and services. In this section, we outline some of the actions that will help increase the production capacity of the developing countries for digital goods and services. This includes the knowledge base and skill base of the country, and the human capital that exists within the country.
Knowledge for digital industry
1. Document local knowledge base. Intellectual property rights are gained largely through the documentation of innovation, not innovation itself. Because many innovations in the developing world, for example uses of traditional plants as medicines, are not documented-- individuals and entities in developed countries can sometimes receive rights for works that have already been created in developing countries but whose existence has not been formally documented. We should promote initiatives that will protect traditional indigenous practices and locally created intellectual property through aggressive documentation to establish “prior art” barriers to usurpers, as well as proactive publication and protection under intellectual copyright, trademark and patent regimes to gain such rights for those in developing regions.
2. Support use of non-proprietary technologies. Developing countries must be afforded access to inexpensive productive information and materials (for example, operating systems code) if they are to advance. In the developed world, innovators have access to a wide range of free “common” information and knowledge, from which new technologies, applications and businesses are formed. We need to support initiatives to make similar pools of open knowledge available throughout the world. Resources that are already in the public domain, or the commons, should be identified (such as open source software and non-proprietary drugs) and those that are most useful highlighted to developing countries. At the same time, efforts need to be made to widen the commons, so that there are more productive resources available to developing countries as they increase their innovative activities.
Local industrial base
3. Promote an open local manufacturing base for information technology systems. Developing countries should (a) open local markets to electronic components that can be used to manufacture personal computers, cellular phones and other technology necessary to create information or technology systems; (b) encourage small-scale assembly of such systems by favorable tax treatment and business licensing; (c) use national and regional government purchasing power to promote local sources of information technology systems; (d) use the same purchasing power for local communications services and for systems integration services; and (e) encourage development of technology parks that promote the sharing of physical resources as well as the exchange of intellectual capital.
4. Invest in development of digital business processes locally. Management institutes will be able to train managers and their employees in advanced business process improvement, include current state-of-the art process improvement ideas for agriculture, manufacturing, services, and especially knowledge work. Developing countries should participate in international quality process standards, such as ISO 9002 for manufacturing and SEI rating for software engineering, and participate in investment quality improvement efforts in cooperation with established multinational investors.
5. Regional sharing of best practices. Developing countries should promote the sharing of best practices in evolving digital businesses. This exchange can be enabled through efforts such as eASEAN and other transnational bodies, as well as proposed exchanges such as the ECHO Project of the World Economic Forum.
6. Encourage technical knowledge sharing, professional societies and other forms of social networking and cooperation. Social networking and cooperation will speed up the learning process for businesses and will expand the knowledge base of the country. Collaborative projects with multiple partners across the private sector can serve to enable the sharing of business methods and processes that would otherwise remain locked within a small number of successful companies. In some cases this may require changes to existing law to allow competitors to act together.
Local human capital
7. Develop a visa program for foreign nationals with specific skills in ICT and management. Establish a fellowship program, to entice skilled workers to move to a developing country for a period of time to teach advanced skills to local workers and entrepreneurs.
8. Adopt policies that bring the skills and investment of those that have been educated or trained abroad back to their countries. Repatriation may be supported by underwriting individuals' first year back in their countries of origin through fellowship programs. A fellowship may allow an individual to leave her native country again without having increased her debt load or leaving a year gap in her resume.
9. Revisit visa requirements. Developed countries, especially the U.S., should revisit their immigration laws so that these countries are not inadvertently creating skill shortages in developing countries.
· How has the movement of the most technically skilled away from developing countries impacted their ability to develop digital markets now?
· Has the movement of skilled people stopped, and is there anything that we can do to stop the shifting of these people away from developing countries?
12 month deliverables:
See proposals for online consultation portals and database design in Sections C and F above.
One of the most significant comparative advantages for developing countries has historically been low production costs. However, this advantage has not been achieved in the digital markets as the cost to access Internet and telecommunications services in developing countries has been extremely high, and there is a lack of bandwidth into and out of countries. The physical connectivity situation is changing rapidly (for example, the SAFE project will connect from Malaysia to many points in southern and western Africa and up to Europe), however access costs for digital businesses, especially small and medium-sized enterprises, remain in question.
1. In order to encourage adoption of components and devices manufactured at world scale and the lowest possible unit cost, align countries' current technology infrastructure, licensing and regulatory structure to world standards. Where possible, for example, map spectrum allocations to those used internationally and adopt wireless standards to ensure that there is conformity (Link to Action points 3 & 8)
2. Reduce overseas telecommunication charges in order to promote trade in developing-country originated knowledge-based services. Such services include software development, advanced clerical work (e.g. medical transcription, financial accounting, insurance claims processing), and call processing (customer service and technical support, telemarketing and order taking). Developing countries can be competitive in servicing customers in the more developed nations and regions, but only when their already low wage rates are joined with low-cost international connectivity. A specific opportunity exists in southern and western Africa in 2002. Many nations are becoming connected to undersea fiber optic transmission facilities for the first time this year. Special discounted rates for access should be explored for particular types of digital businesses, in order to promote trade and local entrepreneurial capabilities.
3. Reduce the price of Internet access by liberalizing key markets such as international leased circuits, domestic leased circuits, and VSAT connections, or by reducing the price directly in the case markets dominated by government carriers. As part of the rationale for such pricing actions or liberalization, analysis needs to be carried out to estimate the degree to which telecommunications revenue shortfalls will be offset by rapid expansion of the economy as a whole, with consequent increases in total GNP and tax receipts to government.
4. Assist the local Internet Service Provider (ISP) industry in setting up localized Internet exchange points (IXPs) so that ISPs can exchange national traffic locally. In modern Internet-based and wireless networks small scale networks can be cost effective and rapidly deployed. However, these networks are not of great value to customers unless other customers are reachable. By facilitating local network-to-network interconnection, proliferation of small networks can be encouraged, with resulting benefits in access and pricing. Work with national telecommunications regulators together with local ISPs and ISP associations in selected developing countries to put in place pilot technology projects for implementing Internet exchanges.
5. Insist on interconnection of local communications networks on favorable terms to all service operators. The incentive in creating more interconnection relationships from the incumbent’s perspective is that special charging arrangements from for example non-geographic numbers (e.g. 0845 numbers) opens the door to a variety of new commercial deals between the local telephone company and ISPs, and in turn between ISPs and end users, which will lead to increased telecommunications revenue for the incumbent.
6. Provide telecommunication services that will support innovation in digital goods and services. Work closely with state-owned networks, by leading the way to hybrid state-private services provided by partnerships, advising on new business models to allow revenue sharing between incumbent and new entrants, and nationwide numbering plans to implement non-geographic calling. For example, in developed nations considerable benefits did flow to small businesses from the provision of special (non-geographic) numbers for dial-up Internet access, charged at uniform rates throughout the entire country. Extending similar such services in developing nations will allow small entrepreneurial businesses in both rural and urban areas to gain access to the Internet at rates only slightly above current local rates without overall revenue loss to the incumbent network. However, this would require interconnection of local ISP networks and other smaller telecommunication networks (such as VSAT networks) to the incumbent’s network.
· How much more bandwidth will be available to developing countries in the next year? How can we further reduce the cost of international bandwidth and make it available to all entrepreneurs in the region?
· What is required to reduce the cost of domestic internet access in developing countries to facilitate innovation?
12 month deliverables:
The transfer of technologies from one country to another without any customization has traditionally failed. Part of the DOT Force responsibility is to ensure that appropriate technology is deployed within developing countries according to the needs and the goals of the countries themselves.
In terms of producing goods for developing countries, the developing countries themselves must be leaders in the innovation process from the outset. On the other hand, companies and individuals in the more developed world may have much to offer. Thus we see potential in alliances between individuals in developing and more developed countries to promote the innovation process which will lead to new digital goods and services produced in the developing world for export or use in the local economy.
Examples of projects and programs in this category include the following.
· E-Inclusion - World e-Inclusion is a business initiative with a clear social mission. Working with a range of local and global partners, HP is developing and delivering sustainable information solutions in partnership with people with very low incomes in the developing world. Involved regions include Africa, Asia, Central and Eastern Europe, Latin America and the Middle East. See www.hp.com/e-inclusion/.
· DigitalDividend.org - Digital Dividend is a Web site dedicated to exploring creative business approaches, public-private partnerships, and other sustainable ways to bridge the global digital divide and create lasting economic, social, and environmental benefits. See www.digitaldividend.org.
· BusyInternet - BusyInternet is an initiative to develop large-scale Internet development centers throughout Africa. The centers comprise a mixture of training facilities, office space and public internet access. See www.busyinternet.com.
1. Study the experience of pilot programs promoting digital innovation, and identify legal and regulatory issues that present hurdles to such initiatives. Open Economies is working closely with other centers of digital experimentation to stay in touch with and promising experiments. By working as legal advocates and legal researchers to help those in pilots solve their legal and regulatory issues, we are able to catalogue issues and develop both legal support materials plus policy recommendations for nations.
· What are the legal and regulatory issues of most importance to innovative pilot projects and technologies? How can these be addressed in specific cases, and how can we generalize from these issues to make policy recommendations to governments?
12 month deliverables:
Entrepreneurship may not yet be part of the culture of some developing countries, thus support should be provided to develop entrepreneurial skills in these emerging markets.
1. Promote technical education. Establish specialized educational tracks, starting in elementary school, that will help produce students who are capable of excelling at the application of information technology to a variety of businesses and which will result in a substantial number of students being able to go on to higher education in science and engineering. (link to Action Point 3)
2. Develop educational incentives. Establish scholarships in partnership with major NGOs and developed nations to provide training for teachers in technical subjects either within their home country or abroad. These scholarships would be merit based and would be subject to the person returning to their home country and teaching for at least three years.
3. Adopt distance learning. Engage in educational partnerships with overseas universities to provide distance learning of technical subjects to support the development of digital businesses.
· Will the education of individuals in developing countries take a generation, or are there ways to speed up the development of needed skills?
· Can a world-class innovation economy develop without a world-class science and technology university base within a country? If not, how can one best create both at the same time?
· How are culture, education and entrepreneurship intertwined?
12 month deliverables:
 Branscomb, Lewis M., and James H. Keller. "Towards a Research and Innovation Policy." Chap. 18 in Investing in Innovation: Creating a Research and Innovation Policy That Works, edited by Lewis M. Branscomb and James H. Keller. Cambridge, MA: MIT Press, 1998.
 Porter, Michael E., The Competitive Advantage of Nations. New York: The Free Press, 1990. Republished with a new introduction, 1998.
 Moore, James F., The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems. New York: HarperBusiness, 1996.
 Fountain, Jane E. "Social Capital: A Key Enabler of Innovation." Chap. 4 in Investing in Innovation: Creating a Research and Innovation Policy That Works, edited by Lewis M. Branscomb and James H. Keller. Cambridge, MA: MIT Press, 1998.
 We will use the term digital business to refer to those that make extensive use of ICT or are involved in the production of digital goods and services.