Dial Growth

AuthorOlivier Lambert/Elizabeth Littlefield
PositionTelecom Sector Leader of the World Bank Group’s Multilateral Investment Guarantee Agency/Chief Executive Officer of the World Bank Group’s Consultative Group to Assist the Poor
Pages48-50

Page 48

Handheld devices are enabling nascent economies to skip a generation of development

ACROSS the developing world, mobile telephones are enabling countries to bypass what was once an unavoidable stage of development: the establishment of a national mail service and of land-based telecommunications. The falling unit cost, ease of use, and ever-expanding reach of mobile telephony are enabling developing countries to “leapfrog” a phase in economic evolution that once took decades to traverse.

Mobile telephones are revolutionizing the formative processes of economic development. These relatively cheap handheld personal communicators are empowering the most basic development agents, turning former functionaries reliant on erratic and remote external inputs into key decision makers with direct access to the facts they need.

In less than a generation, mobile telephony has transformed agriculture, marketing, fisheries, freight logistics, irrigation, banking, and small business in the developing world. But there are stiff upfront costs, and daunting risks, in establishing mobile telephone networks in developing countries. In this article, first Olivier Lambert looks at how foreign direct investment in developing-country telecommunications sectors is enabled and supported. Then Elizabeth Littlefield focuses on the mobile telephone function with perhaps the greatest potential development multiplier: mobile banking. Once telecommunications-sector investment is assured and once small-scale economic agents have easy and mobile access to the accelerant of financial intermediation, the article will show, more rapid development can but follow.

Short cut—at a price

AN advantage of “leapfrog” development is that the developing country can skip or bypass stages of economic or technological evolution that were previously rites of passage for economies embarking on industrialization. Thus largely rural, primary product–exporting economies can now install state-of-the-art, large-scale wireless communications systems at a stroke. However, hand in hand with old-fashioned incremental development went equally incremental and graduated financial requirements. The disadvantage of “leapfrog” development is that it requires early and substantial capital outlays and infrastructure commitments well ahead of any payoff. Investment guarantees therefore assume a high profile.

After nearly a decade of conflict and political instability, the West African state of Guinea-Bissau is one of the poorest countries in the world. Civil war and a coup d’état have left a legacy of deteriorated physical infrastructure, weakened administrative and policy implementation capacity, unsustainable fiscal deficits, and heavy reliance on donor support. But the country abuts a more stable and prosperous neighbor, Senegal. The Senegalese telecommunications operator Sonatel invested $25.8 million in a fully digital cellular network in Guinea-Bissau that was launched in May 2007. Sonatel had a partner in its venture: the Multilateral Investment Guarantee Agency (MIGA)—the World Bank Group’s political risk insurance arm.

MIGA issued a guarantee to Sonatel for its equity investment in, and shareholder loans to, its subsidiary in Guinea-Bissau, Orange Bissau. Sonatel is covered against the risks of transfer restriction, expropriation, war...

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