Following is the text of Larson's remarks as prepared for delivery:

The International Digital Divide: Building Bridges to the Developing World

Alan Larson,
Under Secretary of State for Economic, Business and Agricultural Affairs
Washington, D.C.

October 20, 2000

Remarks delivered at the Woodrow Wilson Center
as part of the Sovereignty in the Digital Age Series.

Director Robert Litwak (Director of International Studies Division at the Wilson Center), Leslie Simon (Senior Policy Fellow), and assembled guests. Thank you for this opportunity to speak today about the so-called international digital divide.

We stand at the beginning of a promising new era. Information technology (IT) is dramatically reshaping our economies and societies. IT's potential to promote economic growth, social development and expand democratic values is immense. IT can help advance prosperity and social welfare worldwide.

What has the Digital Economy meant to the developed world?

IT already is transforming the U.S. economy. IT has helped us to achieve high growth and historically low unemployment and inflation while sustaining the longest expansion in U.S. economic history. Although IT industries account for only 8 percent of total U.S. economic output, they contributed nearly a third of real U.S. economic growth between 1995 and 1999.

Many other developed and developing countries also are beginning to reap the rewards of the new technologies. Participants in the emerging "Global New Economy" are seeing signs of similar IT-led economic growth. They are witnessing an explosion in the business-to-business and business-to-consumer applications that provide greater choice and lower prices.

What is the international digital divide?

Unfortunately, however, many developing countries are not benefiting fully from these technologies. There is, in fact, an "international digital divide." The "digital divide" essentially is a lack of opportunity for people to use digital technologies to reach economic and social objectives. It is caused by a lack of human capacity, appropriate regulatory and policy regimes and appropriate hardware and software.

It manifests itself most starkly, however, as a lack of access to information and communication networks. Less than a quarter of the approximately 275 million people currently online reside outside North America and Europe. Just 3 percent of the world's Internet users live in South America. There reportedly are more Internet users in New York City than in the entire continent of Africa.

Why should we care about the digital divide?

This is unacceptable because using IT can help developing countries to achieve their most basic development objectives. These objectives include reducing poverty, building skills, fostering economic growth and productivity, disseminating public health information, tracking disease, improving health care through telemedicine, increasing educational opportunities at every level through distance learning, improving environmental management, responding more effectively to disasters, enhancing the transparency of government, and preserving local and indigenous cultures.

IT: How does it fit into our broader development strategy?

IT is an integral part of our overall development strategy. Increased use of IT can foster faster, more sustainable development on its own. It also can support development objectives in other sectors. In either case, though, technology is a means of achieving progress, not an end to itself.

Recent economic studies confirm strong positive links between productive investment in telecommunications and labor productivity. Good communications services clearly support economic development. The rate of return on investment in computer capital is generally higher than that on non-computer capital, and this will likely remain true as computer-related technology is incorporated into economic activity.

While systematic evidence of IT's development impact is still being gathered, the anecdotal evidence is quite dramatic. In Tanzania, for example, a small company used 10-cent e-mails to replace $20 faxes and has seen its telecommunications bill go from over $500 per month to $45 per month. An ISP established in a remote village near Chineros, Peru allowed the village council to sell its vegetables to a company in New York and increase the villages' income from just $300 per month to $1,500 per month. In India the development of the software and services industry has created 200,000 IT-related jobs.

But IT also can play a major role in achieving development in other sectors as well. Enhancing access to information technology is not a silver bullet. But it can help achieve development in several key areas:

First, poverty reduction. G-8 countries are committed to debt relief for highly indebted poor countries as one way of reducing poverty. But we also understand that sustainable growth is the long-term catalyst for accelerating poverty reduction. The economic growth fueled by productive investments, and few investments are more productive than those made in technology, are essential to reducing poverty and meeting development targets. Information technology can build the opportunities available to the poor and position them to be full participants in global economic life.

Second, health. Improved health is particularly important for developing countries whose poor depend on their own labor for their livelihoods. We are committed to addressing developing world health challenges, including HIV/AIDS. IT can make a significant contribution by facilitating the tracking of disease like HIV/AIDS, spreading public health information, and allowing health care professionals to extend their reach through tele-medicine into the remotest or most underserved areas.

Third, education. Building human capacity can help break the cycle of poverty and deprivation. IT can make it easier to deliver education, skills training and lifelong learning to a broader segment of the population. Since 1970 the percentage of school-age children completing a primary school education is up worldwide from less than half to more than 75 percent. Primary school education has reached about 86 percent in all developing countries but only 60 percent in the least developed. Distance learning has the potential to increase those percentages dramatically.

Fourth, trade and investment. Countries must participate in the mainstream of global trade and investment flows to reach higher stages of development. The U.N. reports that "fast integrators" that bring down trade and investments barriers quickly grow as much as half again as fast as "slow integrators." IT can play an exciting role in facilitating exports for companies in developing countries. Armed with nothing more than a computer, some software, Internet access, and a good idea even the smallest business can access global markets. But IT also can make it easier to invest in developing countries by enhancing regulatory transparency. New technologies also make it easier for companies like AOL to "outsource" major functions, like online support, to countries like the Philippines.

Fifth, social, legal and institutional reform. Democracy, rule of law, freedom, respect for human rights, and fair and accountable governance are critical foundations for growth and poverty alleviation. The poor bear the brunt of bad policy and weak institutions. IT can make a major contribution to meeting these objectives by promoting transparency, accountability, and non-discrimination. Whether it's lobbying government leaders through e-mail, monitoring breaking news over the Internet, forming communities of interest in chat rooms, or checking regulations on government web sites, IT empowers citizens to participate in civil society.

Once we have understood the significance of enhancing digital opportunity and its impact on development, we naturally ask: "What can we do about it?" The approach we have taken with our G-8 partners under the Okinawa Charter on the Global Information Society issued in July rests on four pillars.

One, we must help developing countries foster the appropriate policy and regulatory environment and build their readiness. Nothing will deter investment, growth and development faster than a highly regulatory environment that stifles private investment and innovation. We must provide policy advice and support local capacity building to help create pro-competitive, flexible, market-led, technology neutral policy and regulatory regimes that unlock the private sector's energy, ideas and investment. Such organizations as APEC and the Kennedy School of Government have already created Internet and e-commerce readiness assessments that can help countries determine whether they have the right policies and infrastructures in place to prepare for the Digital Revolution.

Second, we must help developing countries improve connectivity, increase access and lower cost. We must help developing countries make the Internet and related technologies affordable and accessible at home or work or through community access points like schools, libraries or information kiosks. Private investment and competition are the keys. No government can hope to satisfy on its own the tremendous demand that exists. Countries like Chile have shown that with the right policies in place they can create a revolution in access and affordability. A recent World Bank study of Internet access pricing in Africa found that countries with the least liberal markets had access charges 700 percent higher than countries with the most liberal telecommunications regimes on the continent. We also must encourage the development of hardware and software that meets the needs of the developing world.

Third, we must help developing countries build human capacity. Human capacity is an often-neglected component of building a digital society. Human capacity begins with basic education and literacy. Citizens must have the underlying skills to use the technology effectively. Teachers must have the knowledge necessary to train their students. Regulators must have the capacity to establish the appropriate regulatory and policy environment. Public institutions, including schools, research centers and universities must be prepared to share their knowledge online.

Fourth, we must help developing countries participate in global electronic commerce. We can help developing countries achieve their development goals by assessing and increasing their e-commerce readiness and providing start-up businesses with advice. We can help them encourage small and medium-sized enterprises to access global markets and to participate in worldwide supply chains. But we also must help traditional brick-and-mortar companies to use these technologies to make their operations more efficient.

To translate this framework into practice, the G-8 Leaders outlined in the Okinawa Charter plans for a Digital Opportunity Taskforce or "dot force." The dot force is designed to mobilize resources and coordinate the efforts of governments, the private sector, foundations, multilateral and international institutions and others to bridge the international digital divide and create digital opportunity.

The G-8 plans to launch the dot force next month. We expect that it will be composed of a "core group" of one representative from each G-8 country, one representative from the European Commission and representatives from 9 or so developing countries. We are also looking for ways to include participation by international organizations and by representatives from the business and non-profit communities. A proposal by the World Bank and the UN Development Program to serve as a dot force secretariat has been accepted.

How are the USG and the private sector contributing to the dot force?

To demonstrate the USG's commitment to the dot force President Clinton announced that he would expand the Internet for Economic Development Initiative to 20 Developing Countries. Consistent with the goals of the G-8 Summit, Guyana, Indonesia, Kenya, Mali, Nigeria, Romania and Senegal were invited to join the IED, bringing the total number of countries to 20. Since then we have added Bangladesh to make it 21.

The President also announced that the Overseas Private Investment Corporation would establish a $200 million line of credit for U.S. companies seeking support for e-commerce and IT projects, and for projects that will help close the digital divide in developing countries. OPIC is giving priority to applications for support in these sectors, and participating in the U.S. Government's outreach efforts to highlight investment opportunities in developing countries.

President Clinton also used the Okinawa Summit to challenge the private sector to join with him to close the global digital divide and issue a "Global Call To Action." The Call to Action challenges companies, foundations and non-profit organizations to work together to create digital access and education for all by the year 2010.

The response was impressive: The Markle Foundation, World Economic Forum, IBM, Harvard University, United Nations Development Program and U.N. Foundation pledged to develop country-specific Self Assessment Readiness Guides and create a Global Task Force to offer pro bono advice to the developing nation governments and private sector entities. Cisco Systems announced it would invest $3.5 million to expand its Cisco Network Academy Program -- which teaches people around the world to design, build and maintain computer networks -- to 24 of the least developed countries. The Global Business Dialogue on Electronic Commerce committed to partnering with ASEAN nations to identify the policy and regulatory issues that must be addressed to speed Internet adoption and the development of e-commerce. Intel pledged to expand its "Teach to the Future" program, which is focused on providing over 400,000 classroom teachers with the skills to effectively apply technology to their curriculum, to additional developing nations.

Conclusion

Helping developing countries achieve greater prosperity and social development is more than an expression of U.S. altruism. Global integration means that problems such as disease, narcotics, crime, corruption, and environmental degradation can affect us no matter where on this planet they may occur. Yet global economic integration -- the increased flow of people, goods, services, knowledge, and capital -- also is a process that allows us to more readily cooperate with and potentially help improve the lot of people all over the world. The approach and the programs I've outlined here today are simply a beginning. They are not a panacea. But helping to close the digital divide and create digital opportunity will ultimately make the world safer and more prosperous for all of us.

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Distributed by the Office of International Information Programs, U.S. Department of State.
Web site: http://usinfo.state.gov