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Bangladesh Perspectives: ICT Infrastructure

Seminar Speakers and Contributors 

  • Marcus Adaktusson of Grameenphone
  • Alliance for Affordable Internet
  • Alexia Gonzalez Fanfalone, doctoral candidate at Toulouse School of Economics (TSE)

Seminar Presentation by Alexia Gonzalez Fanfalone

Background

A global Copenhagen Consensus study on broadband connectivity showed that tripling the coverage of mobile networks in the developing world from 21% to 60% led to benefits worth 17 times the original investment. Bangladesh’s mobile network lags significantly behind most other developing countries, with less than 1% of the population having mobile phone subscriptions. Increasing this to 60% would have enormous value, but every taka spent would only return between 3 and 6 taka of benefits. 

Information and Communications Technology (ICT) is a transformative technology for any economy. It improves productivity for businesses at all scales and can also help deliver health, education and government services to citizens. Mobile technology, in particular, is a big factor in boosting rural economic development, which is particularly important for Bangladesh.

Not only does Bangladesh lag far behind the average developing country in terms of broadband coverage, it is also well behind other countries in the region. In 2013, only 6.5% of Bangladeshis used the Internet, compared to 15.3% in India and 10.9% in Pakistan. Mobile broadband reaches just 0.4% of the population and only 1% of households have fixed broadband connections. 

Broadband is such an important enabling technology that it is difficult to estimate the complete impact on the economy. Because the country starts from such a low baseline, getting up to the target of 60% broadband penetration means getting 107 million subscribers online. 

The sheer cost of building the infrastructure is one reason why the return on investment in broadband is lower in Bangladesh than elsewhere. The country’s relatively low GDP is also a factor: investment costs will be similar across countries, but economic benefits will not be as large as for a more prosperous country. In fact, though, the benefit estimate is quite conservative, so this probably represents the lower end of the possible range. 
But there are several institutional changes which could make the benefit higher. One constraint is the current control of the transmission network by two established players: Power Grid Company of Bangladesh and Fiber@Home. Opening up the network to competition would see better use of existing capacity. A second constraint is international connectivity, via six cables through India and a single submarine cable. Fortunately a second undersea cable should be ready for use in 2017.

The ICT sector is also unfortunately loaded with excess costs, with a 21% import duty on handsets and a 57.8% levy on goods and services. Although this might seem like a good way for the government to raise revenue, as it holds back economic growth this is a very short-sighted policy.  

Bangladesh, in common with Pakistan and some African countries, has also kept the price of connecting incoming international calls high to maximize revenue, but in practice reducing the cost would greatly increase traffic. 

Investing in a massive extension of mobile broadband coverage could give a real boost to growth in Bangladesh, but to make the most of this, the government must increase competition and reduce the burden of taxation.