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Trade in ICT Services: Uganda Case Study

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Information about Trade in ICT Services: Uganda Case Study
Science-Technology

Published on December 22, 2008

Author: minges

Source: authorstream.com

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Trade in Information & Communication Services:Opportunities for East & Southern Africa Uganda Case Study : Trade in Information & Communication Services:Opportunities for East & Southern Africa Uganda Case Study A World Bank project carried out by Telecommunications Management Group, Inc. October 3, 2007 Contents : Contents Background ICT Competitiveness ICT and Trade ICT and WTO Background : Background A World Bank project to analyze opportunities for ICT-related trade for six East and Southern African nations: Ethiopia Kenya Rwanda Sudan Tanzania Uganda ICT-related trade : ICT-related trade 11 % of Ugandan firms using website to interact with Buyers/ Suppliers/ Customers (World Bank 2006) Around 300 million minutes of incoming international calls (UCC, 2007) US$ 17 million in communication services exports (Bank of Uganda, 2003/04) US$ 5.7 million of Computer & Information services exports (Bank of Uganda 2003/04) ICT-ENABLED SERVICES – WHY IS IT IMPORTANT? : ICT-ENABLED SERVICES – WHY IS IT IMPORTANT? Government Academia Industry Citizens Enhances economy, investment, and employment Provides new curriculum and academic programs and new job opportunities to graduates Fosters development of new domestic and foreign companies and enhances opportunities for existing industries Provides new job opportunities for citizens with multiple levels of experience (e.g., secondary schooling and more advanced training) ICT COMPETITIVENESS : ICT COMPETITIVENESS ICT-competitiveness refers to a country’s capability to exploit information and communication technology in order to effectively participate in the global information economy Fixed line metrics : Fixed line metrics Main lines (per 100 people), 2006 Low penetration… Delays in obtaining a fixed line (days) …but little wait Monthly basket, US$, 2007 …but expensive Source: TMG, Inc. adapted from UCC, UTL & “Doing Business”. Faults cleared by next day Good quality… International voice : International voice Uganda’s international voice tariffs within average range of Study Countries Importance of VoIP for call centers 1-minute peak rate call to USA, US$, 2007 Mobile metrics : Mobile metrics HHI, 2006 Relatively competitive… Mobile coverage (% population), 2006 …good coverage Monthly basket, US$, 2007 Average price… Mobile subscribers (per 100 people), 2006 …relatively low access Internet metrics : Internet metrics People per ISP, millions, 2006 Reasonably competitive… Bits per person, 2006 …average bandwidth ADSL prices, 256 kbps, US$, 2007 Expensive… Internet users (per 100 people), 2006 …average access International Internet bandwidth, 2006 : International Internet bandwidth, 2006 Proposed East African undersea fiber optic cable systems : Proposed East African undersea fiber optic cable systems (Reliance’s investment for connecting four regions around the world) Computer market-Services : Computer market-Services According to one source, there were around 150 registered firms in the sector in 2002. Computer software and services revenue were estimated at US$ 37 million in 2005, 0.36% of GDP. A survey found that 17 Ugandan ICT firms were providing ICT export-oriented services such as call centers, software development, training, website design, data processing and consultancy. Computer services revenue As % of GDP, 2005 Source: Adapted from BMI-T, 2006. Computer market-Hardware : Computer market-Hardware Some 28,000 computers were sold in Uganda in 2005 and by the end of 2005, penetration of computers was estimated at 0.61 per 100 inhabitants, just below the average of 0.65 in the Study Countries. No local manufacturing of computers; however, computer assembly has grown in Uganda due to the elimination of tariffs on parts and reportedly some are even exported to other East African nations. Imports of office machines & automatic data processing machines, US$ millions Source: UBOS. ICT sector contribution to GDP : ICT sector contribution to GDP Communications sector as % of GDP, Uganda Telecom revenue as % of GDP, 2005 Source: TMG, Inc. estimates. Source: BoU. ICT sector-Trade : ICT sector-Trade Office & telecom equipment imports, US$ millions Services exports (excluding travel & transport), US$ million Source: WTO. ICT Institutions : ICT Institutions Ministry of Information and Communications Technology Uganda Communications Commission National Information Technology Authority (to be established) ICT REGULATORY AND POLICY FRAMEWORK : ICT REGULATORY AND POLICY FRAMEWORK Most key policy, laws and regulations are in place Uganda Communications Act of 1997 National ICT Policy, 2003 Various supporting Regulations, 2005 Lack of data protection and e-commerce laws, although bills have been drafted Liberalized telecommunications market Generic telecommunications licensing framework that is flexible & technology neutral BUSINESS ENVIRONMENT : BUSINESS ENVIRONMENT Electricity Taxes Foreign investment Governance “Doing Business” % of firms identifying problem as main obstacle Source: World Bank, Enterprise Surveys: Uganda, 2006 Electricity : Electricity Source: The World Bank Enterprise Surveys. www.enterprisesurveys.org Taxes : Taxes Uganda has eliminated virtually all ICT equipment import duties (remaining duties basically on wired telecom equipment). Uganda’s import duties less than East African Community Customs Union in most cases. Excise taxes on communications services are a barrier to greater use and have a detrimental impact on the economy. Uganda has highest mobile excise tax in East Africa and also charges excise on fixed calls. Uganda’s VAT (18%) is between Kenya (16%) and Tanzania (20%). Import duties, 2006 Foreign investment : Foreign investment Favorable foreign investment scheme 100% foreign investment possible Incentives and support from Uganda Investment Authority Governance : Governance Source: World Bank, Worldwide Governance Indicators info.worldbank.org/governance/wgi2007 27 15 18 45 14 25 Ibrahim Index of African Governance rank Doing Business : Doing Business Source: World Bank, “Doing Business” (2006) www.doingbusiness.org Human resources – Education / Skills : Human resources – Education / Skills Based on weighted average of literacy and combined gross school enrolment ratio. UNDP Education Index 2006 Source: UNDP Human Development Report 2006 http://hdr.undp.org % of firms identifying labor skill shortageas major constraint2006 Source: World Bank “Uganda’s cheap, trainable and English-speaking workforce can be turned into a cadre of skilled ICT technocrats to provide the necessary human resources for ICT growth.”—UNCTAD, ICC “AN INVESTMENT GUIDE TO UGANDA” Human resources - Language skills : Human resources - Language skills “From an ICT services perspective…certain skills are a necessary condition to compete in the services outsourcing business…Language skills are also often mentioned as important in choosing locations…TOEFL test scores are often taken as an indicator of skills…”—OECD TOEFL=Test of English as a Foreign Language TOEFL Average ScoreJuly 2005-June 2006 Source: Educational Testing Service (ETS) www.ets.org/toefl Human resources – Costs : Human resources – Costs Note: PPP = Purchasing Power Parity. GDP per capita, PPP, International US$, 2006 GDP per capita, US$,2006 Source: IMF. Business Process Outsourcing (BPO) : Business Process Outsourcing (BPO) Source: WTO. Trade in commercial services, 2004 Total = US$ 2,211 billion Insurance (2%) Financial (6%) Communications (2%) Computer & Information Services (2%) US$ 42 billion Construction (2%) Royalties (7%) Personal, cultural & recreational (1%) US$ 1,061 billion BPO in action : BPO in action South Africa call center agents Source: CallingtheCape Accumulated FDI in Mauritius BPO market, US$ million Philippines BPO export market Source: NASSCOM Source: BPA/P. Source: BOI Uganda BPO policy & actions : Uganda BPO policy & actions “Facilitate the establishment of Internet-ready Industrial Parks to engage in Data Capture and Data Processing export work.” —National ICT Policy 2002 “The creation of a policy and regulatory environment that supports Uganda’s aspiration of being a telecommunications and IT services hub.” —Telecom Sector Policy Review 2005 Uganda Investment Authority profiles on call centers, data centers and e-translation BPO Group within Ministry of ICT ICT Park Presidential Committee ICT Outsourcing Services Association BPO destinations : BPO destinations BPO ranking : BPO ranking Human Resources UNDP Education Index TOEFL GDP per capita ICT Infrastructure International bandwidth Broadband costs Fixed lines ICT Laws WTO BTA WIPO WCT UNICTRAL Business Environment Doing Business Rank Governance Rank Electricity Uganda BPO SWOT : Uganda BPO SWOT Benefits of WTO Commitments in ICT : Benefits of WTO Commitments in ICT Transparency and predictability Support for domestic reform efforts Attract foreign investment Market opening for exports WTO and ICT : WTO and ICT General Agreement on Trade in Services (GATS) Covers services only Telecommunications Computer & Related Services (CRS) Information Technology Agreement (ITA) Addresses tariffs on goods considered essential to ICT sector General Agreement on Trade and Tariffs (GATT) Governs import of products through tariff schedules Uganda Status WTO member since 1995 Scheduled commitments for communications services under GATS Expanded telecom commitments in 1999 (post-1997 after Basic Telecommunications Agreement concluded) and signed on to Telecommunications Reference Paper No CRS commitment Not party to ITA Structure of GATS : Structure of GATS GATS is an integral part of the WTO Agreement, consisting of a number of articles in its main body and several annexes, including an Annex on Telecommunications  General Obligations: Main body of the GATS and the Annex on Telecommunications are applicable to every WTO Member.  Specific Commitments: Each WTO Member has attached its own schedule to the GATS, through which it makes individual specific commitments on market access, national treatment, and any additional commitments the Member wishes to undertake.  Basic Telecommunications Agreement (BTA): Special GATS negotiations intended to deepen and expand commitments in basic telecommunications concluded in 1997, referred to as the BTA.  Members participating in these negotiations made commitments, or further commitments, in their schedules on market access or national treatment.  Many also made additional commitments in the form of a "Reference Paper", which contained a set of regulatory principles applicable to the telecommunications sector. Supply modes : Supply modes Specific commitments are inscribed by service sector and mode of supply of the service, and may be subject to limitations on market access and national treatment. Telecommunications Services : Telecommunications Services Annex on Telecommunications General obligation imposed on all WTO Members to ensure that all service suppliers seeking to take advantage of scheduled commitments are accorded access to and use of public basic telecommunications, both networks and services, on reasonable and non-discriminatory basis. Specific commitments made by WTO Members for telecommunications services which are attached as national schedules, and made a part of the GATS. Telecommunications Reference Paper – additional commitment made by WTO Members through their schedule. WTO Members can include the Reference Paper in whole (e.g., Uganda) or in part (e.g., India) as part of their commitment. The Paper set forth six regulatory principles: i) competitive safeguards; ii) interconnection; iii) universal service; iv) public availability of licensing criteria; v) independent regulators; and vi) allocation and use of scarce resources. Computer & Related Services (CRS) : Computer & Related Services (CRS) BUSINESS SERVICES Computer & Related Services Consultancy services related to the installation of computer hardware (841) Software implementation services (842) Data processing services (843) Data base services (844) Other (845 and 849) Top 25 BPO Jurisdictions 20 of top 25 BPO jurisdictions have made commitments in their Schedules for CRS Source A.T. Kearny; WTO Information Technology Agreement (ITA) : Information Technology Agreement (ITA) Plurilateral initiative among WTO Members and acceding states (each Member must specifically sign on) Requires Members that have signed on to the ITA to eliminate tariffs on IT products listed in the Attachment to the Ministerial Declaration on Trade in Information Technology Products and to bind their tariffs for these products at zero. Applied on the principle of “Most Favoured Nation” and therefore all WTO members benefit from the Member’s commitment. Certain ITA products listed in Attachment to the Declaration Computers Telecommunications Semiconductors Semiconductor manufacturing equipment Software Scientific Instruments ITA facts : ITA facts Initially, 29 Members signed on at the Singapore Ministerial Conference (December 1996) The number of participants has grown to 70, representing about 97% of world trade in ICT products 18 of top 25 BPO jurisdictions have signed on to ITA Top 25 BPO Jurisdictions Source A.T. Kearny; WTO Uganda’s current GATS commitments for telecommunications services : Uganda’s current GATS commitments for telecommunications services Specific commitments for telecommunications services Market access commitments No limitations on measures affecting consumption abroad of telecommunications services Some limitations on national treatment, measures affecting cross-border supply, consumption abroad, and commercial presence for supply of telecommunications services Measures affecting presence of natural persons are unbound No Most Favored Nation (MFN) exemption under Art. II of GATS Specific limitations Commitments provide for duopoly in public voice and data services and private voice network services to third parties All international services must be provided through duopoly license holders Resale of excess capacity not permitted Limit of three mobile providers (one being UTL) Video and audio broadcast services excluded from scope of telecom services Signed on to Telecommunications Reference Paper Uganda GATS and Reference Paper recommendations : Uganda GATS and Reference Paper recommendations Generally, compliance with GATS Recommendations to update Uganda’s commitments to the Ugandan reality Issues in which Uganda’s legal reforms are not reflected in current commitments Recommendations to enhance ICT marketplace by adopting “full commitments” for telecommunications services under GATS Issues to expand compliance under GATS Recommendations to ensure compliance with current GATS general obligations and Reference Paper Recommendation to update Uganda’s schedule of commitments to the Ugandan reality : Recommendation to update Uganda’s schedule of commitments to the Ugandan reality Recommendations to enhance Ugandan ICT market by adopting “full commitments” for telecommunications services under GATS : Recommendations to enhance Ugandan ICT market by adopting “full commitments” for telecommunications services under GATS Recommendations to ensure compliance with GATS General Obligations for telecommunication services and Reference Paper : Recommendations to ensure compliance with GATS General Obligations for telecommunication services and Reference Paper CRS recommendations : CRS recommendations Make commitments to cover all types of computer services. Uganda should make its commitments at the overall two digit computer services sector level (based on the two-digit WTO Secretariat’s Services Sectoral Classification and Central Product Classification (CNC) number of 84) so that all forms of computer services are covered by its commitments. Currently, confusion arises because many ICT/BPO activities could potentially fall under more than one of the subcategories listed under CRS. ITA recommendation : ITA recommendation Uganda should join the ITA and commit to reducing its tariffs for ITA products to zero; this can be done over a period of time. A number of Uganda’s tariffs of ICT products are already at zero (e.g., no import duty in Uganda on mobile phones or computers). Eliminating tariffs and thereby reducing costs on IT products will: benefit various ICT industries: data processing, computer assembly, and telecommunications services, particularly mobile services industry. enhance productivity and improve economic efficiency in industry Likely result in expanded ICT usage benefiting consumer, industry and economy. These benefits will outweigh the costs of potential short-term loss in customs duties collected, and potential adverse competitive effects on inefficient domestic producers of information technology products. In binding its duties at zero, Uganda would be providing a signal to foreign and domestic investors of its commitment to maintain this policy in the future. Conclusions and Recommendations : Conclusions and Recommendations Connectivity is key strategic issue and Uganda should ensure that it has other avenues for bandwidth than simply relying on Kenya While connectivity is a serious issue and resolution of this is fundamental, it will not resolve all issues and automatically make Uganda a tier one BPO jurisdiction Competition is fierce among the countries vying for ICT-enabled services, and a number of countries have mature markets for these services; as such, Uganda should seek to enhance its attractiveness as a BPO jurisdiction as much as possible in order to differentiate it from its competitors (e.g., updating and enhancing its WTO commitments, enacting ICT laws, maximizing potential incentives for BPO companies) Uganda should support the development of a BPO industry association, such as NASCOM in India Given that resources are limited, within the government, ICT-enabled service activities should be coordinated among the different agencies to ensure that initiatives do not overlap and are properly coordinated As found in many BPO jurisdictions, it is better to focus on certain niche BPO specialties and then evolve to more enhanced activities rather than try to compete for all types of BPO services Slide 50: Thank you. Janet Hernandez janet@tmgtelecom.com Michael Minges minges@tmgtelecom.com Tel. 01-703-224-1501 Fax 01-703-224-1544 www.tmgtelecom.com

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